Published on 28 August 2023

FIRST SECTION

Application no. 4191/21 SAHARA BANK S.A. against Hungary lodged on 15 January 2021 communicated on 10 July 2023

SUBJECT MATTER OF THE CASE

The applicant is a commercial bank established under Libyan law. It has its seat in Tripoli, Libya.

The application concerns the decision of the Hungarian Kúria to the effect that no payment obligation existed under a bank guarantee concluded between the applicant and the Hungarian branch of BNP Paribas (“BNPP Hungarian Branch”) – and this because of binding United Nations and European Union law which had placed an embargo on Libya during the First Libyan Civil War in 2011 (“the civil war”).

On 7 July 2009 the Libyan Housing and Infrastructure Board (“HIB”), a Libyan company, and Nemzetközi Vegyépszer Zrt. (“Vegyépszer”), a Hungarian company, entered into a construction agreement. Pursuant to the construction agreement, HIB agreed to pay an advance to Vegyépszer in the amount of several tens of millions of Libyan dinars. The reimbursement of the advance was secured by a multi-actor chain of bank guarantees.

On 20 November 2009, at the request of Vegyépszer, Magyar Export-Import Bank Zrt. (“Eximbank”, a Hungarian bank) issued a counter-guarantee to BNPP Hungarian Branch with the expiry date of 14 September 2013.

On 24 November 2009 BNPP Hungarian Branch issued a counter-guarantee to the applicant bank, with the expiry date of 30 August 2013.

On 28 February 2010 the applicant issued a counter-guarantee to HIB.

In 2011, in the context of the civil war, UN Security Council resolution no. 1970 (2011), Council of the EU decision no. 2011/137/CFSP and Council of the EU regulation no. 204/2011/EU introduced an embargo against various Libyan individuals and legal entities.

The applicant was placed on the embargo list between 22 March 2011 and 2 September 2011. HIB was also placed on the embargo list between 11 March 2011 and 29 January 2014.

In November 2012, HIB called the guarantee issued by the applicant bank.

On 29 November and 18 December 2012 and 2 January 2013, the applicant bank called the guarantee from BNPP Hungarian Branch.

On 10 January 2013 BNPP Hungarian Branch sent the applicant an acknowledgement about the fulfilment of requirements to call the guarantee; however, they refused the payment of the guarantee to the applicant on the basis of Council of the EU regulation no. 204/2011/EU.

On 22 January 2013 the applicant called on BNPP Hungarian Branch and its parent company to perform the obligations arising from their guarantee or else the applicant would lodge a court claim against them.

On 22 April 2013, apparently in the context of separate court proceedings between BNPP Hungarian Branch and the National Tax Authority, the Budapest High Court prohibited BNPP Hungarian Branch from performing the guarantee payment until HIB was on the embargo list.

On 10 March 2014, the European Commission issued an opinion stating that the call on a guarantee should be distinguished from the execution of a payment under guarantee.

In 2015 HIB lodged a claim against the applicant for the performance of the guarantee. It appears that, ultimately, HIB managed, by virtue of Libyan court decisions, to acquire assets of the applicant bank in the context of this claim.

On 30 June 2016 BNPP Hungarian Branch submitted a claim against the applicant, asking the court to terminate the payment obligation of BNPP Hungarian Branch as the latter was no longer obliged to pay under the counter-guarantee issued for the applicant or, in the alternative, to hold that the applicant’s call of the guarantee was not valid due to the embargo.

On 15 September 2017 the Budapest High Court found in favour of BNPP Hungarian Branch.

On 6 June 2018, following an appeal, the Budapest Court of Appeal reversed the judgment, as in their opinion the embargo „in itself did not have a civil-law effect”.

On 6 June 2019, following a suspension and requesting a preliminary ruling from the Court of Justice of the European Union, the Kúria quashed the second-instance decision and upheld the first-instance one.

On 14 July 2020, the Constitutional Court, sitting in a five-member formation, rejected the applicant bank’s constitutional complaint, holding that there was no meaningful connection between the content of the contested judicial decision and the scope of the constitutional protection of the right to property.

Ultimately, the applicant failed to receive the amount of guarantee from BNPP Hungarian Branch as a consequence of the Hungarian court decisions.

The applicant complains about an alleged violation of Article 1 of Protocol No. 1 to the Convention arguing that the decisions of the Hungarian courts interfered with its right to the peaceful enjoyment of their possessions in a discriminatory manner and without justification.

QUESTIONS TO THE PARTIES

1. Is the present application compatible ratione loci and personae with the provisions of the Convention within the meaning of Article 35 § 3 (a)?

If so:

2. Did the restriction on the applicant bank’s guarantee constitute an interference with its peaceful enjoyment of possessions within the meaning of the Article 1 of Protocol No. 1 to the Convention?

3. In the affirmative, was this interference justifiable under Article 1 of Protocol No. 1 to the Convention?