In the case of Agrokompleks v. Ukraine,
The European Court of Human Rights (Fifth Section), sitting as
a Chamber composed of:
Mark Villiger, President,
Angelika Nußberger,
Boštjan M. Zupančič,
Ann Power-Forde,
Ganna Yudkivska,
Helena Jäderblom,
Aleš Pejchal, judges,
and Claudia Westerdiek,
Section Registrar,
Having deliberated in private on 2 July 2013,
Delivers the following judgment, which was adopted on that
date:
PROCEDURE
The case originated in an application (no.
23465/03) against Ukraine lodged with the Court under Article 34 of the
Convention for the Protection of Human Rights and Fundamental Freedoms (“the
Convention”) by Agrokompleks JSC (“the applicant company”) on 23 June 2003.
The applicant company was represented, at different
times, by Cabinet Lucas-Delvolve (a French law firm), Salkom (a Ukrainian law
firm), and Trillat and Associés (a French law firm). The Ukrainian Government
(“the Government”) were most recently represented by their Agent, Mr N. Kulchytskyy.
In a judgment delivered on 6 October 2011 (“the principal
judgment”), the Court found several violations of Article 6 of the Convention
and Article 1 of Protocol No. 1 in respect of the insolvency proceedings
initiated by the applicant company against LyNOS, a State-owned oil refinery.
The Court held that the domestic courts dealing with the case could not be
regarded as independent or impartial given the blatant interferences of the
highest State authorities in the proceedings. It also held that the principle
of legal certainty enshrined in Article 6 of the Convention had been violated by
the quashing of the final judicial ruling of 2 July 1998 determining the amount
of the debt owed by LyNOS to the applicant company. Furthermore, the length of
the insolvency proceedings in question was found to have been excessive.
Lastly, the Court found a violation of Article 1 of Protocol No. 1 on account
of the aforementioned issues, as the proceedings in question had had a direct
impact on the property interests of the applicant company.
Since the question of the application of Article
41 of the Convention was not ready for decision, the Court reserved it and
invited the Government and the applicant company to submit, within three months
of the date on which the judgment became final, their written observations on
that issue and, in particular, to notify the Court of any agreement they might
reach (see the principal judgment, § 178, and point 7 of the operative
provisions).
On 8 March 2012 a panel of five judges of the
Grand Chamber rejected the Government’s request for the referral of the case to
the Grand Chamber. The judgment therefore became final.
The time-limit set for the parties to reach an
agreement passed without the conclusion of such an agreement. The applicant
company and the Government each filed observations on the application of
Article 41 of the Convention.
THE FACTS
I. THE CIRCUMSTANCES OF THE CASE
The applicant
company is a private company registered in Ukraine. It belongs to a group of
several companies (known as “the Agrokompleks Group”) whose business activities
include the production of foodstuffs, various packaging and plastic items,
printing, the wholesaling of foodstuffs and drinks and tobacco, and other types
of wholesale trade. At the time of the events the applicant company carried out,
in particular, transactions with Russian companies involving the exchange of
raw foodstuffs from Ukraine for Russian crude oil, and the further sale of
finished oil products.
A. Events and documents prior to the adoption of the
principal judgment
In 1991-1993 the applicant company supplied for
refining 375,000 tons of crude oil to LyNOS (then named the Lysychansk Oil
Refinery), the largest oil refinery in Ukraine, 67.41% of whose shares were
owned by the State. It received back only a small part of the oil products due
to it.
By decisions of 18 November 1994, 5 April 1995,
19 July 1996 and 3 March 1997, the domestic arbitration courts allowed the
applicant company’s claims against the Refinery (a detailed summary of these
decisions can be found in §§ 11, 13, 15 and 18 of the principal judgment).
On 9 August 1996 insolvency proceedings were
initiated against LyNOS.
On 20 August 1997 the applicant company signed an
agreement with LyNOS concerning the repayment by the latter of its arrears resulting
from its failure to comply with its contractual obligations vis-à-vis the
applicant company, as established by several judicial decisions. In signing that
agreement, the debtor acknowledged its debt in the amount of 225,355,355 Ukrainian
hryvnias (UAH), which was, according to the agreed schedule, to be repaid in
kind within five years. The agreement contained a detailed breakdown of the
aforementioned sum. It consisted of the following amounts:
(a) a monetary debt of UAH 29,441,292 pursuant to
the judgment of the Higher Arbitration Court (“the HAC”) of 5 April 1995, calculated
on the basis of the prices of the oil products as of 1 April 1995;
(b) UAH 26,370,434, being the value of the
undelivered oil products, namely: 13,670 tons of A-80 petrol, 37,135 tons of
diesel and 26,997 tons of fuel oil, which remained due to the applicant company
under the HAC judgment of 18 November 1994, as calculated on the basis of the
prices at the date of the agreement (20 August 1997);
(c) arrears of UAH 219,909 in respect of the
penalties and legal costs and expenses which LyNOS had been ordered to pay to
the applicant company under the HAC judgment of 19 July 1996; and
(d) compensation for financial losses in the amount
of UAH 169,323,720 pursuant to the judgment of the Poltava Regional
Arbitration Court of 3 March 1997.
As to the debt under point (a) above, the
agreement further specified that it was to be repaid in kind in volumes
calculated on the basis of the prices of the oil products as at the date of the
agreement (20 August 1997) and VAT inclusive (20%). The prices were given as
follows: A-80 petrol - UAH 486.61 per ton; diesel - UAH 411.04 per ton; and
fuel oil - UAH 165 per ton. The debtor was allowed to supply pyropropylene to
the applicant company instead of the above-mentioned oil products.
Between September and December 1997 LyNOS
supplied 3,999 tons of A-80 petrol and 1,976 tons of pyropropylene to the
applicant company. Between January and June 1998 it supplied some further oil
products to the value of UAH 9,204,810.
On 2 July 1998 the HAC examined a request by the
applicant company for the determination of the final amount of the debtor’s
outstanding arrears. It noted that the applicant company had originally
estimated the arrears at UAH 660,000,000, but, following negotiations with the
debtor, that amount had been reduced to UAH 225,355,355 under the agreement of
20 August 1997. Following the partial implementation by LyNOS of that agreement
between September 1997 and June 1998, which the court viewed as confirmation
that LyNOS had accepted its terms, the outstanding debt was UAH 216,150,544.
The HAC also invited the parties to agree on a debt repayment schedule on the
basis of that ruling and the agreement of 20 August 1997. The ruling of the HAC
became final.
In July 2000 the State’s shares in LyNOS were
sold to TNK-Ukraine, a newly-established subsidiary of the Russian holding
company Tyumen Oil Company in Ukraine.
On 27 June 2001 the HAC, at the request of
LyNOS, reviewed the above-mentioned ruling in the light of newly-discovered
circumstances and reduced the final amount of LyNOS’ outstanding debts
vis-à-vis the applicant company to UAH 97,406,920.
On 29 October 2001 the Donetsk Commercial Court
of Appeal further reduced the debt to UAH 90,983,077.
On 24 December 2001 the Kyiv Scientific Research
Institute of Forensic Expert Examinations of the Ministry of Justice of Ukraine
issued a forensic accounting expert examination report regarding the applicant
company’s claims against LyNOS. The examination had been undertaken within the
framework of a separate set of civil proceedings brought by an individual
shareholder of LyNOS against the applicant company, about which no further
information is available. Nor is it known whether, and if so where, the report
was ever used.
The report was based on the following questions:
“1. What was the quantity and value of the oil
products LyNOS was required to transfer to [the applicant company] under the
agreement of 20 August 1997?
2. Have the prices of the oil products which LyNOS
was required to transfer to [the applicant company] changed between the date
the debt was incurred and the present?
3. How has the change in the prices of the oil
products influenced the amount of the debt owed by LyNOS to [the applicant
company]?
4. What was the cost of the said oil products on the
date of the introduction of the claim [June 2001]?
5. Have [the applicant company’s] claims increased because
of an increase in the principal debt or because of surcharges?”
In reply to the first question, the expert
stated that LyNOS was required to transfer oil products to the applicant
company to the value of UAH 225,355,355 on the basis of the following
prices: A-80 petrol - UAH 486.61 per ton; diesel - UAH 411.04 per ton; and
fuel oil - UAH 165 per ton.
As to the second question, the conclusion was
that the prices of oil products had increased.
With regard to the third question, the expert
noted that LyNOS was required to redeem its debt vis-à-vis the applicant
company in kind (in oil products). Accordingly, the increase in the prices of
oil products had led to an increase of the amount of the principal debt. Thus,
the price of the previously stipulated volume of oil products was, at the date
of the report, UAH 574,012,817.
In reply to the fourth question, the expert
indicated the following prices:
-
A-80 petrol - varying between UAH 1,037 and 1,238 per ton;
-
diesel - UAH 1,106 per ton; and
-
fuel oil - UAH 500 per ton.
Lastly, as regards the fifth question, it was
concluded that, given, on the one hand, the obligation of LyNOS to repay its
debt in kind, and, on the other, the increase in the prices of oil products,
the amount of the principal debt had increased.
On 21 November 2003 a friendly-settlement
agreement was signed between a committee of the creditors, on the one side, and
LyNOS as the debtor, on the other, under which the creditors’ claims were to be
settled by exchanging them for the debtor’s assets. The applicant company was
to receive 90,983,077 shares (UAH 1 being the price of one share) owned by LyNOS
in the share capital of the Lysychansk Oil Investment Company (“LyNIK”), a
closed joint-stock company, which had been founded shortly before and whose major
shareholder was TNK-Ukraine.
The applicant company unsuccessfully challenged
that settlement before the domestic courts as discriminatory and unfair.
B. Audit and other reports commissioned by the
applicant company after the adoption of the principal judgment
Following the adoption by the Court of the
principal judgment on 6 October 2011, the applicant company ordered a
number of expert reports with regard to its just satisfaction claims. The
Government, conversely, did not seek any expert opinions.
1. UkrPetrolConsulting and Derzhzovnishinform data on
oil product prices
On 5 April 2012 UkrPetrolConsulting (OOO “УкрПетрол-Консалтинг”,
“UPECO”), a Ukrainian company specialising in oil and gas consultancy, wrote to
the applicant company in response to their enquiry, stating that “the average
value grades of oil products in the large wholesale sector” were as follows:
-
as of 7 March 2012: A-76/80 petrol - UAH 12,498 per ton; diesel (L-3-0.2-62)
- UAH 10,675 per ton; and fuel oil M-100 - UAH 6,100 per ton (Kazakhstan
origin) or UAH 6,300 (Ukraine origin);
-
as of 12 March 2012: A-76/80 petrol - UAH 12,479 per ton; diesel (L-3-0.2-62)
- UAH 10,700 per ton; and fuel oil M-100 - UAH 6,150 per ton (Kazakhstan
origin) or UAH 6,300 (Ukraine origin).
On 11 April 2012 Derzhzovnishinform (ДП “Держзовнішінформ”,
“DZI”), an information, analysis and expert centre under the Ukraine Ministry
of Foreign Economic Relations and Trade, gave the following prices for oil
products in reply to an enquiry by the applicant company,:
-
as of 7 March 2012: A-80 petrol - between UAH 12,400 and
UAH 12,600 per ton; diesel - between UAH 10,380 and 10,900 per ton; and
fuel oil M-100 - between UAH 5,800 and UAH 6,500 per ton;
-
as of 12 March 2012: A-80 petrol - between UAH 12,400 and UAH 12,600
per ton; diesel - between UAH 10,380 and 10,950 per ton; and fuel oil M-100 -
between UAH 5,800 and UAH 6,500 per ton.
2. Report of Spetsotsinka-Ukraine LLC on the investment
attractiveness and probable market value of the LyNIK shares in the applicant
company’s possession
On 27 April 2012 the Consolidated Enterprise for
the Valuation and Examination of Special Objects and Investments - Ukraine LLC (“Об’єднане
підприємство
з оцінки та
експертизи
спеціальних
об’єктів та
інвестицій”,
ТОВ
“СПЕЦОЦІНКА
-УКРАЇНА”, “Spetsotsinka-Ukraine LLC”)
issued its report in response to the applicant company’s request regarding the 90,983,077
LyNIK shares owned by the applicant company, which amounted to 4.78% of the
LyNIK joint stock capital and had a nominal value of UAH 1 per share.
The stated purpose of the “examination” was to
determine the “investment attractiveness and probable market value benchmark”
of the shares. The report contained, in particular, the following observations
and conclusions:
“The examination results are planned to be used in management
decision-making process.
The results of the examinations cannot be used for purposes
other than previously agreed with Client.
The format of this work includes only providing consulting
services, and as agreed with Client, it does not include valuation. [...]
The market value benchmark of the [shares] is under
examination, which will enable Client to make conclusions for decision-making
process.
The market basis determines the use of the [shares] in
accordance with the Highest and Best Use principle.
Market value is defined as the estimated amount
for which an asset should exchange on the valuation date between a willing
buyer and a willing seller in an arm’s length transaction, after proper
marketing and where the parties had each acted knowledgeably, prudently and
without compulsion. ...
The examination was carried out in the period from 25 to 27
April 2012. ...
As mentioned above, the format of the work does not include
appraisal. The estimation of the market value benchmark of the [shares in
question] was impeded by lack of adequate input data and cannot be considered
feasible (obtained result may contain considerable errors). ...
As agreed with Client, the work was carried out within a
limited period of time and was based on the limited data ..., without
inspection of the [shares], which resulted in the limitation of the examination
range.
The nature of limitations, sources, and adequate data, their
probable impact on the results of the work were agreed with Client.”
As to the investment attractiveness of the
shares, Spetsotsinka-Ukraine LLC noted that LyNIK, being an oil refinery, was
experiencing continuing economic losses, like all companies involved in the oil
refining industry in Ukraine. The situation was not expected to change in the
near future, and oil refining for the Ukrainian and Russian market would remain
unprofitable. A general conclusion was drawn that investment in refineries in
the existing investment climate was not feasible in principle. As a result,
there was no incentive for potential investors to acquire LyNIK shares.
3. Tetra-Audit report on the
expenses associated with the bank loans taken out by the Agrokomplex Group
companies
On 14 May 2012 the auditing company Tetra-Audit (“Аудиторська
фірма
“Компанія
“Тетра-аудит”,
ТОВ.”), an auditing body registered by the Audit
Chamber of Ukraine on 30 October 2003, issued an independent auditor’s report
at the applicant company’s request. The aim of the report was to determine “the
amount of the losses incurred as direct expenses in the raising of credit
funds, including interest on the credit funds and commission under the loan
agreements of the Agrokompleks Group Companies during the period 2 July 1998 to
1 May 2012”.
The report noted that the Agrokompleks Group had
been obliged to raise credit funds because of, in particular, the inability of
the applicant company to recover the debt owed to it under the ruling of 2 July
1998.
Tetra-Audit listed all the bank loans received
by the Agrokompleks Group companies during the above-mentioned period.
According to its calculations, the expenses directly incurred by the raising of
the credit funds constituted, as of the date of the report, EUR 44,213,247.
4. The SORGEM Evaluation Company’s report on the
pecuniary damage suffered by the applicant company on account of the violations
found by the Court in the principal judgment
The applicant company assigned the SORGEM
Evaluation Company (“SORGEM”), a subsidiary of SA Sorgem Holding in Paris
specialising, in particular, in loss evaluation, to evaluate the pecuniary
damage stemming from the violations of its rights under the Convention found by
the Court in the principal judgment.
On 5 June 2012 SORGEM completed its report. It
expressed the view that compensation to the applicant company in respect of the
pecuniary damage should consist of: firstly, the repayment of the debt under
the judicial ruling of 2 July 1998, and, secondly, compensation for the delay in
the repayment of that debt.
With regard to the debt in question, SORGEM
noted that the ruling of 2 July 1998 explicitly referred to the agreement
between the applicant company and LyNOS of 20 August 1997, according to which
the amount of the debt in monetary terms was to be based on the oil product
prices as of August 1997. It had also been envisaged that the debt would be repaid
to the applicant company in kind.
Bearing this in mind, SORGEM stated that the
first option for the respondent Government would be to repay the applicant
company in kind by oil products, in accordance with the ruling of 2 July 1998.
In the experts’ opinion, this was not impossible given the State ownership of a
number of oil refineries.
Should this option be chosen, the following
formula was suggested, where V is the volume of the oil products, the figures are
the prices for oil products as defined in the agreement of 20 August 1997, and
the total is the amount of the final debt under the ruling of 2 July 1998:
V x 486.61 + V x 411.04
+ V x 165.00 = 216,150,544
Under this formula, the applicant company was
entitled to receive 610,221.27 tons of oil products.
The amounts of A-80 petrol, diesel and fuel were
to be equal or in the following proportions (14.7% in petrol A-80 (= 89,702.53
tons), 32,5% in fuel (= 198,321.91 tons), and 52.8% in black oil (= 322,196.83
tons), having regard to the losses inherent in the refinery process).
The SORGEM report also examined another option -
the repayment of the debt to the applicant company in monetary terms - should
payment in kind appear too complicated.
Relying on the current oil product prices
according to the data from UPECO and DZI (see paragraphs 28 and 29 above),
SORGEM arrived at the following possible amounts:
(a) if
the UPECO data were used: from UAH 5,271,280,000 or UAH 5,996,240,000
depending on whether the oil products were taken in three equal shares or in
the percentages stated; and
(b) if
the DZI data were used: from UAH 5,217,900,000 or UAH 5,962,880,000
depending on the range of oil products concerned.
Lastly, SORGEM calculated the average of the aforementioned
figures, which came to UAH 5,612,070,000. If converted to euros at the exchange
rate applicable on 30 May 2012, this sum corresponded to EUR 560,700,000.
SORGEM further proceeded to the calculation of
the pecuniary damage suffered by the applicant company on account of its
prolonged inability to enjoy its possessions.
It noted that the debt owed to the applicant
company under the final judicial decision, and thus considered a possession,
was UAH 216,150,544 as of 2 July 1998. According to the exchange rate published
by the National Bank of Ukraine, this was equal to 96,081,000 European
currency units (ECU). With the replacement of the ECU by the euro on 1 January
1999 on a one-to-one basis, this amount was equal to EUR 96,081,000.
In the experts’ opinion, the period during which
applicant company’s right to peaceful enjoyment of its possessions had been infringed
started running on 2 July 1998. Although technically it was impossible to
establish the marginal lending rate of the European Central Bank (ECB) before
the introduction of the euro on 1 January 1999, SORGEM suggested that the
calculation should be based on the hypothesis that the marginal lending rate as
of 1 January 1999 applied retrospectively to the period from 2 July 1998, with
regard to the ECU/EUR one-to-one rate.
The SORGEM report provided a table setting out the
ECB marginal lending facility rates from 1 January 1999 to December 2011.
On the basis of the rates therein, and adding 3 %, it estimated the damages for
loss of enjoyment for the period from 2 July 1998 to 8 June 2012 at
EUR 88,094,431.
. SORGEM also calculated the sum of the
damages for loss of enjoyment for the said period on the basis of the National
Bank of Ukraine discount rate. The total was UAH 504,677,469. Its
conversion to euros at the official exchange rate of the National Bank of
Ukraine gave EUR 50,422,326.
SORGEM estimated the amount of compensation due to
the applicant company for its inability to use UAH 216,150,544 at the average of
EUR 50,422,326 and EUR 88,094,431, that is, EUR 69,000,000.
In sum, the compensation for pecuniary damage to
be paid to the applicant company under the SORGEM calculations was as follows:
-
610,221.27 tons of oil products or, in the alternative,
EUR 560,700,000; plus
-
EUR 69,000,000 in damages for loss of enjoyment.
THE LAW
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
1. The parties’ submissions
(a) The applicant company
. The applicant company submitted that
it had suffered inherently unlawful dispossession of the oil products it had
title to. Accordingly, it considered that the respondent Government should compensate
it either by the repayment of those oil products in kind at their 1997 prices, or
by payment of the current value of their volume, as well as the cost of the loss
of enjoyment. More specifically, the applicant
company claimed: firstly, 610,221.27 tons of oil products (in different
proportions possible - see paragraphs 40-42 above) or their value, estimated at
EUR 561,000,000; and, secondly, EUR 50,422,326 or EUR 88,094,431
(depending on the calculation method used) in compensation for loss of
enjoyment. It based these claims on the SORGEM report (see paragraphs 48-49
above). In addition, the applicant company claimed EUR 250,000 in respect of
non-pecuniary damage.
The applicant company considered that
restitution in integrum, that is, the repayment in
kind of the oil products to it, was in principle possible. It noted, in
particular, that the State owned a number of refineries in Ukraine.
Furthermore, the oil products specified in the judgment of 2 July 1998 and in
the earlier agreement of 20 August 1997 were still in existence.
However, if this was impossible, the monetary
equivalent of those products payable to the applicant company would be
EUR 561,000,000.
The applicant company emphasised that the
calculation of this amount by SORGEM was consistent with that in the forensic
accounting expert report of the Kyiv Scientific Research Institute of Forensic
Expert Examinations of the Ministry of Justice of Ukraine of 24 December 2001
(see paragraphs 18-24 above). That report
had been issued by a government agency and its validity was not questioned.
Even though it had been undertaken within separate proceedings, it nonetheless provided
an evaluation of the damage suffered by the applicant company. Furthermore, the
expert evaluation in question had been based on calculation methods the
soundness of which there was no reason to question. It would therefore be
logical to apply the same method to the calculation of the pecuniary damage
suffered by the applicant company, which SORGEM had duly done.
. The applicant company noted that the
questions before the expert of the Ministry of Justice had been those within his
area of knowledge and naturally had not concerned any legal issues.
Accordingly, the applicant company considered it to be of no relevance that the
expert report of 24 December 2001 did not refer to the ruling of
2 July 1998.
The applicant company next argued that the fact
that some LyNIK shares had been transferred to it should not be regarded as a
reason to reduce the amount due for pecuniary damage. The applicant company
insisted that those shares were and remained of no value and that they had been
imposed on it as a result of the numerous violations of its rights acknowledged
by the Court in the principal judgment. It further emphasised that the value of
the shares in question had not been duly established at the time of their
transfer into the applicant company’s possession. Furthermore, it noted, with
reference to the report of Spetsotsinka-Ukraine LLC, that the shares had become
worthless by 2012 (see paragraphs 30-32 above).
The applicant company also submitted that, as a
gesture of good will and subject to the full payment of the compensation for
pecuniary damage, it was prepared to transfer into the State’s possession, on a
tax-free basis and for no charge, the shares it held in the LyNIK company in
their current legal status and condition.
. The applicant company also relied on
the SORGEM report with regard to the calculation of the compensation for loss
of enjoyment (see paragraphs 45-50 above).
. The applicant company further noted
that there were no effective legal mechanisms at the national level for it to
seek compensation in respect of the violations of its rights under the
Convention. The applicant company referred in this connection to the Law of
Ukraine on the Enforcement of Judgments and the Application of the Case-law of
the European Court of Human Rights, according to which the enforcement of such
judgments could not be made conditional on any judgment of the national courts
and did not require their approval or consent.
. In substantiation of its claim for compensation
in respect of non-pecuniary damage in the amount of EUR 250,000, the applicant
company emphasised that it had always acted in good faith and shown
understanding of the difficulties experienced by LyNOS with regard to the
delivery of the agreed oil products. Instead of the debt being repaid, however,
the amount owed had been illegally reduced and the applicant company had had a
disadvantageous settlement imposed on it.
The applicant company maintained that it had
been left in a state of uncertainty as to when its possessions would be returned
to it and had thus been unable to plan or develop its business. Furthermore,
the authorities’ wrongdoings had had a negative impact on its reputation.
Lastly, the applicant company noted that its
management had been kept in a state of anxiety and had had to devote
significant time and resources to the lengthy judicial proceedings and the handling
of the attendant formalities.
(b) The Government
The Government considered that the applicant
company’s claims under this head should be rejected in their entirety.
They submitted that the applicant company could
bring a fresh action for recovery of its possessions at the national level on
the basis of the Court’s judgment on the merits of the case. In the Government’s
opinion, the fact that LyNOS no longer existed was of little significance as
its legal successors could take its place in the relevant domestic proceedings.
As to the applicant company’s claim for
610,221.27 tons of oil products, the Government noted that the principal
judgment concerned the quashing of the final judicial decision of 2 July 1998
and the reduction of the amount of the debt owed to the applicant company from
UAH 216,150,544 to UAH 90,983,077. The Government emphasised that no
issues regarding the redemption of the debt had been considered by the Court in
its judgment and that they could not therefore be raised now. The Government
therefore considered that there were no grounds for the applicant company to
claim compensation for pecuniary damage in kind.
As regards the applicant company’s calculations
of the pecuniary damage in monetary terms, the Government considered that the application
of several methods resulting in different amounts was to be viewed as
“manipulation of the sums”.
The Government noted, in particular, that the
forensic accounting expert examination report of 24 December 2001, on which the
applicant company had relied in its calculation in respect of pecuniary damage,
had no relevance for the present case, because, firstly, it had been issued within
the framework of separate unrelated proceedings, and, secondly, the questions
before the expert did not concern the judicial ruling of 2 July 1998.
The Government further noted that the debt owed
to the applicant company by LyNOS, as established by the decision of the
Donetsk Commercial Court of Appeal of 29 October 2001, had been repaid to it in
full by means of the LyNIK shares. They noted that the issue of the value of
those shares had not been examined in the Court’s principal judgment.
Furthermore, the report by Spetsotsinka-Ukraine LLC, commissioned by the
applicant company, had not determined the value of the shares, but had rather assessed
their “investment attractiveness” as in 2012, that is, after they had been in
the applicant company’s possession for some eight years.
The Government maintained that, even if the
final amount of the debt owed to the applicant company was accepted as the
amount established by the HAC’s ruling of 2 July 1998, as the applicant
company insisted, there was still no basis for it to claim any pecuniary damage
in excess of the difference between the aforementioned amount of
UAH 216,150,544 and the value of the LyNIK shares it had eventually
received to the amount of UAH 90,983,077. In other words, in the
Government’s opinion, the maximum amount of compensation for pecuniary damage
the applicant company could claim on the basis of the HAC’s ruling of 2 July
1998 was UAH 125,167,468.
The Government also drew the Court’s attention
to the context of that ruling. They noted that it had merely determined the
amount of the debt owed to a creditor in the framework of insolvency
proceedings. Given the specific nature of those proceedings, there were no
guarantees that the applicant company would have been able to collect that debt
in its entirety. Furthermore, that debt had not been required to be repaid to
the applicant company immediately, but only after completion of the insolvency
proceedings (in 2003).
Finally, as regards the just satisfaction claim
in respect of non-pecuniary damage, the Government considered that the
applicant company had not submitted any evidence to support it.
2. The Court’s assessment
The Court reiterates that a judgment in which it
finds a breach imposes on the respondent State a legal obligation to put an end
to the breach and to make reparation for its consequences in such a way as to
restore as far as possible the situation existing before the breach (see, for
example, Brumărescu v. Romania (just satisfaction) [GC], no.
28342/95, § 19, ECHR 2001-I, and Iatridis v. Greece (just
satisfaction) [GC], no. 31107/96, § 32, ECHR 2000-XI).
The Contracting States that are parties to a
case are in principle free to choose the means whereby they will comply with a
judgment in which the Court has found a breach. This discretion as to the
manner of execution of a judgment reflects the freedom of choice attaching to
the primary obligation of the Contracting States under the Convention to secure
the rights and freedoms guaranteed (Article 1). If the nature of the breach
allows of restitutio in integrum, it is for the respondent State to
effect it. If, on the other hand, national law does not allow - or allows only
partial - reparation to be made for the consequences of the breach, Article 41
empowers the Court to afford the injured party such satisfaction as appears to
it to be appropriate (see Brumărescu v. Romania (just satisfaction)
[GC], cited above, § 20).
. The
nature and the extent of the just satisfaction to be afforded by the Court
under Article 41 of the Convention directly depend on the nature of the breach
(see Shesti Mai Engineering OOD and Others v. Bulgaria,
no. 17854/04, § 101, 20 September
2011, with further references). Moreover, the Court’s
case-law establishes that there must be a clear causal connection between the
damage claimed by the applicant and the violation of the Convention (see,
amongst others, Stretch v. the United Kingdom, no. 44277/98, § 47,
24 June 2003).
Thus, for an award to be
made in respect of pecuniary damage the applicant must demonstrate that there is a causal link between the violation
and any financial loss alleged (see, for example, Družstevní
záložna Pria and Others v. the Czech Republic
(just satisfaction), no. 72034/01, § 9, 21 January 2010).
Sometimes, however, a precise calculation of the
sums necessary to make complete reparation in respect of the pecuniary losses
suffered by the applicant may be prevented by the inherently uncertain
character of the damage flowing from the violation (see Smith and Grady v.
the United Kingdom (just satisfaction), nos. 33985/96 and 33986/96, § 18,
ECHR 2000-IX, and Basarba OOD v. Bulgaria (just satisfaction), no.
77660/01, § 20, 20 January 2011).
As to pecuniary compensation for non-pecuniary
damage, the Court may award it to commercial companies ruling on equitable
basis, as its exact calculation is in principle impossible.
If one or more heads of damage cannot be calculated
precisely or if the distinction between pecuniary and non-pecuniary damage
proves difficult, the Court may decide to make a global assessment (see Comingersoll
S.A. v. Portugal [GC], no. 35382/97, § 29, ECHR 2000-IV).
In order to determine just satisfaction, the
Court has regard to the particular features of each case, which may call for an
award less than the value of the actual damage sustained or the costs and
expenses actually incurred, or even for no award at all (see Ukraine-Tyumen
v. Ukraine (just satisfaction), no. 22603/02, § 22, 20 May 2010). It is also noteworthy that the Court enjoys a certain discretion in the exercise of the power
conferred by Article 41, as is borne out by the adjective “just” and the phrase “if
necessary” in its text (see Guzzardi v. Italy, 6 November 1980,
§ 114, Series A no. 39).
Turning to the present case, the Court notes that
it has found violations of Article 6 § 1 of the Convention and Article 1 of
Protocol No. 1, mainly on account of the following two issues: firstly,
the reduction, contrary to the legal certainty principle, of the finally
established debt owed to the applicant company by LyNOS, a State-owned company;
and, secondly, the direct interferences of the highest State authorities in the
insolvency proceedings involving the applicant company as a creditor and
directly affecting its property interests. It has also found a violation of
Article 6 § 1 of the Convention in respect of the length of the aforementioned
proceedings.
In establishing the pecuniary damage flowing
from violations of Article 6 § 1 of the Convention and Article 1 of
Protocol No. 1 on account of setting aside a final judicial decision in an applicant’s
favour contrary to the res judicata principle, the Court’s traditional
approach has been to award the applicant the sum which he/she would have
received had the judgment in question not been quashed, deducting the
subsequent domestic award if there had been any (see, for example, Stanislav
Volkov v. Russia, no. 8564/02, § 40, 15 March 2007; Zheltyakov v.
Ukraine, no. 4994/04, § 73, 9 June
2011; and Bezrukovy v. Russia, no. 34616/02, § 53, 10 May 2012).
Bearing this in mind, the Court
considers that in the present case the applicant company should have the right
to recover the money to which it was entitled by virtue of the HAC ruling of 2
July 1998, less the value of the LyNIK shares transferred to it by way of repayment
of the debt in 2003 (see and compare Oferta Plus SRL v. Moldova (just
satisfaction), no. 14385/04, § 71, 12 February 2008).
The Court observes that the parties are in
dispute as regards both the nature and value of the award of the above-mentioned
judicial ruling and the value of the LyNIK shares in question. According to the
applicant company, the HAC ruling was based on the earlier agreement of 20
August 1997 and thus, even though it determined the final outstanding debt vis-à-vis
the applicant company at UAH 216,150,544, this award implied a specific
volume of oil products at the 1997 prices. Given the constant growth in the price
of oil products, the applicant company considered that the amount of the judicial
debt had increased accordingly. In substantiation of this position it relied,
in particular, on the Ministry of Justice forensic accounting expert report of
24 December 2001 and the SORGEM report of 5 June 2012 (see paragraphs 18-24
and 36-51 above). The Government, however, insisted that the amount in question
had been established in monetary terms with precision.
86. The Court considers
that the mentioned expert reports cannot be accepted as a comprehensive,
convincing and sufficient basis for the determination of the exact amount of
the damages in the present case, in particular, in view of the insufficiency of
the data they were based on (see and compare Decheva and Others v.
Bulgaria, no. 43071/06, § 69,
26 June 2012). Namely, the evaluation of the Ministry of Justice report
was confined to the agreement between the applicant company and LyNOS of 20
August 1997. It appears from its contents that that report took into account
neither the subsequent partial implementation of that agreement nor the
findings of the HAC ruling of 2 July 1998. As to the SORGEM report, it
disregarded altogether the transfer of the LyNIK shares into the applicant
company’s possession.
87. In
the Court’s opinion, the judicial ruling of 2 July 1998 was unambiguous in determining
the final debt owed to the applicant company at UAH 216,150,544. The
practical modalities for its repayment remained beyond that court’s evaluation
and it referred in that regard to the agreement of 20 August 1997. Accordingly,
the Court considers it unfounded to simply express the debt under that ruling in
terms of certain types and volumes of oil products.
88. Furthermore,
the Court cannot accept the applicant company’s interpretation of the
report by Spetsotsinka-Ukraine LLC as establishing a “zero” value for the LyNIK
shares in question. The experts explicitly stated that this task was impossible
and that their conclusions only concerned the investment attractiveness of the
shares at the time of the report (see paragraph 31 above).
It follows that the only reference point for the value of the shares is their
declared nominal value as of November 2003 of UAH 1 per share (see
paragraph 25 above). It appears impossible to verify the credibility of this
valuation. The Court also notes that there have been no further valuations of which
it is aware. At the same time, it cannot consider it established that, as the
applicant company claims, the LyNIK shares were and remain worthless.
The Court also finds it necessary to emphasise that the quashing of the final
judicial decision of 2 July 1998, being in the applicant company’s favour, was not
the only violation it found in the principal judgment. There were other
aspects, such as the domestic courts’ lack of impartiality and independence,
that had adverse effects on the applicant company’s property interests but which
are impossible to quantify.
The Court accepts that the prolonged impossibility for the applicant company
to use the money it was entitled to had negative consequences for its business
activities. However, the Court finds it equally impossible to calculate the
loss of enjoyment in exact terms, particularly given that the present case
concerns the commercial activities of a company, which implies the taking of
risks and a degree of uncertainty as to the use and the profitability of the possessions
in question (see Basarba OOD v. Bulgaria, cited above, § 26).
The Court also considers that the violations it
has found of Article 6 § 1 of the Convention and Article 1 of
Protocol No. 1 in the instant case must have caused the applicant company
prolonged uncertainty in the conduct of its business (see Rock Ruby Hotels
Ltd v. Turkey (just satisfaction), no. 46159/99, § 36, 26 October 2010, and Centro Europa 7 S.R.L. and di
Stefano v. Italy [GC], no. 38433/09,
§ 221, ECHR 2012).
Having regard to the lapse of time, the large
number of imponderables involved and the impossibility of quantifying the
applicant company’s pecuniary and non-pecuniary losses in exact terms, the
Court considers that it must rule in equity and make a global assessment,
taking as a starting point the award under the HAC ruling
of 2 July 1998 (see paragraph 84 above).
In view of the above, the Court considers it reasonable
to award the applicant company an aggregate sum of EUR 27,000,000,
covering all heads of damage, plus any tax that may be chargeable on that
amount.
The Court has decided to allow payment of this
sum by instalments and has fixed time-limits for settlement accordingly (Rule
75 § 3 of the Rules of Court).
B. Costs and expenses
1. The parties’ submissions
The applicant company claimed EUR 490,395.15 in
respect of the costs incurred for legal services provided by its Ukrainian and
French lawyers. This amount comprised the following sums:
-
fees for the legal services rendered - EUR 468,294.94;
-
expenses incurred for business trips - EUR 16,883.33;
-
other pertinent costs (telephone charges, postage, and so on) - EUR 5,216.88.
In substantiation of these claims, the applicant
company submitted invoices from the law firms representing its interests in the
LyNOS insolvency proceedings between 2000 and 2004, for a total of UAH 568,054.20
(in December 2004, the equivalent of EUR 76,435). The applicant company
also submitted invoices from Cabinet Lucas-Delvolve, Salkom, and Trillat and
Associés for a total of EUR 390,388.76, in respect of its representation in the
proceedings before the Court from 2003 to 2012. According to the time-sheets
submitted, the companies’ lawyers spent about 1,200 working hours on the case.
The Government pointed out that the difference
between the amount of costs and expenses initially claimed by the applicant
company in 2010 (EUR 253,878.95 - see § 176 of the principal judgment) and
the amount they claimed in 2012 was EUR 200,000. In their opinion, the
applicant company could not have reasonably incurred such expenses in the
preparation of the just satisfaction claims alone.
Furthermore, the Government submitted that the
applicant company’s claims were excessive and not supported by sufficient
documentary evidence.
2. The Court’s assessment
The Court reiterates that in order for costs
and expenses to be included in an award under Article 41 of the Convention, it
must be established that they were actually and necessarily incurred and were
reasonable as to quantum (see, for example, Amihalachioaie v. Moldova,
no. 60115/00, § 47, ECHR 2004-III).
In the present case, the Court considers that
not all the legal costs claimed were necessarily and reasonably incurred, given
that there was some duplication in the work carried out by the foreign and the
domestic lawyers, as can be seen from the relevant time sheets. Making its own
estimate on the basis of the information available, the Court awards the
applicant company EUR 30,000 in respect of costs and expenses.
C. Default interest
The Court considers it appropriate that the default
interest rate 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
1. Holds
(a) that the respondent State is to pay the
applicant company in two instalments the total sum of EUR 27,000,000
(twenty-seven million euros), plus any tax that may be chargeable, in respect
of pecuniary and non-pecuniary damage, to be converted into the currency of the
respondent State at the rate applicable at the date of settlement, namely:
(i) EUR 13,500,000 (thirteen million five hundred
thousand euros) within twelve months and
(ii) the remaining EUR 13,500,000 (thirteen million
five hundred thousand euros) within twenty-four months of the date on which the
judgment becomes final in accordance with Article 44 § 2 of the Convention;
(b) that from the expiry of the above-mentioned
time-limits until settlement simple interest shall be payable on the above
amounts at a rate equal to the marginal lending rate of the European Central
Bank during the default period plus three percentage points;
2. Holds
(a) that the respondent State is to pay the
applicant company EUR 30,000 (thirty thousand euros), plus any tax that
may be chargeable to the applicant company, in respect of costs and expenses,
to be converted into the currency of the respondent State at the rate
applicable at the date of settlement, within three months of the date on which
the judgment becomes final in accordance with Article 44 § 2 of the Convention;
(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;
3. Dismisses the remainder of the applicant
company’s claim for just satisfaction.
Done in English, and notified in writing on 25 July 2013,
pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.
Claudia
Westerdiek Mark
Villiger
Registrar President
