FIFTH SECTION
CASE OF INTERNATIONAL BANK FOR COMMERCE AND DEVELOPMENT AD AND OTHERS v. BULGARIA
(Application no. 7031/05)
JUDGMENT
STRASBOURG
2 June 2016
FINAL
17/10/2016
This judgment has become final under Article 44 § 2 of the Convention. It may be subject to editorial revision.
TABLE OF CONTENTS
PROCEDURE
THE FACTS
I. THE CIRCUMSTANCES OF THE CASE
A. The bank’s shareholders and management
B. The general meetings of the bank’s shareholders on 24 and 27 June 2004
C. The Sofia City Court’s decisions to register the resolutions adopted at the two general meetings of shareholders
D. The criminal proceedings against Mr Bonev, Mr Panev and Mr Ivanov
1. The proceedings against Mr Bonev, Mr Panev and Mr Ivanov
2. The proceedings against Mr Panev and Mr Ivanov
E. The service contracts between the bank and Mr Panev, Mr Ivanov and Mr Radev and their attempt to take up office
F. The proceedings before the prosecuting authorities
G. The share transfer
H. The legal challenges against the Sofia City Court’s registration decisions
1. The requests for revision
2. The claims under section 74 of the Commerce Act 1991
I. Measures taken by the BNB in relation to the bank
J. The bank’s winding-up
K. The freezing of Mr Panev’s and Mr Ivanov’s bank accounts
II. RELEVANT DOMESTIC LAW
A. The register of companies and legal challenges against entries in it and against resolutions of the general meeting of a company’s shareholders
B. Powers of the prosecuting authorities under section 119(1)(6) of the Judiciary Act 1994
C. The BNB’s powers in relation to commercial banks and the rules governing bank insolvency
D. Freezing of the assets of managers of insolvent banks
THE LAW
I. PRELIMINARY PROCEDURAL POINTS
II. STANDING TO COMPLAIN ON BEHALF OF THE BANK
III. THE PROSECUTING AUTHORITIES’ DECISIONS WITH RESPECT TO THE BANK’S MANAGEMENT
Article 1 of Protocol No. 1 (protection of property)
Article 6 § 1 of the Convention (right to a fair hearing)
Article 13 of the Convention (right to an effective remedy)
A. The parties’ submissions
B. The Court’s assessment
IV. THE REVOCATION OF THE BANK’S LICENCE
A. The parties’ submissions
B. The Court’s assessment
V. THE PROCEEDINGS IN WHICH THE BANK WAS DECLARED INSOLVENT
A. The parties’ submissions
B. The Court’s assessment
VI. THE FREEZING OF MR PANEV’S AND MR IVANOV’S BANK ACCOUNTS
A. The parties’ submissions
B. The Court’s assessment
VII. THE CRIMINAL PROCEEDINGS
A. The parties’ submissions
B. The Court’s assessment
VIII. THE TRAVEL BANS
A. The parties’ submissions
B. The Court’s assessment
IX. OTHER ALLEGED VIOLATIONS OF THE CONVENTION AND PROTOCOL No. 1
X. APPLICATION OF ARTICLE 41 OF THE CONVENTION
A. Pecuniary damage
B. Non-pecuniary damage
C. Costs and expenses
D. Default interest
APPENDIX
In the case of International Bank for Commerce and Development AD and Others v. Bulgaria,
The European Court of Human Rights (Fifth Section), sitting as a Chamber composed of:
Angelika Nußberger, President,
Khanlar Hajiyev,
Erik Møse,
Yonko Grozev,
Síofra O’Leary,
Carlo Ranzoni,
Mārtiņš Mits, judges,
and Claudia Westerdiek, Section Registrar,
Having deliberated in private on 26 April 2016,
Delivers the following judgment, which was adopted on that date:
PROCEDURE
1. The case originated in an application (no. 7031/05) against the Republic of Bulgaria lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) on 17 February 2005.
2. The application was in the first place lodged on behalf of International Bank for Commerce and Development AD (“the bank”), a company founded in 1991 that had its registered office in Sofia, Bulgaria. On 28 May 2005 the Bulgarian National Bank (“the BNB”) placed the bank under compulsory administration, and on 14 June 2005 revoked its licence (see paragraphs 64 and 67 below). On 29 June 2005 the Sofia City Court declared the bank insolvent and made an order for it to be wound up. On 17 August 2007 the same court closed the winding-up proceedings in respect of the bank and struck it out of the register of companies (see paragraph 72 below). The application was introduced on the bank’s behalf by the remaining applicants.
3. The first of those applicants, Mr Boni Evlogiev Bonev, is a Bulgarian and Swiss national born in 1960 and living in Sofia. He was a shareholder in the bank (see paragraph 11 below).
4. The second and third of those applicants, Mr Svetlozar Venelinov Ivanov and Mr Atanas Radev Radev, are Bulgarian nationals born respectively in 1963 and 1937 and living respectively in Sofia and Varna. They said that on 24 and 27 June 2004 they had been appointed as members of the bank’s executive board (see paragraphs 16 and 17 below).
5. The fourth of those applicants, Mr Alexander Stefanov Panev, is a Bulgarian national born in 1961 and living in Sofia. He said that on 24 and 27 June 2004 he had been appointed as executive director of the bank and chairman of its executive board (see paragraphs 16 and 17 below).
6. The application was initially lodged also on behalf of twenty companies which were likewise shareholders in the bank (see paragraph 11 below):
– Bemahague Investments Ltd, Card Transaction Services Ltd, Carina Consultants Inc, Flavors, Fragrances and Chemicals (FFCH) Ltd, General Foods Int’l Corp, Geneltech Ltd, Industrial Finance Int’l Corp, Megatours-A New Dimension in Travel-Inc, Mossview Trade Inc, Petrofinance Ltd, Potenza Enterprises Ltd, and V.V.V. Holdings Corp, companies registered in Delaware, the United States of America;
– Briarfield Consultants Limited, McMaden Securities Limited, Navarro Resources Inc, and Shephard Securities Ltd, companies registered in Belize; and
– Navasota Investments Ltd, Ozark Ventures Inc, Parham Investment Services, and Yoakum Trading Inc, companies registered in the Turks and Caicos Islands, a British Overseas Territory.
In a letter of 16 November 2005 those companies said that they wished to withdraw their complaints because they had transferred all of their shares in the bank to Mr Bonev (see paragraph 51 below), and because Mr Bonev’s failure to pay for those shares had become an internal issue between them following the placing of the bank in insolvent liquidation.
7. The applicants were represented by Mr D. Kanchev and Ms G. Petkova, lawyers practising in Sofia. The Bulgarian Government (“the Government”) were represented by their Agent, Ms M. Dimova, of the Ministry of Justice.
8. The applicants alleged, in particular, that (a) the prosecuting authorities had unlawfully interfered with the bank’s management; (b) the revocation of the bank’s licence by the BNB had been unlawful; (c) the proceedings in which the bank had been declared insolvent had not been fair; and (d) the freezing of Mr Panev’s and Mr Ivanov’s personal bank accounts had been disproportionate and not subject to review.
9. On 25 September 2012 the Court decided to give the Government notice of the application.
10. The Swiss Government, having been apprised of their right to intervene in the case in view of Mr Bonev’s Swiss nationality (Article 36 § 1 of the Convention and Rule 44 § 1 of the Rules of Court), said, in a letter of 2 October 2012, that they did not wish to avail themselves of that opportunity.
THE FACTS
I. THE CIRCUMSTANCES OF THE CASE
A. The bank’s shareholders and management
11. The bank was founded and entered in the register of companies in 1991. According to the BNB’s records, its shareholders on 31 March 2004 were the second applicant, Mr Bonev, who held 4.98% of the shares; his brother, Mr P.E.B., who also held 4.98% of the shares; the twenty companies listed in paragraph 6 above, each of which held between 4.98% and 2.81% of the shares; a Mr B.P., who held 0.19% of the shares; and a Mr P.B., who held 1.20% of the shares (for a full breakdown, see the Appendix).
12. At the material time the bank had a two-tier management system, consisting of an executive board and a supervisory board. Mr Panev and Mr Ivanov were members of the executive board between 30 May 2003 and 5 April 2004. In May and June 2004 Mr B.P. (see paragraph 11 above) was member of the bank’s executive board and one of its executive directors.
B. The general meetings of the bank’s shareholders on 24 and 27 June 2004
13. In early 2004 tensions arose among the bank’s shareholders and between some of the shareholders and the bank’s management. On 18 March 2004 Mr Bonev and Flavors, Fragrances and Chemicals (FFCH) Ltd, acting in their capacity as shareholders who had held more than five per cent of the bank’s shares for more than three months, asked the executive board to call a general meeting of shareholders with a view to adopting amendments to the bank’s articles of association, reducing the number of members of the bank’s executive and supervisory boards, and replacing some of the boards’ members. The same day the executive board agreed to call such a meeting, but on 23 March 2004 the supervisory board set its resolution aside and called a general meeting of shareholders with a different order of business, to be held on 24 June 2004.
14. Thereupon Mr Bonev, Card Transaction Services Ltd, Flavors, Fragrances and Chemicals (FFCH) Ltd, Geneltech Ltd, General Foods Int’l Corp, Industrial Finance Int’l Corp, Megatours-A New Dimension in Travel-Inc, Petrofinance Ltd and V.V.V. Holdings Corp, acting in their capacity as shareholders who had held more than five per cent of the bank’s shares for more than three months, applied to the Sofia City Court for an order adding the points that they wished to have included on the general meeting’s order of business. On 14 May 2004 the chairman of the bank’s executive board and one of its executive directors objected to the request, saying that according to the bank’s register of shareholders, the persons who had made the request did not hold enough shares to be entitled to make one, and that the companies which had made the request had not produced proper credentials. On 8 June 2004 the Sofia City Court made an order in the terms sought by Mr Bonev and the companies, noting that they had proved that they had held the required number of shares for more than three months through notarised declarations.
15. Separately, Mr Bonev and Flavors, Fragrances and Chemicals (FFCH) Ltd, again acting in their capacity as shareholders who had held more than five per cent of the bank’s shares for more than three months, asked the Sofia City Court to authorise them to call a separate general meeting of shareholders, with the order of business that they wished to have. To establish their capacity as shareholders, they enclosed with their request provisional share warrants issued in 2003. On 17 May 2004 the Sofia City Court upheld the request. On 20 and 26 May 2004 the chairman of the bank’s executive board and one of its executive directors, Mr B.P., asked the court to vary its order, arguing that the provisional share warrants had not been registered in the bank’s register of shareholders, and that the documents enclosed with the applicants’ request had not been issued by persons authorised to act on the bank’s behalf. On 20 and 28 May 2004 the court refused to vary its order, holding that by law that was not possible.
16. On 24 June 2004 proxies representing the twenty companies listed in paragraph 6 above showed up at the bank’s premises with a view to taking part in the general meeting of shareholders. Mr P.E.B, Mr B.P. and Mr P.B., who between them held 6.37% of the bank’s shares, were also represented. The polling commission entrusted by the bank’s executive board to check the shareholders’ credentials refused to accept the provisional share warrants through which the twenty companies sought to establish their capacity as shareholders. Concluding that only 6.37% of the shares were duly represented, the commission decided to adjourn the meeting for another date. A dispute ensued, and the twenty companies’ proxies held a parallel general meeting in the stairwell of the bank’s building. They resolved to amend the bank’s articles of association, reduce the number of members of its executive and supervisory boards from five to three, remove four members of the supervisory board and four members of the executive board, including Mr B.P., and appoint two new members of the supervisory board and three new members of the executive board, who were to be also executive directors: the applicants Mr Panev, Mr Ivanov and Mr Radev.
17. On 27 June 2004 Mr Bonev’s and the twenty companies’ proxies tried to hold another general meeting of shareholders at the Sofia Hilton hotel, as authorised by the Sofia City Court (see paragraph 15 above). Mr P.E.B, Mr B.P. and Mr P.B. were also represented. The police showed up, trying to seize the provisional share warrants which Mr Bonev’s and the twenty companies’ proxies were supposed to use to establish their capacity as shareholders, but could apparently not find them. The police were acting on an order issued by the prosecuting authorities in connection with criminal proceedings concerning the genuineness of those warrants, which they had opened pursuant to complaints by Mr B.P. (see paragraph 22 below). In view of the failure of the proxies to produce valid share warrants, the polling commission entrusted by the bank’s executive board to check the shareholders’ credentials found that only 6.37% of the shares were duly represented and decided to adjourn the meeting for another date. However, Mr Bonev’s and the twenty companies’ proxies held a parallel general meeting in an adjoining room, and adopted the same resolutions as the ones adopted on 24 June 2004.
C. The Sofia City Court’s decisions to register the resolutions adopted at the two general meetings of shareholders
18. On 16 August 2004 the Sofia City Court, sitting in private, decided to enter the changes resolved upon at the general meeting on 24 June 2004 (see paragraph 16 above) in the register of companies. The court found that the change in the bank’s management and the amendment of its articles of association had been duly carried out. It registered the amendment to the bank’s articles of association and the reduction of the number of members of its executive and supervisory boards from five to three. The court also struck out of the register four members of the supervisory board and four members of the executive board, including Mr B.P., and registered two new members of the supervisory board and three new members of the executive board, who were also to be executive directors: the applicants Mr Panev, Mr Ivanov and Mr Radev. Lastly, the court registered Mr Panev as chairman of the executive board. The court specified that its decision was to be entered in the register of companies and published, and that it was not subject to appeal.
19. The court’s decision was entered in the register of companies the afternoon of the following day, 17 August 2004. In the morning a notary sent to the register of companies by Mr B.P. certified that the decision had not yet been entered in the register. The same day the court issued a certificate reflecting the changes in the bank’s registration.
20. On 24 August 2004 the Sofia City Court, sitting in private, decided to enter the changes and amendments resolved upon at the general meeting on 27 June 2004 (see paragraph 17 above) in the register of companies. The court found that the changes in the bank’s management and the amendment of its articles of association had been duly made. The changes registered by the court were identical to the ones registered with its decision of 16 August 2008 (see paragraph 18 above).
21. Subsequently, Mr B.P. and Mr P.B. sought revision of those two decisions and brought claims for the annulment of the shareholder resolutions whose registration they ordered (see paragraphs 52-58 below).
D. The criminal proceedings against Mr Bonev, Mr Panev and Mr Ivanov
1. The proceedings against Mr Bonev, Mr Panev and Mr Ivanov
22. On 19 May 2004 Mr B.P. wrote to the police and to the Sofia District Prosecutor’s Office, alleging that the provisional share warrants on which Mr Bonev and Flavors, Fragrances and Chemicals (FFCH) Ltd had relied to obtain the court order of 17 May 2004 (see paragraph 15 above) were false and did not correspond to the entries in the bank’s register of shareholders. He pointed out that the warrants had been signed by Mr Panev and Mr Ivanov, and asked the authorities to open criminal proceedings and check whether any criminal offences had been committed in relation to that.
23. On 4 June 2004 the police issued an order for Mr Panev’s arrest for twenty-four hours. He was arrested and released later the same day. It does not appear that he has attempted to seek judicial review of his detention.
24. In the following days Mr Panev and Mr Ivanov were charged with making false private documents. Mr Bonev was, for his part, charged with using a false official document. The charges were later amended: Mr Panev and Mr Ivanov were charged with making false official documents, and Mr Bonev was charged with knowingly using a false document.
25. On 11 June 2004 the Sofia District Prosecutor’s Office, noting that Mr Panev and Mr Ivanov had in the past four years travelled extensively out of the country, which in its view meant that they could seek to evade criminal liability by fleeing abroad, banned them from leaving the country. On 23 July 2004 it made the same decision with respect to Mr Bonev.
26. On 29 December 2004 the Sofia District Prosecutor’s Office turned down Mr Bonev’s, Mr Panev’s and Mr Ivanov’s requests that the travel bans be lifted. It reasoned that, in view of the advanced stage of the pre-trial proceedings, their prolonged absence from the country might cause delays.
27. The preliminary investigation was completed in the end of December 2004 and on 11 January 2005 the three applicants were indicted. However, finding that the indictment suffered from various defects, on 25 January 2005 the Sofia District Court referred the case back to the prosecuting authorities.
28. On 14 June 2005 the Sofia District Prosecutor’s Office turned down a request by Mr Bonev to be allowed to travel to Switzerland for business meetings in July, August, September and October 2005.
29. On 27 June 2005 the Sofia District Prosecutor’s Office re-submitted the indictment, and on 22 July 2005 the Sofia District Court set the case down for trial on 6 December 2005.
30. In the meantime, on 11 July 2005 the Sofia District Court refused a request by Mr Bonev to be allowed to travel to Switzerland for business meetings. It held that there was no evidence that he had a pressing need to travel there. However, on 21 September and 19 October 2005 the court allowed Mr Bonev to travel abroad in October and the first half of November 2005 respectively. On 27 October 2005 it allowed him to travel to Turkey in the end of November 2005 for a business seminar.
31. The Sofia District Court heard the case on 6 December 2005 and 14 March, 5 June and 19 October 2006.
32. At the hearing on 6 December 2005, noting that Mr Bonev had duly appeared and had not attempted to flee during the investigation, the court allowed him to travel abroad during the period until the following hearing. On 17 February 2006 the court allowed Mr Bonev to travel to Belgium in the second half of March 2006 for business meetings.
33. On 4 April, 26 April and 5 May 2006 respectively the Sofia District Court lifted the travel bans imposed on Mr Bonev, Mr Panev and Mr Ivanov.
34. On 19 October 2006 the Sofia District Court acquitted Mr Panev, Mr Ivanov and Mr Bonev. Its judgment was not appealed against and became final on 4 November 2006.
2. The proceedings against Mr Panev and Mr Ivanov
35. On 14 and 18 October 2004 respectively Mr Ivanov and Mr Panev were charged with forgery offences in connection with their participation in the general meeting of shareholders of the bank on 24 June 2004 (see paragraph 16 above). On 18 January 2005 the Sofia District Prosecutor’s Office banned them from leaving the country. Four other persons were charged as well.
36. On 13 April 2005 Mr Panev, Mr Ivanov and their co-accused were indicted. However, finding that the indictment suffered from various defects, on 3 June 2005 the Sofia District Court referred the case back to the prosecuting authorities.
37. On 27 November 2005 the Sofia District Prosecutor’s Office re‑submitted the indictment. The Sofia District Court heard the case on four unspecified dates in 2005-06.
38. On an unspecified date in the autumn of 2005 Mr Panev and Mr Ivanov asked the Sofia District Court to lift the travel bans. In a decision of 24 November 2005 the court refused their request, but on 4 April 2006 lifted the bans.
39. On 11 July 2006 the Sofia District Court acquitted Mr Panev, Mr Ivanov and their four co-accused. On 25 July 2006 the prosecution appealed but then withdrew its appeal, and on 18 December 2006 the Sofia City Court discontinued the appeal proceedings.
E. The service contracts between the bank and Mr Panev, Mr Ivanov and Mr Radev and their attempt to take up office
40. On 16 August 2004 Mr Panev, Mr Ivanov and Mr Radev entered into service contracts with the bank, represented by a member of its supervisory board. They undertook to sit on the bank’s executive board for three years following the registration of the resolutions of the general meeting of shareholders to appoint them as members of that board. In return, each of them was to receive a monthly salary of 10,000 Bulgarian levs (BGN) plus a host of other benefits.
41. The same day Mr Panev and Mr Ivanov tried to take up their duties, but the bank’s former management refused to vacate their offices and called the police, saying that they were not aware of any resolution to remove them. The next day, 17 August 2004, the bank’s former management forced the applicants out of the bank’s building, with help from the police. It appears that the police were acting on orders from the prosecuting authorities (see paragraph 42 below).
F. The proceedings before the prosecuting authorities
42. On 17 August 2004 the Sofia City Prosecutor’s Office ordered the police to assist Mr B.P. in preventing any changes in the status quo in the bank’s management and operations, and to warn Mr Panev, Mr Ivanov and Mr K.Y., a newly registered member of the bank’s supervisory board, to refrain from any actions in relation to that until the matter had been duly resolved by the competent authorities. It relied on section 119(1)(6) of the Judiciary Act 1994 (see paragraph 77 below), and reasoned that the Sofia City Court’s decision of 16 August 2004 (see paragraph 18 above) was being verified by the Sofia District Prosecutor’s Office, that the record drawn up by the notary public (see paragraph 19 above) made it apparent that that decision had not been entered in the register of companies, which meant that it did not in fact exist, that Mr B.P. had applied to the Supreme Court of Cassation to reopen the proceedings and annul that decision (see paragraph 52 below), and that by trying to put the decision into effect Mr Panev, Mr Ivanov and Mr K.Y. were interfering with the bank’s normal business. The prosecutor found that, in view of the possibility for them to dispose of the bank’s documents and assets and imperil the interests of the bank’s depositors, that gave rise to a real risk of irreparable damage.
43. Mr Panev, Mr Ivanov and Mr K.Y. appealed to the Sofia Appellate Prosecutor’s Office, arguing that the order was unlawful and arbitrary. They pointed out that the Sofia City Court’s decision was valid and immediately enforceable, that no appeal lay against it to the Supreme Court of Cassation, and that the prosecuting authorities had no power to stay its enforcement. The question whether a judicial decision had been entered in the register of companies was to be established on the basis of official documents issued by the competent court, not of a record drawn up by a notary public outside his competence. The certificate issued by the Sofia City Court (see paragraph 19 above) showed that its decision had in fact been duly entered in the register of companies.
44. On 23 August 2004 the Sofia Appellate Prosecutor’s Office dismissed the appeal. It noted that the Sofia City Prosecutor’s Office had been spurred into action by information, given to it by the Sofia District Prosecutor’s Office, that the Sofia City Court’s decision to make changes in the bank’s registration might have been based on false documents. At the time when the Sofia City Prosecutor’s Office had issued its order, the Sofia City Court’s decision had not yet been entered in the register of companies. Proceedings against that decision were pending before the Supreme Court of Cassation. All of that showed that until the Sofia District Prosecutor’s Office had completed its inquiry into the matter or until the Supreme Court of Cassation had given judgment, there would continue to exist a risk of changes in the status quo and irreparable damage to the bank.
45. Mr Panev, Mr Ivanov and Mr K.Y. appealed to the Supreme Cassation Prosecutor’s Office, reiterating their arguments.
46. On 7 September 2004 the Supreme Cassation Prosecutor’s Office dismissed the appeal. It reasoned that it was beyond doubt that the prosecuting authorities were faced with a judicial decision under challenge and with evidence that that decision had been obtained through the use of false documents. Moreover, the decision had been issued in spite of a decision staying the registration proceedings and the existence of pending contentious proceedings. The appellants’ argument that the Supreme Court of Cassation had no jurisdiction to hear a legal challenge against the Sofia City Court’s decision was unavailing because the prosecuting authorities were not competent to make pronouncements on such points. Faced with pending judicial proceedings and a pending criminal investigation, they were bound to take measures to prevent changes in the status quo before any judicial resolution of the matter. The appellants’ attempts to change that status quo were premised on rights acquired through a judicial decision based on false documents. It was necessary for the judiciary to check the lawfulness of that decision and for the investigating authorities to gather evidence with a view to uncovering the truth. The bank had to be protected against damage flowing from offences that had already been committed and from the risk of future offences. The prerequisites of section 119(1)(6) of the Judiciary Act 1994 (see paragraph 77 below) were therefore in place.
47. Mr Panev, Mr Ivanov and Mr K.Y. appealed to the Chief Prosecutor, arguing that the prosecuting authorities had acted in a patently unlawful way and in excess of their powers. Their decisions had been based on false findings of fact, and on the finding – not based on a final conviction – that offences had been committed by them.
48. On 28 September 2004 the head of the economic crime division of the Supreme Cassation Prosecutor’s Office, to whom the case had been assigned, dismissed the appeal. He reasoned that the prosecuting authorities had acted lawfully and within their powers under section 119(1)(6) of the Judiciary Act 1994 (see paragraph 77 below). The Sofia District Prosecutor’s Office was investigating the making of false documents with a view to obtaining changes in the bank’s registration, and the Sofia City Court’s decision had been challenged before the Supreme Court of Cassation. There had therefore been a need to preserve the status quo with a view to ensuring the normal operation of the bank.
49. The same day, 28 September 2004, the Sofia District Prosecutor’s Office ordered the police to take measures to ensure compliance with the Sofia City Prosecutor’s Office’s order of 17 August 2004 (see paragraph 42 above) and the preservation of the status quo in the bank. It noted that criminal proceedings had been instituted against members of the bank’s newly appointed management in relation to documentary offences, and that information existed that a group of persons had tried to enter the bank’s premises. Mr B.P. and the applicants Mr Panev and Mr Ivanov had complained to the prosecuting authorities in relation to that. Since the criminal proceedings concerned allegations of using false documents to obtain judicial decisions to make entries in the register of companies, it was appropriate to maintain the status quo pending the resolution of the case. Indeed, this had already been ordered by the higher prosecutor’s offices, whose decisions were mandatory for the Sofia District Prosecutor’s Office. The decision did not mention the legal provisions on which it was based.
50. In the following months Mr Bonev wrote a number of letters to the Chief Prosecutor and tried to meet him in person with a view to obtaining the quashing or varying of the above prosecutors’ decisions, to no avail. He also lodged complaints with the Minister of Justice and the Supreme Judicial Council.
G. The share transfer
51. On 25 August 2004 the twenty companies listed in paragraph 6 above transferred their shares to Mr Bonev by endorsing the provisional share warrants issued in 2003. As a result, he became the owner of 93.63% of the bank’s shares. The companies submitted that Mr Bonev paid part of the shares’ price immediately and undertook to pay the remainder when the transfer would be registered in the bank’s register of shareholders. The companies submitted that they could not obtain the remainder of the price because the bank’s former management, who were de facto running the bank by virtue of the prosecutors’ decisions outlined in paragraphs 42-49 above, refused to register the transfer.
H. The legal challenges against the Sofia City Court’s registration decisions
1. The requests for revision
52. On an unspecified date in 2004 Mr B.P. and Mr P.B. sought revision of the Sofia City Court’s decisions of 16 and 24 August 2004 (see paragraphs 18 and 20 above).
53. In two decisions of 4 February 2005 (опр. № 6 от 04.02.2005 г. по гр. д. № 554/2004 г., ВКС, І т. о., and опр. № 7 от 04.02.2005 г. по гр. д. № 483/2004 г., ВКС, І т. о.) a three-member panel of the Supreme Court of Cassation refused to examine the requests, holding that judicial decisions making entries in the register of companies were not subject to revision. Such decisions did not determine disputes between opposing litigants and did not enjoy res judicata. The proper way to contest entries in the register of companies obtained by criminal means was by way of a claim under Article 431 § 2 of the Code of Civil Procedure 1952 aiming to have the entries erased under Article 498 of that Code (see paragraph 76 below). Mr B.P. and Mr P.B. appealed. In two decisions of 28 June 2005 (опр. от 28.06.2005 г. по гр. д. № 53/2005 г., ВКС, петчл. с-в, and опр. № 28 от 28.06.2005 г. по гр. д. № 52/2005 г., ВКС, петчл. с-в) a five-member panel of the Supreme Court of Cassation upheld the three-member panel’s rulings, fully agreeing with them.
2. The claims under section 74 of the Commerce Act 1991
54. In the meantime, Mr B.P. and Mr P.B. brought claims against the bank under section 74 of the Commerce Act 1991 (see paragraph 76 below), asking the Sofia City Court to annul the resolutions of the general meetings of shareholders held on 24 and 27 June 2004 (see paragraphs 16 and 17 above).
55. In two judgments of 28 February and 7 March 2005, the Sofia City Court allowed the claims and annulled all resolutions adopted by the two meetings. It found that the meetings had been adjourned by the polling commission for lack of quorum and had not taken place, and that the parallel meetings had not been valid, chiefly because the persons who had taken part in them had not established their capacity as shareholders on the basis of valid provisional share warrants.
56. Following appeals by the bank, represented by the management appointed in June 2004 (see paragraphs 16 and 17 above) and registered by the Sofia City Court in August 2004 (paragraphs 18-20 above), on 16 and 19 June 2006 respectively the Sofia Court of Appeal quashed those judgments and dismissed the claims. It found that the persons who had held the parallel meetings had in fact represented 93.62% of the bank’s capital. The bank’s records, which fully matched those of the BNB, and a document issued by Mr B.P. in his capacity as executive director on the day of the meeting, showed that they had indeed been shareholders in it.
57. On appeals by Mr B.P. and Mr P.B., in two judgments of 7 June and 3 July 2007 (реш. № 111 от 07.06.2007 по т. д. № 598/2006 г., ВКС, І т. о., and реш. № 113 от 03.07.2007 по т. д. № 600/2006 г., ВКС, І т. о.) the Supreme Court of Cassation quashed the Sofia Court of Appeal’s judgments and annulled the resolutions of the two general meetings. It held that, where nominative shares which had still not been issued were concerned, the only way of proving that a person was a shareholder entitled to take part in a general meeting was by producing a valid provisional share warrant. This had not happened at the two meetings. They had therefore been held by persons whose capacity as shareholders had not been duly established, and all resolutions adopted by them were unlawful.
58. On 27 June and 18 July 2007 the Sofia City Court, acting of its own motion (see paragraph 76 below), and noting that the resolutions of the general meetings of 24 and 27 June 2004 had been ultimately annulled by the Supreme Court of Cassation, erased the entries in the register of companies relating to those resolutions.
I. Measures taken by the BNB in relation to the bank
59. Between September 2004 and April 2005 the applicants repeatedly asked the BNB to exercise its supervisory powers and take measures to resolve the bank’s situation. On 4 October 2004 the BNB wrote to the Chief Prosecutor with a view to elucidating the effect of the prosecutors’ decisions outlined in paragraphs 42-49 above on the bank’s management, but apparently did not receive a reply.
60. On 10 February 2005 the BNB’s deputy-governor in charge of banking supervision noted that Mr Panev and Mr Ivanov, who had been duly registered as members of the bank’s executive board, were being prevented from carrying out their duties as a result of the decisions of the prosecuting authorities (see paragraphs 42-49 above). That made it impossible for the bank’s executive board to function. The attempts to approach the Chief Prosecutor with a view to solving the problem had proved unfruitful. At the same time, a check of the bank’s finances carried out in December 2004 showed that its credit portfolio was deteriorating due to the ever more frequent failure of its debtors to service considerable loans extended by the bank, and that the bank was not carrying out proper credit‑risk assessments. All of that seriously affected its stability and the interests of its creditors and depositors. It was therefore necessary to take urgent measures to solve the problem with the bank’s management. The BNB’s deputy-governor accordingly decided to call a meeting of the bank’s supervisory board on 11 February 2005 with a view to taking measures, possibly including replacing the members of the bank’s executive board, that could allow the bank to be effectively managed. The order specified that it was immediately enforceable and not subject to judicial review.
61. The next day, 11 February 2005, the bank’s supervisory board held a meeting at which it resolved to relieve Mr Ivanov of his duties as executive director of the bank and member of its executive board, and to appoint a Mr S.S. in his stead. The board noted that Mr Ivanov’s removal was not due to any failure on his part but to factors beyond the bank’s control. The next day, 18 February 2005, the BNB informed the bank that it gave its regulatory approval to the changes in the bank’s executive board.
62. On 18 February 2005 Mr Panev and Mr S.S. asked the Sofia City Court to register the supervisory board’s resolution. On 17 March 2005 Mr B.P. and Mr Bonev’s brother, Mr P.E.B., acting in their capacity as shareholders in the bank, asked the court not to proceed with the registration pending the outcome of the proceedings in which Mr B.P. and Mr P.B. had challenged the resolutions of the general meetings of shareholders of 24 and 27 June 2004 (see paragraph 54 above). On 21 March 2005 the court upheld that latter request, noting that the general meeting’s resolutions under challenge included the one to appoint the supervisory board whose resolution the court was being asked to enter in the register of companies. This registration was therefore to be adjourned pending the outcome of the proceedings against the general meeting’s resolutions.
63. In the following months the BNB repeatedly instructed the bank to take steps to overcome its financial difficulties. On 4 May 2005 it noted that, contrary to a statutory rule prohibiting banks from exposing more than a quarter of their capital to any one debtor, the bank had, as early as July 2004, extended a large loan to a company. In spite of the BNB’s instructions to fix that, the bank later had, on the contrary, vastly increased its exposure to that company. It was also overly exposed to other debtors, and faced with a serious deterioration of its credit portfolio, with ever more frequent failures by its nine principal debtors to service their loans. That required the bank to increase its non-performing loan provisions, but doing so would deplete its capital to a level requiring revocation of its licence. The BNB therefore asked all persons engaged with running the bank to join efforts to remedy its situation, and instructed the bank immediately to bring its exposure into line with the statutory requirements and collect its overdue loans from nine companies and all of its loans from another company. The BNB also barred the bank from taking in new term deposits, except from shareholders, and warned it that failure to comply with those instructions would lead to harsher measures, including the appointment of special administrators or revocation of its licence.
64. On 28 May 2005 the BNB’s deputy-governor in charge of banking supervision decided to place the bank under compulsory administration and to appoint two special administrators to run it for three months. She noted that it had already been established that the bank’s financial situation had substantially deteriorated and that its capital was below the amount required by law, which called for immediate remedial action; in particular, the collection of some of the loans extended by the bank. Despite instructions to that effect by the BNB and a warning that failure to act would trigger harsher measures, the bank’s management had not taken such action. A report by an inspector appointed by the BNB showed that the bank’s liquidity was worsening daily. The bank was therefore at risk of insolvency that its shareholders and management had not taken steps to avert. There was uncertainty in relation to the persons running the bank: those actually doing so no longer featured in the register of companies and were not in law entitled to act on the bank’s behalf, whereas those featuring in the register could not in fact do so because of the decisions of the prosecuting authorities (see paragraphs 42-49 above). That threw doubt on the reliability of the reports which the bank was submitting to the BNB; there were reasons to believe that its financial situation was worse than transpiring from these reports. At the same time, the infighting between the bank’s shareholders precluded outside assistance. All that showed that the interests of the bank’s depositors were at serious risk, and the BNB had no choice but to place it under administration and appoint special administrators to run it. The BNB specified that its order was immediately enforceable and not subject to judicial review.
65. In the following days the special administrators invited the bank’s management and shareholders to take steps to resolve the bank’s situation. Mr Bonev entered into settlements with the other shareholders – his brother, Mr B.P. and Mr P.B. – whereby they agreed to resolve the disputes between them. Mr Bonev also tried to find companies which would take over the non-performing loans extended by the bank. However, on 8 June 2005 the special administrators wrote to Mr Bonev, advising him that the results of an audit that they had ordered showed that the only way to prevent the bank from sliding into insolvency was to sell its risky loans immediately. The administrators went on to say that if Mr Bonev was serious about preventing that from happening, he had to buy those loans before 5 p.m. the next day, 9 June 2005. Otherwise, the administrators would be bound to notify the BNB that the bank was insolvent.
66. On 14 June 2005 the applicants wrote to the BNB’s governor and deputy-governor, complaining of undue pressure and improper conduct on the part of the special administrators, and saying that one of them was forcing Mr Bonev to sell his shares in the bank on very unfavourable terms.
67. The same day, 14 June 2005, the BNB’s governor, relying on section 21(2) and (5) of the Banks Act 1997 (see paragraph 78 below), and acting on a recommendation by the deputy-governor in charge of banking supervision, revoked the bank’s licence and extended the term of office of the two special administrators previously appointed to run the bank (see paragraph 64 above). He noted that a report by those administrators filed the previous day and the documents enclosed with it, all of which had been drawn up in line with the BNB’s requirements, showed that the bank’s liabilities exceeded its assets by BGN 19,181,000 and that its capital was negative – minus BGN 19,184,000. It was thus clear that the bank was insolvent, and that the BNB had to revoke its licence and petition the courts to open winding-up proceedings against it. The special administrators previously appointed to run the bank were to continue to carry out their duties pending the appointment of liquidators by the court. The governor specified that his decision was immediately enforceable and not subject to judicial review.
J. The bank’s winding-up
68. Following its decision to revoke the bank’s licence, on 15 June 2005 the BNB petitioned the Sofia City Court to declare the bank insolvent and wind it up. As required by law (see paragraph 79 below), in those proceedings the bank was represented by the special administrators previously appointed by the BNB (see paragraphs 64 and 67 above and paragraph 79 below).
69. Mr Bonev sought leave to intervene as a third party, citing concerns that the special administrators would not strive to protect the bank’s best interests. On 27 June 2005 the Sofia City Court turned down his request, holding that the Bank Insolvency Act 2002 set out in an exhaustive manner the persons entitled to take part in such proceedings (see paragraph 79 below). Mr Bonev appealed, arguing that he had an interest to take part in the proceedings in his capacity as shareholder in the bank. In a final decision of 11 October 2005, the Sofia Court of Appeal dismissed the appeal. It agreed with the lower court, and added that Mr Bonev did not have an interest to take part in the proceedings because, being merely a shareholder in the bank, he would not himself be bound by the courts’ decisions in relation to it.
70. In a decision of 29 June 2005, the Sofia City Court granted the BNB’s petition, declared the bank insolvent, made an order for it to be wound up, divested its decision-making bodies of their powers and the bank of the right to administer its property, and ordered the sale of its assets. Relying on the Supreme Court of Cassation’s judgment at issue in Capital Bank AD v. Bulgaria (no. 49429/99, § 33, 24 November 2005), the court held that, unlike the position with regular companies, the fact that a bank was insolvent was conclusively determined by the BNB. The construction of the applicable statutory provisions (see paragraph 79 below) showed that the insolvency court could not scrutinise that determination, and, faced with a decision by the BNB to revoke a bank’s licence and a facially valid winding-up petition lodged by the BNB, it was bound to declare the bank insolvent and make an order for it to be wound up. The decision was not appealed against. Immediately after it the Deposit Insurance Fund appointed liquidators from among the list of persons eligible to serve as liquidators kept by the BNB (see paragraph 81 below).
71. On 23 May 2007 Central Cooperative Bank AD bought all of the bank’s assets for one Bulgarian lev and undertook to satisfy the claims of its creditors which had been accepted by its liquidators. On 2 July 2007 the Sofia City Court approved the transaction. It found that it would result in a higher rate of repayment of the bank’s debts than if its assets were to be sold piecemeal over a protracted period of time.
72. On 17 August 2007 the Sofia City Court closed the winding-up proceedings in respect of the bank and struck it out of the register of companies.
K. The freezing of Mr Panev’s and Mr Ivanov’s bank accounts
73. On 24 June 2005 the BNB informed Mr Panev and Mr Ivanov that following the revocation of the bank’s licence, all of their bank accounts were being frozen, as required under paragraph 4(1) of the transitional and concluding provisions of the Bank Deposits Guarantee Act 1998 (see paragraph 83 below). They would be unfrozen six months after the BNB had applied for the opening of insolvency proceedings against the bank, unless in the meantime Mr Panev and Mr Ivanov had been charged with a criminal offence in relation to that, or unless the bank’s liquidators had brought a claim against them.
74. On 16 August 2005 Mr Ivanov and Mr Panev protested against the freeze, pointing out that as a result of the prosecuting authorities’ decisions set out in paragraphs 42-49 above they had in effect never been able to take up their duties and therefore did not fall under that provision. On 31 August 2005 the BNB replied that it did not have discretion to unfreeze the accounts.
75. On 12 January 2006 Mr Panev and Mr Ivanov asked the BNB to unfreeze their accounts as the six-month period laid down in paragraph 4(1) of the transitional and concluding provisions of the Bank Deposits Guarantee Act 1998 (see paragraph 83 below) had expired. Finding that no criminal proceedings or claims by the bank’s liquidators had been brought against Mr Panev or Mr Ivanov within those six months, on 20 January 2006 the BNB unfroze the accounts.
II. RELEVANT DOMESTIC LAW
A. The register of companies and legal challenges against entries in it and against resolutions of the general meeting of a company’s shareholders
76. The law governing the register of companies, legal challenges against entries in that register, and legal challenges against resolutions of the general meeting of a company’s shareholders has been set out in Shesti Mai Engineering OOD and Others v. Bulgaria (no. 17854/04, §§ 49-51, 56 and 58, 20 September 2011).
B. Powers of the prosecuting authorities under section 119(1)(6) of the Judiciary Act 1994
77. The powers of the prosecuting authorities under section 119(1)(6) of the Judiciary Act 1994 have set out in Zlínsat, spol. s r.o. v. Bulgaria (no. 57785/00, §§ 38 and 41-43, 15 June 2006). In 2007 that provision was superseded by section 145(1)(6) of the Judiciary Act 2007, which is almost identically worded.
C. The BNB’s powers in relation to commercial banks and the rules governing bank insolvency
78. The provisions of the Banks Act 1997 governing the BNB’s supervisory and enforcement powers in relation to commercial banks (in particular, to appoint special administrators and revoke a bank’s licence), the law governing judicial review of the BNB’s decisions, and the provisions of the Banks Act 1997 and other statutes governing bank insolvency have been set out in Capital Bank AD (cited above, §§ 46-67).
79. In December 2002 the provisions of the Banks Act 1997 governing bank insolvency were superseded by the Bank Insolvency Act 2002. Sections 9(2) and 13(1) of that Act are almost identical to sections 79(3) and 82 of the 1997 Act. Section 11(3) of the 2002 Act, as originally enacted, provided that in proceedings in which the court was to decide whether to grant the BNB’s petition to open insolvency proceedings against a bank, the bank was to be represented by the special administrators appointed by the BNB. A new subsection (4), added in 2006, now provides that shareholders who at the time of revoking of the bank’s licence hold more than five per cent of its shares are entitled to take part in the proceedings. However, section 16(1) in fine provides that only the BNB, the special administrators appointed by it, and the public prosecutor may appeal against the insolvency court’s decision on the winding-up petition against the bank. In a decision of 11 January 2016 (опр. № 4 от 11.01.2016 г. по т. д. № 3343/2015 г., ВКС, I т. о.), given in the case of a bank whose licence was revoked by the BNB on 6 November 2014, the Supreme Court of Cassation asked the Constitutional Court to declare sections 11(3) and 16(1) unconstitutional and contrary to Article 6 § 1 of the Convention in the light of this Court’s judgment in Capital Bank AD (cited above, §§ 117-18). On 4 February 2016 the Constitutional Court admitted the request for examination in so far as it concerned the constitutionality of those sections, but turned it down in so far as it concerned their compatibility with Article 6 § 1 of the Convention, on the basis that under the applicable rules of procedure the Supreme Court of Cassation only had standing to seek pronouncements on the constitutionality of statutes, not their compatibility with international treaties (see опр. от 4 февруари 2016 г. по к. д. № 1/2016 г., КС). The proceedings on the merits are still pending.
80. By section 92(5) of the Bank Insolvency Act 2002, the bulk sale of the assets of an insolvent bank to another bank automatically entails the termination of all rights of its shareholders, save for the right to receive any monies payable upon liquidation if the purchasing bank has undertaken to make such payment.
81. One small difference between the Banks Act 1997 and the Bank Insolvency Act 2002 is that under the former, the liquidators were, by section 82(8), appointed directly by the insolvency court, whereas under the latter they are, by section 26, appointed by the Deposit Insurance Fund immediately after the declaration of insolvency by the insolvency court. The liquidators still have to be persons featuring on a list kept by the BNB (section 25(1)(12) of the 2002 Act).
82. In the beginning of 2007 the remainder of the Banks Act 1997 was superseded by the Credit Institutions Act 2006. Sections 36(6) and 103(3) and (4) of that Act are almost identical to section 21(5) of the 1997 Act (see paragraph 78 above), but section 151(3) provides that the BNB’s decision to revoke a bank’s licence is subject to review by the Supreme Administrative Court. When dealing with legal challenges against the decision of the BNB on 6 November 2014 to revoke the licence of a bank (see paragraph 79 above), that court held that its shareholders did not have standing to bring claims under section 151(3) on their own behalf (see опр. № 3725 от 02.04.2015 г. по адм. д. № 3438/2015 г., ВАС, петчл. с-в). In a parallel case, it held that the bank’s managers, who had earlier been replaced by special administrators appointed by the BNB, did not have such standing either (see опр. № 2038 от 25.02.2015 г., по адм. д. № 1813/2015 г., ВАС, петчл. с-в). In the wake of those decisions, on 9 March 2015 the President of the Supreme Bar Council asked that court to give an interpretative decision on these points, arguing that its rulings were contrary to, inter alia, Article 6 § 1 of the Convention and Article 1 of Protocol No. 1. The plenary court deliberated on the admissibility of the request (тълк. д. № 4/2015 г., ВАС, ОС) on 29 March 2016.
D. Freezing of the assets of managers of insolvent banks
83. By paragraph 2(1) of the transitional and concluding provisions of the State Protection of Deposits and Accounts in Commercial Banks Whose Insolvency Has Been Sought by the BNB Act 1996, when petitioning the courts to declare a bank insolvent, the BNB had to freeze the assets of the members of its management. In 1998 that provision was superseded by the similarly worded paragraph 4(1) of the transitional and concluding provisions of the Bank Deposits Guarantee Act 1998, which provided that when seeking the opening of insolvency proceedings against a bank the BNB’s governor had to ask the investigating authorities to check whether members of the bank’s executive and supervisory boards had committed offences, and freeze their bank accounts and immovable property. By paragraph 4(3), these were to be later unfrozen, unless within six months after the BNB had lodged the winding-up petition the investigating or prosecuting authorities informed it that they had opened criminal proceedings in connection with the insolvency, or the bank’s liquidators informed it that they had brought a claim against the boards’ members.
84. Although the courts have not directly dealt with the question whether the decisions of the BNB in this respect are amenable to judicial review, they appear to assume so (see опр. № 8834 от 06.10.2003 г. по адм. д. № 7953/2003 г., ВАС, петчл. с-в, and опр. № 1743 от 23.06.2015 г. по в. гр. д. № 1588/2015 г., САС). There are no reported cases under the 1996 or the 2002 Acts in which such a freeze has been set aside.
THE LAW
I. PRELIMINARY PROCEDURAL POINTS
85. On 16 November 2005 the twenty companies listed in paragraph 6 above stated that they wished to withdraw their complaints because they had transferred all of their shares in the bank to the second applicant, Mr Bonev (see paragraphs 6 and 51 above). These companies may accordingly be regarded as no longer intending to pursue their application (Article 37 § 1 (a) of the Convention). As the issues raised by them were also raised by the remaining applicants, respect for human rights, within the meaning of Article 37 § 1 in fine, does not require the Court to continue examining the application in so far as it concerns these companies (see Shesti Mai Engineering OOD and Others, cited above, § 62). This part of the application is to be therefore struck out of the list of cases.
86. The Government submitted that, in so far as it had been lodged on behalf of the bank, the application had to be struck out of the Court’s list of cases because the bank, having been struck out of the register of companies after the conclusion of the winding-up proceedings (see paragraph 72 above), no longer existed and could not pursue it.
87. The applicants replied that the complaints made on behalf of the bank concerned the revocation of its licence and its ensuing liquidation, which had eventually led to its striking out of the register of companies and its disappearance as a legal person. This situation was exactly the same as that in Capital Bank AD (cited above), and there was no reason to reach a different conclusion in relation to it.
88. The Court was faced with, and rejected, almost identical submissions in Capital Bank AD (cited above, §§ 74-80), OAO Neftyanaya kompaniya Yukos v. Russia ((dec.), no. 14902/04, §§ 439-44, 29 January 2009), Süzer and Eksen Holding A.Ş. v. Turkey (no. 6334/05, §§ 80 and 92, 23 October 2012) and S.C. « Asul de Aur – Aranyaszok » S.R.L. and Fodor Barabas v. Romania (no. 35720/06, §§ 34 and 39, 3 March 2015). It sees no reason to do otherwise in this case.
II. STANDING TO COMPLAIN ON BEHALF OF THE BANK
89. The application was lodged on behalf of the bank by shareholders and by persons appointed to its management in resolutions of the general meeting of its shareholders later annulled by the courts (see paragraphs 3-5, 11, 16, 17 and 54-58 above), shortly before the BNB appointed special administrators to represent and manage the bank instead of its bodies, who were in turn replaced by liquidators appointed by the Deposit Insurance Fund after the Sofia City Court declared the bank insolvent (see paragraphs 1, 64 and 70 above).
90. In Capital Bank AD (cited above) the Court was likewise faced with complaints raised on behalf of a bank placed in compulsory administration, and then insolvency, by its shareholders and former managers. In its admissibility decision in that case (see Capital Bank AD v. Bulgaria (dec.), no. 49429/99, 9 September 2004), it held that in as much as the complaints related to the chain of events leading to the appointment of special administrators and liquidators and to their role in the proceedings in which the bank was declared insolvent, its shareholders and former management were exceptionally entitled to complain on its behalf (see also Credit and Industrial Bank v. the Czech Republic (no. 29010/95, §§ 46-52, ECHR 2003‑XI (extracts)).
91. The present case is almost identical. The complaints made on behalf of the bank concern the interference of the prosecuting authorities with its management, the revocation of its licence, and the fact that in the proceedings in which it was declared insolvent it was only represented by the special administrators appointed by the BNB (see paragraphs 93, 101 and 109 below). Mr Bonev, who following the share transfer on 25 August 2004 appears to have held 93.63% of the bank’s shares (see paragraphs 6, 11 and 51 above), is therefore entitled to complain on its behalf in relation to these matters.
92. In view of this conclusion, the Court does not have to decide whether Mr Ivanov, Mr Radev and Mr Panev, whose appointment to the bank’s management was later annulled by the courts (see paragraphs 57 and 58 above), were likewise entitled to complain on its behalf.
III. THE PROSECUTING AUTHORITIES’ DECISIONS WITH RESPECT TO THE BANK’S MANAGEMENT
93. A complaint was made on behalf of the bank that the prosecuting authorities had prevented the persons appointed to its management in June 2004 from taking up their duties, with the results that the Sofia City Court’s decisions to register the resolutions of the general meeting of its shareholders to appoint those persons were not put into effect and that the bank’s financial situation was irretrievably prejudiced. It was further complained on behalf of the bank that it had not had an effective domestic remedy in that respect. The complaints were made under Article 1 of Protocol No. 1 and Articles 6 § 1 and 13 of the Convention, which provide, in so far as relevant:
Article 1 of Protocol No. 1 (protection of property)
“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.”
Article 6 § 1 of the Convention (right to a fair hearing)
“In the determination of his civil rights and obligations ..., everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. ...”
Article 13 of the Convention (right to an effective remedy)
“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.”
A. The parties’ submissions
94. The Government submitted that the prosecutors’ decisions with respect to the bank’s management had been prompted by information about irregularities in its operations and the need to elucidate whether the persons appointed as its managers had committed offences. Both criminal and civil proceedings had been instituted in relation to the decisions of the Sofia City Court to register the changes in the bank’s management. In those circumstances, the competent prosecutors, who had an overarching duty to ensure compliance with the law, had been under a duty to preserve the status quo and avert damage to the bank. The applicants had appealed against their decisions in that respect before higher prosecutors, who had fully upheld them.
95. The applicants submitted that the prosecutors’ decisions were manifestly arbitrary and based on a vaguely worded statutory provision enabling the prosecuting authorities to act in relation to any matter in any way they saw fit. Those authorities had in effect determined who was to manage the bank, arrogating to themselves powers normally belonging to the courts and the BNB. Their decisions had not pursued a legitimate aim, and had not specified the offence whose commission they sought to prevent. They could not be justified by the pendency of proceedings against the registration decisions of the Sofia City Court, or of criminal proceedings against Mr Bonev, Mr Panev and Mr Ivanov. They had amounted to an attempt to circumvent the proper legal channels for dealing with such situations, all of which required judicial involvement. There had moreover been no possibility effectively to challenge those decisions, which had in effect nullified the registration decisions of the Sofia City Court.
B. The Court’s assessment
96. The complaints are not manifestly ill-founded within the meaning of Article 35 § 3 (a) of the Convention or inadmissible on any other grounds. They must therefore be declared admissible.
97. The complaint under Article 1 of Protocol No. 1 is almost identical to that examined in Zlínsat, spol. s r.o. (cited above, § 99), where the Court found that decisions made by the prosecuting authorities in the exercise of their vaguely defined and unbridled powers under section 119(1)(6) of the Judiciary Act 1994 (see paragraph 77 above) in relation to a limited liability company had not been surrounded by sufficient guarantees against arbitrariness and could not be regarded as lawful within the meaning of Article 1 of Protocol No. 1.
98. The Court sees no reason to hold otherwise in this case, in which the prosecuting authorities relied on the same provision to block the implementation of two decisions whereby the Sofia City Court registered changes in the bank’s management resolved upon at general meetings of the bank’s shareholders (see paragraphs 42-49 above). Bulgarian law laid down specific remedies in respect of resolutions of the general meeting of shareholders of a company and of the courts’ decisions to enter them in the register of companies, and the aggrieved persons resorted to those remedies (see paragraphs 54-58 and 76 above). The law did not, by contrast, make any provision for the prosecuting authorities to interfere with such matters. As evident from the unfruitful inquiries made by the BNB in the wake of the prosecutors’ decisions, they gave rise to considerable uncertainty about the persons authorised to manage the bank and act on its behalf (see paragraphs 59, 60 and 64 above).
99. There has therefore been a breach of Article 1 of Protocol No. 1.
100. In view of this conclusion, there is no need to examine the same issues by reference to Article 6 § 1 or Article 13 of the Convention.
IV. THE REVOCATION OF THE BANK’S LICENCE
101. A complaint was made on behalf of the bank that the BNB’s decision to revoke its licence had not been surrounded by sufficient safeguards against arbitrariness. The complaint was made under Article 1 of Protocol No. 1, whose text has been set out in paragraph 93 above.
A. The parties’ submissions
102. The Government submitted that the BNB’s decision to revoke a bank’s licence had been surrounded by sufficient safeguards. The BNB did not have discretion in that respect, and had been required to make this decision in view of its findings about the bank’s financial situation. Its decision had been prompted by information emanating from the special administrators previously appointed by it and was fully lawful. The impossibility for the bank to make representations in those proceedings and the exclusion of the BNB’s decision from judicial review had been based on the need for swift action to protect that bank’s depositors. The bank’s financial situation had been rapidly worsening, in part because of the infighting among its shareholders, and the BNB’s earlier attempts to resolve its problems had proved fruitless.
103. The applicants submitted that the lawfulness of the revocation of the bank’s licence had to be assessed by reference to the entire chain of events which had begun with the decision of the prosecuting authorities to block the bank’s new management from taking up its duties. The bank’s insolvency and the subsequent revocation of its licence had inevitably followed from that. The accuracy of the data in the special administrators’ report used by the BNB to find that the bank was insolvent was open to doubt. The integrity of those administrators, who had initially attempted to solve the bank’s problems but had later made impossible demands of Mr Bonev, was likewise doubtful. The BNB had not taken any of that into account, instead choosing fully to trust the administrators’ findings. The presence of even minimal doubts in relation to those findings, which had had very serious consequences for the bank, meant that BNB’s acting on them was not lawful within the meaning of Article 1 of Protocol No. 1. A further argument in support of that assertion was that the very appointment of the administrators had been unlawful. The BNB’s decision to do so had been based on reports on the bank’s financial situation filed by persons who did not have the right to represent the bank and on the bank’s failure to heed the BNB’s erratic and arbitrary instructions which had been impossible to implement, in view in particular of the prosecuting authorities’ interference with its management.
104. The applicants went on to draw parallels between their case and that of Capital Bank AD (cited above), pointing out that the two situations were almost identical but that theirs was worse because the revocation of the bank’s licence had been triggered by a series of actions and omissions on the part of the prosecuting authorities and the BNB that the applicants had been incapable of countering. They emphasised in particular that they had not been able to take part in the preparation of the report of the special administrators or contest in any way the findings in it.
B. The Court’s assessment
105. The complaint 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.
106. This complaint is identical to the one examined in Capital Bank AD (cited above, §§ 130-40). There, the Court held that a decision by the BNB to revoke a bank’s licence under section 21 of the Banks Act 1997 was not surrounded by sufficient guarantees against arbitrariness due to the absence of any of procedural safeguards, and was therefore not lawful within the meaning of Article 1 of Protocol No. 1. The legal framework in this case being the same, and there being no material difference in the way in which it was applied to the bank (see paragraphs 59-67 and 78 above), there is no reason to hold otherwise.
107. There has therefore been a breach of Article 1 of Protocol No. 1 in relation to the BNB’s decision to revoke the bank’s licence.
108. That said, the Court expresses no view on whether the BNB’s decision to revoke the bank’s licence was correct in terms of Bulgarian law. The Court’s power to review compliance with national law is limited and it is not its task to make such assessments in the place of the national authorities (see Capital Bank AD, cited above, § 132, as well as, mutatis mutandis, Družstevní záložna Pria and Others v. the Czech Republic, no. 72034/01, § 95, 31 July 2008, and Rodinná záložna, spořitelní a úvěrní družstvo and Others v. the Czech Republic, no. 74152/01, § 54, 9 December 2010).
V. THE PROCEEDINGS IN WHICH THE BANK WAS DECLARED INSOLVENT
109. Complaints were made on behalf of the bank that in the proceedings in which the Sofia City Court had declared it insolvent it had only been represented by the special administrators appointed by the BNB, and that the Sofia City Court had refused to scrutinise whether the bank was indeed insolvent. The complaint was made under Article 6 § 1 of the Convention, whose text has, in so far as relevant, been set out in paragraph 93 above.
A. The parties’ submissions
110. The Government submitted that the exclusion of the BNB’s decision to revoke a bank’s licence from judicial review had been put in place after a severe banking crisis in 1996-97 and had been justified by the need to deal with failing banks in a speedy way. It limited the rights of a bank’s shareholders to protect those of its depositors, and took into account that the BNB had special expertise in that domain. It was difficult to envisage judicial review of its findings even with the help of special experts, especially in view of the need for swiftness in such situations. The law as it stood since 2007 gave however such a possibility.
111. The Government further submitted that the bank’s being represented by the special administrators in the proceedings leading to the declaration of insolvency had been justified by the need to protect the rights of those affected by its financial difficulties by restricting the powers of its management. This was not the approach taken with respect to regular companies, but banks required special arrangements in view of the effect that their financial difficulties could have on their depositors and creditors. In this case, where the bank’s difficulties had arisen as a result of uncertainty about the persons authorised to manage it, the fact that it was represented by the special administrators had actually been in its favour.
112. The applicants submitted that their case was almost identical to that of Capital Bank AD (cited above).
B. The Court’s assessment
113. The complaints are not manifestly ill-founded within the meaning of Article 35 § 3 (a) of the Convention or inadmissible on any other grounds. They must therefore be declared admissible.
114. The two complaints are identical to the ones examined in Capital Bank AD (cited above, §§ 98-119). There, the Court held that (a) the insolvency courts’ rulings that they could not subject the BNB’s determination that a bank was insolvent to scrutiny, coupled with the impossibility to have that determination reviewed in direct judicial review proceedings, was in breach of Article 6 § 1 of the Convention, and that (b) it was likewise in breach of that provision for a bank to be represented solely by special administrators appointed by the BNB in proceedings in which the BNB was petitioning the court to declare the bank insolvent and to open winding-up proceedings against it.
115. In the present case, in the proceedings opened pursuant to the BNB’s winding-up petition the bank was, as required by law, represented by the special administrators previously appointed by the BNB (see paragraph 68 above), who had already expressed the view that the bank was insolvent (see paragraphs 65 and 67 above). Mr Bonev tried to intervene as a third party in his capacity as shareholder, but his request was turned down (see paragraph 69 above). After the decision of the Sofia City Court, which was immediately enforceable, the bank was represented by the liquidators appointed by the Deposit Insurance Fund, who did not appeal against the decision, which is hardly surprising in view of their dependence on the BNB (see Capital Bank AD, cited above, § 117). As a result, the procedural situation of the bank throughout the proceedings was materially identical to that of Capital Bank AD.
116. When ruling on the merits of the BNB’s winding-up petition, the Sofia City Court held, by reference to the Supreme Court of Cassation’s decision in Capital Bank AD (cited above), that it could not scrutinise the BNB’s determination that a bank was insolvent and was bound to make an order in the terms sought by the BNB if it had revoked the bank’s licence and lodged a facially valid petition (see paragraph 70 above). In this respect, the situation was likewise identical to that in Capital Bank AD (cited above). The only difference is that the Sofia City Court’s decision in the present case was not appealed against. But, given that in Capital Bank AD’s case the appeals were lodged by the prosecuting authorities (ibid., §§ 29, 32 and 117 in fine), and that the bank’s shareholders and management in the present case could not take part in the proceedings, this does not make any difference. In any event, the Sofia City Court’s ruling was fully consistent with the applicable statutory provisions and the Supreme Court of Cassation’s case-law at the time, and it does not appear that an appeal against it would have stood any prospect of success.
117. There has therefore been a breach of Article 6 § 1 of the Convention with respect to both (a) the lack of proper representation of the bank in the proceedings opened pursuant to the BNB’s winding-up petition, and (b) the refusal of the Sofia City Court to scrutinise the BNB’s determination that the bank was insolvent.
VI. THE FREEZING OF MR PANEV’S AND MR IVANOV’S BANK ACCOUNTS
118. Mr Panev and Mr Ivanov complained that following the opening of winding-up proceedings against the bank all of their bank accounts were frozen for six months and that they could not challenge that measure. They relied on Article 1 of Protocol No. 1 and Articles 6 § 1 and 13 of the Convention, whose text has been set out in paragraph 93 above.
A. The parties’ submissions
119. The Government submitted that the BNB had been bound to freeze Mr Panev’s and Mr Ivanov’s bank accounts. In the absence of an express statutory provision excluding its decision to do so from judicial review, it had been open to the applicants to seek such review. The freezing had been necessary to prevent the dissipation of assets in view of the need to protect the rights of depositors and to enable, if necessary, the imposition of civil and criminal sanctions on the applicants in their capacity as managers of the bank. The measure had been of strictly limited duration, and had been lifted immediately after the expiry of the applicable six-month time-limit.
120. The applicants conceded that the freezing of Mr Panev’s and Mr Ivanov’s bank accounts had been lawful and intended to protect the rights of others, but submitted that the automatic application of that measure in their case had been disproportionate. As a result of the decisions taken by the prosecuting authorities, Mr Panev and Mr Ivanov had been unable to take up their duties in the bank’s management. They could not therefore be held responsible for its difficulties. Moreover, they had not had any means of effectively challenging the freezing.
B. The Court’s assessment
121. The Government’s submission that it had been open to Mr Panev and Mr Ivanov to seek judicial review of the BNB’s decision to freeze their bank accounts must be regarded as an objection that they have failed to exhaust domestic remedies. Since it coincides with Mr Panev’s and Mr Ivanov’s complaint that they did not have at their disposal an effective domestic remedy to challenge the freezing, it should be joined to the merits.
122. The complaints are not manifestly ill-founded within the meaning of Article 35 § 3 (a) of the Convention or inadmissible on any other grounds. They must therefore be declared admissible.
123. The freezing of Mr Panev’s and Mr Ivanov’s bank accounts was a measure of control of the use of property (see, mutatis mutandis, Raimondo v. Italy, 22 February 1994, § 27, Series A no. 281-A, as regards the provisional seizure of assets with a view to their forfeiture under proceeds‑of-crime legislation; Luordo v. Italy, no. 32190/96, § 67, ECHR 2003-IX, and Valentin v. Denmark, no. 26461/06, §§ 70-71, 26 March 2009, as regards the stripping of bankrupts of the right to administer and deal with their property; and Trajkovski v. the former Yugoslav Republic of Macedonia (dec.), no. 53320/99, ECHR 2002-IV, and Ališić and Others v. Bosnia and Herzegovina, Croatia, Serbia, Slovenia and the former Yugoslav Republic of Macedonia [GC], no. 60642/08, § 99, ECHR 2014, as regards the freezing of bank accounts). It was not disputed that it was lawful and pursued a legitimate aim: to ensure that the managers of a bank which had fallen into insolvency would not dissipate their assets in anticipation of possible criminal charges or civil claims relating to the way in which they had run the bank before the insolvency. Chiefly in issue is the proportionality of the measure.
124. The stability of banks and the interests of their depositors and creditors deserve enhanced protection, and the national authorities enjoy a broad margin of appreciation in choosing how to deal with such matters (see Capital Bank AD, cited above, § 136, citing Olczak v. Poland (dec.), no. 30417/96, § 85, ECHR 2002-X (extracts)). In normal circumstances, such freezing, which has a strictly limited duration of six months (see paragraph 83 above), could be regarded as falling within that margin. But in this case the Court does not need to pass upon that point, because the situation at hand was quite unusual: as a result of decisions taken by the prosecuting authorities, in relation to which the Court found a breach of Article 1 of Protocol No. 1 (see paragraphs 97-99 above), Mr Panev and Mr Ivanov were not able to take up their duties, and were managers of the bank on paper only. The risk that the freezing was intended to avert was therefore not present, and it could not therefore be regarded as necessary. However, as apparent from the BNB’s reply to Mr Panev’s and Mr Ivanov’s protests against the freezing (see paragraph 74 above) and the Government’s submissions, the applicable statutory rule, which did not appear to permit of any exceptions, required the BNB to freeze the accounts without being able to take into account the applicants’ individual circumstances. It follows that even though the BNB’s decision in that respect could theoretically have been subject to judicial review (see paragraph 84 above), no information has been provided which suggests that Mr Panev and Mr Ivanov could, in practice and in a timely fashion, have successfully challenged it.
125. In these circumstances, the Court concludes that there has been a breach of Article 1 of Protocol No. 1 and Article 13 of the Convention, and rejects the Government’s objection of non-exhaustion of domestic remedies. This conclusion makes it unnecessary to examine the same issues by reference to Article 6 § 1 of the Convention.
VII. THE CRIMINAL PROCEEDINGS
126. Mr Bonev, Mr Panev and Mr Ivanov complained of the institution of criminal proceedings against them and of the length of those proceedings, which they said interfered with their private lives, as well as of the lack of an effective domestic remedy in that respect. They relied on Articles 6 § 1, 8 and 13 of the Convention. The text of Articles 6 § 1 and 13 has been set out in paragraph 93 above. Article 8 provides, in so far as relevant:
“1. Everyone has the right to respect for his private ... life ...
2. There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.”
A. The parties’ submissions
127. The Government submitted that the criminal proceedings had not lasted unreasonably long, especially in view of their factual complexity and the delaying tactics used by the applicants.
128. The applicants submitted that the proceedings had been opened for the sole purpose of putting undue pressure on Mr Bonev, Mr Panev and Mr Ivanov. This was amply proved by the final judgments of acquittal in which they had resulted. The prosecuting authorities had unjustifiably prolonged the pre-trial phase of the proceedings, and had caused further delay by failing to submit properly drafted indictments. The applicants had not had an effective remedy in respect of the unreasonable length of the proceedings.
B. The Court’s assessment
129. Article 6 of the Convention does not guarantee the right not to be criminally prosecuted; it only enshrines the right to a fair trial within a reasonable time if and when criminal charges are brought against a person (see I.J.L. and Others v. the United Kingdom, nos. 29522/95, 30056/96 and 30574/96, § 101, ECHR 2000-IX). Nor can a general right not to be criminally prosecuted be derived from Article 8 of the Convention. The appropriateness of a decision to prosecute thus normally falls out of the scope of the Court’s review (see Patsuria v. Georgia, no. 30779/04, § 42, 6 November 2007, and Mustafa (Abu Hamza) v. the United Kingdom (dec.), no. 31411/07, § 34, 18 January 2011). Therefore, to the extent that Mr Bonev, Mr Panev and Mr Ivanov complained that criminal proceedings had been instituted and conducted against them, their complaints are incompatible ratione materiae with the provisions of the Convention within the meaning of Article 35 § 3 (a).
130. In as much as Mr Bonev, Mr Panev and Mr Ivanov are to be taken to complain that those proceedings were unfair, it should be noted that they resulted in final acquittals (see paragraphs 34 and 39 above), which means that they cannot claim to be victims of a breach of their right to a fair trial (see, among other authorities, Correia de Matos v. Portugal (dec.), no. 48188/99, 15 November 2001, ECHR 2001-XII; M. and Others v. Italy and Bulgaria, no. 40020/03, §§ 184-85, 31 July 2012; and Lenev v. Bulgaria, no. 41452/07, § 158, 4 December 2012).
131. In so far as Mr Bonev, Mr Panev and Mr Ivanov complained of the allegedly unreasonable length of the proceedings, it should be noted that in Valcheva and Abrashev v. Bulgaria ((dec.), nos. 6194/11 and 34887/11, §§ 92-122, 18 June 2013) the Court found that two compensatory remedies put in place in 2012 in relation to the length of criminal proceedings were effective and available to applicants who, like Mr Bonev, Mr Panev and Mr Ivanov, had lodged their applications before their introduction. However, since the Government, who had been given notice of this complaint, did not raise this point in their submissions, which were filed after those remedies had been put in place, the Court is not in a position to rule, of its own motion, on whether this complaint is inadmissible for non‑exhaustion of domestic remedies (see Dobrev v. Bulgaria, no. 55389/00, §§ 112-13, 10 August 2006, and Yordanov v. Bulgaria, no. 56856/00, §§ 76‑77, 10 August 2006).
132. However, the criminal proceedings against Mr Bonev, Mr Panev and Mr Ivanov lasted in total less than two and a half years for a preliminary investigation and one level of court (see paragraphs 24-34 above). While there were delays for which the authorities were responsible, for instance that resulting from the remittal of the case by the Sofia District Court due to the prosecution’s failure to draw up the indictment properly (see paragraph 27 above), the proceedings as a whole cannot be regarded as unreasonably lengthy.
133. The same goes for the parallel criminal proceedings against Mr Panev and Mr Ivanov. Their total duration was even shorter: just over two years and two months for a preliminary investigation, a trial, and an (aborted) appeal (see paragraphs 35-39 above). While there were delays for which the authorities were responsible, for instance that resulting from the remittal of the case by the Sofia District Court due to the prosecution’s failure to draw up the indictment properly (see paragraph 36 above), the proceedings as a whole cannot be regarded as unreasonably lengthy.
134. The complaint under Article 6 § 1 of the Convention in respect of the length of those proceedings is therefore manifestly ill-founded, and the related complaint under Article 13 of the Convention is incompatible ratione materiae with the provisions of the Convention within the meaning of Article 35 § 3 (a) because of the lack of an arguable claim.
135. Mr Bonev’s, Mr Panev’s and Mr Ivanov’s complaints in relation to the criminal proceedings against them must therefore be rejected in accordance with Article 35 § 4 of the Convention.
VIII. THE TRAVEL BANS
136. Mr Bonev, Mr Panev and Mr Ivanov complained of the international travel bans imposed on them. Mr Bonev also complained that the ban had prevented him from maintaining normal contacts with his wife and three children, who lived in Switzerland, and from attending medical examinations there. The applicants also complained that they had not had an effective domestic remedy in respect of the bans. They relied on Article 2 of Protocol No. 4 and Articles 8 and 13 of the Convention. The text of Article 8 has been set out in paragraph 126 above, and that of Article 13 in paragraph 93 above. Article 2 of Protocol No. 4 provides, in so far as relevant:
“...
2. Everyone shall be free to leave any country, including his own.
3. No restrictions shall be placed on the exercise of [this right] other than such as are in accordance with law and are necessary in a democratic society in the interests of national security or public safety, for the maintenance of ordre public, for the prevention of crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.
...”
A. The parties’ submissions
137. The Government submitted that, in as much as they had not attempted to challenge the decisions to refuse them to travel on specific occasions, the applicants had failed to exhaust domestic remedies. The Government further submitted that to ban a person charged with a criminal offence from travelling abroad was in principle justified, and that the effects of that measure in the case at hand had been largely mitigated by the numerous permissions given to the applicants to leave the country on specific occasions.
138. The applicants submitted that they could not have obtained redress in respect of the international travel bans by way of claims for damages against the authorities. In their view, the bans had not been necessary because they had been imposed in connection with arbitrary criminal charges whose sole purpose had been to put undue pressure on Mr Bonev, Mr Panev and Mr Ivanov. There had been no risk of them absconding, but they had not had at their disposal a means of challenging the bans as such on the basis that they were not necessary.
B. The Court’s assessment
139. At the relevant time, the decision of the prosecuting authorities to ban a person charged with a criminal offence from leaving the country without permission was not as such amenable to judicial review. However, a prosecutor’s ensuing refusal to give such permission was subject to judicial review, and a trial court’s refusal to give such permission was, for its part, subject to appeal before a higher court (see Pfeifer, cited above, §§ 45 and 70). The Court has accepted that in so far as such requests – which could be made at any time without restriction – were capable of relieving the effect which the ban had on the person concerned, they could be regarded as a remedy against it (ibid., § 70 in fine). It follows that appeals against refusals to grant them must likewise to be regarded as such a remedy.
140. In the present case, Mr Bonev twice asked the Sofia District Prosecutor’s Office to allow him to travel abroad. There is however no evidence that he sought judicial review of its refusals (see paragraphs 26 and 28 above). Nor is there any indication that he appealed against the Sofia District Court’s refusal of 11 July 2005 (see paragraph 30 above). There is nothing to suggest that these avenues were not effective, especially bearing in mind that Mr Bonev later successfully sought permission to travel abroad on a number of occasions (ibid.), and that in April and May 2006 all three applicants managed to have the travel bans lifted in their entirety (see paragraph 33 above).
141. The same goes for Mr Panev and Mr Ivanov. There is no evidence that they sought permission to travel abroad from the prosecuting authorities or that that they attempted to appeal against the Sofia District Court’s decision of 24 November 2005 in which it refused to lift the ban (see paragraph 38 above).
142. The complaints under Article 2 § 2 of Protocol No. 4 and under Article 8 of the Convention are therefore inadmissible under Article 35 § 1 of the Convention for non-exhaustion of domestic remedies, and the complaint under Article 13 of the Convention is manifestly ill-founded. They must therefore be rejected in accordance with Article 35 § 4 of the Convention.
IX. OTHER ALLEGED VIOLATIONS OF THE CONVENTION AND PROTOCOL No. 1
143. Mr Bonev complained under Article 1 of Protocol No. 1 that the decisions of the prosecuting authorities with respect to the bank’s management interfered with the peaceful exercise of his shareholder rights in it.
144. It is true that Mr Bonev was in the circumstances entitled to – and did – complain on the bank’s behalf (see paragraphs 89-91 above, and contrast Bakalov and Others v. Bulgaria (dec.), no. 55796/00, 18 September 2007). It can also be accepted that his interests as a shareholder in the bank were harmed by the decisions taken by the prosecuting authorities with respect to its management. But his rights were not directly affected by those decisions (see Credit and Industrial Bank and Moravec v. the Czech Republic, no. 29010/95, Commission decision of 20 May 1998, Decisions and Reports 93-A, p. 72, at p. 81; Minda and Others v. Hungary (dec.), no. 6690/02, 13 September 2005; and Družstevní záložna Pria and Others, cited above, § 100). His complaint in this respect is therefore incompatible ratione personae with the provisions of the Convention within the meaning of Article 35 § 3 (a).
145. Mr Bonev also complained under Article 1 of Protocol No. 1 of the refusal of the bank’s de facto management to register the 25 August 2004 share transfer (see paragraph 51 above), which allegedly prevented him from fully exercising his rights under the shares that he had acquired by virtue of that transfer.
146. In the manner in which it was framed by Mr Bonev, this complaint was directed against an omission of the bank’s de facto managers, who were private persons and did not engage the State’s responsibility under the Convention. It is therefore likewise incompatible ratione personae with the provisions of the Convention within the meaning of Article 35 § 3 (a).
147. Mr Panev, Mr Ivanov and Mr Radev complained under Article 1 of Protocol No. 1 that as a result of the prosecuting authorities’ decisions with respect to the bank’s management they were unable to take up and carry out their duties and accordingly receive remuneration for their services.
148. It is true that the prosecuting authorities’ decision to maintain the status quo and not to allow Mr Panev, Mr Ivanov and Mr Radev to take up their duties prevented them from discharging those duties under the service contracts that they had made with the bank (see paragraphs 40 and 41 above). It is however unclear whether that also barred them from receiving remuneration for their services. It does not appear that they have taken any steps or brought any domestic proceedings with a view to obtaining that remuneration. The complaint is therefore speculative and as such manifestly ill-founded.
149. Mr Panev complained under Article 5 §§ 1 and 3 of the Convention of his detention by the police on 4 June 2004 (see paragraph 23 above).
150. There is no indication that Mr Panev has attempted to seek judicial review of that detention or to claim damages in relation to it, as possible under Bulgarian law (see Kandzhov v. Bulgaria, no. 68294/01, § 45, 6 November 2008, and Lenev, cited above, § 155). He has not therefore exhausted domestic remedies, as required under Article 35 § 1 of the Convention.
151. A complaint was made on behalf of the bank of the length of the proceedings in which Mr B.P. and Mr P.B. had sought revision of the two registration decisions of the Sofia City Court.
152. Those proceedings only concerned the question whether it was admissible to seek revision of those registration decisions (see paragraphs 52 and 53 above). Article 6 § 1 of the Convention does not in principle apply to proceedings concerning the reopening of a civil case (see Bochan v. Ukraine (no. 2) [GC], no. 22251/08, §§ 44-50, ECHR 2015). This complaint is therefore incompatible ratione materiae with the provisions of the Convention within the meaning of Article 35 § 3 (a).
153. It follows that all of the above complaints must be rejected under Article 35 § 4 of the Convention.
X. APPLICATION OF ARTICLE 41 OF THE CONVENTION
154. 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. Pecuniary damage
155. Mr Bonev submitted that the revocation of the bank’s licence and its subsequent winding up had caused him to lose all his shares in it. He put his damage in respect of this at 1,112,277.63 euros (EUR), which was the sum that he had paid to acquire some of those shares on 25 August 2004 from the twenty companies listed in paragraph 6 above, plus 36,781 Bulgarian levs (BGN), which represented the shares’ par value.
156. Mr Panev, Mr Ivanov and Mr Radev claimed EUR 90,000 each. They submitted that as a result of the decisions of the prosecuting authorities they had been prevented from normally carrying out their duties as managers of the bank for a period of nine months. Under the terms of their employment, they would have received BGN 10,000 per month for their services.
157. The Government first noted that no claim in respect of pecuniary damage had been made on behalf of the bank. They went on to submit that the finding of a violation amounted to sufficient just satisfaction with respect to any damage suffered by the applicants as a result of the alleged breaches of the Convention and its Protocols. In the alternative, they argued that the claims were exorbitant. The State was not liable for the precarious financial situation in which the bank had found itself, and could not be held liable for damage arising out of transactions between private persons. As for Mr Panev, Mr Ivanov and Mr Radev, they had not led any evidence that they had indeed entered into contracts of employment with the bank.
158. As regards the claim made by Mr Bonev, the Court does not consider that he is an “injured party” with respect to the breaches found in relation to the bank. The words “injured party” in Article 41 (former Article 50) of the Convention are synonymous with the term “victim” in Article 34 (former Article 25) and denote the person directly affected by the failure to observe the Convention (see De Wilde, Ooms and Versyp v. Belgium (Article 50), 10 March 1972, § 23, Series A no. 14; The Sunday Times v. the United Kingdom (no. 1) (Article 50), 6 November 1980, § 13, Series A no. 38; and Airey v. Ireland (Article 50), 6 February 1981, § 9, Series A no. 41). The complaint that Mr Bonev made in his personal capacity with respect to the decisions taken by the prosecuting authorities in relation to bank was declared inadmissible precisely because he was not directly affected by those decisions (see paragraph 144 above). Only the bank, although now dissolved, may claim just satisfaction in that respect. The question how any award made in its favour is to be distributed is a separate matter (see OAO Neftyanaya Kompaniya Yukos v. Russia (just satisfaction), no. 14902/04, §§ 37-38, 31 July 2014).
159. Even if Mr Bonev’s claim is to be regarded as having been made on behalf of the bank, or if Mr Bonev may exceptionally be regarded as having become the “injured party” following the bulk sale of the bank’s assets to another bank in 2007, which automatically terminated all of his shareholder rights in it (see paragraphs 71, 72 and 80 above and, mutatis mutandis, Olczak, cited above, § 59 in fine, and Reisner v. Turkey, no. 46815/09, § 47, 21 July 2015), the Court does not consider that an award is called for because it is not satisfied that there exists a sufficient causal link between the breaches found and the damage claimed. The existence of such link is an indispensable condition for an award in respect of pecuniary damage (see, among other authorities, Andrejeva v. Latvia [GC], no. 55707/00, § 111, ECHR 2009).
160. It cannot be speculated what would have been the outcome of the administrative proceedings in which the BNB decided to revoke the bank’s licence and the ensuing judicial proceedings in which the Sofia City Court’s declared the bank insolvent if the breaches of Article 1 of Protocol No. 1 and Article 6 § 1 of the Convention found in relation to them had not taken place (see Capital Bank AD, cited above, § 144, as well as, mutatis mutandis, Družstevní záložna Pria and Others v. the Czech Republic (just satisfaction), no. 72034/01, § 9, 21 January 2010; Rodinná záložna, spořitelní a úvěrní družstvo and Others v. the Czech Republic (just satisfaction), no. 74152/01, §§ 11-12, 19 January 2012; and Paulet v. the United Kingdom, no. 6219/08, § 73, 13 May 2014). No award can therefore be made in relation to those breaches.
161. The position in relation to the breach of Article 1 of Protocol No. 1 flowing from the prosecuting authorities’ decisions with respect to the bank’s management (see paragraphs 97-99 above) is somewhat more complicated. As shown from the steps taken by the BNB in the wake of those decisions, they gave rise to considerable uncertainty about which persons were entitled to manage and represent the bank, which in turn inhibited the efforts to remedy its already dire financial situation (see paragraphs 59, 60, 61 and 64 above). However, it appears that the bank had serious financial problems even before those decisions (see paragraph 63 above). The Court is therefore not persuaded that, had it not been for the prosecuting authorities’ decisions, the bank would have been able to overcome those problems and avoid insolvency. All of this leads to the conclusion that the requisite causal link between the breach and the alleged loss has not been sufficiently made out.
162. Mr Panev’s, Mr Ivanov’s and Mr Radev’s claims were, for their part, based on a complaint which was declared inadmissible (see paragraph 148 above). They must therefore be rejected as well (see Nencheva and Others v. Bulgaria, no. 48609/06, § 162, 18 June 2013).
B. Non-pecuniary damage
163. Mr Bonev, Mr Panev and Mr Ivanov claimed EUR 8,000 each in respect of mental suffering. They submitted that they had been frustrated by the decisions of the prosecuting authorities with respect to the bank’s management and the impossibility to obtain any redress. Mr Radev claimed EUR 6,000 in that respect. Mr Bonev, Mr Panev and Mr Ivanov submitted that their claims were higher as, unlike Mr Radev, they had also endured breaches of their rights under Articles 6 § 1, 8 and 13 of the Convention and Article 2 § 2 of Protocol No. 4 in connection with the criminal proceedings against them.
164. The Government noted that the criminal proceedings against Mr Bonev, Mr Panev and Mr Ivanov had resulted in final acquittals, and pointed out that those three applicants had then successfully brought claims for damages against the authorities in connection with those proceedings and been awarded substantial sums. Those sums could be regarded as sufficiently compensating any non-pecuniary damage suffered by them.
165. The Court notes that all complaints raised by Mr Bonev, Mr Panev, Mr Ivanov and Mr Radev in their personal capacity, save for those raised by Mr Panev and Mr Ivanov in relation to the freezing of their bank accounts, were declared inadmissible (see paragraphs 135, 142, 144, 146, 148, 150 and 153 above). To the extent that they relate to inadmissible complaints, their claims for just satisfaction must be rejected (see Nencheva and Others, cited above, § 162). In as much as the four applicants based their claims on the authorities’ actions in relation to the bank, the Court notes that only Mr Bonev was found to have standing to complain on the bank’s behalf (see paragraphs 91 and 92 above). But, as already noted (see paragraph 158 above), even he cannot be regarded as an “injured party”, within the meaning of Article 41 of the Convention, with respect to the breaches found in relation to the bank. It follows that none of the four applicants is entitled to compensation in respect of any non-pecuniary damage allegedly suffered as a result of those breaches. By contrast, Mr Panev and Mr Ivanov must have endured some non-pecuniary damage as a result of the unjustified freezing of all of their bank accounts. However, since they did not make any claim in respect of that, the Court sees no reason to award them anything under this head (see Rule 60 § 1 of the Rules of Court and points 5 and 15 of the Practice Direction on Just Satisfaction Claims).
C. Costs and expenses
166. The applicants sought reimbursement of (a) EUR 4,000 incurred in lawyers’ fees for the preparation of their initial application; (b) EUR 1,500 incurred in lawyers’ fees for the preparation of their follow-up complaints; and (c) EUR 2,600 incurred in lawyers’ fees for the preparation of their observations in reply to those of the Government and their claims for just satisfaction. They explained that the sums under items (a) and (b) had been entirely borne by Mr Bonev, that Mr Bonev, Mr Panev, Mr Ivanov and Mr Radev had each paid EUR 325 of the sum under item (c), and that EUR 1,300 of that sum remained outstanding and due to their second legal representative, Ms Petkova. The applicants requested that any award made in respect of that latter sum be made payable directly to Ms Petkova. The applicants further claimed BGN 167.30 (EUR 85.54) in respect of postage. In support of their claim, the applicants submitted fee agreements with their legal representatives and postal receipts.
167. The Government submitted that the claims were exorbitant. They pointed out that the agreements between the applicants and their two legal representatives did not clearly set out the respective duties of each of the two, and did not contain a breakdown of the amount of time spent by the representatives on the case. The sums claimed were many times higher than those envisaged for similar work in domestic proceedings and out of tune with economic realities in the country.
168. According to the Court’s settled case-law, costs and expenses are recoverable under Article 41 of the Convention if it is established that they were actually and necessarily incurred and are reasonable as to quantum.
169. The Court is not bound by domestic scales or standards in the assessment of the latter point (see Dimitrov and Others v. Bulgaria, no. 77938/11, § 190, 1 July 2014, with further references). It notes however that part of the application, including all complaints made by Mr Bonev and Mr Radev in their personal capacity, was declared inadmissible, which calls for a certain reduction in the award of costs (see Glass v. the United Kingdom, no. 61827/00, § 91, ECHR 2004-II; Yordanova and Toshev v. Bulgaria, no. 5126/05, § 85, 2 October 2012; and Harakchiev and Tolumov v. Bulgaria, nos. 15018/11 and 61199/12, § 289, 8 July 2014), and constitutes grounds not to award any costs to Mr Bonev and Mr Radev in respect of the complaints made in their personal capacity. Moreover, since the complaints made on behalf of the bank were examined at the instance of Mr Bonev, in his capacity as majority shareholder in it (see paragraphs 91 and 92 above), the costs referable to those complaints can only be reimbursed to him, not to Mr Panev, Mr Ivanov or Mr Radev.
170. Taking account of the information in its possession and the awards made in Capital Bank AD (cited above, § 148) and Zlínsat, spol. s r.o. (cited above, § 109), on which the main complaints in this case were based, and finding that, in view of the factual complexity of the case, it was not unreasonable for the applicants to resort to the services of two legal representatives, the Court awards Mr Bonev, Mr Panev and Mr Ivanov a total of EUR 4,085.54, plus any tax that may be chargeable to them. In line with the explanations and requests of the applicants, EUR 1,000 of this sum is to be paid to their second legal representative, Ms Petkova, EUR 200 to Mr Panev, EUR 200 to Mr Ivanov, and the remainder to Mr Bonev.
D. Default interest
171. 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. Decides to strike the application out of the list of cases in so far as it concerns the twenty companies listed in paragraph 6 of the judgment;
2. Rejects the Government’s request that the application be struck out of the list of cases in so far as it concerns the bank;
3. Joins to the merits the Government’s objection of non-exhaustion of domestic remedies in respect of the complaint relating to the freezing of Mr Panev’s and Mr Ivanov’s bank accounts;
4. Declares the complaints concerning (a) the decisions of the prosecuting authorities in relation to the bank’s management, (b) the revocation of the bank’s licence, (c) the alleged unfairness of the proceedings in which the bank was declared insolvent, and (d) the freezing of Mr Panev’s and Mr Ivanov’s bank accounts admissible and the remainder of the application inadmissible;
5. Holds that there has been a violation of Article 1 of Protocol No. 1 in relation to the decisions of the prosecuting authorities concerning the bank’s management, and that there is no need to examine separately the related complaints under Article 6 § 1 and Article 13 of the Convention;
6. Holds that there has been a violation of Article 1 of Protocol No. 1 in relation to the decision of the BNB to revoke the bank’s licence;
7. Holds that there has been a violation of Article 6 § 1 of the Convention in relation to (a) the lack of proper representation of the bank’s interests in the proceedings opened pursuant to the BNB’s winding-up petition and (b) the refusal of the Sofia City Court to scrutinise the BNB’s determination that the bank was insolvent;
8. Holds that there have been violations of Article 1 of Protocol No. 1 and Article 13 of the Convention in relation to the freezing of Mr Panev’s and Mr Ivanov’s bank accounts and the impossibility to have that measure effectively reviewed, and accordingly rejects the Government’s objection of non-exhaustion of domestic remedies in that respect, and holds that there is no need to examine the related complaint under Article 6 § 1 of the Convention;
9. Holds
(a) that the respondent State is to pay the applicants Mr Bonev, Mr Panev and Mr Ivanov, in respect of costs and expenses, within three months from the date on which the judgment becomes final in accordance with Article 44 § 2 of the Convention, EUR 4,085.54 (four thousand eighty-five euros and fifty-four cents), plus any tax that may be chargeable to them, to be converted into the currency of the respondent State at the rate applicable at the date of settlement; EUR 1,000 (one thousand euros) of this sum is to be paid to the applicants’ legal representative, Ms Petkova, EUR 200 (two hundred euros) to Mr Panev, EUR 200 (two hundred euros) to Mr Ivanov, and the remainder to Mr Bonev;
(b) that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amount at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points;
10. Dismisses the remainder of the applicants’ claims for just satisfaction.
Done in English, and notified in writing on 2 June 2016, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.
Claudia WesterdiekAngelika Nußberger
RegistrarPresident
APPENDIX
Shareholders in the bank on 31 March 2004,
according to information held by the BNB
Name of the shareholderPercentage of shares
Mr Boni Evlogiev Bonev4.98%
Mr P.E.B.4.98%
Mr P.B.1.20%
Mr B.P.0.19%
Bemahague Investments Ltd3.99%
Briarfield Consultants Limited4.75%
Card Transaction Services Ltd4.97%
Carina Consultants Inc4.89%
Flavors, Fragrances and Chemicals (FFCH) Ltd4.98%
General Foods Int’l Corp4.92%
Geneltech Ltd4.88%
Industrial Finance Int’l Corp4.91%
McMaden Securities Limited4.64%
Megatours – A New Dimension in Travel – Inc4.01%
Mossview Trade Inc4.03%
Navarro Resources Inc3.95%
Navasota Investments Ltd4.75%
Ozark Ventures Inc2.81%
Parham Investment Services3.99%
Petrofinance Ltd4.38%
Potenza Enterprises Ltd4.86%
Shephard Securities Ltd3.97%
V.V.V. Holdings Corp4.98%
Yoakum Trading Inc3.99%
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