SECOND SECTION
DECISION
Application no. 33461/09
Refii Samim BERENT and Others
against Turkey
The European Court of Human Rights (Second Section), sitting on 21 September 2021 as a Committee composed of:
Carlo Ranzoni, President,
Egidijus Kūris,
Pauliine Koskelo, judges,
and Hasan Bakırcı, Deputy Section Registrar,
Having regard to the above application lodged on 15 June 2009,
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 circumstances of the case1. A list of the applicants is set out in the appendix. The applicants were represented before the Court by Mr T. Akıllıoğlu, a lawyer practicing in Ankara
2. The Turkish Government (“the Government”) were represented by their Agent, Mr Hacı Ali Açıkgül, Head of the Department of Human Rights of the Ministry of Justice of the Republic of Turkey.
3. The facts of the case, as submitted by the applicants, may be summarised as follows.
The background to the case4. The first applicant is the president of two companies, listed as the second and third applicants. All three of them held a certain amount of shares in Pamukbank T.A.Ş. (hereinafter “Pamukbank”), which they bought on an unspecified date. At the time, 99% of the bank’s shares were held by the Çukurova Group (hereinafter “the Group”), which was the main shareholder in a number of other companies.
5. By a decision dated 18 June 2002 (no. 742), the Banking Regulation and Supervision Board (Bankalar Düzenleme ve Denetleme Kurulu ‑ hereinafter “the Board”) revoked Pamukbank’s licence to conduct banking activities pursuant to sections 14(3) and (4) of the Banking Activities Act (Law no. 4389). It also decided to transfer the bank’s management and control to the Savings Deposit Insurance Fund (Tasarruf Mevduatı Sigorta Fonu ‑ hereinafter “the Fund”).
6. On 19 June 2002 the Fund took over the possession of all shares of Pamukbank in line with section 14(5) of Law no. 4389.
Proceedings brought by the Çukurova Group7. Following Pamukbank’s takeover by the State, the Çukurova Group brought annulment proceedings and requested the stay of execution of the Board’s decision to transfer the bank to the Fund.
8. On 19 September 2002 the Supreme Administrative Court rejected the request.
9. After assessing the Group’s objection to that decision, on 22 November 2002 the General Assembly of the Administrative Proceedings Divisions of the Supreme Administrative Court (Danıştay İdari Dava Daireleri Genel Kurulu - hereinafter “the General Assembly”) granted the Group’s request for the stay of execution. It found that the procedure before the transfer had not been conducted in compliance with provisional section 4 of Law no. 4389, according to which, before transferring banks with insufficient capital, the Banking Regulation and Supervision Agency (Bankalar Düzenleme ve Denetleme Kurumu - hereinafter “the Agency”) had to provide them with information and time to take additional measures in order for them to achieve restructuring and recapitalisation. After stating that it had been established by independent audit reports that the bank’s capital adequacy ratio had been negative, the appellate court concluded that the Board’s decision to transfer Pamukbank to the Fund had not been lawful, as before adopting the decision the authorities had not had recourse to certain measures set forth in provisional section 4 of Law no. 4389 which would allow the bank to increase its capital.
10. On 27 January 2003 the Çukurova Group withdrew its case. Subsequently, on 30 January 2003 the Supreme Administrative Court found it not necessary to deliver a judgment.
11. On 31 January 2003 the Group signed an agreement with the Agency and the Fund, according to which, besides withdrawing its case before the Supreme Administrative Court, the Group undertook not to bring further proceedings regarding the actions of the Fund and the Agency. It also took on the liability to pay compensation to third parties, in case the actions lodged by those third parties against the State authorities were accepted by the Supreme Administrative Court. In return, the Fund undertook to sell the shares of certain companies, which had previously been transferred to it as part of Pamukbank’s assets, back to the Group for the amounts specified in the agreement.
12. On 3 February 2003 the Board adopted a decision to resume the execution of Pamukbank’s transfer to the Fund.
Proceeding brought by the applicants13. On 11 November 2002 the applicants brought proceedings against the Fund and the Agency, requesting the stay of execution and annulment of the decisions pertaining to Pamukbank’s transfer to the Fund and the latter’s takeover of the bank’s shares. They argued that the impugned decisions had not been in accordance with law and that the authorities had failed to take into account the rights of the minority shareholders, who had not been part of the procedure before the bank’s takeover and had relied on the information provided by the Agency.
14. On 17 April 2003 the Supreme Administrative Court rejected the applicants’ request for stay of execution, finding that the impugned administrative decisions had been taken in line with section 14(3) and (4) of Law no. 4389. The court stated that Pamukbank had been under supervision since 1982 and had carried out a substantial number of correspondence with the authorities regarding the liquidation of frozen assets and credits, as well as capital increase. It had been established by three independent audit reports that the bank’s capital adequacy ratio was negative, and that its feasibility reports regarding the liquidation of its debts had not been considered as enforceable. In view of the findings of all reports to the effect that the bank’s liabilities exceeded its assets, the court concluded that the bank’s transfer to the Fund had been lawful.
15. On 9 November 2004, following a decision of the Board, Pamukbank merged with Halkbank, a State bank.
16. In the meantime, in response to the applicants’ query about whether their rights as minority shareholders would be taken into account in the merger, both the Agency and the Fund informed the applicants that their rights as shareholders had ceased to exist by Pamukbank’s transfer to the Fund and that they did not have any enforceable rights in the absence of a judicial decision to that effect.
17. On 18 May 2005 the Supreme Administrative Court dismissed the applicants’ case. Reiterating its findings in its decision regarding the stay of execution of the impugned administrative act, the domestic court found that Pamukbank’s transfer to the Fund had been in line with section 14(3) and (4) of Law no. 4389. As for the applicants’ arguments regarding the measures set forth in provisional section 4 of Law no. 4389 providing for the recapitalisation of the bank, the court held that, according to the wording of provisional section 4, that provision did not hinder the application of section 14 of the Banking Activities Act when certain conditions have been satisfied.
18. On 26 June 2008 the Joint Administrative Chambers of the Supreme Administrative Court upheld that judgment. The appellate court rejected the applicants’ request for the rectification of the judgment on 15 April 2010.
Relevant domestic law19. A description of the relevant domestic law may be found in the judgments of Reisner v. Turkey (no. 46815/09, 21 July 2015), and Yaşar Holding A.Ş. v. Turkey (merits) (no. 48642/07, 4 April 2017).
COMPLAINT
20. The applicants complained under Article 1 of Protocol No. 1 to the Convention that they had unlawfully been deprived of their property as they had not been paid any compensation for the loss of their shares.
THE LAW
The parties’ submissionsThe applicants21. The applicants complained of a violation of their right to peaceful enjoyment of possessions on account of the State’s takeover of their shares in Pamukbank. They argued that the case they had lodged for the annulment of that takeover had been dismissed as a result of the change in the Supreme Administrative Court’s approach, which, according to them, had resulted from the agreement signed between the main shareholders and the State authorities. In that connection, they referred to the cases of Süzer and Eksen Holding A.Ş. v. Turkey (no. 6334/05, 23 October 2012) and Cıngıllı Holding A.Ş. and Cıngıllıoğlu v. Turkey (nos. 31833/06 and 37538/06, 21 July 2015), wherein the Supreme Administrative Court had annulled the transfer of the banks and companies concerned, and argued that had the impugned agreement not been signed, the Supreme Administrative Court’s decision of 22 November 2002 for the stay of execution of Pamukbank’s transfer would have taken effect and their shares would have been restored. Lastly, they challenged the Government’s contention regarding the risk taken by them on account of their having bought shares on the stock exchange and argue that the shares had value as shown by the lack of any judicial decision establishing that Pamukbank had been in deficit.
The Government22. The Government argued that the applicants had had no possessions within the meaning of Article 1 of Protocol No. 1, in that the shares they had held had lost all of their value as a result of the financial status of Pamukbank. They considered accordingly that the application was incompatible ratione materiae with the provisions of the Convention.
23. The Government argued, in the alternative, that the applicants had failed to exhaust domestic remedies as they had not lodged a compensation action before the administrative courts. They also argued that the applicants had also failed to initiate proceedings against the Çukurova Group. In that respect, they noted that the clause in the agreement pertaining to the Group’s liability for cases brought by third parties did not preclude the applicants from lodging a case, as the agreement was only binding for the signatory parties, that is, the Group, the Agency and the Fund.
24. Lastly, the Government submitted that the application was inadmissible for being manifestly ill-founded. They stated that even assuming that the applicants had had possessions, the interference at issue had been made on the basis of accessible and foreseeable provisions, namely section 14(3) and (5) of Law no. 4389, which had satisfied the conditions of “law”. Moreover, in view of the financial crisis in Turkey at the time, the State’s takeover of Pamukbank had been in the public interest to maintain financial stability and to protect the banking system. As regards proportionality, the Government submitted that the applicants had obtained Pamukbank’s shares on the stock market with the sole aim of making a commercial profit. They maintained that such commercial activities contained an element of risk, which the applicants had taken of their own accord by not selling their shares until the very last minute, even though they could have predicted the situation and the resulting transfer of the bank as investors.
25. As for the applicants’ contention regarding the shift in the domestic court’s approach in the case of the main shareholders, the Government stated that the decision delivered by the General Assembly on 22 November 2002 was merely an interlocutory decision for stay of execution and not a decision on the merits of the case. Therefore, there had been no change in the domestic court’s approach.
26. Taking account of the procedural guarantees provided by the domestic courts and referring to the Court’s decision in the case of Olczak v. Poland ((dec.), no. 30417/96, ECHR 2002‑X (extracts)), the Government concluded that the interference with the applicants’ right to property had not imposed an excessive burden on them and had been proportionate to the general public interest pursued.
The Court’s assessment27. The Court notes at the outset that the Government did not raise an objection as regards the applicants’ victim status. It finds, however, that the question concerns incompatibility ratione personae of the application which goes to the Court’s jurisdiction and which it is not prevented from examining of its own motion (see, mutatis mutandis, Béláné Nagy v. Hungary [GC], no. 53080/13, § 71, ECHR 2016).
28. The Court reiterates that when it comes to cases brought by shareholders of a company, it found it crucial to draw a distinction between complaints brought by shareholders about measures affecting their rights as shareholders and those about acts affecting companies, in which they hold shares (see Albert and Others v. Hungary [GC], no. 5294/14, § 122, 7 July 2020, and the cases cited therein). It also reiterates that acts affecting the rights of the shareholders are distinct from measures or proceedings affecting the company in that both the nature of such acts and their alleged effect impact the shareholders’ legal rights both directly and personally and go beyond merely disturbing their interests in the company by upsetting their position in the company’s governance structure (ibid., § 134).
29. In the present case, the Court observes that the transfer of Pamukbank to the Fund together with all its shares was a measure which directly and adversely affected the applicants’ ownership of their shares (ibid., § 131). It follows that the application is compatible ratione personae with the Convention within the meaning of Article 35 §§ 3 (a) and 4.
30. As to the Government’s objections regarding whether the applicants’ shares constituted possessions within the meaning of Article 1 of Protocol No. 1 and the non-exhaustion of domestic remedies on account of their failure to claim compensation before the administrative courts, the Court notes that it has already examined similar objections and rejected them (see Zülfikari and Pekcan v. Turkey, nos. 6372/05 and 52543/07, §§ 36 and 47, 19 March 2019, and the cases cited therein).
31. The Court does not consider it necessary to reach a conclusion regarding the applicants’ failure to lodge a case against the Group since the complaint under Article 1 of Protocol No. 1 to the Convention is in any event inadmissible for the following reasons (see Çulha and Others v. Turkey (dec.), nos. 7023/07 and 22 others, 15 May 2018).
32. The Court refers to its established case-law with regard to the structure of Article 1 of Protocol No. 1 and the three rules contained therein (see, among other authorities, Lekić v. Slovenia [GC], no. 36480/07, § 92, 11 December 2018).
33. The Court observes that the applicants had been shareholders in Pamukbank before it was taken over by the State authorities. They lost the ownership of their shares by Pamukbank’s transfer to the Fund, as that transfer concerned all shares of the bank as well as its management and control. In the Court’s view, there has therefore been an interference with their right to peaceful enjoyment of their property (see Süzer and Eksen Holding A.Ş. v. Turkey, no. 6334/05, § 143, 23 October 2012, and Reisner v. Turkey...§ 47). The Court further observes that the Agency’s decision to take over the bank was adopted as a measure to control the country’s banking sector. It is true that it involved a deprivation of property, but in the circumstances of the present case, that deprivation formed a constituent element of a scheme for controlling the banking industry. It is therefore the second paragraph of Article 1 of Protocol No. 1 which is applicable in the present case (see Süzer and Eksen Holding A.Ş., §§ 146‑147; Reisner, § 47; and Yaşar Holding A.Ş., § 89, all cited above).
34. A wide margin is usually allowed to the State under the Convention when it comes to general measures of economic or social strategy. Because of their direct knowledge of their society and its needs, the national authorities are in principle better placed than the international judge to appreciate what is in the public interest on social or economic grounds, and the Court will generally respect the legislature’s policy choice unless it is “manifestly without reasonable foundation” (see Grainger and Others v. the United Kingdom (dec.), no. 34940/10, § 36, 10 July 2012).
35. The Court notes that the impugned interference, namely, the transfer of all shares of Pamukbank to the Fund, was made on the basis of sections 14(3), (4) and (5) of Law no. 4389 and pursued the general interest of protecting financial stability.
36. As regards the proportionality of the interference, the Court observes first of all that, both in its decision rejecting the applicants’ request for the stay of execution of the administrative act at issue and in its judgment dismissing the applicants’ action for the annulment of that act, the Supreme Administrative Court established on the basis of three independent auditors’ reports that Pamukbank’s capital adequacy ratio had been negative and that its liabilities had exceeded its assets. The domestic court also found that the bank’s feasibility reports regarding its capital increase had not been considered to be enforceable. In assessing the bank’s financial situation, the domestic court noted that the bank had been supervised by State authorities since 1982. It concluded therefore that the State’s takeover of the bank had been in accordance with the relevant provisions of the Banking Activities Act (Law no. 4389) (see paragraphs 14 and 17 above).
37. Taking account of the reasoning provided by the Supreme Administrative Court, the Court cannot give weight to the applicants’ contention that the domestic court had changed its line of reasoning following the agreement reached between the State authorities and the Çukurova Group, in that it had initially found the transfer unlawful on account of non-compliance with provisional section 4 of Law no. 4389. In that connection, the Court notes that while the Supreme Administrative Court had accepted the Group’s request for stay of execution on account of the lack of any measures which would enable the bank to increase its capital (see paragraph 9 above), it concluded in the applicant’s case that the application of that provision was subject to certain conditions which did not prevent the authorities to rely on section 14 of the same Act providing for the transfer of the bank to the Fund (see paragraph 17 above).
38. Moreover, the Court cannot agree with the applicants’ submission that there has been no judicial decision establishing that Pamukbank had been in deficit. It notes that while no final judgment was delivered by the Supreme Administrative Court in the main shareholders’ case on account of the latter’s waiver, in the applicant’s case the domestic court assessed the bank’s financial situation in detail and held, as noted above, that its liabilities had exceeded its assets. The Court considers therefore that the applicants were provided with adequate procedural guarantees regarding their claims before the domestic courts. As for the applicants’ contention that they were prevented from lodging an action against the main shareholders of the bank - the Çukurova Group - due to the clause in the agreement between the Group and the State authorities, according to which the former would be liable for any compensation that the State authorities would be obliged to pay to third parties if the Supreme Administrative Court accepted those third parties’ cases (see paragraph 11 above), the Court notes that, as pointed out by the Government, the agreement containing that clause was binding only for its signatory parties. Accordingly, it remained open to the applicants to initiate proceedings against the Group before the civil courts, causing no prejudice to the State’s obligation to open adequate legal avenues for the applicants to assert their rights.
39. As noted above, the Court accepts that the domestic authorities’ objective in transferring the management and control of Pamukbank, as well as all its shares to the Fund was to protect the financial stability and the banking system of the country. In the absence of any unlawfulness established either by the domestic courts or by the Court regarding the State’s takeover of the bank, there was no duty owed by the State to the shareholders to protect their investments in Pamukbank (contrast Süzer and Eksen Holding A.Ş.; Cıngıllı Holding A.Ş. and Cıngıllıoğlu, both cited above, as regards the unlawfulness of takeover established by the domestic courts; and Yaşar Holding A.Ş., as regards that established by the Court). Nor does Article 1 of Protocol No. 1 impose such a positive obligation on the State; indeed, the Court has stressed on many occasions that this provision cannot be interpreted as imposing any general obligation on the Contracting States to cover the debts of private entities (see Kotov v. Russia [GC], no. 54522/00, § 111, 3 April 2012, and Grainger and Others, cited above, § 42). It also considers that in the present case there were no additional factors requiring the State to bear any civil liability for Pamukbank’s lack of resources (see Ališić and Others v. Bosnia and Herzegovina, Croatia, Serbia, Slovenia and the former Yugoslav Republic of Macedonia [GC], no. 60642/08, § 115, ECHR 2014; see also Anokhin v. Russia (dec.), no. 25867/02, 31 May 2007 for the factors to be taken into consideration in order to establish such liability). In that connection, the Court notes that by holding minority shares of private bank for investment purposes, the applicants assumed certain risks, including those related to mismanagement and even fraud. Hence, it was not for the State to bear any civil liability for the liquidator’s unlawful actions (compare Kotov, cited above, §§ 116-117, and Soyuer and Others v. Turkey (dec.), no. 49445/07, 21 June 2011).
40. In view of the above and taking account of the wide margin of appreciation afforded to States in respect of matters involving economic policy, the Court concludes that the interference at issue was proportionate to the general interest pursued.
41. It follows that the complaint regarding the applicants’ right to peaceful enjoyment of possessions is manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 and 4 of the Convention.
For these reasons, the Court, unanimously,
Declares the application inadmissible.
Done in English and notified in writing on 21 October 2021.
{signature_p_2}
Hasan Bakırcı Carlo Ranzoni
Deputy Registrar President
Appendix
No.
Applicant’s Name
Birth date
Nationality
Place of residence
1
Refii Samim BERENT
15/03/1944
Turkish
Ankara
2
Polmak Makine İmalat A.Ş.
Turkish
Ankara
3
Polmak Sondaj Sanayi A.Ş.
Turkish
Ankara