CASE OF FRIDA, LLC v. UKRAINE

FIFTH SECTION

CASE OF FRIDA, LLC v. UKRAINE

(Application no. 24003/07)

JUDGMENT

STRASBOURG

8 December 2016

FINAL

08/03/2017

This judgment has become final under Article 44 § 2 of the Convention. It may be subject to editorial revision.

In the case of Frida, LLC v. Ukraine,

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

Angelika Nußberger, President,
Erik Møse,
Khanlar Hajiyev,
Ganna Yudkivska,
Faris Vehabović,
Síofra O’Leary,
Carlo Ranzoni, judges,
and Milan Blaško, Deputy Section Registrar,

Having deliberated in private on 15 November 2016,

Delivers the following judgment, which was adopted on that date:

PROCEDURE

1. The case originated in an application (no. 24003/07) against Ukraine lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by Frida, a limited liability company registered in Ukraine (“the applicant company”), on 8 June 2007.

2. The applicant company was represented by Mr K. Klymenko, a lawyer practising in Kyiv. The Ukrainian Government (“the Government”) were represented by their Agent, most recently, Mr I. Lishchyna.

3. The applicant company alleged, in particular, that its right of access to a court had been unduly restricted, and that the principles of adversarial proceedings and equality of arms had not been respected.

4. On 17 February 2011 the application was communicated to the Government.

THE FACTS

I. THE CIRCUMSTANCES OF THE CASE

5. The applicant company is a limited liability company registered in 2004 in Ukraine, with its registered office in Kyiv.

6. On 12 April 2005 the applicant company and another company, S., concluded an agreement by which the applicant company undertook to provide information and analytical services to S., and the latter undertook to pay for those services. On 24 November 2005 the parties concluded an additional agreement for supplementary services to be provided to S. by the applicant company.

7. On 27 April 2006 the applicant company lodged a claim against S. with the Kyiv Commercial Court, seeking recovery of an alleged debt under the above agreement, as well as the payment of penalties and legal fees.

8. On 9 June 2006 the Kyiv Commercial Court opened the proceedings in the case.

9. On 11 September 2006, during a hearing in the case, S. submitted a counterclaim, seeking that the agreement be declared void. The court adjourned the hearing until 14 September 2006 without deciding on the admissibility of the counterclaim.

10. On 14 September 2006 the judge hearing the case accepted S.’s counterclaim for joint consideration with the original claim by the applicant company. At the same hearing, the judge granted S.’s counterclaim in part and rejected the original claim of the applicant company in full. According to the record of the hearing, the hearing lasted ten minutes.

11. On 13 October 2006 the applicant company lodged an appeal on points of law against the judgment of 14 September 2006 with the Higher Commercial Court of Ukraine (“the HCCU”). It argued that the proceedings before the first-instance court had not been adversarial, and had not complied with the principle of procedural equality between the parties: the first-instance court had not provided the applicant company with an opportunity to prepare and submit observations as to S.’s counterclaim or collect and provide evidence in defence. The applicant company requested that the impugned judgment be quashed and the case remitted to the first-instance court for fresh consideration.

12. On 9 November 2006 the HCCU returned the applicant company’s appeal on points of law to it without considering the appeal on the merits, because the relevant court fee had not been paid in full.

13. On 21 November 2006 the applicant company resubmitted its appeal on points of law with proof of having paid the full court fee. The appeal on points of law was submitted together with a cover letter. In the cover letter, the applicant company set out the circumstances which had resulted in its missing the deadline for appealing on points of law, and asked the HCCU to extend the relevant time-limit and consider the appeal. Apart from that information, the cover letter contained the date, name and address of the court to which it was addressed, the case reference number, the parties’ contact details, and the disputed amount which was the subject of the case. The letter ended with a list of enclosures, the applicant company’s lawyer’s details, his signature and a stamp.

14. On 19 December 2006 the HCCU found that the applicant company had submitted the second appeal on points of law outside the time-limit provided for by Article 110 of the Code of Commercial Procedure, and had failed to enclose an application for an extension. Relying on sub-paragraph 5 of Article 111-3 § 1, the HCCU declined to consider the applicant company’s appeal on points of law.

15. On 4 January 2007 the applicant company challenged the decision of 19 December 2006 before the Supreme Court, arguing that on 21 November 2006 it had in fact applied for an extension of the time-limit for lodging the appeal on points of law with the HCCU. The application had been included in the text of the cover letter accompanying the appeal on points of law.

16. On 22 February 2007 the Supreme Court upheld the decision of 19 December 2006.

II. RELEVANT DOMESTIC LAW AND PRACTICE

A. Code of Commercial Procedure of 6 November 1991 (as worded at the material time)

17. Article 4-2 of the Code provides that commercial courts should administer justice based on the principle of the equality of all participants to the proceedings before the law and the court.

18. Article 4-3 of the Code provides that commercial courts should administer justice in the course of adversarial proceedings. The parties and other participants in the proceedings should substantiate their claims and objections by evidence adduced before the court. The commercial courts should provide the parties and other participants in the proceedings with the necessary conditions for establishing the factual circumstances of a case and the correct application of the law.

19. In accordance with Articles 107 and 108 of the Code, the parties to a case and a prosecutor have the right to appeal on points of law to the HCCU against a judgment of a first-instance commercial court which has come into effect, and against a resolution of a commercial court of appeal.

20. According to Article 110 of the Code, an appeal on points of law should be lodged within one month of the date when the judgment of a first‑instance commercial court or resolution of the court of appeal came into effect.

21. Under sub-paragraph 5 of Article 111-3 § 1 of the Code, the HCCU should decline to consider an appeal on points of law if it has been lodged outside the time-limit provided for in Article 110 of the Code, and there has been no application for an extension, or an application to that effect has been dismissed.

B. Domestic judicial practice

22. On 28 March 2002 the Presidium of the HCCU issued an official interpretation of the procedure for appealing on points of law before the HCCU. It noted in particular that an application for an extension of the time-limit for lodging an appeal on points of law with the HCCU could be either included in the text of the appeal on points of law, or set out as a separate application joined to the appeal on points of law.

THE LAW

I. ALLEGED VIOLATION OF ARTICLE 6 § 1 OF THE CONVENTION

A. Access to court

23. The applicant company complained that its right of access to the HCCU had been unduly restricted. It relied on Article 6 § 1 and Article 13 of the Convention.

24. The Court decided to examine the complaint solely under Article 6 § 1 of the Convention, which in the present case should be viewed as a lex specialis in relation to Article 13.

25. Article 6 § 1 of the Convention reads, in so far as relevant:

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

1. Admissibility

26. The Government argued that, by its decision of 19 December 2006, the HCCU had refused to entertain the belated appeal on points of law submitted by the applicant company, after finding that the applicant company had failed to submit an application for an extension of the time‑limit. Following that decision, the applicant company could have submitted its appeal on points of law once again, enclosing an application for an extension of the time-limit prepared in accordance with the procedural requirements. The Government therefore suggested that, having failed to resubmit its appeal on points of law, the applicant company had not exhausted domestic remedies.

27. The applicant company disagreed, and argued that it had taken all measures in respect of its complaint in order to comply with the rule regarding the exhaustion of domestic remedies.

28. The Court notes that the applicant company does not complain regarding a general lack of opportunity to resubmit appeals before the same domestic court, but the refusal of the HCCU to examine a specific appeal on points of law without giving valid reasons. The applicant company challenged such a refusal before the Supreme Court, and in that regard it exhausted the remedies at domestic level (see MPP Golub v. Ukraine (dec.), no. 6778/05, ECHR 2005‑XI). The Government’s objection is therefore dismissed.

29. 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.

2. Merits

30. The applicant company maintained its complaint.

31. The Government maintained that the applicant company had failed to comply with procedural rules when applying to the HCCU, because it had neither included the application for an extension of the time-limit in the text of its appeal on points of law, nor submitted such an application as a separate application. In addition, including the application for an extension of time in a cover letter to the appeal on points of law was not a proper way of raising the question of an extension before the HCCU. The Government submitted that the HCCU had followed the procedural requirements as to the form of an application for an extension, and its decision had not been disproportionate. Furthermore, that decision had been upheld by the Supreme Court.

32. The Court reiterates that the right of access to court is not absolute, but may be subject to limitations; these are permitted by implication since the right of access, by its very nature, calls for regulation by the State, regulation which may vary in time and in place according to the needs and resources of the community and of individuals. In laying down such regulation, the Contracting States enjoy a certain margin of appreciation. Whilst the final decision as to observance of the Convention’s requirements rests with the Court, it is no part of the Court’s function to substitute for the assessment of the national authorities any other assessment of what might be the best policy in this field. Nonetheless, the limitations applied must not restrict the access left to the individual in such a way or to such an extent that the very essence of the right is impaired. Furthermore, a limitation will not be compatible with Article 6 § 1 if it does not pursue a legitimate aim and if there is not a reasonable relationship of proportionality between the means employed and the aim sought to be achieved (see Stanev v. Bulgaria [GC], no. 36760/06, § 230, ECHR 2012).

33. In applying the rules of procedure, the national courts must avoid both excessive formalism which would affect the fairness of the procedure, and excessive flexibility which would result in removing procedural requirements established by law (see Walchli v. France, no. 35787/03, § 29, 26 July 2007). The manner in which Article 6 § 1 applies to courts of appeal or of cassation depends on the special features of the proceedings concerned, and account must be taken of the entirety of the proceedings conducted in the domestic legal order, and the court of cassation’s role in those proceedings; the conditions of admissibility for an appeal on points of law may be stricter than for an ordinary appeal (see, for example, Bulfracht Ltd v. Croatia, no. 53261/08, § 35, 21 June 2011).

34. In the present case, the applicant company’s initial appeal on points of law was returned without consideration, as the relevant court fee had not been paid in full. The applicant company was not given a time-limit for correcting that shortcoming, however, it was entitled to resubmit its appeal on points of law with an application for an extension of time, given that by that point the relevant deadline had expired.

35. When lodging its second appeal on points of law, the applicant company could either submit an application for an extension of time separately in a document enclosed to the appeal on points of law, or include it in the text of the appeal on points of law. Both procedural forms were acceptable according to domestic judicial practice (see paragraph 22 above). The applicant company included the application for an extension of time in the text of the cover letter to its appeal on points of law. The HCCU disregarded the cover letter, and found that the applicant company had failed to apply for an extension of time. The HCCU therefore declared the belated appeal on points of law inadmissible, and later that ruling was upheld by the Supreme Court.

36. The Court notes that refusing to consider a belated appeal pursues the legitimate aim of ensuring the good administration of justice. In the present case, however, the question arises as to whether the HCCU, in pursuing such a legitimate aim, struck a fair balance between the means employed and the aim sought to be achieved. More specifically, the question arises as to whether the applicant company’s appeal on points of law was declared inadmissible as a result of excessive formalism on the part of the domestic courts.

37. In that regard, the Court notes that the applicant company’s cover letter, submitted together with the appeal on points of law, did not have a title indicating that it was a procedural application. However, the only issue raised in the cover letter was that of the deadline which had expired by the time the appeal on points of law was resubmitted. The cover letter contained the essential elements to identify the case which it concerned. It further set out the circumstances in which the deadline had been missed, and contained a request to the HCCU to extend the relevant time-limit and consider the enclosed appeal on points of law. The letter ended with the list of enclosures, signature and stamp of the lawyer.

38. Accordingly, the substantive and formal elements of the applicant company’s cover letter corresponded to what would be in a typical application for an extension of time. The only element lacking was the document title announcing that it was a procedural application. Even though this might be a shortcoming, the Court considers that, in the present case, that shortcoming was not crucial and sufficient for the whole document to be disregarded. As noted above (see paragraph 33 above), the conditions of admissibility for an appeal on points of law may be stricter then for an ordinary appeal, however in the present case the conditions relating to the form of the application for extension of time were not formalised explicitly in the domestic law and were relegated to the level of domestic practice which did not ensure sufficient guarantees against arbitrariness. The Court considers that, in finding that the applicant company had not applied for an extension of time, and consequently in refusing to examine its appeal on points of law, the domestic courts showed excessive formalism. In such circumstances, the Court holds that the applicant company’s right to have its case reviewed on points of law was restricted disproportionately.

39. There has therefore been a violation of Article 6 § 1 of the Convention in that regard.

B. The principles of adversarial proceedings and equality of arms

40. The applicant company complained under Article 6 §§ 1 and 3 (b) of the Convention that the principles of adversarial proceedings and equality of arms had not been respected as regards the examination of the defendant’s counterclaim by the first-instance court.

41. The complaint falls to be examined solely under the first paragraph of Article 6 of the Convention, since it concerns the determination of the civil rights and obligations of the applicant company, and there is no criminal charge at issue which could attract the guarantees of the third paragraph of that Article.

42. The Court considers that this complaint is admissible. However, given the above findings concerning access to a higher tribunal, the Court holds that it is not necessary to examine separately the present complaint (see Bochan v. Ukraine (no. 2) [GC], no. 22251/08, § 68, ECHR 2015).

II. OTHER ALLEGED VIOLATIONS OF THE CONVENTION

43. The applicant company further complained of other violations of its rights under the Convention.

44. The Court has examined these complaints and considers that, in the light of all the material in its possession and in so far as the matters complained of are within its competence, they do not disclose any appearance of a violation of the rights and freedoms set out in the Convention or its Protocols. Accordingly, the Court rejects them as manifestly ill-founded, pursuant to Article 35 §§ 3 (a) and 4 of the Convention.

III. APPLICATION OF ARTICLE 41 OF THE CONVENTION

45. 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

46. The applicant company claimed 5,549.92 euros (EUR) in respect of pecuniary damage, and EUR 2,000 in respect of non-pecuniary damage.

47. The Government submitted that these claims were groundless and unsubstantiated.

48. The Court does not discern any causal link between the violation found and the pecuniary damage alleged; it therefore rejects this claim. On the other hand, it awards the applicant EUR 2,000 in respect of non‑pecuniary damage.

B. Costs and expenses

49. The applicant also claimed EUR 3,452.39 for costs and expenses incurred before the domestic courts and the Court.

50. The Government submitted that the claim was not properly substantiated and was excessive.

51. According to the Court’s case-law, an applicant is entitled to the reimbursement of costs and expenses only in so far as it has been shown that these have been actually and necessarily incurred and are reasonable as to quantum. In the present case, regard being had to the documents in its possession and the above criteria, the Court considers it reasonable to award the sum of EUR 1,000 to cover costs and expenses in the proceedings before the Court.

C. Default interest

52. 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 complaints under Article 6 § 1 of the Convention concerning access to court and the principles of adversarial proceedings and equality of arms admissible, and the remainder of the application inadmissible;

2. Holds that there has been a violation of Article 6 § 1 of the Convention as regards the applicant company’s right of access to court;

3. Holds that there is no need to examine the complaint concerning the alleged violation of Article 6 § 1 of the Convention as regards the principles of adversarial proceedings and equality of arms;

4. Holds

(a) that the respondent State is to pay the applicant company, within three months from the date on which the judgment becomes final in accordance with Article 44 § 2 of the Convention, the following amounts, to be converted into the currency of the respondent State at the rate applicable at the date of settlement:

(i) EUR 2,000 (two thousand euros), plus any tax that may be chargeable, in respect of non-pecuniary damage;

(ii) EUR 1,000 (one thousand euros), plus any tax that may be chargeable to the applicant company, in respect of costs and expenses;

(b) 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;

5. Dismisses the remainder of the applicant company’s claim for just satisfaction.

Done in English, and notified in writing on 8 December 2016, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.

Milan BlaškoAngelika Nußberger
Deputy RegistrarPresident

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