FOURTH SECTION
DECISION
Application no. 8457/05
BULGARTSVET-VELINGRAD OOD and Konstantin Mihaylov KOPPE
against Bulgaria
The European Court of Human Rights (Fourth Section), sitting on 20 January 2015 as a Chamber composed of:
Guido Raimondi, President,
Päivi Hirvelä,
George Nicolaou,
Nona Tsotsoria,
Zdravka Kalaydjieva,
Krzysztof Wojtyczek,
Faris Vehabović, judges,
and Françoise Elens-Passos, Section Registrar,
Having regard to the above application lodged on 1 March 2005,
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
1. The applicant company, Bulgartsvet-Velingrad OOD, is a limited liability company created in 1992. It is registered in Velingrad, Bulgaria. The applicant, Mr Konstantin Mihaylov Koppe, is a German national who was born in 1943 and lives in Germany. The applicants were represented before the Court by Mr Y. Grozev, a lawyer practising in Sofia. The respondent Government were represented by their Agents, V. Hristova, M. Kotseva and M. Dimova, of the Ministry of Justice.
2. The German Government, informed of their right to intervene in the proceedings in accordance with Article 36 § 1 of the Convention and Rule 44 § 1 of the Rules of Court, have not availed themselves of this opportunity.
A. The circumstances of the case
1. Initial developments
3. The applicant held a fifty per cent stake in the applicant company. The other fifty per cent was held by Fabrika 12 EOOD, a Bulgarian limited liability company wholly owned by the applicant.
4. On 3 February 1998 another company, Oranzherii Pazardzhik EAD (“OP”), a state-owned limited liability company, was declared insolvent and insolvency proceedings were opened. Following a public auction of part of its property, on 24 March 1999 the applicant company acquired several greenhouses. However, in a final decision of 22 November 1999 the auction was cancelled.
5. Pending a new auction, on 14 December 1999 OP, represented by its trustee in insolvency, and the applicant company signed a contract pursuant to which the applicant company was appointed guardian of the greenhouses until they were sold. The applicant company undertook to maintain the greenhouses’ equipment and to carry out urgent repair works. In the meantime the applicant company was entitled to use the property and in exchange undertook to pay monthly rent.
6. In addition to the repairs indicated in the contract of 14 December 1999, the applicant company carried out substantial works on the greenhouses, which it alleged were necessary for the latter’s proper functioning. On an unspecified date it requested the trustee in insolvency of OP to reimburse the costs of those works. Initially the trustee included those costs in the list of accepted claims against OP. Later, however, following an objection by one of the other creditors of OP, which was based on the fact that the costs were substantial, had not been approved by the creditors and had been incurred after the beginning of the insolvency proceedings, in a decision of 4 July 2000 the trustee removed this claim from the list.
7. In a final decision of 11 July 2000, the Pazardzhik Regional Court upheld the removal, as it was not satisfied that the additional works had been urgent and necessary. Moreover, the works had not been authorised by the trustee and the remaining creditors. The Regional Court considered that a creditor such as the applicant company, with a claim which had not been agreed in the insolvency proceedings, could make that claim in separate civil proceedings.
2. The civil proceedings brought by the applicant company
(a) Judgment of 30 October 2001
8. On 31 October 2000 the applicant company brought a civil claim against OP and also against the Ministry of Agriculture, as a representative of the State, which owned OP’s capital. Initially it sought 100,000 Bulgarian levs (BGN) (the equivalent of 51,072 euros (EUR)), representing part of the repair costs. In the course of the proceedings it increased its claim to BGN 1,195,520 (approximately EUR 610,582), claiming that OP had unjustly enriched itself by that amount. The applicant company did not seek to have its claim included in the list of accepted claims prepared by the trustee, but argued that it was entitled to receive payment prior to the distribution of any amounts obtained through the sale of the property of OP among the remaining creditors.
9. In a judgment of 30 October 2001, the Sofia City Court granted the claim against OP. It found that the applicant company had been unable to claim or receive payment in the course of the insolvency proceedings, and that therefore it was open to it to do so in separate civil proceedings. It went on to say that the repairs had been necessary, that the defendant company had unjustly enriched itself, and that it had had to reimburse the costs of the repairs. It accepted the applicant company’s argument that it had been a “third party” to the insolvency proceedings, and that it was entitled to receive payment outside those proceedings. Thus, the domestic court ordered OP to pay the applicant company the amount of BGN 1,195,520, plus interest and costs.
10. On the other hand, the Sofia City Court dismissed the applicant company’s claim against the Ministry of Agriculture, finding that the latter could not be held liable for OP’s debts.
11. OP appealed against the above judgment, but its appeal was rejected as inadmissible in a final decision of the Supreme Court of Cassation of 17 May 2002. As a result, the Sofia City Court’s judgment became final.
(b) Reopening of the proceedings and new examination of the case
12. On 9 June 2002 OP requested the reopening of the proceedings, claiming that it had not been properly summoned to the first two hearings in the case, held on 11 December 2000 and 12 February 2001. In a judgment of 14 March 2003 the Supreme Court of Cassation allowed the request and reopened the proceedings.
13. After a fresh examination of the case, in a decision of 22 March 2004 the Sofia City Court discontinued the proceedings in respect of OP. It held that the claim was precluded by virtue of the provision of the newly introduced section 637(5) of the Commerce Act (“the CA”, see paragraph 25 below), which concerned procedural rights and was therefore applicable to pending proceedings.
14. As regards the proceedings against the Ministry of Agriculture, the Sofia City Court observed that they were still pending.
15. On appeals by the applicant company, on 9 May and 6 August 2004 respectively the Sofia City Court’s conclusions were upheld by the Sofia Court of Appeal and the Supreme Court of Cassation.
16. The Supreme Court of Cassation considered in addition that the applicant company should have lodged a claim under section 694 of the CA (see paragraph 24 below) within the insolvency proceedings.
17. The applicant company submits that it became aware of the Supreme Court of Cassation’s decision of 6 August 2004 on 14 September 2004.
(c) Proceedings against the Ministry of Agriculture
18. Following the discontinuation of the proceedings in so far as they concerned OP, the proceedings continued against the Ministry of Agriculture.
19. In a judgment of 23 January 2008, the Sofia City Court rejected the applicant company’s claim against the Ministry. It noted that it had ordered OP to provide several invoices which it considered relevant. Those invoices had not been presented (OP had in the meantime been wound up); accordingly, the domestic court found that the claim had not been proved.
20. The applicant company did not lodge an appeal against the above judgment, as it was entitled to do under domestic law.
21. The applicant company used the greenhouses until 2002, when it was evicted. The greenhouses were sold at a new public auction in 2004.
B. Relevant domestic law and practice
22. Company insolvency is governed by Part IV of the Commerce Act (“the CA”) of 1991. Since its enactment in 1994, its provisions relating to company insolvency were amended on numerous occasions.
23. Pursuant to section 685 of the CA, creditors had to declare their claims against the insolvent company. The trustee in insolvency then prepared a list of accepted claims. Refusal by the trustee to accept a claim and include it in the list could be contested before the insolvency court. A creditor could also object to a decision to accept another creditor’s claim. At the relevant time, the trustee would decide on the matter and then submit the list for approval to the insolvency court.
24. By section 694 of the CA, introduced in October 2000 and as worded at the time, a creditor whose claim had not been accepted and included in the list could also bring an action for a declaration seeking to establish the existence of the claim. Such an action could be brought within fourteen days of the entry in the company register of the insolvency court’s decision approving the list of accepted claims. If the claimant was successful, the claim was to be satisfied within the insolvency proceedings. A similar provision existed in the CA until June 1998, when it was repealed.
25. Until the end of June 2003 there was no provision which explicitly allowed or barred the bringing of a civil claim against an insolvent company separately from the insolvency proceedings against that company, and there was no well-established practice of the domestic courts in this regard. Following amendments to the CA of June 2003, a bar to such claims was introduced (initially section 637(5), currently (6)).
COMPLAINTS
26. The applicants complained under Article 6 § 1 of the Convention that they had been deprived of access to court. They pointed out that in its judgment of 11 July 2000 the insolvency court had found that the applicant company could bring a separate civil action. However, once the applicant company had brought such an action, the courts were precluded from examining it because of the new legal provisions, namely the amendment to the CA by the introduction of section 637(5) in 2003. The Supreme Court of Cassation, in its decision of 6 August 2004, had referred to section 694 of the CA, but by the time this provision was adopted the applicant company could no longer make use of the remedy provided therein, owing to the short time-limits.
27. The applicants also complained under Article 1 of Protocol No. 1 that because the applicant company’s claim had been rejected as inadmissible pursuant to those legislative amendments, the State had failed to protect the peaceful enjoyment of their possessions. They averred that the applicant company had been de facto deprived of its property in favour of OP.
28. Lastly, the applicants complained under Article 6 § 1 of the Convention that the reopening of the civil proceedings brought by the applicant company had been unlawful. They considered in addition that the domestic courts had not been impartial, had favoured the defendant (OP), and had thus deprived the applicant company of a fair trial.
THE LAW
A. The applicant company’s complaints under Article 6 § 1 of the Convention as regards access to court, and under Article 1 of Protocol No. 1
29. The applicant company complained first under Article 6 § 1 of the Convention that it had been deprived of access to court, and under Article 1 of Protocol No. 1 that lack of access to court had also infringed its right to peaceful enjoyment of its possessions.
30. The relevant parts of Article 6 § 1 state the following:
“In the determination of his civil rights and obligations ... everyone is entitled to a fair ... hearing ... by [a] ... tribunal ...”
Article 1 of Protocol No. 1 reads:
“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.”
1. Arguments of the parties
31. The Government considered that the complaints should be declared inadmissible for non-exhaustion of domestic remedies, because the applicant company did not appeal against the Sofia City Court’s judgment of 23 January 2008 dismissing its claim against the Ministry of Agriculture (see paragraph 20 above).
32. The Government argued in addition that the amendment of section 637(5) of the CA in 2003 had been aimed at protecting the interests of the initial creditors of the insolvent company. Without elaborating any further, they stated that depriving the applicant company of access to court had been a proportionate measure. The Government argued also that there had been no violation of the applicant company’s rights under Article 1 of Protocol No. 1.
33. The applicant company disagreed. As regards the Government’s objection on the basis of non-exhaustion of domestic remedies, it argued that an appeal against the judgment of 23 January 2008 would not have been an effective remedy. Its counsel in the domestic proceedings had advised it not to appeal against that judgment in order not to incur further costs, as he had been of the view that the action, at this stage directed solely against the Ministry of Agriculture, representative of the State as the owner of OP’s capital, was bound to fail.
34. The applicant company argued that it had had no avenue under domestic law to have its claim against OP examined by a court. Under Article 1 of Protocol No. 1 the applicant company considered that it had been made to bear a disproportionate burden.
2. The Court’s assessment
35. The Court takes note of the Government’s objection of non‑exhaustion of domestic remedies, which was based on the fact that the applicant company had failed to appeal against the Sofia City Court’s judgment of 23 January 2008 (see paragraph 31 above). It reiterates in that regard that it is intended to be subsidiary to the national systems safeguarding human rights, and that it is appropriate for the national courts to have the initial opportunity to determine questions regarding the compatibility of domestic law with the Convention (see, among others, A, B and C v. Ireland [GC], no. 25579/05, § 142, ECHR 2010). Thus, according to Article 35 § 1 of the Convention the Court may only deal with a matter after all domestic remedies have been exhausted, according to the generally recognised rules of international law. This rule requires normal recourse by an applicant to remedies which are likely to be effective, sufficient and available (see, for example, Aquilina v. Malta [GC], no. 25642/94, § 39, ECHR 1999‑III).
36. In the present case, the applicant company chose to bring a claim against two defendants. Initially, in a judgment of the Sofia City Court of 30 October 2001 the claim was allowed in respect of one of them, OP, and rejected in respect of the other, the Ministry of Agriculture (see paragraphs 9-10 above). Later, the proceedings against OP were discontinued and the claim against the Ministry of Agriculture was rejected, once again by the Sofia City Court, in a judgment of 23 January 2008 (see paragraphs 13-19 above).
37. The Court must determine whether the appeal which lay against that last judgment, which the applicant company chose not to lodge, constituted an effective remedy capable of leading to the examination of its claim to recover the costs of the repair works undertook by it in 1999-2000.
38. In this regard the Court observes that in its judgment of 23 January 2008 the Sofia City Court examined the applicant company’s claim against the Ministry of Agriculture on the merits and rejected it as unproven (see paragraph 19 above). For the Court, there is nothing to show that, had the judgment been appealed against, the higher courts would have refused to examine the claim’s merits as well. The applicant company argued that the claim against the Ministry of Agriculture was bound to fail (see paragraph 33 above). However, the Court points out that the right of access to court, which is at the heart of the complaints under examination, does not guarantee a positive outcome of the proceedings initiated by the applicant company. What it did require was the applicant company to have the opportunity to have the merits of its claim examined by a court. Such an opportunity was provided for, and the merits were examined in the judgment of 23 January 2008. The applicant company, which was dissatisfied with that judgment’s conclusions, could have appealed against it. As already discussed, it chose not to do so.
39. Accordingly, the Court is of the view that the applicant company failed to avail itself of a remedy which satisfied the requirements of Article 35 § 1 of the Convention, and that the Government’s objection of non‑exhaustion of domestic remedies is well-founded.
40. It follows that this part of the application is inadmissible for failure to exhaust domestic remedies within the meaning of Article 35 § 1 of the Convention, and must be rejected in accordance with Article 35 § 4.
B. Remaining complaints raised by the applicants
41. The applicant, Mr Koppe, complained, relying on Article 6 § 1 and Article 1 of Protocol No. 1, in his capacity as sole shareholder of the applicant company. The applicant company complained under Article 6 § 1 of the Convention that the reopening of the civil proceedings on 14 March 2003 (see paragraph 13 above) had been granted unlawfully and that the domestic courts had not been impartial.
42. The Court has examined these complaints as submitted by the applicants. However, 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 rights and freedoms set out in the Convention or its Protocols.
43. It follows that this part of the application must be rejected as manifestly ill‑founded, pursuant to Article 35 §§ 3 (a) and 4 of the Convention.
For these reasons, the Court unanimously
Declares the application inadmissible.
Done in English and notified in writing on 12 February 2015.
Françoise Elens-PassosGuido Raimondi
RegistrarPresident
Full & Egal Universal Law Academy