FIFTH SECTION
DECISION
Application no. 36453/02
FRANSOV S.A.S.
against Ukraine
The European Court of Human Rights (Fifth Section), sitting on 15 October 2013 as a Committee composed of:
Boštjan M. Zupančič, President,
Ann Power-Forde,
Paul Lemmens, judges,
and Stephen Phillips, Deputy Section Registrar,
Having regard to the above application lodged on 17 September 2002,
Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicant,
Having regard to the decision of the French Government not to intervene in the proceedings in accordance with Article 36 § 1 of the Convention,
Having deliberated, decides as follows:
THE FACTS
The applicant, Fransov S.A.S., is a private company (“société par actions simplifiée”) registered in France (“the applicant company”). It was represented before the Court by Messrs Pierre-Yves Lucas and Laurent Delvolvé, lawyers practicing in Paris, and by Messrs R. Martynovskiy and O. Makyeyenko, lawyers practising in Sevastopol.
The Ukrainian Government (“the Government”) were represented by their Agent, most recently, Mr N. Kulchytskyy, of the Ministry of Justice of Ukraine.
A. The circumstances of the case
The facts of the case, as submitted by the parties, may be summarised as follows.
1. Background to the case
The applicant company is a private company based in France, specialising in the seafood trade. According to the applicant company, it had a business relationship with the Sevastopol Directorate of Ocean Fishing State Company (ДП Севастопольське управління океанічного рибальства, “the SUOR”) since 1995.
Under a fixed-term charter agreement dated 12 April 2001 the applicant company chartered a fishing vessel, Grigory Kovtun, and crew from the SUOR for a period of ten years. It was agreed that disputes related to this agreement were to be decided by the Moscow Chamber of Commerce Arbitration.
The applicant company submitted that by 10 May 2001 the SUOR owed it a total of 974,128 United States dollars (USD), as was confirmed by a statement of verification of mutual payments, signed on that date by the managers of both companies.
On the same date the applicant company and the SUOR concluded a debt settlement agreement, under which the latter undertook to repay the above amount in full by 30 June 2001 and to secure its debt by giving the applicant company a mortgage on its fishing vessels.
On 22 May 2001 the applicant company and the SUOR signed two deeds, drawn up by a notary, mortgaging two of the SUOR’s vessels, Anatoly Gankevich (value of 8,830,238.32 Ukrainian hryvnias (UAH) (at the material time around USD 1,631,120)) and Grigory Kovtun (value of UAH 1,959,272.81 (at the material time around USD 361,917), as security for the settlement agreement of 10 May 2001.
2. Mortgage enforcement proceedings (case no. 20-6-601)
As the SUOR failed to repay its debt within the agreed time-limit, the applicant company brought proceedings to enforce the mortgages.
In the meantime, on 18 September 2001 the Sevastopol City Commercial Court (“the City Court”) opened a separate set of bankruptcy proceedings against the SUOR, following a request from company S., and issued an injunction barring debt recovery.
On 1 October 2001 the City Court, following hearings, at which the applicant company was represented by Messrs M. and Ma., lawyers practicing in Ukraine, allowed its claim, awarded it USD 974,128 and ordered a foreclosure sale of the mortgaged vessels. The SUOR representative did not attend the hearing.
The SUOR appealed against the judgment of 1 October 2001, referring to the above injunction and to the fact that there had been a tax lien on its property, which therefore could not be mortgaged or otherwise disposed of without authorisation from the tax authorities.
On 16 November 2001 the Sevastopol Commercial Court of Appeal (“the Court of Appeal”), following a hearing held in the presence of the parties, rejected the appeal and upheld the first)instqnce judgment, stating, inter alia, that the debt recovery injunction did not apply to the debt at issue.
The SUOR lodged an appeal in cassation to the Higher Commercial Court of Ukraine (“the Higher Commercial Court”). On 17 December 2001 the Sevastopol City Prosecutor’s Office (“the Prosecutor’s Office”) also submitted an appeal in cassation against the decisions of 1 October 2001 and 16 November 2001 on behalf of the State, considering, inter alia, that the SUOR had no right to sign the deeds without approval of the State Department of Fisheries (Державний департамент рибного господарства). There is no evidence that the applicant company was not aware of these appeals.
On 6 March 2002, in the absence of the parties, a judge of the Higher Commercial Court fixed a hearing for 19 March 2002. According to the applicant company, this decision was sent to its address in France by a simple letter on 7 March 2002 and was received on 20 March 2002 only. The applicant company submitted a copy of an envelope with a stamp “recommandé” and a hardly readable post stamp “07.03...”.
On 19 March 2002 the Higher Commercial Court held a hearing attended by the representative of the SUOR and a prosecutor, but not by the representatives of the applicant company. The court decided to disregard the appeal by the Prosecutor’s Office, as it had not participated in the first-instance and appeal proceedings concerning this case.
The Higher Commercial Court quashed the decisions of the lower courts and rejected the applicant company’s claim, holding that the injunction, introduced in the context of the bankruptcy proceedings, and the tax lien on the SUOR’s property barred the foreclosure sale of the disputed vessels. In particular, the court held that SUOR’s property has been subject to tax lien since 26 November 1999, therefore, the State Tax Inspectorate had a prior right over the vessels in question. The court also stated that the case file did not contain any documents proving the existence of the SUOR’s debt to the applicant company. The question of the absence from the hearing of the applicant company’s representatives was not addressed in the Higher Commercial Court’s decision.
On 17 April 2002 the applicant company lodged an appeal in cassation with the Supreme Court of Ukraine, in which it, inter alia, raised a complaint under Article 6 of the Convention in respect of the Higher Commercial Court’s alleged failure to ensure the presence of its representative at the cassation hearing. The applicant company’s appeal in cassation contained no reference to any pieces of evidence in support of its statement that it had become aware of the hearing of 19 March 2002 only on 20 March 2002.
On 6 June 2002 the Supreme Court refused the applicant company leave to appeal in cassation, finding that no procedural or substantive breaches had occurred before the lower courts.
On an unknown date in 2004 the applicant company asked the Higher Commercial Court to clarify its statement as to the absence of documents concerning the existence of the SUOR’s debt. The applicant company sought to know whether this statement should be understood as a finding that no such debt existed. On 12 April 2004 the Higher Commercial Court held that its jurisdiction on an appeal in cassation did not extend to making any findings as to the facts. Therefore, the statement at issue was not a factual determination of the existence or non-existence of the debt. The examination of the case was limited only to reviewing the compatibility of the lower courts’ decisions with substantive and procedural law.
3. Cases on annulment of the vessels’ mortgages (cases nos. 20-2/062-163 and 20-2/062-173) and on annulment of the charter agreement (case no. 20-2/062-175)
On 23 June 2001 the Prosecutor’s Office filed two actions on behalf of the State in the interests of the State Department of Fisheries against the applicant company and the SUOR, seeking the annulment of the mortgages on the Anatoly Gankevich and Grigory Kovtun vessels. The Prosecutor’s Office considered, inter alia, that the SUOR had acted ultra vires by signing the deeds of 22 May 2001 as it could not dispose of its vessels without the prior consent of the Department. In a third action, filed on the same day, the Prosecutor challenged the validity of the fixed-term charter agreement of 12 April 2001 for the Grigory Kovtun on the same grounds.
On 16 July 2001 the City Court found that it lacked territorial jurisdiction to hear these three actions. The law provided that the disputes were to be considered by the court of the location of the defendant. The applicant company was situated in France and, as there was no agreement between France and Ukraine about settling disputes, the present cases could not be examined by the Ukrainian courts.
The prosecution’s subsequent appeals against these decisions were rejected by the Court of Appeal on 11 September 2001.
The Prosecutor’s Office lodged appeals in cassation against the above decisions. On 29 January 2002 (cases nos. 20-2/062-173 and 20-2/062-163) and 31 January 2002 (case no. 20-2/062-175) the Higher Commercial Court dismissed the appeals without examination because the Prosecutor’s Office had not submitted any proof that a copy of its appeal had been sent to the applicant company.
On 27 May 2002 (case no. 20-2/062-175) the Higher Commercial Court rejected the prosecutor’s subsequent appeal as time-barred. It was also noted that the shortcomings mentioned in its decision of 31 January 2002 had not been corrected. However, on 14 June the Higher Commercial Court decided that the decision of 27 May 2002 had been adopted “by mistake” as in the meantime the prosecutor had submitted a postal delivery confirmation of 20 March 2002 to prove that the applicant company had received a copy of his appeal. The court renewed the time-limit for lodging an appeal and scheduled a hearing for 2 July 2002.
On 27 May 2002 the Higher Commercial Court renewed the time-limit for lodging an appeal in the two other cases and scheduled a hearing for 2 July 2002.
The hearing in the cases finally took place on 13 August 2002. The Higher Commercial Court allowed the appeals and remitted all three cases for a fresh examination to the first instance court.
On 14 and 21 November 2002 the Supreme Court of Ukraine rejected the applicant company’s requests for leave to appeal in cassation.
After one more round of proceedings (the prosecutor’s claims were granted by lower courts but these decisions were quashed), by decisions dated 6 February 2006 (the City Court, case no. 20-2/062-163), 12 and 20April 2006 (the Court of Appeal, cases nos. 20-2/062-173 and 20-2/062-175) the courts discontinued the proceedings in the cases for lack of territorial jurisdiction.
On 4 October and 23 November 2006 the Higher Commercial Court and the Supreme Court of Ukraine, respectively, rejected the SUOR’s appeals against the decisions of 12 and 20 April 2006.
4. Further cases on annulment of the vessels’ mortgages (cases nos. 20-7/1462 and 20-7/1466) and on annulment of the charter agreement (case no. 20-7/1463)
On 10 and 11 October 2001 the Prosecutor’s Office filed new actions on behalf of the State Department of Fisheries and the Sevastopol State Tax Inspectorate (Державна податкова інспекція м. Севастополя) against the SUOR seeking to have declared null and void the mortgage of the vessels and the fixed-term charter agreement of 12 April 2001. According to the Government, the applicant company was indicated as a second defendant on 6 November 2001.
On 28 November 2001 the City Court allowed the prosecutor’s actions. In particular, the court found that the agreement of 10 May 2001 contained no reference to any initial agreements and no indication of initial obligations and terms of their fulfilment. It further held that the SUOR could not dispose of its vessels without the prior authorisation of the Department. Moreover, the SUOR’s property had been subject to tax lien. Finally the City Court found that the value of the vessel specified in the impugned deed had been considerably understated. The applicant company appealed.
On 14 February 2002 the Court of Appeal quashed the judgments of 28 November 2001 and discontinued the proceedings for lack of territorial jurisdiction. The Court of Appeal considered that such an action would be more appropriately brought before the relevant French court with jurisdiction for the place where the defendant, namely the applicant company, was registered. No appeals were lodged by the parties against such decision in the case no. 20-7/1462.
On 3 June 2002 the Higher Commercial Court rejected the prosecutor’s appeal against the decision of 14 February 2002 in the case no. 20-7/1463 (annulment of the charter agreement)
On 20 June 2002 the Higher Commercial Court quashed the Court of Appeal’s decision of 14 February 2002 in the case no. 20-7/1466 (annulment of the mortgage agreement in respect of the Anatoly Gankevich vessel) and remitted the case for a fresh hearing to the first instance court. On 12 September 2002 the Supreme Court of Ukraine rejected the applicant company’s request for leave to appeal in cassation against this decision.
On 9 January 2003 the City Court suspended proceedings in the case no. 20-7/1466 pending the outcome of the case no. 20-2/062-173 (see above), as it concerned the same subject matter.
On 7 August 2007 the proceedings were resumed. They were terminated on 21 May 2008. The parties did not submit a copy of this decision. It could be understood from their submissions that the proceedings were terminated without the case being considered on the merits allegedly for the lack of territorial jurisdiction.
5. Other proceedings
On 1 October 2004 the Nanterre Commercial Court (Tribunal de commerce de Nanterre) in the absence of the defendant, awarded the applicant company, inter alia, USD 974,128.29 to be paid by the SUOR for the failure to comply with its obligations under the agreements of 12 October 2000, 12 April 2001 and 10 May 2001.
On 29 December 2004 the Moscow Chamber of Commerce Arbitration Tribunal rejected the applicant company’s claim to oblige the SUOR to comply with the agreement of 12 April 2001 and found the above agreement to be null and void.
The parties did not submit any further information about these proceedings.
B. Relevant domestic law
Section 15 of the Code of Commercial Procedure (“the Code”) provides that disputes on nullity of contracts shall be examined by a commercial court at the location of the defendant. In case there are several defendants in the case such case shall be examined by a court at the location of one of the defendants upon the claimant’s choice.
Section 79 of the Code provides that the commercial court shall suspend the proceedings in the case (“зупиняє провадження”) until another related case is considered. The decision on suspension of the proceedings can be appealed against.
Section 111-7 of the Code provides that the cassation instance shall verify the application of procedural and substantive law to the facts of the case already established by the lower courts.
COMPLAINTS
In respect of case no. 20-6/601 the applicant company complained under Article 6 § 1 of the Convention that the Higher Commercial Court’s failure to secure its representative’s presence at the hearing of 19 March 2002 had been contrary to the principle of equality of arms. Moreover, the applicant company contended that it had been placed at a disadvantage vis-à-vis the opposite party because the latter’s position had been supported by the Prosecutor’s Office.
Relying on Article 1 of Protocol No. 1 to the Convention the applicant company complained that the Higher Commercial Court’s allegedly arbitrary decision of 19 March 2002 had infringed its right to peaceful enjoyment of property.
In respect of cases nos. 20-2/062-163, 20-2/062-173, 20-2/062-175 and 20-7/1466 the applicant company complained under Article 6 § 1 of the Convention about unfair hearings in those cases referring to various breaches of procedure. It further complained that the prosecutor’s involvement in these cases had been contrary to the principle of equality of arms and that the applicant company’s representative had not been properly informed of the time and place of hearings. It also complained that the Ukrainian courts had not been impartial and competent to examine such disputes. The applicant company also complained about the allegedly excessive length of the proceedings.
The applicant company finally invoked Article 14 of the Convention and complained of being discriminated against because of its foreign origin.
THE LAW
1. The applicant company complained that the hearing of 19 March 2002 in case no. 20-6-601 had been held in its representative’s absence in breach of Article 6 § 1 of the Convention.
The invoked Article reads, in so far as relevant, as follows:
“In the determination of his civil rights and obligations ... everyone is entitled to a fair ... hearing ... by [a] ... tribunal ...”
The Government submitted that the absence of the applicant company’s representative in a court hearing on 19 March 2002 had not led to an erroneous decision in the applicant company’s case since the Higher Commercial Court of Ukraine had examined only materials and facts which had been already known at the time of examination of the case in the lower instances. Moreover, it was not the final decision in the case since it was appealed to the Supreme Court of Ukraine. The latter thoroughly examined the applicant company’s appeal and found it to be unsubstantiated. Therefore, according to the Government there was no breach of the applicant company’s right to a fair hearing under Article 6 § 1 of the Convention.
The applicant company maintained that the Supreme Court’s decision of 6 June 2002 rejecting its appeal against the decision of 19 March 2002 had not been reasoned.
The Court reiterates that although Article 6 of the Convention does not compel the Contracting States to set up courts of appeal or of cassation (see, among other authorities, Delcourt v. Belgium, 17 January 1970, §§ 25‑26, Series A no. 11), where such courts exist the guarantees contained in Article 6 must be complied with.
The Court further reiterates that Article 6 of the Convention does not guarantee the right to personal presence before a civil court but rather a more general right to present one’s case effectively before the court and to enjoy equality of arms with the opposing side. The principle of equality of arms – in the sense of a “fair balance” between the parties – requires that each party should be afforded a reasonable opportunity to present his case under conditions that do not place him at a substantial disadvantage vis-à-vis his opponent (see, among other authorities, Dombo Beheer B.V. v. the Netherlands, 27 October 1993, § 33, Series A no. 274).
In the present case the applicant company complained of its allegedly late notification about the hearing of 19 March 2002 before the Higher Commercial Court as a result of which the hearing took place in the applicant company’s representative’s absence but in the presence of the opposite party.
In this regard the Court notes that the principle of equality of arms would be devoid of substance if a party to the case were not notified of the hearing in such a way as to have an opportunity to attend it, should he or she decide to exercise a right to appear established in domestic law (see, Zagorodnikov v. Russia, no. 66941/01, § 30, 7 June 2007).
The Court notes that the applicant company did not submit either before this Court or before the Supreme Court of Ukraine any convincing evidence in support of its statement that it had not received in time the notification about the hearing of 19 March 2002. Moreover, while the applicant company was represented by Ukrainian lawyers throughout the proceedings, it did not address in its submissions before the Supreme Court of Ukraine the issue of whether they had been informed about the hearing of 19 March 2002.
The Court further notes that the examination of the case in the cassation instance was limited to the question of law and the applicant company did not contest that it had an opportunity to answer in writing the claimant’s arguments.
The Court considers that this complaint is manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 and 4 of the Convention.
2. The applicant company complained under Article 6 § 1 of the Convention about an excessive length of proceedings in case no. 20-7/1466.
The invoked Article reads, in so far as relevant, as follows:
“In the determination of his civil rights and obligations ... everyone is entitled to a ... hearing within a reasonable time by [a] ... tribunal ...”
According to the Government, the applicant company became a party to the proceedings in question only on 6 November 2001 when it had become a second defendant in the case.
The Government further indicated that “between 6 December 2002 and 21 May 2008” the proceedings in the applicant company’s case were stayed since identical proceedings were pending before the court. The Government argued that this period should not be included in the overall duration of the proceedings (see Sen v. Ukraine (dec.), no. 31740/08, 5 November 2010). Moreover, the applicant company did not challenge the decision to stay the proceedings.
The Government finally stated that, in view of the above, the requirement of the reasonable length of proceedings had not been breached in the present case.
The applicant company stated that the issue in question in case no. 20-7/1466 was similar to the issues in two other cases examined simultaneously with it (cases nos. 20-7/1462 and 20-7/1463) and concerned the territorial jurisdiction of the Ukrainian commercial courts. The cases nos. 20-7/1462 and 20-7/1463 were terminated on 14 February 2002 for lack of such jurisdiction. Therefore, in case no. 20-7/1466 the court had not had to wait for the termination of the proceedings in case no. 20-2/062-173.
According to the applicant company, “the proceedings in its case should be assessed in its entirety”. Thus, the disputes in the Ukrainian courts concerning the debt of a public enterprise started in July 2001 and remained unexamined till January 2008. Moreover, the City Court terminated the proceedings in case no. 20-7/1466 only one year and six months after the final decision in case no. 20-2/062-173.
The Court notes that it is unclear when the applicant company became a party to case no. 20-7/1466. Since the applicant company did not contest the Government’s submission that it became a party to the proceedings on 6 November 2001, the Court takes this date as a reference date for the beginning of the proceedings.
Thus, the period to be taken into consideration began on 6 November 2001, when the applicant company joined the proceedings, and ended on 21 May 2008. It thus lasted six years and six and a half months.
The proceedings in the case were comprised of three periods: between 6 November 2001 and 9 January 2003 (one year and two months for four instances); between 9 January 2003 and 7 August 2007 (four and a half years), when the proceedings were suspended pending the outcome of another set of proceedings; and between 7 August 2007 and 21 May 2008 (nine months).
The Court reiterates that the reasonableness of the length of proceedings must be assessed in the light of the circumstances of the case and with reference to the following criteria: the complexity of the case, the conduct of the applicant and the relevant authorities and what was at stake for the applicant in the dispute (see, among many other authorities, Frydlender v. France [GC], no. 30979/96, § 43, ECHR 2000‑VII).
It does not appear that the present case was a complex one. There is also no evidence that the applicant company had contributed to the length of the proceedings.
The Court notes that in the present case the periods of inactivity were caused by suspension of the proceedings pending examination of another case and by belated decisions to resume the proceedings and to terminate them.
In this respect the Court considers that the suspension of the proceedings in question pending the outcome of another case does not appear to be unlawful, unreasonable or arbitrary. Moreover, there is no evidence that the applicant company had challenged the decision to suspend the proceedings. Although it is true that the proceedings in question were re-opened only eight months after the proceedings in the reference case had been terminated, there is equally no evidence that the applicant company had itself requested to resume consideration of case no. 20-7/1466.
The Court notes that it further took the national authorities another nine months to terminate the proceedings in the latter case. However, having regard to all the circumstances of the case and, in particular, to the overall duration of the proceedings, the Court finds that their length did not in itself exceed what may be considered “reasonable”.
It follows that this complaint is manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 and 4 of the Convention.
3. The applicant company complained about breach of its property rights under Article 1 of Protocol No. 1 to the Convention.
The invoked Article reads as follows:
“Every natural or 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.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”
The Government submitted that the decisions of 1 October and 16 November 2001 had been quashed under the ordinary cassation procedure. Therefore, there was no breach of the applicant company’s property rights.
The applicant company maintained that quashing of the decisions in its favour in case no. 20-6-601 had been done in proceedings during which the guarantees of Article 6 of the Convention had not been respected.
In view of its above findings in respect of the applicant company’s complaint about an alleged breach of the equality of arms under Article 6 § 1 of the Convention, the Court considers that the applicant company’s complaint under Article 1 of Protocol No. 1 to the Convention is manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 and 4 of the Convention.
4. The Court has examined the remainder of the applicant company’s complaints. Having regard to all the material in its possession, it finds that these complaints do not disclose any appearance of a violation of the rights and freedoms set out in the Convention. It follows that this part of the application must also be rejected as being manifestly ill-founded, pursuant to Article 35 §§ 3 and 4 of the Convention.
For these reasons, the Court unanimously
Declares the application inadmissible.
Stephen PhillipsBoštjan M. Zupančič
Deputy RegistrarPresident
Full & Egal Universal Law Academy