THE FACTS

Whereas the facts presented by the Applicants' solicitors Messrs. ...,

in London may be summarised as follows:

The Applicants are British nationals living in England. They are

holders as follows of 4 and 3/4 per cent debenture stock 1968/78 of the

United Steel Companies Limited, a corporation incorporated under the

laws of the United Kingdom:

Mr. A £ ...;  Mr. B £ ...;  Mr. C £ ...;  Mrs. D £ ...;

Under the Iron and Steel Act, 1953, an agency, the Iron and Steel

Holding and Realisation Agency, was established to realise and thus

denationalize the undertaking and property of the British Steel

Industry which had been nationalised by the Iron and Steel Act, 1949.

In exercise of its powers under the 1953 Act, this agency first of all

subscribed for the stock issued in 1953 in the amount of £ 10,000,000

at £ 98 per cent. The funds for the subscription were provided by the

Treasury and the account was under the control and management of the

Treasury.

By an offer for sale dated the 24th February, 1961, the agency sold the

stock to the British public at £ 81 per cent.

The following is a summary of the provisions as to the redemption of

the stock:

(a) The company was bound to repay the stock at par on the 31st

December, 1978.

(b) The company was bound to apply in each year, starting in 1959, £

200,000 either in the redemption at par of £ 200,000 of stock selected

by drawing or by the purchase of the stock in the market (such stock

counting at par or at the cost of purchase).

(c) The company had a right to redeem the stock at any time on or after

the 31st December, 1968, at a premium of £ 2 per cent between the 31st

December, 1968 and 31st December, 1970, at a premium of £ 1 per cent

between the 1st January, 1970 and the 31st December, 1976, and

thereafter at par.

(d) The company was free to purchase the stock in the market.

(e) If the stock became payable by reason of the company's default, it

was payable at a premium of £ 2 per cent.

Each of the Applicants (except Mr. A) bought his or her stock from the

agency upon the terms of the offer for sale. Mr. A bought his stock in

the market on the faith of the terms of the offer for sale in March,

1964.By the Iron and Steel Act of 22nd March, 1967, the stock will be

compulsorily acquired on the vesting date appointed by the competent

minister, i.e. 28th July, 1967. The "main purpose" of the Act as stated

in the accompanying explanatory memorandum is "to bring into public

ownership the principal companies concerned with the production of

steel in Great Britain.

On ...November, 1966, the Applicants' solicitors wrote to the Minister

of Power arguing that under the principles of English law and under

Article 1 of the Protocol to the Convention, the Government was

precluded from depriving the stockholders of their right to hold the

stock until redemption date. On .. January, 1967, the Treasury

Solicitor's Department to which the letter had been transmitted replied

that, according to Section 28 (1) of the 1953 Act, the Iron and Steel

Holding and Realisation Agency was not to be regarded as the "servant

or agent of the Crown", and that the Agency had only acted as the

seller of the debentures but had not itself issued them. As to the

question of compensation, the reply points out that the Iron and Steel

Act fixes the compensation value of these debentures by reference to

the average of the prices at which they have been bought and sold by

investors over the period of sixty-one months to April, 1966. On the

Government's calculation this price is estimated to be £ 80. 18. 0. as

against the current Stock Exchange price of about £ 76. 10. 0.

In the House of Lords, both at the Committee stage on the 27th

February, and at the Report stage on the 9th March, 1967, an amendment

was moved and, on the second occasion, carried to remove the Stock and

other similar debenture stocks from the Bill. In the House of Commons

on the 21st March, 1967, this amendment was negatived and debenture

stocks were restored to the Bill for nationalisation.

Complaints

Whereas the Applicants claim that the proposed acquisition of their

stock against their will and at the price proposed in the Act when they

are entitled to hold the stock until due redemption under the Trust

Deed is an infringement of Article 1 of the Protocol to the Convention

on the following grounds:

(a) The agency was a body set up by the British Government as stated

above, it subscribed for the stock with moneys provided by the

Government, it sold the stock to the Applicants and in these

circumstances for the British Government to deprive the holders of the

stock of their holdings infringes the following principle of the

English law and general justice: "If a party enters into an arrangement

which can only take effect by the continuance of an existing state of

circumstances, there is an implied engagement on his part that it shall

do nothing of his own motion to put an end to that state of

circumstances under which alone the arrangement can be operative."

(b) Applying that principle to the present case the agency on behalf

of the British Government to the extent provided in the Iron and Steel

Act, 1953, and in order to give effect to the policy of the British

Government sold the stock to the Applicants and others upon the terms

of the trust deed and the offer for sale. The implied engagement of the

Government was that it would do nothing of its own motion to prevent

stockholders from enjoying their full contractual rights against the

company.

(c) A departure from this principle and indeed any acquisition by

nationalisation of the Applicant's stock could only be justified, if

at all, under the Protocol as being in the general interest. While the

Government has asserted such an interest, no grounds for this interest

have been given nor are any apparent for the reasons given below.

(d) Holders of debenture stock such as the stockholders, do not own the

company. The shareholders do. The stockholders are creditors. The

Government could therefore achieve the main purpose of the Act, namely

to bring the company into public ownership merely by the acquisition

of the shares.

Debenture stocks represent debts and should be honoured, unless it was

necessary to acquire debenture stocks in order to reorganise the

industry. The word "necessary" appears in Article 1 to the Protocol and

is the right test. In Parliament it was urged by the Opposition that

it was not necessary to acquire debenture stocks. The rights of

debenture stockholders depend on the terms of the trust deeds

constituting them, but in every case known to the Opposition the stocks

become payable if the company goes into liquidation.

Under English law, a company has a statutory right to go into

liquidation and if all the shares were owned by the corporation set up

under the Act, the necessary resolution could be passed in a few days.

Every conceivable kind of reorganisation can be carried out in a

liquidation. Accordingly no reorganisation would be held up if the

debenture stocks were left outstanding. In so far as their continued

existence did not impede any reorganisation they would be paid off in

due course. In so far as they did impede any reorganisation which was

considered in the future they could be easily disposed of and paid off

by a reorganisation in liquidation.

The Government declined to answer these arguments in any detail but

merely asserted that the rights of the stockholders would enable them

to go to court to stop certain reorganisations and could delay or

prevent reorganisations.

This answer was rested on assertion rather than logical argument

because it does not bear examination as a matter of English law. A

company can go into liquidation. This is a cheap and quick process

where all the shares are owned. In every case known to the Opposition

or indeed to the Applicants, debenture stocks become immediately

repayable on liquidation. If they are repaid, the holders cease to be

creditors and have no standing to make any application to the court.

Every reorganisation of a company which can be carried out while a

company is a going concern can be carried out while it is in

liquidation. The British Government never argued the contrary giving

chapter and verse.

(e) A further argument applicable to the stock is that under the trust

deed constituting it, the stock is repayable at the option of the

company at the end of 1968. Acting under the powers conferred on him

by Section 9 (5) of the Act, the Minister has appointed the 28th July,

1967 to be the vesting date, that being the date upon which all

securities of the steel companies are to vest in the corporation

established under the Act. This corporation has to consider what

reorganisation to make. This must be a long process. It is therefore

unlikely that in any event the stock would be required to be disposed

of before it becomes repayable in the ordinary course. It is,

therefore, unnecessary to acquire the stock.

In the circumstances, it is not necessary, nor could the British

Government reasonably deem it to be necessary, to acquire the stock in

order "to control the use of property in accordance with the general

interest" within the meaning of Article 1 of the Protocol.

History of Proceedings

Whereas the proceedings before the Commission may be summarised as

follows:

The Application dated 1st February, 1967, was received by the

Secretariat of the Commission on 3rd February, 1967, and entered on the

same date in the special register provided for by Rule 13 of the

Commission's Rules of Procedure.

On 9th March, 1967, the President acting on behalf of the Commission

decided proprio motu to give precedence to the case under Rule 38,

paragraph (1), of the Rules of Procedure.

On 5th April, 1967, the case was submitted to a group of three members

for a preliminary examination in accordance with Rule 34 of the Rules

of Procedure. On 8th April, 1967, the Commission examined the

Application and decided to adjourn its decision on admissibility

pending confirmation by the Applicants' solicitors that the Iron and

Steel Bill had been enacted in the meantime.

This information and the final text of the Act were received on 10th

April, 1967, and a further statement was submitted by the Applicants'

solicitors on 10th May, 1967. A new preliminary examination on the

basis of these submissions was carried out by a group of three members

on 8th and 26th May, 1967. On 29th May, 1967, the Commission resumed

its examination of the case and adopted the present decision.

THE LAW

Whereas it is necessary first to recall the precise terms of Article

1 of the Protocol (P1-1) to the Convention which forms the basis of the

Applicants'complaints:

"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.

Whereas the compulsory acquisition of the Applicants' debenture stock

is a deprivation of possessions and not a control of their use;

whereas, therefore, the second paragraph on which the Applicants base

their allegation that this measure was not "necessary in the general

interest" is not applicable to the present case;

Whereas the said compulsory acquisition is covered by the Iron and

Steel Act 1967 (see Schedules 1 and 4, section 59 (1), to the Act) and

therefore in accordance with "the conditions provided for by law"

within the meaning of the second sentence of the first paragraph

of Article 1 (Art. 1);

Whereas the qualification "except in the public interest" is one of the

clauses of exception in the Convention similar to those in Articles 8

to 11  (Art. 8, 9, 10, 11) and whereas the Commission in determining

whether measures taken by a High Contracting Party are properly covered

by such clauses, has always stated that a "margin of appreciation"

should be given to the High Contracting Party concerned, although it

remains for the competent bodies under the Convention to investigate

such measures and determine whether they are, in fact, consistent with

the Convention; whereas the Commission refers in this respect to its

decisions concerning applications under Articles 8, 9 and 10

(Art. 8, 9, 10) of the Convention (see for Article 8 (Art. 8),

Applications Nos. 911/60, Yearbook, Volume IV, page 218, 1449/62,

Yearbook, Volume VI, page 266, 2306/64, Collection of Decisions, Volume

21, page 33; for Article 9 (Art. 9), Application No. 1068/61, Yearbook,

Volume V, page 284; for Article 10 (Art. 10), Applications Nos. 753/60,

Yearbook, Volume III, page 318, 1167/61, Yearbook, Volume VI, page

218);

Whereas, with regard to the question whether the compulsory acquisition

of the Applicants' debenture stock was a measure taken in the public

interest the Commission observes that:

(i) the Iron and Steel Act 1967 was, as is not contested by the

Applicants, enacted by the legislature for the purpose of serving a

public interest, namely the establishment of a sound economic basis for

the British Iron and Steel industry,

(ii) the reversal by the House of Commons of the House of Lords

amendments on the very measure in issue shows that it was the view of

the legislature that this measure was essential for the implementation

of the policy of the Act and therefore in the public interest,

(iii) debenture stocks have been included also in previous acts of

nationalisation, for example, the Iron and Steel Act 1949 and the

Transport Act 1947.

Whereas, in view of these circumstances, the Commission is of the

opinion that, in adopting the provisions of the Iron and Steel Act 1967

affecting the Applicants' rights as debenture holders, the United

Kingdom has not exceeded the margin of appreciation as to what measures

were "in the public interest";

Whereas, consequently, the examination of the case does not disclose

any appearance of a violation of the rights and freedoms set forth in

the Convention and Protocol and, in particular, in Article 1 of the

Protocol (P1-1) and it follows that the Application is manifestly

ill-founded within the meaning of Article 27, paragraph (2)

(Art. 27-2), of the Convention.

Now therefore the Commission declares this Application inadmissible.