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THE FACTS
The applicant, Mr Valters Poķis, is a Latvian national who was born in 1970 and lives in Riga (Latvia). He was represented before the Court by Mrs I. Jansone, a lawyer practising in Riga.
A. The circumstances of the case
The facts of the case, as submitted by the applicant, may be summarised as follows.
In November 1996 the applicant, together with three other individuals and a legal entity, set up a limited-liability company named SIA Latelektro‑Gulbene (“the company”), which was entered immediately in the companies register (Uzņēmumu reģistrs). The new company’s base capital amounted to 2,000 lati (LVL), comprising 2,000 shares worth LVL 1 each. The applicant held 756 shares, making him the majority shareholder. In May 1998 the applicant used his shares as security for a loan from a commercial bank in Riga, but continued to own them.
On 27 September 1999 a general meeting of company members decided to wind up the company. On 14 January 2000 a winding-up petition was lodged with the Vidzeme Regional Court, which examined it at a hearing on 7 March 2000. Despite the explanations of the company’s representatives to the effect that the company’s financial situation had improved in the meantime, with the result that it was now able to honour its debts, the court declared the company insolvent, placed it in compulsory liquidation and appointed a liquidator (administrators), N.P. In addition, the court appointed the company’s Chairman, Z.J., its Chief Executive, D.G., and its accountant, M.R., as the debtor’s representatives (parādnieka pārstāvji). The Regional Court’s judgment of 7 March 2000 was final.
In September 2000 a creditors’ meeting adopted a recovery plan (sanācijas plāns) for the company, based in particular on a very substantial increase in its share capital. However, by an order of 6 October 2000, the Vidzeme Regional Court refused to ratify the plan.
Notwithstanding this refusal, N.P. forwarded amendments to the company’s memorandum and articles of association for entry in the companies register. The amendments were entered straight away. On an application by the applicant dated 29 October 2000, the Chief Registrar of Companies (galvenais valsts notārs) cancelled the registration of the amendments in question. According to the Chief Registrar, the liquidator had acted in bad faith, as he had had no right to amend the company’s memorandum and articles of association when the recovery plan had not been ratified by the courts. The Chief Registrar also observed that the increase in the company’s share capital envisaged by N.P. would interfere with the applicant’s right of pre-emption over the new shares.
On 30 October 2000 a creditors’ meeting again approved the increase in the company’s share capital and the amendments to its memorandum and articles of association.
In November 2000 the applicant’s three individual associates concluded a deed of gift with a third party, V.M., under which they transferred all their shares to him. V.M. thus became the majority shareholder, with 1,044 shares. The applicant continued to own 756 shares and the remaining 200 shares were held by the legal entity which had been one of the company’s founders.
On 24 November and 5 December 2000 the company’s creditors met and adopted a new recovery plan. Under the terms of the plan, V.M. was to increase the company’s share capital to LVL 100,000 within fifteen days. The funds required for the purpose were to come from the public limited company B.H., of which V.M. was Chairman and Chief Executive. By a final order of 3 January 2001, the Vidzeme Regional Court ratified the new plan.
In the meantime, on 28 December 2000, the applicant, represented by the bank to which he had pledged his shares as security, lodged an application with the Vidzeme Regional Court challenging the decisions of the company’s creditors and the actions of the liquidator. In his memorial he submitted a series of complaints concerning the conduct of the insolvency procedure. Firstly, he contended that N.P. did not have the right to increase the company’s share capital and that the creditors had no right to approve the unlawful decisions taken by the liquidator. Secondly, he criticised the final version of the recovery plan. In his view, the text contained a number of shortcomings and irregularities which made it incompatible with the legislation on company insolvency. He argued, for instance, that the plan did not set out in sufficient detail the recovery measures and the deadlines for their implementation; the debt repayment schedule was unfair as it gave small creditors an advantage; the overall recovery period exceeded the statutory maximum period of two years; and the creditors’ meeting had not had all the documents it needed in order to take an equitable decision. Thirdly, in the applicant’s view, N.P.’s conduct demonstrated that he was incompetent and had acted in bad faith, and he should be dismissed as liquidator. Accordingly, the applicant requested the court to declare all the decisions taken by N.P. and the creditors null and void, to refuse to ratify the recovery plan and to dismiss N.P.
By an order of 9 January 2001, the relevant judge of the Vidzeme Regional Court declared the applicant’s application inadmissible. The order stated that no legislation conferred on ordinary shareholders a right of appeal against decisions taken by the liquidator or by meetings of the creditors of a company in liquidation. In that connection the judge pointed out that only the official representatives of the debtor company could participate in the insolvency proceedings and that the applicant was not one of the three representatives appointed under the judgment of 7 March 2000. Finally, the judge found that the applicant was not entitled to request the dismissal of the liquidator; such a request could be made only by a meeting of the creditors.
This order was served on the bank, as the applicant’s representative, but not on the applicant himself. Consequently, he did not receive a copy until 19 January 2001. On 23 January 2001 he challenged the order by means of an appeal to the Civil Division of the Supreme Court. At the same time he requested the Vidzeme Regional Court to extend the time allowed for lodging an appeal against the order in question, explaining that he had received a copy of the order on the last day of the ten-day period laid down in section 442 of the Civil Procedure Act and had therefore been unable to lodge his appeal within the time allowed.
On 5 February 2001 the relevant judge of the Regional Court transmitted the appeal to the Supreme Court without giving a formal ruling on the extension of the time allowed. The judge simply noted that “the appeal [had been] lodged within the period set down by section 133 of the Civil Procedure Act and [was] to be forwarded” to the recipient.
By a final order of 19 March 2001, the relevant judge of the Civil Division declared the appeal inadmissible on the ground that it had been lodged out of time and that the first-instance judge had not extended the period specified in section 442 of the Civil Procedure Act.
The applicant then lodged an appeal on points of law with the Senate of the Supreme Court, which dismissed it by a final order of 9 May 2001. In the Senate’s view, the fact that the first-instance judge had omitted to rule on the extension of the time allowed for lodging an appeal did not alter the finding that the appeal had been lodged out of time; the appeal court had therefore been right not to examine it.
B. Relevant domestic law
Insolvency proceedings are governed by the Companies Insolvency Act of 12 September 1996 (Likums “Par uzņēmumu un uzņēmējsabiedrību maksātnespēju”). In accordance with the Act, the chief players in insolvency proceedings are the liquidator, the company’s representatives, the creditors’ meetings and, where appropriate, the creditors’ committee. As a rule, a meeting of creditors includes all the creditors of the company in liquidation; any person with a claim against the company has the right to attend (section 6(1)). The liquidator is appointed by the relevant court (section 16(1)). At the material time the debtor company’s representatives were usually appointed by the liquidator (section 33), but could also be appointed or approved by the court. They are now appointed by the court in all cases.
Once a company has been declared insolvent, it loses the right to dispose of its assets, that right being transferred to the liquidator. Similarly, the bodies responsible for administering and managing the company are suspended and their powers transferred to the liquidator (section 19(2) and (3) and section 50(1)). The latter must report to a meeting of creditors, which can request his dismissal (section 7(1)). The procedure for dismissal is laid down in section 28: if the creditors’ meeting considers that the liquidator no longer fulfils the statutory requirements, is incompetent or is acting in bad faith, it must pass a vote of no confidence in him. It must then request the relevant court to dismiss the liquidator and replace him.
At the relevant time a creditors’ meeting could challenge the decisions of the liquidator before the courts, on condition that it had first made an application to the liquidator himself. This option was also available to the debtor company and to individual creditors. The latter had first to apply to the liquidator; if their application was rejected, explicitly or implicitly, they had to propose legal action to a creditors’ meeting. If the meeting rejected the proposal, they could then institute legal proceedings themselves (section 61(1)).
A company recovery plan adopted by a creditors’ meeting may be challenged before the courts by the liquidator, a single creditor or a group of creditors (section 91).
Judicial insolvency proceedings are governed by Chapter 46 of the Civil Procedure Act (Civilprocesa likums). At the material time the relevant provisions of this Chapter were identical in substance to those of the Insolvency Act. Section 358(1) stated that the liquidator had the right to appeal against any decisions taken by a meeting of creditors.
COMPLAINTS
1. Relying on Article 6 § 1 of the Convention concerning the right of access to a court, the applicant complained of the refusal of the Vidzeme Regional Court to examine his application of 28 December 2000 relating to several aspects of the proceedings for liquidation of the company. He further complained of the fact that his appeal had been dismissed as being out of time as the result of serious negligence on the part of the first‑instance judge. Lastly, the applicant complained of an infringement of his right to a fair hearing; in that connection he criticised the order of the Regional Court of 3 January 2001 ratifying the recovery plan for the company despite his objections.
2. Under Article 13 of the Convention, the applicant complained that, in Latvian law, shareholders in a company in liquidation did not automatically have locus standi to challenge decisions taken by a meeting of creditors or by the liquidator, or to request that the latter be dismissed.
THE LAW
A. Complaint under Article 6 § 1 of the Convention
The applicant alleged a violation of Article 6 § 1 of the Convention, the relevant parts of which provide:
“In the determination of his civil rights and obligations ..., everyone is entitled to a fair ... hearing ... by [a] ... tribunal ...”
The Court reiterates that for Article 6 § 1 to be applicable in its “civil” limb there must be a dispute (“contestation”) over a “right” that can be said, at least on arguable grounds, to be recognised under domestic law. In other words, this provision does not in itself guarantee any particular content for “civil rights and obligations” and is not meant to create new substantive rights which have no legal basis in the State concerned (see W. v. the United Kingdom, 8 July 1987, § 73, Series A no. 121). The dispute must be genuine and serious; it may relate not only to the actual existence of a right but also to its scope and the manner of its exercise. Finally, the outcome of the proceedings must be directly decisive for the right in question: mere tenuous connections or remote consequences are not sufficient to bring Article 6 § 1 into play (see, among many other authorities, Gorraiz Lizarraga and Others v. Spain, no. 62543/00, § 43, ECHR 2004‑III).
In the instant case the Court notes at the outset that there is no provision in Latvian law conferring on ordinary shareholders the capacity to act in the context of liquidation proceedings (see, mutatis mutandis, Rodinná záložna, spořitelní a úvěrové družstvo and Others v. the Czech Republic (dec.), no. 74152/01, 31 January 2006).
The Court further notes that the liquidation proceedings related only to the company as a legal person and not to the applicant in his personal capacity (see, mutatis mutandis, Nosov v. Russia (dec.), no. 30877/02, 20 October 2005). In that connection the Court points out that it has always been mindful of the separate legal personality of companies, authorising the piercing of the “corporate veil” only in exceptional circumstances (see Agrotexim and Others v. Greece, 24 October 1995, §§ 66-68, Series A no. 330‑A). It is true that the company in question had been placed in compulsory liquidation, that the functioning of its governing bodies had been suspended in consequence, and that it was being managed by a liquidator. However, that did not mean that it had ceased to exist as a legal person which continued to have its own separate assets (see, mutatis mutandis, Géniteau v. France (no. 2), no. 4069/02, § 24, 8 November 2005).
The applicant in the present case complained that his application of 28 December 2000 had been declared inadmissible and that the higher courts had refused to examine his subsequent appeal. The Court observes that the application in question related, in substance, to three issues in connection with the winding-up of the company: the increase in the share capital by means of a substantial investment, certain shortcomings and irregularities in the recovery plan adopted by the creditors’ meeting, and the possible dismissal of the liquidator for incompetence. The applicant further criticised the order of 3 January 2001 ratifying the above-mentioned recovery plan. It is clear from the facts of the case, however, that all these measures directly concerned the capital of the company rather than the applicant’s possessions.
The Court acknowledges that the winding-up of the company undoubtedly affected the financial interests of the applicant as a member of the company. However, it considers that the likely effects on him are too indirect and remote to be regarded as “directly decisive” for his individual rights (see, mutatis mutandis, Mimikos v. Greece (dec.), no. 27629/02, 18 September 2003, and Hodina v. the Czech Republic (dec.), no. 66450/01, 30 March 2004).
The Court notes that, in certain cases, it has indeed held that measures relating to a company could be regarded as directly affecting the rights of an individual member. It has reached such a decision firstly in cases where the applicant was the sole owner or shareholder of the company, or where he was carrying out his business through the company (see, for example, G.J. v. Luxembourg, no. 21156/93, § 24, 26 October 2000; Ankarcrona v. Sweden (dec.), no. 35178/97, ECHR 2000‑VI; and Camberrow MM5 AD v. Bulgaria (dec.), no. 50357/99, 1 April 2004). Such decisions have related, secondly, to cases where the impugned measures had a direct bearing on the rights inherent in owning stocks or shares, as is the case with the cancelling of shares or the obligation to exchange them at a disadvantageous rate (see Olczak v. Poland (dec.), no. 30417/96, ECHR 2002‑X, and Offerhaus v. the Netherlands (dec.), no. 35730/97, 16 January 2001). However, the Court cannot discern any similar circumstances in the instant case.
Having regard to the above, the Court concludes that the measures which the applicant sought to challenge before the courts did not directly affect his individual pecuniary rights, with the result that the outcome of such a challenge could not be “directly decisive” for his “civil rights and obligations”. Accordingly, Article 6 § 1 is not applicable in the present case.
It follows that this complaint is incompatible ratione materiae with the provisions of the Convention within the meaning of Article 35 § 3 of the Convention and must be rejected pursuant to Article 35 § 4.
B. Complaint under Article 13 of the Convention
The applicant also considered that he had been a victim of a violation of Article 13 of the Convention, which provides:
“Everyone whose rights and freedoms as set forth in [the] Convention are violated shall have an effective remedy before a national authority notwithstanding that the violation has been committed by persons acting in an official capacity.”
The Court reiterates first of all that Article 13 does not have an independent existence, but simply requires the provision of a domestic remedy to deal with the substance of an “arguable complaint” based on another provision of the Convention or the Protocols thereto. Furthermore, in civil matters, Article 6 § 1 constitutes a lex specialis in relation to the safeguards of Article 13. Hence, as a general rule, where the question is one of access to a court or of fair process, the requirements of Article 13 are absorbed by those of Article 6 § 1 (see Tinnelly & Sons Ltd and Others and McElduff and Others v. the United Kingdom, 10 July 1998, § 77, Reports of Judgments and Decisions 1998‑IV; Kudła v. Poland [GC], no. 30210/96, § 146, ECHR 2000‑XI; and Ernst and Others v. Belgium, no. 33400/96, § 80, 15 July 2003).
In the instant case the Court has found that Article 6 § 1 does not apply. It must therefore examine separately whether Article 13 is applicable and, if so, whether it has been violated.
The Court observes that, under Article 13, the applicant complained of the inability of a person holding shares in a company in liquidation to challenge a decision taken by a creditors’ meeting or by the liquidator or to request the dismissal of the latter; his complaint is therefore linked to the management of his pecuniary interests. The Court has consistently accepted that shares held in a public limited company constitute “possessions” within the meaning of Article 1 of Protocol No. 1 (see, among many other authorities, Sovtransavto Holding v. Ukraine, no. 48553/99, § 91, ECHR 2002‑VII); exactly the same is true of shares in a limited-liability company. That being so, the Court considers that, in the instant case, Article 13 of the Convention should be read in conjunction with Article 1 of Protocol No. 1, which provides:
“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.”
In that connection the Court cannot but refer back to its findings in relation to Article 6 § 1 of the Convention, to the effect that the measures complained of by the applicant related directly to the assets of the company, that is, of a separate legal person, and were not “directly decisive” for his individual pecuniary rights. It reiterates that, in circumstances similar to those in the present case, it has consistently refused to accept that shareholders complaining of measures winding up a company or of other infringements of a company’s rights were “victims” of a violation of Article 1 of Protocol No. 1 (see, in addition to the case-law cited under Article 6 § 1, Amat-G Ltd and Mebaghishvili v. Georgia, no. 2507/03, §§ 33-34, ECHR 2005‑VIII; Minda and Others v. Hungary (dec.), no. 6690/02, 13 September 2005; and Veselá and Loyka v. Slovakia (dec.), no. 54811/00, 13 December 2005). The Court sees no particular reason to depart from its consistent and established case-law in the instant case.
Accordingly, the applicant cannot claim to be a victim of a violation of his rights under Article 1 of Protocol No. 1. In other words, this Article is inapplicable ratione personae to the circumstances of the case. The Court therefore concludes that the applicant’s allegation that he had an “arguable claim” based on that Article is unfounded. Consequently, the guarantees contained in Article 13 do not apply either to the instant case.
It follows that this complaint should also be rejected in accordance with Article 35 §§ 3 and 4 of the Convention.
For these reasons, the Court unanimously
Declares the application inadmissible.
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