Milosav ILIC v Serbia - 21811/09 [2010] ECHR 1466 (14 September 2010)

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The European Court of Human Rights (Second Section), sitting on 14 September 2010 as a Chamber composed of:

Françoise Tulkens, President,
Ireneu Cabral Barreto,
Danutė Jočienė,
Dragoljub Popović,
András Sajó,
Işıl Karakaş,
Guido Raimondi, judges,
and Stanley Naismith, Section Registrar,

Having regard to the decision to grant priority to the above application under Rule 41 of the Rules of Court,

Having regard to the decision to apply Article 29 § 3 of the Convention and examine the admissibility and merits of the case together,

Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicant,

1. The applicant, Mr Milosav Ilić, is a Serbian national who was born in 1950 and lives in Kruševac. He was represented before the Court by Mr R. Dimitrijević, a lawyer practising in Kruševac. The Serbian Government (“the Government”) were represented by their Agent, Mr S. Carić.

2. The facts of the case, as submitted by the parties, may be summarised as follows.

3. On 8 December 1992 and 8 January 1993 the applicant deposited 14,000 and 10,033.94 German Marks, respectively, for a fixed period of time with the Dafiment Bank branch in Belgrade.

4. The said bank was one of a number of privately-owned “pyramid scheme” banks that existed at the time in Serbia, which were well-known for offering extremely high interest rates (in the applicant's case 15% and 18% monthly).

5. After the expiration of the applicant's fixed-period deposit contracts, the Dafiment Bank refused to release his funds or pay him the interest stipulated.

6. On 10 April 2002 the applicant appears to have formally registered his compensation request with the Commercial Court in Belgrade (“prijavio potraZivanje kod Privrednog suda u Beogradu”), the judicial body in charge of the ongoing liquidation proceedings against the bank in question.

7. Following the financial collapse of the pyramid schemes in Serbia, as well as the prior insolvency of a number of other banks, in a series of Acts adopted in 1998 and 2002, the State accepted to convert the foreign currency deposits in these banks into a “public debt” and then went on to set out the time-frame, modalities and the amounts to be paid back to their former clients. As far as the Dafiment Bank was concerned, the State undertook to release the deposits in question by 2016, according to a schedule and in certain fixed amounts annually. The accrued interest and any payments received by the savers prior to the institution of the liquidation proceedings were to be deducted from the deposits in question.

8. It would appear that a certain accrued interest had in the meantime been paid to the applicant by the bank in issue. It is not clear, however, whether this amount was equal to the sums originally deposited.

9. Between 9 October 1992 and 15 March 1993 the applicant deposited a total of 44,800 German Marks and 1,800 Swiss Francs for a fixed period of time with the Srpsko-moravska Bank's branch in Vrnjačka Banja.

10. That bank was also one of a number of privately-owned “pyramid scheme” banks that existed at the time in Serbia, which were well-known for offering extremely high interest rates (in the applicant's case 14% and 17% respectively for a period of six months).

11. Following the expiration of his fixed-term deposit contracts, the Srpsko-moravska Bank refused to release the applicant's funds or pay him the interest stipulated.

12. It would appear that on 22 July 1993 the Central Bank (Narodna banka Jugoslavije) banned the activities of the Srpsko-moravska Bank.

13. On 16 September 1994 the applicant obtained a judgment from the Municipal Court (Opštinski sud) in Kruševac, ordering the bank to release his savings, together with the accrued interest. It would appear that this judgment subsequently became final and enforceable.

14. On 5 December 1994 the Central Bank apparently requested the institution of insolvency proceedings in respect of the Srpsko-moravska Bank before the Commercial Court in Kraljevo.

15. On an unspecified date thereafter, the applicant formally registered his compensation request with that court.

16. On 6 March 2000 the Commercial Court in Kraljevo terminated the insolvency proceedings, concluding that the bank's assets were minute, and ordered that the bank be removed from the register of active legal entities. The foreign currency deposits in the Srpsko-moravska Bank were never converted into a public debt.

1. Act on the Settlement of Obligations Arising from the Citizens' Foreign Currency Savings (Zakon o izmirenju obaveza po osnovu devizne štednje građana; published in the Official Gazette of the Federal Republic of Yugoslavia - OG FRY - nos. 59/98, 44/99 and 53/01)

17. Articles 1, 2, 3 and 4 provided that all foreign currency savings deposited with the “authorised banks” before 18 March 1995 were to become public debts.

18. Under Article 10 the State's responsibility in that respect was to be fully honoured by 2012 through the payment of specified amounts, plus interest, and according to a certain time-frame.

19. Article 22 provided that, as of the date of this Act's entry into force (12 December 1998), “all pending lawsuits, including judicial enforcement proceedings, aimed at the collection of the foreign currency covered by this Act shall be discontinued.”

2. Act on the Settlement of the Public Debt of the Federal Republic of Yugoslavia Arising from the Citizens' Foreign Currency Savings (Zakon o regulisanju javnog duga Savezne Republike Jugoslavije po osnovu devizne štednje građana; published in OG FRY no. 36/02)

20. This Act repeals the Act described above. It modifies the time-frame for honouring the debt in question (from 2012 to 2016) and specifies amended amounts, plus interest, to be paid annually. It was subsequently amended on two occasions, but these amendments concerned peripheral issues unrelated to the savers' above-described status.

3. Act on the Settlement of the Public Debt of the Federal Republic of Yugoslavia in Respect of the Citizens' Foreign Currency Fixed Deposit Contracts with the Dafiment Bank AD, Belgrade, undergoing liquidation, as well as their Foreign Currency Deposits with the Private Enterprise Bank AD, Podgorica (Zakon o regulisanju javnog duga Savezne Republike Jugoslavije po ugovorima o deviznim depozitima građana oročenim kod Dafiment banke AD, Beograd, u likvidaciji i po deviznim sredstvima građana poloZenim kod Banke privatne privrede Crne Gore AD, Podgorica; published in the OG FRY no. 36/02)

21. Article 1 states that all foreign currency savings deposited with the Dafiment Bank, among other “authorised banks”, were initially recognised as part of the public debt by the Act described at paragraphs 17-19 above.

22. Under Articles 2 and 4, which provide more details in relation to the foreign currency savings deposited with the Dafiment Bank in particular, the State undertook to release the deposits by 2016, according to a schedule and in certain fixed amounts annually. The accrued interest and any payments received by the savers prior to the institution of the liquidation proceedings were to be deducted from the deposits in question.

23. Pursuant to Article 12, the bank's clients may make use of their deposits converted into Government bonds in order to pay taxes or indeed, under Articles 11 and 13, in advance of the said time-frame, for a number of purposes such as buying State property, taking part in the privatisation of State-owned businesses and banks, as well as, under certain conditions and up to a specified amount, for the payment of medical treatment, medication and funeral costs.

24. In accordance with Articles 9 and 10, the bank's clients can sell the said bonds on the stock exchange or to other banks and individuals. Such trading is exempt from all taxation.

25. This Act has been in force since 4 July 2002. It was subsequently amended once, but these amendments did not change the savers' status.

26. The applicant relies on Articles 6 and 13 of the Convention, as well as Article 1 of Protocol No. 1. In substance, however, he complains about: (a) the continuing refusal of the respondent State to release all of his foreign currency savings deposited with the Dafiment Bank, together with the interest originally stipulated; (b) being denied an effective domestic remedy in respect of the previous complaint; and (c) the continuing refusal of the respondent State to “pay back” all his foreign currency savings deposited with the Srpsko-moravska Bank and the non-enforcement of the final judgment rendered against this Bank.

A. Alleged violation of Article 1 of Protocol No. 1 in respect of the applicant's savings deposited with the Dafiment Bank

27. Relying on Article 1 of Protocol No. 1, the applicant primarily complained about the continuing refusal of the respondent State to release instantaneously all of his foreign currency savings deposited with the Dafiment Bank, together with the interest originally stipulated.

28. The Government submitted that the applicant's complaint was incompatible ratione temporis since the relevant foreign currency legislation had been adopted before the Serbian ratification of the Convention and Protocol No. 1 thereto. The Government also maintained that the applicant had not exhausted all effective domestic remedies as required by Article 35 § 1 of the Convention. In particular, he had failed to bring a separate civil lawsuit against the Dafiment Bank prior to the adoption of the relevant legislation.

Alternatively, they contended that the complaint was manifestly ill-founded. Their primary submission was that the State had been faced with a large-scale financial crisis and had essentially had no choice but to adopt legislation aimed at protecting the public interest, e.g. the liquidity of State funds. The Government further stressed that the so-called “pyramid scheme” banks were well-known for offering extremely high interest rates, which brought many savers more money than they had initially deposited. Therefore, the Government had prescribed by its legislation (see paragraphs 21-25 above) that the accrued interest and any payments received by the Dafiment savers prior to the institution of the liquidation proceedings were to be deducted from their deposits. The Government argued that these legislative measures do not impose an excessive burden on the applicant, but are aimed at regulating the situation of a large number of foreign currency deposit holders and the principle of equity between them.

29. The applicant disagreed with the Government's admissibility objections. He stressed that his application concerned a continuing situation. As regards the objection about the non-exhaustion of remedies, the applicant also claimed that he had not complained before this Court about the refusal of the bank to pay him back his deposits, together with the interest accrued, but only about the content of the said legislation, which did not provide for the instantaneous release of his savings by the State.

Moreover, the applicant contested the legislative measures, considering them a flagrant breach of the principle of peaceful enjoyment of property. He maintained that he should have the right to the instantaneous disposal of all his deposits in the Dafiment Bank so that he could invest them and thereby increase his wealth.

30. In view of its conclusion below, the Court considers that it is not necessary to examine the issues of its temporal competence or exhaustion of domestic remedies by the applicant.

31. As to the Government's alternative argument, the Court first finds that the contested measures, in so far as they affect the applicant's savings, amount to a control of the use of property (see, mutatis mutandis, Trajkovski v. the Former Yugoslav Republic of Macedonia (dec.), no. 53320/99, 7 March 2002, p. 12).

32. As regards the instantaneous release of the funds sought by the applicant, the Court has already considered practically identical circumstances in Molnar Gabor v. Serbia (no. 22762/05, §§ 43-51, 8 December 2009) in respect of a “non-pyramid scheme” bank. It found, inter alia, that given the dire reality of the Serbian economy at the relevant time and the wide margin of appreciation afforded to States in respect of matters involving economic policy, the impugned legislation, providing for the gradual reimbursement of the deposits at issue, struck a fair balance between the general interest of the community and the applicant's persisting legitimate claim to his original savings, as well as the property rights of all others in the same situation as him. The Court does not see any reason to hold otherwise in the present case.

33. The Court further observes that the Act which regulates the status of the Dafiment savers differs only slightly from the “general foreign currency legislation” (see paras. 17-20), in particular, as regards the deduction of the accrued interest and any payments from the deposits that the Dafiment savers might already have collected. In this respect, however, the Government's view regarding the necessity of the impugned legislative measure does not appear unreasonable (see, mutatis mutandis, Trajkovski v. the Former Yugoslav Republic of Macedonia (dec.), cited above). Indeed, the applicant had engaged in a bank transaction which, by its very nature, involved a critical element of risk. The obviously high interest rates should have indicated to the applicant the serious risk of the whole pyramidal bank system collapsing at some point and the possibility that he would not be able to collect both his deposits and the interest initially stipulated. The Court considers that the applicant has not suffered an “individual and excessive burden” (see the James and Others v. the United Kingdom, 21 February 1986, § 50, Series A no. 98, and Trajkovski v. the Former Yugoslav Republic of Macedonia (dec.), cited above).

34. This being so, the Court finds that the means chosen were suited to achieving the legitimate aim pursued. It follows that this complaint is manifestly ill-founded and must be rejected pursuant to Article 35 §§ 3 and 4 of the Convention.

B. Alleged violation of Article 13 of the Convention in respect of the applicant's savings deposited with the Dafiment bank

35. The applicant further contended that Article 22 of the Act described at paragraph 19 above barred the institution of any new lawsuits aimed at the collection of the foreign currency deposited with the Dafiment Bank, contrary to Article 13 of the Convention.

36. According to the Court's case-law, Article 13 applies only where an individual has an “arguable claim” to be the victim of a violation of a Convention right. Having regard to its considerations above under Article 1 of Protocol No. 1, the Court does not find that the applicant had an arguable claim for the purposes of Article 13, which therefore does not apply (see Boyle and Rice v. the United Kingdom, 27 April 1988, § 52, Series A no. 131). It follows that this part of the application is also manifestly ill-founded within the meaning of Article 35 § 3 of the Convention and must be rejected pursuant to Article 35 § 4.

37. The applicant further complained, relying on various articles, about the non-enforcement of the final judgment of 1994 rendered in his favour (see paragraph 13 above), as well as about the continuing refusal of the respondent State to reimburse all of his foreign currency savings deposited with the Srpsko-moravska Bank.

38. The Government submitted that the applicant's complaints were incompatible ratione temporis with the provisions of the Convention, because they related to events, e.g. the final judgment in question and the subsequent legislation barring its execution, which had occurred before the Serbian ratification of the Convention on 3 March 2004. Moreover, the Government further stressed that the Srpsko-moravska Bank was not an “authorised bank” for the purposes of the relevant legislation (see paragraph 17 above), and that the foreign currency savings deposited with such banks, which had never deposited any funds with the Central Bank, had never been converted into a public debt. Finally, the Commercial Court in Kraljevo terminated the insolvency proceedings in 2000 and ordered that this bank be removed from the register of active legal entities.

39. The applicant reaffirmed his complaints. He argued, in particular, that the respondent State had allegedly kept the foreign currency deposits of the Srpsko-moravska Bank and that he had a continuing right to the enforcement of the 1994 judgment. He maintained, furthermore, that this Bank had been authorised to operate in Serbia and, therefore, the respondent State should have applied the impugned legislation and recognised the foreign currency deposits of this Bank's savers as a public debt.

40. In this regard, the Court, firstly, notes that the Srpsko-moravska Bank did not have a special operating licence issued by the Central Bank and the latter had even banned its activities in 1993. Secondly, the Court observes that the impugned legislation had barred the enforcement of the applicant's judgment as of 12 December 1998 and extinguished the impact of the final judgment in question well before the respondent State's ratification (see paragraph 19 above). Finally, the Court notes that, even assuming that the applicant has any remaining entitlement to the enforcement of the judgment in issue, the respondent State has never accepted to convert into a public debt the foreign currency deposits held by this “unauthorised financial institution”, which, in any event, ceased to exist in 2000 on account of its insolvency.

41. Therefore, even assuming that the applicant's complaints are compatible ratione temporis, the Court finds that they are, for the reasons stated above, incompatible ratione personae with the provisions of the Convention within the meaning of Article 35 § 3 and must be rejected pursuant to Article 35 § 4.

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You are here: BAILII >> Databases >> European Court of Human Rights >> Milosav ILIC v Serbia - 21811/09 [2010] ECHR 1466 (14 September 2010) URL: http://www.bailii.org/eu/cases/ECHR/2010/1466.html Cite as: [2010] ECHR 1466