Information Note on the Court’s case-law No. 119
May 2009
Varnima Corporation International S.A. v. Greece - 48906/06
Judgment 28.5.2009 [Section I]
Article 6
Civil proceedings
Article 6-1
Fair hearing
Equality of arms
Preferential treatment of State with respect to limitation period in private-law proceedings against a private entity: violation
Facts: The applicant company entered into a contract with the State for the importation of petroleum products on its behalf. The State brought a claim against it for damages before the Court of First Instance, alleging that the company had failed to fulfil its contractual obligations. The company then lodged a counterclaim for damages on the grounds that the State had not fully performed the contract. The Court of First Instance joined the two actions. It subsequently rejected the applicant company’s action as time-barred. Among other things, the court observed that, by law, an action concerning a contract for the transfer of goods was to be regarded as time-barred, where the proceedings were already pending, if the difference in time between two successive procedural acts, initiated either by the parties or by the court, exceeded one year. The same court further considered that, as regards the action brought by the State against the applicant company, the one-year limitation period was not applicable. It declared applicable the law governing the limitation period for claims of the State against private individuals. Under that law, claims of the State arising from non-performance of a contract had a limitation period of twenty years. The court upheld the State’s claim and awarded it the sums requested. The applicant company appealed but the Court of Appeal partly upheld the decision. In particular, it accepted that the reasons for preferential treatment of the State in relation to the limitation period did not cease to exist when the State was acting jure gestionis, that is to say not in the exercise of its sovereign power but in the context of the private management of its resources. The Court of Appeal added that the importing of petroleum products served the general interest and satisfied the fundamental needs of society. It lastly found that the application of two different limitation period for the two parties did not contravene the provision of the Constitution enshrining the principle of equality, nor was it in breach of Article 6 § 1 of the Convention. An appeal on points of law by the applicant company was dismissed.
Law: The domestic courts, in the same case, had applied two different limitation periods in relation to the respective claims of each party. The applicant company’s claim against the State had thus been regarded as time-barred after one year and, as regards the State’s claim against the applicant company, the rule setting a twenty-year limitation period for claims of the State had been declared applicable. In addition to the substantial disadvantage per se of one party in relation to the other, as regards the possibility of bringing a claim, the Court also took into account the equivalent status and role of the parties to the proceedings in deciding whether or not there had been a breach of the principle of the equality of arms. In the present case, the application of different limitation periods had unquestionably placed the applicant company in a position of substantial disadvantage compared to the State for the submission of its claim. As a result of the imposition on the applicant of a limitation period twenty times shorter than that granted to the opposite party, its claims had been dismissed by the domestic courts.
It was therefore also appropriate to ascertain whether the two parties enjoyed an equivalent status in the proceedings in question, as that would confirm the breach of the principle of the equality of arms. The dispute in question concerned a private commercial transaction governed by private law rather than a sovereign act of authority by the State. The State had not entered into the contract jure imperii, in the exercise of its sovereign power, but jure gestionis, that it to say in a private management context, acting as a private person. In the context of private-law procedures the authorities could be pursuing public-law missions, for which the requisite privileges and immunities might possibly be granted to it. However, the mere fact of belonging to the structure of the State did not suffice in itself to render legitimate, in all circumstances, the application of State privileges, which had to be necessary for the proper exercise of public authority. The application to the State in the present case of a twenty-year limitation period for its claims did not appear to be justified by a need to ensure the efficient management of public finance or the fulfilment of the State’s budgetary objectives. The mere interest of the public treasury could not by itself be deemed a public or general interest that might justify in a given case a breach of the principle of the equality of arms. Accordingly, the application of a twenty-year limitation period for the State’s claims against the applicant company was not sufficiently justified by the general interest. The Court therefore took the view that the application, to the detriment of the applicant company’s claims against the State, of different periods of limitation to the opposing parties, entailing a considerable discrepancy between them, contravened the principle of the equality of arms. Accordingly, the Court dismissed the Government’s preliminary objection to the effect that the applicant company’s complaint was inadmissible ratione materiae.
Conclusion: violation (unanimously).
Article 41 – EUR 6,000 for non-pecuniary damage.
© Council of Europe/European Court of Human Rights
This summary by the Registry does not bind the Court.
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