Communicated on 7 February 2020
Published on 24 February 2020
SECOND SECTION
Application no. 56774/18
UAB AMBERCORE DC and UAB ARCUS NOVUS
against Lithuania
lodged on 28 November 2018
STATEMENT OF FACTS
The applicants, AmberCore DC and Arcus Novus, are two companies registered at the technology park in Liepiškės village near Vilnius. They are represented before the Court by Mr R. Simaitis, a lawyer practising in Vilnius.The circumstances of the case
The facts of the case, as submitted by the applicant companies, may be summarised as follows.
The applicant companies work in the field of telecommunication services. They belong to SatGate group which provides satellite communication services. In 2007 Arcus Novus set up a technology park in Liepniškės village. Arcus Novus is also a member of the Lithuanian aeronautics association and has taken part in developing first Lithuanian satellites.
Around 2012 the applicant companies started a project to build the biggest data storage facility in Lithuania, to be constructed near Vilnius. The facility was supposed to store information from the State and commercial institutions, such as banks. At a certain point, the applicant companies applied to the Lithuanian authorities for necessary permits to build that data storage facility.
By decision no. NS-23 of 16 August 2016, the Commission for the Assessment of Conformity of Potential Participants to National Security Interests (hereinafter – the Commission) held that the applicant companies were not in compliance with Article 7 §§ 10 (3 and 4) of the Law on Enterprises and Facilities of Strategic Importance to National Security and Other Enterprises of Importance to Ensuring National Security (hereinafter – “the Law”, see the Relevant domestic law part below). The Commission informed the applicant companies that its decision was based on the State Security Department’s (hereinafter – “the SSD”) report of 5 August 2016. On the basis of that report the Commission held that Arcus Novus, through intermediary companies, was owned and controlled by four citizens of the Russian Federation. Moreover, one of those citizens, V.A., in 2006-09 worked in the Kaliningrad region as a director of Gazprom related company, which meant that he had worked in companies that were linked to the Russian Government and were controlled by the Federal Security Service (FSB) of the Russian Federation. In the light of the above, the Commission considered that the data storage facility could be connected to the Internet and to the Lithuanian telecommunications networks, and, through those, to the member states of the European Union and to the Russian Federation, thus linking the data storage facility to the FSB intelligence center in the Russian Federation. As noted by the SSD, the FSB then would be able to have access to the data stored at that facility by the Lithuanian and foreign Governments or companies. The FSB would also be able to have an impact on the Lithuanian telecommunications networks, and Lithuanian territory could be used to perform cyber-attacks against third countries. Lastly, if the State institutions, commercial banks, telecommunications companies were to become clients of that data storage facility, Russia would have possibilities to disrupt the functioning of the Lithuanian State and its economics.
The applicant companies then started administrative court proceedings challenging the Commission’s decision.
On 8 March 2018 the Vilnius Regional Administrative Court upheld the Commission’s decision. The court acknowledged that the Commission reached its conclusions on the basis of both – classified and publicly available – information. Responding to the applicant companies’ argument that the Commission’s decision was essentially based on the classified information which they could not contest and which therefore restricted their right to defence, the court wrote that the Commission’s decision “was not exclusively based on classified information”. In the words of the court, “publicly available information as well as not classified information adduced to the case-file by the SSD and the Commission”, was sufficient for the Commission to reach its conclusion that the applicant companies failed to meet the requirements of the Law.
The applicant companies appealed. They argued that the first instance court merely restated in its reasoning what had been said in the Commission’s decision and failed to evaluate any of the circumstances to assess the reasonableness of that decision. Moreover, the first instance court also failed to properly examine the evidence which was submitted to the file. It also refused to summon and question witnesses, thus demonstrating its prejudicial attitude towards the applicants. Likewise, the testimony of some of the witnesses as well as the testimony of the directors of the applicant companies [who testified] had not been reflected in the first instance court’s decision. The applicant companies also disputed the lower court’s conclusion that publicly available information had been sufficient for the Commission to reach its decision. They underlined that, in reality, the Commission had not adduced to the file any piece of evidence which would be not classified to substantiate its suppositions (prielaidos) that the applicant companies posed threat to national security.
The applicant companies also pointed out that joinder of non-public documents (nevieši dokumentai) to the file was in beach of their procedural guarantees. If the State institutions wished to rely on such documents, the SSD firstly had to declassify them.
The applicant companies also wished to explain to the appellate court that the purpose of the data storage facility was to store computers and data storage equipment safely from fires or physical break in. They pointed out that the data storage facility would not own the external fibre optic cables connecting it to Internet. They also asseverated that they had no intention to connect the data storage facility via fibre optics cables to the FSB intelligence center in the Russian Federation. Such assumption of the Commission was far-fetched and not feasible technologically, since this would require pulling a fibre optics cable until and over the State border which was more than 160 kilometres away. In the light of the above, the applicant companies could not comprehend what threat their project posed to the national security.
The applicant companies lastly pleaded that the Commission’s decision was in breach of the principle of non-discrimination. It also breached their right to protection of property and their right to presumption of innocence.
By a ruling of 30 May 2018 the Supreme Administrative Court ordered the SSD, which was the third party in those administrative proceedings, to provide, “as evidence (dėl įrodymų pateikimo)”, that court with the classified documents (įslaptinti dokumentai) which were the basis on which the Commission adopted the decision no. NS-23 of 16 August 2016 (see above). The Supreme Administrative Court noted that “[so far] the classified materials had not been included in the case-file [before that court] and they were necessary in order to assess whether the Commission’s decision was lawful and reasoned”.
Afterwards, having examined the case in written proceedings, by a ruling of 27 June 2018, the Supreme Administrative Court dismissed the applicant companies’ appeal and left the lower court’s decision unchanged. The court firstly referred to Article 8 § 1 of the Law on Public Administration (see the Relevant domestic law part below) to the effect that each individual administrative act had to be based on objective data (facts) and legal norms, and any measures applied by the State (such as revocation of a licence or a permit, or temporary prohibition to engage in a certain activity or to provide certain services) had to be reasoned.
As to the case at hand, the Supreme Administrative Court then considered that “from the content of the Commission’s decision one could comprehend (galima suvokti) the factual and legal basis” on which it was based, from which it followed that the applicant companies’ right to defence had not been curtailed. The Supreme Administrative Court then stated that its chamber had “examined the evidence as existing in the case-file, and reached the conclusion that the publicly available factual evidence provided by the SSD confirm[ed] that the companies [SatGate] and Arcus Novus have links to the FSB of the Russian Federation”. The Supreme Administrative Court observed that, when reaching its decision, “the first instance court had also relied on classified information provided by the SSD”. In that context, the Supreme Administrative Court referred to Article 56 § 3 of the Law on Administrative Proceedings, that, as a rule, data which is State secret may not be used as evidence in administrative proceedings unless it has been declassified (see the Relevant domestic law part below). The same stemmed from the Constitutional Court’s ruling of 15 May 2007 (see ibid). Notwithstanding this issue, and even if “the first instance court had reasonably agreed that the classified information was allowed in evidence in the applicant companies’ case”, this did not breach their procedural rights, given that the non-classified evidence in the case-file allowed reaching a reasonable conclusion that because of their connections with secret services of foreign States the applicant companies failed to meet the criteria mentioned in Article 7 § 1 (4) of the Law.Relevant domestic law and practice
The Law on Enterprises and Facilities of Strategic Importance to National Security and Other Enterprises of Importance to Ensuring National Security (Strateginę reikšmę nacionaliniam saugumui turinčių įmonių ir įrenginių bei kitų nacionaliniam saugumui užtikrinti svarbių įmonių įstatymas), insofar as relevant and at the material time, read:
Article 2: Definitions
“1. National security interests mean protection of the independence and sovereignty of the State, European and trans-Atlantic integration, reducing threats and risks to energy and other economic sectors of crucial importance to public security.
2. Potential participant means a natural or legal person that has officially declared an intention or interest in acquiring the shares of an enterprise of strategic or considerable importance to national security, or of an enterprise being established or operating in the economic sector of considerable strategic importance to national security, or acquiring ownership, management or any other rights to facilities of particular strategic importance or strategic importance to national security. In the cases provided for by this Law, an existing shareholder of an enterprise of strategic or considerable importance to national security seeking to additionally acquire the shares of the enterprise shall also be considered as a potential participant.
...
4. Enterprises and facilities of strategic or considerable importance to national security and facilities of particular strategic or strategic importance to national security means enterprises located or being established and facilities being designed or constructed in the Republic of Lithuania which, according to their purpose and/or nature of activities, are, under this Law, assigned particular strategic, strategic or considerable importance to national security and which, due to the protection of essential interests of national security, are subject to conditions and requirements regarding ownership, management or any other rights to the enterprises or facilities, the capital structure of the enterprises and changes therein, as well as requirements to be complied with by potential participants.”
Article 3: State and municipal enterprises of strategic importance to national security and facilities belonging to the State by the right of ownership
“3. The following economic sectors shall be of considerable strategic importance to national security:
...
3) information technologies and telecommunications, other high technologies; ...”
Article 7: Assessment of conformity of potential participants to national security interests
“1. Assessment of conformity of potential participants to national security interests shall be carried out in the manner and cases stipulated by this Article.
...
10. A potential participant shall be recognised as conforming to national security interests provided that he meets all of the following conditions:
1) meets the criteria of European and trans-Atlantic integration ...;
...
3) does not maintain the relations with institutions of the foreign States not members of the European Union and the North Atlantic Treaty Organization or with persons from those States which might increase the risk or pose a threat to national security;
4) there is no data that a person is related to organised criminal groups, special services ... of foreign States, or is related to international terrorist organisations or maintains relations with persons suspected of membership thereof; ...”
The Law on Public Administration (Viešojo administravimo įstatymas) at the material time held:
Article 8: General Requirements for an Individual Administrative Act and a Notification about Adoption of an Individual Administrative Act
“1. An individual administrative act must be based on objective data (facts) and the norms of legal acts, and the sanctions applied (withdrawal of a licence or authorisation, temporary prohibition to engage in a particular activity or to provide services, imposition of a fine) must be reasoned.”
The Law on Administrative Proceedings (Administracinių bylų teisenos įstatymas) at the material time read:
Article 56. Evidence
“1. Evidence in an administrative case is all factual data found admissible by the court hearing the case and based upon which the court finds ... that there are circumstances which justify the claims and rebuttals of the parties to the proceedings and other circumstances which are relevant to the fair disposal of the case, or that there are no such circumstances ...
3. As a rule (paprastai), factual data which constitutes a State or official secret may not be used as evidence in an administrative case, until the data has been declassified in a manner prescribed by law.”
In the ruling of 15 May 2007 the Constitutional Court underlined that no court decision could be entirely substantiated by the information constituting a State secret (or other classified information), which was not known to the parties (one party) to the case.
COMPLAINTS
The applicant companies complain, under Article 6 of the Convention, that they had not had a fair hearing when challenging the Commission’s decision in the administrative courts.
They note, firstly, that those courts had relied on classified documents provided by the SSD. The applicant companies, however, could not contest accusations against them, pursuant to which they were declared “enemies of the State”. This was in clear breach of the principle of equality of arms. In that context, they submit that the SatGate group has been operating in the Republic of Lithuania for more than a decade. During that time the SatGate group has provided services to the armed forces of the Republic of Lithuania, to the North Atlantic Treaty Organisation, without the group’s integrity having ever been questioned. In this connection, the applicant companies also refer to the information that in 2017 the director of Arcus Novus – V.T., who is a Lithuanian citizen, received recognition from the President of the Republic of Lithuania for activities and innovation that benefitted Lithuania. The President of the Republic also noted the company’s contribution when promoting Lithuania’s cooperation with NASA and the European Space Agency.
Referring to Article 6 of the Convention, the applicant companies also state that the courts examined the case within the general anti-Russian setting existing in Lithuania. They submit that, on the SSD’s initiative and while the court proceedings had still been pending, the Commission’s decision had been widely publicised in the media, including the SSD’s comments, essentially calling the applicant companies to be threat to national security, which damaged their reputation beyond repair. The SSD also claimed that the Commission’s decision was a victory in stopping unfriendly Russian activities in Lithuania and ensuring security in cyberspace. The applicant companies also state that after numerous publications in the press they received inquiries from their concerned business partners in Lithuania, Western Europe and the United States.
The applicant companies also complain that they had faced discrimination due to the fact that some of their shareholders are Russian citizens. They do not deny that V.A. used to work for a subsidiary of Gazprom; however, this information is public and is listed on his public LinkedIn network profile, and the applicant companies had never been hiding it. In the applicants’ words, it is “ridiculous” to think that natural persons who are spies for Russia would list the single fact that incriminates them as Russian spies (employment history) on their public LinkedIn profile. Conversely, no other facts proving that V.A. works or used to work for the FSB or companies linked to the FSB were presented and revealed either by the Commission or by the SSD. Likewise, the mere fact that V.A. is a Russian citizen should not be considered as proof that he is a threat to national security of Lithuania. The applicant companies thus plead that, for the Lithuanian authorities, “being Russian” is tantamount to “being a Russian spy”. In their opinion, holding such a view is clearly disproportionate.
Lastly, the applicant companies maintain that they had already invested more than four million euros in the data storage facility project. Bearing in mind that, as a consequence of the unfavourable court proceedings, they will not be able to acquire necessary licenses and permits, they will suffer financial losses, which will amount to a breach of their right to protection of property, under Article 1 of Protocol No. 1 to the Convention.
QUESTIONS TO THE PARTIES
1. Was Article 6 § 1 of the Convention, under its civil head, applicable to the administrative court proceedings in which the applicant companies challenged the Commission’s decision not to issue them the permit to construct the data storage facility (see Pocius v. Lithuania, no. 35601/04, §§ 38-46, 6 July 2010; Regner v. the Czech Republic [GC], no. 35289/11, §§ 124 and 125, 19 September 2017, and, mutatis mutandis, Sine Tsaggarakis A.E.E. v. Greece, no. 17257/13, §§ 40 and 42, 23 May 2019, with further references)?
2. If Article 6 § 1 of the Convention is applicable, did the applicant companies have a fair hearing and adversarial proceedings in their case? The Court refers to the applicants’ complaint that, when upholding the Commission’s decision against the applicants, the administrative courts examined and relied on classified evidence which was not revealed to the applicants and which they could not contest? Have the applicant companies been placed in disadvantage with another party (see, mutatis mutandis, Jasper v. the United Kingdom [GC], no. 27052/95, §§ 52 and 53, 16 February 2000)? Did the decision-making procedure ensure that, as far as possible, it complied with the requirements to provide adversarial proceedings and equality of arms and incorporate adequate safeguards to protect the applicants’ interests (see ibid., § 53)?
Besides the classified information, what exactly and specifically was the other evidence that was publicly available to the parties and the courts at each stage of the administrative court proceedings, bearing in mind that this evidence purportedly served as basis for the decision not to issue the applicant companies the permit to construct the data storage facility (see Regner v. the Czech Republic [GC], no. 35289/11, §§ 146-149, 19 September 2017; in this context also see and compare Zarubin and Others v Lithuania (dec.), § 55, 19 December 2019)?
In the context of the applicant companies’ complaint about the alleged unfairness of the court proceedings against them, have they been discriminated against because of their shareholder’s citizenship? Have they had a right to an impartial tribunal?
3. Has there been a breach of the applicant companies’ right to protection of property, under Article 1 of Protocol No. 1 to the Convention?
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