CENTRUM HANDLOWE AGORA SP. Z O.O. v. POLAND

FIRST SECTION

DECISION

Application no. 8928/13
CENTRUM HANDLOWE AGORA SP. Z O.O.
against Poland

The European Court of Human Rights (First Section), sitting on 20 February 2024 as a Chamber composed of:

 Marko Bošnjak, President,
 Alena Poláčková,
 Krzysztof Wojtyczek,
 Lətif Hüseynov,
 Péter Paczolay,
 Gilberto Felici,
 Erik Wennerström, judges,
and Ilse Freiwirth, Section Registrar,

Having regard to the above application lodged on 17 January 2013,

Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicant,

Having deliberated, decides as follows:

THE FACTS

1.  The applicant, Centrum Handlowe Agora Sp. z o.o. is a limited liability company registered in Poland, with its seat in Warsaw. It was represented before the Court by Mr M. Pietrzak and Ms M. Mączka-Pacholak, lawyers practising in Warsaw.

2.  The Polish Government (“the Government”) were represented by their Agent, Ms J. Chrzanowska, and subsequently by Mr J. Sobczak, of the Ministry of Foreign Affairs.

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

4.  The applicant company operated on the real estate market. Its business partner, another company (“the claimant”), brought an action for payment of 2,703,498 Polish zlotys (PLN – approximately 675,900 euros (EUR)), plus interest, against the applicant company. On 31 May 2004 the Warsaw Regional Court upheld the action and issued a payment order against the applicant company.

5.  The applicant company did not appeal, but on 9 July 2004 it lodged a successful application for the reopening of the proceedings. Subsequently, the parties were involved in a lengthy civil dispute that lasted from 2004 until 2012; the claimant changed the amount sought several times. Finally, on 22 February 2012 the Warsaw Regional Court gave judgment, finding against the applicant company. It awarded the claimant interest on the amount of PLN 2,337,111 (approximately EUR 584,300) from 25 August 2006 until the day of payment, plus costs of the proceedings.

6.  In the appeal against the first-instance judgment lodged on 27 April 2012, the applicant company’s lawyer applied for partial exemption from the court fees – namely the fees for lodging an appeal (PLN 100,000 −approximately EUR 25,000). The application’s entire written justification was contained in one sentence indicating that the applicant company lacked sufficient funds with which to pay the fees. By way of proof, the applicant company submitted its balance sheet and profit and loss report for 2011, monthly bank statements, copies of documents showing that the company’s bank account (as well as its shares in certain real estate in Warsaw) had been seized by bailiffs (in 2010, on the basis of writs of execution dating back to 2009), and statements by the board of directors declaring that the company owned proprietary rights (that is, the right of long-term use) to real estate and did not maintain a cash register. The financial documents indicated that: the total amount of the applicant company’s assets amounted to PLN 1,751,330.72 (approximately EUR 394,400); its revenue for 2011 had amounted to PLN 438,835.16 (approximately EUR 98,800); and the costs of its activities amounted to PLN 514,722.78 (approximately EUR 128,700), resulting in a financial loss for 2011 in the amount of PLN 75,887.62 (approximately EUR 19,000).

7.  On 15 May 2012 the Warsaw Regional Court dismissed the applicant company’s application, relying on well-established case-law stating that: (i) section 103 of the Law of 28 July 2005 on Court Fees in Civil Cases (the “Law on court fees”; Ustawa o kosztach sądowych w sprawach cywilnych) required that a party to court proceedings demonstrate its long-term inability to pay the relevant court fees if it sought a reduction or waiver of those fees and that (ii) since civil disputes were a normal part of a commercial activity, companies should not prioritise other expenses over court fees. In that context, the court took note of the applicant company’s assets and revenue for 2011 and noted that the costs of the applicant company’s activities (PLN 514,722.78 – approximately EUR 128,700) included PLN 132,874.40 (approximately EUR 33,200) spent on external services. The court therefore found that the applicant company’s financial loss for 2011 had not resulted in the applicant being unable to pay the court fees and that the balance sheet did not indicate a long-term inability to acquire funds for the purpose of participating in the ongoing civil proceedings. As could be seen from the documents submitted by the applicant company, the latter had not been wound up and was not insolvent; rather, it had been operating at a loss.

8.  On 28 May 2012 the applicant company lodged an interlocutory appeal, arguing that the first-instance court had erred in fact by concluding that the company had sufficient funds to cover the costs of the proceedings. It also submitted that the court had wrongly applied section 103 of the Law on court fees. In its view, the obligation to secure funds and to demonstrate a long-term inability to pay the court fees had not been envisaged by that provision, and that interpretation had constituted an unduly broad interpretation of the law. The applicant company also argued that the fact that it had not been in insolvency or liquidation proceedings had not meant that it had had sufficient funds to pay the required court fees. It considered that a company can exist in “a state in which, despite financial uncertainty, [it] still has [enough] funds to run its business but definitely has no funds to pay court fees”. The entire written justification of the interlocutory appeal counted less than one page; it did not address, in any way, the first instance court’s observations regarding the funds spent on external services. No additional supporting documents were submitted with the interlocutory appeal.

9.  On 28 June 2012 the Warsaw Court of Appeal dismissed the applicant company’s interlocutory appeal. It found that the obligation to demonstrate a long-term inability to pay court fees was connected to the fact that the costs of litigation were a normal part of commercial activities. Therefore, commercial entities should take into account the necessity to secure funds in order to be able to participate in possible litigation. If, during court proceedings a company had a short-term shortage of funds, it should be able to take out a loan. The Court of Appeal stressed that the applicant company had been actively engaging in business activities and generating income and that it held assets – including stocks of significant value. The court also emphasised the 2011 expenses on external services and, that, as a matter of principle enshrined in the Supreme Court’s case-law, those costs should not be given precedence over the requirement that it pay any court fees owed.

10.  The applicant company did not pay the required court fee. Consequently, the judgment of 22 February 2012 became final and binding.

11.  On 19 August 2014 the applicant company was declared bankrupt by the Warsaw District Court.

RELEVANT LEGAL FRAMEWORK

12.  The domestic legislation governing the possibility of exemption from court fees was set out in Nieruchomości sp. z o.o. v. Poland (no. 32740/06, §§ 12-17, 2 February 2010).

13.  Section 103 of the Law on court fees, as applicable at the time in question, provided as follows:

“The court shall grant an exemption from [the obligation to pay] court fees to a legal person or to an entity not possessing legal personality whose legal capacity has been recognised by law, provided that it has demonstrated that it does not have sufficient means to pay them.”

14.  Under section 110 of the Law on court fees:

“A court shall revoke an exemption from [the obligation to pay] fees if it transpires that the circumstances on the basis of which [that exemption] was granted did not exist or no longer exist. In either case, the party shall be obliged to pay all mandatory fees and to reimburse expenses; however, in the second case, the court may also burden the party with this obligation only in part, should any change have arisen in respect of their situation. ...”

COMPLAINT

15.  The applicant company complained under Article 6 § 1 of the Convention that it had been deprived of its right of access to a court on account of the excessive fees required for its appeal to be pursued.

THE LAW

16.  The applicant company complained that the court fees demanded in connection with lodging an appeal against the Warsaw Regional Court’s judgment of 22 February 2012 had been excessive and that the domestic courts’ refusal to waive them had in effect deprived it of the right of access to a court provided by Article 6 § 1 of the Convention, which in its relevant part reads as follows:

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

17.  The Government submitted that the domestic courts had accurately examined the applicant company’s financial situation; thus, the amount of court fees required from the applicant company was not arbitrary.

18.  The applicant company maintained its application, stressing that, in its view, the documents submitted with the application for exemption from court fees had clearly demonstrated the impossibility of it covering those fees.

19.  The general principles of the Court’s case law on the right of access to a court have been set out in numerous judgments (see, for example, Zubac v. Croatia [GC], no. 40160/12, §§ 76-79, 5 April 2018, and Nalbant and Others v. Turkey, no. 59914/16, §§ 32-40, 3 May 2022). As for the relevant law and practice concerning access to a court in connection with the obligation to pay court fees in Poland, the applicable principles were summarised in the Court’s judgments in the cases of Kreuz v. Poland (no. 28249/95, §§52-57, ECHR 2001‑VI), Jedamski and Jedamska v. Poland (no. 73547/01, §§ 57-59, 26 July 2005), Podbielski and PPU Polpure v. Poland (no. 39199/98, §§ 61-64, 26 July 2005) and Teltronic-CATV v. Poland (no. 48140/99, §§ 47-49, 10 January 2006).

(a)   Criteria relevant for the examination of applications for exemption from court fees

20.  In its case-law regarding the exemption of legal persons (specifically companies) from the obligation to pay court fees, the Court has established several criteria as potentially relevant for the examination of such requests, of which three appear to be pertinent in the instant case.

(i)      Claim pursued in the relevant proceedings

21.  Firstly, it is important to assess whether the claim pursued in the proceedings at issue appears meritorious or not (see the above-cited cases of Teltronic-CATV, § 60, and Nieruchomości sp. z o.o., §§ 8-10 and 29).

(ii)    Overall financial situation of the company applying for exemption

22.  Secondly, the company’s overall financial situation at the time in question should be assessed, taking into account, inter alia, such elements as: (i) whether the company generated a loss, gross income, or net profit (see the above-cited cases of Podbielski and PPU Polpure, § 67; Teltronic‑CATV, § 53; and Nieruchomości sp. z o.o., §§ 8-10 and 33-34; see also Felix Blau sp. z o.o. v Poland, no. 1783/04, §§ 12-14 and 38, 19 January 2010); (ii) the value of its share capital (see Teltronic-CATV, cited above, § 59); (iii) the value of its assets, as well as its freedom to dispose of those assets (see the above-cited cases of Podbielski and PPU Polpure, § 67, Teltronic-CATV, §§ 53 and 56, and Nalbant and Others, cited above, § 43); and (iv) its long-term prospects, including the possibility to obtain a bank loan or additional funds (see Teltronic-CATV, cited above, §§ 58-59). The Court has found, however, that reliance by the domestic courts on a limited number of the abovementioned factors without adequate reasoning may be insufficient (see the above-cited cases of Teltronic-CATV, § 55, and Nieruchomości sp. z o.o., § 34).

(iii)   Conduct of the company in the relevant proceedings

23.  Thirdly, the company’s conduct within the proceedings at issue may also be of importance, notably: (i) the requisite level of diligence which may be higher in respect of an entity engaged in a commercial activity than that required from a natural person – especially when represented by a lawyer (see Elcomp sp. z o.o. v. Poland, no. 37492/05, § 41, 19 April 2011, and Zubac, cited above, §§ 87-89), and (ii) the scope, quality and completeness of the documents submitted by the company in the domestic proceedings – that is to say whether the documents in question allowed the domestic courts to comprehensively evaluate the company’s financial situation (see Elcomp sp. z o.o., cited above, § 43).

(b)   Limits of the Court’s review regarding the exemption from court fees

24.  Notwithstanding the above, the Court reiterates that it should not act as a fourth-instance body and will therefore not question under Article 6 § 1 of the Convention the judgment of the national courts, unless their findings can be regarded as arbitrary or manifestly unreasonable (see Zubac, cited above, § 79). The right of access to a court is not absolute and may be subject to restrictions that are intended, in particular, to meet the legitimate concern of controlling the use of public funds to sponsor private litigation (see Granos Organicos Nacionales S.A. v. Germany, no. 19508/07, § 46, 22 March 2012).

25.  In the present case, the Court firstly observes that the claim pursued in the domestic proceedings at issue appears meritorious, since the applicant company had been ordered to pay a substantial amount to the claimant following lengthy civil proceedings.

26.  As concerns the company’s overall financial situation at the time in question and its conduct within the proceedings, the Court has regard to the following.

27.  The applicant company’s application to be exempted from paying court fees was eventually dismissed after both the Warsaw Regional Court and the Warsaw Court of Appeal found that the applicant company had not proved its long-term inability to secure funds for the purpose of participating in the ongoing civil proceedings, as required by section 103 of the Law on court fees. The Court notes that despite the fact that the cited provision did not explicitly mention this requirement, the domestic courts, in giving their interpretation of this provision, relied on the relevant case-law of the domestic appellate courts and the Supreme Court. Therefore, contrary to the applicant company’s assertion, that requirement was sufficiently foreseeable for it – especially considering the commercial character of its enterprise and the fact that it was represented by a lawyer (see the above-cited cases of Zubac, § 89, and Elcomp sp. z o.o., § 41).

28.  Moreover, the Court observes that both the first- and second-instance courts took account of the applicant company’s assets and revenues, as noted in a balance sheet and in a profit-and-loss report produced at the end of 2011 – that is to say about four months before the application for exemption was lodged. The domestic courts noted that even though the applicant company recorded a loss in 2011, a large part of its expenses had been spent on external services. Those figures were not disputed by the applicant company, as they had been presented in its own financial documents; nor were they commented on in even the briefest terms in any of its submissions. The domestic courts accordingly argued that it was incumbent on the applicant company to substantiate its long-term inability to pay the court fees and to secure funds for the purpose of participating in the proceedings, and that its other above-mentioned expenses could not be given precedence over the necessity for it to pay the court fees. To the Court, the domestic courts’ argument in this regard was not manifestly unreasonable, and nor did it place a disproportionate burden on the applicant company. The facts of the case show that shortly before lodging its appeal the applicant company had at its disposal significant assets and that at least from 9 July 2004 (the date of the applicant company’s application for the reopening of the proceedings) onwards, it was aware of the ongoing proceedings.

29.  Notwithstanding the above, and by way of complementing its existing case-law on the matter (see paragraph 22 above), the Court notes that, in exceptional situations, a problem may arise where the time-limit for lodging court submissions subject to fees is short (for example, an appeal, as opposed to a claim initiating proceedings) and the fees are substantial when viewed in the light of the company’s short-term financial situation. Accordingly, despite its best efforts, a company may be unable to secure the necessary funds in the short period in question – even if its long-term financial situation does not reach the threshold of severity required by the domestic case-law. If such an argument is raised and substantiated by the company (while exercising the required level of diligence – see paragraph 23 above), domestic courts should examine whether any temporary difficulties in securing funds with which to pay the required fees are indeed serious and if the company has undertaken all reasonable efforts to obtain additional financing. The Court notes in this respect that section 110 of the Law on court fees (see paragraph 14 above) allows for the later revocation of an initially granted exemption, should the relevant circumstances change.

30.  That said, the Court notes that the applicant company could not have reasonably expected the domestic courts to conduct the analysis referred to in the previous paragraph, owing to its own conduct in those proceedings, as examined in detail below.

31.  The Court considers that a party seeking exemption from court fees should act with requisite diligence when presenting to the courts evidence concerning its financial standing and when it is under an obligation to cooperate faithfully with the courts in this matter (see Elcomp sp. z o.o., cited above, § 41). The applicant company, as a commercial entity, was best placed to produce the necessary documents and to present to the domestic courts the facts and arguments supporting its application. It was represented in the proceedings by a lawyer and should have been well aware of the judicial practice in this regard when applying for the exemption. Therefore, from the outset of the proceedings nothing prevented the applicant company from presenting all the necessary arguments and evidence. Moreover, the Warsaw Regional Court set out its argument sufficiently clearly for the applicant to address it in the course of the interlocutory appeal proceedings. However, the applicant company did not avail itself of that possibility; not only did it fail to submit, with the appeal, any additional documents substantiating its assertions, but it also refrained altogether from addressing the case-law based arguments that had been raised by the Regional Court. Given the circumstances, the Court finds no reason to hold that the requirement for the applicant company to demonstrate its inability to secure the necessary funds placed a disproportionate burden on it.

32.  The Court notes the applicant company’s arguments that its bank account and shares in real estate had been seized by bailiffs. The applicant company argued that the seizures had prevented it from disposing of its assets, as the shares had constituted the larger part of the assets included in its 2011 balance sheet and that, owing to the seizure of its bank account, any funds at its disposal would have been seized by the bailiffs. However, the Court notes that neither in its application for an exemption from the obligation to pay the court fees nor in its interlocutory appeal against the first-instance decision did the applicant company raise any arguments relating to the seizures in question and the effects thereof. Even though the documents confirming the seizures were attached to the applicant company’s application for an exemption, without any explicit argument in this regard, the domestic courts could only surmise what the effects of those seizures on the applicant company’s financial standing had been (compare and contrast with Nalbant and Others, cited above, § 11 and §§ 42-43, where the applicant companies, from the outset, explicitly relied on the seizure of their assets). To substantiate those doubts, it is sufficient to note that the writs of execution against the applicant company that served as the basis for the impugned seizures were issued as early as in 2009, whereas (as noted by the domestic courts) in 2011 the applicant company was still actively running its business. Given those circumstances, the Court finds that the applicant company has failed to satisfy the relevant diligence requirements (see paragraph 23 above), thus depriving the domestic courts of the opportunity to comprehensively evaluate its financial situation, and sees no reason to question their assessment under the Convention (see, mutatis mutandis, the above-cited cases of Felix Blau sp. z  o.o., § 38, and Elcomp sp. z o.o., § 43).

33.  In view of the foregoing, the Court finds that the domestic courts’ refusal to exempt the applicant company from paying the relevant court fees cannot be regarded as arbitrary or as failing to have struck the proper balance between, on the one hand, the interest of the State in collecting the court fees for dealing with claims and, on the other hand, the interest of the applicant company in pursuing its claim at the appellate level.

34.  In the light of the above, the Court considers that the application is manifestly ill-founded within the meaning of Article 35 § 3 (a) of the Convention and must accordingly be rejected, pursuant to Article 35 § 4.

For these reasons, the Court, unanimously,

Declares the application inadmissible.

Done in English and notified in writing on 14 March 2024.

 Ilse Freiwirth Marko Bošnjak
 Registrar President