BAKALOV AND OTHERS v. BULGARIA

FIFTH SECTION

DECISION

AS TO THE ADMISSIBILITY OF

Application no. 55796/00
by Gancho Savov BAKALOV and Others
against Bulgaria

The European Court of Human Rights (Fifth Section), sitting on 18 September 2007 as a Chamber composed of:

MrP. Lorenzen, President,
MrsS. Botoucharova,
MrV. Butkevych,
MrsM. Tsatsa-Nikolovska,
MrR. Maruste,
MrJ. Borrego Borrego,
MrsR. Jaeger, judges,
and Ms C. Westerdiek, Section Registrar,

Having regard to the above application lodged on 13 July 1999,

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 applicants,

Having deliberated, decides as follows:

THE FACTS

The applicants, Mr Gancho Bakalov, Mr Ivan Orizarski, Mrs Genoveva Petkova, Mr Ventsislav Yosifov, Mrs Emilia Savova and Mrs Mariana Madzharova, are Bulgarian nationals who were born in 1933, 1933, 1947, 1947, 1949 and 1962 respectively and live in Sofia. They were represented before the Court by Ms I. Loultcheva and Ms D. Penkova, lawyers practising in Sofia.

The respondent Government were represented by their Agent, Ms M. Karadjova, of the Ministry of Justice.

A. The circumstances of the case

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

The applicants were shareholders in “First Private Bank AD” (“the Bank”), a private banking institution incorporated in 1990.

On 25 February 1991 the Bank was granted a full banking licence by the Bulgarian National Bank (“the BNB”) which was revoked on 15 May 1996.

1. The applicants

(a) Stockholdings

The Bank’s capital structure consisted of 988,735 named shares held by 5,987 named shareholders and 444,366 bearer shares.

Based on the presented list of named shareholders, the applicants’ stockholdings in the Bank were as follows:

– Mr Bakalov held 3 named shares,

– Mr Orizarski held 15 named shares,

– Mrs Petkova held 6,363 named shares,

– Mr Yosifov held 7,021 named shares,

– Mrs Savova held 2,000 named shares, and

– Mrs Madzharova held 50 named shares.

The applicants did not claim to have held any bearer shares.

Accordingly, the applicants held a total of 15,452 named shares representing 1.56 per cent of the named shares issued by the Bank.

(b) Mr Yosifov

Mr Yosifov was one of the three executive directors of the Bank at the time of the revocation of its licence.

(c) Club of Shareholders of First Private Bank AD – 1998

Some of the applicants were also members of the “Club of Shareholders of First Private Bank AD – 1998” (“the Club”), whose aim, according to its Charter, was to “protect the interests of the shareholders of the Bank”. Its constituent meeting was held on 13 December 1997 and Mr Orizarski initially acted as its chairman. The Club was registered as a non-profit organisation on 27 April 1999 and Mr Bakalov became its chairman.

At meetings on 15 January and 13 July 1999 the Club decided that proceedings should be initiated before the Court in order to protect the rights of the Bank’s shareholders.

The Charter of the Club, dating from 11 February 2002, was signed by seven shareholders, four of which are applicants in the present case – Mr Bakalov, Mrs Petkova, Mrs Savova and Mrs Madzharova.

Based on the presented list of named shareholders, the founding members held a total 8,766 named shares representing 0.88 per cent of the named shares issued by the Bank. They did not indicate how many, if any, bearer shares were held by the founding members.

A list of the Club’s members and their stockholdings in the Bank was not presented to the Court. Mr Bakalov did however provide a declaration, dated 19 August 2005, that the members of the Club held more than fifty‑one per cent of the named shares having the right to vote and more than thirty-four per cent of all the shares of the Bank.

(d) Applications submitted to the Court

The applicants submitted their applications to the Court in their private capacities as shareholders and did not refer to having made them on behalf of the Bank or the Club. Likewise, the powers of attorney they provided to their representatives were executed in their private capacities and did not cite or indicate to be made on behalf of the Bank or the Club. The Club however did enter into a legal fees agreement with one of the applicants’ representatives, Ms I. Lulcheva, and agreed to cover her costs.

2. Revocation of the Bank’s licence

With a decision of 15 May 1996 the BNB placed the Bank under supervision as it considered that there was a danger of it becoming insolvent, revoked its banking licence, restricted its activities and appointed two special administrators (“квестори”) to act in place of its board of directors.

On an unspecified date the former executive directors of the Bank, including Mr Yosifov, appealed against the decision of the BNB. In a decision of 10 March 1998 the Supreme Administrative Court rejected the appeal on the basis that section 21 (5) of the new Banks Act precluded any judicial review of decisions of the BNB for revoking a bank’s licence.

3. The Bank’s insolvency proceedings

(a) Proceedings before the Sofia City Court

With a decision of 31 May 1996 the BNB found the Bank to be insolvent and decided to initiate proceedings to wind it up. A petition to that effect was filed with the Sofia City Court on 5 June 1996.

In the ensuing proceedings the Bank was represented by its special administrators, who opposed the petition of the BNB and argued that the banking institution was not insolvent. A prosecutor from the Sofia City Prosecutor’s Office also took part in the proceedings (see the references in the Relevant domestic law and practice below).

On an unspecified date the former executive directors of the Bank, including Mr Yosifov, requested leave to intervene in the proceedings arguing that the banking institution was being improperly represented by the special administrators who had an alleged conflict of interest. In a decision of 17 or 19 June 1996 the Sofia City Court rejected their request and this decision was upheld on appeal by the Supreme Court on an unspecified date. The domestic courts found that because the Bank was under supervision it could only be represented by its special administrators.

In a judgment of 18 December 1996 the Sofia City Court dismissed as unsubstantiated and unproven the petition of the BNB to declare the Bank insolvent and to wind it up.

(b) Appeal to the Supreme Court

Upon appeal by the BNB and the Prosecutor’s Office, the Supreme Court, on an unspecified date, quashed the judgment of the Sofia City Court and remitted the case.

(c) Retrial before the Sofia City Court

During the retrial proceedings the Sofia City Court appointed a special counsel to act on behalf of the Bank as it considered that the special administrators had a conflict of interest.

In a judgment of 23 December 1997 the Sofia City Court granted BNB’s petition and, inter alia, declared the Bank insolvent, made an order for it to be wound up, divested its decision-making bodies of their powers and appointed two liquidators (“синдици”). The judgment was subject to immediate enforcement irrespective of any appeals filed against it (section 634 of the Commerce Act).

On an unspecified date the special counsel appointed by the Sofia City Court appealed against the judgment on behalf of the Bank.

(d) Proceedings before the Supreme Court of Cassation

On 21 January 1998, the Supreme Court of Cassation, in camera, rejected the appeal filed by the special counsel on behalf of the Bank. It found that the Sofia City Court had not acted within its powers by appointing such a special counsel and, therefore, that the decision for his appointment was null and void. As a consequence, it considered that the appeal had been filed by a person lacking the necessary powers to represent the Bank and rejected the appeal. Accordingly, the judgment of 23 December 1997 became final.

On 18 March 1998 Mr Orizarski, in his capacity of shareholder, filed a request with the Sofia City Court to have the proceeding reopened. He claimed that following the decision of 21 January 1998 of the Supreme Court of Cassation to declare null and void the appointment of the special counsel it had become evident that the Bank had not been represented by its authorised representatives – the two special administrators – in the proceedings before the Sofia City Court. On 24 March 1998 the domestic court instructed Mr Orizarski to pay the required court fee, which he did on 2 April 1998. His request was then transferred to the Supreme Court of Cassation on 13 April 1998 but there is not indication that it was ever ruled on.

On 16 June 1998 the Chief Prosecutor’s Office filed a petition for review (cassation) against the decision of the Supreme Court of Cassation of 21 January 1998. It argued that the appeal proceedings initiated by the special counsel should not have been rejected without giving the Bank’s authorised representatives the opportunity to endorse the actions of the said counsel.

In a judgment of 7 December 1998 the extended panel of the Supreme Court of Cassation granted the petition of the Chief Prosecutor’s Office, quashed the decision of 21 January 1998 and remitted the case with instructions that the shortcoming be corrected.

The appeal proceedings continued before the Supreme Court of Cassation, which on 15 December 1998 invited the liquidators to indicate whether they endorse the actions of the special counsel in filing the appeal against the judgment of 23 December 1997 of the Sofia City Court. In a submission of 13 January 1999 the two liquidators, acting on behalf of the Bank, informed the court that they did not support the appeal filed by the special counsel and that they do not endorse his actions. As a result, on 14 January 1999 the President of the Supreme Court of Cassation discontinued the appeal proceedings and the judgment of 23 December 1997 of the Sofia City Court became final.

The applicants claimed, which the Government contested, that on 16 February 1999 Mr Orizarski filed another request with the Sofia City Court for reopening of the proceedings which was never ruled on by the courts.

4. The winding up of the Bank

The Bank’s winding up proceedings began on 23 December 1997 when the judgment of the Sofia City Court became immediately enforceable (section 634 of the Commerce Act).

On 20 August 1998 Mr Orizarski, acting as the first chairman of the Club, filed a complaint with the President of the Sofia City Court questioning the actions of the liquidators in selling off certain assets of the Bank and requesting information whether those transactions had been approved. No action was apparently taken in response.

On an unspecified date Mr Orizarski filed a similar complaint with the BNB. In a letter of 6 October 1998 the BNB informed him that as a creditor of the Bank he had the right to petition the courts to annul transactions executed by the liquidators. There is no indication that Mr Orizarski or any of the other applicants made such requests to the courts.

On 6 November 1998 Mr Orizarski petitioned the Chief Prosecutor’s Office to investigate the actions of the liquidators in selling off assets of the Bank. As a consequence, on 30 December 1998 the Chief Prosecutor instructed the Sofia City Prosecutor’s Office to investigate the actions of the liquidators and to inform them that they must refrain from selling off assets of the Bank until the appeal proceedings against the judgment of 23 December 1997 of the Sofia City Court, which were pending at the time, have been completed.

On 6 November 1998 Mr Orizarski unsuccessfully petitioned the Sofia City Court to be allowed access to the court file. The applicants claimed, which the Government contested, that he made a similar request on 19 February 1999. The applicants further claimed, which the Government also contested, that on 10 June 1999 Mr Orizarski and Mr Bakalov filed a complaint with the Sofia City Court that the domestic courts had denied them access to court because they had not examined the request for reopening of 18 March 1998 and the repeated requests for provision of information.

In a decision of 22 May 2000 the Sofia City Court approved the sale of the Bank’s remaining assets to a private company against 14,820,000 new Bulgarian levs (approximately 7,600,000 euros).

On 14 July 2000 the Sofia City Court brought the winding up to an end and ordered that the Bank be struck off the register of companies.

B. Relevant domestic law and practice

The provisions of the Banks and Credit Activity Act of 1992, the Banks Act of 1997, the powers and practice of the Bulgarian National Bank and the domestic courts over the given period have been summarised in the Court’s judgments in the case of Capital Bank AD v. Bulgaria (no. 49429/99, §§ 45-73, ECHR 2005‑... (extracts) and in the inadmissibility decision in the case of Camberrow MM5 AD v. Bulgaria (dec.) (no. 50357/99, 1 April 2004).

COMPLAINTS

1. The applicants complained, relying on Article 6 of the Convention, that in the insolvency proceedings the Bank was not represented by its authorised representatives, but by the special administrators appointed by the BNB, then by a court-appointed special counsel and finally by the court‑appointed liquidators approved by the BNB; and that as shareholders they could not take part in the proceedings and that their requests for reopening were not examined.

2. The applicants also complained that their shareholders’ rights were detrimentally restricted as they could not participate in the winding up proceedings, such as in the appointment and supervision of the liquidators, whose liability was restricted only to deliberately caused damage.

3. The applicants also relied on Article 13 of the Convention in respect of their complaints.

THE LAW

1. The Court notes that the applicants complained that the insolvency proceedings were not adversarial because the Bank was not represented by its authorised representatives. This complaint falls to be examined under Article 6 of the Convention, which provides:

“In the determination of his civil rights and obligations ..., everyone is entitled to a fair ... hearing ... by [a] ... tribunal...”

The Government in their submissions argued that the applicants could not claim to be victims of a violation of the Convention, because they were only shareholders in the Bank, held an undetermined number of shares, did not claim to have held a significant stockholding and were complaining in their private capacities. In addition, they noted that the applicants, including Mr Yosifov, did not claim to be representing the Bank in the current proceedings. Thus, the Government claimed that as shareholders the applicants did not have the rights complained of and could only claim a part of the share capital of the Bank, proportionate to their stockholding, and after all the other creditors had been satisfied.

The applicants disagreed and claimed to be representing shareholders with significant stockholdings in the Bank. In particular, they claimed that the Club had members holding 507,369 named shares, which was equal to more than fifty-one per cent of the named shares having the right to vote and more than thirty-four per cent of all the shares of the Bank. In addition, the applicants argued that it should not be required that they have a substantial shareholding in the Bank as there had been a restriction in domestic legislation for anyone to hold more than five per cent of the voting shares in such an institution. Moreover, the number of shareholders in the Bank had been substantial and numbered several thousand. Lastly, the applicants considered that there was no one else who could have filed an application with the Court in view of the removal of the Bank’s management.

The Court recalls that the term “victim” in Article 34 of the Convention denotes the person directly affected by the act or omission which is at issue (see Eckle v. Germany, judgment of 15 July 1982, Series A no. 51, § 66). The Court further recalls that disregarding a company’s legal personality as regards the question of being the “person” directly affected will be justified only in exceptional circumstances, in particular where it is clearly established that it is impossible for the company to apply to the Court through the organs set up under its articles of incorporation or – in the event of liquidation or bankruptcy – through its liquidators or trustees in bankruptcy (see Agrotexim and Others v. Greece, judgment of 24 October 1995, Series A no. 330-A, § 66; Camberrow MM5 AD, cited above; Capital Bank AD v. Bulgaria (dec.), no. 49429/99, 9 September 2004).

The Court observes that, at the time of lodging the present application, the Bank was represented by its two liquidators and that none of the applicants, including Mr Yosifov, were competent to act on its behalf in court proceedings. The Court further observes that it was the Bank which was the party to the domestic proceedings, rather than the applicants. Most importantly though, after having thoroughly examined the applicants’ submissions, the Court finds that it does not transpire from them that the applicants had an intention to lodge an application on behalf of the Bank. On the contrary, the applicants lodged applications solely in their own names, complained about violations of their rights as shareholders in the Bank and, in reply to the Government’s submissions, persisted that in their capacity as shareholders they personally were victims of the alleged violations (compare with Bayramov v. Azerbaijan (dec.), no. 23055/03, 14 February 2006).

Accordingly, insofar as the complaint has been lodged by the applicants in their own names, it remains to be seen whether they themselves can claim to be “victims” of the alleged violations.

The Court notes, in this respect, that the applicants did not have a substantial shareholding in the Bank but held a total of 15,452 named shares representing 1.56 per cent of the named shares issued by the Bank. They did however claim that the Club represented the interests of shareholders with a substantial shareholding of more than fifty-one per cent of the named shares having the right to vote and more than thirty-four per cent of all the shares of the Bank. However, the Court notes that this claim was made on the basis of a declaration of the Club’s chairman of 19 August 2005 without any supporting documents or evidence – such as a list of its members and their stockholdings – which would have made it possible to verify their assertion. In any event, the Court observes that the applicants did not claim to be acting on behalf of the Club before the Court and executed all related documents and authorisations in their private capacities as shareholders.

Accordingly, considering the particular circumstances of the present case and the lack of a proven substantial shareholding interest by the applicants, the Court finds that they cannot claim to be “victims” of the alleged violations within the meaning of Article 34 of the Convention.

It follows that this complaint is incompatible ratione personae with the provisions of the Convention within the meaning of Article 35 § 3 and must be rejected in accordance with Article 35 § 4.

2. In respect of the applicants’ complaints that as shareholders they could not participate in the Bank’s insolvency and winding up proceedings, the Court notes that neither Article 6 nor Article 13 of the Convention imply that under the national law of the Contracting States shareholders in a private company, such as the Bank, should have the right to bring or participate in proceedings in respect of acts that are prejudicial to “their” company (see Agrotexim and Others, cited above, pp. 26-27, § 73).

It follows that the applicants’ complaints that as shareholders they could not participate in the Bank’s insolvency and winding up proceedings, or have them reopened, are incompatible ratione materiae with the provisions of the Convention within the meaning of Article 35 § 3 and must be rejected in accordance with Article 35 § 4.

3. The Court further notes that the applicants complained of their inability to participate in the appointment and supervision of the liquidators, whose actions were allegedly detrimental to their rights as shareholders.

The Court is of the view that the applicants’ complaint falls to be examined under Article 1 of Protocol No. 1 to the Convention, which provides:

“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 in their submissions argued that the applicants had failed to avail themselves of the existing remedies in the Commerce Act and the Banks Act 1997 to challenge the actions of the liquidators and to seek damages from them. The applicants disagreed.

The Court notes at the outset that the responsibility of the Contracting States is incurred solely by the actions or omissions of their organs, not by the actions and omissions of private individuals. Thus, for example, a lawyer, even if he or she is officially appointed to a case, cannot be considered as an organ of a State and his or her actions do not normally engage its responsibility under the Convention (see W. v. Switzerland, no. 9022/80, Commission decision of 13 July 1983, DR 33, p. 21 and Rutkowski v. Poland (dec.), no. 45995/99, ECHR 2001‑XI). Similarly, the Court sees no grounds on which to accept that the function of a liquidator, carried out on the basis of a case‑by‑case appointment by a court, could be assimilated to the functions carried out within the hierarchical organisation systems of public service (see Camberrow MM5 AD (dec.), cited above). Thus, the State cannot be held directly liable for the liquidators’ alleged shortcomings in managing the Bank’s assets.

However, the applicants may also be considered as raising a complaint under Article 13 of the Convention in conjunction with Article 1 of Protocol No. 1 to the Convention. In this respect, the Court notes that in the above cited inadmissibility decision in the case of Camberrow MM5 AD (cited above) it examined a similar complaint and found that remedies existed in domestic legislation which could be considered effective. In particular, under section 657(2) of the Commerce Act a debtor or a creditor, such as the applicants, could request the court to dismiss a liquidator if he or she does not perform his or her duties or imperils the creditor’s or the debtor’s interests through his or her actions. In addition, section 84(2) of the Banks Act 1997 provided that a liquidator must be discharged by the court if he or she is struck off the list of bank liquidators maintained by the BNB. Lastly, under section 663(3) of the Commerce Act the applicants could have sought compensation for the damage they had allegedly sustained from the liquidators’ allegedly faulty actions or omissions (see Savona v. Italy, no. 31661/96, Commission decision of 14 January 1998, unreported, and Paparatti and Others v. Italy (dec.), nos. 37196/97, 37198‑200/97, 37202‑5/97, 37208/97, 1 June 1999). The applicants never availed themselves of any of these opportunities.

In addition, the Court notes that when on 6 November 1998 Mr Orizarski complained to the Chief Prosecutor’s Office the latter took action and instructed the Sofia City Prosecutor’s Office to investigate the actions of the liquidators and to inform them that they must refrain from selling off assets of the Bank until the appeal proceedings had been completed. In connection with this, it should be stressed that it is not necessary under Article 13 of the Convention that an applicant obtains a favourable decision on the substance of his claim (see Salonen v. Finland, no. 27868/95, Commission decision of 2 July 1997, DR 90, p. 60 and The Islamic Republic of Iran Shipping Lines v. Turkey (dec.), no. 40998/98, 10 April 2003).

It follows from the above that this complaint is manifestly ill‑founded and must be rejected in accordance with Article 35 §§ 3 and 4 of the Convention.

4. In view of the above findings, it is appropriate to discontinue the application of Article 29 § 3 of the Convention and to reject the application.

For these reasons, the Court unanimously

Declares the application inadmissible.

Claudia WesterdiekPeer Lorenzen
RegistrarPresident

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