AS TO THE ADMISSIBILITY OF

Application No. 37527/97

by Jiří KUCHAŘ and Petr ŠTIS

against the Czech Republic

The European Commission of Human Rights (Second Chamber) sitting in private on 21 October 1998, the following members being present:

MM J.-C. GEUS, President

M.A. NOWICKI

G. JÖRUNDSSON

A. GÖZÜBÜYÜK

J.-C. SOYER

H. DANELIUS

Mrs G.H. THUNE

MM F. MARTINEZ

I. CABRAL BARRETO

D. ŠVÁBY

P. LORENZEN

E. BIELIŪNAS

E.A. ALKEMA

A. ARABADJIEV

Ms M.-T. SCHOEPFER, Secretary to the Chamber

Having regard to Article 25 of the Convention for the Protection of Human Rights and Fundamental Freedoms;

Having regard to the application introduced on 3 July 1997 by Jiří KUCHAŘ and Petr ŠTIS against the Czech Republic and registered on 28 August 1997 under file No. 37527/97;

Having regard to the report provided for in Rule 47 of the Rules of Procedure of the Commission;

Having deliberated;

Decides as follows:

THE FACTS

The applicants, two Czech citizens, born in 1960 and 1957 respectively, reside in Prague.  Before the Commission, the first applicant also represents the second applicant.

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

On 20 October 1991 the applicants founded a limited partnership ( konsorcium ) in accordance with Sections 106za and 360a of the Economic Code ( hospodářský zákoník ) for the purposes of the creation, financing, production, distribution and selling of a video- programme called "Public healers" (" Lidoví léčitelé ").

On 23 October 1991 the applicants concluded an association agreement with Ms B. concerning the creation, financing, production, distribution and selling of the video- programme .  The parties agreed on a budget of 251,730 crowns.  The applicants were to put in 50% of the budget amount before 1 November 1991 and Ms B. the other 50%.  Ms B. was to ensure that, by 10 February 1992, her contribution to the cost of realising the work would be equal to the monies expended on behalf of the applicants.  It was also agreed that the agreement could be brought to an end only with the parties' written consent and that the parties would be liable for damages in case of breach of their obligations under the agreement.

On 19 August 1992 the applicants brought an action for damages against Ms B. for failure to perform her obligations under the agreement.  They claimed damages of 125,865 crowns corresponding to the part of the budget already paid by them.  They also sought to cancel the parties' rights and obligations under the agreement.  The applicants further claimed default interest at the rate of 18%.

On 13 July 1995, after four hearings held on 10 and 28 March, 12 May and 23 June 1995, the Prague Regional Commercial Court ( krajský obchodní soud ) dismissed the applicants' action.  The court heard the parties and read documentary evidence, in particular the correspondence between the parties and the deposit receipt confirming that on 31 October 1991 the applicants had paid 125,865 crowns.  It considered it was not necessary to assess further evidence put forward by the applicants as it was not essential for a decision on the merits.  The court stated inter alia :

"According to Section 125(1) of the Economic Code, companies may change or cancel any obligation if this is not excluded by the nature of the obligation or by a legal provision; they may also invite the arbitration board to decide.  From the evidence assessed - the agreement of 23.10.1991 - it clearly appears that the parties excluded ... unilateral withdrawal from the agreement or notice of termination; the agreement did not become extinct and was not cancelled. ... Their contractual relationship therefore continues to exist, and the court dismisses the action to the extent that the plaintiffs claim to cancel the parties' legal relationship.

The plaintiffs further claim damages of 125,865 crowns corresponding to the sum paid on the defendant's account for the purposes of realising the work.  The court, having assessed the evidence, finds that the contractual relationship between the plaintiffs and the defendant, and, therefore, their bilateral obligations to create the film, still exist.  Accordingly, the fact that the plaintiffs had paid this sum did not cause them any damage within the meaning of Section 145 of the Economic Code. ..."

On 4 June 1996 the Court of Cassation ( Vrchní soud ) upheld this judgment, stating in particular:

"Like the court of first instance, the appellate court found that the agreement between the parties still exists and that, therefore, the expenditure of the fees used for the realisation of the work could not be considered as damage, i.e. the plaintiffs' pecuniary loss.

...

According to Article II of the agreement, the parties concluded the agreement pursuant to Section 360a of the Economic Code in order to attain its purposes, i.e. to create the work and use it as provided for in the agreement.  The agreement is not a fixed term contract, but a contract concluded for definite purposes.  The parties did not decide, as they could have done under Article IV(4), to bring the agreement to an end.  None of them could withdraw from the agreement or give notice of its termination until the work had been accomplished (Article IV(2)).  The work has not been finished, and the parties' contractual relationship based on this agreement therefore continues to exist.

The plaintiffs submitted in their appeal that it became impossible to perform the agreement because the renowned healer, Mr [K.K.], had died ...  Moreover, the agreement could not be performed because the defendant refused to go on a journey to Brno on 29.11.1991.  ...

The court does not agree with the plaintiffs' opinion. ...  According to Articles II and III of the agreement, the parties did not specify the number and names of the healers who would have participated in the film.  The fact that the film could not be realised with Mr [K.K.] because of his death does not prevent the agreement from being performed, and does not, therefore, cause the extinction of the contractual obligation and give rise to a duty to compensate for losses.  The right to damages cannot be deduced from the breach of the particular obligations ... by the defendant because they were not sufficiently specified ... It cannot be concluded that the particular conditions substantiating the claim for damages, i.e. breach of obligation, causal link and the origin of the damage were made out."

On 25 October 1996 the applicants lodged a constitutional appeal ( ústavní stížnost ) alleging a violation of Article 11 of the Charter of Fundamental Rights and Freedoms and Article 1 of Protocol No. 1 to the Convention in that they had been deprived of 125,865 crowns.  They submitted that the only way to recover this sum was a claim for damages, which, in their case, had unlawfully been dismissed by the national courts.  They also alleged a violation of Article 6 para. 1 of the Convention claiming that the national court had wrongly interpreted the association agreement in contradiction with its actual wording and had not taken into account the provisions in their favour , i.e. the fact that any breach of the obligations under the agreement by one party rendered this party liable for damages.  They further submitted that the proceedings before the national courts had been unreasonably long.

On 29 January 1997 the Constitutional Court ( Ústavní soud ) declared the applicants' constitutional appeal manifestly ill-founded.  The Court stated that it was not part of the system of general courts and could not interfere with their jurisdiction and act as an appellate court in matters which were within their jurisdiction.  It stated that the applicants' case did not relate to an absolute owner relationship within the meaning of Article 11 of the Charter of Fundamental Rights and Freedoms but to obligations following from a legal relation based on the association agreement, which was not protected by this provision.  The Court further considered that the proceedings applied by the general courts had not breached constitutional principles. As to the assessment of evidence, the Constitutional Court found that the general courts had proceeded in accordance with Section 132 of the Code of Civil Procedure and held that the fact that the applicants had not been successful in their claim could not be considered as a violation of the rights guaranteed by the Constitution.

COMPLAINTS

1. The applicants claim under Article 6 of the Convention that the principle of equality of arms was breached in that the court of first instance failed to assess certain evidence put forward by the applicants, in particular the accounting records establishing the costs expended for the realisation of the work.  They submit that these records and their reliability were decisive for resolving the question of the purposes for which the sum of 125,865 crowns had been used.  They also claim that the appellate court refused to assess this evidence and that the Constitutional Court did not deal with this matter at all.

2. The applicants further allege a violation of Article 1 of Protocol No. 1 to the Convention in that they have been deprived of the sum of 125,865 crowns corresponding to the part of the budget paid by them.  They dispute the finding of the national courts, which was allegedly not based on the national law, that as long as the contractual relationship between the parties exists, the applicants cannot sue Ms B. for damages.  They claim that an action for damages was the sole way to recover their money, because it was impossible to force Ms B., who refused to perform her obligations under the agreement, to continue the work.  The applicants also claim that their absolute property rights, proved by the deposit receipt, are indubitable and not contested by the defendant.

3. The applicant finally claim under Article 6 of the Convention that the proceedings for damages lasted unreasonably long.

THE LAW

1. The applicants claim that the principle of equality of arms was breached in that the courts failed to assess certain evidence put forward by them, in particular the accounting records establishing the costs expended for the realisation of the work.  They invoke Article 6 of the Convention which, insofar as relevant, provides as follows:

"1. In the determination of his civil rights and obligations ..., everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law ..."

The Commission recalls that, in accordance with Article 19 of the Convention, its only task is to ensure the observance of the obligations undertaken by the Parties in the Convention.  In particular, it is not competent to deal with complaints alleging that errors of law or fact have been committed by domestic courts, except where it considers that such errors might have involved a possible violation of any of the rights and freedoms set out in the Convention (see No. 25062/94, Dec. 18.10.95, D.R. 83, p. 77).  In addition, as regards the assessment of the evidence, it is not for the Commission to re-assess the factual or legal elements of the case before the domestic courts, given that the decisions taken had a basis in law and were based on relevant and sufficient reasons (see Eur. Court HR, Schenk v. Switzerland judgment of 12 July 1988, Series A no. 140, p. 29, para. 46).

In the present case the Commission finds no indication that the applicants, who were represented by their lawyer throughout the proceedings, could not sufficiently put forward their point of view, that the various legal arguments presented by them were not duly examined by the domestic courts, that the other party was put in a better position or that the proceedings were otherwise unfairly conducted.  The Commission notes in particular that the domestic courts based their judgments on the analysis of evidence derived from several documents, in particular the text of the association agreement, the parties' correspondence and the deposit receipt confirming that the applicants had paid 125,865 crowns, and on their assessment of this evidence in the light of the parties' submissions.  The court of first instance found that in accordance with the terms of the association agreement and relevant legal provisions then in force, the contractual relationship between the parties based on the agreement continued to exist and that, therefore, the payment of the applicants' part of the budget had not caused them any damage.  Similarly, the appellate court held that the fees expended for the realisation of the work could not be regarded as a pecuniary loss to the applicants, and stated that the particular conditions of the right to recover damages had not been established.  The Commission cannot, therefore, find that the domestic courts acted arbitrarily, as regards the establishment of the facts and the assessment of the evidence, in deciding not to assess further evidence put forward by the applicants on the ground that it was not essential for a decision on the merits.

In the light of the above considerations, the Commission does not find that the applicants were deprived of a fair hearing within the meaning of Article 6 para. 1 of the Convention.

It follows that this part of the application is manifestly ill-founded within the meaning of Article 27 para. 2 of the Convention.

2. The applicants further claim under Article 1 of Protocol No. 1 to the Convention that they have been deprived of the part of the budget paid by them.  They dispute the finding of the national courts, which was allegedly not based on the national law, that as long as the contractual relationship between the parties exists, they cannot sue Ms B. for damages.

The Commission recalls that the deprivation of property referred to in the second sentence of Article 1 of Protocol No. 1 to the Convention is primarily concerned with the formal expropriation of assets for public purposes, and not with the regulation of rights between persons under private law unless State responsibility is in some way involved in affecting their exercise (see No. 13021/87, Dec. 8.9.88, D.R. 57, p. 268).

In the present case, it is clear the Czech Republic has not directly deprived the applicants of their possessions or otherwise expropriated their property.  Nor can it be said that the Czech Republic was enforcing "such laws as it deems necessary to control the use of property" within the meaning of Article 1 of Protocol No. 1 to the Convention.  The order against the applicants was, rather, made by the domestic courts in the exercise of their jurisdiction over a private law dispute between the applicants on the one hand and Ms B. on the other hand concerning the latter's alleged breach of her obligations under the association agreement, for which the applicants claimed damages corresponding to the sum of 125,865 crowns which they had paid under the agreement.  In essence the domestic courts decided that there was no breach of the agreement and dismissed the applicants' claim to recover the sum in question.

The Commission considers that the fact that one of the Contracting parties did not perform the agreement and that the domestic judicial authorities provided a forum for the determination of their private law dispute concerning their contractual arrangements, in which the applicants were unsuccessful, does not give rise to an interference by the State with property rights under Article 1 of Protocol No. 1 to the Convention, since it is the function of the courts to determine disputes between parties, with the inevitable consequence that one party may ultimately be unsuccessful in the litigation in question (see No. 11949/86, Dec. 1.12.86, D.R. 51, p. 195).

Accordingly, the Commission finds that the outcome of the proceedings in which the applicants were involved, which resulted in the dismissal of their action for damages did not give rise to a violation of the rights protected by Article 1 of Protocol No. 1 to the Convention.

It follows that this part of the application is manifestly ill-founded within the meaning of Article 27 para. 2 of the Convention.

3. The applicants finally claim under Article 6 para. 1 of the Convention that the proceedings for damages were unreasonably long.

The Commission considers that the length of proceedings issue to which the application gives rise involves complicated issues of fact and law and that it cannot, on the basis of the applicants' submissions, determine the admissibility of this complaint.  It is therefore necessary, in accordance with Rule 48 para. 2 (b) of the Rules of Procedure, to communicate this part of the application to the respondent Government.

For these reasons, the Commission

DECIDES TO ADJOURN the examination of the applicants' complaint concerning the length of the proceedings for damages;

unanimously,

DECLARES INADMISSIBLE the remainder of the application.

   M.-T. SCHOEPFER                                           J.-C. GEUS

      Secretary                                                           President

to the Second Chamber                                of the Second Chamber