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FIRST
SECTION
CASE OF SPK DIMSKIY v. RUSSIA
(Application
no. 27191/02)
JUDGMENT
STRASBOURG
18 March
2010
This
judgment will become final in the circumstances set out in Article 44
§ 2 of the Convention. It may be subject to editorial
revision.
In the case of SPK Dimskiy v.
Russia,
The
European Court of Human Rights (First Section), sitting as a Chamber
composed of:
Christos Rozakis, President,
Nina
Vajić,
Anatoly Kovler,
Elisabeth
Steiner,
Khanlar Hajiyev,
Giorgio
Malinverni,
George Nicolaou, judges,
and André
Wampach, Deputy Section Registrar,
Having
deliberated in private on 25 February 2010,
Delivers
the following judgment, which was adopted on that date:
PROCEDURE
- The
case originated in an application (no. 27191/02) against the Russian
Federation lodged with the Court under Article 34 of the Convention
for the Protection of Human Rights and Fundamental Freedoms (“the
Convention”) by the Agricultural production co-operative (SPK)
'Dimskiy' (“the applicant”), on 30 May 2002.
- The
applicant was represented by Mr V. Okunev, a lawyer practising in
Blagoveshchensk. The Russian Government (“the Government”)
were initially represented by Mr P. Laptev, Representative of
the Russian Federation at the European Court of Human Rights, and
subsequently by their new Representative, Mr G. Matyushkin.
- The
applicant alleged, in particular, that the failure on the part of the
Russian Government to implement the procedure for redemption of
Urozhay-90 bonds had been in breach of Article 1 of Protocol
No. 1.
- By
a decision of 11 September 2008 the Court declared the application
admissible.
- The
applicant and the Government each filed observations on the merits
(Rule 59 § 1).
THE FACTS
I. THE CIRCUMSTANCES OF THE CASE
- The
applicant is the agricultural production co-operative “Dimskiy”
(сельскохозяйственный
производственный
кооператив
«Димский»),
a legal entity under the Russian law, established in 1992 in the
village of Novoaleksandrovka in the Tambov District of the Amur
Region. The applicant was subsequently re-organised into a
joint-stock company “Dimskoye” (ОАО
«Димское»).
A. Background information on Urozhay-90 bonds
- In
1987 the General Secretary of the USSR Communist Party Mikhail
Gorbachev presented his “basic theses”, which laid the
political foundation for economic reform heralding the transition to
a market economy. Several laws were enacted which opened up the
State-dominated planned economy to private enterprise. However, the
Government preferred to keep control over consumer prices rather than
leaving them to be determined by the free market.
- By
1990 Government spending increased sharply as a growing number of
unprofitable enterprises required State support, whereas more
resources were diverted to subsidise consumer prices. At the same
time, the elimination of central control over production decisions,
especially in the consumer-goods sector, led to a breakdown in
traditional supply-demand relationships. This resulted in pervasive
shortages of food and basic consumer goods. The Government reacted by
introducing ration stamps for food and certain hygiene articles.
- In
addition to ration stamps, the Government of the Russian Socialist
Federative Soviet Republic (RSFSR)
put into circulation several types of so-called “commodity
bonds” (товарные
чеки)
which gave their bearers the right to purchase consumer goods, such
as refrigerators, washing machines, tape recorders and passenger
cars. The Urozhay-90 (“Harvest-90”) bonds were one
of many types of bonds; they were distributed among agricultural
workers and companies which had sold grain and other agricultural
produce to the State in 1990 and 1991. Those bonds were designed to
encourage agricultural workers to sell produce to the State in
exchange for the right to priority purchasing of goods in high demand
(see paragraph 26 below). The State paid workers for the produce at
fixed prices and also gave them bonds in amounts proportionate to the
value of the produce sold.
- The
Urozhay-90 bonds were not legal tender, but they had a certain
nominal value indicated on their face. That value determined the
maximum purchase price of consumer goods which could be sold on
production of the bonds. The bonds were not intended for payment but
merely for certification of the right to purchase specific goods; the
sale of goods was conditional on payment of the full purchase price
by the bond-holder and production of the bonds for the same amount.
The bonds were not registered in the person's name or otherwise
personalised and the Government Resolution did not prevent them from
being transferred among individuals and legal entities.
- On
2 January 1992 the Russian Government decided to put an end to the
regulation of retail prices. Shops began to fill up with merchandise
but prices increased at a staggering speed (the inflation rate in
1992 was 2,600%). In March 1992, the Government established that
goods available under the bonds would be sold at the prices fixed
before 2 January 1992 (see paragraph 27 below).
- In
August 1992 the Government introduced the possibility of buying out
the bonds with a coefficient of 10. In 1994, the coefficient was
raised to 70 (see paragraphs 28 and 29 below). It appears that a
significant number of bonds were bought out by the State before the
buyout operations were stopped in 1996 (see paragraph 31 below).
- In
1995 the status of the commodity bonds was codified in the Commodity
Bonds Act passed by Parliament (see paragraph 30 below). Its text was
very laconic, shorter than one page, but it purported to cover every
type of commodities bonds issued in previous years. Section 1
recognised the commodity bonds as part of the internal debt of the
Russian Federation; section 2 fixed at ten years the limitation
period for the obligations arising out of commodity bonds (the
starting date was not specified); section 3 required the Government
to adopt a programme for settlement of the internal debt.
- In
2000 the Government presented the programme for settlement of the
internal debt (see paragraph 33 below). It covered every type of
commodity bond, save for the Urozhay-90 bonds. A few months
before the Commodity Bonds Act was amended so as to provide that the
settlement of the debt under the Urozhay-90 bonds would be
regulated by a special federal law (see paragraph 32 below).
- Between
2003 and 2009 the application of section 1 of the Commodity Bonds Act
was suspended in the part concerning the Urozhay-90 bonds, in
accordance with the laws on the federal budget for each successive
year (see paragraph 34 below).
- In
2009 Parliament passed a law on the buyout of the Urozhay-90
bonds and the Government issued implementing regulations which set
out a detailed procedure for buyout of the bonds (see paragraphs 35
and 36 below).
B. The applicant's attempts to obtain redemption of the
bonds
- The
applicant holds Urozhay-90 bonds with a total nominal value of
343,375 non-denominated Russian roubles (RUR).
- On
1 March 2001 the applicant brought an action against the Russian
Government, seeking to recover 8,236,498 Russian roubles (RUB) as
compensation for the bonds. The amount was calculated as the nominal
value of the bonds multiplied by the official inflation co-efficient.
- On
7 May 2001 the Commercial Court of the Amur Region issued a decision
to dismiss the applicant's claim. It noted that the federal law
establishing the procedure for redemption of Urozhay-90 bonds
had not yet been adopted and their maturity date had not been
determined. The Commercial Court held that the plaintiff had not yet
obtained the right to lodge this claim.
- On
20 June 2001 the Appeals Division of the Commercial Court of the Amur
Region quashed the decision of 7 May 2001 on procedural grounds and
remitted the claim for a new examination.
- On
27 August 2001 the Commercial Court of the Amur Region gave judgment.
It established that the Ministry of Finance, rather than the Russian
Government, should have been the proper defendant in the applicant's
claim for damages because the Russian Government had not committed
any unlawful actions. As the applicant refused to substitute the
original defendant or to join the Ministry of Finance as a
co-defendant and as the court was not competent to do so of its own
motion, it determined to disallow the applicant's claim.
- On
22 October 2001 the Appeals Division of the Commercial Court of the
Amur Region upheld the judgment of 27 August 2001.
- Counsel
for the applicant, Mr Okunev, submitted a cassation appeal. On 23
November 2001 the Federal Commercial Court of the Far-Eastern Circuit
fixed the hearing date for 11 December 2001. Mr Okunev had been
notified of that decision on 3 December 2001 by registered mail.
- On
11 December 2001 the Federal Commercial Court heard oral submissions
by Mr Okunev and adjourned the hearing until 17 December 2001.
- On
17 December 2001 Mr Okunev did not appear at court. In the absence of
any valid reason for his absence, the Federal Commercial Court
proceeded with the hearing and upheld, in the final instance, the
judgments of 27 August and 22 October 2001. It confirmed that
the actions of the Russian Government had been lawful and that the
Ministry of Finance was responsible for the debts chargeable to the
treasury.
II. RELEVANT DOMESTIC LAW AND PRACTICE
- On 26 July 1990 the RSFSR Council of Ministers adopted
Resolution no. 259 on urgent measures for increasing the
purchase of agricultural products harvested in 1990 and for ensuring
their safe keeping. Its relevant parts resolved as follows:
I. Measures to increase the independence
of decision-making by collective and Soviet farms concerning the sale
of the harvest
“1. To authorise all manufacturers of
agricultural produce to sell the surplus of such produce that remains
after delivery under existing agreements ... to procurers or other
consumers at negotiated prices...
2. To declare inadmissible any restrictions
on the sale or shipment of agricultural produce to consumers in
autonomous districts or regions of the RSFSR under paragraph 1 of the
present resolution... Should local councils introduce such
restrictions in their territories, the RSFSR Council of Ministers may
stop issuing Urozhay-90 bonds or delivering goods on the basis
of them in those territories...”
II. Measures to encourage the sale of
agricultural produce to the State through the reciprocal sale of
goods in high demand
“7. To begin issuing, in 1990,
Urozhay-90 bonds to employees of collective and Soviet farms,
other agro-industrial enterprises and organisations, peasants' farms
and owners of personal subsidiary land plots in respect of
agricultural produce sold to the State.
To determine that the bonds certify the right to
purchase goods in high demand at retail prices in trade outlets. The
said bonds are not legal tender.
8. The RSFSR Ministry of Finance and the
RSFSR Ministry of Agriculture and Food will, until 1 September 1990,
print and put into circulation through the branches of the RSFSR
State Bank Urozhay-90 bonds for a total amount of 10 billion
roubles. The bonds are to be used before 1 October 1991.
9. To establish that Urozhay-90 bonds are
issued by the branches of the RSFSR State Bank:
- to all producers who sold standard products to the
State between 1 July 1990 and 30 June 1991 ... in an amount
equivalent to 10% of the value of the products sold...
...
13. The Russian Consumers' Association is to
submit to the RSFSR Ministry for Foreign Economic Relations requests
for those goods in high demand which are to be sold on production of
the Urozhay-90 bonds, and organise their sale, on advance
orders by citizens and organisations, at regional fairs and
exhibitions and in specialised trade outlets. The Consumers'
Associations is to deliver goods to the consumers on the basis of the
Urozhay-90 bonds no later than 1 January 1990 [sic]. In
1991 orders under the said bonds will be executed within two months.”
- On 15 March 1992 the Russian Government issued
Resolution no. 161, intended to compensate the owners of
Urozhay-90 bonds for an increase in retail prices. It
resolved, in particular:
“1. To establish that passenger cars
and other consumer goods which are made available to citizens as a
reward for the grain and other agricultural produce that was sold to
the State in 1990 and 1991 are to be sold at the retail prices that
prevailed before 2 January 1992...
2. To extend the period of validity of the
Urozhay-90 bonds until the end of 1992...”
- On 10 August 1992 the Government adopted Resolution
no. 1442-r. It required the Russian ministries to allocate
substantial amounts for the purchase of goods that were to be sold on
production of the Urozhay-90 bonds. It further provided:
“4. The Ministry for Trade and Material
Resources, in cooperation with the Central Consumers' Union, shall
define, within two weeks, the list of goods intended for the
implementation of the Urozhay-90 bonds...
5. The Prices Committee of the Ministry of
the Economy shall determine the increase in prices of domestic and
imported goods since 1990... The price difference shall be reimbursed
from the republican budget.
6. The Ministry of Agriculture shall carry
out an inventory of bonds held by agricultural enterprises and
organisations and private individuals as on 1 September.
7. The Ministry of Finance and the Ministry
of Agriculture shall, within two weeks, lay down the procedure for
the buyout of the Urozhay-90 bonds through the branches of the
Savings Bank. It is to be taken into account that these bonds may be
either used for purchasing goods or bought out by the State with a
coefficient of 10.”
- On 16 April 1994 the Government approved Regulation
no. 344 on State commodity bonds, which provided as follows:
“With a view to redeeming the State commodity
bonds and preventing accrual of the State's liability to compensate
for price differences, the Government of the Russian Federation
resolves:
1. The Ministry of Finance of the Russian
Federation –
– will buy out ... the Urozhay-90 bonds at
a price equivalent to their nominal value multiplied by 70 and credit
that amount into a bank account...”
30. On 1 June
1995 the Commodity
Bonds Act (no.
86-FZ, ФЗ
«О государственных
долговых товарных
обязательствах»)
was enacted. It
provided that State commodity bonds, including Urozhay-90
bonds, would be recognised as part of the internal State debt of the
Russian Federation (section 1). The obligations arising out of
the commodity bonds would be settled in accordance with the general
principles of the Russian Civil Code, the limitation period being set
at ten years (section 2). The original wording of section 3 provided:
“The Government of the Russian Federation shall
draft, in 1995-1997, the State Programme for settlement of the
internal debt of the Russian Federation described in section 1, based
on the principle of full compensation. The Programme shall provide
for redemption terms ... convenient for citizens, including,
according to their choice: provision of goods designated in ... the
State bonds issued to agricultural suppliers ...; redemption of State
commodity bonds at consumer prices prevailing at the time of the
redemption ...; conversion of the debt into State securities...”
- On 16 January 1996 the Government adopted Resolution
no. 33, by which it annulled Regulation no. 344 and instructed the
Ministry of Finance to redeem the State commodity bonds within the
amounts allocated for that purpose in the federal budget.
- On 2 June 2000, section 3 of the Commodity Bonds Act
was amended to provide that the procedure for implementation of the
State's obligations to holders of the Urozhay-90 bonds would
be determined in a special federal law.
- On 27 December 2000 the Government adopted the State
Programme for settlement of the internal debt of the Russian
Federation. Paragraph 14 of the Programme provided that the procedure
for payments in respect of the Urozhay-90 bonds would be
determined in a special federal law.
- In 2003 the application of section 1 of the Commodity
Bonds Act was for the first time suspended in the part concerning the
Urozhay-90 bonds. The suspension clause was maintained in the
following years (Federal Law no. 176-FZ of 24 December
2002; no. 186-FZ of 23 December 2003; no. 173-FZ of 23 December
2004; no. 189-FZ of 26 December 2005; no. 238-FZ of 19 December
2006; and no. 198-FZ of 24 July 2007).
- On 19 July 2009 a federal law governing the procedure
for the buyout of the Urozhay-90 bonds was adopted (no. 200-FZ
– “the Buyout Act”). It established that holders of
the bonds would be paid, in the period between 15 December 2009 and
31 December 2010, an amount equivalent to the nominal value of the
bonds divided by 1,000 (section 2). The law also amended the
Commodity Bonds Act by removing the reference to the Urozhay-90
bonds from section 1 of that Act.
- On 15 September 2009 the Government issued Resolution
no. 749, setting out the detailed procedure for payments in exchange
for the production of Urozhay-90 bonds.
- On 15 December 2000 the Constitutional Court gave a
decision on an application lodged by the Parliament of the Sakha
(Yakutiya) Republic, which had claimed that the amendments of 2 June
2000 (see above) had indefinitely delayed the implementation of the
State's obligations towards the bearers of the Urozhay-90
bonds. The Constitutional Court declared the application inadmissible
for the following reasons:
“In its [previous decisions] the Constitutional
Court has already determined that a unilateral change in the scope of
the State's obligations towards individuals, including the obligation
to sell goods in exchange for commodity bonds, is impermissible. This
does not exclude, however, the possibility of imposing restrictions
on the property rights of individuals – in an established form
and within the constitutional limits – in the matter of State
obligations, which is compatible with Article 55 § 3 of the
Constitution.
In particular, it follows from the case-law of the
Constitutional Court ... that implementation of the rights and lawful
interests of individual citizens or groups of citizens should not
excessively and adversely affect the budgetary resources allocated
for satisfying the rights and interests of society as a whole. This
principle becomes particularly relevant in a situation where
budgetary resources are insufficient to resolve many social problems
relating to the exercise of the rights to life and personal dignity.
It follows that the balance between the rights and lawful interests
of the individuals who act as creditors for the State in property
relationships, on the one hand, and everyone else, on the other hand,
may, in principle, be struck only in the form of an act of
Parliament.
Hence, given that the legislature may restrict
individual rights and freedoms (including property rights) for the
purpose of the protection of the rights and lawful interests of
others, a review of the federal law amending section 3 of the
Commodity Bonds Act by the Constitutional Court would imply an
assessment of the financial and economic justification for the
legislative decision on the procedure for settlement of State
commodity bonds, which ... falls outside the jurisdiction of the
Constitutional Court.
When examining claims relating to settlement of the
State commodity bonds, courts of general jurisdiction have the right
and duty to interpret the legislative provisions in the light of the
interests of the individual (Articles 2 and 18 of the Constitution)
and be guided, in particular, by section 2 of the Commodity Bonds
Act, which establishes that State commodity bonds are to be settled
in an appropriate form and in accordance with the Civil Code of the
Russian Federation.”
THE LAW
I. ALLEGED VIOLATION OF ARTICLE 1 OF PROTOCOL No. 1
- The
applicant complained under Article 1 of Protocol No. 1 about the
Russian State's continued failure to legislate on the procedure for
redemption of Urozhay-90 bonds. Article 1 of Protocol No. 1
provides:
“Every natural or legal person is entitled to the
peaceful enjoyment of his possessions. No one shall be deprived of
his possessions except in the public interest and subject to the
conditions provided for by law and by the general principles of
international law.
The preceding provisions shall not, however, in any way
impair the right of a State to enforce such laws as it deems
necessary to control the use of property in accordance with the
general interest or to secure the payment of taxes or other
contributions or penalties.”
A. The Government's preliminary objection
- The
Government, in their additional observations of 18 November 2008
following the Court's decision as to the admissibility of the
application on 11 September 2008, contended for the first time that
the applicant had not exhausted domestic remedies in respect of its
complaint under Article 1 of Protocol No. 1. They submitted that
the Russian courts had not actually taken cognisance of the merits of
the applicant's claim because it had been lodged against the wrong
defendant and therefore rejected on a procedural ground. Furthermore,
the applicant had not applied to the Supreme Commercial Court of the
Russian Federation with a request for supervisory review.
- The
applicant pointed out that the Government's objection as to the
non-exhaustion of the domestic remedies was belated at this stage of
proceedings.
- The
Court reiterates that, according to Rule 55 of the Rules of
Court, any plea of inadmissibility must, in so far as its character
and the circumstances permit, be raised by the respondent Contracting
Party in its written or oral observations on the admissibility of the
application (see Prokopovich v. Russia, no. 58255/00, §
29, ECHR 2004 XI (extracts), with further references). The
Government's submissions referred to the events that had occurred
before the application was lodged with the Court and there had been
no relevant legal developments thereafter. There are no exceptional
circumstances which would have absolved the Government from the
obligation to raise their preliminary objection before the Court's
decision as to the admissibility of the application on 11 September
2008.
- Consequently,
the Government are estopped from raising a preliminary objection of
non-exhaustion of domestic remedies at the present stage of the
proceedings. The objection must therefore be dismissed.
B. Submissions by the parties
1. The applicant
- The
applicant pointed out that it had received the Urozhay-90 bonds
in 1990 in exchange for the agricultural produce it had supplied to
the State. At that time it existed in the form of a collective farm
(колхоз), but had been
subsequently re-organised into the agricultural co-operative
“Dimskiy”.
- The
applicant emphasised that the State had not discharged its
obligations under the bonds which have remained outstanding to date.
According to the general principles of Russian law, any outstanding
obligation or debt has a value. The obligation arising out of the
bonds could be settled either by implementing the right to purchase
goods in high demand or, if that right had not been implemented, by
paying compensation in the amount indicated in the bond. However,
neither has been done which amounted to a breach of trust and
confidence in business relations between the applicant and the State
and also frustrated the applicant's legitimate expectation to be paid
for the produce it had supplied to the State.
- The
Government's argument about insufficient budgetary funds as a reason
for introducing a moratorium on settlement of the commodity bonds was
unconvincing for the applicant. As of late the revenues of the
Russian federal budget had constantly exceeded expenditure and
multi-billion amounts had been transferred into the Stabilisation
Fund. In the applicant's view, there were no exceptional
circumstances which would be able to account for such a protracted
failure to regulate the payment of compensation under the Urozhay-90
bonds.
2. The Government
- The
Government claimed that the Urozhay-90 bonds did not
constitute “property rights” or “possessions”
within the meaning of Article 1 of Protocol No. 1. They
distinguished the present case from the Broniowski v. Poland case
([GC], no. 31443/96, ECHR 2004 V), in which the obligation of
the Polish authorities to compensate repatriated persons for
abandoned property had not been disputed. In the Government's view,
the present case had similarities with the situation obtaining in the
Grishchenko v. Russia case ((dec.), no. 75907/01, 8 July
2004), in which the Court had found that the applicant's claim under
a commodity bond for the purchase of a Russian-made car had not been
sufficiently established to be enforceable.
- The
Government emphasised the specific legal nature of the Urozhay-90
bonds. The bonds were not legal tender; they could not be exchanged
for goods or money. They merely certified the holder's right to
purchase goods in high demand, but he or she could only do so at his
or her own expense. The bonds were distributed in addition to payment
for agricultural produce as an incentive for farmers to sell produce
to the State. Thus, the face value of a bond did not represent the
amount the State owed to the holder but rather the scope of the
holder's entitlement to purchase goods which had not been otherwise
available for purchase in the early 1990s.
- The
Government pointed out that the bonds had been issued as an
individual incentive and that the applicable regulations did not
provide for a possibility of their sale or purchase. Referring to the
fact that the applicant had been incorporated in 1992, they claimed
that the applicant's bonds had been bought from third parties. It
could not therefore be said to have suffered an “individual and
excessive burden”, because it had not submitted any information
on the price at which it had purchased the bonds.
- According
to the Government's position, the obligations arising out of the
Urozhay-90 bonds could not described as a “debt”
because the holders had not given their money to the State and
because the State had paid for the agricultural produce. Their
recognition in the Commodity Bonds Act as internal debt was
“mistaken”. The application of the Act had been suspended
by successive laws on the federal budget. The interference therefore
had a lawful basis and the domestic courts had taken reasoned and
justified decisions to dismiss the applicant's claims. It was also in
the public interest since, in a situation where the budgetary
resources were insufficient to satisfy pressing social needs, the
State had a duty to protect the budget from excessive spending.
- Finally,
the Government indicated that at the time of submission of their
memorandum a draft law governing the procedure for buyout of the
Urozhay-90 bonds had been prepared and submitted to Parliament
for a vote. The law would regulate all aspects of redemption of the
bonds.
C. The Court's assessment
1. Applicability of Article 1 of Protocol No. 1
- The
concept of “possessions” in the first part of Article 1
of Protocol No. 1 has an autonomous meaning which is not limited to
the ownership of material goods and is independent from the formal
classification in domestic law. In the same way as material goods,
certain other rights and interests constituting assets can also be
regarded as “property rights”, and thus as “possessions”
for the purposes of this provision. In each case the issue that needs
to be examined is whether the circumstances of the case, considered
as a whole, conferred on the applicant title to a substantive
interest protected by Article 1 of Protocol No. 1 (see Broniowski,
cited above, § 129; Iatridis v. Greece [GC], no.
31107/96, § 54, ECHR 1999-II; and Beyeler v. Italy
[GC], no. 33202/96, § 100, ECHR 2000-I).
- When
declaring the application admissible, the Court examined the issue of
applicability of Article 1 of Protocol No. 1. It found that the scope
of the entitlement conferred by the Urozhay-90 bonds on their
holders had not been identical throughout their lifetime. In the
initial period following their introduction and until early 1992, the
bonds had had no independent value, being merely an administrative
instrument for the distribution of consumer goods in high demand. In
the subsequent period the right the bonds had originally certified –
the right to purchase goods in high demand – lost its value and
relevance on transition to the market economy. However, the legal
regulations governing the bonds evolved in line with the changing
economic conditions in Russia, with the result that the bonds were
firstly treated as equivalent to discount coupons, later gave access
to monetary compensation and, eventually, were recognised as part of
the internal debt by the Commodity Bonds Act.
- The
Court further noted that by enacting the Commodity Bonds Act in 1995,
the Russian State had taken upon itself an obligation to settle the
debt arising out of the Urozhay-90 bonds. That obligation
existed both on the date of the ratification of Protocol No. 1 by
Russia (5 May 1998) and on the date of the submission of the present
application to the Court. Although the application of the relevant
provision of the Commodity Bonds Act had been suspended for many
years, it had not been revoked or annulled. Moreover, despite the
discrepancy in the grounds invoked by the domestic courts which had
rejected the applicant's claims, the domestic judgments had
acknowledged the existence of a debt arising out of the Urozhay-90
bonds under the Commodity Bonds Act and chargeable to the State.
- In
sum, the Court found that the applicant had a proprietary interest
which was both recognised under Russian law and acknowledged by
Russian courts and which qualified for protection under Article 1 of
Protocol No. 1. It finds nothing in the Government's present
arguments to change the conclusion that, as has already been
established in the decision on admissibility, the applicant's right
to obtain redemption of the debt arising out of the Urozhay-90
bonds constitutes a “possession” within the
meaning of that Convention provision.
- Following
the decision on the admissibility of the application, the Russian
Parliament amended the Commodity Bonds Act by removing the reference
to the Urozhay-90 bonds, and also passed a law governing the
buyout of those bonds. This welcome development has put an end to the
situation of legal uncertainty which was the main subject of the
applicant's complaint. However, the Court reiterates that the issue
must be seen from the perspective of what “possessions”
the applicant had on the date of the Protocol's entry into force and,
critically, on the date on which he submitted the complaint to the
Court (see Broniowski, cited above, § 132). As noted
above, on both those dates the debt arising out of the bonds had been
recognised but the implementing regulations had not been adopted,
making redemption of the bonds impossible.
- The
fact that the applicant complained about the lack of legal regulation
of its entitlement distinguishes the present case from the situation
obtaining in the Grishchenko case, to which the Government
referred above. Ms Grishchenko possessed a different type of a
commodity bond, one that originally certified her right to purchase a
passenger car. She lodged a complaint with the Court after the
Government had defined the procedure for redemption of bonds of that
type, because she was dissatisfied with the Government's decision to
grant an allegedly insufficient sum of money instead of a real car.
The thrust of her complaint under Article 1 of Protocol No. 1 was
therefore not the lack of regulation of her entitlement but rather
the adequacy of compensation, a matter which is not in issue in the
instant case.
- Having
regard to the above, the Court finds that for the purposes of Article
1 of Protocol No. 1, the applicant's “possessions”
comprised the entitlement to obtain some form of compensation for, or
redemption of, the Urozhay-90 bonds. While that right was
created in a kind of inchoate form, as its materialisation was
conditional on the enactment of implementing legislation, at the
material time section 1 of the Commodity Bonds Act clearly
constituted a legal basis for the State's obligation to implement it
(compare Broniowski, cited above, § 133).
2. The applicable rule and the nature of the alleged
violation
- Article
1 of Protocol No. 1 comprises three distinct rules: the first rule,
set out in the first sentence of the first paragraph, is of a general
nature and enunciates the principle of the peaceful enjoyment of
property; the second rule, contained in the second sentence of the
first paragraph, covers deprivation of possessions and subjects it to
certain conditions; the third rule, stated in the second paragraph,
recognises that the Contracting States are entitled, inter alia,
to control the use of property in accordance with the general
interest. The three rules are not, however, distinct in the sense of
being unconnected. The second and third rules are concerned with
particular instances of interference with the right to peaceful
enjoyment of property and should therefore be construed in the light
of the general principle enunciated in the first rule (see
Broniowski, § 134; Iatridis, § 55; and
Beyeler, § 98, all cited above).
- The
parties did not take a clear position on the question under which
rule of Article 1 of Protocol No. 1 the case should be examined.
Having regard to the complexity of the legal and factual issues
involved, the Court considers that the alleged violation of the
applicant's property rights cannot be classified in a precise
category. In any event, the situation mentioned in the second
sentence of the first paragraph is only a particular instance of
interference with the right to peaceful enjoyment of property as
guaranteed by the general rule laid down in the first sentence (see
Beyeler, cited above, § 106). The case should
therefore more appropriately be examined in the light of that general
rule (compare Broniowski, cited above, §§ 135-136).
- The
Court further reiterates that the boundaries between the State's
positive and negative obligations under Article 1 of Protocol No. 1
do not lend themselves to precise definition. The applicable
principles are nonetheless similar. Whether the case is analysed in
terms of a positive duty of the State or in terms of an interference
by a public authority which needs to be justified, the criteria to be
applied do not differ in substance. In both contexts regard must be
had to the fair balance to be struck between the competing interests
of the individual and of the community as a whole. It also holds true
that the aims mentioned in that provision may be of some relevance in
assessing whether a balance between the demands of the public
interest involved and the applicant's fundamental right of property
has been struck. In both contexts the State enjoys a certain margin
of appreciation in determining the steps to be taken to ensure
compliance with the Convention (see Broniowski, cited
above, § 144, and Hatton and Others v. the United Kingdom
[GC], no. 36022/97, §§ 98 et seq., ECHR
2003-VIII).
- In
the present case the applicant's submission under Article 1 of
Protocol No. 1 is that the Russian State, having conferred on it an
entitlement to seek redemption of the Urozhay-90 bonds, made
it impossible to benefit from that entitlement by failing for years
to adopt the implementing regulations. That situation may well be
examined in terms of a hindrance to the effective exercise of the
right protected by Article 1 of Protocol No. 1 or in terms of a
failure to secure the implementation of that right (compare
Broniowski, cited above, § 146).
- The
Court will determine whether the conduct of the Russian State was
justifiable in the light of the principles of lawfulness, pursuance
of a legitimate aim in the public interest and striking of a fair
balance between the general interest of the community and the
applicant's right to the peaceful enjoyment of its possessions (see,
for a detailed description of those principles, Broniowski,
cited above, §§ 147-151).
3. Compliance with Article 1 of Protocol No. 1
(a) Respect for the principle of
lawfulness
- The
Court notes that the application of section 1 of the Commodity Bonds
Act in the part concerning the Urozhay-90 bonds was repeatedly
suspended through the laws on the federal budget for each successive
year (see paragraph 34 above).
- It
is therefore satisfied that an interference with, or a restriction
on, the exercise of the applicant's right to the peaceful enjoyment
of its possessions was “provided for by law” within the
meaning of Article 1 of Protocol No. 1.
(b) Existence of a legitimate aim in the
public interest
- The
Government indicated that the restriction on the implementation of
the bond-holders' entitlement sought to prevent excessive expenditure
from the federal budget. This position was reflected in the decision
of the Russian Constitutional Court, which held that the necessity to
restrict property rights could arise “in a situation where
budgetary resources [were] insufficient to resolve many social
problems relating to the exercise of the rights to life and personal
dignity” (see paragraph 37 above).
- The
Court observes that in the 1990s the Russian State went through a
tumultuous transition from a State-controlled to a market economy.
Its economic well-being was further jeopardised by the financial
crisis of 1998 and the sharp devaluation of the national currency.
Even though it has achieved relative prosperity and wealth in recent
years, the Court agrees that defining budgetary priorities in terms
of favouring expenditure on pressing social issues to the detriment
of claims with a purely pecuniary nature was a legitimate aim in the
public interest.
(c) Striking of a fair balance between the
general interest and the applicant's rights
- The
Court notes at the outset that, by contrast with the situation
obtaining in the above-mentioned Broniowski case and other
similar cases, for instance, Ramadhi and Others v. Albania (no.
38222/02, 13 November 2007) and Deneş and Others v. Romania
(no. 25862/03, 3 March 2009), the applicant had not suffered an
initial taking or loss of property which the State had undertaken to
compensate for. The bonds of which the applicant was the holder were
given to agricultural workers as an additional incentive to encourage
them to sell their produce to the State, which had paid for it at
fixed prices. Nor could these bonds be used as legal tender or a
money substitute: they certified the bearer's right to purchase goods
in high demand but the buyer still had to pay the full purchase price
in cash or otherwise. These particular features of the bonds may be
relevant for an assessment of the level of compensation which was
eventually offered to the bond-holders, since the Court has already
considered that a substantially reduced amount of compensation may be
acceptable in a situation in which the compensatory entitlement does
not arise from any previous taking of individual property by the
respondent State but is designed to mitigate the effects of a taking
or loss of property not attributable to the State (see Broniowski,
cited above, §§ 182 and 186). However, the Court
reiterates that the applicant's complaints in the instant case do not
concern the amount of compensation recoverable under the Buyout Act
passed in 2009; its grievances stemmed from the fact that, in passing
the Commodity Bonds Act, the Russian State had voluntarily taken upon
itself an obligation towards bearers of the bonds that had not been
discharged for many years owing to the absence of a legislative
framework for its implementation.
- The
rule of law underlying the Convention and the principle of lawfulness
in Article 1 of Protocol No. 1 require States not only to respect and
apply, in a foreseeable and consistent manner, the laws they have
enacted, but also, as a corollary of this duty, to ensure the legal
and practical conditions for their implementation (see Broniowski,
cited above, §§ 147 and 184). In the context of the present
case, those principles required the Russian State to fulfil in good
time, in an appropriate and consistent manner, the legislative
promises it had made in respect of claims arising out of the
Urozhay-90 bonds. In particular, it was incumbent on the
authorities to legislate on the conditions for implementation of the
bond-bearers' entitlement with a view to satisfying the undertaking
that had been created through the enactment of the Commodity Bonds
Act. The Court is not persuaded by the Government's submission that
the recognition of the bonds as part of the State's internal debt had
been “mistaken”. Even if this were so, no explanation was
offered as to why that alleged mistake had not been promptly
identified and corrected through an appropriate amendment of the
Commodity Bonds Act. It could not have been due to a mere oversight
or oblivion because the application of section 1 of the Commodity
Bonds Act in the part concerning the Urozhay-90 bonds had been
explicitly and repeatedly suspended for many years in the successive
laws on the federal budget.
- During
the entire period between the enactment of the Commodity Bonds Act in
1995 and the approval of the Buyout Act in 2009, the conduct of the
Russian authorities appears to have been passive vis-à-vis
the implementation of the entitlement of the bond-bearers which had
been continuously recognised as part of the State's internal debt.
The information available to the Court does not allow it to find that
the Russian Government took any measures in that period with a view
to satisfying the claims arising out of the bonds. No draft
legislation governing the State's obligations under the bonds had
been proposed or discussed in Parliament. The preparatory work which
was essential for drafting such legislation had not been carried out.
The inventory of the bonds, which had already been decided upon in
the Government's Resolution of 10 August 1992 (see paragraph 28
above), had never been completed and, accordingly, the exact number
and amount of the outstanding bonds could not have been known. The
Court therefore finds that the Government's argument that the
restrictions on redemption of the bonds had been necessary to prevent
excessive expenditure from the federal budget is hardly persuasive.
An appropriate balancing exercise determining the exact amount that
would be required to settle the debt under the bonds in relation to
other priority expenses could not have been possible in the absence
of crucial figures, such as the quantity and total valuation of the
remaining bonds. While the Court agrees that the radical reform of
Russia's political and economic system, as well as the state of the
country's finances, may have justified stringent financial
limitations on rights of a purely pecuniary nature, it finds that the
Russian Government were not able to adduce satisfactory grounds
justifying, in terms of Article 1 of Protocol No. 1, the continuous
failure over many years to implement an entitlement conferred on the
applicant by Russian legislation.
- As
regards the conduct of the applicant, the Court reiterates that
following the enactment of the Commodity Bonds Act it had a
legitimate expectation of obtaining some form of compensation for, or
redemption of, the Urozhay-90 bonds. It did not remain passive
but rather displayed an active attitude by filing a claim with the
domestic courts and making use of the appeals procedure. The
Government did not suggest that any other effective domestic remedies
were available to it. In these circumstances, it cannot be said that
the applicant was responsible for, or culpably contributed to, the
state of affairs which it complained about (compare Broniowski,
cited above, § 181). Rather, as the Court has found on the
strength of the evidence before it, the hindrance to the peaceful
enjoyment of its possessions was solely attributable to the
respondent State.
- On
balance, the Court considers that the Russian authorities, by
imposing successive limitations on the application of the legislative
provision establishing the basis for the applicant's right to
redemption of the Urozhay-90 bonds and by failing for years to
legislate on the procedure for implementation of that entitlement,
kept the applicant in a state of uncertainty, which was incompatible
in itself with the obligation arising under Article 1 of Protocol No.
1 to secure the peaceful enjoyment of possessions, notably with the
duty to act in good time, in an appropriate and consistent manner
where an issue of general interest is at stake (see Broniowski,
cited above, §§ 151 and 185).
- There
has therefore been a violation of Article 1 of Protocol No. 1.
II. ALLEGED VIOLATION OF ARTICLE 6 OF THE CONVENTION
- The
applicant complained that the Federal Commercial Court had not
notified its counsel of the date of the hearing before it and
undermined thereby the right to a fair hearing enshrined in Article 6
§ 1 of the Convention, which provides as follows:
“In the determination of his civil rights and
obligations ..., everyone is entitled to a fair ... hearing ... by
[a] ... tribunal ...”
- The
applicant claimed that counsel had not been notified of the
adjournment of the hearing until 17 December 2001 by mail delivery.
- The
Government submitted that counsel had been informed by mail that the
hearing would take place on 11 December 2001. On that date he had
appeared before the Federal Commercial Court and made oral
submissions. The court had subsequently decided to adjourn the
hearing until 17 December 2001, of which counsel had been
immediately informed. However, on 17 December 2001 he had not
appeared at court.
- The Court has previously found a violation of the
right to a “public and fair hearing” in several cases
against Russia, in which a party to civil litigation was deprived of
an opportunity to attend the hearing because of the belated or
defective service of the summons (see Yakovlev v. Russia,
no. 72701/01, §§ 19 et seq., 15 March 2005;
Groshev v. Russia, no. 69889/01, §§ 27 et seq.,
20 October 2005; and Mokrushina v. Russia, no.
23377/02, 5 October 2006). The situation in the present case was
different. Counsel for the applicant had been duly informed of the
hearing on 11 December 2001 by mail. The decision to adjourn the
hearing until 17 December 2001 had been communicated to him in
person. Thus, it transpires that he had been fully aware of the new
hearing date but had not appeared at court, without giving a valid
reason for his absence.
- There
has therefore been no violation of Article 6 of the Convention.
III. APPLICATION OF ARTICLE 41 OF THE CONVENTION
- Article 41 of the Convention provides:
“If the Court finds that there has been a
violation of the Convention or the Protocols thereto, and if the
internal law of the High Contracting Party concerned allows only
partial reparation to be made, the Court shall, if necessary, afford
just satisfaction to the injured party.”
A. Damage
- The
applicant claimed RUR 21,241,324.10 as compensation in respect of
pecuniary damage, which represented the nominal value of the bonds
adjusted for the inflation since 1991, and 10,000 euros (EUR) in
respect of non-pecuniary damage.
- The Government objected to an award of just
satisfaction, claiming that the applicant had not suffered any damage
because the bonds had not been legal tender and only certified the
bearer's right to buy goods in high demand. They also considered that
the claim for non-pecuniary damage was excessive and unsubstantiated.
- As
regards pecuniary damage, the Court notes that, following the
enactment of the Buyout Act in 2009 and the Government's Resolution
governing the buyout procedure (see paragraphs 35 and 36 above), it
is now open to the applicant to apply to the competent domestic
authorities for redemption of its bonds.
- The
Court further considers that, in the circumstances of the case and
having regard to the applicant's status as a legal entity, the
finding of a violation constitutes in itself sufficient just
satisfaction for any non-pecuniary damage. Accordingly, it dismisses
the applicant's claim in respect of damage.
B. Costs and expenses
- The
applicant further claimed the court fee of RUR 55,241.62 and RUR
99,000 for its representation in the domestic and Strasbourg
proceedings. Copies of legal-services agreements were submitted. The
Government did not make specific comments on this claim.
- Having
regard to the material in its possession, the Court considers it
reasonable to award EUR 1,000, plus any tax that may be chargeable to
the applicant on that amount.
C. Default interest
- The
Court considers it appropriate that the default interest should be
based on the marginal lending rate of the European Central Bank, to
which should be added three percentage points.
FOR THESE REASONS, THE COURT UNANIMOUSLY
- Holds that there has been a violation of Article
1 of Protocol No. 1;
- Holds that there has been no violation of
Article 6 of the Convention;
- Holds
(a) that
the respondent State is to pay the applicant, within three months
from the date on which the judgment becomes final in accordance with
Article 44 § 2 of the Convention, EUR 1,000 (one
thousand euros) in respect of costs and expenses, plus any tax that
may be chargeable to the applicant, to be converted into Russian
roubles at the rate applicable at the date of settlement;
(b) that
from the expiry of the above-mentioned three months until settlement
simple interest shall be payable on the above amount at a rate equal
to the marginal lending rate of the European Central Bank during the
default period plus three percentage points;
- Dismisses the remainder of the applicant's claim
for just satisfaction.
Done in English, and notified in writing on 18 March 2010, pursuant
to Rule 77 §§ 2 and 3 of the Rules of Court.
André Wampach Christos Rozakis
Deputy
Registrar President
