FIRST SECTION

DECISION

AS TO THE ADMISSIBILITY OF

Application no. 30426/03 by Joko BATINOVI Ć and POINT-TRADE, d.o.o. against Croatia

The European Court of Human Rights (First Section), sitting on 10 July 2007 as a Chamber composed of:

Mr C.L. Rozakis , President , Mr L. Loucaides , Mrs N. Vajić , Mr A. Kovler, Mr D. Spielmann , Mr S.E. Jebens , Mr G. Malinverni, judges , and Mr S. Nielsen , Section Registrar ,

Having regard to the above application lodged on 25 July 2003,

Having regard to the decision to apply Article 29 § 3 of the Convention and examine the admissibility and merits of the case together.

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

Having deliberated, decides as follows:

THE FACTS

The first applicant, Mr Joko Batinović, is a Croatian national who w as born in 1948 and live s in Ploče . The second applicant, Point-Trade, d.o.o., is a limited liability company with its seat in Imotski. The applicants were represented before the Court by Palić and Šurjak Law Offices , Zagreb . The Croatian Government (“the Government”) were represented by their Agent, Mrs Š. Stažnik .

A. The circumstances of the case

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

The applicants were shareholders of the Croatia Bank, which is a joint stock company with its seat in Zagreb (“the Bank”). The Bank was entirely owned by private individuals and companies.

On 23 February 1999 the Council of the Croatian National Bank ( Savjet Hrvatske Narodne Banke , “the HNB”) adopted a decision to appoint a temporary manager for the Bank. According to the Banks Act, from the date of the service of such decision, all powers of the management board, the supervisory board and the shareholders ’ assembly were transferred to the temporary manager. Subsequently, on 23 August 1999 the HNB prolonged the appointed temporary manager ’ s mandate for another two months.

Meanwhile, on the basis of an expert opinion indicating the Bank ’ s financial losses, on 18 June 1999 the HNB proposed to the Government to commence the process of sanation and restructuring of the Bank in line with the domestic legislation.

According to the above proposal, on 23 September 1999 the Government adopted the Decision on Sanation and Restructuring of the Croatia Bank (“the Decision”). From that date, all shares of the shareholders were withdrawn and annulled. Following the process of sanation, the Bank was to issue new shares, all to the name of the State Agency for Securing Deposits and Sanation of Banks ( Državna agencija za osiguranja štednih uloga i sanaciju banaka ).

In late 1999 the applicants filed separate petitions for review of constitutionality and legality ( prijedlog za ocjenu ustavnosti i zakonitosti ) of the Decision. They complained that the Decision violated their property rights as shareholders of the Bank. They also claimed that the Bank had been in good standing and that the Decision had therefore been arbitrary and, in any event, unnecessary.

On 30 January 2003 the Constitutional Court ( Ustavni sud Republike Hrvatske ) discontinued the proceedings because the law on which the Decision was based had meanwhile been abrogated.

B. Relevant domestic law and practice

The Law on Sanation and Restructuring of Banks ( Zakon o sanaciji i restrukturiranju banaka , Official Gazette no. 44/1994 of 3 June 1994, “the Sanation and Restructuring Act”), insofar as relevant, read as follows:

Section 3 (1)

“The procedure of sanation and restructuring shall take place when a bank shows potential losses ... of more than 50% of the amount of its share capital, if the HNB deems such procedure feasible and economically justifiable.

Section 11 (1)

The decision on sanation and restructuring of a bank shall be given by the Government of the Republic of Croatia on the basis of a proposal by the HNB.”

The Sanation and Restructuring Act was abrogated on 23 May 2000 ( Zakon o prestanku važenja zakona o sanaciji i restrukturiranju banaka , Official Gazette no. 52/2000 of 23 May 2000 ).

The Decision on Sanation and Restructuring of the Croatia Bank ( Odluka o sanaciji i restrukturiranju Croatia Banke d.d., Zagreb , Official Gazette nos. 98/1999 of 27 September 1999 and 53/2000 of 26 May 2000; “the Decision”), insofar as relevant, reads as follows:

Section 2

“It is established that on 31 May 1999 the Bank has

(a) risky placements and potential obligations in the amount of 1,809 million kunas, including potential losses of 517 million kunas:

(b) doubtful and disputed claims ... in the amount of 446 million kunas;

(c) business losses incurred in 1998 and between 1 January and 31 May 1999 in the amount of 622.2 million kunas.

Section 7

On the day of the publication of this Decision all existing shares of the Bank shall be withdrawn and annulled. The Bank shall issue new shares in the amount of 217 million kunas, which shall be entirely owned by the Agency.”

The Constitution of the Republic of Croatia ( Ustav Republike Hrvatske , Official Gazette no. 11/2001 of 7 May 2001 ) provides as follows:

Article 48 § 1

“The right of ownership is guaranteed.

Article 50

1. Property may be restricted or taken in accordance with the law and in the interest of the Republic of Croatia subject to payment of compensation equal to its market value.

2. The exercise...of property rights may, on an exceptional basis, be restricted by law for the protection of the interests and security of the Republic of Croatia , nature, th e environment or public health.

Article 128

The Constitutional Court of the Republic of Croatia :

- shall decide on the conformity of statutes with the Constitution;

- shall decide on the conformity of subordinate legislation with the Constitution and statutes ;

- may decide on the constitutionality of statutes or subordinate legislation which are no longer in force, provided that from the moment of their abrogation until the submission of a n application or a petition to institute the proceedings not more than one year has passed .”

The Constitutional Act on the Constitutional Court ( Ustavni zakon o Ustavnom sudu Republike Hrvatske , Official Gazette no. 49/2002 of 3 May 2002 ; “the Constitutional Court Act”), insofar as relevant, provides as follows:

Section 38 (1)

“Every individual or legal person has the right to request the institution of proceedings to review the constitutionality of statutes or subordinate legislation... .

Section 40 (2)

“ The Constitutional Court shall commence proceedings within one year after the petition has been lodged. ”

The relevant part of section 19 (1) of the Courts Act ( Zakon o sudovima , Official Gazette nos. 3/1994, 100/1996, 131/1997 and 129/2000) as in force at the material time reads as follows:

Commercial courts... adjudicate disputes concerning establishment, functioning and dissolution of commercial companies as well as disputes concerning dispositions with membership and membership rights in such companies...”

In its judgment Pž-6234/04-2 of 21 December 2004 the High Commercial Court ( Visoki trgovački sud ) adopted a judgment, which insofar relevant reads as follows:

“It is declared that A.K. ... is a shareholder of Croatia Bank d.d. Zagreb and holder of rights in respect of 1,517 shares of nominal value of 200 HRK each..., and therefore entitled to both the property rights deriving from these shares and all the rights acquired through the investment of capital in Croatia banka d.d. from its foundation until the present day...”

COMPLAINTS

The applicants complain ed under Article 1 of Protocol No. 1 to the Convention that the Government ’ s decision violated their property rights. In particular, the applicants claimed to have been deprived of their property by the State in that their shares were withdrawn without any justification or adequate compensation.

The applicants further complained under Article 13 that they had no effective remedy at their disposal in order to challenge the Decision.

Lastly, the applicants complained under Article 6 § 1 of the Convention about the Constitutional Court ’ s decision to discontinue the proceedings following their motion for review of constitutionality and legality of the Decision.

THE LAW

A. Alleged violation of Article 1 of Protocol No. 1 to the Convention taken alone and in conjunction with Article 13 of the Convention

The applicants complained to have been deprived of their shares by the Government ’ s decision of 23 September 1999 without any compensation. They also submitted that they had no effective remedy at their disposal against that Decision. The applicants relied on Article 1 of Protocol No. 1 and on Article 13, which 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 13

“Everyone whose rights and freedoms as set forth in [the] Convention are violated shall have an effective remedy before a national authority notwithstanding that the violation has been committed by persons acting in an official capacity.”

1. The parties ’ submissions

The Government contested this view. They submitted that the applicants had at their disposal several domestic remedies in order to challenge the effects of the Decision and that they failed to use any of them.

In the first place, the Government pointed out that the applicants could have appealed against the HNB ’ s decision of 23 February 1999 appointing a temporary manager for the Bank. That decision extinguished all powers of the management board, the supervisory board and the shareholders ’ assembly transferring them to the temporary manager. The impugned decision was an administrative act, which could have been challenged in administrative proceedings, but the applicants never did so.

Secondly, in order to protect their rights as shareholders of the Bank, the applicants could have resorted to the Commercial Court and relied on the Constitution, the Convention or the Companies Act. In support of their claim, the Government submitted a judgment of the High Commercial Court by which that court ruled for another shareholder of the Bank acknowledging her right to shares in an identical legal situation as the applicants.

Finally, the Government claimed that the applicants could have instituted civil proceedings before the ordinary courts.

In the Government ’ s view, any of the above proceedings would have enabled the applicants to eventually reach the Constitutional Court by submitting a constitutional complaint under section 62 of the Constitutional Court Act.

The applicants admitted that certain shareholders of the Bank had instituted proceedings before the Commercial Court and that only one of those cases had meanwhile been resolved by the judgment submitted by the Government. However, they pointed out that despite the fact that the decision in question became final and enforceable, it had to date not been enforced. Moreover, the respondent (i.e. the State) lodged a constitutional complaint against that judgment, which proceedings have not yet come to an end.

The applicants reiterated that the only remedy available to them was the petition for review of constitutionality and legality, which was unjustifiably never examined by the Constitutional Court . Instead, that court simply discontinued the proceedings once the law on which the Decision was based had been abrogated. The applicants further maintained that pursuant to independent expert opinions, the Bank had been in good standing and in no need of sanation or restructuring.

2. The Court ’ s assessment

The Court reiterates that under Article 35 § 1 of the Convention it may only deal with a matter after all domestic remedies have been exhausted. In other words, any applicant must have provided the domestic courts with the opportunity of preventing or putting right the violations alleged against them (see Cardot v. France , judgment of 19 March 1991, Series A no. 200, p. 19, § 36). That rule is based on the assumption, reflected in Article 13 of the Convention – with which it has close affinity – that there is an effective remedy available in the domestic system in respect of the alleged breach (see, for example, Selmouni v. France [GC], no. 25803/94, § 74, ECHR 1999-V).

The only remedies which Article 35 of the Convention requires to be exhausted are those that relate to the breaches alleged and that are at the same time available and sufficient. The existence of such remedies must be sufficiently certain not only in theory but also in practice, failing which they will lack the requisite accessibility and effectiveness; it falls to the respondent State to establish that these various conditions are satisfied (see, among many other authorities, Vernillo v. France , judgment of 20 February 1991, Series A no. 198, p. 11, § 27).

In the present case, the applicants primarily complained that the Bank had been in good standing and that its sanation had not been necessary. In their opinion, the impugned Decision was arbitrary and it unjustifiably interfered with their property rights as shareholders. In support of their arguments, the applicants submitted independent expert opinions.

However, the applicants did not present their arguments in this respect to any domestic court of full jurisdiction, which would be far better placed than the Court to examine the factual background of their case. The only instance the applicants resorted to by filing an abstract petition for review of constitutionality and legality of the Decision was the Constitutional Court . However, that court could not have assessed facts or evidence pertaining to the applicants ’ specific situation either. It could only have quashed the Decision had it found that it had been contrary to the law or to the Constitution.

Given that commercial courts are generally competent in cases when a shareholder deems that his shareholder ’ s rights were violated, it is reasonable to assume that bringing an action in the competent commercial court would have had reasonable prospects of success. The Court recalls in this connection that a mere doubt as to the prospect of success of a remedy is not sufficient to exempt an applicant from submitting a complaint to the competent authority (see Elsanova v. Russia (dec.), no. 57952/00, 15 November 2005).

The foregoing conclusion is reinforced by the High Commercial Court ’ s judgment submitted by the Government, which shows that commercial courts accepted jurisdiction in the matter and even decided in favour of another shareholder of the Bank, who was in the identical legal situation as the applicants. Irrespective of the fact that those proceedings are still pending before the Constitutional Court , it is evident that the applicants had a domestic forum where they could have presented their arguments with reasonable prospects of success, but they never did so.

In these circumstances, the Court concludes that the applicants ’ complaint under Article 1 of Protocol No. 1 to the Convention must be rejected under Article 3 5 §§ 1 and 4 of the Convention for non-exhaustion of domestic remedies.

In light of the above conclusion, the applicants ’ complaint under Article 13 is manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 and 4 of the Convention.

B. Alleged violation of Article 6 § 1 of the Convention

The applicants also complained about the length and the fairness of the proceedings before the Constitutional Court concerning their petition for review of constitutionality and legality. They relied on Article 6 § 1 of the Convention, which insofar relevant provides as follows:

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

The Government contested this view, claiming that Article 6 was not applicable to the Constitutional Court proceedings in the present case. They submitted that a petition for review of constitutionality and legality concerned abstract proceedings rather than those for the protection of rights and interests of individuals. When filing such a petition, the person did not have to prove his or her standing or legal interest in the matter. Once the petition was lodged, it is for the Constitutional Court to decide whether or not it would institute proceedings for review of constitutionality and legality. In sum, based on the purpose and characteristics of proceedings following such a petition, the Government claimed that they did not concern a “dispute” within the meaning of Article 6 § 1 of the Convention.

The applicants disagreed.

The Court recalls that Constitutional Court proceedings do not in principle fall outside the scope of Article 6 § 1 of the Convention (see Süßmann v. Germany , judgment of 16 September 1996, Reports of Judgments and Decisions 1996 ‑ IV, p. 1171 , § 39). However, for Article 6 § 1 to be applicable, the impugned proceedings must involve a dispute over an individual ’ s civil rights or obligations.

In the present case, the Court has already concluded that the applicants had the opportunity to address the commercial courts with their claim for the return of their shares. Nonetheless, they never brought such an action. Instead, the applicants filed a petition for constitutional review, which did not automatically institute such proceedings, but required a separate discretionary decision of the Constitutional Court to that end. However, that court had never decided to institute the review proceedings following the applicants ’ petition . In these circumstances, the Court considers that the proceedings before the Constitutional Court did not involve a “ dispute ” over civil rights or obligations within the meaning of Article 6 § 1 of the Convention.

Having regard to this, the Court finds that Article 6 § 1 of the Convention does not apply to the present case.

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

For these reasons, the Court unanimously

Declares the application inadmissible.

Søren Nielsen Christos Rozakis Registrar President