Communicated on 24 January 2018
FOURTH SECTION
Application no. 20880/07
BUSHBM-PLYUS, TOV
against Ukraine
lodged on 16 April 2007
STATEMENT OF FACTS
THE FACTS
The applicant company, BUSHBM-PLYUS, TOV, is a limited liability company, which was registered in Ukraine in 1994, with its office in Bryanka, Lugansk Region. It is represented before the Court by Mr A. Fomin, one of its major shareholders.
A. The circumstances of the case
The facts of the case, as submitted by the applicant company, may be summarised as follows.
1. Background information
On 7 July 2000 the applicant company and the Ukrvuglegeologiya State Company (“UVG”), an administrative entity of the Ministry of Fuel and Energy of Ukraine represented by its own administrative entity, Sevastopol‑based Izumrud Recreation Centre (“IRC”), concluded a ten-year rental agreement, under which the former rented from the latter bedroom block no. 3 (“block no. 3”) in IRC.
Subsequently, the applicant company and IRC concluded an additional agreement under which the former undertook to repair block no. 3, as previously approved by UVG. The applicant company duly repaired it.
On an unspecified date the applicant company applied to the Sevastopol office of the State Property Fund of Ukraine (“the Fund”) seeking privatisation of block no. 3. In its turn, the latter sought approval from the Ministry of Fuel and Energy, which in a letter of 6 August 2003 stated that it did not object.
By a decision of 8 December 2003 the Fund included block no. 3 in the list of objects to be subjected to privatisation.
On 26 December 2003 the Fund’s office in Sevastopol adopted a decision on the privatisation of block no. 3 by selling it for 552,756 Ukrainian hryvnyas (UAH)[1], this sum representing its market value minus the value of repairs made by the applicant company. On the same date the Fund’s office concluded a sale and purchase contract with the applicant company, under which the latter purchased block no. 3 for the above price. The contract envisaged that title to block no. 3 would pass from the buyer to the seller at the moment of notarial certification of the contract, which also took place on the same day.
In view of the above contract, on 12 February 2004 the applicant company and IRC terminated the rental agreement of 7 July 2000.
According to the applicant company, despite the above contract, UVG retained block no. 3 on its books. Moreover, in 2005 block no. 3 was disconnected from the electricity and water supplies.
2. Proceedings instituted by the applicant company against UVG
In August 2005 the applicant company lodged a claim with the Donetsk Regional Commercial Court against UVG, requesting that the court, inter alia, oblige the latter to remove block no. 3 from its books and re-connect it to IRC’s utility networks (water, electricity and drainage system).
In its turn, UVG lodged a counter-claim against the applicant company and the Fund’s office in Sevastopol, seeking invalidation of the contract of 26 December 2003. It claimed, in particular, that IRC and its block no. 3 were included in a list of objects which were not eligible for to privatisation.
By a judgment of 1 February 2006, the court partly allowed the claim and dismissed the counter-claim. It stated that the applicant company was the owner of block no. 3, having obtained property rights to it following its privatisation, which had not been declared invalid. As regards the alleged invalidity of the contract of 26 December 2003, the court stated, inter alia, that: (1) it was the Fund itself, rather than its Sevastopol office, which made the decision concerning privatisation, and its decision was not being contested; (2) block no. 3 was privatised not as an integral property complex (цілісний майновий комплекс) but as an individually determined immovable property (індивідуально визначене майно – об’єкт нерухомості) which, according to the law, could be subject to privatisation; and that (3) UVG had failed to prove that block no. 3 belonged to the category of objects of cultural, historical or national importance which under the law could not be privatised. The court thus ordered UVG to remove block no. 3 from its books, to connect it to IRC’s utility networks, and not to interfere with the use by the applicant company of electricity, water and the drainage system.
On 21 March 2006 the Commercial Court of Appeal of the Donetsk Region quashed the judgment of 1 February 2006 on the grounds that, according to the court jurisdiction rules, the case had to be examined by the Sevastopol City Commercial Court.
On 21 June 2006 the Higher Commercial Court of Ukraine quashed the decision of 21 March 2006 as erroneous and upheld the judgment of 1 February 2006.
On 23 August 2006 the Supreme Court refused to allow an appeal against the decision of 21 June 2006 lodged by the respondent company.
In the meantime, on 20 December 2005 the Ministry for the Coal Industry (successor of the Ministry of Fuel and Energy) decided to reorganise UVG by singling out its structural unit, IRC, and creating on its base the Izumrud Recreation Centre State Enterprise (“IRC State Enterprise”). The above State Enterprise thus became UVG’s successor in part of its activities connected with its former structural unit, IRC.
On 23 November 2006 the Donetsk Regional Commercial Court allowed the applicant company’s request and replaced UVG with its successor, IRC State Enterprise, in proceedings instituted for the enforcement of the judgment of 1 February 2006 which, apparently, remained unenforced.
In particular, on 4 June 2007 bailiffs informed the applicant company that they had two mutually exclusive executive writs: one concerning the judgment of 1 February 2006 and another one concerning the judgment of 13 October 2006 (see below). They therefore sent a letter to the Donetsk Regional Commercial Court, asking it to clarify how the judgment of 1 February 2006 was to be executed. It appears that they did not receive any reply and stayed the enforcement proceedings.
On 24 April 2007 IRC State Enterprise lodged a request with the Donetsk Regional Commercial Court for review of the judgment of 1 February 2006 under the procedure relating to newly discovered circumstances. It referred to the judgment of 13 October 2006 (see below), in which it was found that the Fund’s decision to include block no. 3 in the list of objects subject to privatisation had been in breach of the law. It therefore considered that the judgment of 1 February 2006 had lost its legal effect and requested that the court quash it.
On 4 June 2008 the court returned the request unexamined, as the claimant had subsequently withdrawn its request, having failed both to explain the reasons for it and to send a representative to the court hearings.
3. Proceedings instituted by IRC State Enterprise against the applicant company
In September 2006 IRC State Enterprise lodged a claim with the Sevastopol City Commercial Court against the Fund’s Sevastopol office and the applicant company seeking invalidation of the contract of 26 December 2003. The applicant company challenged the claim and requested that the court discontinue the proceedings, stating that the matter had already been resolved by the judgment of 1 February 2006.
On 20 September 2006 the Sevastopol City Prosecution Office lodged a request with the court to join the proceedings, which the court allowed.
By a judgment of 13 October 2006, the court partially allowed the claim. It stated that UVG, being a geological-service enterprise, was a company of national importance. It therefore belonged the category of State property which was not eligible for privatisation. At the moment of conclusion of the contract of 26 December 2003 block no. 3 had been part of UVG’s integral property complex. IRC was a structural unit of UVG and its property was not eligible for privatisation. Although under the law an entity which belongs to a State enterprise as part of its integral property complex could be eligible for privatisation if its singling out from the enterprise did not affect the technological unity of production at such an enterprise, the court referred to a letter from the Fund’s Sevastopol office to the Ministry of Fuel and Energy citing the impossibility and inadvisability of singling out block no. 3 from UVG’s integral property complex. Therefore, inclusion by the Fund of block no. 3 in the list of objects subject to privatisation had been in breach of the law. Moreover, the sale of block no. 3 had not been agreed with the UVG trade union, as required by law. The court thus invalidated the contract of 26 December 2003, ordered the applicant company to return block no. 3 to the State and ordered the State to refund UAH 552,756 to the applicant company, to be paid out of the State budget.
As to the applicant company’s request for discontinuation of the proceedings, the court held that by the time the case had been resolved by the Donetsk Regional Commercial Court, IRC had been reorganised into an independent legal entity and its property rights had been transferred to IRC State Enterprise. UVG could therefore not put forward any counter-claims seeking to invalidate the contract of 26 December 2003. Accordingly, the applicant company had failed to prove that the courts had already decided the claim of IRC State Enterprise referring to the same object and grounds.
On 10 November 2006 the Sevastopol Commercial Court of Appeal upheld the above judgment. It agreed with the lower court’s findings regarding the claim of IRC State Enterprise and, as regards the applicant company’s objections, stated that it was IRC State Enterprise, and not UVG, which should have been the proper respondent (counter-claimant) in the case when the judgment of 1 February 2006 was adopted, and that the applicant company had failed to prove that the same dispute with IRC State Enterprise had already been decided by the courts.
On 21 December 2006 the Higher Commercial Court of Ukraine partly modified the judgment of 13 October 2006, holding that the lower courts had not taken into account legal provisions governing the refund to buyers of money they had paid for privatised objects in the event of termination of a contract for their sale. Pursuant to those provisions, money could be refunded only after the repeated sale of such an object after its return to the State. It thus removed from the above judgment the paragraph ordering UAH 552,756 to be refunded to the applicant company.
On 20 February 2007 the Supreme Court upheld the decision of 21 December 2006.
On an unspecified date in 2008 the applicant company lodged a request with the Higher Commercial Court for reconsideration of its decision of 21 December 2006 under the procedure regarding newly discovered circumstances. It stated, in particular, that on 3 April 2008 the Higher Administrative Court of Ukraine had adopted a decision (see below), which rebutted the conclusions of the Higher Commercial Court set forth in its decision of 21 December 2006. On 7 August 2008 the court rejected the request, stating that the applicant company’s arguments did not contain any newly discovered circumstances but rather boiled down to a reassessment of circumstances that had existed at the time the case was considered by all the courts. It also held that the decision of 3 April 2008 did not contain any newly discovered circumstances within the meaning of relevant provisions of the Code of Commercial Procedure. On 23 October 2008 the Supreme Court upheld the ruling of 7 August 2008.
On 26 June 2008 the Supreme Court rejected the applicant company’s similar request for reconsideration of its decision of 20 February 2007 under the procedure regarding newly discovered circumstances, stating that it had not adopted any new decision on the merits of the dispute in this case.
4. Proceedings instituted by the Sevastopol City Prosecutor’s Office against the State Property Fund
On 24 October 2006 the Sevastopol City Prosecutor’s Office, acting in the interests of the Ministry for the Coal Industry and IRC State Enterprise, lodged an administrative claim with the Sevastopol City Commercial Court against the Fund, seeking invalidation of its decision of 8 December 2003.
By a judgment of 17 November 2006 the above court allowed the claim and invalidated the Fund’s decision of 8 December 2003 largely on the same grounds as stated in its judgment of 13 October 2006.
On 23 January 2007 the Sevastopol City Commercial Court of Appeal upheld the above judgment.
On 3 April 2008 the Higher Administrative Court, upon an appeal in cassation lodged by the applicant company, quashed the lower courts’ decisions and rejected the prosecutor’s claim. It stated that the principal specialisation of UVG was mining geology and technical drilling. Block no. 3 had been rented out as an individually determined immovable property and this had not had any effect on the technological unity of mining geology and technical drilling. Singling out IRC as a separate enterprise on 20 December 2005 had confirmed that its property had not been involved in UVG’s technological process and had not affected the unity of that process. At the time it was rented out, block no. 3 had been involved in a separate commercial activity and not in the principal specialisation of UVG. Moreover, the lower courts had had no grounds for concluding that block no. 3 had ever been included in the integral property complex of UVG. The Fund’s decision had therefore been lawful. It had not been concerned with the privatisation of UVG or its property, since block no. 3 had been a separate individually determined immovable property when the decision of 8 December 2003 was adopted.
On 4 November 2008 the Supreme Court quashed all decisions adopted within this set of proceedings and discontinued them, stating that the case should be examined under commercial (rather than administrative) rules of procedure.
B. Relevant domestic law
1. Code of Commercial Procedure of Ukraine of 6 November 1991
Article 80 § 2 of the Code states that a commercial court must discontinue proceedings if there already exists a decision by a commercial court on a dispute between the same parties about the same subject matter and on the same grounds.
2. Law of Ukraine “On the State Programme of Privatisation” of 18 May 2000 (repealed on 18 February 2012)
Pursuant to paragraph 133 of the State Programme of Privatisation for 2000-2002 introduced by the above Law, in the event of the termination of contracts of sale and purchase of privatised objects due to their invalidation by the court, money paid by buyers for privatised objects was to be refunded on the basis of a court decision from the proceeds of the repeated sale of such objects.
3. Decree of the State Property Fund of Ukraine No. 1701 of 15 August 2000 (repealed on 13 May 2013)
The Procedure for the refund to buyers of money paid for privatised objects in the event of termination or invalidation of sale and purchase contracts − which was approved by the above Decree − essentially repeated paragraph 133 of the State Program of Privatisation for 2000-2002 cited above. It stated, in particular, that payments were to be made to buyers only after the repeated sale of an object returned to the State.
COMPLAINTS
The applicant company complains under Article 6 § 1 of the Convention about the non-enforcement of the judgment of 1 February 2006 as a result of the judgment of 13 October 2006. It asserts, in particular, that in these judgments the courts adopted opposite approaches on the same dispute between the same parties.
It also complains under Article 1 of Protocol No. 1 to the Convention that, because of the judgment of 13 October 2006, it was deprived of its title to block no. 3, even though the question of its title to that property had already been resolved in the judgment of 1 February 2006; furthermore, neither the selling price of block no. 3 nor the cost of repairs made to it have been refunded to it.
QUESTIONS
1. Was the non-enforcement of the final judgment of 1 February 2006, which was a result of the subsequent proceedings and, in particular, the judgment of 13 October 2006, compatible with the principle of legal certainty enshrined in Article 6 § 1 of the Convention (see, mutatis mutandis, Esertas v. Lithuania, no. 50208/06, § 25, 31 May 2012, and Zheltyakov v. Ukraine, no. 4994/04, § 55, 9 June 2011)?
2. Has there been an interference with the applicant company’s peaceful enjoyment of its possessions, within the meaning of Article 1 of Protocol No. 1 to the Convention, in view of the judgment of 13 October 2006? If so, was that interference in compliance with the requirements of Article 1 of Protocol No. 1?
[1]. Around EUR 83,564 at the material time.
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