CASE OF REDQUEST LIMITED v. SLOVAKIA

THIRD SECTION

CASE OF REDQUEST LIMITED v. SLOVAKIA

(Application no. 2749/17)

JUDGMENT
 

STRASBOURG

19 May 2020

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

In the case of REDQUEST LIMITED v. Slovakia,

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

Dmitry Dedov, President,
Alena Poláčková,
Gilberto Felici, judges,
and Olga Chernishova, Deputy Section Registrar,

Having regard to:

the application against the Slovak Republic lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by a British company, REDQUEST LIMITED (“the applicant company”), on 4 January 2017;

the decision to give notice to the Slovak Government (“the Government”) of the application;

the parties’ observations;

Having deliberated in private on 28 April 2020,

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

INTRODUCTION

The applicant company complained, in particular, that the quashing, upon an extraordinary appeal on points of law filed by the Prosecutor General, of a final and binding judgment in its favour was contrary to its rights under Article 6 § 1 of the Convention and Article 1 of Protocol No. 1.

THE FACTS

1.  The applicant company has its registered seat in London (United Kingdom). It was represented by Mr P. Chrenko, a lawyer practising in Bratislava.

2.  The Government were represented by their Agent, Ms M. Pirošíková.

3.  The Government of the United Kingdom, who had been invited to submit written observations on the case, did not express any wish to exercise that right (Article 36 § 1 of the Convention and Rule 44 § 1).

4.  The facts of the case, as submitted by the parties, may be summarised as follows.

5.  In 2002, the Slovak Regulatory Office for Network Industries issued a series of decisions based on a new Regulation Act, by which it determined the maximum tariff for gas and electricity supply. The applicant company’s legal predecessor and some other companies challenged those decisions before the Constitutional Court, complaining that they had been issued prior to the adoption of a generally binding secondary regulation required by the above Act. By a judgment of 7 July 2006, the Constitutional Court allowed the complaint and quashed the impugned decisions.

6.  In the meantime, on 20 February 2006 the applicant company’s legal predecessor filed an action for damages against the State based on the State Liability Act no. 58/1969, claiming that it had sustained inter alia a loss of profit due to the difference between the prices of energy before and after the impugned decisions of the Regulatory Office.

7.  On 16 April 2009 the Bratislava II District Court (hereafter “the District Court”) issued an interlocutory judgment recognising the basis for the claim. Admitting that the conditions for lodging the action, i.e. quashing of the allegedly irregular decisions and filing of a preliminary request for damages with the State authority, had not been met at the time of opening of the proceedings, it considered decisive that both had been fulfilled in its course.

8.  On 17 August 2009, the applicant company’s legal predecessor informed the District Court that it had transferred the above claim to the applicant company, and proposed that the latter enter the proceedings in its stead.

9.  On 30 November 2009 the Bratislava Regional Court quashed the interlocutory judgment, given that the applicant company’s legal predecessor was no longer the right-holder at the time of the adoption of that judgment since it had transferred the claim to the applicant company with effect on 13 April 2009 at the latest.

10.  On 16 August 2010, the District Court granted leave to the applicant company to enter the proceedings.

11.  On 25 January 2013, the District Court issued a new interlocutory judgment recognising the basis for the claim brought henceforth by the applicant company. In its view it would be contrary to the Constitution if the latter could not claim damages on the ground that it had not participated to the original – irregular - proceedings having led to the unlawful decisions.

12.  The State as a defendant appealed, contesting its legal standing (given that the Ministry of Finance did not supervise the Regulatory Office) and asserting that the District Court could not substitute itself to the Constitutional Court by ruling out a legal provision due to its alleged unconstitutionality.

13.  By a judgment of 25 June 2013, the Regional Court upheld the decision of the District Court, sharing the latter’s opinion that it was not possible to deny the possibility to claim damages to those who could be affected by unlawful decisions without having been direct participants to the – irregular – proceedings having led to the issuance of such decisions.

14.  On 18 March 2014, the Prosecutor General challenged the judgments dated 25 January 2013 and 25 June 2013 by way of an extraordinary appeal on points of law (mimoriadne dovolanie), being of the view that the conditions set by the State Liability Act had not been met in the present case. He mainly asserted that the impugned claim for damages was a fictive one since no real damage had not yet occurred, in particular because an unjust enrichment could be claimed from the companies which had been paid a higher price for energy and such claim prevailed over the damages claim, and that the unlawfulness of the conduct of the Regulatory Office was only of a formal, not material, character.

15.  By a decision of 16 December 2015, the Supreme Court quashed the impugned judgments and remitted the matter to the District Court. It first considered that the Prosecutor General had been entitled to lodge an extraordinary appeal on points of law to protect the defendant’s rights, on the grounds that the courts’ decisions had breached the law and the State was at risk of sustaining a significant economic damage if held liable in the present case. The Supreme Court also observed that the defendant had had no other means of asserting its rights directly, in particular by way of an appeal on points of law.

As to the substance of the matter, the Supreme Court shared the Prosecutor General’s opinion that the courts had failed to determine whether the State’s liability should be engaged on account of an irregular decision or conduct, or on account of both, despite the fact that the conditions were set differently for the two grounds and that even an interlocutory judgment could not be issued without having ascertained that all those conditions had been met, which was not the case here.

16.  The applicant company lodged a constitutional complaint, claiming that the judgment of the Supreme Court was arbitrary, that it did not at all reflect the Court’s relevant case-law and that it breached its rights under Article 6 of the Convention and Article 1 of Protocol No. 1.

17.  By a decision of 28 June 2016 (III. ÚS 432/2016), the Constitutional Court dismissed the constitutional complaint mainly as manifestly-ill founded, referring mainly to the unifying opinion of its plenary no. PLz. ÚS 3/2015. The Constitutional Court considered that the Supreme Court’s assessment was correct since the defendant itself had not had at its disposal any remedy which it could have used to protect its rights. The fact that the applicant company did not share this view did not amount to a breach of its rights.

18.  Consequently, the case was remitted back to the District Court for re‑examination. The hearing having taken place on 5 June 2018 was adjourned sine die, on account of the present application brought before the Court.

RELEVANT LEGAL FRAMEWORK AND PRACTICE

19.  The relevant domestic law and practice and European texts have been summarised in the Court’s judgments in, inter alia, the case of DRAFT - OVA a.s. v. Slovakia (no. 72493/10, §§ 39-56 and 58-61, 9 June 2015).

20.  According to Article 237 of the Code of Civil Procedure, an appeal on points of law is admissible against any decision of the appellate court provided that (a) the courts decided in a matter outside their jurisdiction; (b) a person who acted as a party to the proceedings lacked legal capacity to be a party to court proceedings; (c) a party to the proceedings lacked capacity to act in court proceedings and was not duly represented; (d) the courts decided in a matter which had been res judicata or which had already been pending in another proceedings; (e) the proceedings could only commence by way of an action and no such action was actually filed; (f) the courts prevented a party to the proceedings from acting before them; and (g) the case was decided upon by an excluded judge or where the composition of the court was incorrect.

THE LAWALLEGED VIOLATION OF ARTICLE 6 § 1 OF THE CONVENTION

21.  The applicant company asserted that the fact that a final judgment in its favour was repeatedly quashed by the Supreme Court following an extraordinary appeal on points of law lodged by the Prosecutor General was contrary to the principles of legal certainty and equality of arms. It relied in this respect on Article 6 § 1 of the Convention, which reads as follows:

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

22.  The Government contested that argument.Admissibility

23.  The Court notes that this complaint is neither manifestly ill-founded nor inadmissible on any other grounds listed in Article 35 of the Convention. It must therefore be declared admissible.MeritsThe parties’ arguments

24.  The applicant company asserted, first, that contrary to what was contended by the Government, the State as a defendant should have had filed an (ordinary) appeal on points of law on the grounds of serious procedural errors as set out in Article 237 of the Code of Civil Procedure (see paragraph 20 above). Since it had not done so, i.e. since there had not been any such errors, it cannot be argued that there were reasons allowing the Supreme Court to quash a final judgment upon an extraordinary appeal by the Prosecutor General. The applicant company noted in this context that the latter had only relied in his appeal on an incorrect legal assessment of the matter by the lower courts. In the applicant company’s view, there was thus no reason in the present case to depart from the Court’s judgments in the very similar cases of DRAFT - OVA a.s. v. Slovakia, cited above, and PSMA, spol. s r.o. v. Slovakia (no. 42533/11, 9 June 2015), nor from the subsequent domestic practice of the Slovak highest courts according to which the admissibility of an extraordinary appeal on points of law was acceptable only if the party to the proceedings had exhausted all ordinary and extraordinary remedies which were available to him/her. The applicant company further stated that if both the Supreme Court and the Constitutional Court had chosen not to follow their own case-law in the case at hand, it was because they tended to decide on the admissibility of extraordinary appeals rather selectively and arbitrarily, depending on whether such appeals were lodged for the benefit of the State’s financial interests.

25.  Second, the applicant company considered that, when blaming it for not having sought unjust enrichment prior to claiming damages from the State and when asserting that the courts had failed to examine the conditions of the State’s liability required by Act no. 58/1969 and deviated from the relevant case-law, the Government only aimed at the legal assessment and the errors allegedly committed by the lower courts, without pointing to any fundamental defects in the sense of the Court’s case-law. Moreover, while the lower courts had duly refuted most of these arguments, some other points relied on by the Prosecutor General or the Supreme Court constituted inadmissible novelties which had not been previously raised by the State. In such circumstances, the applicant company was convinced that the extraordinary appeal had amounted rather to an appeal in disguise, the Supreme Court having itself considered that the impugned judgments had been vitiated by simple “errors of legal assessment” within the meaning of Article 243f § 1(c) of the Code of Civil Procedure.

26.  The Government pointed out that the Court’s case-law does not absolutely prohibit the possibility that final decisions be quashed following an extraordinary remedy, provided that such departure from the principle of legal certainty is made necessary by circumstances of a substantial and compelling character such as fundamental defects or miscarriage of justice. In the instant case, the Government was of the view that, having not complied with the conditions required by Act no. 58/1969 for claiming damages from the State and having failed to seek unjust enrichment first, the applicant company was simply not entitled to seek damages from the State. The fundamental errors stemmed also from the fact that the lower courts’ decisions displayed incoherent approach to the issue of the State liability and did not even determine on which of the two legal grounds (irregular procedure or unlawful decision) damages should be granted, which is why they had been quashed by the Supreme Court. The latter also shared the Prosecutor General’s opinion that the claim for damages against the State could only be successful if the plaintiff had unsuccessfully sought to recover an unjust enrichment from the relevant entity, and stated that the lower courts’ assessment of that issue was incorrect. The Government also asserted that the impugned judgments were in contravention with the established domestic case-law concerning damages under the State Liability Act, quoting in this respect judgments issued by the same courts in 2009-2013, by which similar claims had been dismissed.

27.  The Government further observed that, as also confirmed by the Supreme Court, an appeal on points of law (to be filed by the State as a defendant) would not have been admissible in this case, unlike in the cited above cases of DRAFT - OVA a.s., § 85, and PSMA, spol. s r.o., § 73. Given that the proceedings before the lower courts had not been flawed by procedural defects (although the judgments suffered from the above-mentioned substantive errors), an appeal on points of law would not have met the strict admissibility conditions set for such extraordinary remedy by Article 237 of the Code of Civil Procedure. Thus, without the Prosecutor General’s intervention, the State would have suffered a significant and irreparable economic damage since it would have been obliged to pay a high amount of money to the applicant company, which moreover had replaced the original plaintiff meant to have sustained the damage. It is nevertheless important for an effective functioning of the judiciary system in the eyes of the public that judgments obliging the State to pay damages from its budget be free from any fundamental errors.

28.  Consequently, the Government were convinced that there had been circumstances of a substantial and compelling character which justified the departure from the principle of legal certainty in the case at hand.The Court’s assessment

29.  The Court reiterates that for the sake of legal certainty implicitly required by Article 6 of the Convention, final judgments should generally be left intact. They may be disturbed only to correct fundamental defects, such as jurisdictional error, a serious breach of court procedure or abuses of power, which may justify the quashing (see Luchkina v. Russia, no. 3548/04, § 21, 10 April 2008). Departures from the principle of legal certainty are thus justified only when made necessary by circumstances of a substantial and compelling character, the existence of which has to be examined case by case (see, e.g., Tishkevich v. Russia, no. 2202/05, §§ 25-26, 4 December 2008; and Sutyazhnik v. Russia, no. 8269/02, § 35, 23 July 2009). The mere possibility of there being two views on the subject is not a ground for re‑examination (see Ryabykh v. Russia, no. 52854/99, §§ 51-52, ECHR 2003‑IX).

30.  In the present case the final and binding interlocutory judgment of 25 June 2013 in favour of the applicant company was quashed upon the extraordinary appeal lodged on account of an erroneous resolution of the matter, the Prosecutor General being of the opinion that the lower courts had wrongly concluded that the conditions set by the State Liability Act had been met. In the Prosecutor General’s view, the applicant company was not entitled to claim damages from the State since it had suffered no real damage, all the less due to an unlawful decision or conduct of the State authorities. It then follows from the Supreme Court’s decision of 16 December 2015 that the main ground for the quashing was an incorrect assessment of the fulfilment of the conditions for the State’s liability, regard being had to the fact that, if not quashed, the above judgment would put the State at risk of sustaining a significant economic damage.

31.  The Court is called to ascertain whether such interference with a final judgment was compatible with the guarantees of Article 6 of the Convention, in particular with the principles of the rule of law, legal certainty and equality of arms inherent in that provision. In line with its case-law (see, for applicable principles, DRAFT - OVA a.s., cited above, §§ 77 and 78, with further references), the Court finds it appropriate to examine first whether there has been any circumstance of a substantial and compelling character to justify a departure from the principle of legal certainty according to which, where the courts have finally determined an issue, their ruling should not be called into question.

32.  It follows from the Government’s observations that the alleged fundamental errors in the instant case stem from the fact that the applicant company was not entitled to seek damages from the State, that the courts did not make it clear on which of the two grounds set by the relevant law they had decided to grant the applicant company’s request and that their judgments were in contravention with the domestic case-law. In the Government’s view, those qualified as serious substantive or material defects, as opposed to procedural flaws that had been absent in this case, which is why an ordinary appeal on points of law would have been inadmissible (see paragraph 27 above).

33.  The Court is of the opinion that the issues mentioned by the Government pertain to the legal assessment of the matter and raise no more than ordinary questions of law the resolution of which falls within common judicial activity. It clearly appears from the facts of the case that the State as a defendant had a particular interest in the outcome of the impugned proceedings since, as the Supreme Court had pointed out (see paragraph 15 above), it was at risk of sustaining a significant economic damage if held liable in the present case. It has however never been argued that in the preceding proceedings, the fairness of which was not called into question, the State was in any way prevented from submitting any arguments or evidence to protect its rights, including the points raised later by the Prosecutor General. In such conditions, the Court considers that the extraordinary appeal may rather be seen as a further appeal or, in other words, an appeal in disguise in terms of the Court’s case-law (see, for example, Ryabykh, cited above, § 52).

34.  The Court is thus not convinced that there existed any “error of fundamental importance to the judicial system” (see Sutyazhnik, cited above, § 38) or any other defect or miscarriage of justice justifying an interference with the final and binding judgment in the present case. As the applicant company pointed out, had there been any serious procedural defects, the State would have been entitled to lodge an ordinary appeal on points of law pursuant to Article 237 of the Code of Civil Procedure (see paragraphs 20 and 24 above).

35.  In these circumstances, the Court has established no particular grounds for departing from the general premise that under the principle of legal certainty where the courts have finally determined an issue, their ruling should not be called into question (Brumărescu v. Romania [GC], no. 28342/95, § 61, ECHR 1999‑VII). This conclusion is unaffected by whether or not this will ultimately result in any real damage having been sustained by the applicant company.

36.  There has accordingly been a violation of Article 6 § 1 of the Convention. This finding makes it unnecessary for the Court to consider separately whether the procedural guarantees of Article 6 of the Convention, namely the principle of equality of arms, were respected during the proceedings on the extraordinary appeal.ALLEGED VIOLATION OF ARTICLE 1 OF PROTOCOL No. 1

37.  The applicant company complained that its right to the peaceful enjoyment of its possessions had been violated as a result of the quashing of the final interlocutory judgment in its favour. It invoked Article 1 of Protocol No. 1 which provides as relevant:

“Every (...) 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.”Admissibility

38.  The Government contended that, the Supreme Court having remitted the case back to the lower courts, this complaint was premature. They also submitted that, following the quashing of the lower courts’ judgments by the Supreme Court, the proceedings were still pending before the first-instance court, which offered the applicant company a new opportunity to present its legal views. A complaint about the outcome of such proceedings was thus premature (see also Michaela Huserová, Administrator in Bankruptcy of Union banka, a.s. in liquidation and Stroden Management Limited v. Slovakia ((dec.), no. 760/04, 9 November 2010). Moreover, referring to the Supreme Court’s decision, the Government observed that the applicant company had not used all available remedies since it had not taken advantage of the possibility to seek the amount claimed through an action for unjust enrichment directed at other entities than the State.

39.  The Government further asserted that a property interest could be considered as a “claim” within the meaning of the Court’s case-law only if it had a sufficient basis in the domestic law or practice. Although a final decision, which may be subject to an extraordinary remedy, can in principle give rise to a high level of legitimate expectation, one cannot ignore the possibility – allowed for also by the Court’s case-law – to reopen the proceedings or otherwise revisit such a final decision.

40.  Even if, in the present case, the final interlocutory judgment could have given the applicant company a certain hope to obtain an unspecified amount of money, that claim had no basis in the domestic law or practice. Since the impugned judgment was in fact unlawful and, as such, had to be quashed, it was not able to create any “possessions”. In the Government’s view, this part of the application was thus incompatible ratione materiae with the provisions of the Convention.

41.  Contesting the Government’s arguments, the applicant company asserted that a violation consisting in the quashing of a final judgment – which had recognized a proprietary claim in its favour – could not be remedied in the subsequent proceedings. The redress was possible only through a constitutional complaint, which had however been dismissed, and not by means of suing another defendant for unjust enrichment, as claimed by the Government. Thus the complaint could not be considered as premature (see COMPCAR, s.r.o. v. Slovakia, no. 25132/13, §§ 53, 9 June 2015; PSMA, spol. s r.o., cited above, § 62).

42.  The applicant company further contended that in the Slovak law an interlocutory judgment had the effect of ascertaining the existence and the legal basis of a claim, only the amount of which remained to be determined. In the present case, the courts had thus established its entitlement to a pecuniary claim, giving rise to a legitimate expectation on its part that the claim would be protected and settled in the future. It was irrelevant in this respect whether the courts’ judgments were correct from the perspective of the domestic law and case-law.

43.  The Court notes that the complaint under Article 1 of Protocol No. 1 concerns the repercussions of the extraordinary appeal in the present case, namely the fact that the impugned decision of the Supreme Court quashed the interlocutory judgment in the applicant company’s favour. While acknowledging that since the Supreme Court’s decision, the proceedings have again been pending before the ordinary courts (see paragraph 18 above), the Court underlines that the present application concerns not the ultimate outcome of the applicant company’s action but rather the precise fact that a final and binding interlocutory judgment in its favour was quashed, with final effect, following which the relevant matter was remitted to the first-instance stage. The Government did not demonstrate how the lodging by the applicant company of a different action (for unjust enrichment) could have remedied the alleged procedural shortcomings. The only remedy capable of redressing this situation being the constitutional complaint, which the applicant company duly used, this part of the application is neither premature nor inadmissible for non-exhaustion of domestic remedies.

44.  In so far as the Government sought to compare the present case with another case referred to by them (see paragraph 38 above), the Court observes that, in that other case it had declared inadmissible for being premature a complaint submitted by one of the applicants who had acquired the property in question only after a final and binding judgment concerning that property had been quashed.

45.  The Court further reiterates that a judgment debt may be regarded as a “possession” for the purposes of Article 1 of Protocol No. 1 (see, among other authorities, Burdov v. Russia, no. 59498/00, § 40, ECHR 2002-III; Ryabykh, cited above, § 61).

46.  In the present case, the final interlocutory judgment of 25 June 2013 recognised the legal basis for the applicant company’s pecuniary claim against the State, the amount of which remained to be determined. This judgment thereby established a clear, pecuniary entitlement for the applicant company, which falls under the protection of Article 1 of Protocol No. 1.

47.  Lastly, the Court notes that the applicant company’s complaint under the latter provision is closely linked to that under Article 6 § 1 of the Convention, which the Court has examined above and declared admissible (see paragraph 23 above). Accordingly, the applicant company’s complaint under Article 1 of Protocol No. 1 being neither manifestly ill-founded nor inadmissible on any other grounds listed in Article 35 of the Convention, it must be declared admissible.Merits

48.  The applicant company maintained its assertion that the unsubstantiated intervention of the General Prosecutor and the Supreme Court, which was contrary to Article 6 of the Convention, had also breached its right to the peaceful enjoyment of possessions.

49.  Referring to their observations pertaining to the complaint under Article 6 of the Convention, the Government contended that the impugned interference with the applicant company’s right to the peaceful enjoyment of possessions was lawful and followed a public interest, and that a fair balance had been struck between the interests of the applicant company and those of the State as the defending party.

50.  The Court observes that, according to the applicant company, Article 1 of Protocol No. 1 was violated because of the annulment of the final interlocutory judgment in its favour. In this regard, the Court notes that it has found that the annulment at issue was in violation of the requirement of legal certainty under Article 6 § 1 of the Convention (see paragraph 36 above). It further reiterates that, in general, quashing a judgment giving rise to a “possession” after it has become final and unappealable constitutes an interference with the judgment beneficiary’s right to the peaceful enjoyment of that possession (see, for example, Brumărescu v. Romania, cited above, § 74; Agrotehservis v. Ukraine, no. 62608/00, 5 July 2005; and Timotiyevich v. Ukraine, no. 63158/00, 8 November 2005).

51.  In the present case, the Court is also mindful that the impugned annulment of the previous decisions in the applicant company’s favour created a situation of legal uncertainty, essentially removing the res judicata protection of the recognition of the applicant company’s claim for damages and leading to a full reconsideration of that matter. Thus, even though the impugned annulment did not directly presume the outcome of the applicant company’s action, which is to be examined anew, it arguably constituted an interference with its right to claim the damages.

52.  Even assuming that such an interference may be regarded as being in compliance with the law and serving a public interest, in the light of its above finding of a violation of the applicant company’s rights under Article 6 of the Convention, the Court finds that the interference may not be considered justified since a fair balance was not preserved and the applicant company was required to bear an individual and excessive burden (see DRAFT - OVA a.s., cited above, § 93).

53.  Moreover, the fact that the renewed proceedings are still pending leaves the applicant company in a situation in which there is a continuing uncertainty about its entitlement to damages. Irrespective of any financial repercussions, the frustration which could naturally result from such a prolonged ambiguous situation constitutes in itself a disproportionate burden (see, mutatis mutandis, Rysovskyy v. Ukraine, no. 29979/04, § 77, 20 October 2011).

54.  In view of all the above, there has thus been a violation of Article 1 of Protocol No. 1 to the Convention.APPLICATION OF ARTICLE 41 OF THE CONVENTION

55.  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.”

56.  The applicant company did not claim any damages nor costs and expenses under Article 41 of the Convention.

57.  Accordingly, the Court considers that there is no call to award it any sum on account of just satisfaction.

FOR THESE REASONS, THE COURT, UNANIMOUSLY,Declares the application admissible;Holds that there has been a violation of Article 6 § 1 of the Convention;Holds that there has been a violation of Article 1 of Protocol No. 1.

Done in English, and notified in writing on 19 May 2020, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.

Olga Chernishova Dmitry Dedov
Deputy RegistrarPresident

 

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