CASE OF KALUGINA v. RUSSIA

THIRD SECTION

CASE OF KALUGINA v. RUSSIA

(Application no. 2686/06)

STRASBOURG

21 June 2016

This judgment is final but it may be subject to editorial revision.

In the case of Kalugina v. Russia,

The European Court of Human Rights (Third Section), sitting as a Committee composed of:

Branko Lubarda, President,
Pere Pastor Vilanova,
Georgios A. Serghides, judges,
and Stephen Phillips, Section Registrar,

Having deliberated in private on 31 May 2016,

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

PROCEDURE

1. The case originated in an application (no. 2686/06) against the Russian Federation lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by a Russian national, Ms Lyudmila Alekseyevna Kalugina (“the applicant”), on 24 October 2005.

2. The Russian Government (“the Government”) were represented by Mr G. Matyushkin, Representative of the Russian Federation to the European Court of Human Rights.

3. On 16 April 2014 the application was communicated to the Government.

THE FACTS

I. THE CIRCUMSTANCES OF THE CASE

4. The applicant was born in 1954 and lives in Petrozavodsk, in the Republic of Kareliya. She was a municipal unitary enterprise employee in Petrozavodsk, working for Auto Transport Column 1126 (“Avtokolonna 1126”, hereafter “the company”).

A. Available information about the debtor company

5. Avtokolonna 1126 was set up in accordance with a decision of the administration of the town of Petrozavodsk (“the town administration”), and provided public transport services in the town on a commercial basis. In order to carry out its statutory activities, the company had “the right of economic control” (право хозяйственного ведения) over the assets allocated to it by the town administration (see Liseytseva and Maslov v. Russia, nos. 39483/05 and 40527/10, §§ 55-75, 9 October 2014 for further details on the company’s status). In accordance with several agreements between the company and the town administration, the company undertook to provide certain sections of the population with transport services free of charge, and the town administration was to reimburse it for the expenses incurred out of the budget allocated for that purpose by the Ministry of Finance of the Republic of Kareliya or the federal budget. A letter from the town administration to the applicant dated 19 March 2003 shows that at some point, owing to the relevant budgets lacking funds, the company was owed a significant amount of money. Consequently, it was unable to pay its employees on time. In 2004 the town administration asked the legislative body of the Republic of Kareliya to consider allocating additional funds to cover the company’s debt, but to no avail.

6. On an unspecified date the town administration ordered the restructuring of the company in the form of a spin-off as a new entity, and transferred the assets mentioned in paragraph 5 above to the newly created municipal unitary enterprise “Avtokolonna 1126 Plus”. The debt which had accumulated in respect of the unpaid salaries was not transferred, and remained with the applicant’s employer. On 6 July 2003 the Commercial Court of the Republic of Kareliya declared the debtor company “Avtokolonna 1126” insolvent, and liquidation proceedings were commenced.

B. Judgments in the applicant’s favour and the company’s liquidation

7. On 18 May 2004 the Petrozavodsk Town Court awarded the applicant 21,830 Russian roubles (RUB) in respect of salary arrears, default interest and non-pecuniary damage. The judgment became final ten days later. According to a payment note on a writ of execution of 20 July 2006, at some point the company paid the applicant RUB 9,206. The remainder of the judgment debt has remained unpaid.

8. On 10 April 2006 a justice of the peace of the 11th Court Circuit of Petrozavodsk ordered the company to pay the applicant RUB 614 in compensation for non-pecuniary damage. The award became final ten days later, but was not paid to the applicant.

9. On 4 October 2006 the Commercial Court of the Republic of Kareliya ordered the company’s liquidation. Creditors’ claims which had not been satisfied during the liquidation proceedings, including the applicant’s remaining claims, were considered settled. On 15 October 2006 the liquidation was recorded in the Register of Legal Entities, and the company ceased to exist.

C. Subsidiary liability proceedings

10. On 16 March 2005, in subsidiary liability proceedings, the Petrozavodsk Town Court refused to hold the town administration liable for the company’s debts. The court found that the applicant had failed to adduce evidence to demonstrate that it had caused the company’s insolvency. It appears that the judgment was not appealed against.

II. RELEVANT DOMESTIC LAW AND PRACTICE

11. The relevant provisions and domestic case-law on the legal status of State and municipal unitary enterprises with the right of economic control are summarised in Liseytseva and Maslov, cited above, §§ 55-127.

THE LAW

I. ALLEGED VIOLATION OF ARTICLES 6 AND 13 OF THE CONVENTION AND ARTICLE 1 OF PROTOCOL No. 1 TO THE CONVENTION

12. The applicant complained under Article 6 of the Convention and Article 1 of Protocol No. 1 to the Convention about the non-enforcement of judgments in her favour. The relevant parts of these provisions read:

Article 6

“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

“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.”

13. The applicant further complained that she did not have effective domestic remedies at her disposal in respect of the non-enforcement of the judgments in her favour. Article 13 of the Convention reads:

“Everyone whose rights and freedoms as set forth in [the] Convention are violated shall have an effective remedy before a national authority notwithstanding that the violation has been committed by persons acting in an official capacity.”

14. The Government contested the complaint on the same grounds as those set out in Samsonov ((dec.), no. 2880/10, §§ 51-57, 16 September 2014), and Liseytseva and Maslov (cited above, §§ 137-41). In particular, they submitted that the applicant had failed to exhaust a number of domestic remedies, such as a claim against the liquidator and a damage claim under Chapter 59 of the Civil Code. They further argued that the debts of a municipal unitary enterprise – a separate legal entity under domestic law – could not be attributed to the State, for exactly the same reasons as those summarised in Liseytseva and Maslov (cited above, §§ 136-42). They submitted that judgments in the applicant’s favour had been issued against a private entity and could not be enforced as a result of that entity’s insolvency, and that the authorities had provided the applicant with the requisite assistance in her efforts to have the court awards enforced.

15. The applicant maintained her claim. She pointed out that the town administration had transferred the company’s property to the newly created “Avtokolonna 1126 Plus”, so that the newly created company had obtained the company’s assets, whilst the aggregated debt owed to the employees had remained with her employer. Therefore, the town administration had actually controlled the company and was liable for its debts.

A. Admissibility

1. Non-exhaustion

16. The Court reiterates that it has already examined the exhaustion issue in detail in the Liseytseva and Maslov case (cited above, § 156-82), and does not see a reason to depart from those conclusions in the present case. As regards proceedings against the liquidator, the Government did not provide any clarification or minimum explanation as to the proper procedure to be followed, or cite any examples from the domestic case-law demonstrating that the purported avenue was accessible to the applicant or had any reasonable prospects of success in the context of the company’s lack of funds (ibid., § 163). Similarly, it was not demonstrated that the claim for compensation under Chapter 59 of the Civil Code would have had any prospects of success in the present case, given that the purported legal avenue is conditional on the establishment of fault on the part of the authorities – an element missing in the present case (ibid., § 165, with further references). Finally, the Court notes that the applicant initiated the subsidiary liability proceedings under Article 56 § 3 of the Civil Code, however, in the absence of either a final decision or any specific arguments from the parties concerning the effectiveness of that legal avenue, the Court does not consider it necessary to address that set of proceedings.

17. Accordingly, the Court rejects the Government’s plea as to non‑exhaustion.

2. Compatibility ratione personae

18. The Court has already dealt with the Government’s argument concerning the company’s legal status in domestic law in the above‑mentioned Liseytseva and Maslov. Having examined the Government’s respective objection in detail, the Court held that the existing legal framework in Russia did not provide unitary enterprises with the degree of institutional and operational independence that would absolve the State from any responsibility under the Convention for any such companies’ debts (see Liseytseva and Maslov, cited above, §§ 193-204). In order to determine the issue of State responsibility for the debts of unitary enterprises, the Court must examine whether and how the extensive powers of control provided for in the domestic law were actually exercised by the authorities in a given case (ibid., §§ 204-06). Applying that approach to the same unitary enterprise which appears in the present case, and referring to the same facts as outlined in paragraphs 5-6 above, the Court found that the company’s assets and activities were, as a matter of fact, controlled and managed by the authorities to a decisive extent at the relevant time. Therefore, the Court concluded that the company had not enjoyed sufficient institutional and operational independence from the municipal authority (ibid., §§ 215-19).

19. The Court does not find any reason to depart from the above conclusion, and rejects the ratione personae objection. Accordingly, the municipality, and hence the State, is to be held responsible under the Convention for the debts owed to the applicant by the company under the judgments in her favour.

3. Conclusion

20. The Court further notes that the application 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

1. Article 6 of the Convention and Article 1 of Protocol No. 1 to the Convention

21. The Court reiterates at the outset that an unreasonably long delay in the enforcement of a binding judgment may breach the Convention (see, in so far as relevant, Burdov v. Russia, no. 59498/00, ECHR 2002‑III). Turning to the present case, the Court notes that the judgments given in the applicant’s favour in 2004 and 2006 have remained unenforced to date. While liquidation proceedings, which in this case ended in October 2006, may objectively justify some limited delay in enforcement, the facts of the present case would rather suggest that the municipal authority did not consider itself bound to honour the salary-related judgment debt in the employee’s favour after it decided to liquidate the company (see, mutatis mutandis, Yershova v. Russia, no. 1387/04, § 72, 8 April 2010, and Liseytseva and Maslov, cited above, §§ 220-21, with further references). Such an attitude is difficult to reconcile with the State’s obligations under the Convention to comply with domestic judicial decisions within a reasonable time.

22. By failing to take the necessary measures to comply with the final judgments in the instant case for a considerable period of time, the authorities deprived the provisions of Article 6 § 1 of all useful effect, and also prevented the applicant from receiving the money to which she was entitled, which amounted to a disproportionate interference with her peaceful enjoyment of possessions (see, among others, Khachatryan v. Armenia, no. 31761/04, § 69, 1 December 2009). Therefore, there has been a violation of Article 6 § 1 of the Convention and Article 1 of Protocol No. 1 to the Convention on account of the non‑enforcement of the final and binding judgments in her favour.

2. Article 13 of the Convention

23. With reference to its above findings (see paragraph 17 above), and for the same reasons as those stated in Liseytseva and Maslov (cited above, §§ 156-82), the Court concludes that none of the remedial avenues put forward by the Government constituted an effective remedy in the present case. Accordingly, it finds that there has been a breach of Article 13 of the Convention, in conjunction with Article 6 of the Convention and Article 1 of Protocol No. 1 to the Convention.

II. APPLICATION OF ARTICLE 41 OF THE CONVENTION

24. 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

25. The applicant claimed 15,950 Russian roubles (RUB) (approximately 214 euros (EUR)) in respect of pecuniary damage, that amount representing RUB 8,124 of the unpaid judgment debt in respect of salary arrears and RUB 7,826 in respect of default interest for the period until 29 May 2014, the date the relevant claim was lodged with the Court. She provided a detailed calculation in support of her claims. She further claimed EUR 4,000 in respect of non-pecuniary damage.

26. The Government argued that no award should be made to the applicant, since her Convention rights had not been violated, but did not dispute the actual sums claimed by the applicant.

27. As regards pecuniary damage, the Court notes that the Government did not challenge the method or accuracy of the calculation of the applicant’s pecuniary losses. Therefore, the Court will determine the compensation on the basis of her submissions. It considers it appropriate to grant the applicant’s claim and awards her EUR 214 under this head, plus any tax that may be chargeable to her.

28. As regards the non-pecuniary damage, the Court reiterates that, in a recent case, it found appropriate to apply a unified approach to non‑enforcement cases involving municipal unitary enterprises (see Voronkov v. Russia, no. 39678/03, § 68, 30 July 2015, with further references). In view of above, the Court considers it reasonable and equitable to award EUR 2,000 to the applicant in respect of non-pecuniary damage, plus any tax that may be chargeable, and rejects her remaining claims under this head.

B. Costs and expenses

29. The applicant also claimed EUR 3 (RUB 202) in respect of postal expenses relating to her complaint. The Government disputed this claim, submitting that it was unfounded and not itemized.

30. Regard being had to the documents in its possession and to its case‑law, the Court considers it reasonable to award the amount claimed under this head, that is EUR 3, plus any tax that may be chargeable to the applicant.

C. Default interest

31. 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 application admissible;

2. Holds that there has been a violation of Article 6 of the Convention and Article 1 of Protocol No. 1 to the Convention in respect of the non‑enforcement of the domestic judgments in the applicant’s favour;

3. Holds that there has been a violation of Article 13 of the Convention on account of the lack of an effective remedy in respect of the non‑enforcement of the final domestic judgments in the applicant’s favour;

4. Holds

(a) that the respondent State is to pay the applicant, within three months, the following amounts, to be converted into the currency of the respondent State at the rate applicable at the date of settlement:

(i) EUR 214 (two hundred and fourteen euros), plus any tax that may be chargeable, in respect of pecuniary damage;

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

(iii) EUR 3 (three euros), plus any tax that may be chargeable to the applicant, 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’s claim for just satisfaction.

Done in English, and notified in writing on 21 June 2016, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.

              Stephen PhillipsBranko Lubarda
RegistrarPresident

Full & Egal Universal Law Academy