Communicated on 9 July 2015
FOURTH SECTION
Application no. 29769/06
Andris JAUNZEMS and others
against Latvia
lodged on 17 July 2006
STATEMENT OF FACTS
The applicants are twenty-two persons, whose names and dates of birth are included in the appendix. Four of the applicants (Vasilijs Bogdanovs, Guntars Ozols, Ivars Smukulis and Ilgvars Stopnieks) died after the application was lodged with the Court.
A. The circumstances of the case
The facts of the case, as submitted by the applicants, may be summarised as follows.
The applicants were employed by a State enterprise “Alūksnes komutācijas tehnikas mezglu rūpnīca” (hereafter – “KTMR”), a factory producing industrial equipment. On 21 February 1996 the enterprise was offered for privatisation but on 14 May 1996 the privatisation process was suspended due to a dispute concerning denationalisation of the enterprise and the related court proceedings.
On an unknown date twenty of the twenty-two applicants, as well as some other employees, initiated court proceedings in which they argued that since 1999 the payment of their salaries had been delayed and that from June 2000 through January 2001 they had received no pay at all. On 14 March 2001 the Alūksne District Court upheld their claims in part and ordered KTMR to pay the outstanding salaries. No appeal was lodged against the judgment and it became final on 4 April 2001.
On 11 January 2002 the Privatisation Agency (Privatizācijas Aģentūra) –a non-profit State joint stock company whose primary function is the management of the privatisation process – sent a letter to the Alūksne District bailiffs’ office. The letter noted that on 23 August 2001 the Minister of Economy had issued an ordinance no. 156 renewing the process of privatisation of KTMR. For that reason, the Privatisation Agency invoked section 560 (2) of the Civil Procedure Law and invited the bailiffs to suspend the enforcement of the judgment of 14 March 2001. According to this provision, when an enterprise had been put up for privatisation a suspension of enforcement proceedings was compulsory, save for the cases concerning compensation for accidents at work or occupational diseases.
On 17 January 2002 the enforcement of the judgment was suspended. The pre-typed form of the bailiff’s decision contained an indication that it could be appealed against in a court pursuant to section 564 (3) of the Civil Procedure Law. It appears that the applicants did not appeal.
On 20 March 2002 the Vidzeme Regional Court declared KTMR insolvent, having established that its debt liabilities exceeded its assets more than tenfold. More than 90% of its debt liabilities consisted of unpaid taxes and penalties. KTMR had no secured creditors. KTMR was declared insolvent starting from the day the insolvency application had been lodged – 18 January 2002. Creditors were given a three-month time-limit for submitting their claims to the insolvency administrator.
Meanwhile, on 20 February 2002, all twenty-two applicants and some other employees of KTMR had lodged another claim concerning the salaries that had not been paid from January 2001 through February 2002. On 22 May 2002 the Alūksne District Court upheld this claim in full. No information about enforcement proceedings of this judgment, if any, has been provided.
On 29 December 2003 the applicants’ representative submitted a complaint about the unpaid salaries to the Ministry of Economy and on 23 January 2004 the deputy State secretary of the ministry provided a response. He replied that the enforcement of the Alūksne District Court’s judgments had been terminated not because of an arbitrary decision of the Privatisation Agency, as alleged by the applicants, but because KTMR had been declared insolvent and because section 50 (2) of the Law on Insolvency of Companies (likums “Par uzņēmumu un uzņēmējsabiedrību maksātnespēju”) stipulated that the enforcement of judgments against insolvent enterprises should be terminated. The letter stated that the Law on Insolvency of Companies was lex specialis as compared to the laws on which the judgments of the Alūksne District Court had been based. Furthermore, in 2002 KTMR had been granted 17 242.67 Latvian lati (LVL) from the State budget in order to cover the employees’ claims, out of which 7 033.88 LVL had been paid to the employees to cover three months’ salaries and severance pay. Accordingly, the deputy State secretary was of the view that all claims guaranteed to the applicants under the Law on Protection of Employees in Case of Insolvency of Employer (likums “Par darbinieku aizsardzību darba devēja maksātnespējas gadījumā”) had been fully covered from the State budget. In addition, the deputy State secretary emphasised that the fact the State had paid a portion of the KTMR’s debts to the applicants did not mean that the State had replaced the applicants’ employer in their civil-law relationships. The question concerning the recovery of the outstanding payments had to be resolved between the applicants and their employer, or their employers’ successor, via civil-law mechanisms. With regard to the applicants’ question as to whether and when they would receive their salaries, the deputy State secretary responded that it depended on whether during the course of the liquidation proceedings sufficient funds would be left after the debts of the priority creditors would be covered.
According to the explanations submitted by the applicants, they had received severance pay but not their salaries or any other further payments from KTMR. The salaries owed to the applicants on 20 December 2002, according to the accounting data of KTMR, are listed in the appendix. These sums are also confirmed by the applicants.
B. Relevant domestic law
Section 560(2) of the Civil Procedure Law requires suspension of the enforcement proceedings in case a decision has been taken to privatise the debtor company. In particular, it states that upon a request of the institution carrying out the privatisation (i.e. the Privatisation Agency) any enforcement proceedings against this company shall be suspended, except if they concern compensation for an accident at work or occupational disease.
Section 563 (2) of the Civil Procedure Law provides that the enforcement of a judgment is to be terminated upon a request from an insolvency administrator if the debtor has been declared insolvent. This provision at the relevant time was echoed in section 50 (2) of the Law on Insolvency of Companies that was in force until 1 January 2008.
According to section 564 (3) of the Civil Procedure Law, as in force until 24 July 2003, judgment creditors and debtors could challenge a decision to suspend, renew or terminate enforcement proceedings before the court. After the said date such right was removed.
According to section 107 (3) of the Law on Insolvency of Companies, in the case of a bankruptcy of an insolvent company the employees’ claims were included in the category of debts to be covered immediately after covering the costs of the insolvency administration. However, the employees’ claims with such a priority status were limited to, in so far as relevant to the present case, salaries for the first three months after the company had ceased to pay the salaries.
From 16 July 2002 until 1 January 2003 the payment of compensations to the employees of insolvent State companies was provided for in the Regulations of the Cabinet of Ministers no. 308 (2002). Paragraphs 3.2 and 3.4 of the Regulations provided for a payment, from the State budget, of salaries for the first three months after the company had ceased paying salaries and of severance pay.
Subsequently this issue became regulated by the Law on Protection of Employees in Case of Insolvency of Employer, which entered in force on 1 January 2003. This Law provides for creation of a guarantee fund, which is administered by a State institution and can be used for covering the employees’ claims in case of the employer’s insolvency. According to sections 3 and 4 of this Law, the employees are entitled to, insofar as relevant here, the salaries for the last three months of their employment relationship that had existed in the last twelve month prior to the employer’s insolvency, as well as to the severance pay. Section 7 (3) stipulates that in case the assets in the guarantee fund would not be sufficient, the claims guaranteed by this Law shall be covered from the State budget.
COMPLAINT
The applicants complain under Article 1 of Protocol No. 1 to the Convention that they have not received their salaries.
QUESTIONS TO THE PARTIES
1. Is the applicants’ inability to obtain enforcement of the two judgments of the Alūksne District Court in their favour imputable to the State, within the meaning of Article 34 of the Convention? In particular, was the institutional and operational independence of the State enterprise “Alūksnes komutācijas tehnikas mezglu rūpnīca” sufficient to absolve the State from its liability for the debts of this State-owned company (see Liseytseva and Maslov v. Russia, nos. 39483/05 and 40527/10, 9 October 2014)?
2. Did the failure to enforce the two judgments of the Alūksne District Court in the applicants’ favour breach Article 1 of Protocol No. 1 to the Convention?
Appendix
List of the applicants and of the due sums
No.
Applicant’s name and
date of birth
Unpaid salary (LVL)
Egons BARAŅENKO
04/12/1957
993.97
Elita BERKULE
17/03/1947
895.19
Vasilijs BOGDANOVS
25/05/1938
656.15
Laimons GĀTERS
12/05/1941
774.73
Vitauts HANZENS
16/09/1936
1 335.12
Imants IRBE
02/01/1953
867.11
Andris JAUNZEMS
26/08/1970
982.90
Ausma JURJĀNE
16/12/1946
603.38
Anna KALNIŅA
26/05/1943
467.93
Biruta KRANCMANE
10/07/1949
717.17
Vaira KRŪMIŅA
19/03/1942
290.33
Boriss ŅEZLOBINS
18/02/1957
597.62
Guntars OZOLS
05/09/1943
880.13
Aivars PUTNS
21/09/1954
600.86
Māra ROZIŅA
05/03/1947
437.46
Māris RUTKIS
05/09/1965
175.00
Ivars SMUKULIS
15/10/1942
654.72
Ilgvars STOPNIEKS
01/02/1946
761.17
Ilga ŠIKOVA
07/05/1951
560.21
Rolands VENDIŅŠ
12/09/1958
696.47
Malda ZAĶE
28/03/1948
706.12
Kārlis ZĒĢELE
28/08/1952
725.30
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