SECOND SECTION

DECISION

Applications nos. 26878/07 and 32446/07 Mehmet Emin ACAR and o thers against Turkey and Åžafak DOÄžAN against Turkey

The European Court of Human Rights (Second Section), sitting on 12 December 2017 as a Chamber composed of:

Robert Spano, President, Julia Laffranque, Işıl Karakaş, Nebojša Vučinić, Paul Lemmens, Valeriu Griţco, Stéphanie Mourou-Vikström, judges, and Stanley Naismith , Section Registrar ,

Having regard to the above applications lodged on 26 June 2007 and 25 July 2007 respectively,

Having deliberated, decides as follows:

THE FACTS

1. A list of the applicants is set out in the appendix.

A. The circumstances of the case

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

3. The applicants were employed by E.E.T.I. (hereafter “the company”), a private enterprise. On various dates between 2001 and 2003, following the termination of their employment contracts, some of the applicants in application no. 26878/07 brought judicial proceedings against the company to claim unpaid salary and other related payments. On 19 February, 25 February and 23 August 2003 respectively the İzmir Labour Court delivered judgments against the company, awarding those applicants salary arrears and severance pay.

4. Other applicants directly started execution proceedings ( icra takibi ) against the company via the bailiff ’ s office and served a confiscation order in order to enforce payment of their salary arrears and other related claims. As a result of the company ’ s objection to the execution proceedings, the applicants brought cases before the labour court and requested that the court annul the company ’ s objection and rule on additional compensation of 40% of the debt as a penalty for the company ’ s objecting to the execution proceedings ( icra inkar tazminatı ). On various dates in 2003 the labour court ruled in favour of the applicants and granted their claims, including compensation amounting to 40% of the debt.

5. On 26 February 2004 the Commercial Court of İzmir declared the company insolvent and ordered the start of the insolvency proceedings. On appeal, the Court of Cassation quashed the Commercial Court ’ s judgment, the cassation decision becoming final on 17 March 2005 . In the fresh proceedings, the first-instance court declared the company insolvent on 6 May 2005, a decision which became final on 7 June 2005.

6. Following the opening of insolvency proceedings by the decision of 6 May 2005, the liquidation administration established a ranking of unsecured creditors, including the applicants ’ work-related claims against the company. That list placed the claims concerning the four applicants in application no. 26878/07 and the applicant in application no. 32446/07, in the fourth and lowest rank, which were to be satisfied after the priority claims. A portion of the remaining applicants ’ claims was classified as having priority and therefore placed in the first rank while some of their claims, which concerned solely interest or the penalties against the company for challenging the execution proceedings, were placed in the lowest rank. The provisional list was served on the applicants on 11 October 2005.

7. On 14 and 18 October 2005, respectively, the applicants brought a case before the Enforcement Court of Ä°zmir. They challenged the ranking assigned to them by the liquidation administration and requested that the court assign priority ranking to all of their work-related claims. During the proceedings, the applicants further argued that the relevant provisions of the Enforcement and Bankruptcy Act, which provided for the priority ranking of labour-related claims only dating back a year from the date of the opening of insolvency proceedings, were unconstitutional for being discriminatory in so far as they created a difference in treatment between workers who had worked for the same company for the same amount of time. They further argued that the provision deprived them of any prospect of recovering claims which fell outside the reference period. Moreover, the applicants in application no. 26878/07 requested the domestic court to refer their plea of unconstitutionality to the Constitutional Court.

8. On 29 March and 28 April 2006, respectively, the court dismissed the applicants ’ claims, holding that their claims fell outside the one ‑ year time ‑ limit and that therefore they could not be granted priority. The court also dismissed the applicants ’ request to refer the question of the compatibility of the relevant legislation with the Constitution, holding that the relevant sections of the Enforcement and Bankruptcy Act did not raise an issue of the different treatment of claims.

9. On 14 December 2006 and 1 February 2007, respectively, the Court of Cassation upheld the judgments of 29 March and 28 April 2006.

10. On an unspecified date, the liquidation administration prepared a final dividend sheet ( pay cetveli ), the details of which were not made available to the Court.

11. On an unspecified date, the applicants were given certificates by the liquidation administration for the amount of their claims that had remained unsatisfied after the distribution of assets. Accordingly, apart from five applicants whose claims were mostly satisfied, the claims of the other applicants remain unpaid (see annexed table).

12. On 30 December 2016 the company was wound up pursuant to the decision of the Commercial Court of Ä°zmir.

B. Relevant domestic law

1. Insolvency Procedure

13. The insolvency procedure applicable to private companies is established by the relevant provisions of the Enforcement and Bankruptcy Act (Law no. 2004, hereafter “the Bankruptcy Act”).

14. Under section 223 of that Law, a liquidation administration ( iflas idaresi ) must be comprised of three persons, who must be nominated by the creditors and appointed by the enforcement court. Anyone but the debtor can be nominated as a member. The liquidation administration represents the bankrupt estate and is entitled to discharge the debtor ’ s obligations by settling the claims of creditors in compliance with a register of claims which is established by the liquidation administration itself. The register of creditors ’ claims must be closed two months after the publication of information on the insolvency and the beginning of the insolvency proceedings. Creditors ’ claims should be met in accordance with the priority ranking set out in section 206 of the Law.

15. Section 206 provides for ranking creditors in relation to their claims against the bankrupt debtor ’ s assets. The order of priority is secured claims, priority claims and ordinary claims. Secured creditors have priority over the sale proceeds of secured assets after the deduction of the relevant taxes in rem and expenses relating to the maintenance of the secured assets. Expenses of the liquidation administration rank immediately after secured creditors. The remainder of the proceeds of the liquidation is distributed among priority and ordinary claims, in order of priority and on the basis of pari passu in proportion to the amounts of the respective claims. Finally, each level of priority must be paid in full before the next level of creditors is paid.

16 . Law no. 2004 also ranks claims within the class of priority claims. Accordingly, the work-related claims of employees, including severance and notice pay accrued within the year prior to the opening of insolvency proceedings, as well as notice and severance pay accrued because of the termination of an employment contract as a result of the insolvency, are ranked first. Work-related claims that were not accrued within the reference period of one year are considered as ordinary claims and therefore rank in fourth place, the lowest level, which is satisfied after tax claims. In the calculation of the reference period for work-related claims, the period of judicial proceedings concerning the dispute regarding the claim itself and the time taken to declare the debtor insolvent are not taken into account.

17. After the register of claims becomes final, and the bankrupt estate ’ s assets are liquidated, the liquidation administration prepares a dividend sheet for the distribution of the proceeds ( pay cetveli ), indicating a list of creditors who will receive dividends and the amount to which they are entitled.

18. Any claims that cannot be satisfied because the proceeds of the liquidation are insufficient will be regarded as unenforced and the creditors will be issued with a certificate to that effect.

19. Since October 2004 former Article 33 of the Labour Code (Law no. 4857) and the provisional section 1 of the Unemployment Insurance Act provide for a wage guarantee fund to protect employees ’ entitlements in case of an employer ’ s insolvency or bankruptcy. The fund covers up to three months of unpaid wages and is financed with one percent of the annual employers ’ contributions to the Unemployment Insurance Scheme.

2. Question of constitutionality

20 . During judicial proceedings the courts of general jurisdiction can of their own motion refer a question of the constitutionality of a law to the Constitutional Court. When one of the parties raises the question, the court hearing the case can either refer the question to the Constitutional Court if it sees the issue as being serious, or dismiss it by giving reasons. If the request is dismissed, the party involved can only contest it by lodging an appeal to the appeal body reviewing the judgment.

C. Relevant international law

21 . Article 11 of ILO Convention No. 95 on Protection of Wages (adopted in 1949 and ratified by Turkey on 29 March 1961) provides as follows:

“1. In the event of the bankruptcy or judicial liquidation of an undertaking, the workers employed therein shall be treated as privileged creditors either as regards wages due to them for service rendered during such a period prior to the bankruptcy or judicial liquidation as may be prescribed by national laws or regulations, or as regards wages up to a prescribed amount as may be determined by national laws or regulations.

2. Wages constituting a privileged debt shall be paid in full before ordinary creditors may establish any claim to a share of the assets.

3. The relative priority of wages constituting a privileged debt and other privileged debts shall be determined by national laws or regulations.”

22. The relevant provisions of ILO Convention no. 173 on Protection of Workers ’ Claims (Employer ’ s Insolvency) (adopted in 1992 and not ratified by Turkey) provides as follows:

Article 5

“In the event of an employer ’ s insolvency, workers ’ claims arising out of their employment shall be protected by a privilege so that they are paid out of the assets of the insolvent employer before non-privileged creditors can be paid their share.”

Article 6

“The privilege shall cover at least:

(a) the workers ’ claims for wages relating to a prescribed period, which shall not be less than three months, prior to the insolvency or prior to the termination of the employment

...”

Article 8

“1. National laws or regulations shall give workers ’ claims a higher rank of privilege than most other privileged claims, and in particular those of the State and the social security system.

2. However, where workers ’ claims are protected by a guarantee institution in accordance with Part III of this Convention, the claims so protected may be given a lower rank of privilege than those of the State and the social security system.”

COMPLAINTS

23. The applicants complained under Article 1 of Protocol No. 1 to the Convention, taken in conjunction with Article 14, about the classification of their claims in the lowest rank. In particular, they argued that section 206 of Law no. 2004, which restricted work-related claims to being classed as first ‑ tier priority claims by reference to a one-year period preceding the date of insolvency was discriminatory. The applicants in application no. 26878/07 further complained under the same provision that their plea of the unconstitutionality of the related provisions of Law no. 2004 had gone unanswered by the first-instant court. Finally, all the applicants complained that the decisions of the courts had not been adequately reasoned.

THE LAW

A. Joinder of applications

24. Given their similar factual and legal background, the Court decides that the applications should be joined, pursuant to Rule 42 § 1 of the Rules of Court.

B. Complaints under Article 1 of Protocol No. 1 taken alone and in conjunction with Article 14 of the Convention

25. The applicants complained about not receiving equal treatment in the ranking of their claims and thereby incurring a financial loss. In that respect, they contended that the one-year reference period provided for by law had resulted in their claims being treated in a discriminatory way.

26. The relevant Articles read as follows:

Article 1 of Protocol No. 1

“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.”

Article 14 of the Convention

“The enjoyment of the rights and freedoms set forth in [the] Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.”

27. In the present applications, the Court is at the outset called upon to answer the question of whether limiting the privilege given to work-related claims with a specific time-limit creates an interference in compliance with the requirements of Article 1 of Protocol No. 1.

28. The Court notes that the applicants Naim Çevir, Nadir Ceviz, Harun Doksat, Özkan Kahraman and Ahmet Kurnaz had claims which were accorded first priority ranking and which were paid almost in full (see annexed table). The issue arises as to whether they can claim to be victims of a violation of their rights guaranteed by Article 1 of Protocol No. 1, regard being had to their complaint that they were not granted priority status in the insolvency proceedings . However, the Court does not consider it necessary to determine this issue in the instant case because it considers the applicants ’ complaints are, in any event, inadmissible for the following reasons.

30 . The Court therefore notes at the outset that the insolvency proceedings in the present case concern a civil-law dispute between private parties. The relevant principles emerging from the Court ’ s case-law in such type of cases are summarised in Anheuser-Busch Inc. v. Portugal ([GC], no. 73049/01, § 83, ECHR 2007 ‑ I), and, in more detail, in Zagrebačka banka d.d. v. Croatia (no. 39544/05 , § § 250-51, 12 December 2013) .

32. In the present case, the applicants were fully able to present their case at two levels of jurisdiction. The enforcement court ’ s judgment, which applied the provisions of Law no. 2004 to the applicants ’ situation, provided reasons for dismissing their claims. Nothing in the case file indicates that the domestic court decisions were arbitrary or the proceedings were otherwise unfair. The fact that the domestic authorities provided a forum for the determination of an insolvency dispute between private parties does not automatically give rise to an interference by the State with property rights under Article 1 of Protocol No. 1 to the Convention (see, mutatis mutandis , Melnychuk v. Ukraine (dec.), no. 28743/03, ECHR 2005 ‑ IX, and Investylia Public Company Limited v. Cyprus (dec.), no. 24321/05, 17 September 2009 ).

34. With regard to the proportionality of the measure to the intended aim, the Court notes that a fair balance must be struck between the demands of the general interest and the requirements of the individual ’ s fundamental rights (see Sporrong and Lö nnr o th v. Sweden , 23 September 1982, § 69, Series A no. 52). It observes in that connection that in many Contracting States, priority is accorded to workers ’ claims for debts up to a certain amount or covering a specific period in the distribution of the debtor employer ’ s assets, the details of the limitation as well as the relative priority of such claims being a matter left to the discretion of the States, as provided in ILO Convention on the issue of wage protection in bankruptcy (see paragraph 21 above). In that regard, the provisions of Turkey ’ s insolvency legislation that give a first-ranking priority to workers ’ claims over ordinary claims, but after secured creditors and the expenses of the administration (see paragraph 16 above), correspond to the level of protection required by the ILO Convention no. 95 as well as Convention no. 173. The Court further notes that the reference period of one year for such claims to be accorded priority cannot be regarded as u nreasonably short, especially in comparison to the minimum three-month period provided for in the ILO Convention no. 173. For the period that falls outside the one ‑ year reference period, the Court further notes that the presumption that creditors could make use of regular enforcement proceedings can be regarded as a justification for not granting such claims priority.

35. In view of the above, the Court finds that the applicants ’ complaints under this provision are manifestly ill-founded within the meaning of Article 35 § 3 of the Convention and must be rejected pursuant to Article 35 § 4 of the Convention.

36. The applicants also complained under Article 14 of the Convention that the one-year reference period provided for by law for granting priority to workers claims gave rise to unequal treatment amongst workers working for the debtor company for the same amount of time. The Court reiterates that Article 14 has no independent existence since it has effect solely in relation to the rights and freedoms safeguarded by the other substantive provisions of the Convention and the Protocols thereto. The application of Article 14 does not necessarily presuppose a viol è ation of one of the substantive rights guaranteed by the Convention – it is necessary but it is also sufficient for the facts of the case to fall “within the ambit” of one or more of the provisions in question (see Stec and Others v. the United Kingdom (dec.) [GC], nos. 65731/01 and 65900/01, § 39, ECHR 2005-X). In the present case, the Court considers that the applicants ’ complaints concerning the allocation of their claims to the lowest category fall within the scope of Article 1 of Protocol No. 1 and the right to the protection of property which it safeguards (see paragraph 29 above). That is sufficient to render Article 14 of the Convention applicable.

37. According to the Court ’ s settled case-law, discrimination means treating differently, without an objective and reasonable justification, persons in similar situations (see D.H. and Others v. the Czech Republic [GC], no. 57325/00, § 175, ECHR 2007-IV). The Court reiterates that in order for an issue to arise under Article 14, there must be a difference in the treatment of persons who are in analogous, or relevantly similar, situations (see Carson and Others v. the United Kingdom [GC], no. 42184/05, § 61, ECHR 2010).

38. The applicants complained that the application of the one-year reference period had resulted in their claims being treated differently from those of other workers who had also worked for the company. The Court has doubts that the situation complained of by the applicants is analogous or relevantly similar to that of other workers whose claims accrued within the one-year period prior to insolvency; that is because, unlike the others, the applicants had a window of opportunity to enforce their claims individually against the debtor before it was declared insolvent. In that regard, from the time the applicant ’ s claims became judicially enforceable to when the employer ’ s insolvency was first ordered by the court, all the applicants had the possibility to start regular enforcement proceedings. However, even assuming that the applicants ’ situation was analogous or relevantly similar to that of other workers, the Court considers, for the reasons explained above (see paragraphs §§ 33-34 above), that the difference in the treatment of their claims was objectively and reasonably justified. Consequently, the difference in the treatment of the applicants ’ claims does not amount to discrimination within the meaning of that provision.

39. It follows that this part of the application is manifestly ill-founded within the meaning of Article 35 § 3 of the Convention and therefore must be rejected in accordance with Article 35 § 4 of the Convention.

C. Complaint under Article 6 § 1 of the Convention

40. The applicants complained that the domestic courts did not give sufficient reasons for dismissing their claims. The applicants in application no. 26878/07 further complained that their request to refer the constitutionality of the relevant provisions of the Bankruptcy Act had been unfairly dismissed by the domestic courts.

41. The applicants relied on Article 6 § 1 of the Convention, which reads, in so far as relevant, as follows:

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

42. The Court reiterates that Article 6 § 1 of the Convention obliges courts to give reasons for their judgments, but cannot be understood as requiring a detailed answer to every argument. The extent to which this duty to give reasons applies may vary according to the nature of the decision. It is, moreover, necessary to take into account, inter alia , the diversity of the submissions that a litigant may bring before the courts and the differences existing in the Contracting States with regard to statutory provisions, customary rules, legal opinion and the presentation and drafting of judgments. Thus the question whether a court has failed to fulfil the obligation to state reasons, deriving from Article 6 of the Convention, can only be determined in the light of the circumstances of the case (see Ruiz Torija v. Spain , 9 December 1994, § 29, Series A no. 303 ‑ A). Furthermore, the Court should not act as a fourth-instance body and will therefore not question under Article 6 § 1 the national courts ’ assessment, unless their findings can be regarded as arbitrary or manifestly unreasonable (for a recapitulation of the relevant principles see, as a recent example, Moreira Ferreira v. Portugal (no. 2) [GC] , no. 19867/12, §§ 83 and 84, ECHR 2017 (extracts) ).

44. In the Turkish legal context, where a question of constitutionality arises during judicial proceedings, the courts have discretion in deciding on referring the matter to the Constitutional Court. If the court hearing the case does not regard the issue as raising serious doubts about its compatibility with the Constitution, it may dismiss it by giving reasons (see paragraph 20 above). Therefore, the question of whether a court has failed to provide reasons for its decision on such an issue can only be determined in the light of the circumstances of the case (see, mutatis mutandis, Pronina, cited above, § 24).

45. In the present case, the Court notes that the enforcement court decided on the merits of the applicants ’ case by taking the nature of their claims as well as the time in which they had accrued into account. Furthermore, in the calculation of the one-year reference period, it did not take account of the length of the proceedings for the claims themselves or the time taken to open the insolvency proceedings. It then ruled that the portions of their claims which had accrued prior to the one-year period could not be granted priority status. The Court notes in that regard that the applicants ’ cases were examined in adversarial proceedings at two levels of jurisdiction, that the judgments were based on the legislation in force and do not appear arbitrary. Therefore, the part of the applicants ’ complaint concerning an alleged lack of reasoning by the domestic courts is manifestly ill-founded.

46. As regards the applicants ’ complaints in application no. 26878/07 about the dismissal of their request to refer the matter to the Constitutional Court, the Court notes that the domestic court reasoned that the relevant provisions in the Bankruptcy Act could not be regarded as discriminatory when it came to the treatment of claims. Having regard to the discretion accorded to the domestic courts in this matter and the fact that the decision to dismiss the constitutional question was reviewed by the appeal court, which simply endorsed the reasoning of the enforcement court, the Court is satisfied that the domestic courts examined the applicants ’ arguments and gave reasons for dismissing them. Therefore, this part of the complaint must also be declared manifestly ill-founded within the meani ng of Article 35 § 3 (a) and should be rejected in accordance with Article 35 § 4 of the Convention.

For these reasons, the Court, unanimously,

Decides to join the applications;

Declares the applications inadmissible.

Done in English and notified in writing on 18 January 2018 .

             Stanley Naismith Robert Spano Registrar President

APPENDIX

No.

Application

no.

Lodged on

Applicant name

date of birth

place of residence

Rank assigned to the claim

Amount Recognised in TRY (approx. EUR at the time)

Amount Remaining Unpaid in TRY

26878/07

26/06/2007

Mehmet Emin ACAR

12/01/1957

Ä°ZMÄ°R

4

21,791.80

(13,151)

21,971.80

26878/07

26/06/2007

Hasan AT Ä° K

1959Ä°ZMÄ°R

4

75,150.21

(45,353)

75,150.21

26878/07

26/06/2007

Naim ÇEVİR 01/01/1959

Ä°ZMÄ°R

1

66,933.38

(40,394)

3,184.94

26878/07

26/06/2007

Nadir CEVÄ°Z

27/02/1954

Ä°ZMÄ°R

1

72,336.65

(43,655)

3,386.83

26878/07

26/06/2007

Adem DERYAN 25/07/1960

Ä°ZMÄ°R

4

44,534.99

(26,876)

44,534.99

26878/07

26/06/2007

Harun DOKSAT

1958Ä°ZMÄ°R

1

91,852.55

(55,432)

6,416.76

26878/07

26/06/2007

Erkan ENDİNÇ 03/11/1955

Ä°ZMÄ°R

4

77,098.84

(46,528)

77,098.84

26878/07

26/06/2007

Özkan KAHRAMAN 22/03/1957

Ä°ZMÄ°R

1

90,396.31

(54,554)

6,266.53

26878/07

26/06/2007

Ahmet KURNAZ

1954Ä°ZMÄ°R

1

45,627.85

(27,536)

3,135.48

32446/07

25/07/2007

Åžafak DOÄžAN

22/04/1967

Ä°ZMÄ°R

4

39,214.42

(23,665)

39,214.42