Published on 13 December 2021

THIRD SECTION

Application no. 56677/19 PAO PROMSVYAZBANK against Russia lodged on 25 October 2019 communicated on 23 November 2021

STATEMENT OF FACTS

1. The applicant, PAO Promsvyazbank (“the applicant bank”), is a Russian bank, established in 1995 in Moscow.

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

3 . On 11 December 2017 the Bank of Russia (“CBR”), following the inspection of the applicant bank, issued an order obliging it, inter alia , to reclassify outstanding loans and to make additional reserves in the amount of 104.6 bn. Russian roubles (RUB) (about 1.5 bn. euros (EUR)) until 13 December 2017 (“Order No. 1”).

4. The applicant bank fulfilled the requirements set up by the order using its own funds (capital), which resulted in 70 per cent decrease of the applicant bank’s own funds.

5 . On 15 December 2017 the CBR, by another order, following the decrease of the applicant bank’s own funds, placed it under temporary administration (“Order No. 2”).

6 . On 12 January 2018 the CBR, having established the negative value of the applicant bank’s own funds (capital), issued an order on decrease of its share capital to RUB 1 (EUR 0,014) (“Order No. 3”).

7. On 14 February 2018 the applicant bank lodged a claim with the Commercial Court of Moscow (“the commercial court”) seeking to invalidate the orders of the CBR (paragraphs 3, 5 and 6 above). It stated that the Order No. 1 had been disproportionate in terms of time-limit and the amount of required reserves and therefore inherently unfeasible to execute; the Order No. 2 had represented a sequence for the 1st one and therefore illegal as well; the Order No. 3 had been taken following the activities of the temporary administration and not of the applicant bank itself; under the former governance the applicant bank’s own funds (capital) had never had negative value. The applicant bank was represented by Mr Dmitry Ananyev, a former chairman of board, discharged after placement of the bank under temporary administration.

8. On 6 July 2018 the commercial court rejected the claim of the applicant bank without examination in respect of Orders No. 1 and No. 3 stating that in accordance with the law (paragraph 15 below), the former executive body of the bank was entitled to challenge solely the decision on the placement of the bank under temporary administration, and dismissed the remainder of the claim as unsubstantiated considering that the Order No. 2 had been issued in accordance with the applicable regulations.

9. The applicant bank challenged the judgment before the 9 th Commercial Court of Appeal, Commercial Court of Moscow Circuit as first cassation and the Supreme Court of Russia as second cassation, unsuccessfully .

10. The applicant bank submitted a complaint to the Constitutional Court of the Russian Federation seeking to declare the provisions of Articles 189.35 and 189.50 of the Bankruptcy (Insolvency) Act unconstitutional, in the part precluding the former executive body to challenge the orders of the Central Bank of Russia related to reclassification of loans and decrease of share capital. On 25 April 2019 the Constitutional Court rejected the complaint without examination stating that Mr Ananyev had not been entitled anymore to act on behalf of the applicant bank.

11. Article 46 of the Constitution is exposed in the judgment Blyudik v. Russia , no. 46401/08, § 21, 25 June 2019.

12. Article 198 (paragraph 1) of the Code of Commercial Procedure entitles natural and legal persons to submit a claim to a commercial court seeking to invalidate individual acts, declare illegal decisions and actions (inaction) of the bodies performing public functions, if they deem that such acts, actions (inaction) do not correspond with the law and violate their rights and legal interests in the domain of entrepreneurial activity.

13. Article 73 of Federal Law 86-FZ of 10 July 2002 “On the Central Bank of the Russian Federation (Bank of Russia)” provides that the Bank of Russia conducts inspections of credit institutions, transfers to them obligatory orders on elimination of violations of federal laws and legal acts of the Bank of Russia detected in their activities, and applies sanctions in respect of perpetrators.

14. Bankruptcy (Insolvency) Act (Federal Law 127-FZ of 26 October 2002) provides as follows. According to subparagraph 2 of paragraph 1 of Article 189.26, the Bank of Russia is entitled to place a credit institution under temporary administration in case of decrease of its own funds (capital) for more than 30 per cent in comparison with its maximum value reached within the last twelve months, upon simultaneous violation of one of the statutory ratios established by the Bank of Russia.

15 . According to paragraph 4 of Article 189.35, former executive body of a credit institution is empowered to represent it in a commercial court while challenging the Bank of Russia’s decision on placement of the credit institution under temporary administration.

16. According to paragraph 1 of Article 189.50, during the temporary administration the Bank of Russia is entitled to decide on decrease of the share capital of a bank to the amount of its own funds (capital) and, if the bank’s own funds (capital) has negative value, to one rouble.

COMPLAINT

The applicant bank complains under Article 6 § 1 of the Convention that it had no access to court to challenge the orders of the Bank of Russia obliging it to form additional reserves and decreasing its share capital to one rouble and under Article 1 of Protocol No. 1 to the Convention about loss of control over its business caused by placement under temporary administration.

QUESTIONS TO THE PARTIES

1. Did the applicant bank, represented by its former chairman of the board, have access to court, as required by Article 6 § 1 of the Convention, given that the commercial court did not examine its claim in respect of two out of three orders issued by the Bank of Russia (see, mutatis mutandis , Credit and Industrial Bank v. the Czech Republic , no. 29010/95, §§ 64-73, ECHR 2003 ‑ XI (extracts); Capital Bank AD v. Bulgaria , no. 49429/99, §§ 98-119, ECHR 2005 ‑ XII (extracts); and Feldman and Slovyanskyy Bank v. Ukraine , no. 42758/05, §§ 38-46, 21 December 2017)?

In particular, were the orders of the Bank of Russia on reclassification of outstanding loans and making of additional reserves and/or on decrease of the applicant bank’s share capital to one rouble subject to judicial review? If yes, who had standing to bring such claim before a court (see, mutatis mutandis , Feldman and Slovyanskyy Bank , cited above, §§ 42-44)?

While considering the applicant bank claim, did the courts examine the substantive reasons for the decision to impose temporary administration ( see, mutatis mutandis , Credit and Industrial Bank, cited above, §§ 70-71 )?

2. Did the applicant bank have possessions within the meaning of Article 1 of Protocol No. 1? In particular, did banking licence, financial assets as well as the right to manage its own financial affairs constitute the applicant bank’s possessions within the meaning of Article 1 of Protocol No. 1?

If yes, has there been an interference with the applicant bank’s right to peaceful enjoyment of possessions, within the meaning of Article 1 of Protocol No. 1 (see, mutatis mutandis , Credit and Industrial Bank, cited above, § 78; Capital Bank AD , cited above, §§ 130-31; and Feldman and Slovyanskyy Bank , cited above, §§ 51-52)?

Was this interference in conformity with the requirements of Article 1 of Protocol No. 1? In particular:

(a) Was the interference “subject to the conditions provided for by law”?

(b) Did the interference serve a legitimate public (or general) interest, within the meaning of the mentioned Article?

(c) Was the interference proportionate to the aim pursued (see, mutatis mutandis , Olczak v. Poland (dec.), no. 30417/96, §§ 78-85, ECHR 2002 X (extracts))?