FIFTH SECTION

DECISION

Application no. 15361/10 KOMTEKH-PLUS, PF NVP against Ukraine

The European Court of Human Rights (Fifth Section), sitting on 4 February 2021 as a Committee composed of:

Stéphanie Mourou-Vikström, President, Ganna Yudkivska, Lado Chanturia, judges, and Martina Keller, Deputy Section Registrar ,

Having regard to the above application lodged on 2 March 2010,

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

Having deliberated, decides as follows:

THE FACTS

1 . Komtekh-Plus, P F N VP (“the applicant company”) is a private company incorporated under the laws of Ukraine. It was represented by Mr I.A. Yesipov, a lawyer practising in Lviv.

2 . The Ukrainian Government (“the Government”) were represented by their Agent, Mr I. Lishchyna.

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

4 . On 4 December 2007 five private companies (including RGK, TBS, KA and KM), in their capacity as vendors, entered into a provisional agreement with the applicant company for the sale of four units located in non-residential premises in Lviv. On the same day they signed an arbitration agreement, which provided that any disputes relating to that agreement were to be settled by means of ad hoc domestic arbitration.

5 . The contract of sale (“the contract”) was signed on 14 December 2007.

6 . At the end of December 2007, a dispute arose between the applicant company and the vendors concerning the failure of the latter to have the contract notarised. On 25 December 2007 the applicant company requested arbitration, claiming title to the four units. The dispute was amicably settled on 23 January 2008 by an agreement between the parties that the applicant company was the owner of the four units. On 24 January 2008 an arbitral tribunal confirmed the settlement by a consent award.

7 . The applicant company applied to a local court to have an enforcement order made in relation to the arbitral tribunal ’ s award (case no. 6/47).

8 . On 22 April 2008 the Ivano-Frankivsk Regional Commercial Court refused to make an enforcement order, finding that the arbitral tribunal had exceeded its jurisdiction.

9 . On 22 July 2008 the Lviv Commercial Court of Appeal quashed that decision and ordered the first-instance court to make an enforcement order.

10 . On 23 September 2008 the Ivano-Frankivsk Regional Commercial Court made an enforcement order.

11 . On 9 April 2009 a private company, the Z. company, lodged an appeal on points of law with the Higher Commercial Court of Ukraine against the decision of 22 July 2008, claiming that the arbitral award had interfered with its property rights in respect of one of the above-mentioned four units (“the fourth unit”).

12 . On 29 May 2009 the applicant company ’ s title to the fourth unit was registered.

13 . On an unspecified date the applicant company submitted its reply to the Z. company ’ s cassation appeal. In its reply the applicant company argued, among other things, that in accordance with the Domestic Arbitration Act the decision of the appellate court concerning the enforcement of a domestic arbitral award was not open to appeal in cassation.

14 . On 30 June 2009 the Higher Commercial Court of Ukraine quashed the decisions of 22 April and 22 July 2008 and remitted the case to the first-instance court for reconsideration. It referred to Article 107 of the Code of Commercial Procedure, which provided that a person who was not a party to the proceedings could submit an appeal on points of law against a court decision that interfered with that person ’ s rights and obligations. On 13 August 2009 the Supreme Court of Ukraine refused to hear an appeal on points of law against this ruling.

15 . On 5 November 2009 the Ivano-Frankivsk Regional Commercial Court stayed the proceedings until the Lviv Commercial Court of Appeal had considered case no. 15/91 (see paragraphs 17 - 22 below).

16 . On 15 September 2011 the Ivano-Frankivsk Regional Commercial Court closed the proceedings upon the applicant company ’ s request.

17 . On 5 June 2009 the Z. company brought a claim against the applicant company and the other five private companies (see paragraph 4 above) before the Ivano-Frankivsk Regional Commercial Court, seeking to have the arbitral award partially set aside on the grounds that this award had interfered with its property rights in respect of the fourth unit and to have its title to the fourth unit established (case no. 15/91).

18 . On 11 September 2009 the Ivano-Frankivsk Regional Commercial Court rejected the claim in full. The court found that the Z. company had not had title to the fourth unit when the dispute had arisen and when the arbitral award had been made. In addition, it established that the Z. company ’ s claim was time-barred.

19 . The Z. company appealed against this decision to the Lviv Commercial Court of Appeal.

20 . According to the applicant company, on 9 November 2009 the other five private companies, as co-respondents in the case, submitted their joint reply to the Z. company ’ s appeal. They argued, inter alia , that the Lviv Commercial Court of Appeal lacked jurisdiction to hear the case.

21 . On 13 November 2009 the applicant company submitted its reply to the Z. company ’ s appeal, arguing that there were no grounds to quash the decision of the Ivano-Frankivsk Regional Commercial Court and that the Z. company had missed the time-limit for lodging an appeal.

22 . On 18 May 2010 the Lviv Commercial Court of Appeal quashed the decision of the first-instance court and set aside the arbitral award in the part relating to the applicant company ’ s title to the fourth unit, as it adversely affected the property rights of the Z. company and on the basis that the arbitral tribunal had exceeded its jurisdiction. The court referred to a decision of the Lviv Regional Court of Appeal of 22 January 2007, which had quashed a judgment of 23 May 2006 of the Lychakivskyy District Court of Lviv in which the private company RGK (see paragraph 4 above) had been found to be the owner of the fourth unit; it also referred to a decision of the Lychakivskyy District Court of Lviv of 28 October 2008 which, at the request of the Z. company, had reversed the enforcement of its judgment of 23 May 2006, thus restoring the Z. company ’ s title to the fourth unit. In addition, the Lviv Commercial Court of Appeal found that the Z. company had brought its claim within the statutory time-limit, as it had not learned about the arbitral award until 29 May 2009.

23 . On 26 May 2010 the applicant company appealed on points of law to the Higher Commercial Court of Ukraine. It argued that the Lviv Commercial Court of Appeal had misapplied the Domestic Arbitration Act in that, of its own motion, it had considered certain reasons for setting aside the arbitral award that had not been relied upon by the Z. company in its appeal. It further disagreed with the establishment of the facts by the appellate court and with the reasoning of its decision.

24 . On 15 June 2010 the company RGK also appealed on points of law. It argued, inter alia , that the Lviv Commercial Court of Appeal lacked jurisdiction to hear the case, as the decision of the Ivano-Frankivsk Regional Commercial Court was final. On an unspecified date TBS (see paragraph 4 above) appealed on points of law. The applicant company did not provide a copy of its appeal.

25 . On 14 September 2010 the Higher Commercial Court of Ukraine acknowledged in a decision that RGK, TBS and the applicant company had complained that the Lviv Commercial Court of Appeal had misapplied the Domestic Arbitration Act and had not established the circumstances of the case correctly. It upheld the findings of the Lviv Commercial Court of Appeal, confirming that the arbitral tribunal had exceeded its jurisdiction by deciding on the rights and obligations of a company which had not been a party to the arbitration proceedings and which had brought its claim within the statutory time-limit.

26 . On 25 October 2010 the applicant company, and on an unspecified date TBS and KA (see paragraph 4 above), appealed to the Lviv Commercial Court of Appeal against its decision of 18 May 2010 (see paragraph 22 above), applying to have the appeal proceedings reopened owing to newly discovered circumstances, namely the fact that the above ‑ mentioned decision of 28 October 2008 of the Lychakivskyy District Court of Lviv (see paragraph 22 above) had been quashed on 14 July 2010 by the Lviv Regional Court of Appeal following an appeal by the applicant company.

27 . On 15 November 2010 the Lviv Commercial Court of Appeal extended the time-limit for lodging the application and reopened the proceedings. On 20 January 2011 it dismissed the companies ’ claim, confirming that the arbitral tribunal had exceeded its jurisdiction and finding that, in any event, the reversal of the decision of 28 October 2008 had not influenced the outcome of the case because the reasoning of the 18 May 2010 judgment had also been based on the decision of the Lviv Regional Court of Appeal of 22 January 2007 by which the Z. company ’ s title to the fourth unit had been restored.

28 . On an unspecified date the companies RGK, KA and KM (see paragraph 4 above) appealed on points of law to the Higher Administrative Court of Ukraine. On 29 March 2011 that court upheld the appellate court ’ s decision of 20 January 2011.

29 . On 8 October 2012 the local Bureau of Technical Inventory wrote to the Z. company in response to its application for registration of title, informing it that the applicant company ’ s title to the fourth unit had been cancelled on the basis of the decisions of the Lviv Commercial Court of Appeal of 18 May 2010 in case no. 15/91, of the Higher Commercial Court of Ukraine of 14 September 2010, and of the Lviv Administrative Court of Appeal of 29 August 2012 (case no. 2a-8126/09/1370).

30 . On an unspecified date the Z. company registered its title to the fourth unit. On 30 April 2013 it sold the fourth unit to Ms K.

31 . Article 129 of the Constitution of Ukraine reads in its relevant parts as follows:

“...

The main principles of judicial proceedings are:

...

(8) ensuring the right to an appellate review of the case and, in circumstances prescribed by law, to a cassation appeal against a court decision ...”

32 . The relevant provisions of the Domestic Arbitration Act, as in force at the relevant time, read as follows.

Article 2 – Definitions

“... [A] competent court [means] a local court of general or commercial jurisdiction for the place where the case has been heard by an arbitral tribunal ...”

Article 51 – Challenging an arbitral award

“... [A]n arbitral award may be challenged by third parties and parties that were not involved in a case if the arbitral tribunal decided on an issue concerning their rights and obligations, ... before a competent court that has jurisdiction ...

Should a competent court set aside an arbitral award, the parties are not precluded from having recourse to arbitration except as provided in this Article ...”

Article 56 – Procedure for making an enforcement order

“... A ruling of a competent court refusing to make an enforcement order shall come into effect if no appeal has been lodged upon expiry of the time-limit for such appeal . Where an appeal is lodged , a ruling shall come into effect after the appellate court has heard the case ...

Within fifteen days after the competent court has given a ruling refusing to make an enforcement order, the parties shall have a right to appeal against this ruling. After a ruling refusing to make an enforcement order has entered into force, any dispute between the parties may be considered by a competent court in accordance with the general rules [on hearing cases].”

33 . The applicant company relied on case no. 35/156-07 dated 8 August 2007, in which the Higher Commercial Court of Ukraine allowed an appeal on points of law and quashed the decision of the appellate court, which in turn had quashed the decision of the first-instance court allowing an enforcement order to be made in respect of a domestic arbitral award. The Higher Commercial Court of Ukraine found that the appellate court had reached an erroneous conclusion in opening the proceedings and quashing the first-instance court ’ s decision, as neither the Code of Commercial Procedure nor the Domestic Arbitration Act provided for the possibility of appealing against a first-instance court ’ s decision allowing an enforcement order to be made. It was possible to appeal, however, against a first-instance court ’ s decision refusing an enforcement order.

34 . The Government cited the following three cases.

35 . On 8 September 2010, in case no. Т1/019-10, the Higher Commercial Court of Ukraine quashed the decisions of the lower courts granting leave for enforcement of an arbitral award, as it found that the arbitral tribunal had exceeded its jurisdiction to hear the case as the matter was not arbitrable.

36 . On 23 June 2009, in case no. P24/2577, the Higher Commercial Court of Ukraine upheld the decision of an appellate court to remit the case to the first-instance court for re-examination. The first-instance court refused to grant leave for enforcement of an arbitral award on the grounds that the claimant had not indicated under what circumstances intervention by the State Bailiff Service would be required. The Higher Commercial Court found that the debtor had not complied with its obligations under the arbitral award and thus enforcement of that award required certain actions on the part of the State Bailiff Service.

37 . On 28 December 2010, in case no. 38/83, the Higher Commercial Court of Ukraine upheld the findings of the lower courts and their decision to make an enforcement order, as none of the grounds for refusing enforcement, as provided for in Article 56 of the Domestic Arbitration Act, had been established.

38 . The Court further notes that the relevant excerpt from the document “Practice on Application by the Courts of the Domestic Arbitration Act”, issued by the Supreme Court of Ukraine on 11 February 2009, provides as follows:

“... Moreover, paragraph 8 of section 3 of Article 129 of the Constitution [ 254к/96-Ð’Ð )] provides a guarantee of appellate and cassation review of a court decision, unless otherwise provided by law.

An analysis of this norm indicates that an appellate or cassation appeal against a court decision is possible not only in cases provided by law, but also where there is no direct statutory prohibition on such an appeal. This conclusion is contained in a decision of the Constitutional Court of Ukraine of 11 December 2007 in case no. N 11-rp/2007 ... which sought to establish an official interpretation of paragraph 8 of Article 129, section 3, of the Constitution of Ukraine [in conjunction with] Article 383, section 2, of the Code of Criminal Procedure of Ukraine ...”

The said document contains, in particular, references to two cases on the setting-aside and enforcement of domestic arbitral awards, heard by the Supreme Court on 15 October 2008 and 28 January 2009 respectively.

THE LAW

39 . The applicant company complained that the Higher Commercial Court of Ukraine had exceeded its jurisdiction by hearing the appeal on points of law in case no. 6/47, and that the Lviv Commercial Court of Appeal and the Higher Commercial Court of Ukraine had exceeded their jurisdiction by hearing the appeal in case no. 15/91. The applicant company relied on Article 6 § 1 and Article 13 of the Convention.

40 . Article 6 § 1 of the Convention being applicable (see paragraph 52 below), the Court will examine the complaint solely under that provision, which is lex specialis in relation to Article 13 (see, mutatis mutandis , Lupeni Greek Catholic Parish and Others v. Romania [GC], no. 76943/11, § 65, 29 November 2016).

41 . Article 6 § 1 of the Convention r eads in its relevant parts as follows:

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

42 . The Government agreed that Article 6 of the Convention was applicable in the present case, as it related to rights which were clearly pecuniary in nature and stemmed from a contractual relationship between private parties, thus being “civil” rights within the meaning of Article 6 of the Convention.

43 . The Government further submitted that in case no. 15/91 (regarding the setting-aside of the arbitral award), the applicant company had failed to exhaust the available remedies in that it had not raised the objection that the Lviv Commercial Court of Appeal lacked jurisdiction.

44 . The Government argued that the domestic courts had heard the applicant company ’ s appeals in cases nos. 15/91 and 6/47 in accordance with the provisions of the Code of Commercial Procedure, which provided for the possibility of an appellate or a cassation review.

45 . In support of their statement that, at the relevant time, the Higher Commercial Court of Ukraine routinely heard cases related to the enforcement of domestic arbitral awards, the Government relied on three decisions of the Higher Commercial Court of Ukraine, namely case no. Т1/019-10 of 8 September 2010, case no. P24/2577 of 23 June 2009 and case no. 38/83 of 28 December 2010.

46 . With regard to proceedings on the setting-aside of a domestic arbitral award, the Government referred to Regent Company v. Ukraine (no. 773/03, § 54, 3 April 2008) and relied on the following statement by the Court in support of their position that the appellate courts had jurisdiction to set aside such awards:

“The proceedings before the Arbitration Tribunal were similar to those before an ordinary State civil or commercial court and due provision was made for appeals to the Kyiv City Court of Appeal (as applicable at the material time), which could review the award on the grounds specified in the 1994 Arbitration Act.”

47 . The applicant company submitted that Article 6 of the Convention was applicable to the present case, as in accordance with the provisions of the Domestic Arbitration Act the domestic courts were empowered to hear cases concerning the enforcement and setting-aside of arbitral awards.

48 . In response to the Government ’ s argument that it had not exhausted domestic remedies in case no. 15/91, the applicant company submitted that its co-defendants (namely the other five private companies) had raised the issue of a lack of jurisdiction in their written submissions and that consequently it had not wished to repeat the same arguments.

49 . The applicant company further argued that, at the material time, the Code of Commercial Procedure did not provide for a procedure for the making of enforcement orders in respect of domestic arbitral awards, nor did it prescribe a procedure for setting aside domestic arbitral awards. In contrast, the Domestic Arbitration Act provided for a supervisory review of arbitral awards by the local first-instance commercial courts and for an appellate review of cases concerning the enforcement of arbitral awards.

50 . The Court notes that the applicant company specified in its observations in reply to the Government that it did not wish to maintain its complaint related to the proceedings in case no. 15/91 in so far as it concerned the alleged lack of jurisdiction of the Higher Commercial Court of Ukraine. The Court will therefore deal with this complaint only in respect of the alleged lack of jurisdiction of the Lviv Commercial Court of Appeal.

51 . As regards the Government ’ s objection of non-exhaustion of domestic remedies in case no. 15/91, the Court observes that the applicant company ’ s co-defendant, RGK, raised before the Higher Commercial Court of Ukraine the issue of the alleged lack of jurisdiction of the Lviv Commercial Court of Appeal in its notice of appeal on points of law of 15 June 2010 (see paragraph 24 above). The Court reiterates that the purpose of Article 35 is to afford the Contracting States the opportunity of preventing or putting right the violations alleged against them before those allegations are submitted to the Court (see, for instance, KudÅ‚a v. Poland [GC], no. 30210/96, § 152, ECHR 2000 ‑ XI). The Court has frequently emphasised the need to apply the exhaustion rule with some degree of flexibility and without excessive formalism. It has further recognised that the rule of exhaustion is neither absolute nor capable of being applied automatically (see Gherghina v. Romania (dec.) [GC], no. 42219/07 , § 87, 9 July 2015 ). With this in mind, the Court finds it irrelevant that the above-mentioned jurisdiction-related complaint was raised by RGK rather than the applicant company itself. What is important is that the domestic courts were given an opportunity to prevent or put right the violations alleged. The Court, therefore, rejects the Government ’ s objection as to non-exhaustion of domestic remedies.

52 . The Court has already found in previous cases that Article 6 § 1 is applicable to proceedings concerning the enforcement and setting-aside of arbitral awards involving a foreign element or investment (see Regent Company , cited above, § § 55-56, and Stran Greek Refineries and Stratis Andreadis v. Greece , 9 December 1994, §§ 40-41, Series A no. 301 ‑ B). The present case concerns the enforcement and setting-aside of a domestic arbitral award. Since this dispute is of a purely pecuniary nature and involves private legal entities, the Court takes the view that, as accepted by the Government, Article 6 of the Convention is likewise applicable here.

53 . That being so, the Court reiterates that the phrase “established by law” covers not only the legal basis for the very existence of a “tribunal”, but also compliance by the tribunal with the particular rules that govern it (see Sokurenko and Strygun v. Ukraine , nos. 29458/04 and 29465/04, § 24, 20 July 2006, and Lavents v. Latvia , no. 58442/00, § 114, 28 November 2002). A tribunal which oversteps the limits of its jurisdiction cannot be considered a “tribunal established by law” within the meaning of Article 6 § 1 of the Convention (see, for instance, Sokurenko and Strygun , cited above, § 28).

54 . The Court further reiterates that it is not its task to substitute its own assessment for that of the domestic courts. It is primarily for the national authorities, notably the courts, to resolve problems of interpretation of domestic legislation (see Waite and Kennedy v. Germany [GC], no. 26083/94, § 54, ECHR 1999 ‑ I). Save in the event of evident arbitrariness, it is not the Court ’ s role to question the interpretation of the domestic law by the national courts (see Nejdet Åžahin and Perihan Åžahin v. Turkey [GC], no. 13279/05, § 50, 20 October 2011, and Lupeni Greek Catholic Parish and Others , cited above, § 90).

55 . In the present case, the domestic legislation, at the relevant time, did not lay down a specific procedure for the enforcement and setting-aside of domestic arbitral awards. Under the Domestic Arbitration Act, a first-instance court (whether civil or commercial) for the place of arbitration was “competent” to hear cases on the enforcement and setting-aside of such awards. The Act further provided that a decision to refuse the enforcement of an arbitral award could be appealed against. The Code of Commercial Procedure did not contain any provisions on the examination of such cases.

56 . It cannot therefore be said that the Lviv Commercial Court of Appeal or the Higher Commercial Court clearly had no jurisdiction to hear the cases in question. On the contrary, domestic practice allowed for the possibility of an appellate or cassation review in circumstances where the law did not directly prohibit such review (see paragraph 38 above).

57 . The Court further observes that the case-law adduced by the Government and that which is cited by the Supreme Court in its document “ Practice on Application by the Courts of the Domestic Arbitration Act” (paragraphs 34 - 38 above) indicate that, at the relevant time, the appellate and cassation review of cases concerning the setting-aside and enforcement of domestic arbitral awards took place as a matter of course.

58 . As for the case cited by the applicant company (case no. 35/156 ‑ 07 of the Higher Commercial Court of Ukraine – see paragraph 33 above), the Court notes that it was dated 8 August 2007, that is to say almost two years before the decision in question of 30 June 2009. That one case does not prove that a narrow interpretation of the Domestic Arbitration Act was the established practice of the domestic courts, nor does it prove that such practice, if it did exist, persisted in 2009.

59 . Consequently, in the absence of any evidence demonstrating that the applicant company ’ s reading of the relevant legal provisions corresponded to the domestic courts ’ practice, the Court finds that this complaint is unsubstantiated.

60 . The Court, therefore, concludes that this part of the application is manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 and 4 of the Convention.

61 . The applicant company, claiming that it had been unlawfully deprived of its possessions, also alleged a breach of 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.”

62 . The Government argued that the present complaint was incompatible ratione materiae with this provision of the Convention, as the property in question had not been a possession of the applicant company within the meaning of Article 1 of Protocol No. 1. In their submission, the domestic courts had repeatedly concluded that the applicant company did not have title to the fourth unit and the domestic judgments did not disclose any unlawfulness or arbitrariness in the domestic procedure.

63 . The applicant company contested the Government ’ s argument, stating that a title deed in respect of the fourth unit confirmed that the property was in its possession.

64 . The Court reiterates that Article 1 of Protocol No. 1 enshrines the right to the peaceful enjoyment of one ’ s possessions. Where a person actually possessed a property and was considered to be its owner for all legal purposes, that person can be said to have had a “possession” within the meaning of Article 1 of Protocol No. 1 (see Zhigalev v. Russia , no. 54891/00, § 131, 6 July 2006).

65 . The Court notes that the applicant company ’ s title to the fourth unit was registered on 29 May 2009. The property was then in its possession until October 2012, when its registration was cancelled on the basis of decisions of the domestic courts (see paragraphs 12 and 29 above). Therefore, it cannot be said that the applicant company did not have a “possession” within the meaning of Article 1 of Protocol No. 1 (see, mutatis mutandis , Vukušić v. Croatia , no. 69735/11, § 38, 31 May 2016, and Bilozir and Rizova v. Ukraine (dec.), no. 37863/05, 28 September 2010, where the Court found that the applicants had had “possessions” within the meaning of Article 1 of Protocol No. 1 even though the domestic courts had declared their title null and void ab initio ).

66 . The Court further notes that the fact that the State, through its judicial system, provided a forum for the determination of the applicant company ’ s rights and obligations does not automatically engage its responsibility under Article 1 of Protocol No. 1 (see, for instance, Zagrebačka banka d.d. v. Croatia , no. 39544/05, § 250, 12 December 2013, and Kahveci v. Turkey (dec.), no. 21903/05, § 25, 9 January 2018). The State may be held responsible for losses caused by such determinations if court decisions are not given in accordance with domestic law or if they are flawed by arbitrariness or manifest unreasonableness contrary to Article 1 of Protocol No. 1 (see Zagrebačka banka d.d. and Kahveci , both cited above).

67 . The Court r efers back to its finding under Article 6 § 1 of the Convention (see paragraph 60 above) that the applicant company ’ s complaint that the Lviv Commercial Court of Appeal and the Higher Commercial Court of Ukraine had exceeded their jurisdiction was manifestly ill-founded. In addition, there is nothing in the case file which would demonstrate that the domestic courts ’ decisions were arbitrary or manifestly unreasonable.

68 . It follows that this complaint is also manifestly ill-founded within the meaning of Article 35 § 3 of the Convention and must be rejected in accordance with Article 35 § 4 of the Convention.

For these reasons, the Court, unanimously,

Declares the application inadmissible.

Done in English and notified in writing on 4 March 2021 .

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Martina Keller Stéphanie Mourou-Vikström Deputy Registrar President