EKO-KOMUNENERGO, TOV v. UKRAINE

FIFTH SECTION

DECISION

Application no. 17880/17
EKO-KOMUNENERGO, TOV
against Ukraine

The European Court of Human Rights (Fifth Section), sitting on 20 November 2025 as a Committee composed of:

 María Elósegui, President,
 Andreas Zünd,
 Mykola Gnatovskyy, judges,
and Martina Keller, Deputy Section Registrar,

Having regard to:

the application (no. 17880/17) against Ukraine lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) on 3 February 2017 by a private company registered in Ukraine, Eko-Komunenergo, Tov (“the applicant company”), located in Kharkiv, which was represented by Mr A.O. Kotlyar, a lawyer practising in Kyiv;

the decision to give notice of the applicant company’s complaints under Article 1 of Protocol No. 1 to the Convention to the Ukrainian Government (“the Government”), represented by their Agent, Ms M. Sokorenko, and to declare the remainder of the application inadmissible;

the decision to request further observations from the parties pursuant to Rule 54 § 2 (c) of the Rules of Court; and

the parties’ observations and their additional observations;

Having deliberated, decides as follows:

SUBJECT MATTER OF THE CASE

1.  The case concerns the invalidation of the applicant company’s title to property following an action brought by a prosecutor. The applicant company relied on Article 1 of Protocol No. 1 to the Convention.

2.  In 2006 a State-owned company, Malyshev Plant (“the plant”) – one of the biggest military facilities in Ukraine – mortgaged part of its real estate as collateral in order to secure its loan obligations to a private bank, U. (“the U. bank”). To that end, special permission was obtained from the Ministry of Industrial Policy, which confirmed that the premises in question were not part of the plant’s assets (цілісного майнового комплексу) and were therefore not covered by the prohibition on privatisation (see paragraph 4 below). It appears that the premises in question had previously been used as a laboratory and had not been used as a production site.

3.  By a judgment of 18 July 2007, the foreclosure on the mortgaged property was ordered owing to the plant’s inability to comply with its loan obligations. In September 2008 the applicant company bought the property from the U. bank in the context of the mortgage enforcement procedure; the price was set at 30 million Ukrainian hryvnias (UAH; approximately 4,347,800 euros (EUR) at the time). In order to pay for the property, the applicant company took out a loan from the U. bank (see, for more details, paragraphs 8-11 below). The property was mortgaged by the applicant company in order to secure its loan from the U. bank.

4.  In 2015 a prosecutor, acting in the interests of the State, initiated several sets of proceedings with the aim of invalidating the loan and mortgage agreements between the applicant company and the U. bank (and the enforcement thereof), as well as the sale agreement and the applicant company’s title to the premises – in an effort to secure the return of the premises to State ownership. He noted that those premises belonged to a company operating within the defence industry, the assets of which were subject to a moratorium on privatisation and should not therefore have been transferred into private hands.

5.  By a final judgment of 27 September 2016, the Higher Commercial Court of Ukraine upheld the judgments of the lower courts that had allowed the prosecutor’s action against the applicant company; the premises were subsequently reclaimed from it.

6.  The courts reasoned that at the time of the events in question (and at the time of the delivery of the judgments), the plant (a major military manufacturer) had been included in the list of companies that were not subject (as provided by law) to privatisation. Accordingly, the mortgage on its property had been a priori invalid and had not created any legal consequences (except those associated with its invalidity). The courts also noted that the State authorities had not adopted any decisions on the transfer of the property in question. The courts further established that even though the applicant company had been a bona fide owner of the property, Articles 330, 388 and 658 of the Civil Code (for a summary of the relevant provisions see Atima Limited v. Ukraine, no. 56714/11, §§ 22-25, 20 May 2021) allowed property to be reclaimed even from a bona fide owner on condition that the property in question had left the possession of the lawful owner against his or her will. In that regard, the courts discounted the applicant company’s observation that the Ministry of Industrial Policy had approved the mortgage on the premises, noting that such an approval could not have been executed lawfully given that the privatisation of the plant’s property had been prohibited by law.

7.  The applicant company informed the Court that the premises in question had been leased to two private companies with allegedly no connection to the defence industry.

8.  As noted above, when purchasing the disputed property, the applicant company took out a loan from the U. bank. According to the documents available to the Court, the applicant company borrowed 5,772,005 US dollars (USD) which, as agreed by the parties, covered the value of the property in issue. Under the terms of the loan agreement, the maturity date was set as 21 September 2015, with monthly payments scheduled to begin in October 2009.

9.  It appears from the parties’ additional observations that the applicant company did not comply with its loan obligations and that the U. bank instituted court proceedings seeking the recovery of the debt. Its claims were allowed by the judgment of the Kharkiv Regional Commercial Court of 22 October 2013 (which was upheld by the final judgment of the Higher Commercial Court of Ukraine of 23 October 2014). The courts ordered the applicant company to repay the outstanding debt, including all auxiliary charges and applicable penalties.

10.  In May 2016 the U. bank transferred its right of claim against the applicant company to another company which, in turn, assigned its right of claim to a further company (“the L. company”). The L. company was recognised as a creditor in the enforcement proceedings initiated following the above-mentioned judgment of 22 October 2013.

11.  In the course of the enforcement proceedings, the bailiff ordered the seizure of the applicant company’s accounts and assets; however, no such accounts and assets were identified. Accordingly, the writ of enforcement was returned to the L. company on 3 April 2024. It appears that no enforcement proceedings are currently pending against the applicant company.

THE COURT’S ASSESSMENT

12.  The applicant company complained under Article 1 of Protocol No. 1 to the Convention that depriving it of its property, which it had obtained in good faith, had been unlawful and disproportionate. The applicant company asserted that Article 388 of the Civil Code had been erroneously applied, in so far as it could not have been said that the property had left the possession of the lawful owner against its will, given that the plant had clearly intended to mortgage the property and had received unequivocal permission in that connection from the Ministry of Industrial Policy. As regards the public interest, the applicant company noted that the premises in question had not been used by the plant itself and had, in fact, recently been leased to companies with no connection to the defence industry. It therefore concluded that there was no pressing interest in reclaiming the premises from it. Lastly, the applicant company noted that it had not been provided with any compensation for the losses that it had incurred.

13.  The Government argued that the applicant company had failed to exhaust the available domestic remedies as it had not lodged a claim for damages following the invalidation of its title. In particular, they asserted that the applicant company had had an opportunity to lodge a compensation claim under Article 216 of the Civil Code (on the legal consequences of the invalidity of a deed). It could also have lodged a claim for compensation in respect of the expenses that it had incurred for the maintenance and preservation of property under Article 390 of the Civil Code.

14.  The Government also contended that the property had been reclaimed in accordance with the law and had pursued the legitimate aim of transferring back to State ownership a property that had belonged to a critically important company operating within the defence industry. They also emphasised that it appeared that the applicant company had failed from the very beginning to comply with its loan obligations and could not therefore be regarded as having suffered any significant consequences.

15.  The Court observes, firstly, that, as a matter of course, the existence of a remedy that might allow an applicant to obtain compensation but does not lead to the reinstatement of title should be taken into account not in the context of the exhaustion of domestic remedies, but for the purposes of assessing the proportionality of the interference and the calculation of pecuniary damage if a violation of Article 1 of Protocol No. 1 to the Convention is found (see, for example, Batkivska Turbota Foundation v. Ukraine, no. 5876/15, § 47, 9 October 2018).

16.  The Court, however, does not consider it necessary to rule on the above-mentioned issue, as the present application is in any event manifestly ill‑founded for the following reasons.

17.  The general principles regarding interference with the peaceful enjoyment of possessions have been summarised in, for example, Kryvenkyy v. Ukraine (no. 43768/07, § 42, 16 February 2017). In particular, the Court must assess whether the interference was lawful and effected in the public interest, and whether it pursued a legitimate aim by means reasonably proportionate to the aim sought to be realised (ibid.).

18.  The Court observes that in 2008 the applicant company purchased the premises at issue and obtained (duly formalised) title to the premises even though they continued to be encumbered by a mortgage held by the U. bank as collateral for its outstanding loan obligations. The invalidation of the applicant company’s title and the reclaiming of the property therefore constituted an interference with its possessions.

19.  With regard to lawfulness and public interest, the Court is inclined to accept that the property had been reclaimed under the relevant provisions of the Civil Code (see paragraph 6 above) in order to uphold the rule of law in the transfer of property of a major Ukrainian military manufacturer. However, the Court does not overlook the circumstances surrounding that transfer – namely the permission obtained from the Ministry of Industrial Policy and the fact that the plant, the U. bank and the applicant company were all able to formalise the relevant property transactions and titles, with the involvement of a number of authorities.

20.  In respect of proportionality, the Court must determine whether a fair balance has been struck between the demands of the general interest and the interests of the individual company concerned. The Court recognises that the State enjoys a wide margin of appreciation with regard to the means to be employed and to the question of whether the consequences are justified in the general interest for the purpose of achieving the objective pursued (see, for example, G.I.E.M. S.r.l. and Others v. Italy [GC], nos. 1828/06 and 2 others, § 293, 28 June 2018).

21.  In that connection the Court observes that the applicant company obtained the disputed premises under a sale and purchase agreement with the U. bank. However, in so far as it did not have sufficient funds to pay for that purchase, it took out a loan from the same bank. It appears from the information submitted to the Court by the parties that the applicant company – having failed to comply with its loan obligations to the U. bank – was ordered by a court judgment to repay the outstanding debt. That order remained unenforced because the applicant company apparently had no funds or assets (see paragraphs 9 and 11 above). The applicant company has not disputed that information, nor has it submitted that it made any payments under the loan agreement. Furthermore, it has not argued that it commenced any activities on the premises, secured any investment or undertook any other actions in respect of the premises (contrast Budivelno investytsiyna grupa 1 v. Ukraine [Committee], no. 56903/10, § 51, 17 December 2020). Moreover, the applicant company has not argued that it suffered any financial damage overall (contrast Budivelno investytsiyna grupa 1, § 54, and Kryvenkyy, §§ 19 and 35, both cited above; see also West East Group Ltd v. Ukraine (dec.), no. 64284/14, § 23, 17 October 2024).

22.  In the absence of any information regarding any actual negative consequences that the applicant company might have suffered, the Court does not consider that the interference in question upset the balance to be struck between the protection of the applicant company’s rights and the public interest.

23.  It follows that the application is manifestly ill‑founded and must be rejected, in accordance with Article 35 § 4 of the Convention.

For these reasons, the Court, unanimously,

Declares the application inadmissible.

Done in English and notified in writing on 11 December 2025.

 Martina Keller María Elósegui
 Deputy Registrar President