FIRST SECTION

PARTIAL DECISION

AS TO THE ADMISSIBILITY OF

Application no. 40663/98 
by ASITO 
against Moldova

The European Court of Human Rights (First Section), sitting on 10 July 2001 as a Chamber composed of

Mrs E. Palm, President
 Mr L. Ferrari Bravo
 Mr Gaukur Jörundsson
 Mr R. Türmen
 Mr C. Bîrsan
 Mr T. Panţîru
 Mr R. Maruste, judges
and Mr M. O’Boyle, Section Registrar,

Having regard to the above application introduced with the European Commission of Human Rights on 5 February 1998 and registered on 6 April 1998,

Having regard to Article 5 § 2 of Protocol No. 11 to the Convention, by which the competence to examine the application was transferred to the Court,

Having regard to the Section’s partial decision of 16 March 1999,

Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicant company,

Having deliberated, decides as follows:

THE FACTS

The applicant company is a Moldovan incorporated insurance company, with its seat in Chişinău. It is represented before the Court by its lawyer, Mr I. Babei.

The facts of the case, as submitted by the parties, may be summarised as follows:

A.  The circumstances of the case

On 12 June 1991, a governmental order allowed the applicant company to enter “banking and investments operations”, apart from its main insurance activity.

On 28 November 1991, the applicant company obtained from the National Bank of Moldova a licence to engage in banking operations. During a routine audit procedure, the company refused to disclose the books and expenditures, claiming it did not perform any banking activities. On 13 October 1992, the applicant company’s licence was withdrawn. The applicant company did not challenge this decision.

On 25 November 1994, the applicant company concluded a one-year contract (“the contract”), with company F., entitled “Joint Commercial Transaction”. The applicant company made a capital contribution of 330,000 Moldovan lei (MDL) to company F. for the production of brandy bottles and corks, and in exchange it was to receive the sum of MDL 269,500, payable in monthly instalments. Company F. was also to reimburse the capital contribution in a lump sum by 25 November 1995. Non compliance with the terms of the contract gave raise to a penalty of 0,50% of the unpaid sum for each overdue day. By an additional contract, company F. mortgaged its plant and equipment, as a contract security.

By 23 April 1996, company F. had paid the applicant company MDL 420,750. Due to a slowdown in the national economy, company F. was, as of that date, unable to pay the balance in full and had no reasonable prospect to be able to pay it under the terms of the contract.

1.  Proceedings for the execution of the contract

On 24 May 1996 the applicant company filed an application with the Arbitration Court of the Republic of Moldova for breach of contract and requested that company F. be ordered to pay MDL 468,472 as return of the capital contribution and contractual penalties.

 

Company F. argued that the contract contained an implied obligation, arising from the nature and purpose of the contract, that the applicant company was to contribute to the expenses and losses of the joint venture. As the company experienced losses, in spite of its good faith in performance, it asked for an adjustment or cancellation of the MDL 468,472 debt, invoking the Civil Code provisions on risk sharing in joint ventures. As a subsidiary argument, it submitted that, in absence of this implied obligation, the contract became a regular credit one, for which the applicant company did not possess a licence.

On 23 July 1996, A. P., a member of the Moldovan Parliament and representative of a parliamentary commission charged with the control of the “observance of the law, prevention of corruption and organised crime” (the parliamentary commission), addressed a letter to the Arbitration Court. In this document, he drew attention to the fact that the parliamentary commission had received a complaint from company F. regarding illegalities in the contract, and asked if it was possible, in view of the gravity of the allegation, for the case not to be heard in the absence of the parties and the prosecutor.

In its judgment of 1 August 1996, the Arbitration Court admitted in part the applicant company’s demand. It found a breach of contract and rebuffed company’s F. defence, on the ground that “legal norms do not allow the Arbitration Court to change the object and the claim of a litigation”. It nevertheless reduced the contractual penalties by 50%, estimating the claim disproportionate in relation to the actual damage experienced by the applicant company, and issued an order of payment for an amount of MDL 327,474.75, out of which  MDL 315,412.50 represented the debt and the penalty, while MDL 12,062.25 represented the state duty tax. This decision was enforceable prior to 1 November 1996.

In June - July 1996, the Prosecutor General asked for expert opinion on the contract.  In a report drafted by two academics, it was argued that the contract had all the characteristics of a credit operation. According to the Ministry of Finance, the contract was lawful and produced no damages to the State. Refraining from comments regarding the provisions of the Law on Banks and Banking Activity, the National Bank concluded that, although the contract was similar to a credit operation, “it did not contradict chapter 38 of the Civil Code”. The results of this research were not made public.

On 20 August 1996, the Prosecutor General lodged an ordinary appeal (recurs) against the judgment of 1 August 1996, claiming the contract was a disguised credit operation. It pointed out that the applicant company had lost its banking licence and that it practised an interest rate much higher than any bank in Moldova. The Prosecutor General also requested a stay of execution.

On 6 September 1996, the Arbitration Court admitted the stay of execution.

On 28 November 1996 entered into force the “Law on Economic Courts” unifying the Arbitration with civil courts in an “Economic Tribunal”. The reorganisation of the judiciary resulted in a suspension of the hearings over a few months period.

In April 1997 the applicant company requested on several occasions the Prosecutor General to intervene so that the court would resume the examination of its case.

On 14 April 1997 the Prosecutor General withdrew his appeal against the judgment of 1 August 1996 and for the stay of execution. The judgment of the Arbitration Court thus became final.

On 19 April 1997, A. P. wrote a letter to the Prosecutor General, to inform him that two civil servants were delegated by the parliamentary commission to examine the legal reasons for the withdrawal of the appeal.

On 16 June 1997 the Prosecutor General lodged under Article 38 § 3 of the Law on Economic Courts an appeal for annulment (recurs în anulare), which is an extraordinary appeal, against the judgement of 1 August 1997, requesting that the contract be declared null and void for non-compliance with the Law on Banks and Banking Activities.

On 23 September 1997 the Appeal Chamber of the Economic Tribunal allowed the appeal for annulment, but dismissed the applicant company’s claim as ill founded.  The Appeal Chamber considered that the contract was a joint venture and therefore, under Article 456 of the Civil Code, expenses and losses were to be divided proportionally with parties’ contribution. The Appeal Chamber found that company F. had returned the entire capital investment, plus a global sum of MDL 90,750 despite its profits, which were no higher than MDL 10,976. The Appeal Chamber thus concluded that F. was not to pay any additional sum. As for the contractual penalties, it deemed they had lapsed according to the statute.

On 3 November 1997, the applicant company appealed against the decision of 23 September 1997, alleging that the contract was of a private nature, and that the State did not demonstrate a public interest to interfere with its fulfilment.

On 24 December 1997, the Supreme Court of Justice rejected the appeal. It found that the contract was a disguised credit operation and since the applicant company no longer possessed a banking licence, concluded that such a contract was illegal.

On 25 December 1997 the applicant company lodged a petition for review (cerere de revizuire), which was rejected by the Supreme Court on 21 January 1998 on the ground that the conditions for the re-opening of the case were not fulfilled.

 

2.  Proceedings for the annulment of the contract

On 17 July 1996, pursuant to Article 5 (2) of the Code of Civil Procedure, the Prosecutor General filed an application with the Arbitration Court of Moldova against the applicant company and company F., seeking to have the contract annulled. According to the Prosecutor General, the contract was a disguised credit operation subject to a very high interest rate and the applicant company was not entitled to grant credit in absence of a licence.

In a judgment of 26 July 1996, the Arbitration Court dismissed the application. The court found that, according to the Law on Insurance, insurance companies were allowed to provide commercial and financial services and that crediting activities were also permitted under the Civil Code. The Arbitration Court did not examine the question of the licence requirement. This judgment became final.

On 16 June 1997 the Prosecutor General lodged under Article 38 § 3 of the Law on Economic Courts an appeal for annulment (recurs în anulare) against the judgement of 16 July 1997. On 23 September 1997 the Appeal Chamber of the Economic Tribunal rejected the appeal.

The Prosecutor General lodged under Article 278/60 of the Civil Procedure Code an extraordinary appeal (recurs) against this decision on 17 November 1997, asking for the annulment of the contract and for the confiscation of the profit.

On 24 December 1997, the Supreme Court quashed the decision of 23 September 1997 and the judgment of 26 July 1996. It found that the contract was a disguised credit operation for which the applicant company had no license and declared it null and void. However, the Supreme Court rejected the Prosecutor General’s request for confiscation of the profit.

The applicant company lodged a petition for review (cerere de revizuire) against the decision of 24 December 1997.  On 21 January 1998 the Supreme Court rejected the petition.

3.  Proceedings for confiscation of the sums concerning the contract

Following the above mentioned procedures, on 2 February 1998 the Prosecutor General and the Ministry of Finance filed a joint application with the Economic Tribunal for the confiscation of the sum of MDL 420,570 from the applicant company representing the investment in and the profit from the contract, which company F. had paid until 23 April 1996.

 

On 20 May 1998 the Prosecutor General requested that the amount to be confiscated be diminished. In this respect, the Prosecutor General pointed out that according to Article 10 of Law on enterprises and business professions, an enterprise having exercised an illegal activity was accountable of the profit obtained and of a fine equal to the profit. Since Asito’s profit amounted to MDL 90,750, the Prosecutor General requested that the amount of MDL 181,500 be confiscated.

On 11 December 2000, the respondent Government informed the Court that by a decision of 2 February 1999, the Chişinău Economic Tribunal had ordered that MDL 181,500 be confiscated from the applicant company, as well as MDL 5,445 representing the judicial taxes.

On 8 February 1999, the applicant company filed an appeal for annulment (recurs în anulare), which was rejected by the Appeal Chamber of the Economic Tribunal at its hearing on 25 October 2000. The applicant company was not present at the hearing and no mention is made in the decision of 25 October 2000 about its notification to the parties. As the applicant company did not file an appeal (recurs), the decision of 25 October 2000 became final.

By a letter of 17 January 2001, the applicant company informed the Court that it had not been present during the examination of its appeal on 25 October 2000, and that it had learned for the first time about the result of the appeal proceedings from the Court’s letter of 13 December 2000.

On 10 April 2001, the respondent Government informed the Court that the decision of the Appeal Chamber of the Chişinău Economic Tribunal of 25 October 2000 had not yet been enforced.

B. Relevant domestic law and practice

Law No. 970 of 24 July 1996 on Economic Courts

Article 38 § 3

“The Prosecutor General and his deputies may lodge, within one year, with the Appeal Chamber of the Economic Tribunal of the Republic of Moldova an appeal for annulment (recurs în anulare) of any final decision of the Arbitration Court (...) on the ground that the material or procedural law was violated (...).  They may also request a stay of execution of the decision of the Arbitration Court.”

Article 42

“On 27 August 1996 it is abolished the Law no 414 - XII of 18 December 1990 regarding the Arbitration of the Republic Moldova.”

 

Law No. 1550 of 25 February 1998 amending certain legislative acts

Article III

In Article 38 § 3 of the Law No. 970 of 24 July 1996 on Economic Courts the words “within one year” should be excluded.

Code of Civil Procedure

Article 5 (2) e) and f)

“Courts may commence to examine a civil action (…) at the prosecutor’s request, in cases relating to (...) the State’s and the society’s interest regarding (…)

(...)

e) (…) the nullity of contracts infringing the State’s interest” (…) ;

f) (…) and for the annulment of acts and activities of corruption and protectionism.”

Article 278/60

“The parties, (…) [and] the Prosecutor General (…) may, either on their own motion or on an application by one of the parties, lodge with the Supreme Court an extraordinary appeal (recurs) against any final judicial decision of the Economic Tribunal of the Republic, on the following grounds:

(1) where the judgment has no legal basis or is contrary to the law or the law was wrongly applied (...)”.

Article 325

“The judgments which became final (...) as well as those delivered by the court of cassation on the merits can be subject to review in the following cases:

(...)

11) in the case when the irrevocable judgments which were delivered by courts of the same or different level of jurisdiction are contradictory (...). The same provision should apply to the contradictory judgments delivered by the court of cassation.”

 

Civil Code, Chapter 38

Article 455

“(...) the participation of parties to a joint venture consists of money, goods or work. All contributions and profits are common property. A party to such agreement May not dispose freely of its shares, in absence of the other party’s consent.”

Article 456

“(...) Whenever parties did not agree on how to cover expenses and losses, they are to be covered by the common property and if this proves insufficient, they are to be shared among the parties, proportionally to their contribution.”

Law No. 601 of 12 June 1991 on Banks and Banking Activities

“Banking activity in the Republic of Moldova is carried out through the National Bank of Moldova and the commercial banks established under the present Law.”

Article 10

“Private individuals and moral persons can carry out banking activities only after having obtained the consent of the National Bank of Moldova, after the adoption of the statutes by the founding members and after their registration with the National Bank.”

Case-law on prosecutor’s applications under Article 5 (2)of the Civil Procedure Code

Between 1989 - 1999, the Prosecutor General made little use of the above mentioned Article 5(2), and the courts interpreted it in a restrictive manner.  An application in a contract termination was rejected, as relating neither to the categories of persons protected under the provision, nor to the State’s interest (Court of Appeal of Moldova, judgement n° 2r-523 of 15.01.1998). In a demand for the annulment of an apartment sale for non compliance with the residence permit, the Supreme Court acknowledged the State’s interest, but rejected the case on the merits (The Supreme Court of Justice, plenary judgement n° 4r/a-17/99 of 8.11.1999).

COMPLAINTS

1.  The applicant company complains under Article 6 § 1 of the Convention that its case has not been decided by an independent court. In this respect, it alleges that A. P., member of the Moldovan Parliament, interfered with the activity of the Arbitration Court by expressing his views on the litigation pending before this court.

2.  The applicant company alleges that its case was not heard by an impartial tribunal, in breach of Article 6 § 1 of the Convention.  It complains in this respect that in the proceedings for the execution of the contract, the same Supreme Court judges examined both the appeal on 24 December 1997 and the petition for review on 21 January 1998.

3.  The applicant company complains also under Article 6 § 1 that it had been denied the right to a fair hearing because the Ministry of Finance was not summoned as witness in proceedings a) and b) and that the domestic courts allowed the Prosecutor General to intervene in a private litigation.

4.  The applicant company finally alleges a violation of Article 1 of Protocol No. 1 to the Convention. It complains about the decision of 23 September 1997 of Appeal Chamber of the Economic Tribunal allowing the appeal for annulment against the final judgment of 1 August 1996 and about the decision of 24 December 1997 of the Supreme Court of Justice which quashed the final judgment of 26 July 1996. In this respect, the applicant company points out to the Prosecutor General’s application for the confiscation of goods.

The applicant company also complains that it was not informed about the date of the examination of its appeal on 25 October 2000, and that therefore, the appeal was examined without it being present.

THE LAW

1.  The applicant company complains that its case has not been decided by an independent court, since A. P., a parliamentarian, interfered with the activity of the Arbitration Court of Moldova by expressing his views on the litigation pending before this court.  It alleges a violation of Article 6 § 1 which, in its relevant part, provides as follows:

“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 Government consider that the letter sent on 19 April 1997 by A. P. to the Prosecutor General had no relevance in relation to the examination of the case by the courts. As to the note written to the Arbitration Court on 23 July 1996, this was only meant to remind of the legal provision concerning the parties’ right to be present at hearing.

The applicant company alleges that A. P.’s intervention was detrimental to its right to an independent tribunal.

The Court notes that the correspondence in question occurred on 23 July 1996 and on 19 April 1997 respectively, which is before the ratification of the Convention by Moldova on 12 September 1997.

The Court therefore finds that this complaint is incompatible ratione temporis with the provisions of the Convention.  It follows that it must be rejected, in accordance with Article 35 § 4.

2.  The applicant company complains under Article 6 § 1 of the Convention that its case was not heard by an impartial tribunal in the proceedings under a), since the same panel of Supreme Court judges examined the case on 24 December 1997 and then on 21 January 1998.

The Government submit that the fact that the same judges examined the case on 24 December 1997 and 21 January 1998 was not in breach of the domestic law, since the appeal examined on 24 December 1997 was on points of fact and law, whereas the petition for review examined on 21 January 1998 related to merely procedural aspects.

The applicant company alleges that a panel ruling first in an appeal and then in revision proceedings, infringes the right to an impartial tribunal.

In the present case, within the appeal proceedings that led to the final decision of 24 December 1997, the Supreme Court rejected the applicant company’s appeal as it found that the contract was a credit operation. The applicant company’s civil rights were thereby finally determined, but it filed with same court a petition for review in order to have the case re-opened. On 21 January 1998 the same judges as those having taken the decision of 24 December 1997 rejected the petition for review of this decision on the ground that the conditions for the re-opening of the case were not fulfilled.

The Court considers that the Supreme Court, in the proceedings for the re-opening of the case, unlike in the appeal proceedings, was not called upon to decide on the applicant company’s civil rights, but had to examine whether the conditions required for the re-opening of the case were fulfilled.

The Court recalls that, according to established case-law, the Convention does not guarantee, as such, any right to have a case re-opened (see, mutatis mutandis, 32916/96, Dec. 2.7.97, D.R. 90-B, p. 168). The Court therefore considers that Article 6 § 1 of the Convention did not apply to the revision proceedings.

It follows that this complaint is incompatible ratione materiae with the provisions of the Convention within the meaning of Article 35 § 3 and must be rejected in accordance with Article 35 § 4 of the Convention.

3.  Invoking Article 6 § 1 of the Convention, the applicant company complains that it had been denied a right to a fair hearing because the Ministry of Finances was not summoned as witness and because the courts allowed the Prosecutor General to intervene in a private litigation.

According to the Government, the Ministry of Finance’s testimony which concerned the sole question of a damage to the State’s property was not relevant, since the notion of public interest is much wider. It also maintains that the transgression of norms affecting the public interest imposed the participation of the Prosecutor General in the litigation.

The applicant company alleges that the Ministry of Finance’s presence was necessary in order to testify that the contract did not produce any damage to the State. It also alleges that the Prosecutor General’s initiative was unlawful, as the contract was private.

(a)  As to the absence of summoning of the Ministry of Finance, the Court notes that the applicant company did not call for the summoning of the Ministry of Finance at any stage of the domestic proceedings. The Court finds that it is not therefore open to it to complain on this issue.

It follows that this complaint must be rejected under Article 35 §§ 1 and 4 of the Convention for non-exhaustion of domestic remedies.

(b)  The Court notes that in the present case the Prosecutor General intervened in the proceedings by means of an appeal for annulment under Article 38 § 3 of the Law on Economic Courts, an extraordinary appeal under the Article 278/60 of the Civil Procedure Code and a civil application under Article 5 (2) e) of the Civil Procedure Code.

(i)  As for the appeal for annulment under Article 38 § 3 the Law on Economic Courts, the Government contend it was a transitory norm enabling the merger of the “quasi judicial” arbitration system with ordinary courts.

The applicant company denies the existence of a transitory period concerning the reorganisation of the judiciary.

The Court considers, in the light of the parties’ submissions, that the complaint raises serious issues of fact and law under the Convention, the determination of which should depend on an examination of the merits. The Court concludes therefore that this complaint is not manifestly ill-founded within the meaning of Article 35 § 3 of the Convention. No other ground for declaring it inadmissible has been established.

(ii)  With regard to the extraordinary appeal instituted under Article 278/60 of the Civil Procedure Code, the Government underline it is available to both parties, in respect of the principle of “equality of arms”.

The applicant company considers that the Prosecutor General’s appeal was not justified, because the contract did not concern public interest.

 

The Court considers, in the light of the parties’ submissions, that the complaint raises serious issues of fact and law under the Convention, the determination of which should depend on an examination of the merits. The Court concludes therefore that this complaint is not manifestly ill-founded within the meaning of Article 35 § 3 of the Convention. No other ground for declaring it inadmissible has been established.

(iii)  As to the civil application made under Article 5 (2) of the Civil Procedure Code, the Government considers that it is a part of the Prosecutor General’s role in supervising legality and securing matters of public interest.

The applicant company points out that such a civil application has no relevance in the present case.

The Court considers, in the light of the parties’ submissions, that the complaint raises serious issues of fact and law under the Convention, the determination of which should depend on an examination of the merits. The Court concludes therefore that this complaint is not manifestly ill-founded within the meaning of Article 35 § 3 of the Convention. No other ground for declaring it inadmissible has been established.

4.  The applicant company complains about the Appeal Chamber of the Economic Tribunal’s decisions of 23 September 1997 and 25 October 2000 within the proceedings under a) and c), as well as the Supreme Court’s decision of 24 December 1997 within the proceedings under b). It alleges a violation of Article 1 of Protocol No. 1, which provides as follows:

“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.”

The Government point out that on 24 December 1997 the contract was declared null and void by the Supreme Court, and that this decision must be accepted with all the consequences it entails.

The applicant company contends that the annulment of final decisions confirming its property rights amounts to a deprivation of its possessions, without this being in the public interest and without a fair compensation.

The Court considers, in the light of the parties’ submissions, that the complaint raises serious issues of fact and law under the Convention, the determination of which should depend on an examination of the merits. The Court concludes therefore that this complaint is not manifestly ill-founded within the meaning of Article 35 § 3 of the Convention. No other ground for declaring it inadmissible has been established.

 

For these reasons, the Court, unanimously,

Declares admissible, without prejudging the merits, the applicant company’s complaint under Article 6 § 1 concerning the Prosecutor General’s appeal for annulment, his extraordinary appeal under the Civil Procedure Code and his civil application under Article 5 (2) of the Civil Procedure Code as well as the complaint concerning the violation of its rights under Article 1 of Protocol No. 1 to the Convention,

Declares inadmissible the remainder of the application.

Michael O’Boyle Elisabeth Palm 
 Registrar President

 

ANNEX

CHRONOLOGICAL TABLE

Chronology

Proceedings for the execution of contract

Proceedings for the annulment of contract

24 May 1996

Asito files an application against company F.

 

17 July 1996

 

Prosecutor General (PG) files an application against Asito and company F.

26 July 1996

 

Application dismissed by the Economic Court. Final judgment.

1 August 1996

Application admitted in part by the Economic Court.

 

20 August 1996

PG files appeal.

 

14 April 1997

PG withdraws appeal. Judgment of 1 August 1996 becomes final.

 

16 June 1997

PG files an appeal for annulment for non-compliance with Law on Banks.

PG lodges an appeal for annulment on the ground that the contract was a disguised credit contract and contrary to Law on Banks

23 September 1997

Appeal for annulment allowed but the Appeal Chamber finds that the Law on Banks was not applicable and that the contract was a joint venture.  Interprets the contract and dismisses the Asito’s original claim.

The Appeal Chamber rejects the appeal for annulment

3 November 1997

Asito files appeal.

 

17 November 1997

 

PG lodges extraordinary appeal

 

24 December 1997

The Supreme Court rejects the appeal on the ground that the contract was a disguised credit operation and contrary to the Law on Banks.

The Supreme Court admits the extraordinary appeal on the ground that the contract was a disguised credit operation and contrary to the Law on Banks.

21 January 1998

Supreme Court rejects the petition for review filed by Asito.

Supreme Court rejects the petition for review filed by Asito.

25 October 2000

(proceedings under c)

 

Appeal Chamber of the Economic Tribunal confirms confiscation of MDL 181,500 and also orders confiscation of MDL 5,445 for judicial taxes

ASITO v. MOLDOVA DECISION


ASITO v. MOLDOVA DECISION