S.C. PAULUS S.R.L. v. ROMANIA

FOURTH SECTION

DECISION

Application no. 36419/13
S.C. PAULUS S.R.L.
against Romania

The European Court of Human Rights (Fourth Section), sitting on 30 April 2019 as a Committee composed of:

Paulo Pinto de Albuquerque, President,
Egidijus Kūris,
Iulia Antoanella Motoc, judges,
and Andrea Tamietti, Deputy Section Registrar,

Having regard to the above application lodged on 8 May 2013,

Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicant,

Having deliberated, decides as follows:

THE FACTS

1.  The applicant, S.C. Paulus S.R.L. (“the applicant company”), is a Romanian company which was set up in 1993 and has its headquarters in Ploiesti. It was represented before the Court by Ms C.M. Vieru, a lawyer practising in Bucharest.

2.  The Romanian Government (“the Government”) were represented by their Agent, Mrs C. Brumar, from the Ministry of Foreign Affairs.

A.  The circumstances of the case

3.  The facts of the case, as submitted by the parties, may be summarised as follows.

1.  Financing of the applicant company’s project from European funds

4.  On 17 September 2009 the applicant company submitted to the Ministry of the Economy and Commerce (“the Ministry”) a proposal for an investment project concerning the construction of a factory to be financed by the State from European funds.

5.  By a letter dated 21 July 2010 the Ministry informed the applicant company that the financing of their project had been rejected.

6.  The applicant company challenged the rejection. By a decision delivered on 9 August 2010 the Ministry confirmed the rejection of its project.

7.  A new challenge lodged by the applicant company was allowed. By a decision of 1 September 2010 the Ministry annulled its prior decision and approved the financing of the applicant company’s project.

8.  On 26 November 2010 the applicant company and the Ministry signed a financing contract by which the former became the beneficiary of non‑reimbursable funds for the implementation of its project concerning the construction of a factory. The total value of the project was 26,750,088.86 Romanian lei (“RON”) (the equivalent of 6,369,068 euros (EUR)).

9.  On 9 February 2011 the applicant company was informed by the Ministry that there was a suspicion about the way in which its investment project had been assessed and selected and therefore the financing contract was suspended. According to a subsequent explanatory letter sent to the applicant company on 4 May 2011, the suspension of the financing contract was the result of non-compliance with the tendering procedure for the projects.

2.  First set of civil proceedings brought by the applicant company

10.  On 18 October 2011 the applicant company brought administrative proceedings against the Ministry, seeking to obtain the financing of its project according to the signed contract. The applicant company made an alternative request for the reimbursement of RON 941,929.32 (the equivalent of EUR 224,268) representing the expenses it had already incurred in completing the project in the event that its main claim were dismissed by the court. The applicant company submitted that the expenses it had already incurred concerned the acquisition of land, the obtaining of all relevant authorisations and permits necessary for the operation of the factory, payment to consultancy services for the development of its project and the elaboration of business plans, management, and architects’ fees.

11.  The applicant company contended that such expenses were eligible for reimbursement according to the applicable legal provisions and Article 4 of the financing contract and were supported by invoices, copies of contracts and accounting documents.

12.  On 12 March 2011 the court appointed an expert to establish the expenses already incurred by the applicant company in the execution of the financing contract. According to the expert report, which was submitted to the court on 17 April 2012, the applicant company had already incurred expenses amounting to RON 941,929.32.

13.  By a judgment of 25 June 2012 the Ploieşti Court of Appeal allowed the applicant company’s action and ordered the Ministry to continue the financing of the project. The court noted that in accordance with the procedure for the examination of challenges against decisions concerning the assessment and evaluation of financing projects, the committee for the examination of challenges was not allowed to annul its own decision by which it had rejected a proposal; such a decision had to be annulled by an administrative court. Moreover, the court noted that the annulment of the first decision of rejection of 9 August 2010 followed by the adoption of a new decision to provide financing to the applicant company (see paragraphs 6-7 above) was attributable to the Ministry. The court held that the financing contract should remain in force with all its legal effects, as its annulment would not serve any public interest.

14.  The court also noted that the applicant had incurred expenses in connection with the execution of its project, as proved by the supporting evidence submitted (see paragraph 12 above). The court considered that it was not necessary to examine the alternative request made by the applicant company for reimbursement of the eligible expenses as long as it allowed its main claim.

15.  The Ministry appealed, claiming that the suspension of the financing contract had been justified in accordance with the applicable regulations of the European Commission which stipulate that any irregularity committed by an economic operator causing prejudice to the European Union’s budget affected the lawfulness of the financing contract.

16.  By a final decision of 28 November 2012 the High Court of Cassation and Justice allowed the appeal and dismissed the applicant company’s action as unfounded. It held that the financing contract was null and void on account of the irregularity in the tendering procedure and the way in which the applicant company’s challenge had been examined irrespective of the liability of the contracting parties. However, without providing any reason, the court did not examine the claim lodged by the applicant company in the alternative for the reimbursement of the expenses it had already incurred (see paragraphs 10-11 above).

3.  Second set of civil proceedings brought by the applicant company

17.  On 1 April 2013 the applicant company brought new civil proceedings against the Ministry seeking to obtain the reimbursement of RON 941,929.32 representing the expenses it had already incurred in completing the project.

18.  By a judgement of 22 July 2013 the Ploieşti Court of Appeal admitted that the High Court of Cassation and Justice had omitted to examine the applicant company’s subsidiary claim in its decision of 28 November 2012 (see paragraph 16 above). After examining the claim on its merits, the court dismissed it as unfounded on the grounds that any expenses incurred without observing national and European regulations could not be considered eligible for reimbursement. The court also held that since the financing contract between the applicant company and the Ministry was null and void it could not produce any legal effects.

19.  The judgment was upheld by the High Court of Cassation and Justice, which dismissed on 1 October 2014 an appeal on points of law by the applicant company.

20.  The court noted that the applicant company had incurred three types of expenses in the execution of the financing contract: (i) expenses declared non-eligible by a letter of 8 September 2010 sent to the applicant company before the signing of the contract; (ii) expenses incurred between the signing of the contract and the notification to the applicant company of the irregularity on 9 February 2011 (see paragraph 9 above) and (iii) expenses incurred after the notification.

21.  As to the first type of expenses the court noted that according to a letter of 8 September 2010, which had been enclosed with the file, the expenses incurred by the applicant company in order to obtain financing for the project, such as the expenses relating to the land designated for the project, offices, headquarters, warehouses, green spaces, furniture, fees, authorisations and approvals, had been declared ineligible at the initial assessment of the project. The letter and other documents submitted by the applicant company relating to these expenses had been part of the financing contract signed on 26 November 2010 (see paragraph 8 above). By signing the financing contract the applicant company had agreed upon the terms and conditions under which it had obtained the financing, including the non-reimbursement of those expenses.

22.  As to the second type of expenses the High Court of Cassation and Justice pointed out that the applicant company could have had a legitimate expectation to recover them from the Ministry provided that several conditions had been met. However, such conditions had not been met for the following reasons. First of all, the validity of the financing contract had been questionable from the beginning because of the irregularity noted at the initial stage of the project in the tendering procedure. Then, even if the financing contract had been valid, the eligibility for reimbursement of the expenses incurred for the implementation of the project had not been guaranteed as it should have been assessed on the basis of the documents submitted by the applicant company.

23.  The expenses incurred after the notification of the suspension of the financing contract were not eligible for reimbursement for obvious reasons.

B.  Relevant domestic law

24.  The legal framework concerning the financing of projects from European Structural Funds is set out in the Commission Regulation (EC) no. 1828/2006.

25.  Government Decision no. 759/2007 regulates the eligibility rules applicable to expenses incurred in operations funded from European structural funds.

COMPLAINTS

26.  The applicant company complained under Article 6 § 1 of the Convention that the High Court of Cassation and Justice had not ruled in its decision of 28 November 2012 on its claim made in the alternative to be compensated by the Ministry for the expenses it had already incurred in connection with the financing contract they had entered into.

27.  Under Article 1 of Protocol No. 1 to the Convention, the applicant company complained about the suspension of the financing contract and the refusal by the domestic courts to allow its claim for the reimbursement of the expenses it had already incurred in relation to the financing contract.

THE LAW

A.  Complaint under Article 6 § 1 of the Convention

28.  The applicant company complained that its right of access to a tribunal had been infringed by the High Court of Cassation and Justice in its decision of 28 November 2012.

It relied on Article 6 § 1 of the Convention, which, in so far as relevant, reads as follows:

“In the determination of his civil rights and obligations ... everyone is entitled to a fair ... hearing ... by [a] ... tribunal ...”

1.  The parties’ submissions

(a)  The Government

29.  The Government contended that the applicant company had lost its victim status since in the new set of proceedings, instituted after the application with the Court had been lodged, the domestic courts had examined its claim for reimbursement of the expenses incurred in relation to the financing contract (see paragraphs 17-23 above). The Government also argued that the individual application lodged by the applicant company was an abuse of the right of application in so far as the applicant company had not informed the Court of the fact that its claim for reimbursement of the expenses related to the execution of the financing contract had been subsequently examined by the domestic courts.

(b)  The applicant company

30.  The applicant company did not submit any observations in this respect.

2.  The Court’s assessment

31.  The Court reiterates that under Article 34 of the Convention it may receive applications from any person claiming to be a victim of a violation by one of the High Contracting Parties of the rights set forth in the Convention or the Protocols thereto. It falls first to the national authorities to redress any alleged violation of the Convention. In this regard, the question whether an applicant can claim to be a victim of the violation alleged is relevant at all stages of the proceedings under the Convention. A decision or measure favorable to an applicant is not, in principle, sufficient to deprive him of his status as a “victim” unless the national authorities have acknowledged, either expressly or in substance, and then afforded redress for, the breach of the Convention (see, for example, Scordino v. Italy (no. 1) [GC], no. 36813/97, §§ 178-80, ECHR 2006‑V).

32.  In the present case, the Court observes that in the new set of civil proceedings the Ploieşti Court of Appeal expressly acknowledged that in the first set of civil proceedings the High Court of Cassation and Justice had omitted to examine the applicant company’s subsidiary claim (see paragraph 18 above). Subsequently, it examined the merits of this claim and dismissed it on the basis of sufficient and relevant reasons. Upon appeal on points of law by the applicant company, another examination of the subsidiary claim was carried out by the High Court of Cassation and Justice (see paragraphs 19-23 above). In the Court’s view, this deprived the applicant company of its victim status in respect of its complaint of lack of access to court. The fact that its claim for reimbursement was dismissed by the domestic courts cannot change this conclusion.

33.  It follows that the applicant company can no longer claim to be the victim of a violation of Article 6 § 1 of the Convention. Accordingly, its complaint is incompatible rationae personae with the provisions of the Convention within the meaning of Article 35 § 3 (a) and must be rejected in accordance with Article 35 § 4.

34.  It is therefore unnecessary to examine the Government’s argument concerning the alleged abuse of the right of individual application (see paragraph 29 above; see also, mutatis mutandis, Chim and Przywieczerski v. Poland, nos. 36661/07 and 38433/07, § 185, 12 April 2018).

B.  Complaint under Article 1 of Protocol No. 1 to the Convention

35.  The applicant company complained that the suspension of the financing contract followed by the non-reimbursement of the expenditure it had already incurred in connection with the execution of the contract had violated its property rights.

It relied on Article 1 of Protocol No. 1 to the Convention, which reads as follows:

“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.”

1.  The parties’ submissions

(a)  The Government

36.  The Government claimed that the applicant company’s complaint was inadmissible ratione materiae, arguing that the applicant company could not have a legitimate expectation of obtaining financing and/or reimbursement of the expenses incurred in connection with its project.

37.  With regard to the suspension of the financing contract, the Government maintained that the applicant company had never proved the existence of any prejudice caused to it by the Ministry. During the three months, between the signing of the contract and the notification of the irregularity, the applicant company had not received any amount as subvention from the Ministry. Accordingly, it had had no obligation to return any money after the Ministry had decided to reject the project.

38.  In the Government’s opinion all expenses incurred by the applicant company in connection with the financing contract had not been eligible for reimbursement. They submitted that this issue had been properly considered by the domestic courts in their decisions of 22 July 2013 and of 1 October 2014 (see paragraphs 18 and 19-23 above).

(b)  The applicant company

39.  The applicant company submitted that it had had a legitimate expectation of obtaining the financing of its project after the signing of the financing contract and the reimbursement of the sum of RON 941.929,32 claimed in court, since it had corresponded to the sums it had spent in order to obtain the financing of the project (see paragraph 12 above).

40.  It also argued that it could not be held accountable for the irregularities in the tendering procedure and therefore it should not be obliged to bear the consequences.

2.  The Court’s assessment

41.  The Court recalls that the concept of “possession” within the meaning of Article 1 of Protocol No. 1 has an autonomous meaning which is not limited to ownership of material goods and is independent from the formal classification in domestic law: certain other rights and interests constituting assets can also be regarded as “property rights”, and thus as “possessions” for the purposes of this provision (see Parrillo v. Italy [GC], no. 46470/11, § 211, ECHR 2015).

42.  Although Article 1 of Protocol No. 1 applies only to a person’s existing possessions and does not create a right to acquire property (see Stummer v. Austria [GC], no. 37452/02, § 82, ECHR 2011), in certain circumstances a “legitimate expectation” of obtaining an “asset” may also enjoy the protection of Article 1 of Protocol No. 1. Thus, where a proprietary interest is in the nature of a claim, the person in whom it is vested may be regarded as having a “legitimate expectation” if there is a sufficient basis for the interest in national law, for example where there is settled case-law of the domestic courts confirming its existence. However, no legitimate expectation can be said to arise where there is a dispute as to the correct interpretation and application of domestic law and the applicant’s submissions are subsequently rejected by the national courts (see, among many other authorities, Anheuser-Busch Inc. v. Portugal [GC], no. 73049/01, §§ 64-65, ECHR 2007-I, and Kopecký v. Slovakia [GC], no. 44912/98, §§ 50 and 52, ECHR 2004-IX).

43.  One of the lines of the Court’s case-law on “legitimate expectation” referred to situations where the persons concerned were entitled to rely on the fact that a legal act, on the basis of which they had incurred financial obligations, would not be retrospectively invalidated to their detriment (see, mutatis mutandis, Pine Valley Developments Ltd and Others v. Ireland, 29 November 1991, § 51, Series A no. 222, and Stretch v. the United Kingdom, no. 44277/98, §§ 33-35, 24 June 2003).

44.  Turning to the present the Court notes that the applicant company’s complaint has two aspects. On the one hand, the applicant company complained of the suspension of the financing contract on account of irregularities in the tendering procedure attributable to the contracting authority. On the other hand, it complained that it had been unable to obtain reimbursement of the expenses it had incurred in relation to the same contract.

45.  The Court finds it appropriate to deal with those two issues separately.

(a)  The suspension of the financing contract

46.  The Court will firstly consider whether the applicant company had a legitimate expectation to obtain the execution of the financing contract.

47.  From the outset, the Court notes that the financing of projects from European funds is governed by EU directives and regulations, which impose strict requirements in the assessment, selection and monitoring of the projects to be financed (see paragraph 24 above). Therefore, in most of the cases, irregularities, qualified as substantial, could not be remedied otherwise than by declaring the contract null and void.

48.  In the present case, after the financing contract had been signed, the competent authority which monitored the compliance of the tendering procedure with the applicable regulations noted that an error had been committed in relation to the review of the applicant company’s second challenge against the decision to reject its proposal. It considered that the error was so significant that it decided to suspend the execution of the financing contract (see paragraph 9 above).

49.  The authority’s decision to suspend the financing contract had been reviewed by the domestic courts. The High Court of Cassation and Justice examined the applicant company’s arguments and dismissed them in a well-reasoned decision. It explained why, in application of the relevant law, it could not uphold the applicant company’s allegations (see paragraph 16 above). The Court has no reason to doubt its findings.

(b)  The reimbursement of the expenses

50.  The Court will further proceed to examine whether a legitimate expectation to obtain reimbursement of the expenses incurred in connection with this contract arose in the circumstances of the present case.

51.  It notes that after the High Court of Cassation and Justice had initially omitted to examine this claim in its decision of 28 November 2012 (see paragraph 16 above), in the second set of civil proceedings the Ploieşti Court of Appeal examined it and dismissed it in a judgment of 22 July 2013 (see paragraph 18 above). The court held that as the financing contract had been null it could not have produced any legal effects. The appeal court’s judgment was upheld by the High Court of Cassation on 1 October 2014, which examined in detail the different nature of the expenses sustained by the applicant company and exposed the reasons why none of them could be reimbursed (see paragraphs 19-23 above).

52.  The Court considers that the domestic courts rejected the applicant company’s claims on the basis of relevant and sufficient reasons. In such circumstances, their decisions to dismiss the applicant company’s civil claim cannot be deemed to have been arbitrary or manifestly unreasonable.

(c)  Conclusion

53.  In view of the above considerations, the Court is of the opinion that the applicant company had neither a “possession” under Article 1 of Protocol No. 1 nor a legitimate expectation under the relevant domestic law, as duly applied and interpreted by the domestic authorities, of obtaining the execution of the contract and the reimbursement of the expenses incurred in connection with this contract. Consequently, the facts of the case do not fall within the ambit of Article 1 of Protocol No. 1.

54.  It follows that the applicant company’s complaint under Article 1 of Protocol No. 1 to the Convention is incompatible rationae materiae with the provisions of the Convention within the meaning of Article 35 § 3 (a) of the Convention and must be rejected in accordance with Article 35 § 4 of the Convention.

For these reasons, the Court, unanimously,

Declares the application inadmissible.

Done in English and notified in writing on 23 May 2019.

Andrea TamiettiPaulo Pinto de Albuquerque
Deputy RegistrarPresident

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