FIFTH SECTION
CASE OF DAY S.R.O. AND OTHERS v. THE CZECH REPUBLIC
(Application no. 48203/09)
JUDGMENT
STRASBOURG
16 February 2012
This judgment is final. It may be subject to editorial revision.
In the case of Day s.r.o. and Others v. the Czech Republic,
The European Court of Human Rights (Fifth Section), sitting as a committee composed of:
Mark Villiger, President,
Karel Jungwiert,
André Potocki, judges,
and Stephen Phillips, Deputy Section Registrar,
Having deliberated in private on 24 January 2012,
Delivers the following judgment, which was adopted on that date:
PROCEDURE
1. The case originated in an application (no. 48203/09) 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 Day s.r.o., a limited liability company incorporated under Czech law (“the applicant company”), Mr Pavel Suda (“the second applicant”), Mr Karel Rybáček (“the third applicant”) and Mr Miroslav Navrátil (“the fourth applicant”) who are Czech nationals and Ms Susanne Minarik (“the fifth applicant”) and Mr Roman Minarik (“the sixth applicant”) who are German nationals, on 2 September 2009.
2. The applicants were 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.
3. On 12 January 2011 the application was communicated to the Government.
4. The Government objected to the examination of the application by a Committee. After having considered the Government’s objection, the Court rejects it.
THE FACTS
I. THE CIRCUMSTANCES OF THE CASE
5. On 24 June 2003 the general meeting of a company Ytong, a.s. adopted, by votes of the main shareholder, a resolution on the winding up of the company and on the transfer of all its assets to the main shareholder. The applicants received cash settlement for their shares based on an expert opinion.
6. The contract between Ytong, a.s. and the main shareholder for the transfer of all assets to the main shareholder included an arbitration clause by which any disagreement of the minority shareholders with the settlement amounts was to be decided in arbitration before the Arbitration Court attached to the Economic Chamber of the Czech Republic and Agricultural Chamber of the Czech Republic (“the Arbitration Court”). The asset transfer contract was approved at the general meeting by votes of the majority shareholder.
A. Court proceedings
7. On 8 October 2003 the applicants lodged with a court an action whereby they asserted that the settlement for the transfer was not adequate and claimed the remainder thereof.
8. On 14 July 2005 the Brno Regional Court (krajský soud) terminated the proceedings holding that it had no jurisdiction over the dispute because of the arbitration clause in the asset transfer contract.
9. On 28 November 2005 the Olomouc High Court (vrchní soud) upheld the decision not finding a violation of the applicants’ right of access to court. It held that the arbitration clause was binding even for the applicants by virtue of Article 220k § 1 of the Commercial Code. It further held that the issue of the settlement amount was first of all a technical issue.
10. On 24 June 2008 the Supreme Court (Nejvyšší soud) dismissed the applicants’ appeal on points of law agreeing with the lower courts.
11. On 17 March 2009 the Constitutional Court (Ústavní soud) dismissed the applicants’ constitutional appeal alleging violations of their right to a fair trial and prohibition of discrimination as manifestly ill-founded stating only that the opinions of the ordinary courts had not diverted from the generally accepted views on the matter.
B. Arbitration proceedings
12. After the High Court’s decision became final on 13 January 2006 the applicants, with the exception of Mr Minarik, instituted proceedings before the Arbitration Court as envisaged in the arbitration clause. They nevertheless submitted that the Arbitration Court had no jurisdiction to hear the case because the arbitration clause was not applicable to them.
13. On 11 October 2006 the Arbitration Court terminated the proceedings regarding Mr Navrátil and Mr Rybáček for lack of jurisdiction holding that they had not consented to the arbitration.
14. On 26 May 2007 the Arbitration Court terminated the proceedings regarding Ms Minarik holding that it had no jurisdiction because Ms Minarik was a German resident and a Czech-German Bilateral Investment Treaty, which was applicable, envisaged right of access to court. On the other hand the motion for lack of jurisdiction concerning Day s.r.o. and Mr Suda was dismissed and the proceedings are pending.
II. RELEVANT DOMESTIC LAW AND PRACTICE
15. In addition to the domestic law and practice set out in the Court’s judgment Suda v. Czech Republic, no. 1643/06, 28 October 2010 the following law and practice is relevant to the present case.
A. Act on the Economic Chamber of the Czech Republic and Agricultural Chamber of the Czech Republic (no. 301/1992), as in force in the relevant period
16. Under section 19(1), the Arbitration Court is a permanent court of arbitration attached to the Economic Chamber of the Czech Republic and it is an independent body for deciding disputes by independent arbitrators under regulations on arbitration proceedings.
B. Rules and practice of the Arbitration Court
17. The Arbitration Court has separate Rules for domestic disputes and for international disputes. However the following rules are the same for both types of proceedings.
18. Section 26(1) of the Rules stipulates that a dispute is considered at a hearing held in camera. The president of the tribunal can decide, with the consent of the parties, that persons who are not parties can be present at a hearing.
19. Under section 37(1) a decision of the tribunal is announced to the parties at the end of the hearing, or if they are not present it is sent to them in writing.
20. In the case of Kohlhofer v. the Czech Republic [Committee], no. 22915/07, § 15, 13 October 2011, the Arbitration Court, referring to the judgment of the Court in Suda v. the Czech Republic, cited above, held that it had no jurisdiction to decide on the merits of a claim because proceedings before the Arbitration Court were not public.
THE LAW
I. ALLEGED VIOLATION OF ARTICLE 6 OF THE CONVENTION
21. The applicants complained that they had been denied access to court regarding their claims that the amount of settlement they had received had been inadequate. They relied on Article 6 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 ...”
22. The Government contested that argument.
A. Admissibility
23. The Court notes that this complaint 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
24. The applicants argued that their case was the same as the case of Suda v. the Czech Republic, cited above, where the Court found a violation of Article 6 of the Convention on the account of lack of access to court. They maintained that they had also not consented to arbitration and that the arbitration proceedings did not comply with the Article 6 guarantees because, in particular, they were not public. They added that the possibility of judicial review of an arbitration decision was not sufficient because it was limited only to procedural issues and not the merits.
25. The Government, on the other hand, considered that there were substantial differences between the Suda case and the present case. In particular, contrary to Suda, the tribunal in the present case was a permanent court of arbitration established by law and was internationally respected and guaranteed fair trial. They further maintained that a judicial review of arbitration decisions was envisioned in the domestic law. Lastly, regarding those applicants, whose arbitration proceedings were terminated, they could have instituted proceedings before courts afterwards.
26. The Court firstly notes that it has decided a similar issue in the case of Suda v. the Czech Republic, cited above, where it found a violation of Article 6 of the Convention, because the applicant had not consented to arbitration proceedings, that had not been public and the tribunal had not been established by law.
27. The Court acknowledges that the present case differs from Suda in that there is no dispute between the parties that the Arbitration Court, to which the applicants had access, was established by law. The applicants, however, maintained that the proceedings before it did not satisfy the requirement of public hearing.
28. The Court notes that indeed the applicable rules of the Arbitration Court allowed for public hearings only upon a decision of the president of the tribunal and with the consent of both parties. Therefore the tribunal could not satisfy the requirement that a public hearing would be held as a matter of a right of the applicants under Article 6 of the Convention.
29. At the same time, however, the Court reiterates that the obligation to hold a public hearing is not absolute (see Jussila v. Finland [GC], no. 73053/01, § 40, ECHR 2006‑XIII). Yet, the Court notes that no reasons were put forward that would justify not holding a public hearing in the matter of the applicants and in view of the Court’s case-law (see Jussila, cited above, §§ 41-49) it does not appear that any such reasons existed.
30. Accordingly, the proceedings before the Arbitration Court could not satisfy the requirement of Article 6 of the Convention of a public hearing and also the related obligation that a judgment shall be pronounced publicly. Given that public hearing constitutes a fundamental principle enshrined in Article 6 § 1 (see Jussila v. Finland [GC], no. 73053/01, § 40, ECHR 2006‑XIII) the Court does not consider that this deficiency can be offset by the fact that the Arbitration Court satisfied all the other requirements of a fair trial as argued by the Government.
31. The Court also notes that the Arbitration Court itself came to the same conclusion (see § 20 above).
32. The Court adds that this deficiency could not be remedied in judicial review proceedings or any other proceedings (see Suda, cited above, § 52 and 54).
33. Lastly, the Court does not accept the Government’s argument that the third, fourth and fifth applicant can now institute proceedings before the courts because their arbitration proceedings were terminated. It notes that in Suda, § 46, cited above, it held that the applicant could not be required to institute arbitration proceedings to which he had never consented and risk that the arbitration tribunal would rule on the merits of his case. Therefore for the purposes of examining the present complaint the applicants were not required to institute arbitration proceedings. The mere fact that they did so and furthermore that the Arbitration Court later declared that it had no jurisdiction to hear the case and thus the applicants could after several years institute proceedings before courts, cannot satisfy their right of access to court, which they should have enjoyed right after the company was wound up and there was a dispute over the amount of settlement.
34. The foregoing considerations are sufficient to enable the Court to conclude that the applicants lacked access to court.
There has accordingly been a violation of Article 6 of the Convention.
II. OTHER ALLEGED VIOLATIONS OF THE CONVENTION
35. The applicants complained also under Article 1 of Protocol No. 1 that the denial of access to court regarding their claims for compensation violated their right to property. Further relying on Article 14 of the Convention they complained that other minority shareholders in similar situations had access to court. They referred to cases of wound up companies where no arbitration clause was concluded and of a squeeze-out without winding up the company under Article 183i of the Commercial Code.
36. Regarding the complaint under the right to property the Court notes that the applicants did not make it before the Constitutional Court. Therefore it must be declared inadmissible on the ground that domestic remedies have not been exhausted as required by Article 35 § 1 of the Convention.
37. Having regard to all the material in its possession, and in so far as the other 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.
38. This part of the application is therefore manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 (a) and 4 of the Convention.
III. APPLICATION OF ARTICLE 41 OF THE CONVENTION
39. 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
40. The applicants claimed 20,000 euros (EUR) each in respect of non‑pecuniary damage.
41. The Government maintained that the finding of a violation would constitute in itself sufficient just satisfaction.
42. The Court ruling on equitable basis awards the applicants EUR 5,000 each in respect of non-pecuniary damage with the exception of the applicant company that did not anyhow substantiate on which ground it suffered non-pecuniary damage as required by the Court’s case-law (see Comingersoll S.A. v. Portugal [GC], no. 35382/97, § 35, ECHR 2000-IV and Forminster Enterprises Limited v. the Czech Republic (just satisfaction), no. 38238/04, § 25, 10 March 2011).
B. Costs and expenses
43. The third, fourth and fifth applicant also claimed altogether 954,130 Czech korunas (CZK) for the costs and expenses incurred in the domestic arbitration proceedings. Further, all applicants claimed altogether CZK 12,650 for costs and expenses incurred before the domestic courts and CZK 120,000 for those incurred before the Court.
44. The Government acknowledged the costs and expenses incurred before the domestic courts but maintained that the costs in the arbitration proceedings should not be reimbursed as they were not sufficiently explained and supported by evidence. The Government further considered the costs for proceedings before the Court excessive.
45. According to the Court’s settled case-law, costs and expenses will not be awarded under Article 41 unless it is established that they were actually and necessarily incurred and are also reasonable as to quantum. Furthermore, legal costs are only recoverable in so far as they relate to the violation found (see Scordino v. Italy (no. 1) [GC], no. 36813/97, § 283, ECHR 2006-V).
46. The Court considers that the costs incurred by the applicants in the arbitration proceedings are not related to the violation found in the present case concerning lack of access to court. It could not be said that by instituting the arbitration proceedings the applicants were trying to access domestic courts or remedy the refusal of access. These costs thus cannot be reimbursed.
47. Regard being had to the documents in its possession and to its case-law, the Court considers it reasonable to award the sum of EUR 5,500 for costs and expenses in the domestic judicial proceedings and the proceedings before the Court.
C. Default interest
48. 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 complaint concerning Article 6 of the Convention admissible and the remainder of the application inadmissible;
2. Holds that there has been a violation of Article 6 of the Convention;
3. Holds
(a) that the respondent State is to pay to the second, third, fourth, fifth and sixth applicant, within three months, EUR 5,000 (five thousand euros) each in respect of non-pecuniary damage, plus any tax that may be chargeable to the applicants;
(b) and to pay all the applicants, within three months, EUR 5,500 (five thousand five-hundred euros), in respect of costs and expenses, plus any tax that may be chargeable to the applicants; the amount to be converted into Czech korunas at the rate applicable at the date of settlement;
(c) that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amounts 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 applicants’ claim for just satisfaction.
Done in English, and notified in writing on 16 February 2012, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.
Stephen PhillipsMark Villiger
Deputy RegistrarPresident
Full & Egal Universal Law Academy