In the case of Roman Minarik v. the Czech Republic,
The European Court of Human Rights (Fifth Section), sitting as
a Chamber composed of:
Dean Spielmann, President,
Mark Villiger,
Karel Jungwiert,
Boštjan M. Zupančič,
André Potocki,
Paul Lemmens,
Helena Jäderblom, judges,
and Stephen Phillips, Deputy Section Registrar,
Having deliberated in private on 23 October 2012,
Delivers the following judgment, which was adopted on that
date:
PROCEDURE
The case originated in an application (no.
58874/11) against the Czech Republic lodged with the Court under Article 34 of
the Convention for the Protection of Human Rights and Fundamental Freedoms
(“the Convention”) by a German national, Mr Roman Minarik (“the applicant”), on 12 September 2011.
The applicant was
represented by Mr P. Zima, a lawyer practising in Prague. The Czech Government
(“the Government”) were represented by their Agent, Mr V. A. Schorm, of the
Ministry of Justice.
On 12 January 2012 the application was
communicated to the Government.
THE FACTS
I. THE CIRCUMSTANCES OF THE CASE
4. The applicant was born in 1965 and lives in Willstätt, Germany. He was a minority shareholder of IVAX CR, a.s., a joint stock company
incorporated under Czech law.
5. On 25 June 2002 general meeting of that
company adopted, by votes of the main shareholder, a resolution on the winding
up of the company and division of its assets between two new companies: IVAX
Pharmaceuticals, s.r.o and První Opavská, a.s. The former company included all
the business of IVAX CR, a.s. and was owned exclusively by the main shareholder
of the wound-up company. The latter company included only financial assets and
was owned by minority shareholders of the wound-up company, including the applicant.
A. Proceedings
on the deletion of the company from the Companies Register
6. On 5 September 2002 the Ostrava Regional
Court (krajský soud) approved
the registration of the winding up of the company and its deletion from the Companies
Register with effect from 31 December 2002. The applicant did not have standing
to participate in the proceedings. He nevertheless lodged an appeal.
7. On 26 November 2002 the Olomouc High Court (vrchní
soud)
dismissed the applicant’s appeal. It ruled that since the applicant
did not have standing to take part in the impugned proceedings, he was not
entitled to appeal their outcome.
8. On 1 March 2006 the Supreme Court (Nejvyšší soud) dismissed the
applicant’s appeal on points of law.
9. On 31 August 2006 the Constitutional Court (Ústavní
soud) dismissed the applicant’s constitutional appeal holding that
participation of shareholders in Companies Register proceedings would cause
considerable delays, which would compromise the requirement to record events
and facts in the Register as soon as possible in order to protect rights of
third persons relying on the correctness of information in it. It added that
the right of access to court of the shareholders was sufficiently safeguarded
in other proceedings. It also noted that if a court in charge of the Companies
Register were to record a fact which was based on a resolution of a general
meeting, and if the resolution was subsequently found unlawful in proceedings
under Article 131 of the Commercial Code, that court would make necessary
amendments to the Register even proprio motu.
B. Proceedings to set aside the resolution of the
general meeting
10. On 25 June 2002 the applicant lodged with
the Regional Court an action to have the
resolution on the winding up of the company set aside, asserting that it
had been adopted contrary to the applicable law.
11. On 24 November 2006 the Regional Court
terminated the proceedings noting that company IVAX CR, a.s. had been deleted
from the Companies Register on 31 December 2002. It referred to Article 220v in
conjunction with 220h § 4 of the Commercial Code that prevented it from
continuing the proceedings after the company had been deleted from the
Companies Register.
12. On 24 April 2007 the High Court dismissed the applicant’s appeal
agreeing with the conclusions of the Regional Court.
13. On 24 June 2009 the Supreme Court dismissed the applicant’s appeal on
points of law agreeing with the lower courts.
On 3 March 2011 the Constitutional Court
dismissed the applicant’s constitutional appeal. It interpreted the relevant provisions of the domestic law in a way that,
in its view, was compatible with the Convention, taking into account especially
the Court’s judgment in Kohlhofer and Minarik v. the Czech
Republic, nos. 32921/03, 28464/04 and 5344/05, 15 October 2009. It held that the applicant could have instituted
proceedings under Article 131 § 4 of the Commercial Code claiming just
satisfaction caused by an unlawful decision of a general meeting. In those
proceedings the courts, as a necessary preliminary question, would have to
decide on the legality of the decision, which was the issue that the applicant
had been seeking access to court for. Consequently, the applicant’s right of
access to court was sufficiently safeguarded in other proceedings. The relevant
part of the judgment reads:
“Although the European
Court of Human Rights found the existence of a legitimate aim of the decisive
legal regulations embodied in Article 131 § 3(c) and Article 220 § 4 of
the Commercial Code, it did not agree that it is a ‘proportionate’ measure, not
even with regard to the existence of related and anticipated proceedings on the
‘review of the compensation’, damages and just satisfaction. ...
However, at present - with
regard to the presented legal interpretation of the interconnection between the
proceedings concerned, envisaged in Articles 220v, or 220h of the Commercial
Code (on additional compensation Article 220k, damages or just satisfaction)
and the proceedings on the invalidity of the general meeting’s resolution - [the
proportionality of the measure] can already be regarded as proved if it was
newly stipulated, in addition to the legal elements ‘at play’ before the
European Court of Human Rights, that [the proceedings] are characterised (in Article
131 § 4 of the Commercial Code) by the basis, which is provided for in the
grounds for the invalidity of the general meeting’s resolution (even ‘if the
court does not declare the general meeting’s resolution null and void for
reasons mentioned in § 3’). This corresponds to the above conclusion that the
issue of validity, or invalidity, of a general meeting’s resolution is an
issue that the court examines as a preliminary question in related proceedings on
those ‘new’ claims; in such proceedings, in which the appellant is (could be) a
fully-fledged participant, he can appropriately defend his rights, including
adequate opposition to the general meeting’s resolution. It has also been said
that the ‘declaration’ sought by the appellant in the reasoning of the order
discontinuing the proceedings on the invalidity of the general meeting’s
resolution lacks the decisive nature (if it ever had one), and it was also
noted that the granting of ‘certain claims for damages and just satisfaction’
is already thereby capable of expressing that the previously challenged general
meeting’s resolution contained some of the deficiencies claimed by the
appellant.”
C. Compensation proceedings under Article 220k of the
Commercial Code
15. The applicant instituted proceedings claiming compensation under
Article 220k of the Commercial Code for an inadequate exchange ratio of shares
of the wound-up company for shares of the new company.
On 30 November 2007 the Regional Court decided
that the amount of compensation the applicant had received was inadequate and
ordered the defendant to pay to the applicant a sum amounting to 289,735.60 Czech
korunas (CZK, 11,802 euros (EUR)) together with interest rate of 7.5 per cent starting
from 31 December 2001.
On 18 September 2009 the High Court upheld the
judgment. It nevertheless partly modified the judgment’s operative part by
including a declaration that the applicant, together with another petitioner,
was entitled to additional compensation as provided for by Articles 200k and
220v of the Commercial Code.
On 14 August 2012 the Supreme Court quashed the decision
in part and remitted the case to the High Court. It considered that that court had
erred when it included the declaration in the operative part.
II. RELEVANT DOMESTIC LAW AND PRACTICE
The relevant domestic law and practice are set
out in the Court’s judgment Kohlhofer and Minarik v. the Czech Republic,
nos. 32921/03, 28464/04 and 5344/06, §§ 40-70,
15 October 2009.
With effect from 1 January 2012 Act no. 355/2011
amending Act no. 125/2008 on the Transformation of Companies and
Cooperatives was adopted. The new wording of section 57 of that act reads as
follows:
“(1) After the registration of the transformation in
the Companies Register it is not possible
...
(b) to declare the transformation project null and
void or to declare the decision on the approval of transformation null and
void; this shall be without prejudice to the members’ right to [additional]
compensation and damages, or to just satisfaction, [...]
(2) If court proceedings are pending on a motion for
the declaration of the transformation project null and void or a motion for the
declaration of the decision on the approval of transformation null and void at
the moment of the registration of the transformation in the Companies Register,
within a time limit set by the court, which must be at least 30 days, the
petitioner can modify the motion for the initiation of the proceedings, even
without the court’s approval, in a way that he seeks a declaration of whether
the transformation project, or the decision on the approval of the
transformation, is contrary to law, memorandum of association or articles of
association. ...
(3) If the court declares that the transformation
project or the decision on the approval of the transformation are contrary to law,
memorandum of association or articles of association, or that they are null and
void, then the persons
(a) who suffered damage in consequence of such
violation or invalidity shall be entitled to damages, and
(b) whose rights were interfered with by such
violation, shall have the right to just satisfaction, which can also be
provided in money.
(4) Persons referred to in subsection 3 shall have
the right mentioned therein
(a) against all persons participating in the
transformation or their legal successors if such a violation or the reason for
the invalidity of the transformation project or the invalidity of the decision
on the transformation are based on the content of the transformation project,
or
(b) against a person participating in the
transformation whose [governing] body decided on the transformation, or against
its legal successor, if such a violation or the reason for the invalidity of
the decision on the transformation is not based on the content of the
transformation project. ...”
In its decision of 30 March 2011, no. 29 Cdo
1048/2008 the Supreme Court referred to the Constitutional Court’s judgment in
the present case and accepted its conclusions that the issue of validity, or
invalidity, of a general meeting’s resolution is an issue that the court would
examine as a preliminary question in continued proceedings on the right to
damages or just satisfaction, or additional compensation.
THE LAW
I. ALLEGED VIOLATION OF ARTICLE 6 OF THE
CONVENTION
The applicant complained that the domestic courts
refused to consider the merits of his action challenging the resolution on the
winding up of the company and thus the interference with his property rights
has not been reviewed by any court. He relied on Article 6 § 1 of the
Convention and Article 1 of Protocol No. 1. The Court considers it appropriate
to examine the complaint under 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 ...”
A. Admissibility
The Government maintained that the application was
inadmissible for non-exhaustion of domestic remedies, the compensation
proceedings being still pending before domestic courts and the applicant had
failed to institute the proceedings for damages and just satisfaction under
Article 131 § 4 of the Commercial Code.
The applicant disagreed, considering these
proceedings not an effective remedy regarding his complaint.
. The
Court considers, as in the case of Kohlhofer
and Minarik (cited above, § 80) that the
question of effectiveness of this remedy is inseparably linked to the
Government’s plea on the merits that such a remedy justified the limitation on
the applicant’s access to court in the set-aside proceedings. It therefore
joins this question to its examination on the merits of the application.
The Court further notes that the application is
not manifestly ill-founded within the meaning of Article 35 § 3 (a) of the
Convention. It further notes that it is not inadmissible on any other grounds.
It must therefore be declared admissible.
B. Merits
1. Submissions of the parties
The applicant maintained
that Czech legislation had made it impossible for him to challenge the
winding-up resolution before a court. He considered that his application had
the same characteristics as that of Kohlhofer
and Minarik v. the Czech Republic, cited above, where the Court
found a violation of Article 6 of the Convention.
. According
to him, the proceedings on damages and just satisfaction had a different
purpose and could not substitute a court review of the legality of the winding-up resolution, which deprived him of his shares. Furthermore,
solely monetary compensation for an illegal squeeze-out of minority
shareholders would not have the necessary dissuasive effect. Moreover, these
proceedings were subject to a much higher court fee than the set-aside
proceedings.
The Government maintained that the right of
access of minority shareholders to court can also be secured in a different way
than solely by participation in the very proceedings on the invalidity of the
general meeting’s resolution with a decision on the merits. Relying in particular
on the judgment of the Constitutional Court in the present case and the
subsequent case-law of the Supreme Court, they argued that the applicant’s
right of access to court was secured by proceedings pursuant to Article 131 § 4
of the Commercial Code.
In their view Article 6 of the Convention did
not stipulate the consequences under substantive law, which the domestic law
must tie to the fact that any act had been found to be contrary to the law, or to
documents like a memorandum of association or articles of association. The
determination of such consequences was clearly the domain of the domestic law
and the Convention did not call upon the Court to substitute the domestic
authorities in this regard, the legislator in particular.
Therefore, even though under Article 6 of the
Convention there existed a right for adversarial proceedings to take place in which
the court decided on the issue of the consistency of a general meeting’s decision
with legal rules or agreements, it did not follow that such proceedings must
necessarily lead to the outright setting aside of the unlawful act. There was
therefore nothing to prevent the consequence under substantive law, compliant
with Article 6 of the Convention, from being, for example, the very finding of
unlawfulness, invalidity or illegality, accompanied by an obligation to provide
damages or just satisfaction.
A different concept of national legislation,
which would provide minority shareholders with an unrestricted right to
challenge a majority shareholder’s decision before a court, could result in a
practical infeasibility of transformation of companies and in a destabilisation
of commercial relationships, with heavy impacts on the Czech Republic’s economy
and also could potentially have a negative impact on the compatibility of Czech
law with the European Union law, namely Directive 2004/25/EC of the European
Parliament and of the Council of 21 April 2004 on takeover bids.
In the proceedings on damages or just satisfaction
pursuant to Article 131 § 4 of the Commercial Code, the validity, or
invalidity, of a general meeting’s resolution was an aspect that would always
have to be considered as a preliminary question. At the same time this would
take place in proceedings to which a minority shareholder was a fully-fledged
party and in which he would be able to make his claims in adversarial
proceedings. In such proceedings the question that was the very essence of the
original proceedings on the invalidity of the general meeting’s resolution would
always be considered on the merits, and the proceedings would satisfy all
requirements of Article 6 of the Convention.
2. The Court’s assessment
The Court first notes that it had
already several opportunities to rule on exactly the same complaint as is the
present one. In all cases it found a violation of Article 6 of the Convention
on account of lack of access to court regarding the
legality of the general meeting resolutions which had deprived the applicants of
their shares (see Kohlhofer and Minarik v. the Czech Republic, cited
above ; Minarik v. the Czech
Republic, no. 46677/06, 10 February
2011 ; Kohlhofer v. the Czech Republic [Committee], no. 22915/07,
13 October 2011 ; Solaris, s.r.o. and Others v. the Czech Republic
[Committee], no. 8992/07, 13 October 2011 ; and Minarik and Others v.
the Czech Republic [Committee], no. 10583/09, 13 October 2011).
In those cases the Court rejected the Government’s
argument that the right of access to court was secured in proceedings for
damages under Article 131 § 4 of the Commercial Code with the following
arguments. First, those proceedings had different
objectives and dealt with the separate issue of the monetary satisfaction. Second, the Government had
not shown that these legal avenues were capable of giving rise to a discussion
of the lawfulness of the resolution in circumstances comparable to a review in
the set-aside proceedings (Kohlhofer and Minarik, cited above § 101).
The Court takes note of the judgment of the
Constitutional Court adopted in the present case that, in reaction to the Court’s
case-law requirements, in the proceedings under Article 131 § 4 of the
Commercial Code the courts will have to decide in the future on the issue of validity, or invalidity, of a general
meeting’s resolution as a preliminary question. It also notes that in these
proceedings the claimants can claim both pecuniary and non-pecuniary damages
for violations of their fundamental rights and that protection of property is
guaranteed as a fundamental right by the Czech constitution.
. In view of these developments, the
Court cannot rule out that proceedings under Article 131 § 4 of the Commercial
Code might satisfy the requirements of Article 6 of the Convention of access to
court regarding disputes about the legality of deprivation of shares of
minority shareholders and that these proceedings could be considered as an
effective remedy in this respect. However, these case-law developments had no
bearing on the applicant’s case.
. Under Article 131 § 4 of the
Commercial Code these proceedings must be started within three months after the
decision to terminate the set-aside proceedings became final. In the present
case that decision became final shortly after 24 April 2007 when the decision
of the High Court was delivered to the parties. Consequently, on 3 March 2011
when the Constitutional Court delivered its judgment the time-limit for
bringing these proceedings had already expired. Moreover, there is no
suggestion in the judgment of the Constitutional Court that the applicant
should be able to bring these proceedings in spite of the expired time-limit.
Similarly, the Court considers that the new
legislation, which entered into force on 1 January 2012 and stipulates that
courts must decide on the legality of a general meeting resolution even after
the transformation was registered in the Companies Register, cannot have any
bearing on the present case either. It observes that unlike in the case of Lajda
and Others v. the Czech Republic ((dec.), no. 20984/05, 3 March 2009),
the applicant cannot take an advantage of this new legislation as the set-aside
proceedings had already finished in his case and he cannot institute them again
under the new legislation.
. Consequently,
the Court considers that the issue in the present case is the same as that in
the cases cited in paragraph 34 above. The Court
sees no reason to depart from its well-established case-law on this matter. Accordingly, it dismisses the Government’s objection of
non-exhaustion of domestic remedies in this respect and finds that there has
been a violation of Article 6 § 1 of the Convention.
II. APPLICATION OF ARTICLE 41 OF THE CONVENTION
Article 41 of the
Convention provides:
“If the Court finds that there
has been a violation of the Convention or the Protocols thereto, and if the
internal law of the High Contracting Party concerned allows only partial
reparation to be made, the Court shall, if necessary, afford just satisfaction
to the injured party.”
A. Damage
The applicant claimed CZK 383,152 (EUR 15,607) in
respect of pecuniary damage consisting of the difference between the real value
of the shares of První opavská a.s. and the amount of settlement he received
for those shares.
The Government maintained that there was no causal
link between the alleged violation of the applicant’s right of access to court
and the pecuniary damage claimed.
The Court does not discern any causal link
between the violation found and the pecuniary damage alleged; it therefore
rejects this claim (see Kohlhofer and Minarik, cited above § 116). Regarding
the non-pecuniary damage, it notes that the applicant did not request any and
accordingly the Court makes no award under this head.
B. Costs and expenses
The applicant also claimed CZK 5,000 (EUR 204) for
the costs and expenses incurred before the domestic courts and CZK 96,720 (EUR
3,940) for those incurred before the Court.
The Government did not consider the costs of the
domestic court proceedings unreasonable. On the other hand they maintained that
the costs of the proceedings before the Court were excessive.
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 sum of EUR 4,144 covering costs under all heads.
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. Declares the application admissible;
2. Holds that there has been a violation of
Article 6 § 1 of the Convention;
3. Holds
(a) that the respondent State is to pay the applicant, within three months of the date on which the judgment becomes final in accordance with
Article 44 § 2 of the Convention, EUR 4,144 (four thousand one
hundred forty four euros), plus any tax that may be chargeable to the
applicant, in respect of costs and expenses, to be converted into Czech korunas
at the rate applicable at the date of settlement;
(b) that from the expiry of the above-mentioned
three months until settlement simple interest shall be payable on the above
amount at a rate equal to the marginal lending rate of the European Central
Bank during the default period plus three percentage points;
4. Dismisses the remainder of the applicant’s
claim for just satisfaction.
Done in English, and notified in writing on 22 November
2012, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.
Stephen
Phillips Dean
Spielmann
Deputy Registrar President
