THIRD SECTION

DECISION

Application no . 40265/07 VÝCHODOSLOVENSKÁ VODÁRENSKÁ SPOLOČNOSŤ, A.S. against Slovakia

The European Court of Human Rights ( Third Section), sitting on 2 July 2013 as a Chamber composed of:

Josep Casadevall , President, Corneliu Bîrsan , Ján Šikuta , Luis López Guerra , Nona Tsotsoria , Kristina Pardalos , Johannes Silvis , judges,

and Santiago Quesada, Section Registrar ,

Having regard to the above application lodged on 30 August 2007,

Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicant,

Having deliberated, decides as follows:

THE FACTS

1. The applicant, Východoslovenská vo dárenská spoločnosť, a.s., is a joint-stock company established under the laws of Slovakia with its registered office in Košice. The application was lodged on its behalf by Mr S. Hreha and Mr R. Kočiško, the company ’ s authorised signatories. It was represented before the Court by Mr P. Kerecman, a lawyer practising in Košice.

The Government of the Slovak Republic (“the Government”) were represented by their Agent, Mrs M. Pirošíková.

A. The circumstances of the case

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

1. Information about the applicant company

3. The applicant company was established in 2003 as a result of the denationalisation of a State-owned company in charge of water supply and sewerage services in the Eastern Slovakia region.

4. According to the applicant company ’ s annual report for 2004, 95.11% of its shares were held by the National Property Fund, a body established to implement the denationalisation of State-owned property under the supervision of the Government and Parliament. The remaining 4.89% of the shares were held by municipalities. The principal activities of the applicant company included the production, supply and distribution of drinking water, as well as the elaboration of plans and coordination of development of public water systems, the protection of existing water sources and the search for new sources.

5. According to the company ’ s annual report for 2011, its shares were held by municipalities of the Eastern Slovakia Region (96.89%), the company itself (2.65%) and the National Property Fund (0.46%). 73.4% of the region ’ s inhabitants were supplied water through public systems. At the end of 2011 there were 543 communities in the region with public water systems. The applicant company owned and maintained public water systems in 355 of those communities. In 95 other communities the applicant company operated public water systems on the basis of contracts with the relevant owner. In the remaining 93 communities public water systems were co-owned by the applicant company and the municipalities. The applicant company operated the municipalities ’ property forming a part of those systems on a contractual basis. The annual report indicated that the applicant company had a dominant position in the region ’ s drinkable water supply and sewerage market.

6. The applicant company ’ s board of directors comprises ten members. Its vice-president and six other members are the mayors of towns belonging to the principal shareholding municipalities. The majority of members of the supervisory board were representatives of the shareholding municipalities.

7. In 2011 the Ministry of Environment issued a report on water management in Slovakia in 2010. It listed the applicant company as one of the seventeen members of the Association of Water Companies ( Asociácia vodárenských spoločností ), who provided 95% of services related to public water and sewerage systems in Slovakia. The report referred to municipalities as playing an important part in the operation of public water distribution and sewerage systems. It indicated that the municipalities ’ property, constituting water supply and sewerage infrastructure, was managed by specialist private joint-stock companies. The municipalities were the shareholders of the latter.

2. Proceedings against the applicant company under the Competition Act 1994

8. Limited liability company D.K., whom the applicant company supplied with drinking water, intended to use ultraviolet light to treat spring water to produce bottled table water for distribution in Slovakia and in the countries of the European Union. Company D.K. unsuccessfully requested the applicant company to supply it with raw water, that is to say spring water not treated for the purpose of meeting drinking water quality requirements.

9. In a decision of 23 June 2003, amended on 6 August 2003, the Antimonopoly Office found that the applicant company had abused its dominant position within the meaning of section 7(5)(b) of the Competition Act 1994, and ordered it to abstain from such behaviour and to restore the supply of raw water to company D.K. within thirty days. A fine in an amount equivalent to approximately 36,000 euros (EUR) was imposed on the applicant company.

10. In a decision of 9 January 2004, amended on 26 January 2004, the Council of the Antimonopoly Office amended the first-instance decision in part, while confirming that the applicant company had abused its dominant position. A fine in an amount equivalent to EUR 12,250 was imposed on the applicant company.

11. On 14 December 2004 the Supreme Court dismissed an action lodged by the applicant company against the above decision.

12. On 24 February 2005 the applicant company appealed. On 28 June 2005 it requested that the appeal proceedings should be stayed in accordance with Article 109 § 1(c) of the Code of Civil Procedure and that a preliminary ruling on three specific questions be requested from the European Court of Justice (ECJ) under Article 234 § 3 of the Treaty establishing the European Community (EC Treaty).

13. On 21 November 2005 the Appeal Chamber of the Supreme Court refused to make a preliminary reference to the ECJ and dismissed the applicant company ’ s appeal.

14. On 15 February 2006 the applicant company lodged a constitutional complaint, alleging a breach of its right to judicial protection as guaranteed by Article 46 § 1 of the Constitution, its right to a judge as guaranteed by Article 48 § 1 of the Constitution, and its right to a fair hearing laid down in Article 6 § 1 of the Convention.

15. On 29 May 2007 the Constitutional Court rejected the complaint as being manifestly ill-founded. It held that, since the relevant facts which were the subject matter of the above proceedings had occurred prior to Slovakia ’ s accession to the European Union on 1 May 2004, the ECJ would have had no jurisdiction to give a preliminary ruling on the questions.

B. Relevant domestic law

1. Municipalities Act 1990 (Law no. 369/1990)

16. Pursuant to section 4(3)(g), municipalities in acting as bodies of self ‑ administration are to ensure the provision of public services, including the supply of water and the collection of sewage.

2. Public Water and Sewerage Systems Act 2002 (Law no. 442/2002)

17. Section 3(1) provides that public water distribution and sewerage systems are established and operated in the public interest, in particular for the purpose of supplying the population with drinking water and collecting sewage from its communities.

18. Pursuant to section 3(2), for reasons of public interest only legal persons with their registered office in Slovakia may own public water and sewerage systems.

19. Section 5(1) provides that only natural or legal persons who have been issued with a trade licence may operate public water and sewerage systems. The licence may be issued only to persons with the required technical expertise.

20. Section 36(1) lists municipalities as public administration bodies at the lowest level of the public water supply and sewerage systems sector. The administrative body at the highest level is the Ministry of Environment.

21. Pursuant to section 36(7)(a) (section 36(9)(a) at the relevant time), municipalities in their capacity as public administration bodies in this field provide facilities for supplying inhabitants with drinking water from public water systems, collecting sewage and, in certain cases, its treatment.

3. Price Act 1996 (Law no. 18/1996) and Regulation no. 87/1996

22. Until the end of 2003 section 5(3) in conjunction with section 4(3) of the Price Act 1996 allowed for, inter alia , price regulation in the field of water resources management.

23. The Ministry of Finance Regulation no. 87/1996 provided for details in implementation of the Price Act 1996. Section 6(1)(c), in force until the end of 2003, listed the production of potable water, its distribution through public pipelines and the collection of sewage as one of the areas where a natural monopoly existed in a non-competitive environment. Price regulation under section 5(3) of the Price Act 1996 was justified in such situations.

COMPLAINTS

24. The applicant company complained under Articles 6 § 1 and 13 of the Convention that its right to a fair hearing by a tribunal established by law and its right to an effective remedy had been breached. In particular, it referred to the Supreme Court ’ s refusal to make a preliminary reference to the ECJ, and the Constitutional Court ’ s conclusion in that respect, which it considered erroneous.

THE LAW

25. The applicant company alleged that i ts right to a fair hearing by a tribunal established by law and its right to an effective remedy had been breached. It relied on Articles 6 § 1 and 13 of the Convention.

26. The Government objected that the applicant company lacked the locus standi to lodge an individual application under Article 34 of the Convention, as it could not be considered to be a “non-governmental organisation” within the meaning of that provision. In particular, they pointed out the fact that the applicant company had been established and operated for the purpose of complying with the municipalities ’ statutory obligation to ensure the supply of water in the public interest. It was owned, directed and controlled by the shareholding municipalities, and it had a natural monopoly on the region ’ s water supply sector.

27. The applicant company disagreed with that argument. It maintained that it was a joint-stock company with no public law powers and was exempt from any subordination to public authorities. It carried out its business activities, namely the production and supply of water and collection of sewage, under the Commercial Code and under contracts with its business partners. This did not mean however that it assumed the municipalities ’ statutory obligation to ensure the supply of water to their inhabitants.

28. The applicant further maintained that its status as a private company could not have been affected by the fact that its shares were held by municipalities. In particular, in their capacities as shareholders the latter did not act as public authorities, and their interests differed from those of the Government. The municipalities ’ rights as the applicant company ’ s shareholders did not differ from those which the law reserved to other shareholders.

29. In Slovakia, any (legal or natural) person may operate water supply and sewerage systems subject to compliance with the statutory requirements and, in particular, the required technical expertise. The applicant company argued that it had no privileged status in that regard. It lastly pointed out the fact that the Court had previously examined the merits of an application lodged by a Czech company in a similar position (see Vodárenská akciová společnost , S.A. v. the Czech Republic , no. 73577/01, 24 February 2004).

30. The Court must determine whether the applicant company has locus standi to file an application under Article 34 of the Convention, which provides as follows:

“The Court may receive applications from any person, non-governmental organisation or group of individuals claiming to be the victim of a violation by one of the High Contracting Parties of the rights set forth in the Convention or the Protocols thereto. The High Contracting Parties undertake not to hinder in any way the effective exercise of this right.”

32. A legal entity “claiming to be the victim of a violation by one of the High Contracting Parties of the rights set forth in the Convention or the Protocols thereto” may submit an application to the Court, provided that it is a “non ‑ governmental organisation” within the meaning of Article 34 of the Convention. The idea behind this principle is to prevent a Contracting Party from acting as both an applicant and a respondent party before the Court.

The term “governmental organisations”, as opposed to “non ‑ governmental organisations” within the meaning of Article 34, includes legal entities which participate in the exercise of governmental powers or run a public service under government control. The term “governmental organisations” applies not only to the central organs of the State, but also to decentralised authorities that exercise “public functions”, regardless of their autonomy vis-à-vis the central organs; likewise it applies to regional and local authorities, including municipalities.

In order to determine whether any given legal person falls within one of the two above categories, account must be taken of its legal status and, where appropriate, the rights that status gives it, the nature of the activity it carries out, the context in which it is carried out, and the degree of its independence from the political authorities.

Thus th e Court has considered a company as a “non-governmental organisation” if it is governed essentially by company law, does not enjoy any governmental or other powers beyond those conferred by ordinary private law in the exercise of its activities, and is subject to the jurisdiction of the ordinary rather than the administrative courts. In the past, the Court has also taken into account the fact that an applicant company carried out commercial activities and had neither a public service role nor a monopoly in a competitive sector.

33. As regards the circumstances of the present case, the Court observes, on the one hand, that the applicant is a commercial joint-stock company operating under private law. Its activities have been governed by the Commercial Code, and it is subject to the jurisdiction of the ordinary courts, with no privileges or special rights or rules concerning enforcement of judgments against it.

34. On the other hand, it is relevant that the shares of the applicant company are owned, according to the most recent annual report, by municipalities of the Eastern Slovakia Region (96.89%), the company itself (2.65%) and the National Property Fund (0.46%). The composition of the company ’ s board of directors and supervisory board reflects the ownership of its shares (see paragraphs 5-6 above). The applicant company has therefore been owned and controlled by municipalities.

35. The principal activities of the applicant company include producing and supplying water through public systems to inhabitants, industry and agriculture, controlling water management, collecting sewage and protecting potable water sources. It is relevant in this context that the Municipalities Act 1990 lists water supply and the collection of sewage among the public services which municipalities are to ensure provision of in acting as bodies of self-administration (see paragraph 16 above). At the same time, section 36 of the Public Water and Sewerage Systems Act 2002 lists municipalities as public administration bodies in the public water and sewerage systems sector. In that context their role consists of, inter alia , setting up the conditions for supplying inhabitants with drinking water from public water systems (see paragraphs 20-21 above).

36. The facts of the present case relate to the finding of the Antimonopoly Office of 23 June 2003, according to which the applicant company had abused its dominant position. Until the end of 2003 domestic law listed the production and distribution of drinking water and collection of sewage through public systems as one of the areas where natural monopoly existed in a non-competitive environment (see paragraph 23 above). It is true that the law has been amended, in that public water and sewerage systems may be owned by any legal person, subject to it having its registered office in Slovakia. However, the information before the Court indicates that the applicant company has maintained a dominant position in that field in the region of Eastern Slovakia (see paragraphs 5, 9 and 10 above).

37. The applicant company is therefore fully dependent on, controlled and managed by municipalities. The latter, through the intermediary of the applicant company, have carried out their public service role to supply water to the region ’ s inhabitants and collect their sewage (see also paragraph 7 above). The Court accordingly concludes that the applicant company is not a “person, non-governmental organisation or group of individuals” within the meaning of Article 34 of the Convention.

38. It follows that this complaint is incompatible ratione personae with the provisions of the Convention within the meaning of Article 35 § 3 (a) and must be rejected in accordance with Article 35 § 4.

For these reasons, the Court unanimously

Declares the application inadmissible.

Santiago Quesada Josep Casadevall Registrar President