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THE FACTS

The applicant company, Transado-Transportes Fluviais do Sado, S.A., is a public limited company formed under Portuguese law, whose registered office is in Setúbal (Portugal). It was represented before the Court by Mr M. Mendes Carqueijeiro and Mr I. Machado, of the Lisbon Bar.

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

The applicant company is a river transport company which operated a ferry across the river Sado between Setúbal and Tróia under a concession contract concluded in 1976 with the Setúbal port authorities ( “the APS”).

Clause XXXIII of the contract provided that any dispute concerning the validity, interpretation or execution of the provisions of the concession contract would in all cases be submitted to an arbitration tribunal made up of three arbitrators, the first to be appointed by the APS, the second by the applicant company and the third – the president – by the Setúbal court.

Clause XXVI of the contract stated that on expiry of the concession the APS would become the owner of all assets and equipment, including ships. However, Transado would be entitled to compensation in respect of those assets acquired by it with the APS’s agreement which had not yet been written off on expiry of the concession; such compensation would correspond to the value that had not been written off. To this end, the applicant company and the APS were required to reach agreement on the writing-off periods for the assets in issue.

On 4 August 1981 the applicant company and the APS signed a supplementary agreement to the concession contract, fixing the length of the concession at twenty years. This period would be automatically extended for ten years unless one of the parties repudiated it at least six months prior to expiry of the contract. Negotiations were also held between the applicant company and the APS with a view to amending clause XXVI of the concession contract, particularly with regard to the formula for calculating compensation, but these came to nothing. In a letter from the APS to the applicant company, dated 14 October 1980, a concrete proposal on amending clause XXVI was put forward. However, no such amendment to the contract was agreed.

In 2001 the applicant company operated a fleet of eight conventional vessels and ferries which it had bought itself; at least three had been purchased with the APS’s authorisation.

On 29 January 2001 the APS informed the applicant company that it did not intend to renew the concession, which would therefore expire on 4 August 2001. It referred in particular to the applicant company’s difficult financial situation and to the problems arising from the considerable sums which it owed to the tax and social security authorities, debts which moreover had entailed the seizure of certain vessels.

On 19 March 2001 the applicant company submitted its request for compensation to the APS. It argued that any such compensation ought to be calculated on the basis of the provisions of clause XXVI of the concession contract, as amended by the APS’s letter of 14 October 1980.

On 11 June 2001 the APS stated that compensation could be awarded only on the basis of the original wording of clause XXVI of the concession contract, and under no circumstances could any such compensation be awarded on the basis of the amendment proposed on 14 October 1980, which had never been agreed.

On 22 June 2001 the applicant company requested that the arbitration tribunal provided for in clause XXXIII of the concession contract be convened, with a view to settling the dispute.

The arbitration tribunal was formed on 12 November 2001. The applicant company and the APS both submitted observations and witnesses were questioned.

The arbitration tribunal delivered a unanimous verdict on 2 April 2002, dismissing the applicant company’s request for compensation. Having interpreted clause XXVI, and noting that only the original text of the concession contract could be applied, it stressed that there was nothing in the facts as established to show that the applicant company and the APS had reached agreement on the writing-off periods for the assets in issue. The compensation request could not therefore succeed.

COMPLAINTS

Relying on Article 1 of Protocol No. 1, the applicant company complained that it had been deprived of its possessions without compensation.

Under Article 6 § 1 of the Convention, it also alleged that the procedure before the arbitration tribunal had been unfair.

THE LAW

1.  The applicant company complained that it had been deprived of its possessions without compensation. It relied on Article 1 of Protocol No. 1, which states:

“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

In this respect, the applicant company claimed that it was the owner of the possessions in issue, particularly the ships, and that it had been deprived of those possessions as a result of the interpretation of a clause in the concession contract which clearly infringed its rights under this Convention provision.

The Court notes that “Article 1 in substance guarantees the right of property ... It comprises ‘three distinct rules’: the first rule, set out in the first sentence of the first paragraph, is of a general nature and enunciates the principle of the peaceful enjoyment of property; the second rule, contained in the second sentence of the first paragraph, covers deprivation of possessions and subjects it to certain conditions; the third rule, stated in the second paragraph, recognises that the Contracting States are entitled, amongst other things, to control the use of property by enforcing such laws as they deem necessary in the general interest ... However, the three rules are not “distinct” in the sense of being unconnected: the second and third rules are concerned with particular instances of interference with the right to peaceful enjoyment of property and should therefore be construed in the light of the general principle enunciated in the first rule ...” (see, among many other authorities, Honecker and Others v. Germany (dec.), nos. 53991/00 and 54999/00, ECHR 2001-XII ).

The Court must first determine whether there was interference by a public authority with the applicant company’s right of property. In this regard, it notes that it is understood that, in the instant case, no interference with the applicant company’s right to peaceful enjoyment of its possessions can be attributed to the Portuguese authorities. The Court’s role consists of ascertaining whether the arbitration tribunal’s interpretation of the disputed concession contract constituted interference with the applicant company’s right to peaceful enjoyment of its possessions and, if so, whether such interference was justified.

On several occasions and with reference to very diverse fields, the Court has stated that it is in the first place for the national authorities, notably the courts, to interpret and apply the domestic law (see, for example, Winterwerp v. the Netherlands, judgment of 24 October 1979, Series A no. 33, p. 20, § 46; Iglesias Gil and A.U.I. v. Spain, no. 56673/00, § 61, ECHR 2003-V; and Slivenko v. Latvia [GC], no. 48321/99, § 105, ECHR 2003-X). This principle, which, by definition, applies to the domestic law, is a fortiori valid in cases requiring the interpretation of a private-law clause adopted by both parties to a contract. In a case such as the instant one, the domestic courts are better placed than an international court to weigh up, in the light of local legal traditions, the particular context of the legal dispute submitted to them and the various competing rights and interests (see, for example, De Diego Nafría v. Spain, no. 46833/99, § 39, 14 March 2002). Accordingly, the national authorities, and especially the courts, enjoy a wide margin of appreciation when called upon to rule in such cases.

The Court may supervise the decisions of domestic courts but, in cases such as the instant one, such supervision must be restricted to checking whether the national courts’ disputed interpretation was reasonable and not arbitrary.

In the instant case, the arbitration tribunal, constituted in accordance with the concession contract, interpreted clause XXVI of the contract, covering possible compensation of the applicant company, and concluded that no such compensation could be awarded in the absence of a prior agreement between the two parties to the contract regarding the writing-off periods for the assets in question. In the Court’s opinion, such an interpretation cannot be described as unreasonable or arbitrary, especially since the applicant company itself recognised that no prior agreement had been concluded.

It follows that, in the instant case, there was no interference by the public authorities with the applicant company’s right to peaceful enjoyment of its possessions, the deprivation of property having been the result of the interpretation of a clause in the concession contract by the arbitration tribunal. Accordingly, Article 1 of Protocol No. 1 is not applicable and this part of the application must be dismissed as incompatible ratione materiae with the Convention’s provisions, in accordance with Article 35 § 3.

2.  The applicant company alleged that it had not received a fair hearing in the proceedings before the arbitration tribunal. The latter had not been impartial and no appeal had lain against its decision. It relied on Article 6  
§ 1 of the Convention, which provides:

“In the determination of his civil rights and obligations ..., everyone is entitled to a fair ... hearing ... by an independent and impartial tribunal established by law.”

The Court notes at the outset that Article 6 does not preclude the setting up of arbitration tribunals in order to settle certain disputes. Indeed, the word “tribunal” in Article 6 § 1 is not necessarily to be understood as signifying a court of law of the classic kind, integrated within the standard judicial machinery of the country (see, inter alia, Lithgow and Others v. the United Kingdom, judgment of 8 July 1986, Series A no. 102, pp. 72-73, § 201).

In the instant case, it was the applicant company itself which decided, in agreement with the APS, to keep out of the ordinary courts certain disputes which might arise in the course of execution of the concession contract. Indeed, such arbitration clauses are common in contracts of the type in issue in the instant case.

The applicant company alleged, without providing further information, that the proceedings in question were unfair. For its part, the Court notes that the applicant company was able to submit those arguments which it considered relevant in full parity with the APS.

As to the tribunal’s partiality, the Court notes firstly that the applicant company provided no information about this complaint and limited itself to challenging the tribunal’s “impartiality”. Further, it sees nothing capable of casting doubt on the subjective impartiality of the members of the arbitration tribunal nor the latter’s objective impartiality. As to objective impartiality in particular, the procedure for setting up the arbitration tribunal, provided for in clause XXXIII, excludes any doubt in this area (see Lithgow and Others, cited above, p. 73, § 202).

Finally, it is true that no appeal lay against the arbitration tribunal’s decision, but it was the applicant company itself, in agreement with the APS, which chose to insert such a clause in the concession contract. There is nothing to prevent an applicant from waiving certain rights, provided that such a waiver is, as in the instant case, lawful and unequivocal (see Pfeifer and Plankl v. Austria, judgment of 25 February 1992, Series A no. 227, pp 16-17, § 37).

To sum up, there is no evidence to support the applicant company’s contention that the proceedings before the arbitration tribunal were unfair. It follows that there is no appearance of a violation of Article 6 § 1 of the Convention, and that this part of the application is accordingly manifestly ill-founded. This complaint must therefore be dismissed in accordance with Article 35 § 3 of the Convention.

For these reasons, the Court unanimously

Declares the application inadmissible.

TRANSADO-TRANSPORTES FLUVIAIS DO SADO v. PORTUGAL DECISION


TRANSADO-TRANSPORTES FLUVIAIS DO SADO, S.A. v. PORTUGAL DECISION