FIFTH SECTION

DECISION

Application no. 43209/19 Piotr SKOCZYLAS and SCOTCHSTONE CAPITAL FUND LTD against Ireland

The European Court of Human Rights (Fifth Section), sitting on 2 September 2021 as a Committee composed of:

Mārtiņš Mits, President, Síofra O’Leary, Lətif Hüseynov, judges, and Martina Keller, Deputy Section Registrar,

Having regard to the above application lodged on 9 August 2019,

Having deliberated, decides as follows:

THE FACTS

1. The first applicant, Mr Piotr Skoczylas is a Polish national who was born in 1971 and lives in Frankfurt am Main, Germany. The second applicant, Scotchstone Capital Fund Ltd, is a limited liability company incorporated in Malta with a registered office at Mriehel, Malta. The second applicant is represented by the first applicant, who is the owner and a director of that company, and by Mr Shane O’Donnell , a lawyer practising in Dublin.

2. The facts of the case, as submitted by the applicants, are detailed and complex and have been laid out extensively in successive domestic court decisions and in proceedings before the Court of Justice of the European Union (CJEU) set out below. Based on the submissions of the applicants they can be be summarised as follows:

(a) The Financial Crisis, the Programme and the recapitalisation of ILP

3. Irish Life and Permanent PLC (“ILP” or “the bank”) was a bank established in Ireland and owned entirely by Irish Life and Permanent Group Holdings PLC (“ILPGH” or “the company”). The applicants were both shareholders in ILPGH, and the first applicant served as a director of ILPGH for a time.

4. During the 2008 financial crisis and subsequently, Irish banks encountered severe difficulties due to their exposure to the property market and their reliance on borrowing from international markets as a source of funding. From 2008, the banks were given extensive support through State guarantees on customer deposits and other liabilities, and emergency liquidity funding from the Central Bank of Ireland (“the Central Bank”) and the European Central Bank (“ECB”). These measures failed to restore confidence. Deposits continued to be withdrawn in a “silent run”, increasing the banks’ reliance on ECB funding. By late 2010, the share price of ILP had fallen 93 per cent from its peak value in 2007; ILP was heavily reliant on monetary authority funding and a large proportion of its assets were loss ‑ making. The State’s potential exposure in respect of ILP alone reached EUR 26 billion.

5. The scale of the State’s commitments to the financial system created a serious threat to its financial stability, raising the possibility that it could default on its sovereign debt. By November 2010, the State had become unable to borrow at a sustainable rate on bond markets and entered the “Programme for Support” (“the Programme”) to access funding from the International Monetary Fund (“the IMF’), the European Union (“the EU”) and other donors. The Programme, overseen by the IMF, the European Commission (“the Commission”) and the ECB, required the State to downsize and recapitalise the banks, setting aside EUR 35 billion for this purpose.

6 . In December 2010, the Council of the EU (“the EU Council”) adopted an implementing decision (2011/77/EU) under Regulation (EU) No 407/2010 (“the Regulation”) granting Ireland EUR 22.5 billion in aid, payable in instalments subject to ongoing compliance with the Programme. The decision required the State to “adequately recapitalise, rapidly deleverage and thoroughly restructure the banking system ”. The Programme required the Central Bank to carry out two detailed reviews of the banks, to be used to determine new capital requirements sufficiently robust to restore their credibility on international markets. On 31 March 2011, following these reviews, the Central Bank informed ILP that it was required to raise EUR 4 billion in regulatory capital; failure to comply could lead to the revocation of its banking licence. The applicants accepted this was a binding legal requirement which had not been challenged, though they claimed it was excessive.

7 . On 30 May 2011, the EU Council adopted a second decision (2011/326/EU) requiring ILP to be recapitalised with EUR 2.9 billion by 31 July 2011, with the remaining sum to be generated at a later date. On 27 June 2011, the company wrote to shareholders to notify them of an extraordinary general meeting (“the EGM”) to be held on 20 July 2011 to consider a proposed State investment. The Chairman of the bank and of the company (“the Chairman”) stated that only EUR 0.2 billion could be raised from internal resources. The remaining sum would have to be provided by the State. The directors did not believe there was any alternative given the bank’s circumstances.

8 . The resolutions put before the EGM provided for a massive increase in the company’s share capital, allowed the directors to issue new shares and allot them to the Minister for Finance (“the Minister”) without shareholder approval, set aside the shareholders’ right of first refusal over new shares (“pre-emption rights”) and allowed the nominal value of the new shares (EUR 0.32) to be reduced to allow the Minister to pay a price of EUR 0.063 per share, reflecting the market value of existing shares on 23 June 2011 subject to a 10 per cent discount. This would result in a reduction of the shareholders’ interest to 0.8 per cent. The proposal followed discussions with the State where the company had failed to secure more advantageous terms.

9 . These resolutions were defeated. Instead resolutions proposed by the shareholders revoked the directors’ authority to allot shares, required them to undertake a search for investors and to contact the Irish authorities and the EU to seek a review of recapitalisation and an extension of the deadline. The Chairman wrote to the Minister, proposing that the new shares be purchased at a price between EUR 0.3 and 0.75, that a pre-emption clause be included for existing shareholders and that EUR 1.4 billion of the State investment be in the form of “B shares” which the company could repurchase at a fixed price if projected losses did not materialise (“The B shares proposal”). The Minister rejected these proposals.

(b) The Commission state aid decision

10 . On 6 July 2011, the State asked the Commission to approve the recapitalisation proposal, in the form considered by the EGM, under EU State aid rules (see paragraph 37, below). The Commission found that recapitalisation was necessary to avoid a serious disturbance in the Irish economy and examined the proposal against the criteria set out in 2008 guidance (see paragraph 37, below). In granting approval on 20 July 2011, the Commission stated that the share price and the dilution of the existing shareholders’ interest was “very significant” and that the reduction of their interest to less than 1 per cent was “very material” as burden-sharing was “close to maximum”.

11. On 25 July 2011, after carrying out the necessary consultations, the Minister issued a “proposed direction order” under section 7 of the Credit Institutions (Stabilisation) Act 2010 (“the Act”). On 26 July 2011, he made an ex parte application to the High Court for a “direction order” under section 9 of the Act (see paragraphs 34-36 , below). His supporting affidavit set out why the order was required to meet the objectives of the Act; it was necessary to ensure recapitalisation by the deadline, preserve the bank, comply with the Programme, address the disruption to the Irish economy and the threat to the Irish financial system, protect depositors and the State’s interests in the guarantee, and restore confidence in the banking sector. The affidavit set out the bank’s circumstances, its reliance on State guarantees and Central Bank and ECB funding, the absence of any alternative to an order, and the possible consequences if the deadline was not met (see further below).

12 . The direction order granted by the High Court on 26 July 2011 (“the Order”) set aside the resolutions and provided for the company to issue 70 billion new shares. The new shares were restructured to reduce their nominal price (see paragraph 8, above). The Minister paid EUR 2.3 billion for shares at EUR 0.063 per share, and EUR 0.4 billion for contingent capital notes, convertible to shares if certain contingencies arose. Consequential changes were made to the memorandum and articles of association. The Minister now held 99.2 per cent of the share capital of ILPGH and the pre-existing shareholders held only 0.8 per cent.

(a) The first High Court judgment

13 . On 3 August 2011 the applicants applied to the High Court under section 11 of the Act to set aside the Order (see paragraph 36, below). The Minister was the respondent and ILP and ILPGH were later joined as notice parties and respondents. The applicants claimed that the Order contravened Articles 25, 29, and 8 of the Second Company Law Directive (Directive 77/91/EEC; “the Directive”) by increasing the company’s share capital without shareholder approval, allotting new shares without offering them to shareholders on a pre-emptive basis and lowering their nominal value without shareholder consent. They referred to the case-law of CJEU on the Directive. They claimed that the Order breached other provisions of EU law (see paragraph 24, below), that it was unnecessary and disproportionate in its effects on their rights, that the Minister had failed to consider less restrictive alternatives, and that it breached their rights under Article 1 of Protocol No. 1. The High Court heard evidence and submissions as to the alternatives to the Order.

14. The applicants argued that the bank did not explore the possibility of raising private capital. The Chairman gave evidence that the bank was unable to raise money privately, despite contacts with potential investors, Deutsche Bank AG and Davy, the bank’s corporate broker, had advised that, given the bank’s circumstances, there was no prospect of private investors providing the capital, the applicants had not identified an investor prepared to make a meaningful contribution, and the bank had lacked the time or the money to engage in such a search. The Minister’s officials gave similar evidence.

15 . The applicants argued that money could have been raised from shareholders through a rights issue. The Minister submitted that to provide EUR 2.3 billion, each shareholder would have been required to contribute, a sum, on average, approximately 120 times the current value of his or her investment; there was no indication the shareholders were able or willing to contribute any meaningful amount.

16 . The applicants claimed that the share price on 23 June 2011, which formed the basis for the price paid by the Minister, was the result of a “false market”, created by his announcement on 31 March 2011 of a State investment, and did not reflect the bank’s true value. He replied that the share price had been falling since 2007. The market had responded to new and accurate information on the bank’s position following the two reviews and the imposition of new capital requirements by the Central Bank.

17. The High Court heard evidence as to the likely consequences if the deadline had not been met. The Chairman believed this would have led to a run on the bank and its immediate forced liquidation. In addition, revocation or suspension of its licence (see paragraph 6, above) would have led to calls for repayment of EUR 9 billion in debt which it was unable to meet. The potential exposure of the State was estimated at EUR 26 billion. He also described the risk of contagion to other institutions in Ireland and the EU. Other State witnesses gave evidence of the possible loss of funding under the Programme, the ECB discontinuing liquidity funding and the State defaulting on its sovereign debt. All agreed that the shareholders would have received nothing in a liquidation.

18 . In its first judgment, issued on 15 July 2014 ([2014] IEHC 418) the High Court made a number of legal and factual findings but deferred any finding as to the application of the Directive, and the lawfulness of the Order generally, pending a reference to the CJEU. The court found that, on the balance of probabilities, the required capital could not have been raised from private investors or the shareholders, failure to recapitalise by the deadline would have led to the bank’s failure, a complete loss of value to the shareholders, extreme adverse consequences for the State, and an increased threat to the financial stability of the EU. The recapitalisation decision was made to fulfil the State’s legal obligations and to protect the Irish financial system and the citizens of the State and of the EU, the share price on 23 June 2011 was not the result of a false market, in applying for the Order, the Minister complied with the procedure under the Act. The court then stayed the proceedings to refer two questions to the CJEU on 2 December 2014 as to whether the Directive precluded the making of a direction order of this nature in these circumstances.

(b) The judgment of the CJEU

19 . The parties lodged written submissions with the CJEU and a hearing took place on 19 April 2016. The Grand Chamber issued judgment on 8 November 2016 (C ‑ 41/15, EU:C:2016:836). The judgment stated:

“... the referring court, after weighing the competing interests, came to the conclusion that, once the decision of [the EGM]... was made to reject the Minister’s proposed recapitalisation, the Direction Order was the only means of ensuring, within the time limit laid down by Implementing Decision 2011/77, the recapitalisation of ILP that was necessary to prevent the failure of that financial institution and thereby to forestall a serious threat to the financial stability of the European Union.”

20 . The CJEU stated that, while the Directive protected shareholders of public limited companies from the actions of their governing bodies in their normal operation, the Order was an exceptional measure, taken by a national authority to prevent the failure of a company which threatened the financial stability of the EU. The CJEU concluded that the Directive did not preclude a measure of this nature taken by national authorities in these circumstances. The CJEU referred to its judgment in Kotnik and Others (C ‑ 526/14, EU:C:2016:570) addressing similar questions (see below) and rejected claims that this approach was irreconcilable with its previous case ‑ law.

(c) The second High Court judgment

21 . The High Court heard further arguments on the CJEU judgment and the application of section 11 of the Act (see paragraph 36, below). The applicants still maintained that the Order was precluded by the Directive, arguing that the CJEU had wrongly assumed that the High Court had found the Order was the “only means” to ensure recapitalisation (see paragraph 19, above). It followed that the Order was permissible only if it was established that it was the “only means” to meet the objective; as it was not, the Directive had been breached. As to alternatives, the applicants argued that the shares could have purchased at a higher price; that even if shareholders could not have made a significant contribution it had been disproportionate to set aside their pre-emption rights; and that the Minister should have accepted the B shares proposal (see paragraph 9, above).

22 . In a second judgment on 31 July 2017 ([2017] IEHC 520) the High Court found that the CJEU judgment had clearly stated that the Directive did not preclude a measure taken by the State in the circumstances described and for the purposes stated and was not conditional on a finding that the Order was the “only means” to achieve recapitalisation. The High Court then examined the CJEU judgment in Kotnik .

24 . The High Court also examined and dismissed the applicants’ claims as to breaches of Directive 2001/34/EC, Directive 2004/39/EC and Directive 2009/101/EC on the basis these rested on their claims as to the Directive. New arguments concerning other provisions of the Directive and a separate Commission state aid decision were dismissed as outside the scope of their case. Their claim under Article 1 of Protocol No. 1 was dismissed on the basis that it rested on their claims that the Order was unlawful under EU law. The High Court concluded that the applicants had failed to show that the Minister’s opinion was “unreasonable or vitiated by any error of law” for the purposes of the Act and dismissed their application.

(d) The third High Court judgment

25 . In a separate judgment on 1 December 2017 ([2017] IEHC 832) the High Court considered if the applicants required leave to appeal to the Court of Appeal under section 64 of the 2010 Act, which allowed certain decisions to be appealed only if that court certified that “a point of law of exceptional public importance” was involved. While the High Court found that this section did not apply, it considered if the applicants’ proposed appeal points met the test and granted leave on the question of whether the High Court had correctly interpreted 1. the CJEU judgments in that case and Kotnik, and 2. the test under section 11 of the Act. It rejected a claim that it had relied on the Commission decision to determine the Order’s legality as a mischaracterisation of its judgment, and rejected other appeal points concerning EU law as resting on the applicants’ claim as to the Directive (see paragraph 24, above).

(e) The Court of Appeal judgment

26 . In their appeal the applicants claimed the High Court had failed to consider evidence as to the viability of the bank, in breach of Article 6 of the Convention, leading to incorrect findings as to its viability. They repeated their arguments as to the CJEU judgment and the Directive and their claims under Article 1 of Protocol No. 1 of the Convention, but did not contest compliance with the Act’s procedural requirements. The notice set out seven proposed further questions for the CJEU.

27 . A further hearing took place and a judgment issued on 2 October 2018 ([2018] IECA 300). The judgment re-examined the events leading to the Order, the evidence as to the consequences if the deadline had not been met and the High Court’s findings on that question. The Court of Appeal, examining the CJEU ruling, noted that the CJEU had found the Order was outside the scope of the Directive. The Court of Appeal agreed with the High Court’s application of Kotnik , noting that the CJEU had stated therein that the protection of property rights could not preclude a burden-sharing requirement as a condition of state aid, and stated both judgments “superseded” the earlier cases relied upon by the applicants.

28. The Court of Appeal stated that, as EU law deferred to national law as to how recapitalisation was to be achieved, the question of proportionality fell to be considered under domestic law, but the scope of review would be the same under EU or domestic law. The judgment then set out a test adopted by the Irish courts to assess the proportionality of restrictions on constitutional rights; this states that such restriction must be rationally connected to the objective, not be arbitrary, unfair or irrational; must impair those rights as little as possible; and their effects must be proportionate to the objective. In applying the second limb some flexibility had to be allowed to decision-makers, particularly where a decision had significant economic consequences and was taken in an acute emergency.

29 . The judgment considered the alternatives proposed: 1. that the Minister should have paid a higher price for the shares, 2. that the order should have provided for a rights issue, and 3. that the Minister should have accepted the B shares proposal (see paragraph 9, above). The Court of Appeal accepted that without recapitalisation ILP would have collapsed, leading to the loss of any shareholder value and that the share price paid by the Minister accurately reflected the company’s value and did not result from a “false market” (see paragraph 16, above). A rights issue would not have resulted in significant up-take by existing shareholders, would have been impractical given the deadline, and disproportionately expensive. The B shares proposal capped the State’s profit from its investment. Subsequent events had also shown that the bank was not over-capitalised and the proposal would have excluded the State from receiving rights the value of which corresponded to its contribution to the recapitalisation, an important consideration in assessing compliance with state aid rules (see paragraphs 10 and 37). Accordingly, given the circumstances of the bank, the Order was not disproportionate.

(f) The application to the Supreme Court

30 . On 28 November 2018, the applicants sought leave to appeal to the Supreme Court. Article 34.5.3˚ of the Irish Constitution permits such leave to be granted only where that court is satisfied “that the decision involves a matter of general public importance” or that it is otherwise necessary “in the interests of justice”. The notice of appeal referred to the statements of the High Court as to the importance of their case (see paragraph 25, above), repeated the applicants’ previous arguments, including their claim under Article 1 of Protocol No. 1, and claimed that the Court of Appeal had substituted a more lenient proportionality test than EU law permitted and disregarded crucial evidence, contrary to Article 6 § 1 of the Convention. Ten questions were proposed for a further referral to the CJEU, several from their Court of Appeal submissions: whether the Directive and the principle of proportionality precluded “oppressive recapitalisation terms” where less restrictive terms were available; whether recent CJEU case-law on the Directive superseded older case-law (see paragraph 27, above); whether the Regulation and the implementing decisions (see paragraphs 6-7, above) could require the State to recapitalise on specific terms; whether the Commission state aid decision could determine the legality of a national measure (see paragraphs 10, 37 and 25) and whether the CJEU could make factual findings beyond those of the domestic court. Further questions repeated arguments dismissed by the High Court as outside the scope of the applicants’ original case or resting on their arguments as to the Directive (see paragraph 24, above).

31. The Supreme Court refused leave in a determination issued on 1 March 2019 ([2019] IESCDET 55). The determination summarised the factual and legislative background, the findings of the lower courts and the CJEU, whose judgment it described as “unequivocal”, and the notice of appeal including some of the proposed questions for the CJEU.

32 . As to whether the appeal raised a point of “general public importance” the Supreme Court noted the different circumstances of the application to those in which the High Court granted leave (see paragraph 25, above), given the Court of Appeal judgment. The Act had also expired and EU legislation now governed the resolution of credit institutions. There was thus insufficient “public interest” in considering the case further. As to whether the appeal met the “interests of justice” test the Supreme Court rejected the criticisms of the Court of Appeal judgment, stating that these failed to engage with that judgment or to recognise the status of the lower courts findings; other issues raised were res judicata, having been dealt with by the High Court. The applicants had no right to a per se review of the Court of Appeal decision.

33. Addressing the proposed questions for the CJEU, the determination stated that these contradicted the High Court’s findings of fact, sought to reopen the CJEU judgment and did not arise out of the Court of Appeal’s judgment. The procedure under Article 267 TFEU did not permit “hypothetical questions in a factual vacuum” to be referred.

34 . The 2010 Act was enacted on 21 December 2010, ceasing to have effect in December 2014. The purposes of the Act under Section 4 included “to address the serious and continuing disruption to the economy and the financial system and the continuing serious threat to the stability of certain credit institutions in the State and the financial system generally”; “to implement the reorganisation of credit institutions to achieve the financial stabilisation of those credit institutions and their restructuring”; “to protect the interests of depositors in credit institutions”; “to protect the State’s interest in respect of the guarantees given by the State”; “to protect the interests of taxpayers”, and “to restore confidence in the banking sector”.

35 . Section 7(1) of the Act provided for the Minister to make a “proposed direction order” requiring a financial institution to take specified actions, such as issuing shares to him on terms set by him, increasing its share capital, altering its memorandum and articles of association, altering the rights of shareholders and disposing of assets. Section 7(2) required him to consult with the Central Bank before making such an order, and to make an order only if he was of the opinion that it was necessary to secure the achievement of a purpose of the Act. Section 7(4) required the Minister to notify the institution of the terms of the proposed order and allow 48 hours for submissions. Section 9 provided for the Minister to then apply ex parte to the High Court for a “direction order” in similar terms. The High Court was required to make an order if satisfied that the above procedure had been complied with and that his opinion was reasonable and not vitiated by any error of law.

36 . Section 11 allowed the relevant institution or a shareholder thereof to apply to the High Court to have a direction order set aside within five working days. An order could be set aside only if the Minister had not complied with the procedures under section 7 or if his opinion under section 7(2) was “unreasonable or vitiated by an error of law”.

37 . Article 107(1) TFEU prohibits EU Member States from granting aid in any form which threatens to distort competition by favouring certain undertakings (“state aid”). Article 107(3) permits, as an exception, aid to remedy a serious disturbance in a Member State’s economy. In 2008 the Commission issued guidance on state aid to financial institutions in the context of recapitalisation (2008/C270/02), which stated that member states should: “receive rights, the value of which correspond to their contribution to the recapitalisation” and that the price of new shares “must be fixed on the basis of a market-oriented valuation”.

COMPLAINTS

38. Under Article 1 of Protocol No. 1 the applicants complained that the Order violated their right to peaceful enjoyment of their possessions, as it was not lawful and was not proportionate to the aim pursued.

39. Under Article 6 § 1 the applicants complain that the Supreme Court refused to grant leave to appeal and to refer questions to the CJEU under Article 267 of the Treaty on the Functioning of the European Union and failed to conduct a proper examination of their submissions, arguments and evidence. Finally they complained of the excessive length of the proceedings. The applicants repeated these complaints under Article 1 of Protocol No. 1.

THE LAW

40. The applicants complained that the Order violated their rights under Article 1 of Protocol No. 1 which 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.”

41. In particular, the applicants argued that their shares and tradeable pre-emption rights were possessions protected under Article 1 of Protocol No. 1. They claimed that the Order was not lawful as it did not comply with the Directive, or with the principle of proportionality under EU law, as the Minister did not adopt the least restrictive alternative. They argued that the Court of Appeal erred in substituting its own proportionality test for that required by EU law. They referred to CJEU case-law establishing the principle of proportionality, stating that derogations from fundamental freedoms under EU law must be interpreted strictly. They argued that the Order was not proportionate as a matter of Convention law in failing to strike a “fair balance” between the demands of the general interest of the community and the requirements of the protection of the individual’s fundamental rights, referring to Cıngıllı Holding A.Ş. and Cıngıllıoğlu v. Turkey , nos. 31833/06 and 37538/06, § 49-51, 21 July 2015.

42. While, as a matter of general principle, shareholders cannot be seen as victims of measures affecting their companies (see Olczak v. Poland . cited above, § 57 and Albert and Others v. Hungary [GC], no. 5294/14, § 124, 7 July 2020) acts affecting the rights of shareholders can be distinguished from those affecting the company in that they impact the legal rights of shareholders directly and personally ( Olczak v. Poland, cited above, § 57; Albert and Others v. Hungary [GC], cited above, §§ 131-133).

43. In a number of cases where a measure complained of by an applicant shareholder directly and adversely affected legal rights covered by shares or the ability to exercise such rights, the Convention institutions recognised the applicant’s victim status implicitly by accepting the case for examination without entering into a detailed discussion (see, as an early example, Erbs v. France , no. 23313/94, Commission decision of 18 May 1995; and also Reisner v. Turkey , no. 46815/09, § 45, 21 July 2015).

44. As explained by the High Court, the effect of the impugned Order was to require ILPGH to issue a large number of new shares which were restructured to allow the sale of shares to the Minister, at a price determined by him, to allow him to obtain 99.2 per cent of the company’s shares. While this was done without shareholder consent, as explained by the High Court, it was in return for a massive increase in the company’s share capital to the tune of euro 2.3 billion with a further euro 0.4 billion in contingent capital notes, funded by the State in order to ensure recapitalisation and preserve the bank. However, control of the company was taken from the shareholders, their resolutions were nullified, and their pre-emption rights were set aside (see paragraph 12, above). In principle, the Order appears to have amounted to an interference with the shareholders’ right to the peaceful enjoyment of their possessions.

45. The Court notes that, while section 11 of the Act permitted the applicants as “members” of ILPGH to challenge the Order, they did not provide information to this Court on the extent of their holding, raising a question as to their victim status. However, the Court considers that it is not necessary to consider this question further as these complaints are manifestly ill-founded for other reasons.

46. As to whether the Order served a legitimate purpose, the Court is satisfied that its purpose was to ensure the bank was recapitalised in accordance with the purposes of the Act and the Programme, to protect the stability of the State’s financial system and to avoid the adverse consequences that would have resulted from the failure of the bank to meet the deadline (see paragraphs 18 and 34, above).

47. The first and most important requirement of Article 1 of Protocol No. 1 is that any interference by a public authority with the peaceful enjoyment of possessions should be lawful (see Broniowski v. Poland [GC], no. 31443/96, § 147, ECHR 2004 ‑ V). The applicants’ arguments were primarily directed at this requirement.

48. The Court reiterates that in order for an interference to be lawful, it must be accompanied by sufficient procedural guarantees against arbitrariness, including an opportunity to effectively challenge the measure in question (see Capital Bank AD v. Bulgaria , no. 49429/99, § 134, ECHR 2005 ‑ XII (extracts); and Vistiņš and Perepjolkins v. Latvia [GC], no. 71243/01, § 97, 25 October 2012). The Order was made under the provisions of the 2010 Act. In their appeal, the applicants accepted that the Minister complied with the procedure under the Act (see paragraphs 26 and 35 ‑ 36, above). The Court considers that, as can be seen from the extensive domestic proceedings outlined above, the applicants were able to effectively challenge the impugned measure and that the procedural requirements of Article 1 of Protocol No. 1 were satisfied.

49. The applicants essentially invited the Court to revisit the domestic courts’ findings under EU and domestic law and their assessment as to whether there was an alternative to the Order. The Court reiterates that its jurisdiction to verify that domestic law has been correctly applied is limited and that it is not its function to take the place of the national courts, its role being rather to ensure that their decisions are not arbitrary or otherwise manifestly unreasonable. This is particularly true when a case turns upon difficult questions of interpretation of domestic law. It is not the function of the Court to deal with errors of fact or law allegedly committed by a national court unless they may have infringed rights and freedoms protected by the Convention (see Anheuser-Busch Inc. v. Portugal [GC], no. 73049/01, § 83, ECHR 2007 ‑ I).

50. As to the application of the Directive, the Court notes that the CJEU delivered a preliminary ruling on this question; the applicants’ submissions on the ruling were examined and rejected by the High Court and the Court of Appeal (see paragraphs 19-20 and 22-27, above). This Court can see nothing manifestly unfair or unreasonable in the findings of the domestic courts in this regard.

51. As to the claim that the Court of Appeal erred in finding that the scope of its proportionality review was governed by domestic law, allegedly resulting in a more lenient approach than permitted under EU law, the Court notes that the Court of Appeal stated that the scope of review would have been the same whether under EU or domestic law. The applicants did not establish how the application of what they claimed was a stricter test would have resulted in different conclusions; this appears relevant only if the domestic authorities had been called to choose between several practical alternatives. The complaint as to the lawfulness of the Order under Article 1 of Protocol No. 1 overlaps with the complaint as to its proportionality, though the Court would stress that its approach to proportionality is not to be conflated with any test required by EU law. The applicants did not contest the Central Bank’s binding recapitalisation requirement. The High Court found, on the balance of probabilities, that the capital could not have been raised from private investors or existing shareholders and that failure to recapitalise by 31 July 2011 would have led to the bank’s failure with a total loss of value for the shareholders (see paragraph 18, above). The High Court heard extensive evidence as to the alternatives to the Order before making findings which were in turn reviewed extensively by the Court of Appeal. The proposed alternatives focused on the share price paid by the Minister, the shareholders’ pre-emption rights and the B shares proposal.

52. As to the share price, the Court notes that, as explained by the domestic courts, State aid rules imposed significant restrictions on the form of recapitalisation. The domestic courts, after considering those restrictions and the CJEU judgment in Kotnik , concluded that the share price adopted and the consequent dilution of the shareholders’ interest was necessary to ensure that shareholders contributed to the recapitalisation in a manner that complied with state aid rules and that this did not breach property rights under EU law (see paragraphs 10, 23, 27 and 37, above). As to pre-emption rights, the domestic courts found that the shareholders were neither able nor willing to make a significant contribution to recapitalisation, and a rights issue would have been disproportionately expensive and impractical given the deadline (see paragraphs 15, 18 and 29, above). Finally, those courts noted that the B Shares proposal required the State to bear the entire risk of its investment while limiting any benefit it could obtain, and raised concerns under state aid rules (see paragraphs 23 and 29, above).

53. The Court can see nothing manifestly unfair or arbitrary in these conclusions. In their submissions, the applicants repeated arguments as to proportionality and EU law raised before the domestic courts but did not show how the latter erred in such a way that their findings as to the absence of an alternative to the Order were manifestly unfair or arbitrary. It appears that the applicants did not fully engage with the restrictions imposed by State aid rules and failed to show that there was a practical alternative to the Order.

54. The Court has repeatedly stated that, in examining the State’s obligations under Article 1 of Protocol No. 1, while regard must be had to the fair balance to be struck between the competing interests of the individual and of the community as a whole, the State enjoys a certain margin of appreciation in determining the steps to be taken to ensure compliance with the Convention (see Broniowski v. Poland (dec.) [GC], no. 31443/96, § 144, ECHR 2002 ‑ X). The Court has on several occasions addressed the margin of appreciation enjoyed by States in the context of the economic crisis which raged in Europe from 2008. In this context it has explained that where, as in the present case, a State is faced with a challenge on this scale that raises economic, social and indeed political questions, the national authorities are in principle better placed than the international judge to choose the most appropriate means of achieving the required fair balance, and the Court will respect their judgment unless it is manifestly without reasonable foundation (see Mamatas and others v. Greece , no. 63066/14, 64297/14 and 66106/14, §§ 88-89, 21 July 2016, and the authorities cited therein). In many of these cases the Court emphasised the extreme economic situation which was the backdrop to the adoption of the different and exceptional measures subsequently challenged (see, for example, Adorisio and Others v. the Netherlands (dec.), no. 47315/13 and 2 other applications, §§ 98-104, 17 March 2015).

55. Having regard to the considerations outlined above and in the absence of any manifest unreasonableness the complaint as to the lawfulness and proportionality of the Order under Article 1 of Protocol No. 1 is manifestly ill-founded and must be dismissed under Article 35 §§ 3 (a) and 4 of the Convention.

56. The applicants complained that the decision of the Supreme Court striking out their application to appeal violated their rights under Article 6 § 1, which reads as follows:

“1. In the determination of his civil rights and obligations ... everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law...”

57. In particular, the applicants argued that the Supreme Court’s refusal to hear their appeal breached their rights under Article 6 § 1. Referring to the High Court’s description of the case as one “of exceptional public importance” (see paragraph 25, above), they argued that, as Article 34.5.3˚ contained a similar test, the Supreme Court should have granted leave. They claimed that, under EU law, the Supreme Court was required to refer the proposed questions to the CJEU, and that its failure to do so, or to give reasons for its decision, breached Article 6 § 1, referring to Ullens de Schooten and Rezabek v. Belgium , nos. 3989/07 and 38353/07, § 62, 20 September 2011. They also claimed that the Supreme Court failed in its duty to conduct a proper examination of their submissions and evidence, referring to Van de Hurk v. the Netherlands , 19 April 1994, § 59, Series A no. 288, in particular evidence as to the likelihood of the bank’s possible failure in the absence of the Order. Finally, they claimed that the length of the proceedings breached Article 6 § 1.

58. The Court would stress again that it is not its function to deal with errors of fact or law allegedly made by a national court, unless and in so far as they may have infringed rights and freedoms protected by the Convention (see, inter alia, García Ruiz v. Spain [GC], no. 30544/96, § 28, ECHR 1999 ‑ I; and Vasiliauskas v. Lithuania [GC], no. 35343/05, § 160, ECHR 2015). Normally, issues such as the weight attached by the national courts to given items of evidence or to findings or assessments in issue before them for consideration are not for the Court to review. The Court should not act as a fourth instance and will not therefore question under Article 6 § 1 the judgment of the national courts, unless their findings can be regarded as arbitrary or manifestly unreasonable (see Bochan v. Ukraine (no. 2) [GC], no. 22251/08, § 61, ECHR 2015; and López Ribalda and Others v. Spain [GC], nos. 1874/13 and 8567/13, § 149, 17 October 2019 ).

59. The Court notes that whether an appeal falls within the Supreme Court’s jurisdiction is a matter for that court under the Constitution (see paragraph 30, above). The Court can see no merit in the comparison with the High Court decision which, as explained by the Supreme Court, concerned a different legal test in a different context (see paragraph 25, above).

60. As to the complaint that the Supreme Court failed in its obligation to refer questions to the CJEU and failed to give reasons for its refusal, the Court notes that it is for the national courts to interpret and apply domestic law in conformity with EU law, and to decide whether it is necessary to seek a preliminary ruling to enable them to give judgment. The Convention does not guarantee the right to have a case referred to the CJEU for a preliminary ruling, though a refusal to grant a referral may, in certain circumstances, infringe the fairness of proceedings where the refusal proves to have been arbitrary, in particular where it was not duly reasoned (see Ullens de Schooten and Rezabek v. Belgium § 59 (above) Baydar v. the Netherlands , no. 55385/14, § 39, 24 April 2018).

61. Moreover, the obligation under Article 6 § 1 for domestic courts to provide reasons for their decisions cannot be understood to mean that a detailed answer to every argument is required. The extent of that obligation may vary according to the nature of the decision. It is 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. That is why the question of whether or not a court has failed to fulfil the obligation to provide reasons can only be determined in the light of the circumstances of the case (see Borovská and Forrai v. Slovakia , no. 48554/10, § 57, 25 November 2014). The Court also notes that, in dismissing an appeal, an appellate court may, in principle, simply endorse the reasons for the lower court’s decision (see García Ruiz v. Spain [GC], § 26). In the case of Stichting Mothers of Srebrenica and Others v. the Netherlands (dec.), no. 65542/12, § 173, ECHR 2013 (extracts), the Court found that summary reasoning used by the domestic court in refusing a request for a preliminary ruling was sufficient, as it followed from a conclusion reached elsewhere in the same judgment that a request for a preliminary ruling was redundant.

62. The Court notes that the Supreme Court was required to decide whether any question remained justifying an appeal within its exceptional jurisdiction; it could only grant leave - and the question of any need for a further preliminary reference could only arise - once that threshold was met. The questions proposed by the applicant (see paragraph 30, above) sought to reopen claims fully addressed by the lower courts, implying that less restrictive alternatives to the Order were available, that the CJEU had misunderstood the High Court judgment, that the High Court relied on the Commission decision to determine the legality of the Order, and restated claims previously dismissed as outside the scope of the applicants’ case (see paragraph 24, above). The Supreme Court determination stated that the application did not meet the “public interest” test for the reasons set out above. In examining if the “interests of justice” justified an appeal, the determination rejected the criticisms of the Court of Appeal judgment (see paragraph 32, above). It then stated that the proposed questions contradicted the High Court’s findings, did not arise from the Court of Appeal judgment and were “based in a factual vacuum”, and thus could not form the basis for a reference. Based on the information available to the Court these criticisms appear justified and, having regard to the jurisprudence of this Court set out above, the reasons given are sufficient to dispose of this complaint.

63. For similar reasons the Court considers the complaint that the Supreme Court failed to consider relevant evidence or submissions lacks merit. In examining the obligation of the courts to examine evidence account must be taken of the entirety of the proceedings and of the role of the appellate court therein ( Helmers v. Sweden , 29 October 1991, § 31, Series A no. 212 ‑ A). The High Court heard extensive evidence on the likelihood of the bank’s failure and the potential alternatives to the Order before making findings examined in detail and upheld by the Court of Appeal. The applicants sought in essence for the Supreme Court to re-open those findings; this was not its role.

64. As to the complaint concerning the length of proceedings, the proceedings were clearly very complex, extending across three levels of jurisdiction, with the High Court engaged twice, including a reference to the CJEU and a range of interlocutory applications within a period of eight years. Such a period of time does not appear unjustifed in a case of this nature, and, in any event, without provision of a detailed chronology and an indication of where the State was considered responsible for the impugned excessive delay, the Court considers this complaint unsubstantiated.

65. It follows that all the applicants’ complaints under Article 6 § 1 are manifestly ill-founded and must be dismissed under Article 35 §§ 3 (a) and 4 of the Convention.

For these reasons, the Court, unanimously,

Declares the application inadmissible.

Done in English and notified in writing on 23 September 2021. {signature_p_2}

Martina Keller Mārtiņš Mits Deputy Registrar President