Published on 7 June 2021

FOURTH SECTION

Application no. 73081/16 Artashes HOVHANNISYAN against Armenia lodged on 28 November 2016 communicated on 21 May 2021

STATEMENT OF FACTS

The applicant, Mr Artashes Hovhannisyan, is an Armenian national who was born in 1952 and lives in Yerevan. He is represented before the Court by Mr G. Grigoryan, a lawyer practising in Yerevan.

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

At the material time the applicant was a shareholder of Ameriabank (“the bank”), a joint-stock company incorporated under Armenian law which has its registered office in Yerevan. The applicant held five shares with a nominal value of 200,000 Armenian drams in total (approximately 400 euros at the relevant time). The remaining shares were owned by other individuals.

On 24 July 2012 the Central Bank of Armenia (“the CBA ”) issued Official Clarification no. 8, enabling all the commercial banks operating in Armenia to consolidate and redeem their shares. The CBA clarified that the implementation of share consolidation projects and the resulting fractional share redemption operations required its approval based on a case-by-case assessment.

On 24 September 2012 the bank ’ s board of directors proposed to the bank ’ s general extraordinary meeting of shareholders an agenda to consolidate and redeem, inter alia , the applicant ’ s shares.

On 15 October 2012 the bank ’ s general meeting of shareholders adopted a resolution whereby it decided to perform a consolidation of the bank ’ s shares. As a result, the nominal value shares held by the applicant became fractional shares subject to redemption at market value. According to the applicant, he was not notified about that meeting.

On an unspecified date the CBA approved the transaction.

Upon the bank ’ s request, on 17 December 2012, the Central Depositary registered the redemption of the applicant ’ s shares. As a result, the shares registered in the applicant ’ s name were cancelled and removed from the central registration list.

According to the applicant, he had not been provided with any information concerning the consolidation transaction and the resulting share redemption operation and he had learned about it only in December 2012 from the bank ’ s website.

It appears that on 24 June 2013 the CBA registered the charter capital changes of the bank.

On 25 April 2014 the applicant submitted a written request to the CBA seeking to obtain clarification regarding the scope of its supervision of the share consolidation transaction and the resulting redemption operation. He further inquired whether the CBA had in fact adopted any decision approving the consolidation transaction and the resulting redemption operation.

On 15 May 2014 the head of the CBA ’ s Legal Department informed the applicant that the CBA ’ s supervisory role towards consolidation transactions and share redemption operations had been set out in the Official Clarification no. 8 issued by the Board of the CBA on 24 July 2012. He further stated that the charter capital changes of the bank had been registered on the basis of that clarification and the relevant domestic legislation.

On 4 July 2014 the applicant lodged a claim with the Kentron and Nork‑Marash District Court of Yerevan (“the District Court”) against the bank seeking to annul the resolution of 15 October 2012 on consolidation and the resulting redemption of his shares.

In his claim, the applicant submitted, inter alia , that the resolution of 15 October 2012 was unlawful since it had been adopted in breach of Article 37 of the Law on Banks and Banking Activity. In particular, the said provision prohibited in general terms share redemption operations carried out by commercial banks. Consequently, the Central Depositary ’ s decision of 17 December 2012 registering the redemption of the applicant ’ s shares and the CBA ’ s decision of 24 June 2013 registering the bank ’ s charter capital changes as a result of the consolidation transaction were also to be declared null and void.

The bank objected to the applicant ’ s claim, arguing, inter alia , that the entire consolidation procedure and the resulting redemption of the applicant ’ s shares had been carried out in accordance with the guiding principles established by the Official Clarification no. 8.

On an unspecified date the applicant lodged an application with the District Court seeking to have the CBA and the Central Depositary involved in the proceedings.

At the hearing of 21 July 2015 the District Court granted the applicant ’ s application by involving the CBA and the Central Depository as third parties.

At the hearing of 29 September 2015 the applicant requested the CBA ’ s representative to disclose the copy of the document approving the consolidation transaction of 15 October 2012 and the resulting share redemption operation. In his submission, that document and in particular the grounds invoked therein had constituted the basis for the deprivation of his property (the shares).

It appears that the CBA ’ s representative explicitly refused the applicant ’ s request, stating that the document in question constituted “restricted” information and was thereby covered by banking secrecy rules.

During the same hearing the applicant attempted to question the representative of the CBA about the content of the document at issue (the approval) and the grounds for issuing it. However, the presiding judge concluded the hearing as it was the end of the working day. According to the applicant, he did not have a further opportunity to question the representative of the CBA since the latter failed to appear in court afterwards.

On 29 September 2015 the applicant lodged an application with the District Court requesting it to oblige the CBA to disclose the content of the document on the approval of the share consolidation transaction as well as providing him access to the case-file relating to the disputed consolidation transaction. The court rejected this application. It held that there was no possibility under the Code of Civil Procedure to make such a request at the final stage of the proceedings.

On 13 November 2015 the District Court dismissed the applicant ’ s claim. It held that the bank ’ s resolution of 15 October 2012 to carry out share consolidation and the resulting share redemption operation had been in compliance with the guiding principles set out in Official Clarification no. 8 issued by the Board of the CBA on 24 July 2012. The District Court relied, inter alia , on the CBA ’ s approval of the consolidation transaction and the resulting redemption operation.

The applicant lodged an appeal, reiterating his arguments submitted before the District Court. He argued that his right to an adversarial trial and the principle of equality of arms had not been respected owing to the fact that he had been deprived of the opportunity to examine the document relating to the CBA ’ s approval of the consolidation transaction and the resulting redemption of his shares. As a result, he was denied the possibility of examining the legal and factual grounds substantiating the deprivation of his shares and comment on the content of that document. He therefore asked the court to assess the lawfulness of that approval.

On 31 March 2016 the Civil Court of Appeal dismissed the applicant ’ s appeal and upheld the judgment of the District Court in full, endorsing the reasons given therein. It did not address the applicant ’ s complaints concerning his inability to examine the document at issue and to comment on it.

The applicant lodged an appeal on points of law raising similar arguments.

On 25 May 2016 the Court of Cassation declared the applicant ’ s appeal on points of law inadmissible for lack of merit. A copy of that decision was served on the applicant on 9 June 2016.

According to Article 36 § 6, the holders of voting shares of the bank (participants) have the right to claim the determination of the repurchase price of the participation or of their shares (equity, stake), or of repurchase of their part, if:

( a ) a decision has been adopted on the reorganisation of the bank, suspending of preference or signing a major transaction and the given participants have voted against the reorganisation of the bank, suspending of preference or signing a major transaction or have not participated therein;

( b ) the rights of the given participants have been limited by some amendments or changes to the charter, or by an adoption of a new charter, and the participants have voted against or have not participated therein.

According to Article 37 § 1, discounting, purchase or acquisition in another form of compensation, acceptance in form of collateral for a loan of own shares by the bank shall be prohibited, except for the cases set forth in point 6 of Article 36 of the said Law when the bank repurchases its own shares (equity, stakes), as well as in the circumstances where acceptance of the shares in the form of collateral or acquisition of the shares is necessary for the prevention of possible losses that may be caused by non-fulfilment or undue fulfilment of the previously assumed obligations towards the bank. The bank shall dispose of the shares within a two-month period after it has acquired the property rights over such shares.

The relevant parts of the Official Clarification no. 8 provide the following:

“1. Banks that are joint-stock companies as well as insurance companies ... are authorised to consolidate their shares and carry out a redemption of the resulting fractional shares upon the receipt of a supervisory approval of the Central Bank for the implementation of these operations.

2. The Central Bank shall provide its position on the consolidation and the resulting redemption of the fractional shares, as well as other corporate actions necessary to protect the rights and/or legitimate interests of shareholders, based on the specific facts of each case.”

COMPLAINTS

1. The applicant complains under Article 6 of the Convention of the unfairness of the proceedings he brought to challenge the bank ’ s resolution of 15 October 2012 on share consolidation and the resulting redemption of his shares. He argues, in particular, that the domestic courts refused him access to the document concerning the approval by the Central Bank of Armenia of the share consolidation transaction and the resulting share redemption operation. As a result, he was deprived of the opportunity to effectively challenge the evidence which had a decisive role for the outcome of the proceedings.

2. The applicant complains under Article 1 of Protocol No. 1 to the Convention that he was unlawfully deprived of his shares and that he was deprived of a reasonable opportunity of effectively challenging the measures interfering with his property rights before the domestic courts.

QUESTIONS TO THE PARTIES

1. Did the applicant have a fair hearing in the determination of his civil rights and obligations, in accordance with Article 6 § 1 of the Convention?

In particular, were the principles of adversarial hearing and equality of arms guaranteed by that provision respected in the proceedings before the civil courts having regard to the non-disclosure of the document on the approval by the Central Bank of Armenia of the share consolidation transaction and the resulting share redemption operation (see Regner v. the Czech Republic [GC], no. 35289/11, § 146, 19 September 2017)?

2. Is Article 1 of Protocol No. 1 applicable in the circumstances of the present case?

In the affirmative, was the applicant afforded access to judicial procedures that offered the necessary procedural guarantees for effectively challenging the measures interfering with his rights guaranteed by that provision (see Sovtransavto Holding v. Ukraine , no. 48553/99, § 96, ECHR 2002‑VII; Chadzitaskos and Franta v. the Czech Republic , nos. 7398/07 and 3 others, § 48, 27 September 2012; and S.L. and J.L. v. Croatia , no. 13712/11, § 61, 7 May 2015?