SECOND SECTION

DECISION

AS TO THE ADMISSIBILITY OF

Applications no. 46392/99, 46394/99, 46396/99 and 46397/99 by Georgios TSATSOS, Andreas TSATSOS-HATZIKYRIAKOS, Anthippi VASSILAKI and Ioannis STAMATIOU against Greece

The European Court of Human Rights ( Second Section ), sitting on 9 March 2000 as a Chamber composed of

Mr M. Fischbach, President ,

Mr C.L. Rozakis, Mr B. Conforti, Mr G. Bonello, Mrs V. Strážnická, Mrs M. Tsatsa-Nikolovska, Mr E. Levits, judges , and Mrs S. Dollé , Section Registrar ,

Having regard to the above applications introduced on 21 December 1998 and registered on 26 February 1999,

Having deliberated, decides as follows:

THE FACTS

The applicants are Greek national , living in London and Athens. They are represented before the Court by Mr P. D. Dagtoglou , professor of Administrative Law at the University of Athens and a lawyer practising in Athens.

A. Particular circumstances of the case

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

The first applicant is a shareholder and was, until 13 September 1983, a member of the board, managing director and group chief executive officer of “ Heracles Anonymos Geniki Etairia Tsimenton ” ( Heracles General Cement S.A. , hereinafter “ Heracles ”), a publicly listed company incorporated under Greek law, established in Lycovryssi , Attica . The second and fourth applicants are shareholders and were, until the same date, members of the board of Heracles . The third applicant is a shareholder of that company.

Founded in 1911, Heracles was the largest cement producer in Greece in 1983. It was also the largest cement exporter in Europe, and one of the main exporters in the world. Apart from producing, distributing and exporting cement, those being its main activities, Heracles and its subsidiary companies produced a large number of other products, from packaging materials to floating cement carriers. It consisted of 33 companies, of which it totally controlled 22, and 7 by more than 50%, while it had minority holdings in 4 other companies.

By 1983, the biggest shareholder of Heracles was the National Bank of Greece (29 %), Greece’s largest State-controlled bank. However, the Tsatsos family, though owning or controlling only 25 % of the shares, traditionally managed the company. The National Bank of Greece, which consented to this, was represented in the fifteen-member board by four members.

The applicants maintain that in the early 80’s a campaign of libellous publications, demonstrations and threats sought to discredit, incriminate and intimidate the management of Heracles . This campaign was encouraged by declarations of Ministers of the new Government. It culminated in September 1983 in a statement on television by the Minister of National Economy accusing several members of the board, and in particular the Tsatsos family, of large scale fraud at the expense of the company, its shareholders and the State (“defrauding the Greek people of the amount of 120 million American dollars”), and of serious violations of the legislation for the protection of the national currency. The Minister pointed out that these crimes carried sanctions which extended to the death penalty. Following these accusations criminal charges were brought against the Tsatsos family and several members of the board. However, in July 1993, the Athens Court of Appeal decided that there was no case to answer.

In 1983 the board, with the exception of the four National Bank members, were forced to resign, particularly because of the declaration of these members, in the morning after the ministerial accusations, that the National Bank was not any longer prepared to accept Heracles ’ cheques. Following the resignation of the board, the Government appointed a new board. According to the applicants, after 1983, under the new State-appointed management, Heracles reversed within two years its profit record into one of losses. In the period between 1983 and 1985 it lost 7,249 million drachmas (GRD), that is three times its then share capital. At the same time, its debt rose from 24 to 44 billion GRD, that is by 70 %. The debt was mainly owned to the National Bank of Greece and the public electricity company, also a State-controlled company.

On 7 August 1986, the company was made subject, by an Order (no. 203/1986) issued by the Deputy Minister for Industry, Energy and Technology, to the provisions of Law no. 1386/1983 concerning business “in difficulties” (namely Article 7 § 2 of the Law) and to the management by a State agency created by the same Law, the Business Revival Agency ( Organismos Anasyngrotisseos Epikheirisseon , “the OAE”), which confirmed ex post facto the new board. The Ministerial Order also proceeded, by virtue of Article 10 of that Law, to the capitalisation of Heracles ’ debt by issuing new shares. It converted more than 60 % of the debt (27,755 million GRD) into share capital, increasing thereby Heracles ’ capital about eleven times. The new shares were issued in the name of State-controlled bodies or companies (68.01 % of the new shares in the name of the Business Revival Agency) and used for paying off Heracles ’ debts). Under the new arrangement more than 90 % of the shares belonged to State-controlled bodies. Heracles ’ private shareholders owned less than 10 % of the increased share capital.

In 1993, the third and fourth applicants applied to the Athens Administrative Court of Appeal to have Ministerial Order no. 203/1986 quashed. The Administrative Court of Appeal rejected the application (judgment 2380/1994). On 23 June 1998, the Supreme Administrative Court confirmed the judgment of the Administrative Court of Appeal (judgment no. 2626/1998).

On the contrary, the first and second applicants allege that they were prevented from lodging an application with the Supreme Administrative Court, through a climate of persecution, of fear and intimidation, that was cultivated by hostile government declarations and headlines and press articles in the government-friendly media. They maintain that this climate hung for years over the Tsatsos family and was especially directed against the first applicant. Its seriousness and intensity culminated in January 1989 in the assassination of two prosecuting judges and the shooting in the legs of a third one by the terrorist organisation “17 November”, which over the years has committed a long series of murders but remains undetected to this date. One of the assassinated judges had proposed the dismissal of the case against the first applicant. The proclamations issued after each terrorist attack usually referred to “the criminal fraud of Tsatsos ” and the judges who “become accomplices with the capitalists”. The first applicant alleges that out of fear for his life, his family and he left Greece in 1985 for London, where he still lives.

In March 1992, Heracles was sold to the Italian cement producer Calcestruzzi .

B. Relevant domestic law and practice

1. Law no. 1386 of 5 August 1983 establishing the Business Revival Agency

The OAE was established by Law no. 1386 of 5 August 1983 and is a public limited company under the supervision of the State.

Designed to serve the public interest, it contributes to the country's economic and social development by putting businesses on a sound financial footing, importing and applying foreign technological know-how and developing Greek technological know-how, and setting up and running nationalised or semi-public businesses (section 2 (2) of the Law).

To achieve these objectives the OAE may, among other things, take over the management of businesses being rehabilitated or nationalised, acquire shareholdings in businesses, grant loans to businesses in which it has an interest or give guarantees for such loans, issue debenture loans and transfer shares to employees or to organisations representing

them, local authorities or other public-law entities (section 2 (3) of the Law).

The relevant provisions of Law no. 1386/83 provide:

Section 5

"Conditions for making a business subject to the provisions of this Law

1. By an order of the Minister for the Economy, issued after consultation of the advisory committee ..., the provisions of this Law may be applied to businesses

(a) which have suspended or ceased their activities for financial reasons;

(b) which have suspended payments;

(c) which are insolvent or have been placed under the management of their creditors or under provisional management or which have gone into liquidation ...

(d) whose total liabilities are five times greater than the sum of their capital and apparent reserves and which are manifestly unable to meet their liabilities ...

(e) which concern the country's defence or are of vital importance for the development of national resources or whose main object is the provision of public services and which are manifestly unable to meet their liabilities;

(f) which request application of the provisions to them.

2. For the purposes of applying the preceding subsection,

...

(c) 'Manifestly unable to meet their liabilities' means: (a) a fall in production and in the number of employees due to the lack of liquid assets;(b) an accumulation of debts due and (c) a deterioration in the liquidity indicators.  This situation may also be proved by a declaration by one or more banks which are the business's main source of finance to the effect that they will no longer maintain their financial support..."

Section 6

"Procedure for making a business subject to the provisions of this Law

1.  The order by the Minister for the Economy making the business subject to the provisions of this Law ... shall be made

(a) at the request of the business;

(b) ...

(c) at the request of a bank or of the administrative authorities or of a public-law entity where these have matured claims against the business;

(d) at the request of the business's creditors other than those mentioned in sub-paragraphs (b) and (c) whose claims represent at least 20% of the business's outstanding debts ...

(e) at the request of the ... trustee in bankruptcy or of the insolvent firm..."

Section 7

"Provisions on the rehabilitation of businesses

The order by the Minister for the Economy ... may provide for

1.  the taking over of the management of the business by the OAE, in accordance with section 8;

2.  the satisfaction of the business's obligations in such a way as to ensure its viability

(a) by a compulsory increase in the capital by means of contributions of new assets or by the conversion of existing debts into shares ...

3.  winding-up, in accordance with section 9 of this Law."

Section 8

"Taking over of management

1.  ...When the ministerial order is published, the powers of the business's managerial bodies shall cease.  The general meeting of shareholders ... shall continue to be held but may not decide to dismiss the directors appointed by the OAE.  The approval of the Minister for the Economy shall be required for the distribution of profits and the establishment of reserves.

...

5.  During the interim administration the OAE shall produce a report on the business's viability and negotiate with the shareholders and creditors in order to conclude an agreement on the business's survival ...

...

8.  During the interim administration the OAE may, by a decision approved in an order of the Minister for the Economy published in the Official Gazette and as an exception to the provisions governing public limited companies, increase the business's capital.  This increase may be made either in cash or by contributions in kind.  Payment of the contribution may be made by set-off.  All the particulars relating to the increase in capital shall be laid down in the aforementioned ministerial order.

The existing shareholders retain a pre-emptive right, which shall be exercised within a period of time to be laid down by the ministerial order.

9.  The OAE or the management appointed by it shall be liable only in the event of fraud or serious negligence."

Section 12

"Transitional period

While the secretariat of the OAE is being set up and until it comes into operation, the Minister for the Economy shall take the measures provided for in sections 7-10 of this Law by means of an order."

2. The Court of Justice of the European Communities' judgment of 30 May 1991

A reference for a preliminary ruling having been made to it by the Greek Supreme Administrative Court, the Court of Justice of the European Communities gave judgment on issues relating to the compatibility of Law no. 1386/83 with the Second Council Directive (77/91/EEC) of 13 December 1976 (concerning the formation of public limited companies and the maintenance and alteration of their capital) and more particularly with Article 25 of the Directive, according to which "any increase in capital must be decided upon by the general meeting".

In its judgment of 30 May 1991 (Marina Karella and Nikolaos Karellas v. Minister of Industry, Energy and Technology and Organismos Anasyngrotisseos Epikhirisseon , Reports of Cases before the Court of Justice and the Court of First Instance, 1991-5, I-2691) the Court of Justice held:

"Article 25 in conjunction with Article 41 (1) of the Second Directive must be interpreted as meaning that they preclude national rules which, in order to ensure the survival and continued operation of undertakings which are of particular economic and social importance for society as a whole and are in exceptional circumstances by reason of their excessive debt burden, provide for the adoption by administrative act of a decision to increase the company capital, without prejudice to the right of pre-emption of the original shareholders when the new shares are issued."

COMPLAINTS

The applicants allege a violation of Article 1 of Protocol No. 1. They maintain that as private shareholders, they suffered damage twice : a) through the transformation of Heracles in 1986 from a highly profitable company to one burdened with losses and debts, which caused pecuniary damage in terms of share value and dividends, and b) through the compulsory transfer of Heracles from the private to the public sector, thereby reducing the private shareholders, hitherto managing the company since its establishment, to a small powerless minority. In addition, the first and second applicants complain of the loss of their remuneration (the first as an managing director, group chief executive officer and member of the board, the second as an executive director and member of the board) when the board was forced to resign on 13 September 1983 and was replaced by a State-appointed board which was confirmed ex post facto in 1986.

THE LAW [Note1]

The applicants allege a violation of Article 1 of Protocol No. 1 which provides 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.”

In the first place, the Court notes that only two of the applicants have applied for judicial review of Ministerial Order No 203/1986 to the Athens Administrative Court of Appeal and the Supreme Administrative Court. The first and second applicants maintain that they were prevented from challenging the legality of that Order before the Greek courts because of a climate of persecution, of fear and intimidation, created by the pro-government media but also by a terrorist organisation which assassinated two of the prosecution judges (one of whom had proposed the dismissal of the criminal charges against the first applicant) and shot in the legs a third one. They allege that out of fear for their lives they did not dare to resort to the courts. They invoke the judgment of the Court in the case of Akdivar v. Turkey (judgment of 16 September 1996, Reports of judgments and decisions 1996-IV, p.1192) and invite the Court to hold that these applicants be absolved from the obligation to exhaust the domestic remedies at their disposal because of the risk of reprisals against them and their lawyers if they had sought to introduce legal proceedings. Furthermore, they recall that the proceedings introduced by the third and fourth applicants had not been successful and in any case the prospects of success of challenging Ministerial Order 203/1986 were negligible because no Greek court has ever quashed important government measures of economic policy, however severe the infringement of individual rights.

The Court considers that the facts of the present case bear no similarity to those in the Akdivar case in which the Court decided that there existed exceptional circumstances justifying the fact that the applicants made no attempt to seek redress before the local courts. The context in which the events complained of took place in the Akdivar case differ radically from the situation prevailing in Greece at the material time.

In assessing whether the application should be rejected as regards the first and second applicants for failure to exhaust domestic remedies, the Court attaches particular importance to the fact that the Athens Administrative Court of Appeal and the Supreme Administrative Court found against the third and fourth applicants. The Court considers that when an application is lodged before it by a number of applicants, it may examine the entire application despite the fact that only some of them have exhausted domestic remedies (application no. 9905/82, dec. 15.03.84, D.R. 36, p. 187). As the complaints of all of the four applicants are essentially the same, the Court concludes that the first and second applicants may be absolved from the obligation to comply with the requirement of Article 35 § 1 of the Convention, as regards that particular remedy, challenging the legality of Order No. 203/1986 and the increase in capital of Heracles , given the lack of any realistic prospects of success.

However, the Court notes that the circumstances of the present case and the complaints raised by the applicants are quite similar to those in the case of Kefalas and Others v. Greece (judgment of 8 June 1995, Series A no. 318-A). In that case, the applicants had not only challenged the Ministerial Order subjecting their company to the provisions of Law No. 1386/1983 as well as the various increases and reduction of capital, but they had also brought actions against the OAE and the State seeking compensation for the damage allegedly caused them by the OAE’s management of the company and by the unlawful increases in capital. These actions were founded on the Civil Code provisions of the State’s liability in tort and unjust enrichment. In deciding the admissibility of the application, the European Commission of Human Rights considered, regarding the applicants’ complaint under Article 1 of Protocol No. 1, that these actions for damages constituted effective remedies, in particular in view of the judgment of the Court of Justice of the European Communities of 30 May 1991 (see the part “Relevant domestic law and practice”). However, as these actions were still pending before the Greek courts, the Commission decided to declare the complaint inadmissible for non exhaustion of domestic remedies.

In the present case, none of the present applicants attempted to bring such actions for damages before the competent courts.

In these circumstances, the Court finds that the applicants have not exhausted domestic remedies as required by Article 35 § 1 of the Convention. The Court concludes that the application must 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 .

S. Dollé M. Fischbach Registrar President

[Note1] In your reasoning specify: Complaint / Article of the Convention [/ Succinct summary of Government’s submissions / Succinct summary of applicant’s submissions in communicated case] / Court’s [Commission’s] case-law, if any / Application of case-law to facts of particular case or considerations for specific facts of case.

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