Information Note on the Court’s case-law 219June 2018Industrial Financial Consortium Investment Metallurgical Union v. Ukraine - 10640/05Judgment 26.6.2018 [Section IV]Article 6Civil proceedingsArticle 6-1Fair hearingAnnulment of final court decisions on privatisation of State company after public statements by President and Prime Minister: violationArticle 1 of Protocol No. 1Article 1 para. 1 of Protocol No. 1Peaceful enjoyment of possessionsAnnulment of final court decisions on privatisation of State company after public statements by President and Prime Minister: violationFacts – In 2004, the applicant company, a Ukrainian joint venture, was founded by private companies owned or controlled by one of the leaders of the then ruling party and the son-in-law of Mr Kuchma, the then President of Ukraine. That same year, the State sold Kryvorizhstal State Metallurgical Enterprise (Kryvorizhstal), one of the world’s largest steel manufacturing companies, to the applicant company. The lawfulness of the sale was challenged in several separate sets of proceedings before the courts of general jurisdiction and the commercial courts. By the end of 2004 the proceedings before the courts of general jurisdiction were completed and the courts of three judicial instances confirmed that the sale was lawful. The proceedings before the commercial courts ended with the decision of the Higher Commercial Court, also favourable to the applicant company, against which the parties did not appeal. The lawfulness and transparency of the privatisation of Kryvorizhstal was also contested by the political opposition during the 2004 presidential election. Following a series of protests that took place in the immediate aftermath of the run-off vote of the election – events commonly known as the Orange Revolution – the newly elected President Yushchenko and Prime Minister Tymoshenko made public statements that the privatisation of Kryvorizhstal had been unlawful, and that the enterprise would be returned to the State and subsequently resold. In 2005, the final decisions of the courts of general jurisdiction were annulled following an extraordinary appeal lodged by a private individual who had not participated in the main proceedings. The case was sent for reconsideration, but eventually terminated without a decision on the merits. The decisions adopted in the course of the commercial proceedings were quashed upon an appeal by the Prosecutor General acting in the interests of the State. The proceedings resumed and ended in a final decision by which the privatisation at issue was held unlawful. The State took control of Kryvorizhstal, declared the applicant company’s contract invalid, returned the money paid and sold it to Mittal Steel Germany GmbH for a significantly higher price as a result of a new bidding competition. Law – Article 6 § 1 of the Convention(a)  Proceedings before the courts of general jurisdiction – The proceedings before the courts of general jurisdiction had been terminated by the final decision of the Supreme Court and had later been reopened upon an extraordinary appeal by a private individual who had not participated in the original proceedings and thus under the Ukrainian law then in force had not been entitled to lodge such an appeal. The appeal was an “appeal in disguise” rather than a “conscientious effort to make good a miscarriage of justice” and was based essentially on the argument which had already been examined and dismissed in the original proceedings. There had been no “circumstances of a substantial and compelling character” justifying the interference with the final and binding judgment in the applicant company’s favour.(b)  Proceedings before the commercial courts – No appeal had been lodged against the decision of the Higher Commercial Court within the one-month time-limit provided for by the law, thus the commercial court decisions had a res judicata effect. However, upon an appeal lodged by the Prosecutor General more than two months after the expiry of that time-limit those decisions had been quashed. The proceedings had been reopened after a delay of four months, which was substantially shorter that the delays examined in Ponomaryov v. Ukraine or Ustimenko v. Ukraine. However, that did not mean that, for the purposes of Article 6 § 1, the Supreme Court enjoyed unfettered discretion to consider whether to reopen the proceedings upon the belated appeal of the Prosecutor General. Firstly, the Office of the Prosecutor General had been informed of the original proceedings as early as July 2004, though no representative had attended the court hearings, notwithstanding the Commercial Court’s specific order in that regard. Secondly, representatives from different State bodies, who had taken part in the proceedings, had lodged no appeal against the decision of the Higher Commercial Court. In his appeal, the Prosecutor General had not suggested that those representatives had been precluded from defending the State interests at stake in the case, nor that there had been a communication problem within the Government resulting in the information about the outcome of the case not reaching those concerned. Thirdly, no explanation had been given as to why the appeal had been lodged more than a month after the Prosecutor General had allegedly been informed of the said decision. The Government had not argued that the Supreme Court had given consideration to those important aspects. Moreover, the appeal contained no information demonstrating that the lower courts had made judicial errors of the kind amounting to a miscarriage of justice or a fundamental defect. Finally, the statements by the President and the Prime Minister concerning the privatisation of Kryvorizhstal and the subsequent unjustified decision of the Supreme Court to reconsider the dispute objectively shed conspicuous light on the independence and impartiality of the commercial courts. In sum, the annulment of the court decisions infringed the principle of legal certainty and the impugned proceedings, seen as a whole and taking into account the statements made by the President and the Prime Minister, had not met the requirements of fairness within the meaning of Article 6 § 1.Conclusion: violation (unanimously).Article 1 of Protocol No. 1: Even though the impugned annulment of the domestic court decisions had not directly resulted in a change in the applicant company’s title to or actual possession of the Kryvorizhstal shares, it arguably constituted an interference with its right to those assets by creating a sitation of legal uncertainty. In any event, unlike the applicants in the cases of Agrotehservis, Ivanova and Timotiyevich, the applicant company had been paid compensation for its lost assets. While the applicant company argued that that sum had not covered the damage it had sustained, no evidence had been submitted in support of that argument. Moreover, not every procedural shortcoming in a case would take an interference with the right of property outside the scope of the “principle of lawfulness”. Unlike certain exceptional cases where the Court had found a violation of Article 1 of Protocol No. 1 on account of the “blatant interference” of the State authorities at the highest level in the court proceedings, the instant case did not concern such kind of interference (compare and contrast Sovtransavto Holding and Agrokompleks). Furthermore, there was no basis for a finding that the impugned proceedings had been flawed to the extent that their outcome could no longer be accepted or that the decisions issued by the commercial courts had been contrary to the “principle of lawfulness”. The applicant company had not demonstrated that it had been denied the opportunity to defend effectively its property rights and interests at stake in the course of the reopened proceedings before the commercial courts. It had not contested the Government’s argument that the impugned interference had been in the public interest, nor did it demonstrate that it had been made to bear an excessive individual burden.Conclusion: no violation (unanimously).Article 41: claim in respect of pecuniary damage dismissed.(See also Diya 97 v. Ukraine, 19164/04, 21 October 2010; Ponomaryov v. Ukraine, 3236/03, 3 April 2008; Ustimenko v. Ukraine, 32053/13, 29 October 2015; Rysovskyy v. Ukraine, 29979/04, 20 October 2011; Agrotehservis v. Ukraine, 62608/00, 5 July 2005; Ivanova v. Ukraine, 74104/01, 13 September 2005; Timotiyevich v. Ukraine, 63158/00, 8 November 2005; Sovtransavto Holding v. Ukraine (dec.), 48553/99, 27 September 2001; and Agrokompleks v. Ukraine, 23465/03, 6 October 2011) © Council of Europe/European Court of Human RightsThis summary by the Registry does not bind the Court.Click here for the Case-Law Information Notes