117 6th meeting – 10 July 2013

Appendix 9

( Item H46-1 )

Resolution CM/ ResDH (2013) 140

Five cases against Czech Republic

Execution of the judgments of the European Court of Human Rights

( Kohlhofer and Minarik , Application No. 32921/03, judgment of 15 October 2009, final on 1 March 2010

Minarik , Application No. 46677/06, judgment of 10 February 2011, final on 10 May 2011

Solaris s.r.o and others, application No. 8992/07, judgment of 13 October 2011, final on 13 October 2011

Minarik and others, Application No. 10583/09, judgment of 13 October 2011, final on 13 October 2011

Kohlhofer , Application No. 22915/07, judgment of 13 October 2011, final 13 October 2011)

(Adopted by the Committee of Ministers on 10 July 2013 at the 1176th meeting of the Ministers ’ Deputies)

The Committee of Ministers, under the terms of Article 46, paragraph 2, of the Convention for the Protection of Human Rights and Fundamental Freedoms, which provides that the Committee supervises the execution of final judgments of the European Court of Human Rights (hereinafter “the Convention” and “the Court”),

Having regard to the final judgments transmitted by the Court to the Committee in the above cases and to the violations established;

Recalling the respondent State ’ s obligation under Article 46, paragraph 1, of the Convention to abide by all final judgments in cases to which it is party and that this obligation entails, over and above the payment of any sums awarded by the Court, the adoption by the authorities of the respondent State, where required:

- of individual measures to put an end to violations established and erase their consequences so as to achieve as far as possible restitutio in integrum ; and

- of general measures preventing similar violations;

Having invited the government of the respondent State to inform the Committee of the measures taken to comply with its above-mentioned obligation;

Having examined the action report provided by the government indicating the measures adopted in order to give effect to the judgments, including the information provided regarding the payment of the just satisfaction awarded by the Court (see document DH-DD(2013)49 );

Having satisfied itself that all the measures required by Article 46, paragraph 1, have been adopted,

DECLARES that it has exercised its functions under Article 46, paragraph 2, of the Convention in these cases and

DECIDES to close the examination thereof.

Execution of the judgments of the European Court of Human Rights

in cases Nos. 32921/03, 28464/04 and 5344/05 – Kohlhofer and Minarik and

No. 46677/06 – Minarik v. the Czech Republic (first group), and

in cases Nos. 8992/07 – Solaris, s.r.o ., and others, 10583/09 – Minarik and others

and 22915/07 – Kohlhofer v. the Czech Republic (second group)

Action Report submitted by the Czech Government on 3 December 2012

In its judgments delivered on 15 October 2009 and 10 February 2011, respectively, with regard to the first group of cases, the Court found a violation of Article 6 § 1 of the Convention stemming in particular from the limitation of the applicants ’ access to a court that would assess the validity of general meetings and resolutions taken at those meetings with the aim of squeezing out minority shareholders, including the applicants, from several companies.

In its judgment of 13 October 2011, the Court has established in respect of the second group of cases a similar violation of Article 6 § 1 of the Convention as in its previous judgments referred to above.

The present report is intended to inform the Committee of Ministers of individual and general measures of execution with regard to the judgments. [1]

I. INDIVIDUAL MEASURES

In all these cases, the transfer of property has been valid and final under Czech law for several years and this fact has been relied on in subsequent complex legal transactions. Therefore, any measures aimed at invalidation of the transfer of assets would imply a disproportionate interference with third persons ’ rights acquired in good faith.

Taking this into account, the g overnment believe s that apart from due payment of the just satisfaction awarded by the Court, introduction of other individual measures is unnecessary and would even be unreasonable in the present cases.

II. GENERAL MEASURES

It sh ould be noted that in the above- mentioned judgments, the Court did not explicitly state what the content of legislation or the approach of the domestic courts should have been in order to comply with Article 6 § 1 of the Convention.

The g overnment ha s been compelled by the Court to seek a solution that would strike a balance between the competing interests of the minority shareholders, other entities involved, and the broader public interest (in particular, the stability of commercial markets and trade and economic development), the legitimacy of which was acknowledged in the Court ’ s judgments.

Measures, described infra, which have been introduced, concern both the relevant legislation and to the case law of national courts.

A. AMENDMENT OF RELEVANT LEGISLATION

The violation of the Convention established by the Court originated , inter alia , from the domestic legislation. [2]

It should be clarified at the outset that the regulation of transfer of assets to the majority shareholder (which has been subject to the Court ’ s scrutiny in the judgments at hand) was erased f rom the Commercial Code in 2008 and moved to a newly introduced Act No. 125/2008 (the “Companies Transformations Act”). Admittedly, these new provisions were based on very similar principles as the former ones and did not entail changes that would significantly alter the position of minority shareholders, considered unsatisfactory in certain aspects by the Court found.

In 2011, the Ministry of Justice prepared an amendment of the relevant legislation, which became Act No. 355/2011 and entered into force on 1 January 2012 (the “Act”). The Act inter alia explicitly reflects the Kohlhofer and Minarik judgment and introduces measures intended to remedy the previous legislative shortcomings identified by the Court.

In particular, Section 131 (3) (c) of the Commercial Code, i.e. one of the provisions that were at the centre of the Court ’ s criticism, [3] has been abolished.

Furthermore, Sections 57(2) and (3) of the Companies Transformations Act [4] have been modified in order to provide for a possibility to continue the proceedings to set aside a decision on transformation of the company (such as transfer of assets to the majority shareholder) after the entry of the transformation into the Commercial Register. This applies on condition that a minority shareholder changes the object of his motion to seek a determination whether the transformation project (e.g. transfer of assets) or the decision approving it are contrary to the legislation or internal statutes of the company. [5]

Upon a court ’ s decision declaring an inconsistency of such transformation project or of the corresponding decision with legislation or the company ’ s internal statutes, the minority shareholders are entitled to claim damages or a just satisfaction for non-pecuniary damage.

Therefore, even after the entry of the transformation into the Commercial Register, minority shareholders will have access to court to contest the general meeting ’ s resolution that has deprived them of their shares. Despite not being able to achieve quashing of the resolution, the merits of their claims, in particular the question whether the resolution had been adopted in breach of law or the company ’ s internal statutes, will be heard and finally decided in adversarial proceedings before the court.

Such solution allows for striking a fair balance between the competing interests of the minority shareholders on the one hand and those of the majority shareholder, the company and the broader public interest on the other hand.

B. REFLECTION OF THE JUDGMENTS IN DOMESTIC CASE LAW

The principles expressed by the Court in the above judgments had found their reflection in the case law of Czech courts, in particular the Constitutional Court and the Supreme Court, already in 2011. [6] This fact illustrates that the Czech courts had not passively awaited legislative changes but instead have by their practice contributed to the introduction of the principles contained in the Court ’ s judgments into the Czech law.

III. CONCLUSION

The Government of the Czech Republic conclude s in respect of implementation of the judgments in Kohlhofer and Minarik v. the Czech Republic, Minarik v. the Czech Republic, Solaris, s.r.o . and others v. the Czech Republic, Minarik and others v. the Czech Republic and Kohlhofer v. the Czech Republic that all necessary measures of execution have been taken.

[1] The issue of payment of just satisfaction has been dealt with separately.

[2] See, in particular, § 93 of the Kohlhofer and Minarik judgment: “The Court finds that the application of [Section] 131(3)(c) of the CC in the case constituted a limitation on the applicants’ access to court as it prevented them from having a court determination on merits of the legal issue at stake, namely whether the resolution had been adopted contrary to law.”

[3] See Act No. 126/2008 which removed former Sections 220a to 220zb from the Commercial Code.

[4] The original version of Section 57 corresponds to former Section 220h of the Commercial Code in the version relevant for the Kohlhofer and Minarik and Minarik judgments.

[5] i.e. with a Memorandum or Deed of Association or Articles of Association (“ společenská smlouva , zakla - datelská smlouva , zakladatelská listina , stanovy ”).

[6] The Constitutional Court’s findings of 3 March 2011, No. III. ÚS 2671/09, and of 21 March 2011, No. I. ÚS 1768/09, the Supreme Court’s resolution of 30 March 2011, No. 29 Cdo 1048/2008.