Communicated on 19 January 2018
FOURTH SECTION
Application no. 53427/09
COSMOS MARITIME TRADING AND SHIPPING AGENCY
against Ukraine
lodged on 25 September 2009
STATEMENT OF FACTS
The applicant is a Turkish company, Cosmos Maritime Trading and Shipping Agency. It is represented before the Court by Mr V.V. Vasko, a lawyer practising in Kyiv.
The facts of the case, as submitted by the applicant company, may be summarised as follows.
A. Background information concerning the applicant company’s claims
The Black Sea Shipping Company (“Blasco”) is a Ukrainian State-owned company. It is the successor of a Soviet State-owned company which until the late 1980s was one the largest shipping companies in the world and operated hundreds of commercial vessels. Beginning in late 1980s and early 1990s Blasco encountered serious legal and economic difficulties which resulted in the loss of a large proportion of its assets.
From October 1996 to April 1997 Blasco, as owners, and Columbus − a Liberian company − as charterers, signed time charters for four of Blasco’s ships. In August 1997 the applicant company also entered into a bareboat charter agreement with Blasco for one of its ships. On 13 November 1997 Columbus assigned all of its claims against Blasco, without specifying their origin or amount, to the applicant company. Blasco was informed about the assignment.
On 2 December 1997 and 22 October 1998 the applicant company and Blasco signed agreements under which Blasco acknowledged certain debts vis-à-vis the applicant company related to services provided to Blasco’s vessels amounting to 3,466,754.93 US Dollars (USD). Of that amount, USD 33,557.29 related to a ship not covered by the above-mentioned charter agreements and USD 257,531.36 was identified as expenses relating to the settlement of unspecified claims and agency costs. The remainder of the claims were ones that had apparently arisen in the context of the legal relationship created under the charter parties, some of them identified in agreements as relating to repair costs, owners’ expenses, and off-hire. On 20 June 2001 the parties signed another agreement reducing the overall debt to USD 2,021,370.13, apparently to take into account the fact that one of the ships to which the debt related had in the meantime been transferred to the applicant company in partial settlement.
On 25 December 1998 bankruptcy proceedings were initiated in respect of Blasco by one of its creditors, company P. The proceedings were discontinued on 2 July 1999. It appears that bankruptcy proceedings were re-initiated and discontinued at some point in 2000 or 2001.
On 11 July 2003 a certain Mr P., Blasco’s creditor, initiated bankruptcy proceedings against Blasco in the Odessa Regional Commercial Court (“the commercial court”). The notice announcing the initiation of proceedings was published, as required by law, on 9 September 2003.
B. From the lodging of the applicant company’s claim to its recognition
On 29 September 2003 the applicant company lodged an application with the commercial court seeking recognition of Blasco’s debt vis-à-vis the applicant company.
On 18 November 2004 the commercial court rejected the applicant company’s claim without considering it on the merits. It held that it was unsubstantiated and it considered that the agreements provided by the applicant company were not sufficient proof that it had valid claims. In order to show the latter, the applicant company would need to provide the original underlying documents showing the basis on which the debts had arisen.
On 14 March 2005, in its supplementary appeal, the applicant company explained that the debt had arisen on the basis of charter parties between it and Blasco in respect of a number of ships. Although under the terms of the charter parties certain costs had to be borne by Blasco as the ship owner, the latter had asked the applicant company to bear those costs and those sums had accordingly become Blasco’s debt.
On 15 March 2005 the Odessa Commercial Court of Appeal (“the Court of Appeal”) quashed the commercial court’s ruling, holding that − since the claim had been lodged within the thirty-day period following publication of the bankruptcy proceedings notice − it could not be rejected without examination of its merits but rather had to be examined on the merits and either accepted or dismissed. The case was remitted to the commercial court.
On 7 February 2006 the applicant company made written submissions to the commercial court explaining the origin of the debt. It explained, in particular, that the claim had its basis in services provided to a number of vessels. It listed all the documents (captains’ receipts, invoices etc.) for each ship and explained that they had been submitted to the court. It also explained that the well-founded nature of the claims had been confirmed in November 1999 by auditors retained by Blasco and the State authority to which Blasco was answerable at the time, namely the State Administration of Maritime and River Transport.
On 24 February 2006 the commercial court rejected the applicant company’s claims as insufficiently substantiated. It held, in particular, that the actual charter party agreements on which the claims were supposedly based had not been submitted to the court.
On the same day the court ordered the introduction of a financial rehabilitation mechanism in respect of Blasco under a court-appointed receiver. This procedure is governed by the Bankruptcy Law and is aimed at restoring the debtor’s solvency. In the ruling introducing this procedure the court stated, inter alia, that the decision was in line with the President’s instruction of 15 April 2005 to the Prime Minister and the Secretary of the National Security Council concerning the need to conduct an audit of Blasco’s financial situation, relaunch its operations, stabilise its situation, and instigate a search for those of Blasco’s assets that had been illegally transferred to third parties in order to secure their return.
The applicant company appealed, arguing − in essence − that the original documents on which the claims had been based had been submitted to the court and that, in any case, the claims had been based directly on the provisions of Ukrainian and Turkish law governing maritime agents, which provided that the obligation to compensate an agent for expenses it has borne has its basis in law,without the need for a formal written contract.
On 12 August 2008 the Court of Appeal upheld the commercial court’s ruling of 24 February 2006 concerning the applicant company’s claims.
The applicant company appealed to the High Commercial Court (“the HCC”). In its supplementary appeal of 23 December 2008 the applicant company stated, in particular, that the receiver was not taking adequate steps to secure the debtor’s assets. It referred to the letters from the president of the commercial court to the Prime Minister and the President of 26 April 2005 and 3 March 2006 respectively, which stated that Blasco was resisting the identification of its assets, was transferring assets to offshore companies without compensation, and had already transferred two billion dollars’ worth of assets that way.
The applicant company further submitted that the courts dealing with its case lacked impartiality. In that context it referred to a number of letters from the president of the commercial court to various executive authorities:
(i) letter of 19 January 2006 to the Ministry of the Economy in which the court president asked the Ministry − which at the time was the body responsible for licensing bankruptcy receivers − for candidates for the position of receiver in the proceedings concerning Blasco. In that letter the court president referred to the instruction of the President to the Cabinet of Ministers, the Prosecutor General and the central bank concerning the audit of the debtor company;
(ii) letter to the Prime Minister of 26 April 2005 in which the court president stated that in the period prior to 2001, when the bankruptcy proceedings were suspended, the major part of the debtor’s assets had been transferred to the Ministry of Transport and certain State-owned and other companies. He complained that in the course of the bankruptcy proceedings the Ministry of Transport and Blasco’s management had failed to provide sufficient information about the debtor’s assets and obligations and that Blasco had been transferring assets to third parties outside of the bankruptcy procedure. The court president went on to inform the Prime Minister that he had informed the law-enforcement authorities that there were indications that Blasco’s management was engaging in criminal activity, and in particular artificially driving the company into bankruptcy. Blasco’s management and their superiors at the Ministry of Transport were not interested in restoring the debtor’s solvency. The court president accordingly asked the Prime Minister for her intervention in order to compel those officials to comply with the law;
(iii) letter to the President of Ukraine of the same date and with similar content;
(iv) letter to the President of Ukraine of 3 March 2006. In that letter the court president pointed out that the President’s earlier instruction to the Cabinet of Ministers concerning the need to take steps to improve the Blasco situation had not been complied with and that the court had been unable to obtain information from the authorities about the debtor’s assets for more than seven years. In view of those facts the court president invited the President to create a “National Council for the Restoration of Ukraine’s Status as a Seafaring Nation” which would be tasked with making proposals as to how to return vessels transferred by Blasco to foreign entities or to receive compensation for them. The President’s personal focus on this issue would permit the Ukrainian nation and State to restore their leading role as a seafaring nation among other countries of the world.
For the applicant company, the statements in the above letters evidenced the fact that the commercial court had failed to play an active role in protecting the creditors’ interests. The court was addressing the executive authorities as if it were their subordinate, merely reporting to them instead of exercising the function of a body with effective power over the process. The applicant company also pointed out that the ruling of 24 February 2006 introducing a rehabilitation procedure in respect of Blasco referred to the instruction of the President of Ukraine in a way that suggested that it was a document that constituted guidance to be followed by the court.
On the same day, 23 December 2008, the applicant company also lodged a separate application with the HCC asking it to discontinue the bankruptcy proceedings as being unfair to the creditors and representing an inadequate tool for protecting their interests and, instead, to recognise the State’s direct responsibility for Blasco’s debts. The applicant company cited instances of transfers of the debtor’s assets prior to the initiation of the bankruptcy proceedings and the letters from the commercial court’s president indicating that similar activities could be continuing. They stressed that under international law, if the owners or managers of a corporate entity acted fraudulently, the corporate veil could be pierced and they could be held liable. In the view of the applicant company, this had occurred in the case of Blasco, the assets of which had been transferred in a non-transparent manner in breach of privatisation and bankruptcy laws. The applicant company accordingly submitted that the State must bear full liability for all the debtor company’s debt vis-à-vis the creditors.
On 21 January 2009 the HCC allowed the applicant company’s appeal in part, quashed the Court of Appeal’s decision of 12 August 2008, and remitted the case to the Court of Appeal on the grounds that the latter had essentially required the applicant company to comply with the requirements of domestic Ukrainian law concerning record-keeping and submit documentary proof to prove its claims, whereas it should have determined the applicable law and evaluated the claims in that light.
The applicant company lodged an appeal with the Supreme Court, asking it to quash the HCC’s ruling, terminate the proceedings and hold the State fully liable for Blasco’s debts.
On 2 April 2009 a panel of judges of that court denied the applicant company leave to appeal.
C. From recognition of the applicant’s claims to the quashing of that decision
On 27 October 2009 the Court of Appeal allowed the applicant company’s application and recognised its claims against Blasco. However, at the same time it refused to include them in the register of creditors’ claims, holding that the latter had to be done through a separate procedure. The Ministry of Transport appealed, but on 10 November 2010 its appeal was rejected by the HCC. The ruling of 27 October 2009 then became final.
On 11 January 2012 the commercial court included the applicant company’s claims in the register of creditor’s claims. On 8 August 2012 the Court of Appeal rejected an appeal by the receiver and upheld that ruling.
On 22 February 2013 the applicant company challenged Judge B., who was presiding over the bankruptcy proceedings at the time, and all the judges of the commercial court. It referred essentially to the same circumstances as previously raised in its supplementary appeal of 23 December 2008 (see above). In addition, the applicant company stated that the commercial court was operating in a building at 29 Shevchenko Boulevard in Odessa that had previously belonged to Blasco. It referred to a newspaper article published in November 2001 which reported Blasco’s former president as saying that the company was transferring the building to the court in order to secure the court’s cooperation in accelerating the examination of the company’s cases. For the applicant company, those circumstances raised doubts as to the commercial court’s impartiality.
On the same day Judge B. rejected the challenge on the grounds that she had only taken over the case on 21 July 2011 and so was not affected by the circumstances referred to by the applicant company, which dated back to 2006 and earlier. Moreover, the judge held that domestic law did not provide for the possibility of challenging all the judges of a court but only the judge sitting in the case.
On 29 March 2013 the Court of Appeal’s registry received Blasco’s application requesting the court to set aside its ruling of 27 October 2009 and to recognise the applicant company’s claims in the light of “newly discovered circumstances”. In particular, according to Blasco, the documents sent to Blasco by the prosecutor’s office on 18 October 2012 showed that the claims presented by the applicant company were unfounded.
On 15 May 2013 the applicant company challenged the panel of the Court of Appeal considering Blasco’s application for reopening. It mainly focussed on the allegation that the debtor had missed the deadline for the application and appeared to argue that by examining such a belated request the court was discriminating against it and favouring a State debtor over a foreign company.
On 30 May 2013 the Court of Appeal quashed its own decision of 27 October 2009 in the light of the “newly discovered circumstances”. The court stated that the application had been lodged within the statutory time‑limit; on the substance, it found that the applicant company’s claims had been based only on agreements signed by Blasco’s managers in 1997-2001 acknowledging certain debts. However, the documents discovered by the prosecutor’s office in 2012 showed that there was no basis in fact for the alleged underlying debt: the applicant company had acquired its claims from Columbus. Columbus’s claims, in turn, had been based on charter party agreements for Blasco’s vessels. The Court of Appeal found that charterers had presented unsubstantiated bills to Blasco for vessel operating costs which it was the charterers’ responsibility to bear. The court concluded that the applicant company’s claims could not be recognised in the bankruptcy proceedings.
The applicant company appealed. It argued, in particular, that it had acquired only Columbus’s claims against Blasco and not its obligations vis‑à-vis Blasco. Moreover, the charter parties to which the Court of Appeal referred were governed by English law and subject to London arbitration. However, the Court of Appeal had failed to establish that Blasco did in fact have valid claims against Columbus under those contracts and, if so, whether it had attempted to settle them through arbitration. Moreover, the circumstances on which the Court of Appeal had based its decision were not really “newly established” as the courts had been aware of them since at least 24 February 2006. The applicant company also argued that its claims had remained “unrecognised” because of its activism in the case, in particular its challenges to the judges of the commercial court and Court of Appeal and its efforts to hold the State directly liable for Blasco’s debts.
On 8 October 2013 the HCC dismissed the appeal and upheld the decision of 30 May 2013, which accordingly became final. The applicant company was informed of the former decision on 12 November 2013. No further ordinary appeal lay against this decision.
COMPLAINTS
The applicant company complains, in its application of 25 September 2009, under Article 6 § 1 of the Convention that the domestic courts which dealt with its case lacked impartiality and that the proceedings concerning the recognition of its claims in the bankruptcy proceedings against Blasco were unfair and unreasonably lengthy. It also complains, on the same application form, under Article 1 of Protocol No. 1 that its right to peaceful enjoyment of its possessions was breached in that (i) the domestic courts failed to recognise its claims against Blasco in the bankruptcy proceedings and (ii) the bankruptcy proceedings were not in themselves capable of protecting its interests.
In letters of 19 November 2010, 29 April and 13 September 2011, 29 February, 25 July, 28 December 2012, 30 April and 30 July 2013, 21 January and 7 July 2014 the applicant company maintained those complaints, stating in particular that there had been “no substantial developments” in the bankruptcy procedure and that the “Ukrainian courts at all instances have failed to provide a fair, adequate and lawful bankruptcy procedure and to protect the property rights of the applicant”.
In its letter of 10 December 2014 the applicant company also complains that its rights under Article 6 § 1 of the Convention and Article 1 of Protocol No. 1 were breached on account of the quashing of the final decision of the Court of Appeal of 27 October 2009 which recognised the applicant company’s claims.
QUESTIONS TO THE PARTIES
1. Has the applicant company complied with the six-month time-limit laid down in Article 35 § 1 of the Convention in respect of its complaints, and in particular:
(a) the complaints under Article 6 § 1 and Article 1 of Protocol No. 1 concerning the quashing of the Court of Appeal’s decision of 27 October 2009; and
(b) the complaint under Article 1 of Protocol No. 1 that the bankruptcy proceedings as such were incapable of protecting its rights guaranteed by that provision?
2. Did the applicant company have a fair hearing by an independent and impartial tribunal in the determination of its civil rights and obligations, in accordance with Article 6 § 1 of the Convention? In particular,
(a) were the courts dealing with the applicant company’s claim for recognition in the insolvency proceedings concerning the company Blasco independent and impartial, as required by Article 6 § 1 of the Convention?
(b) was there a breach of the applicant company’s rights under Article 6 § 1 of the Convention as a result of the reconsideration of the final decision of 27 October 2009 concerning the recognition of the debt owed to it by the company Blasco?
3. Was the length of the proceedings in the present case in breach of the “reasonable time” requirement of Article 6 § 1 of the Convention?
4. Was there an interference with the applicant company’s peaceful enjoyment of possessions within the meaning of Article 1 of Protocol No. 1? If so, was it in breach of that provision?
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