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THIRD
SECTION
DECISION
Application no.
40050/06
by PYROBATYS, A.S. V
REŠTRUKTURALIZÁCII
against Slovakia
The
European Court of Human Rights (Third Section), sitting
on 3 November 2011 as a Chamber
composed of:
Josep
Casadevall,
President,
Alvina
Gyulumyan,
Egbert
Myjer,
Ján
Šikuta,
Luis
López Guerra,
Nona
Tsotsoria,
Mihai
Poalelungi, judges,
and
Marialena Tsirli, Deputy
Section Registrar,
Having
regard to the above application lodged on 27 September 2006,
Having regard to the observations submitted by the respondent
Government and the observations in reply submitted by the applicant,
Having
deliberated, decides as follows:
THE FACTS
- The
applicant, PYROBATYS, a.s. v reštrukturalizácii
(“the applicant company”),
is a joint-stock company established under the laws of Slovakia with
its head office in Batizovce.
The
applicant company was represented before the
Court by Mr Š. Kseňák, a lawyer
practising in Košice.
2. The
Government of the Slovak Republic (“the Government”) were
represented by their Agent, Ms M. Pirošíková.
A. The circumstances of the case
The
facts of the case, as submitted by the parties, may be summarised as
follows.
1. The applicant company
- The
applicant company was established in 1995 in the legal form of
a limited-liability company with the name of PYROBATYS, s.r.o.
It later changed its legal status to that of a joint-stock company
under the name of PYROBATYS, a.s. It then entered the process of
restructuring, which is reflected in its name, as indicated in
paragraph 1 above. The restructuring was concluded in April 2011.
2. Contracts and their parties
- On
7 December 1994 two separate contracts were entered into between a
joint-stock company, A., and, respectively, the applicant company and
a limited-liability company B. (“the contract”).
- Under
the contract A. let property to the applicant company and B. in
return for payment of rent. The property consisted of an
administration building, factory premises and garages. Leases were
concluded for fifty years.
- On
26 May 1999 the Košice Regional Court (Krajský súd)
declared A., which had meanwhile changed its name, insolvent and
appointed a receiver.
- Later
in 1999 B. was merged with the applicant company.
- The applicant company and company A. had the same
address, which was formerly also the address of company B. It appears
from a publicly available official source (http://www.orsr.sk) that
there were also ownership and personal connections between these
companies.
- By
a letter of 6 June 2001 A., acting through the intermediary of its
receiver, unsuccessfully requested an amicable settlement with the
applicant company in respect of an amount of money that was allegedly
owed by the latter by way of outstanding rent under the contract.
3. Ordinary courts
(a) Action
- On
1 August 2001 A., acting through its receiver, sued the applicant
company before the Poprad District Court (Okresný súd)
for payment of rent under the contract.
- The
claimant sought an order for the payment of the equivalent of some
620,000 euros (EUR) and a ruling to the effect that neither party be
awarded costs.
- Despite
the claimant’s failure to pay the court fees, the District
Court went on to examine the action, inter alia by seeking the
applicant company’s written observations in reply to the action
and in respect of expert evidence, as well as by twice hearing the
action on its merits.
- To
defend the action the applicant company appointed an advocate, for
whose services up to 2005 it paid him the equivalent of some
EUR 3,840.
(b) Court fees
- Meanwhile,
on 24 July 2003, the District Court had ordered that the claimant pay
the court fees, amounting to the equivalent of some EUR 2,360.
- On
22 August 2003 the claimant requested an exemption from the
obligation to pay the court fees on the ground that, being insolvent,
it had no means to pay.
- On
30 January 2004 the District Court refused the request of 22 August
2003. No copy of the decision was served on the applicant company.
Despite a specific written request, to which they have responded, the
respondent Government have failed to provide the Court with a copy of
this decision and of any other documents or information enabling the
Court to ascertain the decision’s content.
- The
decision of 30 January 2004 could have been challenged by way of an
appeal on the part of the claimant, in the absence of which it became
final and binding on 2 March 2004.
- By
way of an order that was served on the claimant on 10 February 2005,
it was again asked to pay the court fees. No payment was made.
(c) Discontinuation of action and ruling
on costs
- On
7 March 2005, following a hearing of the action held on the same day,
the District Court discontinued the proceedings and ruled that no
party was entitled to have its costs reimbursed. The ruling has the
procedural form of a decision (uznesenie).
- The
District Court observed that the claimant had neither been granted an
exemption from the obligation to pay the court fees nor had it paid
the court fees, despite having been ordered to do so. The District
Court held that, in such circumstances, pursuant to section 10(1) of
the Court Fees Act (Law no. 71/1992 Coll., as amended), the action
could not be examined.
- As
to the ruling on costs, the District Court observed that:
- the
action had not been withdrawn,
- the
situation was not such as to call for an examination of procedural
responsibility for the discontinuation of the proceedings (Article
146 § 2 of the Code of Civil Procedure (Law no. 99/1963 Coll.,
as amended - “the CCP”) and for the application of the
criterion of success in the proceedings (Article 142 of the CCP),
-
Article 150 of the CCP was to be applied, which allowed for
moderation of the repercussions of the rules on costs,
- the
case was “exceptional and worthy of particular consideration”
in terms of Article 150 of the CCP, in view of the circumstances in
which the contract had been concluded and the fact that the validity
of the contract was being examined in another set of proceedings
before the District Court, which had the aim of securing vacant
possession of the premises in question.
(d) Appeal
- The
applicant company appealed against the ruling on costs, claiming
compensation in an amount equivalent to some EUR 10,500 in respect of
legal representation and costs reimbursable under the applicable
statutory rules, plus the costs of the appeal.
- The
applicant company contended that the District Court’s findings
of fact were erroneous and that its conclusions were not susceptible
of review on account of lack of reasoning.
- Furthermore,
the applicant company submitted that its costs were the
responsibility of the claimant, who had provoked them. Article 150 of
the CCP could only be applied in situations which fell within the
purview of one or more of the remaining rules on costs, if all
conditions for their application had been met, but their application
would produce an intolerable outcome. In so far as the District Court
had referred to the other set of proceedings, in which the validity
of the contract was to be examined, their subject matter was in fact
not the validity of the contract but the amount of the rent set out
in it.
- On
9 February 2006 the Prešov Regional Court upheld the relevant
part of the District Court’s decision. The ruling has the
procedural form of a decision (uznesenie), in which the
Regional Court found that:
- the
District Court had erred in making reference to the criterion of
success in the proceedings (Article 142 of the CCP);
- the
rule that would normally have had to be applied was that costs are to
be borne by the party which had caused the discontinuation of the
proceedings (Article 146 § 2 of the CCP);
- the
District Court had been right in taking account of the financial
standing of both parties;
- in
view of the circumstances the question of the validity of the
contract, which was being examined in another set of proceedings,
could be considered a ground “worthy of particular
consideration”;
- by
applying Article 150 of the CCP the first-instance court had rightly
moderated the repercussions of the application of Article 146 §
2 of the CCP for the claimant, whose only objective was to realise
and distribute fairly its estate in insolvency;
- the
Court of Appeal was also of the opinion that “the amount of the
costs would not have existential consequences for [the applicant
company] and would not jeopardise its property holdings”.
4. Constitutional Court
- On
19 May 2006 the applicant company lodged a complaint with the
Constitutional Court (Ústavný súd) under
Article 127 of the Constitution.
- The
complaint was directed against the Regional Court’s decision of
9 February 2006, the applicant company arguing that that decision had
violated its rights to a fair hearing, procedural equality and
protection of property, as well as prohibition of discrimination.
- In
particular, the applicant company contended that the amount at stake
in the proceedings was rather significant from its perspective and
that it had accordingly needed to acquire legal representation. It
also advanced the following arguments.
- The
Court of Appeal’s conclusion concerning the lack of dramatic
effects of the costs ruling on the applicant company was without any
foundation in fact and evidence whatsoever and, as such, plainly
arbitrary.
- The
claim for reimbursement of costs was independent of the financial
standing of the party making it. In so far as financial standing of
a party was to be taken into account, it was only the standing
of the party that would otherwise be liable to reimburse another
party’s costs.
- As
regards the claimant, at the relevant time it had been the owner of
real property.
- There
was no statutory provision for exemption of an insolvent claimant
from obligation to pay court fees and neither was there any provision
exempting it from reimbursement of procedural costs it had itself
provoked.
- In
the present case the claimant had been liberated from responsibility
for the consequences of its actions and the burden of this
responsibility had arbitrarily been placed on the applicant company.
- In
other words, the applicant company’s property holdings had been
interfered with, in that it had been denied a proprietary claim
without any legal basis.
- On
14 December 2006 the Constitutional Court declared the complaint
admissible.
- On
29 March 2007 the Constitutional Court found that there had been no
violation of the applicant company’s rights in issue.
- The
Constitutional Court observed that the applicant company had no right
to a favourable outcome of the litigation it had been a party to.
The reasons given by the Regional Court for its decision were
such that any arbitrariness was ruled out. On the one hand, it had
upheld the reasons given by the District Court, and on the other it
had reinforced those reasons by adding further reasons of its own, in
particular the reasons related to the financial standing of both
parties to the proceedings.
- In
addition, the Constitutional Court observed that the decision not to
exempt the claimant from the obligation to pay the court fees was not
the subject matter of the present proceedings and that the relevant
circumstances might have changed between that decision and the
contested decision not to award the applicant company reimbursement
of its costs.
- In
so far as the applicant company had contended that the Regional Court
had drawn conclusions concerning its financial standing without
actually examining that standing, the Constitutional Court reiterated
that, as a matter of principle, it had no power to examine whether
the ordinary courts had adequately established and assessed the
facts. It emphasised, in particular, that “[t]he fact that the
applicant company disagreed with the Regional Court’s view
could not give rise to a conclusion that the latter was manifestly
ill-founded or arbitrary, nor did it provide for a basis for the
Constitutional Court to substitute its own legal opinion for that of
the Regional Court.”
- In
accordance with its existing doctrine, the Constitutional Court held
that since there had been no violation of the applicable procedural
rights of the applicant company, by definition there could not have
been any violation of the applicant company’s substantive
proprietary rights. In those circumstances, there was no basis for
the prohibition of discrimination to be applied either.
B. Relevant domestic law and practice
1. The Constitution (Constitutional Law no. 460/1992
Coll., as amended)
- Article
127 provides that:
“1. The Constitutional Court shall
decide complaints by natural or legal persons alleging a violation of
their fundamental rights or freedoms ... unless the protection of
such rights and freedoms falls within the jurisdiction of a different
court.
2. If the Constitutional Court finds a
complaint justified, it shall deliver a decision stating that a
person’s rights or freedoms as set out in paragraph 1 have been
violated by a final decision, specific measure or other act and shall
quash such a decision, measure or act. If the violation that has been
found is the result of a failure to act, the Constitutional Court may
order [the authority] which has violated the rights or freedoms to
take the necessary action. At the same time it may remit the case to
the authority concerned for further proceedings, order that authority
to refrain from violating the fundamental rights and freedoms ... or,
where appropriate, order those who have violated the rights or
freedoms set out in paragraph 1 to restore the situation to that
existing prior to the violation.
3. In its decision on a complaint the
Constitutional Court may grant appropriate financial compensation to
a person whose rights under paragraph 1 have been violated.”
2. Code of Civil Procedure and relevant judicial
practice
- Under
Article 138 § 1, at the request of the party concerned, the
party to the proceedings may be fully or partly exempt from the
obligation to pay court fees where it is justified by the situation
of that party and provided that the claim at issue is neither
frivolous nor clearly devoid of any prospect of success.
- A
party which has been entirely successful is to be awarded costs
necessary for purposeful assertion or defence of its rights against
the unsuccessful party (Article 142 § 1). In the event of
success in part, the costs are normally to be split proportionally
(Article 142 § 2). However, even in the event of success in
part, full award of costs may be granted if the party was
unsuccessful in merely a negligible proportion or if the scope of the
substantive claim depended on expert evidence or judicial discretion
(Article 142 § 3).
- A
party which is liable for the necessity of discontinuing proceedings
is obliged to reimburse the costs of such proceedings (Article 146
§ 2).
- Article
150 provides that:
“If there are reasons worthy of particular
consideration, the court exceptionally does not need to award
reimbursement of costs or their part. The court shall take into
account in particular the situation in which the party which is being
awarded reimbursement of costs has adduced facts and evidence
together with the first procedural step that was for that the party
to take, which however does not apply if the party was not able to
introduce such facts and evidence.”
- In
a commentary on Article 150, with reference to a previous yearbook of
judicial decisions, the view was expressed that, when assessing
“reasons worthy of particular consideration”, regard
should be had to personal, proprietary, income and other
circumstances applying to all parties to the proceedings, and also
the circumstances which caused the parties to assert their
rights before the court, as well as to their attitude in the
proceedings (see Občiansky súdny poriadok,
Jaroslav Krajčo a kolektív, Eurounion, spol.s r.o.,
Bratislava 2004, p. 294).
- The
position described in the preceding paragraph forms part of settled
case-law (see, for example, judgment (rozsudok) of the Supreme
Court in case file no. M Cdo 14/99, judgment of the Constitutional
Court of 23 August 2006 in case file no. III. ÚS 53/06,
decision (uznesenie) of the Supreme Court of 30 November 2009
in case file no. 4 MCdo 18/2008 and decision of the Supreme Court of
28 January 2010 in case file no. 2 M Cdo 17/2009).
In
the decisions quoted, the courts also opined that the application of
Article 150 must be rather exceptional and adequately reasoned. The
existence of the special circumstances has to be established on the
basis of the situation of all parties to the proceedings. It is
necessary to take into account not only the situation of the person
liable to pay the costs but also the impact of the decision refusing
the reimbursement of costs on the property of the party who is
entitled to reimbursement under normal circumstances.
3. Court Fees Act
- Court
fees are collected, inter alia, for individual procedural
steps or for proceedings before the courts, provided that these have
to be initiated by an application (section 1(1)).
- The
fee payer (poplatník) is the person making the
application for a procedural step which is subject to court fees
if the tariff scale provides that the fee is payable on the making of
the application (section 2(1)(a)).
- The
duty to pay the court fees arises when the application is made, if
made by the fee payer (section 5(1)(a)). In such a case, the court
fees become payable at the same time (section 8(1)).
- If
the court fees payable on the making of an application have not been
paid, the first-instance court is to order the fee payer to pay the
fees within a given period, usually ten days. If the fees have not
been paid within this period, the court is to discontinue the
proceedings (section 10(1)).
COMPLAINTS
- The
applicant company complained under Article 6 §
1 of the Convention that the decision not to reimburse its costs had
been arbitrary, unsupported by adequate reasons, based on a
conclusion that was devoid of any basis in evidence or assessment of
evidence and the product of proceedings lacking the guarantees of
procedural equality of the parties.
- The
applicant company also complained under Article 1 of Protocol No.
1 that the decision not to reimburse its costs had interfered without
justification with its property rights.
- Lastly,
in conjunction with the violations alleged above, on the basis of the
same facts the applicant company also alleged a violation of
Article 14 of the Convention.
THE LAW
A. Article 6 § 1 of the Convention
- The
applicant company argued that the proceedings in respect of its costs
had fallen short of the guarantees of fairness pursuant to Article 6
§ 1 of the Convention, the relevant part of which reads as
follows:
“In the determination of his civil rights and
obligations ... everyone is entitled to a fair ... hearing ...
by [a] ... tribunal ...”
- The
Government submitted that it was for the national courts to assess
the facts and to interpret and apply domestic law. In particular,
questions such as admissibility and assessment of evidence were the
primary domain of the national courts, the Court’s role being
limited. In that respect, they referred to the Court’s judgment
in the case of Van de Hurk v. the Netherlands (19 April
1994, § 61, Series A no. 288). They emphasised that, although
Article 6 of the Convention called for judicial decisions to be
reasoned, it did not go as far as to require a detailed answer to
each of the parties’ arguments.
- According
to the Government, in the present case Article 150 of the CCP
conferred judicial discretion on the domestic courts and they had
exercised it legitimately and rightfully. Their decisions had not
been unjustified or arbitrary and had been based on an acceptable
interpretation of the relevant laws and criteria established by
existing judicial practice, as had indeed been confirmed by the
Constitutional Court, to the findings of which the Government
referred.
- In
reply, the applicant company disagreed and submitted that the
complaint raised serious issues of substance, as had been recognised
by the Constitutional Court in that it had declared its complaint
under Article 127 admissible. Judicial discretion under Article 150
of the CCP did not mean uncontrollable arbitrariness. Its exercise
therefore necessitated proper reasoning. However, in the present
case, in so far as the Regional Court relied on the applicant
company’s proprietary situation, no acceptable reasons had been
or could have been cited, since no evidence whatsoever had been taken
and examined in that respect. The decision was therefore based on an
unfounded assumption that had no legal value. Even if it had had a
legal value, the using of property-standing assumptions would amount
to a discriminatory immunity from procedural liability on grounds of
property.
- The
Court observes that the determination of the costs of the trial in
the present case falls within the purview of Article 6 § 1 of
the Convention (see Robins v. the United Kingdom, 23 September
1997, §§ 28 and 29, Reports of Judgments and Decisions
1997 V, and Macková v. Slovakia, no. 51543/99/98,
§ 55, 29 March 2005), which is accordingly applicable.
- The
Court reiterates that the resolution of the issue of court costs may
have implications for the fairness of the proceedings as a whole (see
Stankiewicz v. Poland, no. 46917/99, § 60, ECHR 2006 VI).
- At
the same time, the Court reiterates that, in accordance with Article
19 of the Convention, its duty is to ensure the observance of the
obligations undertaken by the Contracting Parties to the Convention.
In particular, it is not its function to deal with errors of
fact or law allegedly committed by a national court, unless and in so
far as they may have infringed rights and freedoms protected by the
Convention. Moreover, while Article 6 of the Convention guarantees
the right to a fair hearing, it does not lay down any rules on the
admissibility of evidence or the way it should be assessed, which are
therefore primarily matters for regulation by national law and the
national court (see Garćia Ruiz v. Spain [GC], no.
30544/96, § 28, ECHR 1999-I, with further references). The
Court’s task under the Convention is to ascertain whether the
proceedings as a whole, including the way in which evidence was
taken, were fair (see, for example, Petrenco v. Moldova,
no. 20928/05, § 41, 30 March 2010).
- As
to the present case, the Court observes first of all that it arose in
the context of a contractual transaction of a commercial nature
between private parties and that the crux of the Article 6 complaint
appears to be the domestic court’s decision on the applicant
company’s costs, which is an auxiliary issue in relation
to the main subject-matter of the proceedings.
- For
that matter, the Court also observes that the proceedings on the
merits of the claim of A. against the applicant company were
discontinued without any substantive decision and that they thus
essentially ended in the applicant company’s favour. The issue
of the costs of the trial was determined subsequently, at two levels
of ordinary jurisdiction, the decisions of which were ultimately
reviewed by the Constitutional Court.
- The
domestic courts mainly relied on the provisions of Articles 150 and
146 § 2 of the CCP and held that the test that would normally
have had to be applied was that costs are to be borne by the party
which had caused the discontinuation of the proceedings, as provided
for by the latter of the provisions cited. However, in the present
case, the former provision was to be applied, which allowed for
moderation of the repercussions of the latter rules. This was so
because the case was exceptional and worthy of particular
consideration in terms of Article 150 of the CCP, in view of the
circumstances in which the contract had been concluded, the fact that
the validity of the contract was being examined in another set of
proceedings before the District Court and the financial standing of
both parties.
- The
Court considers that, when taken as whole, these reasons are not
manifestly arbitrary, irregular or otherwise wrong. Moreover, the
applicant company was represented by a lawyer throughout the
proceedings and it was provided with ample opportunity to state its
arguments, to challenge the submissions made by A. and to submit any
evidence it considered relevant to the outcome.
- As
to the references, which are now impugned by the applicant company,
and which were made by the ordinary courts to the circumstances of
the conclusion of the contracts, their contested validity and the
financial standing of the parties, the Court - guided by the
principle of subsidiarity - does not finds them inexplicable on the
particular facts (see, for example, paragraph 8 above) and also in
view of the fact that A. was obviously insolvent while the applicant
company was not.
- In
conclusion, in the light of all the material in its possession, and
in so far as the matters complained of are within its competence, the
Court finds that they do not disclose any appearance of any
procedural unfairness within the meaning of Article 6 § 1 of the
Convention.
- It
follows that the relevant part of the application is manifestly
ill founded and must be rejected in accordance with Article 35
§§ 3 (a) and 4 of the Convention.
B. Article 1 of Protocol No. 1
- The
applicant company also complained that the decision not to reimburse
its costs interfered without justification with its property rights,
contrary to Article 1 of Protocol No. 1, which provides as follows:
“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.”
- The
Government objected, first of all, that the complaint was
incompatible ratione materiae with the provisions of the
Convention, since the applicant company could not be said to have had
at stake any “possession” within the meaning of Article 1
of Protocol No. 1.
- The
Government also contended that, in any event, the outcome of the
domestic proceedings had been lawful in terms of Article 150 of the
CCP, was in accordance with the general interest of protecting the
creditors of an insolvent debtor, and was not disproportionate.
- In
reply, the applicant company disagreed, and reiterated its complaint.
In particular, the applicant company submitted that, in the
circumstances, it had a right to have its costs reimbursed that was
sufficiently solid to fall within the ambit of Article 1 of Protocol
No. 1.
- The
Court considers that it is not called upon to rule specifically on
the Government’s objection ratione materiae because the
relevant part of the application is in any event inadmissible for the
reasons stated below.
- In
that respect, the Court observes that the complaint made under
Article 1 of Protocol No. 1 has the same factual, procedural and
substantive background as that under Article 6 § 1 of the
Convention. The Court’s reasons will accordingly apply to the
present complaint mutatis mutandis.
- In
particular, the Court finds it of relevance that the present dispute
over court costs took place between two private entities. A
resolution of such matters in a manner that is compatible with
Article 6 § 1 of the Convention does not give rise to an issue
under Article 1 of Protocol No. 1 (see Sika v. Slovakia
(dec.), no. 2132/02, 10 May 2005).
- At
the same time, the Court observes that in so far as any claim could
potentially be made on the premise that the incurring of procedural
costs by the applicant company was due to erroneous official conduct
on the part of the courts, such a claim has not been asserted at the
domestic level and is not the essence of the present case.
- Thus,
in the light of all the material in its possession, and in so far as
the matters complained of are within its competence, the Court finds
that they do not disclose any appearance of a violation of the
applicant company’s rights set out in Article 1 of Protocol No.
1.
It
follows that the complaint under that provision is manifestly
ill founded and must be rejected in accordance with Article 35
§§ 3 (a) and 4 of the Convention.
C. Remaining complaint
- Lastly,
in conjunction with the violations alleged above, on the basis of the
same facts the applicant company also alleged a violation of
Article 14 of the Convention.
- However,
in so far as this part of the application has been substantiated and
raises any issues that are separate from those examined above under
Articles 6 § 1 of the Convention and 1 of Protocol No. 1, the
Court finds that it does not disclose any appearance of a violation
of the provision invoked.
- It follows that the remainder of the application is
manifestly ill founded and must be rejected in accordance with
Article 35 §§ 3 (a) and 4 of the Convention.
For these reasons, the Court unanimously
Declares the application inadmissible.
Marialena
Tsirli Josep Casadevall
Deputy Registrar President
