Communicated on 8 June 2016

THIRD SECTION

Applications nos . 43987/11 and 51910/15 Dragoljub VASILJEVIĆ against Serbia and Ljubomir DROBNJAKOVIĆ against Serbia lodged on 6 May 2011 and 1 October 2015 respectively

STATEMENT OF FACTS

1. The first applicant, Mr Dragoljub Vasiljević (application no. 43987/11), is a Serbian national who was born in 1938 and lives in Belgrade. He is represented before the Court by Mr V. Janković , a lawyer practising in Belgrade.

2. The second applicant, Mr Ljubomir Drobnjaković (application no. 51910/15), is a Serbian national who was born in 1957 and lives in Paraćin . He is represented before the Court by Mr N. Stanković and Ms A. Martinovi ć , lawyers practising in Belgrade.

A. The circumstances of the case

1. Introduction

3. Since 2001, the Serbian economy has undergone the same kind of transformation as has affected most post-communist economies. Central to this transformation was the adoption of the 2001 Privatisation Act. It provided a legal basis for State or socially-owned companies to be sold by the State Privatisation Agency ( Agencija za privatizaciju ) (the seller) to private buyers. The sale of the companies was organised through a public auction in which the highest bidder entered into a purchase contract with the seller. This has meant that companies incorporated in Serbia, the vast majority of which were previously owned and controlled by the State, have been gradually transformed into privately owned enterprises.

4. The terms of the purchase contracts appear to have been the same for all successful bidders. Among other provisions, they contained a clause according to which a buyer who fails to pay the agreed purchase price loses the right to a refund of the deposit paid for the participation at the auction, as well as the rights and claims based on the contract at hand.

5. In 2005, the 2001 Privatisation Act was amended by the inclusion of Article 41a which provided, among other things, that there would be no reimbursement of funds already paid by a buyer if a contract was terminated owing to the buyer ’ s failure to fulfil his or her contractual obligations.

2. As regards the first applicant

6. In 2002 the applicant bought seventy percent of the shares in Sedmi Juli ‑ Mala Plana , which had been a socially owned company. The purchase price was fixed at 196,000,000 Serbian dinars (RSD), payable in six annual instalments.

7. On 30 December 2002 the applicant paid the first instalment of RSD 32,666,666. The instalment included a deposit of RSD 7,508,000, previously paid for participating in the public auction.

8. The applicant failed to pay the second instalment of the purchase price, which had been due on 30 December 2003. As a consequence, the seller lodged a civil claim for the termination of the purchase contract, relying on breach by the buyer of his contractual obligation.

9. On 27 October 2005 the Belgrade Commercial Court delivered a decision terminating the contract. The decision became final on 23 January 2006.

10. Shortly after, the applicant lodged a civil claim with the Belgrade Commercial Court, demanding repayment of the instalment he had paid, owing to the termination of the contract.

11. On 7 April 2007 the Belgrade Commercial Court ruled against the applicant. Firstly, the court found that the 2005 amendments of the 2001 Privatisation Act had been applicable in the applicant ’ s case, rejecting the applicant ’ s contention that they could not be applied retrospectively. It then referred to Article 41a of the amended Act, which stated that instalments that had already been paid were not refundable when a contract had been terminated because of the buyer ’ s failure to pay the entire purchase price. Since that had been the situation in the applicant ’ s case, the court rejected his claim.

12. On 22 April 2010 the Appellate Commercial Court in Belgrade confirmed that decision and its reasoning.

13. On 16 September 2010, the Constitutional Court declared a constitutional appeal by the applicant as inadmissible. It held that his appeal, substantially the same as the one lodged with the Court, was manifestly ill-founded and of a fourth-instance nature.

3. As regards the second applicant

14. In 2003 the applicant bought seventy percent of the shares in Kompresor-Ćuprija , a socially owned company. The purchase price was fixed at RSD 13,600,000, payable in six annual instalments.

15. On 28 March 2003 the applicant paid the first instalment of RSD 4,719,310.10. The instalment included a deposit of RSD 1,737,000, previously paid for participating in the public auction. On 28 March 2004, or around that date, the applicant paid the se cond instalment of 35,066 euros (EUR).

16. The applicant failed to pay the third instalment of the purchase price, which had been due on 28 March 2005. On 5 September 2005, the seller unilaterally terminated the purchase contract because of the breach by the applicant of his contractual obligation.

17. On 16 September 2009, the applicant lodged a civil claim with the Belgrade Commercial Court, demanding the reimbursement of the instalments he had paid.

18. On 18 February 2010 the Belgrade Commercial Court ruled against the applicant, giving the same reasons as in the case of the first applicant. The court, however, added that Clause 3.2 of the purchase contract itself had limited the applicant ’ s right to the reimbursement of instalments. The relevant part of the purchase contract provides:

“If the Buyer does not pay the purchase price, in accordance with Clause 4, he loses the right to a refund of the deposit, and to the rights and claims based on this Contract; he shall also lose the right to participate in future auctions.”

The court interpreted this clause as excluding the reimbursement of instalments where there had been breach of contract. It therefore based its decision both on the retrospective application of the amended 2001 Privatisation Act and on its interpretation of the contractual arrangement between the applicant and the seller.

19. On 6 June 2012 the Appellate Commercial Court in Belgrade upheld that decision and its reasoning.

20. On 11 March 2015, the Constitutional Court dismissed a constitutional appeal by the applicant as unfounded. Firstly, it held that the reasoning of the lower courts had not been arbitrary and had been based on a constitutionally acceptable interpretation of the existing legal provisions. It thus rejected the applicant ’ s complaint under Article 6 of the Convention and under the equivalent provision of the Serbian Constitution (Article 32). With regard to the applicant ’ s complaint under Article 1 of Protocol No. 1 to the Convention and the equivalent provision of the Constitution (Article 58), the Constitutional Court confirmed the lawfulness of the lower courts ’ impugned decisions, without examining the legitimacy and proportionality of retaining the instalments.

B. Relevant domestic law

21. The Constitution ( Ustav ), published in the Official Gazette ( Službeni glasnik ) of the Republic of Serbia (“the OG RS”), no. 98/06, came into force on 8 November 2006 and provides, in so far as relevant:

Article 32

“Everyone shall have the right to a public hearing within a reasonable time before an independent and impartial tribunal established by law, which shall pronounce judgment on their rights and obligations...”

Article 58

“Peaceful tenure of personal property and other property rights acquired by law shall be guaranteed.

A property right may only be revoked or restricted in the public interest, as established by law, with compensation which cannot be less than the market value.

Restrictions on the manner of using property may be established by law.

Any seizure of or restriction on property in order to collect taxes and other levies or fines shall only be permitted in accordance with the law.”

22. The 2001 Privatisation Act, published in the OG RS 38/01 and 18/03, in its relevant part provided as follows:

Article 41a

“If the sale price is to be paid in several instalments, and the buyer does not pay an instalment on time, the contract shall be terminated and the capital which was subject to the sale will be transferred to the Stocks Fund.”

23. Amendments to the 2001 Privatisation Act ( Zakon o izmenama i dopunama Zakona o privatizaciji ), published in the OG RS 45/05, in its relevant part provided as follows:

Article 19

“Article 41a shall be amended as follows:

...

Where the contract of sale is terminated ... owing to the failure of the buyer to fulfil his contractual obligations, the buyer ... shall not be entitled to a refund of the amount paid towards the agreed price, in order to protect the general public interest.”

24. The Obligations Act ( Zakon o obligacionim odnosima ) , published in the Official Gazette ( Službeni list ) of the Socialist Federal Republic of Yugoslavia nos. 29⁄78, 39⁄85, 45⁄89, 57⁄89 and the Official Gazette of the Federal Republic of Yugoslavia no. 31⁄93, in its relevant part provides as follows:

Article 132

After a contract has been repudiated both parties shall be released from their obligations, except for the obligation to compensate for subsequent loss.

A party performing a contract entirely or partially shall be entitled to the restitution of what he has given.

Should both parties be entitled to claim restitution of what has been given, mutual restitution shall be performed under the rules of the performance of bilateral contracts.

Each party shall owe compensation to the other for the benefits enjoyed from that which he is to restitute or pay compensation for.

A party paying back money shall be obliged to pay interest on arrears from the day of receiving the payment.

COMPLAINTS

The applicants, relying on Article 1 of Protocol No. 1 to the Convention, complain that the retrospective application of a provision to deprive the buyer of a State or socially owned company of a refund of the purchase price when the purchase contract has been terminated due to a breach by the buyer of contractual obligations violated their right to the peaceful enjoyment of their property. The second applicant, relying on Article 6 of the Convention, also complains that the decision of the domestic courts to apply this provision, as well as their interpretation of the purchase contract itself, was arbitrary.

QUESTIONS TO THE PARTIES

1. Did the operation of the 2005 legislation on the proceedings before the domestic courts interfere with the applicants ’ peaceful enjoyment of their possessions, within the meaning of Article 1 of Protocol No. 1 to the Convention?

If so, was that interference compatible with that provision?

The Government are requested to submit relevant domestic case-law, including the case-law of the Supreme Court and the Constitutional Court, which explains the rationale for and operation of Article 41a of the 2001Privatisation Act, as amended in 2005.

2. Was the introduction of the 2005 legislation an attempt to influence the outcome of proceedings in which successful auction buyers failed to pay the full purchase price (see Stran Greek Refineries and Stratis Andreadis v. Greece , 9 December 1994, §§ 49 and 74, Series A no. 301 ‑ B)?

3. Having regard to the reasons given by the Belgrade Commercial Court and Commercial Appellate Court for their decisions of 18 February 2010 and 6 June 2012 did the second applicant have a fair hearing in the determination of his civil rights and obligations, in accordance with Article 6 § 1 of the Convention ( De Moor v. Belgium , 23 June 1994, § 55 in fine , Series A no. 292 ‑ A)?

The Government are requested to submit relevant domestic case-law regarding the interpretation of Clause 3.2 of the purchase contracts concluded in the process of the privatisation of the socially-owned companies, or about clauses which are equivalent in their wording to Clause 3.2 of the contract concluded between the second applicant and the Privatisation Agency ( Agencija za privatizaciju ).