THIRD SECTION

DECISION

AS TO THE ADMISSIBILITY OF

Application no. 33307/02 by Boris Ivanovich GALICH and Margarita Genndaiyevna DERYABINA against Russia

The European Court of Human Rights (Third Section), sitting on 6 April 2006 as a Chamber composed of:

Mr B.M. Zupančič , President ,

Mr J. Hedigan , Mr L. Caflisch , Mr C. Bîrsan , Mr A. Kovler , Mrs A. Gyulumyan , Mr E. Myjer, judges , and Mr V. Berger , Section Registrar ,

Having regard to the above application lodged on 27 August 2002 ,

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 applicants, Boris Ivanovich Galich and Margarita Gennadiyevna Deryabina , are Russian nationals who were born in 1952 and 1964 respectively and live in Omsk . The first applicant is represented before the Court by the second one , who is a lawyer practising in Omsk . The Russian Government (“the Government”) are represented by Mr P. Laptev , the Representative of the Russian Federation in the European Court of Human Rights .

A. The circumstances of the case

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

In May 2000 the first applicant lent a sum of money to a private person, Mr M. The amount of the debt was linked to the exchange rate of the US dollar. Mr M failed to re pay the full amount in due time, and on 19 April 2001 the applicant brought a civil action against Mr M. The applicant sought to recover 141,800 Russian r oubles (RUR) on account of the outstanding amount of the debt, plus statutory interest for the period of delay ( проценты за неисполнение денежного обязательства ) .

In the domestic proceedings the first applicant was represented by the second applicant, a lawyer practising in Omsk region. Mr M, the defendant, claimed that he had returned to the applicant RUR 45,000. However, he recognised the remainder of the debt and statutory interest on it, coming to RUR 137,393 in toto .

On 15 January 2002 the Kirovskiy District Court of Omsk partially satisfied the first applicant ’ s claim. The court found that a part of the debt (RUR 45,000) had already been repai d to the applicant. Given the exchange rate of the US dollar at that moment, the court awarded the applicant 106,500 roubles (~3,970 euros) in compensation for the outstanding amount of the debt, plus 34,611 RUR (~1,290 euros) as statutory interest for 491 days of delay in repay ing the principal amount. To calculate the interest the court applied the annual refinancing rate of the Central Bank of Russia , which amounted to 25 per cent at the time .

The first applicant appealed. In the points of appeal he contested the finding that part of the principal debt had been returned to him.

On 27 February 2002 the Omsk Regional Court examined the appeal and dismissed it. The applicant submits that the issue of statutory interest was not raised either by the plaintiff or the defendant during the proceedings. However, the court ex o f ficio reduced the amount of statutory interest awarded to RUR 10,000 (~373 euros), stating as follows:

“In addition to the principal debt the court ordered recovery of a statutory interest, in accordance with Article 395 of the Civil Code of the Russian Federation .

At the same time, in the opinion of the judicial collegia , the amount of interest – 34,611 roubles 44 kopeks - is disproportionate to the consequences of the breach of the obligation and is excessive.

Consequently, the appeal court ( кассационная инстанция ) deems is necessary, pursuant to Article 333 of the Civil Code of the Russian Federation, to reduce the amount of penalty to 10,000 roubles. ”

The overall amount awarded to the applicant was therefore reduced to RUR 116,500. This decision became final.

B. Relevant domestic law and practice

1. Calculation of s tatutory interest

Pursuant to Article 395 of the Civil Code (“Responsibility for non-compliance with a monetary obligation”) the debtor in delay should pay to the creditor the statutory interest. This interest , by default, is defined as the refinancing rate of the Central Bank of the Russian Federation , unless another rate has been fixed by the law or by the agreement between the parties.

Pursuant to Article 333 of the Civil Code (“The Reduction of the Penalty”), if the penalty due for a violation of a contractual obligation is obviously out of proportion compared with the consequences of the violation of the obligation, the court has the right to reduce the amount of the penalty.

Pursuant to Joint Ruling no. 13/14 by the Russian Supreme Court and Supreme Commercial Court of 8 October 1998 , Article 333 is applicable to the statutory payments provided under Article 395. In deciding whether or not reducing the statutory interest, the courts “should take into account the fluctuation of the refinancing rate of the Central Bank during the period of delay, as well as other circumstances which may affect the rates of interest”.

2. Powers of the court of appeal

Article 294 (“ Scope of review of the case by the court of appeal”) of the Code of Civil Proceedings of 1964, then in force, stipulated:

“The [ court of appeal] shall verify the l egality and reasonableness of the first-instance court judgment within the scope of the appeal. It may examine new evidence and establish new facts. The court shall examine newly submitted evidence if it considers that the evidence could not have been submitted to the first-instance court.

In the interests of legality, the court of appeal may examine the decision of the first instance court in its entirety . ”

COMPLAINTS

1. Under Article 6 § 1 of the Convention t he first applicant complain s about an unfair trial of his case . In particular, he complained about the lack of adversarial character of the proceedings before the appeal court, which, on its own motion, had significantly reduced the amount of the sum awarded to him by the first instance court. The applicant and his lawyer learned about it only after the decision was pronounced and, therefore, were unable to submit their arguments in this respect. Secondly, under the same provision the first applicant complained that the appeal court gave no specific reasons for this decision.

2. The first applicant also complains that the second instance court was not “impartial” within the meaning of Article 6 § 1 of the Convention.

3. The first applicant complains that such a significant reduction of the statutory interest due to him constitutes an interference with his “possessions” contrary to Article 1 of Protocol No. 1.

4. Under Article 3 of the Convention the second applicant complained that the impugned decision of the appeal court was taken with a view to humiliate her in the esteem of her client (the first applicant).

THE LAW

1. The first applicant complained that the proceedings before the court of appeal were not “fair” in that the court had reduced the amount of statutory interest without hearing him on this subject. He also complains that the Court did not give reasons for its decision to reduce t he amount of statutory interest . Article 6 § 1 of the Convention, referred to by the applicant in this respect, reads, insofar as relevant, as follows:

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

The Government submitted that the reading of Artic le 333 of the Civil Code which allowed the court to reduce the amount of statutory interest clearly followed from the Ruling of the Supreme Court no. 13/14 of 8 October 1998 , and, therefore, was foreseeable. By virtue of Article 294 of the Code of Civil Proceedings, the Regional Court was not limited by the parties ’ arguments and could examine the case in its entirety. The applicant, through his representative, had ample opportunities to present his arguments in the hearing before the court of appeal. Therefore, the proceedings were fully adversarial.

Further, the Government submitted that the reasoning of the Regional Court ’ s decision was sufficient. The outstanding amount of the debt had been linked to the exchange rate of the US dollar. Therefore, the applicant was sufficiently protected against the then high inflation of the Russian rouble. However, the first instance court applied the annual refinancing rate for the rouble credits, whereas the rate for the credits in “hard currency” was much lower. Fur thermore, Mr M repai d part of the money in time. All that lad the Regional Court to conclude that the rate of statutory interest (25 % annually), applied by the first instance court, was too high.

The applicant maintained his complaints. In his words, the fact that the amount of debt was linked to the exchange rate of the US dollar was intended to protect the interests of both parties, and not only those of the moneylender. In calculating the amount of statutory interest the first instance court applied the lowest rate that had existed at the moment of the litigation. However, even this rate seemed too high to the Regional Court . Ruling no. 13/14, referred to by the Government, specified that, in applying Article 333, the courts should take into account fluctuations of the lending rate of the Central Bank. However, the amount of interest set by the Regional Court (RUR 10,000) was clearly nominal, made “out of thin air” and without any precise calculations.

Further, the Regional Court went beyond the scope of the appeal, which, according to the second part of Article 294 of the Code of Civil Proceedings, is possible only for the sake of legality. The eventual reduction of statutory interest has never been discussed by the parties before the court at two instances. Finally, the overall amount awarded by the Regional Court (RUR 116,500) was even less than the sum recognised as due by the defendant before the District Court (RUR 137,392.88).

The Court considers, in the light of the parties ’ submissions, that the co m plaint raises serious issues of fact and law under the Convention, the determ i nation of which requires an examination of the merits. The Court concludes therefore that this complaint is not manifestly ill-founded within the meaning of Article 35 § 3 of the Convention. No other ground for declaring it inadmi s sible has been established.

2. The first applicant also complains that the second instance court was not “impartial” within the meaning of Article 6 § 1, cited above. The Court notes, however, that the mere fact that the court rendered a decision which did not satisfy the applicant is not enough to conclude that the judges were not “impartial”, as required by the above Convention provision. The applicant did not forward any other arguments in support of this allegation.

It follows that this complaint must be rejected as being manifestly ill-founded pursuant to Article 35 §§ 3 and 4 of the Convention.

3. The applicant complains that the Regional Court , by reducing the amount of statutory interest, infringed his right to “the peaceful enjoyment of his possessions”. Article 1 of Protocol No. 1, referred to by the applicant in this respect, reads as follows:

“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.”

The Court recalls that the guarantee of peaceful enjoyment of possessions as stipulated in Article 1 of Protocol No. 1 only protects existing property rights, but does not, in principle, affect the courts ’ power to adjudicate claims raised in litigation between private parties (see G. G.M.B.H. v. Austria , n o. 11334/85 , Commission d ecision of 7 January 1991 ). Indeed, in the present case the State through its courts have provided a forum for adjudicating a dispute between the applicant and Mr M. However, this fact by itself does not amount to interference by the State with the applicant ’ s “possessions”.

Even assuming, in the applicant ’ s favour, that the essence of the applicants ’ complaint was directed against the terms of the legislation or its application by the courts, the Court notes the following. Article 1 of Protocol No. 1 applies only to “existing” possessions. A person who complains of a violation of his right to property must first show that this right existed, or that his position in law was sufficiently strong to amount to a “legitimate expectation”, attracting the protection of Article 1 of Protocol No. 1. In the present case the Regional Court, basing on the relevant law, decided that the applicant was entitled to a specific amount of interest, which was less than the applicant expected to obtain. It appears that Russian law, and in particular Article 333 of the Civil Code of the Russian Federation, as interpreted by Ruling no. 13/14, confers on the courts quite a large discretion in defining whether or not the amount claimed by the creditor on the basis of Article 395 is proportionate to his real losses. The Court recalls that its power to review compliance with domestic law is limited , and t he re is nothing to suggest that the interpretation of the relevant provisions on statutory interest was unforeseeable, or that the Regional Court used its discretion in an arbitrary fashion. Consequently, the Court cannot agree with the applicant that the amount of interest that he ex pected to obtain constituted “possessions” within the meaning of Article 1 of Protocol No. 1.

It follows that this complaint must be rejected as being manifestly ill-founded pursuant to Article 35 §§ 3 and 4 of the Convention.

4. The second applicant complained that the appeal court, by reducing the amount of statutory interest, humiliated her in the esteem of her client. She referred to Article 3 of the Convention, which reads as follows:

“No one shall be subjected to torture or to inhuman or degrading treatment or punishment.”

The Court recalls that ill-treatment must attain a minimum level of severity if it is to fall within the scope of Article 3. The assessment of this minimum is relative: it depends on all the circumstances of the case, such as the duration of the treatment , its physical and/or mental effects and, in some cases, the sex, age and state of health of the victim (see , amongst other authorities, Tekin v. Turkey , judgment of 9 June 1998, Reports of Judgments and Decisions 1998-IV, § 52).

Notwithstanding the disappointment which the applicants might have f elt on account of the outcome of the proceedings , the Court is not persuaded that this discloses treatment of sufficient severity to fall within the scope of Article 3 of the Convention.

It follows that this complaint must be rejected as being manifestly ill-founded pursuant to Article 35 §§ 3 and 4 of the Convention.

For these reasons, the Cou rt unanimously

Declares admissible, without prejudging the merits, the first applicant ’ s complaint s under Article 6 § 1 of the Convention about (a) his alleged inability to contest the reduction of the amount of statutory interest, and (b) insufficiency of reasons, adduced by the court of appeal in this respect;

Declares inadmissible the remainder of the application.

Vincent Berger Boštjan M. Zupančič Registrar President