FIFTH SECTION
DECISION
Application no. 62050/10
LENZ VERMÖGENSVERWALTUNGSGESELLSCHAFT GBR
against Germany
The European Court of Human Rights (Fifth Section), sitting on 23 September 2014 as a Committee composed of:
Boštjan M. Zupančič, President,
Angelika Nußberger,
Vincent A. de Gaetano, judges,
and Stephen Phillips, Deputy Section Registrar,
Having regard to the above application lodged on 20 October 2010,
Having deliberated, decides as follows:
THE FACTS
The applicant, Lenz Vermögensverwaltungsgesellschaft Gbr, is a civil law partnership with its registered office in Stuttgart, Germany. The applicant partnership was represented before the Court by Mr J. Broich, a lawyer practising in Frankfurt.
A. The circumstances of the case
1. The facts of the case, as submitted by the applicant, may be summarised as follows.
2. The applicant partnership holds a stake of approximately 42.7% of the shares of Z. AG, a German unlisted stock company operating in the construction business. In November 2005 an Austrian construction corporation, S. SE, acquired 53.6 % of the share capital. The remaining shares are held by one minor shareholder. Subsequently, representatives of S. SE were elected to the supervisory and the management board of Z. AG.
3. On 9 March 2006 the applicant partnership filed a motion jointly against Z. AG and S. SE, requesting the Chamber for Commercial Matters of the Stuttgart Regional Court, to issue an injunction banning Z. AG from undertaking a number of specified restructuring measures and to ban S. SE. from using its dominant position for implementing these measures. The applicant partnership argued that the totality of the envisaged measures would harm Z. AG’s and thus the applicant partnership’s economic interests and would lead to a factual domination of Z. AG by its competitor S. SE (qualifiziert-faktische Konzernierung), without duly protecting the minority shareholders’ interests.
4. On 16 August 2006 the Stuttgart Regional Court dismissed the action on the grounds that the applicant partnership had failed to substantiate that the restructuring measures would be to Z. AG’s detriment. There was no indication that the envisaged measures would jeopardise Z. AG’s profitability or that they would entail excessive risks for the enterprise.
5. On 17 November 2006 the applicant partnership lodged an appeal, arguing, inter alia, that it was contrary to the case-law of the Federal Court of Justice that they should bear the full burden of proof for the alleged detriment. The applicant partnership submitted that they had not been able further to substantiate their allegations, as they did not have access to the pertinent documents which were in the sole possession of Z. AG.
6. On 21 March 2007 the Stuttgart Court of Appeal rejected the applicant’s appeal. Even if one were to grant the applicant partnership an alleviation of the burden of substantiation, the Court of Appeal considered that the applicant partnership had still failed sufficiently to establish the factual grounds for an injunction claim. Relying on the case-law of the Federal Court of Justice, the Court of Appeal considered that it would have been necessary to submit concrete facts indicating that the defendant had undertaken specific detrimental measures. The court considered that the applicant partnership, in its submissions before the first instance court, had merely depicted an abstract risk of detriment to Z. AG. In view of the defendants’ extensive submissions, the applicant partnership should have submitted and offered proof for concrete facts indicating that the management had infringed Z. AG’s interests in a way which exceeded specific interferences which could be made subject to individual compensation claims. The restructuration measures fell within the management’s discretion.
7. With regard to the burden of proof and of substantiation, the Court of Appeal further observed that the applicant partnership, in its capacity as a minority shareholder, would have been entitled to request a special audit under section 315 sentence 2 of the Stock Corporation Act. The Court of Appeal further noted that the applicant partnership had made use of this option during a shareholders’ meeting held on 22 June 2006.
8. On 25 June 2008 the Federal Court of Justice rejected the applicant’s request for leave to appeal (Nichtzulassungsbeschwerde), considering that the lower court’s assessment of the burden of substantiation was in line with its case-law.
9. On 24 April 2009 the Federal Court of Justice rejected the applicant partnership’s motion to be heard (Anhörungsrüge).
10. On 16 June 2009 the applicant partnership lodged a constitutional complaint. They complained, in particular, that the lower courts’ assessment of the burden of substantiation and of proof failed to take into account their structurally weaker position in their capacity of minority shareholders, thus violating their property rights. They further submitted that they could not be reasonably expected to await the outcome of a special audit before lodging their injunction claim, as such proceedings were lengthy and presupposed that damage had already occurred.
11. On 8 April 2010 the Federal Constitutional Court (file no. 1 BvR 1473/09) refused to accept the applicant partnership’s complaint for adjudication for lack of prospect of success. The Federal Constitutional Court considered that the instant case might raise the issue whether the protection of property rights of a shareholder holding control stock (Sperrminorität) had to be differentiated from that of other small shareholders. However, this question was not decisive in the instant case, as the lower courts had unanimously considered that the applicant’s submissions did not contain a sufficient statement of possible detriments which could be caused by the impugned measures. With regard to the complaint that the protection of the applicant partnership’s property rights and the right to a fair trial would have necessitated an alleviation of the burden of proof, the Federal Constitutional Court observed that the applicant partnership had failed to raise this constitutional question before the lower courts, thus failing to comply with the principle of subsidiarity. Furthermore, the applicant partnership had failed sufficiently to address the Court of Appeal’s argument that the applicant could have applied for a special audit under section 315 sentence 2 of the Stock Corporation Law. On the basis of the content of the applicant’s constitutional complaint, the Constitutional Court could not establish that a special audit would not have been an effective means to overcome any existing imbalance in access to information.
B. Relevant domestic law
12. Section 315 of the Stock Corporation Law provides, in so far as relevant:
Special audit
(1) Upon a shareholder’s request, the court shall appoint a special auditor charged with examining the business relations between the company and the controlling enterprise if....
(2) If other facts support the allegation that damage had been inflicted in violation of duties, the request may be lodged by shareholders holding stock reaching the threshold defined in section 142 § 2, if they establish that they have been the holder of the shares for at least three months prior to lodging their request.
Under 142 § 2, the shareholders’ stock must amount to one hundredth of the overall capital stock or to 100,000 euros.
COMPLAINTS
13. The applicant partnership complained under Article 6 § 1 of the Convention that the domestic courts had failed to take into account the disparity in information suffered by the applicant partnership vis-à-vis the defendant parties. The applicant partnership further complained about the Federal Constitutional Court’s refusal to examine the alleged violations of the Basic Law.
14. The applicant partnership complained under Article 1 of Protocol No. 1 that the domestic courts had failed to protect their right to peaceful enjoyment of their stake in Z. AG against unlawful interferences. They complained, in particular, that the domestic courts had failed to grant the applicant partnership access to fair proceedings allowing them adequately to defend their property rights.
THE LAW
I. ALLEGED VIOLATION OF ARTICLE 6 OF THE CONVENTION
15. The applicant partnership complained about a violation of the principle of equality of arms. They complained, in particular, that the domestic courts had failed to have due regard to the fact that they, in contrast to the defendants, did not have access to internal information on Z. company’s business transactions. This resulted in a structural disparity which would have called for a reversal or at least an alleviation of the burden of proof. They further complained that they submitted material evidence which the domestic courts did not admit. The applicant partnership relied on Article 6 § 1 of the Convention, which provides:
“In the determination of his civil rights and obligations ... everyone is entitled to a fair ... hearing ... by [a] ... tribunal ...”
16. The Court reiterates, at the outset, that Article 6 of the Convention does not lay down any rules on the admissibility of evidence or the way it should be assessed, including its probative value or the burden of proof. These matters are therefore primarily for regulation by national law and the national courts (see, among other authorities, García Ruiz v. Spain [GC], no. 30544/96, § 28, ECHR 1999‑IG; Tiemann v. France and Germany (dec.), nos. 47457/99 and 47458/99, ECHR 2000‑IV). Notwithstanding that principle, the right to a fair trial, guaranteed under Article 6 § 1 of the Convention, presumes the observance of the principle of equality of arms, which implies that each party, in litigation involving opposing private interests, must be afforded a reasonable opportunity to present his case – including his evidence – under conditions that do not place him at a substantial disadvantage vis-à-vis his opponent (see, among many other authorities, Dombo Beheer B.V. v. the Netherlands, 27 October 1993, § 33, Series A no. 274; Hämäläinen and Others v. Finland (dec.), no. 351/02, 26 October 2004 and Storck v. Germany, no. 61603/00, § 161, ECHR 2005‑V).
17. Turning to the circumstances of the instant case, the Court observes that the applicant partnership enjoyed the right to adversarial proceedings with the participation of the interested parties before two court instances. Through counsel, they were further in a position to put forward all arguments they considered relevant in the instant case. With regard to the argument that the courts failed to take into account that the applicant partnership, in their capacity as minority shareholders, did not have access to pertinent information, the Court notes that the Stuttgart Court of Appeal had considered that the applicant partnership would have been entitled to request a special audit under section 315 sentence 2 of the Stock Corporation Act in order to obtain further relevant information. The Federal Constitutional Court considered that the applicant partnership had failed to refute this argument in their constitutional complaint. The Court notes that the applicant partnership, in their constitutional complaint dated 16 June 2009, alleged in a rather general way that they could not be reasonably expected to await the outcome of a special audit before lodging their injunction claim, as such proceedings were lengthy and presupposed that damage had already occurred. Under these circumstances, the Federal Constitutional Court’s assessment that the applicant partnership had failed sufficiently to address the Court of Appeal’s argument that the possibility of obtaining further information by demanding a special audit could have counterbalanced any disparity in access to information is in line with the principle of subsidiarity and does not appear in any way arbitrary.
18. Having regard to the above considerations, the Court does not find established that the applicant partnership had suffered a substantial disadvantage vis-à-vis the defendant parties in the civil proceedings on their injunction claim. It follows that this complaint is manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 (a) and 4 of the Convention.
19. With regard to the Federal Constitutional Court’s alleged failure to examine the applicant partnership’s complaint under the Basic Law, the Court observes that the Federal Constitutional Court gave a reasoned decision as to why the applicant partnership’s constitutional complaint lacked prospect of success. It follows that also this complaint is manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 (a) and 4 of the Convention.
II. ALLEGED VIOLATION OF ARTICLE 1 OF PROTOCOL No. 1
20. The applicant partnership further complained that the domestic courts, by refusing to prevent S. SE. from using its factual domination to Z. AG’s detriment, had failed to protect their right to peaceful enjoyment of their property. They relied on Article 1 of Protocol No. 1 to the Convention, providing:
“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.”
21. Relying, in particular, on the Court’s judgment in the case of Sovtransavto Holding v. Ukraine (no. 48553/99, ECHR 2002‑VII), the applicant partnership submitted that the instant case fell to be examined under the general rule set out in Article 1 of Protocol No. 1. According to the applicant partnership, the measures taken by S. SE. diminished the powers they exercised as shareholders. It decreased the assets while diminishing their voting rights. In addition, S. SE. had destroyed Z. AG’s entrepreneurial independence while exposing it to competition with other group companies, thus threatening the very existence of the enterprise.
22. The Court notes that the applicant partnership holds a minority stake of the shares of Z. AG, which constitute possessions within the meaning of Article 1 of Protocol No. 1. The Court reiterates that it has previously considered that company shares not only convey an indirect claim on company assets but that other rights, especially voting rights and the right to influence the company, may follow the share (see Sovtransavto Holding, cited above, § 92; and Marini v. Albania, no. 3738/02, § 165, 18 December 2007).
23. The Court further reiterates that it has examined a number of complaints lodged by company shareholders about a loss of influence in the shareholding company. In the case of Sovtransavto Holding, the applicant company initially held a 49 % stake in another company. Following repeated increases of share capital, the percentage held by the applicant company was reduced to approximately 20 % (see Sovtransavto Holding, cited above, § 92). In the Marini case, the applicant held 50 % of a stock company jointly set up with the defending State. Subsequently, the defending State unilaterally terminated the company’s activities and disposed of the company’s assets (see Marini, cited above, §§ 9, 19, 24). The Court concluded in both cases that there had been changes in the powers the applicant company exercised as a shareholder, that is to say in its ability to run the company and to control its assets, which brought the cases under the general rule of Article 1 of Protocol No. 1 (see Sovtransavto Holding, cited above, § 92; and Marini, cited above, § 166).
24. In the case of Shesti Mai Engineering OOD and Others v. Bulgaria (no. 17854/04, 20 September 2011), the applicants jointly held a total of almost 50 % of the shares of a stock company. As a result of measures undertaken by a fraudulent, but court-registered management, those shares were diluted to a total of less than 1 % (Shesti Mai Engineering OOD, cited above, § 80). The Court concluded that the defendant State had failed to give the applicants adequate protection against an unlawful interference with their property rights (Shesti Mai Engineering OOD, cited above, § 91).
25. The Court observes that the applicants in the above-cited cases either complained about a dramatic dilution of their quota of shares (see Sovtransavto Holding and Shesti Mai Engineering OOD) or direct State interference leading to the termination of the respective shareholding company’s business (Marini). Turning to the circumstances of the instant case, the Court observes that the applicant partnership holds a minority stake of approximately 43 % of the shares of Z. AG., which had not been modified by the restructuring measures complained of. Neither had there been any direct or indirect State interference with the value of the applicant’s stock. It follows that the facts of the instant case fall to be distinguished from those of the cases previously examined by the court. In the instant case, the applicant partnership complains that management installed by a new majority shareholder started to implement a number of restructuring measures which were, in the applicant’s view, detrimental to Z. AG’s business activities. The Court notes in this context that the Stuttgart Regional Court and the Stuttgart Court of Appeal, having examined the applicant partnership’s and the defendants’ submissions, considered that the applicant partnership had failed to establish that the impugned measures had a detrimental effect on Z. AG’s business activities and that the measures complained of fell within the new management’s entrepreneurial discretion. Based on all the material in its possession, and having regard to its considerations under Article 6 of the Convention (see paragraphs 17-18, above) the Court cannot find that the conclusion reached by the domestic courts, which are primarily called upon to establish the relevant facts, was in any way arbitrary.
26. It follows that there is no indication of a violation of the defending State’s obligations under Article 1 of Protocol No. 1 of the Convention. It follows that also this complaint is manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 (a) 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