Information Note on the Court’s case-law 41
April 2002
Credit Bank and Others v. Bulgaria (dec.) - 40064/98
Decision 30.4.2002 [Section I]
Article 1 of Protocol No. 1
Article 1 para. 1 of Protocol No. 1
Peaceful enjoyment of possessions
Court decisions allegedly influenced by retrospective laws initiated by Government for that purpose: inadmissible
In 1994 the applicant companies bought the debts of two State-owned companies, Himko and K., with regard to a third one, Bulgargas, in respect of natural gas delivered under an inter-governmental agreement. A debt assignment contract was signed. Pursuant to an arbitration clause of the contract, K. brought proceedings against the first applicant before the Arbitration Court, which found that the debt assignment contract was valid. Bulgargas brought another claim before the Arbitration Court. On 28 September 1995 the Arbitration Court rejected the argument that the debts concerned by the contract were the property of the State, that they were thus not transferable and that the debt assignment contract was as a consequence invalid. In 1995 the first applicant started proceedings in the Regional Court against Himko, which had still made no payment. The court found in the first applicant’s favour, considering the position of the Arbitration Court of 28 September 1995 as binding. Upon Himko’s appeal, the Supreme Court overturned this judgment in 1995. The Supreme Court held that the judgment of the Arbitration Court was only binding for the parties to the contract. It further found that there had been a particular legal frame established by the State whereby all income from gas supplies had to be paid to the State as part of the national budget. The transfer of the debts to the applicant was contrary to this legal frame and the requirements of the 1993 and 1994 budget Acts. Therefore the contract was void. The Supreme Court expressly stated that its findings were not based on the Law on the 1995 State Budget concerning the applicability of the Law on the Collection of State Debts. The first applicant submitted a petition for review to the Supreme Court of Cassation, which upheld the judgment of the Supreme Court. It found that in all State budgets, from 1993 to 1996, the income from the sale of natural gas had been listed as an item among the expected revenues for the national budget. The transfer of Himko’s debt was thus unlawful. In the meantime, the Council of Ministers introduced in Parliament a Bill for the interpretation of the Law on the 1996 State Budget concerning the question whether claims for the sale of natural gas were transferable. By Acts of July and September 1996, the Law on the 1996 State Budget was amended. The amendments provided, inter alia, that all claims regarding the sale of natural gas were claims of the State and were not transferable. The amendments also provided that a debtor who had paid to the State budget arrears due in respect of deliveries of natural gas should be considered to have discharged their debt and that the State should not be liable to any third person in respect of any sums received for the national budget. By a judgment of 10 December 1996, the Constitutional Court declared the amendments unconstitutional.
Inadmissible under Article 1 of Protocol N° 1: As to whether the applicants’ possessions were affected by retrospective legislation or “attacks” by the executive and legislative powers, the interpretative Bill introduced in Parliament in 1996 and the Acts of July and September 1996 amending the Law on the 1996 State Budget were undoubtedly an attempt on the part of the Government to use retrospective legislation in order to influence the outcome of the pending civil proceedings to which the applicants were parties. However, the adopted legal provisions were declared unconstitutional and repealed by the Constitutional Court. The judgment of the Constitutional Court was delivered before the end of the civil proceedings between Himko and the applicants. Therefore, the Government’s attempt to amend the Law on the 1996 Budget through retrospective legislation adopted in July and September 1996 did not result in any interference with the applicants’ possessions. The applicants further complained that the Laws on the State Budgets of 1995 and 1996 required retrospectively that arrears of the unpaid gas debt, including those already assigned to the applicants, should be collected under the special fiscal procedure, as provided by the Law on the Collection of State Debts. The applicability of the procedure under this law was introduced by a regulation of April 1994, before the debt assignment contract was signed. However, the fiscal authorities would not have been entitled to collect Himko’s debt if the courts had found that the debt assignment contract was valid and that therefore Himko had to pay the applicants. The central issue was whether the courts decided on the basis of retrospective legislation initiated by the Government and, if so, whether such an approach could be justified under Article 1 of Protocol N° 1. The judgments of the Supreme Court and the Supreme Court of Cassation did not rely on the 1996 amendments. The Supreme Court did not mention them and they had been declared unconstitutional when the Supreme Court of Cassation delivered its judgment. As regards the alleged arbitrariness of the impugned judgments, an important feature of the present case was that it concerned legal regulations of economic activities in a period of transition from a wholly State-owned and centrally planned economy to a private property and a market economy. In assessing whether it resulted in an unjustified interference of the State contrary to Article 1 of Protocol N° 1, due account had to be taken of the exceptional character of this transitional period. The debt assignment was executed at a time when the transition had not been completed and concerned sums owed by a State-owned company to another and to the State budget under specific legislation on the implementation of an inter-governmental agreement. Having regard to the transitional period and the fact that the Supreme Court and the Supreme Court of Cassation gave very detailed reasoning, it could not be considered that the fact that an arbitration tribunal reached different conclusions or the alleged lack of foreseeability rendered the impugned judgment arbitrary. It was not established that the Government’s alleged hostility to the contract unduly influenced the Supreme Court or the Supreme Court of Cassation. In conclusion, these judgments which declared the debt assignment contract void as contrary to the law were not based on retrospective legislation and were not arbitrary: manifestly ill-founded.
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