Information Note on the Court’s case-law No. 66

July 2004

Bäck v. Finland - 37598/97

Judgment 20.7.2004 [Section IV]

Article 1 of Protocol No. 1

Article 1 para . 1 of Protocol No. 1

Peaceful enjoyment of possessions

Virtual extinction of guarantor’s claim as a result of court-approved debt adjustment: no violation

Facts : The applicant agreed by contract to guarantee a bank loan in favour of another person. When this person was unable to meet the reimbursement conditions, the applicant had to pay off part of the bank loan for which was guarantor. The debtor later applied for debt adjustment, in accordance with an Act of 1993 on the Adjustment of Debts of a Private Individual. The applicant opposed this request, as it could adversely affect his claim against the debtor; in the alternative, he requested that the adjustment be postponed. The District Court, considering that the debtor’s solvency had been significantly weakened due to his previous unemployment and unsuccessful business activities, granted debt adjustment and adopted a payment schedule. Although the applicant’s claim was reduced by the debt adjustment, the court found that such a reduction was possible under the 1993 Act, and hence, that the payment schedule could not be postponed. The decision was upheld by the Court of Appeal.

Law : Article 1 of Protocol No. 1 – It was not disputed that the applicant’s claim against the debtor constituted a “possession”, based on his right of recourse as guarantor, and that the 1993 Act had interfered with his property rights. As it was not possible to examine the interference solely under the angle of “deprivation” or “control of property”, the Court examined it under the general rule of “peaceful enjoyment of property”. The legislative framework in place which permitted debtors the possibility of seeking debt adjustment could be seen to be in the “public interest”: it served legitimate social and economic policies and was not therefore ipso facto an infringement of Article 1 of Protocol No. 1. Whilst the debt adjustment had caused the applicant significant detriment in monetary terms, by entering the guarantee agreement the applicant had taken upon himself a risk of financial loss. The District Court had heard the applicant and there was no indication that it had arbitrarily failed to consider his arguments. The proceedings as a whole had afforded the applicant the opportunity to put his case to the authorities. Moreover, the applicant’s claim was already precarious prior to the debt adjustment. In such circumstances, the burden imposed on the applicant by the 1993 Act could not be regarded as excessive.

Conclusion : no violation.

© Council of Europe/European Court of Human Rights This summary by the Registry does not bind the Court.

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