NOVA LJUBLJANSKA BANKA D.D. v. CROATIA

SECOND SECTION

DECISION

Application no. 15533/22
NOVA LJUBLJANSKA BANKA D.D.
against Croatia

The European Court of Human Rights (Second Section), sitting on 12 December 2023 as a Committee composed of:

 Pauliine Koskelo, President,
 Lorraine Schembri Orland,
 Davor Derenčinović, judges,
and Dorothee von Arnim, Deputy Section Registrar,

Having regard to:

the application (no. 15533/22) against the Republic of Croatia lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) on 23 March 2022 by Nova Ljubljanska Banka d.d., a commercial company incorporated under Slovenian law having its registered office in Ljubljana (“the applicant bank”), which was represented by Ms C. Annacker, a lawyer practising in Paris;

Having deliberated, decides as follows:

SUBJECT MATTER OF THE CASE

1.  The case concerns fourteen sets of civil proceedings which two Croatian banks instituted against Ljubljanska Banka and the applicant bank seeking reimbursement of what those Croatian banks had to pay over the years on account of foreign-currency savings which Croatian nationals had deposited before 27 April 1991 with the Zagreb Main Branch of Ljubljanska Banka.

2.  The general factual and legal background and the relevant legal framework regarding the status of Ljubljanska Banka and the issues related to so-called “old” foreign-currency savings in the former Yugoslavia and its successor States are set out in Kovačić and Others v. Slovenia ([GC], nos. 44574/98 and 2 others, §§ 27-111 and 164-188, 3 October 2008); Ališić and Others v. Bosnia and Herzegovina, Croatia, Serbia, Slovenia and the former Yugoslav Republic of Macedonia ([GC], no. 60642/08, §§ 12-58 and 61-66, ECHR 2014); Ljubljanska banka d.d. v. Croatia ((dec.), no. 29003/07, §§ 2-7, 31 and 36-43, 12 May 2015); and Slovenia v. Croatia ((dec.) [GC], no. 54155/16, §§ 6-12 and 18, 18 November 2020).

3.  In particular, by a Croatian Government’s Decree of 23 December 1991 and subsequent legislation of 18 November 1993, Croatian nationals could transfer to and withdraw from Croatian banks the foreign-currency savings they had deposited before 27 April 1991 with banks which had operated in Croatia but had their registered office outside Croatian territory. The deposits transferred in that way (“transferred deposits”) were converted into Croatian public debt, the State being the debtor and the Croatian banks to which the deposits were transferred, being the creditors.

4.  Shortly after its declaration of independence on 25 June 1991, Slovenia nationalised Ljubljanska Banka. In 1994, it restructured the bank so that most – but not all – of the bank’s assets and a part of its liabilities were transferred to a new bank – Nova Ljubljanska Banka, which is the applicant in the present case. The “old” Ljubljanska Banka retained all obligations relating to foreign‑currency savings deposited in its branches located outside the territory of Slovenia.

5.  At present 75% of the applicant bank’s shares is held by various private investors whereas 25% is State-owned.

6.  In the mid-1990s two Croatian banks instituted fourteen sets of civil proceedings before Croatian courts against the old Ljubljanska Banka and the applicant bank seeking reimbursement of the money they had paid on account of the transferred foreign-currency savings to Croatian nationals who had initially deposited their savings with the Zagreb Main Branch of the old Ljubljanska Banka. The plaintiff banks’ claims exceeded 460 million euros (EUR).

7.  The plaintiff banks obtained authorisation from the Croatian Minister of Finance to bring those civil actions in their own name but on behalf of the State in 1995 and 2001 respectively. On 19 April 2012 the Government of Croatia approved all the procedural actions taken thus far.

8.  On 11 March 2013 the Governments of Croatia and Slovenia signed a memorandum of understanding whereby they agreed that the issue of the transferred foreign-currency savings would be resolved in the process of succession of the former Yugoslavia. The Government of Croatia agreed to ensure the stay of all the proceedings related to those savings, pending the resolution of the issue. However, the fourteen sets of proceedings in question were never stayed.

9.  Even though in four sets of proceedings lower courts initially ruled against the two Croatian banks, those judgments were overturned by the Supreme Court and the proceedings eventually ended in their favour. The remaining ten sets of proceedings are still pending. The applicant bank submitted that it had already paid over EUR 1.4 million based on the judgment adopted in the first set of proceedings, that over EUR 635,000 were due pursuant to the judgment adopted in the second set of proceedings and over EUR 23 million pursuant to three judgments thus far adopted in the remaining proceedings.

10.  The applicant bank complained, under Articles 6 § 1 and 13 of the Convention and Article 1 of Protocol No. 1 thereto, that the way the domestic courts had applied the relevant substantive law had been arbitrary or manifestly unreasonable, that those courts had not given sufficient reasons for their decisions and that in one of the sets of proceedings they had not replied to the applicant bank’s request to refer certain questions of EU law to the Court of Justice of the European Union (CJEU) for a preliminary ruling.

11.  In particular, the applicant bank complained that it was unclear how the domestic courts had established their international jurisdiction and that they had never defined the underlying legal relationship between the plaintiff banks and the applicant bank which had been necessary for determining which country’s law was applicable. Furthermore, the applicant bank complained that it was unclear how the domestic courts had established that it was liable for the debt of the old Ljubljanska Banka and how the plaintiff banks had had standing to sue for a public debt. The applicant bank also claimed that the domestic courts had systematically disregarded their key arguments in relation to these issues of jurisdiction, standing and liability.

THE COURT’S ASSESSMENT

12.  Given that the safeguards of Article 6 § 1 of the Convention, in circumstances such as those at issue in the present case, are stricter than, and absorb, those of Article 13 (see Kudła v. Poland [GC], no. 30210/96, § 146, ECHR 2000-XI), the Court will examine the application only under Article 6 § 1 and Article 1 of Protocol No. 1.

13.  The Court reiterates that, in principle, a breach by a tribunal of domestic legal provisions relating to the competence of judicial organs gives rise to a violation of Article 6 § 1 of the Convention because a court acting outside its jurisdiction cannot be regarded as a “tribunal established by law”. The Court therefore has jurisdiction to examine whether the domestic law has been complied with in this connection. However, since it is, in the first place, for the national courts to interpret domestic law, the Court may not question their interpretation unless there has been a flagrant violation of domestic law (see Guðmundur Andri Ástráðsson v. Iceland [GC], no. 26374/18, §§ 216‑217, 1 December 2020).

14.  In the present case the domestic courts held that they had (international) jurisdiction in the matter on two grounds.

15.  First, they relied on section 55 of the Croatian Conflicts of Laws Act, in force at the time, which provided that Croatian courts had jurisdiction in disputes against legal entities having their registered office abroad which concerned obligations that arose and had to be performed in Croatia, if such entities had their branch office in Croatia. Since old Ljubljanska Banka had had its branch office in Zagreb and the obligations arising from the foreign‑currency savings deposited in that branch had had to be performed in Croatia, the Croatian courts held that they had jurisdiction in respect of the old Ljubljanska Banka.

16.  Second, domestic courts relied on section 54(1) of the Conflict of Laws Act pursuant to which Croatian courts had jurisdiction in pecuniary disputes if the defendant had property in Croatia. The domestic courts considered it a well-known fact that the old Ljubljanska Banka had property in Croatia (see also the facts of the case in Kovačić and Others, cited above, § 144, and in Ališić and Others, cited above, § 43).

17.  Since the plaintiff banks argued that both defendant banks were jointly and severally liable for the transferred foreign-currency savings, that jurisdiction extended to the applicant bank as the co-defendant (materijalni suparničar) by virtue of section 46(4) of the Conflict of Laws Act.

18.  In these circumstances, the Court cannot accept the applicant bank’s argument that it was unclear how the domestic courts had established their international jurisdiction in the matter (see paragraph 11 above). More importantly, it cannot be argued that the way how those courts established their jurisdiction was in flagrant violation of domestic law (see paragraph 13 above).

19.  It follows that this complaint is therefore inadmissible under Article 35 § 3 (a) of the Convention for being manifestly ill-founded and must be rejected pursuant to Article 35 § 4 thereof.

20.  The Court notes that the gist of the applicant bank’s remaining complaints under this Article is that the domestic courts grossly misinterpreted and misapplied the relevant substantive law regarding standing and liability, which rendered their judgments arbitrary or manifestly unreasonable.

21.  In this regard the Court reiterates that it is for the national authorities, notably the courts, to interpret and apply domestic law, and that the Court cannot call into question their findings on alleged errors of domestic law unless they are arbitrary or manifestly unreasonable (see Naït-Liman v. Switzerland [GC], no. 51357/07, § 116, 15 March 2018). This also applies to the domestic courts’ interpretation and application of international law (see Waite and Kennedy v. Germany [GC], no. 26083/94, § 54, ECHR 1999‑I). Moreover, a domestic judicial decision cannot be qualified as arbitrary to the point of prejudicing the fairness of proceedings unless no reasons are provided for it or if the reasons given are based on a manifest factual or legal error committed by the domestic court, resulting in a “denial of justice” (see Moreira Ferreira v. Portugal (no. 2) [GC], no. 19867/12, § 85, 11 July 2017), that is, an error so “evident” that no reasonable court could ever have made it (see Bochan v. Ukraine (no. 2) [GC], no. 22251/08, § 62, ECHR 2015).

22.  The domestic courts in the present case gave detailed reasons for their decisions. In particular, they held that the plaintiff banks had had standing to sue because they had entered into a collection assignment agreement (cesija radi naplate, inkaso cesija) with the State, that is, an agreement where the debtor (the State) transferred to its creditors (the two Croatian banks) the claims it had against its own debtor (the old Ljubljanska Banka). The authorisation which the Government of Croatia had given to the plaintiff banks in 2012 to act on behalf of the State (see paragraph 7 above) had in fact been an offer to enter the said collection assignment agreement which those banks accepted. While it was true that in May 2012 the Government had withdrawn that authorisation, the domestic courts held that the State thereby could not have unilaterally terminated the said agreement. The domestic courts further held that the memorandum of understanding of 2013 (see paragraph 8 above) was not an international agreement and thus was not binding for the courts.

23.  As regards the liability of the applicant bank, the domestic courts held that it was liable for the debts of the old Ljubljanska Banka on the basis of section 452 of the 1991 Obligations Act which provided that a person to whom a property unit or a part thereof was transferred on the basis of a contract, was jointly and severally liable with the previous owner for debts related to that unit or its part. That provision applied even though the transfer of property between the old Ljubljanska Banka and the applicant bank had not occurred on the basis of a contract (see paragraph 4 above). Such teleological rather than merely textual interpretation of that provision was warranted by one of the basic principles of the Croatian legal order that rights could not be transferred without transferring obligations. That principle aimed to protect creditors and to promote legal certainty and reflected some of the supreme values of the Croatian constitutional order, namely the inviolability of ownership and the rule of law.

24.  Against that background, the Court is not convinced by the applicant bank’s argument that the domestic courts’ interpretation and application of the relevant substantive law regarding the issues of standing and liability was arbitrary or manifestly unreasonable (see paragraph 11 above), that is, that their findings in that regard were the result of a manifest factual or legal error leading to a “denial of justice”.

25.  Moreover, there is nothing to suggest that the proceedings were otherwise unfair. In particular, nothing suggests that the applicant bank did not have the benefit of adversarial proceedings. All its arguments which were relevant to the resolution of the case were duly heard and examined by the domestic courts and, as already noted above, the factual and legal reasons for their judgments were set out at length.

26.  It follows that these complaints are therefore inadmissible under Article 35 § 3 (a) of the Convention for being manifestly ill-founded and must be rejected pursuant to Article 35 § 4 thereof.

27.  As regards the complaint that in one of the sets of proceedings the domestic courts had not replied to the applicant bank’s request to refer certain questions of EU law to the CJEU for a preliminary ruling (see paragraph 10 above), the Court notes that the applicant bank requested that the same (and some other) questions of EU law be referred to the CJEU for a preliminary ruling in the remaining sets of proceedings. In those other proceedings the domestic courts refused such requests and gave detailed reasons in accordance with the so-called Cilfit criteria established by the CJEU. In these circumstances, and in light of these reasons to the effect that in the domestic courts’ opinion those questions of EU law did not require a referral to the CJEU, the Court finds that the applicant bank did not suffer a significant disadvantage on account of the domestic courts’ failure to address such request in one of the sets of proceedings complained of. Moreover, respect for human rights, as defined in the Convention and the Protocols thereto, does not require an examination of this complaint on the merits.

28.  It follows that this part of the application is inadmissible under Article 35 § 3 (a) and (b) of the Convention for being manifestly ill-founded and for lack of a significant disadvantage, respectively, and that it must be rejected pursuant to Article 35 § 4 thereof.

29.  The Court notes that the fourteen sets of proceedings in question concern, in essence, a private-law dispute and that, having regard to its findings above (see paragraphs 20-26), the domestic courts’ decisions were not patently unlawful, arbitrary, or manifestly unreasonable.

30.  It follows that this complaint is therefore inadmissible under Article 35 § 3 (a) of the Convention for being manifestly ill-founded and must be rejected pursuant to Article 35 § 4 thereof.

For these reasons, the Court, unanimously,

Declares the application inadmissible.

Done in English and notified in writing on 18 January 2024.

 Dorothee von Arnim Pauliine Koskelo
 Deputy Registrar President