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FIFTH
SECTION
CASE OF UKRAINE-TYUMEN v. UKRAINE
(Application
no. 22603/02)
JUDGMENT
(Just
satisfaction)
STRASBOURG
20
May 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 Ukraine-Tyumen v. Ukraine,
The
European Court of Human Rights (Fifth Section), sitting as a Chamber
composed of:
Peer Lorenzen, President,
Karel
Jungwiert,
Rait Maruste,
Mark
Villiger,
Isabelle Berro-Lefèvre,
Mirjana
Lazarova Trajkovska, judges,
Mykhaylo Buromenskiy, ad
hoc judge,
and Claudia
Westerdiek, Section
Registrar,
Having
deliberated in private on 27 April 2010,
Delivers
the following judgment, which was adopted on that date:
PROCEDURE
- The
case originated in an application (no. 22603/02) against Ukraine
lodged with the Court under Article 34 of the Convention for the
Protection of Human Rights and Fundamental Freedoms (“the
Convention”) by the Ukraine-Tyumen Joint Stock Company (“the
applicant company”) on 23 July 2001.
- In a judgment delivered on 22 November 2007 (“the
principal judgment”), the Court held that there had been a
violation of Article 6 § 1 of the Convention and
Article 1 of Protocol No. 1 (see Ukraine-Tyumen
v. Ukraine, no. 22603/02, §§ 42 and 61 and points 2 and
3 of the operative provisions, 22 November 2007).
- Under
Article 41 of the Convention the applicant company submitted that it
had suffered some pecuniary damage as a consequence of the violation
of its rights under Article 6 of the Convention and Article 1 of
Protocol No. 1, without specifying the amount, and sought
the return of the building of which it had been deprived.
- Since
the question of the application of Article 41 of the Convention was
not ready for decision as regards pecuniary damage, the Court
reserved it and invited the Government and the applicant company to
submit, within six months, their written observations on that issue
and, in particular, to notify the Court of any agreement they might
reach (§ 66 and point 4 of the operative provisions of the
principle judgment).
- 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
1. Events prior to the adoption of the principal
judgment
- On
31 October 2001 the State Property Fund of Ukraine informed the
applicant company that it could no longer remain a shareholder of the
applicant company because the transfer of the building from
Ukranaftoprodukt to the applicant company, as consideration for its
shares, had been invalidated by the judgment of the Plenary Higher
Arbitration Court of 15 February 2001 (see the principal judgment,
§ 15).
- Subsequently,
several other shareholders, including the Ukrresursy State
Enterprise, also informed the applicant company that they would no
longer be shareholders.
- On
2 November 2001 the general assembly of the applicant company decided
to remove the State Property Fund, the Ukrresursy State Enterprise
and three other companies from its list of shareholders. It was also
decided to cancel the shares of the former shareholders and to reduce
the share capital from 900,000
to 153,000
Ukrainian hryvnias (UAH).
- According
to the applicant company, the substantial drop in its share capital
and its inability to use the building had inhibited its activities,
which it had had to discontinue from May 2004 onwards.
- On
30 September 2006 experts hired by the applicant company estimated
the market value of the building on that date at UAH 7,331,425.20.
2. Events after the adoption of the principal judgment
-
On 31 August 2008 two other experts hired by the applicant company to
evaluate the market value of the building examined it from the
outside, having been refused entry into the building. On
16 September 2008 they drew up an extensive report, finding
that the building was worth UAH 12,711,000
given its actual state, location, existing possibilities of deriving
profit from using the building, and the market values of similar
types of property. They also mentioned that the building had not been
in use since 1998 at least and therefore needed complete renovation.
- On
22 September 2008 the Kyiv City Bureau of Technical
Inventory and Register of Ownership Rights over Immovable Property
(the State real-estate register) produced, at the applicant company’s
request, an expert report which estimated the market value of the
building on 27 February 2001 at UAH 1,656,999,
pointing out that the building had not been repaired or renovated
since 1998.
- On
24 September 2008 the applicant company’s accounts were
examined by an expert who noted, inter alia, that the book
(inventory) value of the building on 1 January 2001 had
been UAH 163,371.91,
that from 1 May 1997 to 1 January 2001 the
applicant company had spent UAH 137,451.22
on repair work to the building, and that its expenses for renting an
office between 15 February and 1 April 2001 had
come to UAH 1,621.55.
The expert also calculated the inflation adjustment of the market
value of the building, as mentioned in the valuation of
22 September 2008. Thus, the value of the building adjusted
on 1 September 2008 amounted to UAH 3,431,452.53.
II. RELEVANT DOMESTIC LAW
- The
relevant provisions of the Economic Associations (Companies) Act of
19 September 1991 (as worded at the material time) read as
follows:
Article 33
Payment for shares
“A shareholder shall pay the full price of the
shares ... at the latest within one year from the date of the
company’s registration.
Failing to make a payment in time ... a shareholder
shall be liable to pay ten percent annual interest...
If no payment is made within three months [after the
expiry of the time-limit] ... the company may sell the shares in
accordance with the procedure established by [its] statute.”
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. Pecuniary damage
1. Arguments of the parties
(a) The applicant company
- The
applicant company, relying on the principle of restitutio in
integrum, asked for the return of the building of which it had
been unlawfully deprived. If the restitution was not possible for any
reason, the applicant company asked for compensation based on the
property’s market value which, according to a valuation made on
31 August 2008 by an expert hired by the applicant, was
worth EUR 1,775,878.81.
- Without
prejudice to its above claim, the applicant company stated that were
the Court to take the date on which it
had lost ownership of the building,
namely, 15 February 2001, when
assessing the pecuniary damage, the
amount of compensation in that respect should be EUR 612,070.39.
The applicant company arrived at that sum by adding the market
value of the building on that date adjusted for inflation (EUR
584,890.39) to the cost of the repair and improvements to the
property at the applicant company’s expense (EUR 26,841.07)
and the amount it had paid for renting an office between
15 February and 1 April 2001 (EUR 328.98).
- According
to the applicant company, the figures were based on the valuations by
the experts at its request (see paragraphs 10-13 above).
(b) The Government
- The
Government submitted that the consequence of the violation of
applicant company’s rights under Article 6 § 1
of the Convention and Article 1 of Protocol No. 1 was
owing to the failure of one of its shareholders, the State Property
Fund, to pay for its shares in the applicant company (valued at
71,542 United States dollars)
by transferring ownership title to the building in issue. In this
connection, the Government argued that under the provisions of its
articles of association and also in line with Article 33 of the
Economic Associations Act of 19 September 1991 the applicant
company was entitled to claim damages, including any actual loss and
loss of profit, for a shareholder’s failure to fulfil its
obligations. Since the applicant company had not availed itself of
this possibility at the domestic level, it had not exhausted domestic
remedies in respect of its claim for pecuniary damage and, therefore,
no just satisfaction could be awarded in this respect.
- The
Government further contended that, given the above reasons, transfer
of title to the building to the applicant company was not possible.
They finally suggested that the finding of a violation in the
applicant company’s case would constitute sufficient just
satisfaction.
2. The Court’s assessment
(a) General principles
- As
the Court has held on a number of occasions, a judgment in which it
finds a breach imposes on the respondent State a legal obligation to
put an end to the breach and make reparation for its consequences in
such a way as to restore as far as possible the situation existing
before the breach (see Iatridis v. Greece (just satisfaction)
[GC], no. 31107/96, § 32, ECHR 2000-XI, and Guiso-Gallisay
v. Italy (just satisfaction) [GC], no.
58858/00, § 90, 22 December 2009). The Contracting States
that are parties to a case are, in principle, free to choose the
means by which 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 attached 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
violation allows for restitutio in integrum it is the duty of
the State held liable to effect it, the Court having neither the
power nor the practical possibility of doing so itself. If, however,
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 appropriate.
- 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. In this
context, the Court reiterates that in cases involving the taking of
property by the State, the distinction between “lawful”
and “unlawful” deprivation of property is particularly
relevant to the assessment of a pecuniary claim (see, mutatis
mutandis, Scordino v. Italy (no. 1) [GC], no.
36813/97, §§ 255-256, ECHR 2006 V, and Guiso-Gallisay,
cited above, §§ 91-95).
b. Application of these
principles to the instant case
- Turning
to the circumstances of the present case, the Court notes that the
applicant company’s claims for pecuniary damage stem from the
deprivation of property which was found to be in breach of Article 1
of Protocol No. 1 (see the principal judgment, §§ 60-61).
The domestic litigation suggested by the Government did not concern
cases of deprivation of property and the Government did not
demonstrate that it offered a reasonable prospect of obtaining
reparation, albeit partial, for the consequences of the breach of the
applicant company’s rights. Furthermore, the Court does not
share the Government’s view that the harm to the applicant
company could be adequately remedied merely by the Court’s
finding of a violation of the Convention. Accordingly, the Court will
determine just satisfaction in the present case.
- In
this context, the Court notes that the origin of the violation found
under Article 1 of Protocol No. 1 was the absence of
compensation for such interference with the applicant company’s
property rights and not, as the applicant company puts it, the
unlawful taking of its property (see the principal judgment, §§ 52,
60, and 61).
- Although the instant case involves an issue of the
domestic courts’ non-compliance with the requirement of legal
certainty under Article 6 § 1 of the Convention,
it differs from the vast majority of cases in which the Court found
violations of the Convention in respect of the quashing of the final
and binding decisions (see, for example, Agrotehservis v. Ukraine,
no. 62608/00, 5 July 2005, and Timotiyevich v.
Ukraine, no. 63158/00, 8 November 2005). In the present
case the domestic judicial decision, the quashing of which the Court
held to be contrary to the principle of legal certainty, did not
directly provide for a transfer or recognition of the applicant
company’s pecuniary rights. At the heart of the case was a
dispute between central and local government over the title to a
building and, as a consequence, the question of the lawfulness of its
transfer to the applicant company’s statutory fund by a State
enterprise.
- In
view of the foregoing, the Court does not find relevant to the
present case the approach based on the total elimination of the
consequences of the impugned interference, which it would normally
apply in determining compensation for pecuniary damage in cases of
res judicata (see, for example, Timotiyevich, cited
above, § 45; Kondrashova v. Russia, no. 75473/01, §
36, 16 November 2006; and Sitkov v. Russia, no.
55531/00, §§ 49-52, 18 January 2007).
- The
Court considers that the interference with the applicant’s
rights under Article 1 of Protocol No. 1 in the
instant case is comparable to a “distinct expropriation”,
adequate compensation for which has to correspond to the market value
of the property at the time of the expropriation (see Scordino
(no. 1), cited above, §§ 256-258). Such
compensation will not cover any other loses, such as inflation or
repair works.
- Thus,
regard being had to the valuation made by a specialised State agency
(see paragraph 12 above) on
22 September 2008 submitted by the applicant company, the
accuracy of which was not contested by the Government, the Court
awards the applicant EUR 334,696 in
compensation for pecuniary damage.
B. Costs and expenses
- The
applicant company claimed UAH 55,700
for legal costs and UAH 227.70
for correspondence expenses incurred in the proceedings before the
Court after the delivery of the principal judgment. It also sought
reimbursement for a total of UAH 60,020
for the expert examinations carried out in the proceedings at its
expense (see paragraphs 10-13 above), which
sum included the cost of valuing the building by the State agency in
September 2008 (UAH 20,000).
- The
applicant company produced copies of
receipts providing evidence of payments made to the
State agency and for correspondence expenses. As to the legal costs,
the applicant company submitted a report of the law firm which it has
hired to represent it in the proceedings before the Court. According
to the report, the firm’s three staff members, a senior lawyer,
a lawyer and an assistant lawyer, had spent a total of 76 hours
working on the case at an hourly rate ranging from UAH 1,500
(senior lawyer) to UAH 300
(assistant lawyer). Their work included the analysis of the case
materials and the preparation of written observations requested by
the Court regarding the just satisfaction aspect of the case.
- According
to the Court’s case-law, an applicant is entitled to the
reimbursement of costs and expenses only in so far as it has been
shown that these have been actually and necessarily incurred and are
reasonable as to quantum. In the present case, regard being had to
the documents in its possession and the above criteria, the Court
considers it reasonable to award the applicant company EUR 4,800,
which includes, apart from a lump sum for legal expenses, the cost of
valuing the building by the State agency in September 2008 and
correspondence expenses.
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
(a) that
the respondent State is to pay the applicant company, within three
months of the date on which the judgment becomes final in accordance
with Article 44 § 2 of the Convention, EUR
334,696 (three hundred and thirty-four
thousand six hundred and ninety-six euros) in respect of pecuniary
damage and EUR 4,800 (four thousand eight
hundred euros) for costs and expenses, plus any tax that may be
chargeable to the applicant company on the above amounts, which shall
be converted into the currency of the respondent State at the rate
applicable on 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 amounts 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 20 May 2010, pursuant to
Rule 77 §§ 2 and 3 of the Rules of Court.
Claudia Westerdiek Peer Lorenzen
Registrar President
