CASE OF LIQUIDATION ESTATE OF THE COMMERCIAL COMPANY POLJIČAN-RAŠICA D.O.O. v. CROATIA

SECOND SECTION

CASE OF LIQUIDATION ESTATE OF THE COMMERCIAL COMPANY POLJIČAN-RAŠICA D.O.O. v. CROATIA

(Application no. 39761/18)

JUDGMENT
 

STRASBOURG

3 December 2024

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

In the case of Liquidation Estate of the Commercial Company Poljičan-Rašica d.o.o. v. Croatia,

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

 Pauliine Koskelo, President,
 Jovan Ilievski,
 Davor Derenčinović, judges,
and Dorothee von Arnim, Deputy Section Registrar,

Having regard to:

the application (no. 39761/18) against the Republic of Croatia lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) on 16 August 2018 by Liquidation Estate of the Commercial Company Poljičan-Rašica d.o.o., that is, the assets of the wound-up company Poljičan-Rašica d.o.o. which was incorporated under Croatian law and had its registered office in Sinj (“the applicant company”), which was represented by Ms S. Marković, a lawyer practising in Zagreb, and Mr M. Jeličić, a lawyer practising in Split;

the decision to give notice of the complaint concerning the protection of property to the Croatian Government (“the Government”), represented by their Agent, Ms Š. Stažnik, and to declare inadmissible the remainder of the application;

the parties’ observations;

Having deliberated in private on 12 November 2024,

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

SUBJECT MATTER OF THE CASE

1.  The application concerns the State authorities’ refusal to allow the import of meat for which the applicant company held a valid import licence due to the introduction of an import ban, as well as the domestic courts’ subsequent dismissal of the applicant company’s claim for compensation for the resultant loss of profits.

2.  In July 2000, the applicant company entered into a long-term production cooperation agreement with the M. company from Bosnia and Herzegovina (“the agreement”). Under the agreement, the M. company was to provide the applicant company with raw bovine and porcine meat which the applicant company was to process into various prepared meat products and deliver them to the M. company. The agreement was concluded for a three-year period with the possibility of extension. Subsequently, they also agreed on a cooperation plan for 2001.

3.  For the purposes of their cooperation, the M. company firstly imported the raw meat, originating from Italy and the Netherlands, into Bosnia and Herzegovina where it underwent customs and veterinary registration, and then delivered it to the applicant company’s facilities in Croatia. Prior to the meat being imported into Croatia, the applicant company had to obtain a decision from the Veterinary Directorate of the Croatian Ministry of Agriculture and Forestry (“the Veterinary Directorate”), confirming that there were no veterinary and/or health obstacles for the import of the goods (“the import licence”). It obtained several of such import licences, the last one having been issued on 26 October 2000, concerning the import of 320 tonnes of fresh and frozen raw porcine meat originating from the Netherlands. The import licence was issued with a validity period of six months from the date of issuing or until revocation by the Ministry.

4.  On the basis of that last licence, the applicant company imported a total of 60 tonnes of raw porcine meat. However, in January 2001 a consignment of 20 tonnes of such meat was returned to Bosnia and Herzegovina from the Croatian border. No formal decision concerning the reasons for refusing the import was issued. However, the Veterinary Directorate informed the applicant company by a letter that a decision on import ban concerning meat originating from Bosnia and Herzegovina was in force.

5.  In the following months, the applicant company contacted the relevant Croatian authorities on several occasions, inquiring about the situation and explaining that the import ban did not apply in its case as the meat it imported did not originate from Bosnia and Herzegovina, but from the Netherlands. This, however, was to no avail, as the domestic authorities considered that the trade in meat which had undergone customs and veterinary registration in Bosnia and Herzegovina no longer constituted goods in transit, but imported goods destined for export, which could not be imported into Croatia due to the import ban.

6.  On 4 December 2001 the applicant company lodged a request with the Veterinary Directorate for the issuance of a new licence concerning the import from Bosnia and Herzegovina of additional 320 tonnes of raw porcine meat originating from the Netherlands. The Veterinary Directorate never decided on this request. The applicant company was however, on several occasions, informed by the relevant authorities of the continued inability to import meat from Bosnia and Herzegovina.

7.  In December 2002 the applicant company instituted civil proceedings against the State before the Sinj Municipal Court, seeking compensation for the damage sustained by the domestic authorities’ unlawful conduct. In particular, it argued that those authorities had, by erroneously applying the import ban, disrupted its business operations. Moreover, they had failed to decide on its request of 4 December 2001. They had thus caused it loss of profits, which it would have otherwise made by continuing its business cooperation with the M. company under the agreement (see paragraph 2 above).

8.  The civil courts eventually found that the import ban had been erroneously applied in the applicant company’s case, as the origin of the meat was not changed by its subsequent customs and veterinary registration in Bosnia and Herzegovina; rather, its Dutch origin was retained. The relevant domestic authorities had thus acted unlawfully when they had prevented the applicant company from importing the meat of Dutch origin from Bosnia and Herzegovina.

9.  Those courts further held that the applicant company could only request compensation for the meat it had been unlawfully prevented from importing, i.e., for the 20 tonnes of raw porcine meat which had been returned from the border (see paragraph 4 above). However, the applicant company had failed to prove the exact extent of damage it had sustained in that regard. As to the remaining 240 tonnes the import of which had been authorised by the licence of 26 October 2000 (see paragraph 3 above), but had never been imported, the applicant company had not proved that such quantity had ever been prepared for import. With respect to the applicant company’s request of 4 December 2001 (see paragraph 6 above), which had never been decided, the courts noted that the applicant company had never brought an action in the relevant administrative court against the Veterinary Directorate for failure to respond (tužba zbog šutnje administracije). Had it used that remedy, it could have prevented or reduced the damage sustained.

10.  The applicant company’s subsequent constitutional complaint was dismissed by the Constitutional Court’s decision of 27 February 2018, served on the applicant company’s representative on 28 March 2018.

11.  Before the Court, the applicant company complained that its rights guaranteed by Article 1 of Protocol No. 1 to the Convention had been violated. In particular, it complained that the domestic authorities had not only erroneously and unlawfully applied the import ban and failed to decide on its request of 4 December 2001, thus causing it loss of profits which it would have otherwise certainly gained, but had subsequently also refused to award it compensation.

THE COURT’S ASSESSMENT

12.  The Government objected to the admissibility of the application arguing, inter alia, that the applicant company had failed to exhaust an effective domestic remedy against the domestic authorities’ failure to decide on its request of 4 December 2001 (see paragraph 6 above), namely an action for failure to respond. Having regard to its case-law on the matter (see, mutatis mutandis, Tolić and Others v. Croatia, no. 13482/15, §§ 86-88, 4 June 2019), the Court finds that the Government’s objection must be upheld.

13.  It follows that, in so far as the present application concerns the domestic authorities’ failure to decide on the applicant company’s request of 4 December 2001 and the resultant damage, it is inadmissible under Article 35 § 1 of the Convention for non-exhaustion of domestic remedies and must therefore be rejected pursuant to Article 35 § 4.

14.  The Government further argued that Article 1 of Protocol No. 1 to the Convention was not applicable in the present case. The applicant company’s compensation claim had been based on a mere speculation concerning the successful implementation of the agreement. It thus concerned future assets, which did not constitute a “possession”. Moreover, in view of the import ban, the applicant company could not have had a legitimate expectation that it would generate income. It also could not have expected to be awarded compensation for the damage caused by the import ban because the domestic courts had dismissed its claim.

15.  In accordance with its case-law (see, for example, O’Sullivan McCarthy Mussel Development Ltd v. Ireland, no. 44460/16, §§ 85-91, 7 June 2018), the Court considers that the present case does concern a “possession”, namely the applicant company’s underlying business. The Government’s objection must therefore be rejected.

16.  The Court further notes that the present application, to the extent that it concerns the application of the import ban placing a restriction on the import licence of 26 October 2000 (see paragraphs 3-5 above), is not manifestly ill-founded within the meaning of Article 35 § 3 (a) of the Convention or inadmissible on any other grounds. It must therefore be declared admissible.

17.  The Court notes that the application of the import ban in the form of preventing the applicant company from importing raw porcine meat under the import licence of 26 October 2000 (see paragraphs 3-5 above) represents a restriction placed on that import licence, which was essential for the usual conduct of the applicant company’s business (see paragraph 3 above). Therefore, the application of that import ban constituted an interference with the applicant company’s peaceful enjoyment of its possessions, namely with its underlying business (see paragraph 15 above).

18.  The domestic courts themselves concluded that the interference in question was unlawful (see paragraph 8 above), and the Court sees no reason to hold otherwise.

19.  The interference with the applicant company’s right to the peaceful enjoyment of its possessions was therefore not justified for the purposes of the second paragraph of Article 1 of Protocol No. 1.

20.  As to the question whether the applicant company lost its status of victim of a breach of its property rights, it is noted that the applicant company tried to have that breach remedied by instituting civil proceedings for compensation but its civil action was ultimately dismissed (see paragraphs 7‑9 above).

21.  It is true that the domestic courts in those civil proceedings dismissed the applicant company’s action for reasons that may suggest that it did not properly use that remedy, namely because it had not proved the extent of the damage sustained (see paragraph 9 above).

22.  However, in that respect the Government did not raise an objection as to the admissibility based on non-exhaustion of domestic remedies.

23.  The Court reiterates in that connection that when notice of the application has been given to the respondent Government and they have not raised the question of non-exhaustion, the Court cannot examine it of its own motion (see Shlykov and Others v. Russia, nos. 78638/11 and 3 others, § 51, 19 January 2021). It does not suffice that the Government have, as in the present case, pleaded non-exhaustion on different grounds (see paragraph 12 above, and Mooren v. Germany [GC], no. 11364/03, § 58, 9 July 2009).

24.  In view of this, it cannot but be concluded that the applicant company is still the victim of the breach of its right to the peaceful enjoyment of its possessions.

25.  There has accordingly been a violation of Article 1 of Protocol No. 1 to the Convention.

APPLICATION OF ARTICLE 41 OF THE CONVENTION

26.  The applicant company claimed pecuniary damage in the amount of 28,042,981.96 Croatian kunas (HRK; approximately 3,721,943 euros (EUR)), corresponding to the amount of lost profits as established by the expert reports obtained in the domestic proceedings together with the accrued statutory default interest. It also claimed EUR 216,000 in respect of non‑pecuniary damage. As regards the costs and expenses incurred before the domestic courts, the applicant company claimed HRK 4,547,419.95 (approximately EUR 603,546) and HRK 25,000 (approximately EUR 3,318) for those incurred before the Court.

27.  The Government contested these claims.

28.  Given that in the civil proceedings for compensation the applicant did not prove the extent of the pecuniary damage sustained (see paragraph 9 above) and in view of the difficulties for the Court to calculate this damage, the Court considers that in the present case the most appropriate way of repairing the consequences of the violation found is to reopen those proceedings (compare with Dabić v. Croatia, no. 49001/14, § 65, 18 March 2021). The Court thus rejects the applicant company’s claim for pecuniary damage.

29.  On the other hand, the Court awards it EUR 3,200 in respect of non‑pecuniary damage, plus any tax that may be chargeable.

30.  As to the costs and expenses incurred before the domestic courts, the Court considers it reasonable to award the applicant company EUR 830 for the costs incurred before the Constitutional Court, plus any tax that may be chargeable to it. The remainder of its claim must be rejected, given that it will be able to have those costs reimbursed should the proceedings complained of be reopened.

31.  As to the costs and expenses incurred before it, the Court considers it reasonable to award the applicant company EUR 1,700, plus any tax that may be chargeable to it.

FOR THESE REASONS, THE COURT, UNANIMOUSLY,

(a)  that the respondent State is to pay the applicant company, within three months, the following amounts:

(i)  EUR 3,200 (three thousand two hundred euros), plus any tax that may be chargeable, in respect of non-pecuniary damage;

(ii)  EUR 2,530 (two thousand five hundred and thirty 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;

Done in English, and notified in writing on 3 December 2024, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.

 Dorothee von Arnim Pauliine Koskelo
 Deputy Registrar President