Communicated on 20 December 2017
FOURTH SECTION
Application no. 14738/16
Bahrija MUMINOVIĆ against Bosnia and Herzegovina
and 3 other applications
(see list appended)
STATEMENT OF FACTS
A list of the applicants is set out in the appendix.
A. The circumstances of the cases
The facts of the cases as submitted by the applicants may be summarised as follows.
1. The case of Ms Bahrija Muminović
In the period from July 2003 until August 2006 the applicant worked as a lawyer at Krivaja d.o.o. Zavidovići, a limited liability company owned by the Federation of Bosnia and Herzegovina (an administrative unit of Bosnia and Herzegovina[1]). In the former Socialist Federal Republic of Yugoslavia (“the SFRY”), the company was one of the leading wood manufacturers. It employed thousands of people. Like all other large companies in the SFRY, it was socially owned. Socially-owned companies were the flagship of the Yugoslav model of self-management: neither private nor State-owned, they were a collective property controlled by their employees, based on a communist vision of industrial relations. Since the dissolution of the SFRY in 1991-92 and the war in Bosnia and Herzegovina in 1992-95, the company has been facing financial difficulties.
Like other employees of that company, the applicant received a reduced salary in the period from July 2003 until May 2004 and no salary thereafter. She therefore initiated two sets of civil proceedings against Krivaja d.o.o. Zavidovići.
By a judgment of the Zavidovići Municipal Court of 12 January 2006, which became final on 3 November 2006, the company was ordered to pay the applicant, within 15 days, 23,531 convertible marks (BAM)[2] in salary arrears, together with default interest at the statutory rate, and BAM 1,216 in costs and expenses. The same court issued a writ of execution (rješenje o izvršenju) in respect of that judgment on 12 December 2006.
Shortly thereafter, the applicant received BAM 5,045 in this connection.
Being unable to pay its debts, on 27 June 2007 Krivaja d.o.o. Zavidovići presented a winding-up petition. The hearing was adjourned at the request of Krivaja d.o.o. Zavidovići on eight occasions because negotiations with its creditors were underway.
By a judgment of the Zavidovići Municipal Court of 4 October 2007, which became final on 17 February 2009, the company was ordered to pay the applicant, within 15 days, BAM 10,330 in salary arrears, together with default interest at the statutory rate, and BAM 120 in costs and expenses. It was also ordered to pay statutory social contributions for the benefit of the applicant to social security funds in the amount of BAM 27,103. In the course of those proceedings, Krivaja d.o.o. Zavidovići argued that the Federation of Bosnia and Herzegovina should be held responsible in this case, rather than the company itself, because it had started charging State-owned companies for wood harvested in State-owned forests. The domestic courts rejected that argument.
On 24 September 2008, with the consent of the Federation of Bosnia and Herzegovina, Krivaja d.o.o. Zavidovići and Ferimpex d.o.o. Zavidovići, a private company, set up a joint-venture company. Soon thereafter, Krivaja d.o.o. Zavidovići withdrew its winding-up petition lodged on 27 June 2007.
On 22 July 2009 the Zavidovići Municipal Court issued a writ of execution in respect of the judgment of 4 October 2007 and then ordered the joinder of the two sets of enforcement proceedings pursued by the applicant.
On 23 September 2009 the Zavidovići Municipal Court held an auction for the sale of an item belonging to Krivaja d.o.o. Zavidovići with a starting price of BAM 29,000. A writ imposing a charge on that item (pljenidbeni popis) was issued in favour of the applicant in January 2008. Such writs had earlier been issued in favour of 22 other creditors. It would appear that the item was not sold.
In March 2010 the Zavidovići Municipal Court issued a writ, in favour of the applicant, imposing a charge on another item belonging to that company worth an estimated value of BAM 100,000. It is not known whether the sale of that item was attempted.
On 7 June 2011 the joint-venture agreement of 24 September 2008 was terminated because creditors of Krivaja d.o.o. Zavidovići (notably, the tax authorities) had blocked the transfer of its property to the new, joint-venture company.
On 11 July 2011 the Zenica Municipal Court, at the request of creditors, made a winding-up order against Krivaja d.o.o. Zavidovići. All enforcement proceedings against that company were stayed by virtue of law on that date, including those of the present applicant. On 4 August 2011 the applicant reported her claims to the liquidator in the amount of BAM 49,664 payable to her (including default interest until 10 November 2011) and BAM 27,103 payable to social security funds for her benefit.
In September 2014 the liquidator sold the tangible property belonging to Krivaja d.o.o. Zavidovići, worth an estimated value of BAM 8,700,000, to a consortium of five private companies. It is not known whether the liquidator has distributed that money to the creditors. At the same time, the Federation of Bosnia and Herzegovina undertook to pay statutory social contributions for the benefit of all former and current employees of Krivaja d.o.o. Zavidovići, including the present applicant. In 2016 the Government of the Federation of Bosnia and Herzegovina lodged a criminal complaint against the former Prime Minister because of that undertaking, claiming that all social contributions should have been paid from the assets of Krivaja d.o.o. Zavidovići in the course of the winding-up proceedings, rather than from the budget of the Federation of Bosnia and Herzegovina. It would appear that no decision has been taken so far with regard to that criminal complaint.
On 8 December 2015 the Constitutional Court found no breach of Article 6 of the Convention and Article 1 of Protocol No. 1 to the Convention in the present case. While the applicant had complained about the overall length of non-enforcement of the judgments of 12 January 2006 and 4 October 2007, the Constitutional Court examined only the length of the enforcement proceedings which had been stayed by virtue of law when the winding-up order was made against Krivaja d.o.o. Zavidovići in July 2011. It held that those proceedings, taken alone, had not been unreasonably long.
It would appear that having sold the tangible property of Krivaja d.o.o. Zavidovići in 2014, the liquidator has since been trying to realise its claims and that the winding-up proceedings against that company are still pending.
2. The case of Mr Nedžad Bradarić
Until 7 May 2001 the applicant was employed at Tvornica transportnih uređaja d.d. Tuzla, a public limited company in which the Tuzla Canton (an administrative unit of Bosnia and Herzegovina) holds 67% of shares. The company was one of the leading manufacturers of industrial vehicles and agricultural machinery in the SFRY. Like all other large companies in the SFRY, it was socially owned. Since the dissolution of the SFRY in 1991-92 and the war in Bosnia and Herzegovina in 1992-95, it has been facing financial difficulties.
The company paid no remuneration to its employees in the period 1998-2000. They therefore initiated civil proceedings against the company. By a judgment of the Tuzla Municipal Court of 17 July 2001, which became final on 17 August 2001, the company was ordered to pay, within 15 days, salary arrears to 428 employees (including BAM 3,078 to the applicant), together with default interest at the statutory rate, and BAM 18,200 in total in costs and expenses. On 3 December 2002 the Tuzla Municipal Court issued a writ of execution.
The company’s bank accounts have been closed since 2004.
At the request of the tax authorities, in 2010 the Tuzla Municipal Court issued a writ imposing a charge on all movable property of the company and in 2011 a writ imposing a charge on all immovable property of the company (its tax debt was at that time BAM 9,343,770).
On 8 October 2012 the applicant requested that the judgment of 17 July 2001 be enforced on the movable property of Tvornica transportnih uređaja d.d. Tuzla. On 9 November 2012 the Tuzla Municipal Court granted that request, but it is not clear whether a writ imposing a charge on that property has been issued in favour of the applicant.
In the period between 18 December 2012 and 3 February 2014 the Tuzla Municipal Court held nine auctions for the sale of items belonging to that company, but none of the items was sold. Even if one of those items were sold, the applicant would not have received anything because he was either an unsecured creditor at that time (if no writ imposing a charge on those items had been issued in his favour) or a secured creditor with a more recent security on those items than the tax authorities (see “Relevant domestic law and practice” below).
On 23 September 2013 the applicant requested that the judgment be also enforced on the immovable property of the company. On 26 December 2014 the Tuzla Municipal Court granted the request and on 6 January 2015 issued a writ imposing a charge on that property in favour of the applicant.
On 7 October 2014 the Constitutional Court found a breach of Article 6 of the Convention on account of the length of the enforcement proceedings set out above, ordered the Tuzla Municipal Court to finalise the proceedings without further delay and awarded the applicant BAM 3,600 in respect of non-pecuniary damage. That sum was paid to the applicant on an unknown date.
On 20 January 2015 the Tuzla Canton (the majority shareholder) decided to try some debt relief measures. However, on 27 May 2015 it cancelled that decision because negotiations with the tax authorities and the social security funds had failed.
On 5 August 2015 the Tuzla Canton (the majority shareholder) and some creditors, including the applicant, presented winding-up petitions against Tvornica transportnih uređaja d.d. Tuzla. On 5 November 2015 the Tuzla Municipal Court made a winding-up order. All enforcement proceedings against that company were stayed by virtue of law on that date, including those of the present applicant. On 20 November 2015 the applicant reported his claim to the liquidator in the amount of BAM 8,734 (including default interest until 15 November 2015). It transpires from the winding-up order that the debts of that company amounted to BAM 23,000,000. According to the applicant, the assets of the company were estimated in December 2016 at BAM 10,906,138. The winding-up proceedings are still pending.
3. The case of Mr Milenko Iveljić
Until August 2010 the applicant was employed at Tvornica transportnih uređaja d.d. Tuzla, the company mentioned above. As he was injured during the 1992-95 war, in March 2001 the social security authorities ordered the company to find a post which would correspond to his disability and to pay him statutory sick pay in the meantime. It would appear that more than hundred employees of Tvornica transportnih uređaja d.d. Tuzla were in that situation at that time.
Like other employees of that company, the applicant did not receive full remuneration. He therefore initiated four sets of civil proceedings against it.
By judgments of 17 July 2001, 15 September 2006, 3 October 2008 and 10 February 2015, which became final on 17 August 2001, 3 October 2006, 15 April 2009 and 7 March 2015, the Tuzla Municipal Court ordered Tvornica transportnih uređaja d.d. Tuzla to pay the applicant, within 15 days, different amounts, together with default interest at the statutory rate, and BAM 8,890 in costs and expenses in total. The company was also ordered to pay statutory social contributions for the benefit of the applicant to social security funds in the amount of BAM 18,658. On 16 December 2002, 3 November 2006, 24 August 2009 and 14 April 2015 the same court issued writs of execution.
The company’s bank accounts have been closed since 2004.
At the request of the tax authorities, in 2010 the Tuzla Municipal Court issued a writ imposing a charge on all movable property of the company and in 2011 a writ imposing a charge on all immovable property of the company (its tax debt was at that time BAM 9,343,770).
It is not clear whether a writ imposing a charge on all movable property of Tvornica transportnih uređaja d.d. Tuzla has been issued in favour of the applicant. It is clear, however, that this had not been done before such a writ was issued in favour of the tax authorities in 2010.
In the period between 18 December 2012 and 3 February 2014 the Tuzla Municipal Court held nine auctions for the sale of items belonging to that company, but none of the items was sold. Only the applicant made an offer of BAM 1,400 for an item worth an estimated value of BAM 26,482. The Tuzla Municipal Court considered his offer to be mala fide and rejected it. Even if one of those items were sold, the applicant would not have received anything because he was either an unsecured creditor at that time (if no writ imposing a charge on those items had been issued in his favour) or a secured creditor with a more recent security on those items than the tax authorities (see “Relevant domestic law and practice” below).
On 27 June 2012 (regarding non-enforcement of the judgment of 17 July 2001), 14 March 2012 (regarding non-enforcement of the judgment of 15 September 2006) and 6 November 2014 (regarding non-enforcement of the judgment of 3 October 2008) the Constitutional Court found a breach of Article 6 of the Convention on account of the length of those three sets of enforcement proceedings, ordered the Tuzla Municipal Court to finalise the proceedings without further delay and awarded the applicant BAM 5,700 in total in respect of non-pecuniary damage. It held that it was not necessary to examine the applicant’s complaints under Article 1 of Protocol No. 1. The sums awarded were paid to the applicant on an unknown date.
On different dates between 2013 and 2015 the applicant requested that all four judgments in his favour be enforced on the immovable property of the company in issue. The Tuzla Municipal Court granted those requests and on different dates in 2014/15 issued writs imposing a charge on all immovable property of the company in favour of the applicant.
On 20 January 2015 the Tuzla Canton (the majority shareholder) decided to try some debt relief measures. However, on 27 May 2015 it cancelled that decision because negotiations with the tax authorities and the social security funds had failed.
On 5 August 2015 the Tuzla Canton (the majority shareholder) and some creditors, including the applicant, presented winding-up petitions against Tvornica transportnih uređaja d.d. Tuzla. On 5 November 2015 the Tuzla Municipal Court made a winding-up order. All enforcement proceedings against that company were stayed by virtue of law on that date, including those of the present applicant. On 20 November 2015 the applicant reported his claims to the liquidator in the total amount of BAM 45,426 (including default interest until 15 November 2015). It transpires from the winding-up order that the debts of Tvornica transportnih uređaja d.d. Tuzla amounted to BAM 23,000,000. According to the applicant, the assets of the company were estimated in December 2016 at BAM 10,906,138. The winding-up proceedings are still pending.
4. The case of Mr Bećir Zerem
In the period from December 2003 until April 2005 the applicant worked at Sigurnost, a statutory company (javno preduzeće) created by the City of Mostar in 1994 to provide security guard services to various clients in the city (for example, the applicant worked as a security guard at a State-owned bank). Like other employees of that company, the applicant did not receive full remuneration. He therefore initiated civil proceedings against Sigurnost.
The company’s bank accounts were closed in 2007 because of illiquidity.
In March 2009 Sigurnost presented a winding-up petition.
By a judgment of the Mostar Municipal Court of 5 May 2009, which became final on 21 May 2009, Sigurnost was ordered to pay the applicant, within 15 days, BAM 10,035 in salary arrears, together with default interest at the statutory rate, and BAM 4,103 in costs and expenses. It was further ordered to pay statutory social contributions for the benefit of the applicant to social security funds in the amount of BAM 1,243.
On 31 August 2009 the Mostar Municipal Court made a winding-up order. Shortly thereafter, the applicant reported his claims to the liquidator. It would appear from the minutes of the meeting of the company’s creditors of 2 November 2009 that the debts of Sigurnost amounted to BAM 602,408. It would appear from the minutes of the meeting of the company’s creditors of 28 December 2012 that the City of Mostar, rather than Sigurnost, was the owner of the property allocated to that company. Sigurnost thus had claims only in the total amount of BAM 55,208. Once the preferential debts of the company had been paid (salaries and social contributions in respect of its current employees), the residual sum was insufficient to cover the expenses of the winding up amounting to BAM 23,105. The liquidator consequently applied for the dissolution of the company. The applicant objected claiming that the City of Mostar, the founder and sole owner of Sigurnost, was liable for its debts.
On 3 June 2014 the Mostar Municipal Court ordered that the company be dissolved. It did not address the applicant’s argument about the liability of the City of Mostar. The decision was published in the Official Gazette of the Federation of Bosnia and Herzegovina no. 46/14 of 11 June 2014. Upon the applicant’s appeal, on 9 December 2014 the Mostar Cantonal Court upheld the decision of 3 June 2014. It held that the City of Mostar was only liable for the debts of Sigurnost in the amount invested in the company.
The Constitutional Court declared the case manifestly ill-founded on 11 January 2017.
B. Relevant domestic law and practice
The present applications concern only companies based in the Federation of Bosnia and Herzegovina (one of the Entities of Bosnia and Herzegovina): the law and practice of the Republika Srpska, the other Entity of Bosnia and Herzegovina, is therefore irrelevant. Furthermore, the present applications concern two different types of companies: State-owned companies (društva sa većinskim učešćem državnog kapitala) and statutory companies (javna preduzeća). Unlike in Serbia (see, among other authorities, R. Kačapor and Others v. Serbia, nos. 2269/06 and 5 others, 15 January 2008, and Zastava It Turs v. Serbia (dec.), no. 24922/12, 9 April 2013), the concept of “social ownership” was abandoned in Bosnia and Herzegovina many years ago (see the Social Ownership Transformation Act 1994[3]).
1. State-owned companies
The Companies Act 2015[4] entered into force on 22 October 2015. It does not differentiate between privately- and State-owned companies as regards the administration of companies: the State and its emanations, such as the Entities and the Cantons, have thus no more control over their companies than any other owner. The only difference is that stricter rules concerning the conflict of interest apply to the members of the administration of State-owned companies (see, in this regard, sections 247 and 252 of that Act; the Public Appointments Act 2003[5]; and the relevant secondary legislation[6]). In addition, regardless of whether a limited liability company (such as Krivaja d.o.o. Zavidovići) or a public limited company (like Tvornica transportnih uređaja d.d. Tuzla) is privately- or State-owned, the owner is only liable for debts of the company in the amount invested in the company. The lifting of the corporate veil is justified, exceptionally, in the following circumstances: if one of the owners uses a company for achieving a personal goal that is not consistent with the goals of other owners and the company itself; treats the company’s assets as his or her own; uses the company to commit fraud or to avoid existing obligations; instigates a reduction of the company’s assets in his or her favour or in favour of third persons, or instigates the company to assume liabilities while knowing or should have known that the company is not or will not be capable of fulfilling its liabilities (section 5 of that Act). The old Companies Act 1999[7], in force from 29 June 1999 until 22 October 2015, contained very similar provisions.
2. Statutory companies
The Statutory Companies Act 2005[8] entered into force on 10 February 2005. It defines the statutory companies as limited liability or public limited companies which provide public utilities, such as telecommunications, gas, electricity, water and so on, and any other company so defined by domestic law (see sections 2 and 3 of that Act). In principle, the owners of statutory companies have no more control over their companies than any other owner. Stricter rules concerning the conflict of interest, however, apply to statutory companies (see, notably, section 14 of that Act). Moreover, the Act seeks to maintain market competition by requiring transparency and prohibiting anti-competitive conduct by statutory companies (see section 2a of that Act). In accordance with section 51 of that Act, the Companies Act 1999 applied by analogy also to statutory companies.
3. Enforcement proceedings
The Enforcement Procedure Act 2003[9], which entered into force on 19 July 2003, does not differentiate between privately-owned companies, State-owned companies and statutory companies. A special regime applies only to the Entity, the Cantons and other public authorities (see sections 79a, 117a, 138 and 187a of that Act).
All enforcement proceedings are urgent (see section 5 of that Act). When requesting that a judgment be enforced, the creditor must indicate the means of enforcement: a bank transfer, the sale of immovable or movable property and so on (see section 8 of that Act). Monetary claims, such as those in the present case, are enforced in a chronological order (section 66 of that Act). In other words, if a number of creditors request that their claims be enforced by means of a bank transfer, the bank will first pay the creditor whose writ of execution it received the first (see section 167 of that Act). Similarly, if a creditor requests that his or her claim be enforced on movable or immovable property of a debtor, he or she is issued with a writ imposing a charge on the property in issue; the creditor with the oldest writ will then be paid the first (see sections 98, 124 and 134 of that Act).
4. Winding-up proceedings
The Insolvency Act 2003[10] entered into force on 1 July 2003. It provides that State-owned companies and statutory companies are, just like privately-owned companies, subject to winding-up proceedings. The manufacturers of weapons and military technology are the only exception: a winding-up order may be made against such a company with the authorisation of the Ministry of Energy only and if the Ministry refuses authorisation the Federation of Bosnia and Herzegovina becomes liable for the debts of the company. The Federation of Bosnia and Herzegovina and other public authorities which are funded from the budget are not subject to winding-up proceedings (see section 5 of that Act).
If a company or any of its creditors presents a winding-up petition, the competent court must establish whether the company in issue lacks liquidity (see section 6 of that Act). If this is the case and the realisable assets of the company are sufficient to cover the expenses of the winding up, it will make a winding-up order (section 43 of that Act). At the request of a creditor with a court judgment against a company in his or her favour which has not been enforced for more than 60 days (counting from the date when the writ of execution became final), it is considered as proved that the company lacks liquidity and the court makes a winding-up order immediately (section 44 of that Act). Once a winding-up order is made, all enforcement proceedings against the company in issue are stayed pursuant to section 58 of that Act and all creditors must report their claims to the liquidator pursuant to section 110 of that Act. The expenses of the winding up, including the liquidator’s remuneration, are paid first from the assets of the company (see sections 40-41 of that Act); the salaries and all other job-related payments to the employees of the company are paid next (section 33 of that Act)[11]; and then all other claims (section 32 of that Act). A special regime applies to the secured creditors: if movable or immovable property securing a debt is sold, they are paid before any unsecured creditors from the purchase price (see section 38 of that Act). If there are more secured creditors in respect of the same property, they are paid in a chronological order according to the date on which a charge on the property was imposed in their favour (see section 142 of the Rights In Rem Act 2013[12]). In accordance with section 9 of the Insolvency Act 2003, the winding-up proceedings are urgent.
C. Relevant international law and practice
At its 53rd session in 2001 the International Law Commission adopted the Articles on Responsibility of States for Internationally Wrongful Acts (see Yearbook of the International Law Commission, 2001, vol. II, Part Two). The customary international law nature of Articles 4 and 8 has since been endorsed by the International Court of Justice; as to Article 5, the question has been left open[13]. Articles 4, 5 and 8 with commentaries read as follows:
Article 4
Conduct of organs of a State
1. The conduct of any State organ shall be considered an act of that State under international law, whether the organ exercises legislative, executive, judicial or any other functions, whatever position it holds in the organization of the State, and whatever its character as an organ of the central Government or of a territorial unit of the State.
2. An organ includes any person or entity which has that status in accordance with the internal law of the State.
Commentary
...
(6) ... Thus, article 4 covers organs, whether they exercise “legislative, executive, judicial or any other functions”. ... It is irrelevant for the purposes of attribution that the conduct of a State organ may be classified as “commercial” or as acta iure gestionis.
...
(11) Paragraph 2 explains the relevance of internal law in determining the status of a State organ. Where the law of a State characterizes an entity as an organ, no difficulty will arise. On the other hand, it is not sufficient to refer to internal law for the status of State organs. ... Accordingly, a State cannot avoid responsibility for the conduct of a body which does in truth act as one of its organs merely by denying it that status under its own law. This result is achieved by the use of the word “includes” in paragraph 2.
Article 5
Conduct of persons or entities exercising elements of governmental authority
“The conduct of a person or entity which is not an organ of the State under article 4 but which is empowered by the law of that State to exercise elements of the governmental authority shall be considered an act of the State under international law, provided the person or entity is acting in that capacity in the particular instance.”
Commentary
...
(2) The generic term “entity” reflects the wide variety of bodies which, though not organs, may be empowered by the law of a State to exercise elements of governmental authority. They may include public corporations, semipublic entities, public agencies of various kinds and even, in special cases, private companies, provided that in each case the entity is empowered by the law of the State to exercise functions of a public character normally exercised by State organs, and the conduct of the entity relates to the exercise of the governmental authority concerned. For example, in some countries private security firms may be contracted to act as prison guards and in that capacity may exercise public powers such as powers of detention and discipline pursuant to a judicial sentence or to prison regulations. Private or State-owned airlines may have delegated to them certain powers in relation to immigration control or quarantine.
...
(3) The fact that an entity can be classified as public or private according to the criteria of a given legal system, the existence of a greater or lesser State participation in its capital, or, more generally, in the ownership of its assets, the fact that it is not subject to executive control – these are not decisive criteria for the purpose of attribution of the entity’s conduct to the State. Instead, article 5 refers to the true common feature, namely that these entities are empowered, if only to a limited extent or in a specific context, to exercise specified elements of governmental authority.
...
(5) The justification for attributing to the State under international law the conduct of “parastatal” entities lies in the fact that the internal law of the State has conferred on the entity in question the exercise of certain elements of the governmental authority. If it is to be regarded as an act of the State for purposes of international responsibility, the conduct of an entity must accordingly concern governmental activity and not other private or commercial activity in which the entity may engage. Thus, for example, the conduct of a railway company to which certain police powers have been granted will be regarded as an act of the State under international law if it concerns the exercise of those powers, but not if it concerns other activities (e.g. the sale of tickets or the purchase of rolling stock).
(6) Article 5 does not attempt to identify precisely the scope of “governmental authority” for the purpose of attribution of the conduct of an entity to the State. Beyond a certain limit, what is regarded as “governmental” depends on the particular society, its history and traditions. Of particular importance will be not just the content of the powers, but the way they are conferred on an entity, the purposes for which they are to be exercised and the extent to which the entity is accountable to government for their exercise. These are essentially questions of the application of a general standard to varied circumstances.
(7) ... For the purposes of article 5, an entity is covered even if its exercise of authority involves an independent discretion or power to act; there is no need to show that the conduct was in fact carried out under the control of the State. On the other hand, article 5 does not extend to cover, for example, situations where internal law authorizes or justifies certain conduct by way of self-help or self-defence; i.e. where it confers powers upon or authorizes conduct by citizens or residents generally. The internal law in question must specifically authorize the conduct as involving the exercise of public authority; it is not enough that it permits activity as part of the general regulation of the affairs of the community. It is accordingly a narrow category.
Article 8
Conduct directed or controlled by a State
“The conduct of a person or group of persons shall be considered an act of a State under international law if the person or group of persons is in fact acting on the instructions of, or under the direction or control of, that State in carrying out the conduct.”
Commentary
(6) Questions arise with respect to the conduct of companies or enterprises which are State-owned and controlled. If such corporations act inconsistently with the international obligations of the State concerned the question arises whether such conduct is attributable to the State. In discussing this issue it is necessary to recall that international law acknowledges the general separateness of corporate entities at the national level, except in those cases where the “corporate veil” is a mere device or a vehicle for fraud or evasion. The fact that the State initially establishes a corporate entity, whether by a special law or otherwise, is not a sufficient basis for the attribution to the State of the subsequent conduct of that entity. Since corporate entities, although owned by and in that sense subject to the control of the State, are considered to be separate, prima facie their conduct in carrying out their activities is not attributable to the State unless they are exercising elements of governmental authority within the meaning of article 5. This was the position taken, for example, in relation to the de facto seizure of property by a State-owned oil company, in a case where there was no proof that the State used its ownership interest as a vehicle for directing the company to seize the property. On the other hand, where there was evidence that the corporation was exercising public powers, or that the State was using its ownership interest in or control of a corporation specifically in order to achieve a particular result, the conduct in question has been attributed to the State.
(7) It is clear then that a State may, either by specific directions or by exercising control over a group, in effect assume responsibility for their conduct. Each case will depend on its own facts, in particular those concerning the relationship between the instructions given or the direction or control exercised and the specific conduct complained of. In the text of article 8, the three terms “instructions”, “direction” and “control” are disjunctive; it is sufficient to establish any one of them. At the same time it is made clear that the instructions, direction or control must relate to the conduct which is said to have amounted to an internationally wrongful act.
(8) Where a State has authorized an act, or has exercised direction or control over it, questions can arise as to the State’s responsibility for actions going beyond the scope of the authorization. For example, questions might arise if the agent, while carrying out lawful instructions or directions, engages in some activity which contravenes both the instructions or directions given and the international obligations of the instructing State. Such cases can be resolved by asking whether the unlawful or unauthorized conduct was really incidental to the mission or clearly went beyond it. In general a State, in giving lawful instructions to persons who are not its organs, does not assume the risk that the instructions will be carried out in an internationally unlawful way. On the other hand, where persons or groups have committed acts under the effective control of a State, the condition for attribution will still be met even if particular instructions may have been ignored. The conduct will have been committed under the control of the State and it will be attributable to the State in accordance with article 8.
COMPLAINTS
The applicants complain under Article 6 of the Convention and Article 1 of Protocol No. 1 about non-enforcement of domestic judgments mentioned above. Some applicants also complain under Article 13 of the Convention that they did not have an effective domestic remedy at their disposal which could compel the State to pay a judgment debt of an insolvent State-owned company instead of that company.
QUESTIONS TO THE PARTIES
1. Have the applicants exhausted all effective domestic remedies, as required by Article 35 § 1 of the Convention? In particular, was the action for the lifting of the corporate veil under section 5 of the Companies Act 2015 (or section 6 of the Companies Act 1999) an effective remedy within the meaning of this provision?
In this regard, the Government are requested to provide the relevant domestic case-law, if any.
2. Is Bosnia and Herzegovina directly responsible for the judgment debts in issue (see, notably, Agrotexim and Others v. Greece, 24 October 1995, § 66, Series A no. 330‑A; Mykhaylenky and Others v. Ukraine, nos. 35091/02 and 9 others, ECHR 2004‑XII; Anokhin v. Russia (dec.), no. 25867/02, 31 May 2007; Khachatryan v. Armenia, no. 31761/04, 1 December 2009; R. Kačapor and Others v. Serbia, nos. 2269/06 and 5 others, 15 January 2008; Mijanović v. Montenegro, no. 19580/06, 17 September 2013; Ališić and Others v. Bosnia and Herzegovina, Croatia, Serbia, Slovenia and the former Yugoslav Republic of Macedonia [GC], no. 60642/08, §§ 114-17, ECHR 2014; Samsonov v. Russia (dec.), no. 2880/10, 16 September 2014; Liseytseva and Maslov v. Russia, nos. 39483/05 and 40527/10, 9 October 2014; as well as the Articles on Responsibility of States for Internationally Wrongful Acts)?
In this connection, the Government are required to submit: a copy of the details from the companies register (izvod iz registra), the memoranda of association (akti o osnivanju) and the articles of association (statuti) relating to Krivaja d.o.o. Zavidovići, Tvornica transportnih uređaja d.d. Tuzla and Sigurnost, with any and all changes; all annual reports of the companies starting from 2002; and any and all acts conferring on them the exercise of certain elements of the governmental authority (akti nadležnog organa o davanju javne ovlasti preduzeću).
Furthermore, as it would appear that Sigurnost did not exercise a right of ownership regarding the property allocated to it, the Government are requested to indicate whether this is the case for all statutory companies.
3. If the answer to question no. 2 above is in the positive, has there been a breach of Article 6 of the Convention and/or Article 1 of Protocol No. 1 to the Convention arising from the fact that the judgments in issue have not yet been fully enforced (see Mykhaylenky and Others v. Ukraine, nos. 35091/02 and 9 others, ECHR 2004‑XII; R. Kačapor and Others v. Serbia, nos. 2269/06 and 5 others, 15 January 2008; Khachatryan v. Armenia, no. 31761/04, 1 December 2009; Mijanović v. Montenegro, no. 19580/06, 17 September 2013; and Liseytseva and Maslov v. Russia, nos. 39483/05 and 40527/10, 9 October 2014)?
4. If the answer to question no. 2 is in the negative, has the respondent State complied with its positive obligation to organise an effective system for enforcement of judgments, as required by Article 6 of the Convention and Article 1 of Protocol No. 1 to the Convention (see, notably, Shestakov v. Russia (dec.), no. 48757/99, 18 June 2002; Fuklev v. Ukraine, no. 71186/01, 7 June 2005; and Kotov v. Russia [GC], no. 54522/00, 3 April 2012)?
In this connection, Ms Bahrija Muminović is requested to indicate when the writ of execution of 12 December 2006 became final and why did she fail to make a winding-up petition against Krivaja d.o.o. Zavidovići under section 44 of the Insolvency Act 2003.
Mr Nedžad Bradarić and Mr Milenko Iveljić are required to indicate when their respective writs of execution of 3 December 2002 became final and why did they decide to present a winding-up petition against Tvornica transportnih uređaja d.d. Tuzla in accordance with section 44 of the Insolvency Act 2003 only in 2015.
The Government are requested to indicate whether the amount obtained in September 2014, when the liquidator sold the tangible property of Krivaja d.o.o. Zavidovići, has been distributed to the creditors and, if not, why not.
The Government are also requested to indicate whether the statutory social contributions for the benefit of Ms Bahrija Muminović and all other employees of Krivaja d.o.o. Zavidovići have already been paid and at which stage are the criminal proceedings initiated in that connection in 2016 by the Government of the Federation of Bosnia and Herzegovina against the former Prime Minister of that Entity.
The Government are requested to submit the entire file in the enforcement proceedings pursued by the applicants and in the winding-up proceedings against Krivaja d.o.o. Zavidovići, Tvornica transportnih uređaja d.d. Tuzla and Sigurnost.
5. Did the applicants have at their disposal an effective domestic remedy for their complaints under Article 6 of the Convention and Article 1 of Protocol No. 1, as required by Article 13 of the Convention?
In this regard, the Government are requested to submit the jurisprudence of the Constitutional Court in which it considered the possibility of holding the State directly responsible for judgment debts of State-owned or statutory companies, if any.
Appendix
No.
Application no.
Lodged on
Applicant
Date of birth
Place of residence
Nationality
Represented by
14738/16
02/03/2016
Bahrija MUMINOVIĆ
24/09/1950
Zavidovići
Bosnia and Herzegovina
-
39857/17
24/05/2017
Nedžad BRADARIĆ
12/08/1954
Tuzla
Bosnia and Herzegovina
Zajednicka advokatska kancelarija Jezdic & Matuzovic
40158/17
30/05/2017
Milenko IVELJIĆ
05/09/1957
Tuzla
Bosnia and Herzegovina
Zajednicka advokatska kancelarija Jezdic & Matuzovic
52377/17
17/07/2017
Bećir ZEREM
03/08/1979
Ostrožac
Bosnia and Herzegovina
Sadudin ZAKLAN
[1] In accordance with the Constitution, Bosnia and Herzegovina consists of two Entities (the Federation of Bosnia and Herzegovina and the Republika Srpska) and the Brčko District. One of the Entities, the Federation of Bosnia and Herzegovina, is divided into Cantons.
[2] The convertible mark (BAM) uses the same fixed exchange rate to the euro (EUR) that the German mark (DEM) has (BAM 1 = EUR 0.51129).
[3] Zakon o pretvorbi društvene svojine, published in the Official Gazette of the Republic of Bosnia and Herzegovina no. 33/94.
[4] Zakon o privrednim društvima, published in the Official Gazette of the Federation of Bosnia and Herzegovina no. 81/15.
[5] Zakon o ministarskim, vladinim i drugim imenovanjima Federacije Bosne i Hercegovine, imposed by the High Representative for Bosnia and Herzegovina (the Official Gazette of the Federation of Bosnia and Herzegovina no. 12/03) and endorsed by the Parliament of the Federation of Bosnia and Herzegovina (the same Official Gazette nos. 34/03 and 65/13).
[6] Uredba o vršenju ovlaštenja u privrednim društvima sa učešćem državnog kapitala iz nadležnosti Federacije Bosne i Hercegovine, published in the Official Gazette of the Federation of Bosnia and Herzegovina no. 20/16.
[7] Zakon o privrednim društvima, published in the Official Gazette of the Federation of Bosnia and Herzegovina no. 23/99, amendments published in the same Official Gazette nos. 45/00, 2/02, 6/02, 29/03, 68/05, 91/07, 84/08, 88/08, 7/09, 63/10 and 75/13.
[8] Zakon o javnim preduzećima u Federaciji Bosne i Hercegovine, published in the Official Gazette of the Federation of Bosnia and Herzegovina no. 8/05, amendments published in the same Official Gazette nos. 81/08, 22/09 and 109/12.
[9] Zakon o izvršnom postupku, published in the Official Gazette of the Federation of Bosnia and Herzegovina no. 32/03, amendments published in the same Official Gazette nos. 52/03, 33/06, 39/06, 39/09, 35/12, 46/16 and 36/17 (the Constitutional Court’s decision U 20/16 of 30 March 2017 declaring one of the provisions of that Act unconstitutional).
[10] Zakon o stečajnom postupku, published in the Official Gazette of the Federation of Bosnia and Herzegovina no. 29/03, amendments published in the same Official Gazette nos. 32/04, 42/06 and 4/17.
[11] In June 2004 section 33 of the Insolvency Act 2003 was amended so that the employees were paid before all other creditors the salaries for the eight months preceding the winding-up order only. On 23 March 2016 the Constitutional Court of the Federation of Bosnia and Herzegovina declared that amendment unconstitutional. It ceased to have effect in January 2017 when the ruling of the Constitutional Court was published (see the Official Gazette of the Federation of Bosnia and Herzegovina no. 4/17).
[12] Zakon o stvarnim pravima, published in the Official Gazette of the Federation of Bosnia and Herzegovina no. 66/13.
[13] Application of the Convention on the Prevention and Punishment of the Crime of Genocide (Bosnia and Herzegovina v. Serbia and Montenegro), judgment of 26 February 2007, ICJ Reports 2007, p. 43, §§ 385, 398 and 414.
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