ITEMID: 001-105447
LANGUAGEISOCODE: ENG
RESPONDENT: GBR
BRANCH: ADMISSIBILITY
DATE: 2011
DOCNAME: HEATHER MOOR & EDGECOMB LTD. v. THE UNITED KINGDOM
IMPORTANCE: 4
CONCLUSION: Inadmissible
JUDGES: Lech Garlicki;Ledi Bianku;Nicolas Bratza;Päivi Hirvelä;Sverre Erik Jebens;Vincent A. De Gaetano
TEXT: The applicant, Heather Moor and Edgecomb Limited (HME), is a company based in Wiltshire. The application was lodged on its behalf by Mr B. Pickering, its managing director. The applicant was advised by Mr A. Speaight Q.C., a barrister practising in London. The United Kingdom Government were represented by their Agent, Mr M. Kuzmicki.
The facts of the case, as submitted by the parties and as presented in the judgment of the Court of Appeal, may be summarised as follows.
HME is a small family company founded in 1970. It provides independent financial advice, and is authorised and regulated by the Financial Services Authority. In June 1999, the company was approached by L, a pilot with British Airways who was soon to reach the company retirement age of 55 years. He was covered by his employer’s occupational pension scheme. There was a significant difference in age between L and his wife, with whom he had two children. He intended to continue working as a pilot until the age of 60, and beyond that if possible. He sought HME’s advice about his pension arrangements.
HME arranged two lengthy meetings with L. At the first of these, a company representative discussed two alternatives in detail: remaining in the company scheme but deferring his pension until the age of 60 (viewed as the safer option), or leaving the scheme on retirement and using the funds to purchase a private pension plan. HME wrote to L a few days later recapitulating the points made at the meeting. It referred to the potential advantage of making alternative pension arrangements, assuming a fund growth rate of 9% per annum, which it described as “very modest”. HME considered it “illogical” not to take up the option in view of the transfer value offered by the company scheme, and emphasised that the projected return on the investment did not presume “a very heavy fund performance”. At the second meeting, which involved the same company representative, the option of transferring to a private plan was discussed at length, including the associated risks and possible choice of fund. HME sent L a written note of the meeting shortly afterwards.
Having doubts, L then consulted another independent financial adviser, C. The balance of the latter’s advice was against leaving the company scheme, on the ground that it offered a quite substantial benefit package and a good level of guaranteed income which was not dependent upon investment returns or annuity rates. C took the view that some of HME’s comments were in breach of the regulator’s guidance. In particular, he considered that the assumption of 9% growth was “anything but modest”, and contrary to the lower investment growth assumptions that the regulator had recently introduced and had to be used by all advisers when projecting pension benefits. L provided a copy of this letter to HME’s representative, who nevertheless maintained his advice. L ultimately decided to accept the advice tendered by HME. He left his employer’s scheme and invested with another fund.
The investment performed strongly in the first year, increasing by 18%, but by 2003 the value of L’s pension fund had fallen by some 23%. In October of that year, L wrote to HME, claiming compensation in the sum of GBP 340,089. HME rejected his complaint, pointing out that L had made a free choice in full knowledge of the potential risks, and having considered contrary advice from another adviser. L filed a complaint with the Financial Ombudsman Service (FOS) on 11 November 2003, alleging that HME had given him inappropriate advice regarding his pension. He claimed that the relative security of his company’s scheme compared to the high risk of the investment he had been advised to choose had not been adequately emphasised during his meetings with HME. The figures used by HME had been very optimistic and far above actual performance.
FOS forwarded the complaint to HME and requested copies of the relevant documents and any evidence that the company wished to have taken into account. HME initially asked that the complaint be dismissed without consideration of its merits. It subsequently provided the requested documents and submitted a detailed outline of its case, by letter of 2 February 2004.
The complaint was considered by an FOS adjudicator, who communicated his opinion on it in a letter to HME dated 7 April 2004. He found that L should have been aware of the risks inherent in the investment he chose to make, in view of the second opinion he had obtained from C, and so the complaint should not be upheld in that respect. Pointing out the greater security offered by occupational pension schemes, he stated that the advantages and disadvantages of a transfer should have been explained and compelling reasons should have been given. He considered that the meeting notes that HME provided to L did not adequately caution him in this respect. While the risks may have been discussed during the meetings, the notes did not balance the advantages and disadvantages, nor did they show that all options had been duly considered. Further, the adjudicator took the view that the investment funds recommended to L entailed a higher risk than he was prepared to accept. He concluded that the transfer and investment funds recommended to L may have been unsuitable. He recommended that HME carry out a loss assessment and, if this revealed a loss, to pay redress. HME was asked whether it was prepared to make such an offer to L.
HME disagreed with the adjudicator’s opinion and gave a substantial response to it by letter dated 6 August 2004. It argued that since the amount involved greatly exceeded the maximum amount that FOS could order a firm to pay a complainant (GBP 100,000), FOS should decline jurisdiction so that the complaint could be determined in court. If this was not accepted, HME requested an oral hearing to establish the facts of the complaint.
By letter dated 14 October 2004, the adjudicator rejected the request for a hearing on the ground that there were no contradictions in the documentary evidence. A hearing would not therefore be advantageous.
HME maintained its request for a hearing, arguing that since the complaint concerned HME’s “civil rights and obligations” Article 6 of the Convention applied. If its version of events was not accepted by L then a hearing, with cross-examination, would be necessary.
On 11 July 2005 an FOS ombudsman wrote to HME in relation to its request for a hearing. He observed that Article 6 did not require a hearing at every stage of the determination of civil rights and obligations and that HME would be able to seek judicial review of the decision. If the company’s view was correct, then every complaint to the FOS would have to include a hearing. There did not appear to be any dispute over the facts in L’s complaint. Even if there were, it did not follow that there should be cross-examination of witnesses at a hearing. With its inquisitional powers, FOS could use other means to establish the facts. Where hearings were held, they were informal and the procedure was set by the Ombudsman. Crossexamination was uncommon. The Ombudsman also rejected the argument that FOS decline jurisdiction in view of the amount of money potentially involved, which, HME said, would endanger its commercial viability.
A provisional decision on the complaint was issued by another FOS Ombudsman on 17 February 2006. Giving detailed reasons, he indicated that he intended to uphold the complaint, subject to any further evidence or comment received.
On 27 April 2006 HME responded in detail to the provisional decision. It again sought a hearing to allow L to be cross-examined. It also submitted a witness statement from an experienced financial adviser, M. The latter stated that, in his opinion, there had been a “respectable school of thought” in 1999 that an assumed growth rate of 9% was modest. He considered that “some competent advisers” would have recommended that L transfer his pension fund.
more clearly. Understating the increase in the deferred pension benefits made the option of remaining in the company scheme appear much less attractive than it was. Had HME shown L the lower assumed growth rates, this might have caused the latter to express concern over the viability of the transfer. Having regard to the opinions received from the other financial advisers, C and M, the Ombudsman placed greater weight on the former’s view, as it was contemporaneous. He considered that a competent adviser would, in view of L’s family situation, have established the value of the widow’s benefit payable and would also have looked at the benefits payable on late retirement and compared these to the benefits available on transfer. He was therefore satisfied that good industry practice in 1999 would have been to advise L against transfer. He agreed with the previous decisions that a hearing had not been necessary, observing that the FOS had an inquisitorial role, not an adversarial one. He directed HME to pay the maximum sum to L (GBP 100,000) and recommended that it also pay compensation for any loss in excess of that amount. L accepted that decision, which therefore became binding on HME.
HME sought judicial review of the decision. The claim was initially rejected on the papers on 21 May 2007. A renewed application involving an oral hearing in the Administrative Court was rejected on 8 October 2007. Permission to appeal was granted on 11 December 2007. Following a threeday hearing before the Court of Appeal, the claim was dismissed on 11 June 2008. The main judgment was given by Stanley Burnton LJ.
HME first argued that FOS was required by the relevant statutory provision – section 228(1) of the Financial Services and Markets Act 2000 (see below) – to determine complaints solely in accordance with the rules of English law. Stanley Burnton LJ rejected this, finding that it was clear from the wording of the provision that Parliament had not intended to limit the basis for FOS decisions in this way. Certain other provisions of the Act reinforced this view, as did the general objective of the complaints scheme, which was to resolve disputes quickly and with minimum formality. Accordingly, FOS could reach a subjective opinion on the merits of a complaint; if that opinion was perverse or irrational it could be set aside by judicial review.
HME claimed that Article 6 of the Convention applied, since their civil rights had been determined by the Ombudsman’s decision. Moreover, since the decision deprived the company of its property, Article 1 of Protocol No. 1 was also engaged. A decision that was not entirely based on law would be contrary to both of these provisions. The scope for subjectivity in FOS decisions meant that they were unpredictable and arbitrary. Companies could not know how to regulate their behaviour so as to avoid complaints, or how to defend themselves where complaints were made against them.
Stanley Burnton LJ observed:
“45. A statutory provision is only incompatible with a Convention right if and to the extent that it necessarily involves infringing that right. It is not suggested that the ombudsman is not an independent and impartial tribunal. The scheme does not preclude the ombudsman from hearing cases in public, or from pronouncing his decision in public: whether and to what extent he may decide not to do so I consider below. And so the only question is whether the ombudsman scheme satisfies the requirements of the Convention as to the law to be applied to a dispute and as to the fairness of the applicable procedure.”
He then referred to the criteria of accessibility and precision set down in Sunday Times v. the United Kingdom (no. 1), 26 April 1979, Series A no. 30, and continued:
“47. Does the scheme established under the 2000 Act, interpreted in accordance with its natural meaning, comply with these requirements? In my judgment, it can and does. The Ombudsman is required by DISP 3.8.1 to take into account the relevant law, regulations, regulators’ rules and guidance and standards, relevant codes of practice and, where appropriate, what he considers to have been good industry practice at the relevant time. He is free to depart from the relevant law, but if he does so he should say so in his decision and explain why. The other matters referred to in this rule are matters that a court would take into account in determining whether a professional financial adviser had been guilty of negligence or breach of his contract with his client. Again, if the Ombudsman is to find an advisor liable to his client notwithstanding his compliance with all those matters, the Ombudsman would have to so state in his decision and explain why, in such circumstances, assuming it to be possible, he came to the conclusion that it was fair and reasonable to hold the adviser liable. In these circumstances, I consider that the rules applied by the Ombudsman are sufficiently predictable. All the matters listed in DISP 3.8.1 are formulated or ascertainable with sufficient precision. So far as guiding the conduct of financial advisers are concerned, provided that they comply with “the relevant law, regulations, regulators’ rules and guidance and standards, relevant codes of practice and, where appropriate, ... good industry practice”, they can be assured that they will not be liable to their client in the absence of some exceptional factor requiring a different decision. Lastly, the common law requires consistency: that like cases are treated alike. Arbitrariness on the part of the Ombudsman, including an unreasoned and unjustified failure to treat like cases alike, would be a ground for judicial review.”
He rejected the argument that firms were unable to know the principles on which FOS would decide complaints. The procedure followed meant that the Ombudsman’s provisional assessment was copied to the parties, who could indicate their disagreement with it and make further representations. Since that had been done in the present case, there was no unfairness.
HME argued that the Ombudsman should have accepted the request for an oral hearing. Stanley Burnton LJ considered that if the determination of the complaint involved the resolution of a dispute as to what had been said at the meetings, or if it could be sensibly argued that L would have taken the same course of action even if he had been advised differently, then the case for an oral hearing might have been substantial. However, the existence of contemporaneous records would normally make a hearing unnecessary. He stated:
“59. ... I have been unable to identify any issue as to HME’s advice to [L] that arguably required an oral hearing in order fairly to determine his complaint. Perhaps more importantly, [HME’s counsel] did not identify any such evidence. The advice given in meetings was the subject of Mr Pickering’s extensive notes, and was confirmed in correspondence. HME did not suggest that Mr Pickering’s notes were inaccurate. In any event, given the length of time between the meetings and [L’s] complaint, any such contention would have been highly unlikely to succeed. HME did not suggest that Mr Pickering had contradicted or modified orally the advice he had previously given in writing. In any event, the Ombudsman, sensibly in my view, considered that the written report provided by HME to [L] carried greater weight than information provided orally.
60. In relation to the issue of reliance, I think it obvious that if [L] had received the advice that the Ombudsman held he should have received, it is inconceivable that he would have removed his pension fund from the BA scheme. It would have been pointless to ask him whether he would have acted differently if differently advised: he undoubtedly would have answered affirmatively.”
He considered the Court’s judgment in Jussila v. Finland ([GC], no. 73053/01, ECHR 2006XIII and found a number of similarities with the facts of the present case: the purpose of the oral hearing was crossexamination, which was reasonably found to be unnecessary; the demands of efficiency and economy referred to in Jussila resembled the objective of the complaints scheme in the present case. There was therefore no unfairness about the Ombudsman’s decision not to hold a hearing. There had in any event been a public hearing before the Court of Appeal in the context of the judicial review proceedings, and this was available to any complainant or respondent who considered that the Ombudsman had made an unlawful decision.
The complaint that the Ombudsman’s decision had not been pronounced publicly was rejected for the same reason. The decision would be made public with the publication of the Court of Appeal’s judgment, which achieved the purpose of ensuring public scrutiny of FOS decisions, as required by Article 6 of the Convention.
Lord Justice Rix agreed with the judgment of Stanley Burnton LJ. He added some further observations on the rule of law and publicity. Regarding the latter, he said:
“90. Finally, I would like to say something about the matter of the FOS "register". This has been the subject of written submissions, but has not figured in oral argument, no doubt because the parties appreciated that it would not affect the outcome of this appeal. Nevertheless, it remains the case that the Act’s Schedule 17, at para 16, in providing for the enforcement of an Ombudsman’s money award in the county courts of England and Wales and by similar means in Northern Ireland and Scotland speaks of such an award "which has been registered in accordance with scheme rules". Thus it is a statutory requirement that the scheme rules provide for the registration of money awards. Accordingly, DISP 3.9.15 R requires the Ombudsman to keep a register: "The Ombudsman must maintain a register of each money award and direction made." In referring to directions, the scheme rules go beyond the statute. FOS seeks to comply with its rule by keeping an internal data base. It is not available to public inspection. I have my doubts as to whether such an internal data base amounts to a "register" properly so called. A register is an official list or record. It may be that it can be kept in any form, but I suspect that it needs to be open to public inspection. Since we have not heard oral argument on this matter, I merely refer to this point in passing.”
Permission to appeal to the House of Lords was refused on 30 October 2008.
The applicable primary legislation is the Financial Services and Markets Act, 2000. Section 225(1) of the Act reads:
“This Part provides for a scheme under which certain disputes may be resolved quickly and with minimum formality by an independent person.”
Section 228(2) provides:
“A complaint is to be determined by reference to what is, in the opinion of the Ombudsman”
Section 229 refers to the awards that an Ombudsman may make. These cannot exceed the monetary limit, which is set at GBP 100,000. Where the assessed loss is higher than this, the Ombudsman may recommend that the respondent pay the excess, but this is not binding on the firm.
Schedule 17 to the Act provides for the making of rules for the complaints procedure. These are referred to as DISP. The relevant DISP provisions that were in force at the time read as follows:
“DISP 3.8.1 R
’ rules and guidance and standards, relevant codes of practice and, where appropriate, what he considers to have been good industry practice at the relevant time.
DISP 3.2.12 R The parties will be informed of their right to make representations before the Ombudsman makes a determination. If he considers that the complaint can be fairly determined without convening a hearing, he will determine the complaint. If not, he will invite the parties to attend a hearing. No hearing will be held after the Ombudsman has determined the complaint.
DISP 3.2.13 R A party who wishes to request a hearing must do so in writing, setting out the issues he wishes to raise and (if appropriate) any reasons why he considers the hearing should be in private, so that the Ombudsman may consider whether the issues are material, whether a hearing should take place and, if so, whether it should be held in public or private.
DISP 3.2.14 G In deciding if there should be a hearing and, if so, whether it should be in public or private, the Ombudsman will have regard to the provisions of the European Convention on Human Rights.
DISP 3.10.1 R
(1) In dealing with any information received in relation to the consideration or investigation of a complaint, the Financial Ombudsman Service must have regard to the parties’ rights of privacy.
(2) Paragraph (1) does not prevent the Ombudsman disclosing information (either in full, or where he considers it necessary or appropriate under DISP 3.5.2R (2), in the form of an edited version or (where this is not practicable) a summary or description):
(a) to the extent that he is required or authorised to do so by law; or
(b) to the parties to the complaint; or
(c) in his determination; or
(d) at a hearing in connection with the complaint.”


ITEMID: 001-5359
LANGUAGEISOCODE: ENG
RESPONDENT: GBR
BRANCH: ADMISSIBILITY
DATE: 2000
DOCNAME: BROOK v. THE UNITED KINGDOM
IMPORTANCE: 4
CONCLUSION: Inadmissible
JUDGES: Nicolas Bratza
TEXT: The applicant is a British national, born in 1949 and living in Surrey, England.
A.
The facts of the case, as submitted by the parties, may be summarised as follows.
The applicant, who has run a company specialising in the research, design and manufacture of equipment for the broadcasting industry since 1967, wanted to set up a short wave radio station which would broadcast scientific, technological and media news. None of his proposed programmes had any political content, but were aimed at an audience interested in the technical side of radio. The BBC World Service has a short wave radio licence to broadcast in the United Kingdom and a few other independent stations are also licensed, for example, Voice of America.
The applicant wrote to the Foreign and Commonwealth Office on 5 August 1986 (having been told on the telephone that this was the relevant department) to apply for a short wave radio licence. Over the next ten years, the applicant wrote about 150 letters in pursuit of his licence to the Radio Authority, the Home Office and other relevant entities. The Government's line of reply was to acknowledge the applicant's interest without giving any definitive response to his request. On 18 March 1997, the Department of National Heritage wrote to the applicant saying:
"...the Department continues to consider the broadcasting policy issues which your proposal for the licensing of short wave frequencies has raised.
I am sorry that there has been such a long interval since your original proposal was received and that you still await a decision. ...
While I am sorry that the resolution of other domestic broadcasting policy issues have been given greater priority than your request to use short wave frequencies, I am not in a position to give you a firm decision on your proposal. The Department is, however, looking at your ideas and we are discussing them with the Radiocommunications Agency which has overall responsibility for the use of the radio spectrum.
I shall write to you again when a decision has been taken."

Following this letter, the applicant applied for judicial review of the failure by the Department of National Heritage to take a final decision. In his affidavit to the High Court, the applicant explained that setting up a station would be a much more difficult prospect now and he would no longer wish to do so, but that this was only as a result of the Government's refusal to reach a clear decision at an early stage. Leave to apply was refused by the High Court on 26 June 1997, there being no arguable basis for judicial review. Mr Justice Tuckey, refusing leave, observed:
"Whilst I can understand your frustration at the failure of the authorities concerned to consider your proposals more favourably and speedily to the point where (as I understand it) it is now really too late to do anything, I am afraid I can see no arguable basis for judicial review."
B. Relevant domestic law and practice
The Radiocommunications Agency (“the Agency”), has overall responsibility for the management of the civil electromagnetic spectrum in the United Kingdom, and an obligation to ensure that it is used efficiently. The Agency represents the United Kingdom at the International Telecommunications Union (“ITU” – an agency of the United Nations), who order the way in which the radio spectrum can be shared effectively between nations, such that one country’s transmissions do not interfere with those of another. The Agency also has responsibility for deciding how the civil use of the radio spectrum in the United Kingdom is divided between different users, such as broadcasting, telecommunication, public safety services (Police, Ambulance etc) and hobby radio, etc.
A quantity of the radio spectrum is allocated for radio broadcasting purposes. This is in turn divided by the Secretary of State for Trade and Industry (under the provisions of the Broadcasting Acts of 1990 and 1996) between the BBC (the public service broadcaster) and the Radio Authority (“the Authority”). The Authority is a body established by statute (section 83 of the Broadcasting Act 1990), and is responsible for licensing and regulating independent radio services within the United Kingdom. It has statutory duties to increase choice for different tastes and interests, to encourage range and diversity and to ensure fair and effective competition in the provision of sound broadcasting.
All radio transmissions require either a licence or a licence exemption under the Wireless Telegraphy Act 1949 (as amended) and, for commercial broadcasts, a licence under the Broadcasting Acts of 1990 and 1996. Licences are awarded by the Authority under open competition. In general terms national licences are considered on the basis of the highest cash bid, whereas the award of local licences takes into account the needs of the community to be served. The Authority seeks the agreement of the BBC and the Agency, so that neither United Kingdom broadcasting services nor non-broadcasting users of the radio spectrum will be adversely affected. In addition the agreement of neighbouring countries is sought. After these negotiations, the Agency is able to issue a licence under the Wireless Telegraphy Act 1949. This system of licensing does not extend to short wave frequencies.
Under section 97 of the Broadcasting Act 1990, it is a criminal offence to provide an independent radio service without an appropriate licence.


ITEMID: 001-85561
LANGUAGEISOCODE: ENG
RESPONDENT: HUN
BRANCH: CHAMBER
DATE: 2008
DOCNAME: CASE OF GŐGÖS v. HUNGARY
IMPORTANCE: 4
CONCLUSION: Violation of Article 6 - Right to a fair trial
JUDGES: András Sajó;Françoise Tulkens;Ireneu Cabral Barreto;Nona Tsotsoria;Vladimiro Zagrebelsky
TEXT: 4. The applicant was born in 1948 and lives in Slovenské Darmoty, Slovakia.
5. On 15 June 1992 some of his relatives brought an action against the applicant seeking termination of their common ownership of a house. The applicant brought counterclaims which he subsequently modified several times.
6. In the course of the first-instance proceedings, the applicant challenged, in vain, the Budapest II/III District Court for bias, arguing that the President of the court – who was not sitting on the bench hearing the case – and the plaintiffs’ lawyer were sisters-in-law.
7. At the hearings on 20 October 1992 and 14 March 1996 Judge E., who was in charge of the case, instructed the plaintiffs to complete their action in a comprehensive form. Subsequently, the case was assigned to Judge H.
8. After having held several hearings and obtained the opinions of three experts, on 3 May 1999 the District Court ordered the auction of the property at issue and determined the parties’ respective shares of the sale price.
9. The applicant appealed to the Budapest Regional Court. In the course of the second-instance proceedings, his two further motions for bias – submitted against the Regional Court’s bench hearing the case – were unsuccessful.
10. After having obtained a further expert opinion, on 12 December 2000 the Regional Court upheld in essence the District Court’s judgment. It finally set the minimum price for the house in question at 27 million Hungarian forints (HUF).
11. On 25 February 2002 execution was ordered. The house in question was auctioned for HUF 41.8 million on 25 April 2002.
12. On 26 November 2003 the Supreme Court dismissed the applicant’s petition for review. The decision was served on the applicant in February 2004.
VIOLATED_ARTICLES: 6


ITEMID: 001-110215
LANGUAGEISOCODE: ENG
RESPONDENT: NLD
BRANCH: ADMISSIBILITY
DATE: 2012
DOCNAME: BINGOL v. THE NETHERLANDS
IMPORTANCE: 3
CONCLUSION: Inadmissible
JUDGES: Alvina Gyulumyan;Corneliu Bîrsan;Egbert Myjer;Ineta Ziemele;Josep Casadevall;Luis López Guerra;Mihai Poalelungi
TEXT: 1. The applicant, Mr Murat Bingöl, is a Turkish national who was born in 1966 and lives in The Hague. He was represented before the Court initially by Mr N.J.F. Snoek, a lawyer practising in Ulvenhout (later in Amstelveen), and subsequently by Mr A. Verbruggen, a lawyer practising in The Hague.
2. The Turkish Government, although informed by the Registrar of their right under Article 36 § 1 of the Convention to participate in the proceedings, did not indicate that they wished to do so.
3. The facts of the case, as submitted by the parties, may be summarised as follows.
4. The applicant is a businessman with a number of projects in The Hague. In 2001 several of his properties were expropriated to make way for development projects planned by the municipality (gemeente). As compensation for the expropriated properties the applicant was offered the lease of a new building on favourable terms, which he subsequently indicated would be used as a party centre (partycentrum – a location in which space is made available for private social events, usually with the offer of catering) and sports facility. By letter of 12 December 2001 the municipality notified the applicant that it was his responsibility to obtain the licences required.
5. At the end of 2002 the applicant received possession of the party centre and it was opened for business in the course of 2003. The lease agreement between the applicant and the municipality was signed in October 2003. It provided, among other things, that the applicant must obtain the licences required for his business.
6. The applicant submitted a request for an operating licence (exploitatievergunning) to the Burgomaster (Burgemeester) of The Hague on 8 January 2004, after having been reminded by the municipality.
7. As the applicant had previously been refused a licence under the Licensing and Catering Act (drank- en horecavergunning) in 2001 for another of his businesses because of criminal convictions including for employing illegal aliens, the Burgomaster requested advice pursuant to section 7 § 3 of the Public Administration (Probity Screening) Act (Wet bevordering integriteitsbeoordelingen door het openbaar bestuur – referred to hereafter by its acronym “BIBOB Act”).
8. On 2 December 2004 the National Agency for Public Administration Probity Screening (landelijk bureau bevordering integriteitsbeoordelingen door het openbaar bestuur – “the BIBOB Agency”) recorded in its report the foll owing “criminal offences and suspicious conduct”:
employing foreign nationals without the requisite work permit;
providing housing to illegal aliens;
convictions, settlement penalties (transacties), official reports (processen verbaal) and notations on incidents (mutaties) concerning minor hygiene and environment related offences (overtredingen);
problems with safety regulations in several buildings the applicant had rented or let;
an unusual transaction of EUR 5,000 registered in the name of the applicant.
Accordingly the BIBOB Agency advised the Burgomaster that there was a serious danger that the applicant would use the requested licence either to enjoy the proceeds of crime or to commit criminal offences.
9. On 22 December 2004 the Burgomaster notified the applicant of his intention (voornemen) to reject the request for an operating licence and allowed the applicant to submit written comments (zienswijze) regarding his proposed decision.
10. In his written comments the applicant explained that he had been convicted of employing illegal Turkish bakers in his bakery. There had been no one else available at the time capable of that traditional work and he would have gone bankrupt had he not employed them. The problem had been solved since and his last conviction had been in 2000. He further stated that he had not been aware that illegal aliens had been living in his houses (especially since some of the houses were jointly owned by his brother and mother as well as by himself) and all he had done had been to let or sublet them to third parties, without any knowledge of who was actually living in them. The hygiene and environment-related offences had involved such matters as not using the correct proportion of water in bread dough, a faulty exhaust and a defective waste disposal system, and had been caused by inexperienced personnel and concerned very minor offences. The breaches of the safety regulations had likewise all occurred several years previously and in the main had concerned minor issues such as defective wiring caused by persons renting his apartments trying to install radio and television cables. The allegedly unusual transaction had in fact concerned an uncle in Turkey who had worked for him and the money was in respect of pension benefits his uncle received in the Netherlands. Finally, the applicant submitted that none of the issues mentioned would arise in the party centre as he would only be supplying customers with a room to rent and would therefore not use any personnel of his own as the customers would be responsible for cleaning the premises.
11. On 8 April 2005 the Burgomaster rejected the applicant’s written comments and refused to grant him an operating licence. He also ordered the party centre to be closed.
12. On 26 April 2005 the applicant lodged an objection (bezwaar) against the Burgomaster’s decision. In his objection he argued that his previous convictions for employing illegal aliens had arisen from an immediate need for Turkish bakers to keep his bakery in business. As he had already indicated, that problem had now been solved. Furthermore, any alleged financial benefits he had reaped had no bearing on the current operation of the party centre. He also argued that it was unfair to impute to him events such as subletting to illegal aliens, those being transactions which had taken place in apartments operated by his brother and the latter’s business partner Y and about which he had known nothing. Nor, for that matter, could he have been aware of what his tenants did when he was not there. Furthermore, the applicant submitted that quite obviously a party centre would not be used to house illegal aliens.
13. On 1 August 2005 the Burgomaster rejected the applicant’s objection. He considered that, given his history and in accordance with the BIBOB Act, there was a serious danger that the applicant would use the requested licence to enjoy the proceeds of crime or to commit criminal offences. He found that the BIBOB Agency’s report showed that the applicant had systematically, over a long period of time, provided housing and work to illegal aliens and thereby gained financial reward. There were therefore reasonable grounds to fear that the applicant would use the party centre for the same purposes.
14. On 14 September 2005 the applicant lodged an appeal with the Regional Court (rechtbank) of The Hague against the Burgomaster’s decision. He submitted that the provisions of the BIBOB Act violated Article 6 § 2 of the Convention as his request for an operating licence had been rejected to a large extent on the basis of facts and suspicions which had never led to a criminal conviction. In particular, the applicant argued that although he had never been convicted of housing illegal aliens, the suggestion that he had done so had been a weighty factor in the Burgomaster’s decision to reject his request for a licence. Furthermore, the aliens had been housed by tenants who had sublet the apartments without his knowledge and he had put an end to the practice as soon as he had been made aware of it. He also claimed that he could not be held responsible for events that had taken place in apartments belonging to his brother. Finally he submitted that the Burgomaster had also taken into account anonymous tip-offs from illegal aliens visiting the party centre even though that information had never led to any arrest, let alone a conviction.
15. On 3 March 2006 the Regional Court dismissed the applicant’s appeal. It considered that the serious danger referred to by the BIBOB Agency in its report was based mainly on the commission of criminal offences and the use of the proceeds of such offences. It had attached only minor importance to the environmental and safety related offences. The court therefore considered that it had been reasonable for the Burgomaster to conclude that the requested licence would be used by the applicant either to enjoy the proceeds of crime or to commit criminal offences. It held that in the light of the BIBOB Agency’s advice there were sufficient reasons to conclude that the applicant and his brother worked so closely together as to make it legitimate to hold the applicant accountable for his brother’s activities. It further found that the illegal aliens had been present in premises above or next to a building the applicant owned and frequently visited, so that it was unlikely that he had been unaware of their presence. The court rejected the applicant’s argument that these previous events would have no bearing on the activities for which the applicant required the licence as it considered that the Burgomaster had rightly assumed that the licence would simply be used to enable the applicant to carry on as before. The fact that most of the offences had been committed some years previously was irrelevant as the applicant had been a recidivist. Finally the court considered that the provisions of the BIBOB Act did not violate Article 6 § 2 as they did not entail any criminal procedure for the purpose of establishing a person’s guilt of a criminal offence. It had thus been reasonable for the Burgomaster to refuse the applicant the requested licence.
16. In accordance with the judgment of the Regional Court, the Burgomaster notified the applicant on 13 March 2006 that the party centre would be closed pursuant to his letter of 8 April 2005.
17. On 18 April 2006 the applicant lodged an appeal to the final appellate court: the Administrative Jurisdiction Division of the Council of State (Afdeling bestuursrechtspraak van de Raad van State; “the Administrative Jurisdiction Division”). In his appeal he argued, inter alia, that the refusal of a licence had a punitive character for the purposes of Article 6 of the Convention as, even though he had not been convicted of any criminal offences for a number of years, he had not been allowed to continue with his business activities. As he had not even been charged with a number of the offences mentioned in the BIBOB Agency’s and Burgomaster’s reports, previous events could in practice be held against him for years to come; accordingly, the provisions of Article 6, and in particular the presumption of innocence, had, in his submission, been violated. Specifically, he had not enjoyed any of the rights of the defence mentioned in Article 6 and had basically been handed a life-long ban on conducting his business. The applicant noted that no criminal offences had ever been committed at the party centre. He further argued that the fact that he had a business partnership with his brother could not mean that all his brother’s acts (even those performed outside the partnership) were attributable to the applicant as well. The applicant also presented further arguments as to why there could be no serious danger that the requested licence could lead to his employing illegal aliens as the entire idea of the party centre was that customers would organise their own festivities.
18. On 22 November 2006 the Administrative Jurisdiction Division rejected the applicant’s appeal. Its reasoning included the following:
“2.4. [The applicant] also maintains his statement that the BIBOB Act runs counter to the presumption of innocence guaranteed by Article 6 § 2 of the Convention ...
2.4.1. The Regional Court has rightly held, referring to the drafting history [of the BIBOB Act], that Article 6 § 2 of the Convention only applies to criminal or comparable proceedings and that the instruments offered by the BIBOB Act fall outside its scope, already because advice under the BIBOB Act and the decision which the government body concerned must base, inter alia, on that do not purport to establish anyone’s guilt of a criminal offence. According to the standards developed by the European Court of Human Rights to determine whether there is a ‘criminal charge’ within the meaning of Article 6 of the Convention the nature of the norm transgressed, the circle of persons to whom the norm is addressed and the purpose, the nature and the seriousness of the sanction risked through the transgression. It is also relevant whether the enforcement of the norm transgressed has been labelled criminal in domestic law. Application of the ground of refusal set out in section 3 of the BIBOB Act is intended to prevent government organs from facilitating criminal activities by unwittingly and unintentionally issuing licences, providing subsidies and granting government contracts. Refusal [of a licence] does not purport to impose suffering in order to encourage behaviour in conformity with the norm. No punitive sanction is therefore in issue. It makes no difference in this respect that [the applicant] perceives the refusal of the licence in this sense. It must be found, as the Regional Court did, that no criminal charge is in issue and the presumption of innocence is irrelevant to the case.
In implementing section 3 of the BIBOB Act the Burgomaster has a responsibility of his own under administrative law, which is unrelated to the responsibility of the government bodies charged with prosecution and punishment. ...”
The Administrative Jurisdiction Division went on to reject the applicant’s argument that the offences in question had been committed in the distant past and should have had no bearing on his request for an operating licence. It also noted the importance of action to prevent the employment of illegal aliens. The Administrative Jurisdiction Division noted that the Regional Court had correctly interpreted the business partnership of the applicant and his brother as well as the consequences of the partnership for the applicant. Finally, it concluded that it had been reasonable for the Burgomaster to conclude that the criminal offences had been committed in pursuit of activities that could also be exploited if the licence was issued.
19. The BIBOB Act entered into force on 1 June 2003. According to the explanatory memorandum to the Bill (Memorie van Toelichting; House of Representatives, no. 26, 883, 1999-2000 session, no. 3), its main purpose is to create an effective instrument to help administrative bodies avoid unwittingly facilitating criminal activities, such as the illegal transport of goods.
20. Pursuant to section 3 of the BIBOB Act, an administrative body can refuse a request for a licence or revoke a previously granted licence if there exists a serious danger that the licence will be used either to commit criminal offences or to enjoy the proceeds of crime.
21. Section 3 of the BIBOB Act reads:
“1. In so far as administrative authorities have acquired such power by or pursuant to an Act of Parliament they may refuse to make a requested decision or may cancel a decision that has been made if there is a serious danger that the decision could be used, among other things:
(a) to enjoy proceeds obtained or yet to be obtained from criminal offences that have been committed, or
(b) to commit criminal offences.
2. In so far as the serious danger referred to in subparagraph 1, opening words and (a) is concerned, the degree of danger is to be determined on the basis of:
(a) facts and circumstances that indicate or give rise to a reasonable suspicion that the person concerned is connected with criminal offences as referred to in subparagraph 1 (a);
(b) in the event of suspicion, the level thereof;
(c) the nature of the connection; and
(d) the amount of the proceeds obtained or yet to be obtained.
3. In so far as the serious danger referred to in subparagraph 1, opening words and (b) is concerned, the degree of danger is to be determined on the basis of:
(a) facts and circumstances that indicate or give rise to a reasonable suspicion that the person concerned is connected with criminal offences that have been committed in the course of activities that correspond or are related to activities for which the decision has been requested or given;
(b) in the event of suspicion, the level thereof;
(c) the nature of the connection; and
(d) the number of criminal offences committed.
4. The person concerned is deemed to be connected with criminal offences as referred to in subparagraphs 2 and 3 if:
(a) he has himself committed these criminal offences;
(b) he is or has been directly or indirectly in charge of, has or has had control over or provides or has provided capital to a legal entity within the meaning of Article 51 of the Criminal Code (Wetboek van Strafrecht) [i.e. a body possessing legal personality, a partnership, etc.] which has committed these criminal offences; or
(c) another person has committed these criminal offences and this person is or has been directly or indirectly in charge of, has or has had control over or provides or has provided capital to the person concerned or is in a joint-business venture with him.
5. The refusal or cancellation referred to in subparagraph 1 shall take place only if this is proportionate to:
(a) the degree of danger, and
(b) in so far as the serious danger referred to in subparagraph 1 (b) is concerned, the seriousness of the criminal offences.
6. Administrative authorities shall have the same power of refusal or cancellation as referred to in subparagraph 1 if facts and circumstances indicate or give rise to a reasonable suspicion that a criminal offence has been committed in order to obtain the decision applied for or made. The refusal or cancellation shall take place only if it is at least proportionate, in the event of suspicions, to the level thereof and to the seriousness of the criminal offence.
7. If no serious danger, as referred to in subparagraph 1, exists, the administrative authority may, in the case of a lesser degree of danger, attach conditions to the decision. Such conditions shall be designed to remove or limit the danger in question.”
22. In accordance with Chapter 3 of the BIBOB Act the above procedure is executed by a separate agency, the BIBOB Agency, at the request of an administrative body, by consulting a number of public and classified databases as well as the criminal records of the person requesting the licence.
23. In the explanatory memorandum to the BIBOB Act, express reference is made to the provisions of Article 6 of the Convention. It was considered that any person whose request for a licence was rejected or whose licence was revoked under the BIBOB Act had the normal avenues of appeal available under the General Administrative Law Act (Algemene wet bestuursrecht), and that this complied with the provisions of Article 6 § 1. The memorandum further stated that Article 6 § 2 was not applicable to the procedures of the BIBOB Act as it only applied to cases where a person was liable to have criminal charges brought against him and had to be considered innocent until proven guilty according to law whereas the conclusions of the BIBOB Agency and subsequent decisions of the administrative body were not intended to establish anyone’s guilt of a criminal offence.
24. The judgment of the Administrative Jurisdiction Division of the Council of State concerning the present application was its first ruling on the application of the BIBOB Act.


ITEMID: 001-60537
LANGUAGEISOCODE: ENG
RESPONDENT: POL
BRANCH: CHAMBER
DATE: 2002
DOCNAME: CASE OF ERYK KAWKA v. POLAND
IMPORTANCE: 3
CONCLUSION: Violation of Art. 5-3;Non-pecuniary damage - finding of violation sufficient;Costs and expenses award - Convention proceedings
JUDGES: Christos Rozakis
TEXT: 8. On 13 January 1996 the applicant was arrested by the police and brought before the Gliwice District Prosecutor (Prokurator Rejonowy). On the same day, the prosecutor charged the applicant with robbery and detained him on remand because there existed a reasonable suspicion that he had committed the offence and because of the serious nature of that offence.
9. On 5 February 1996 the applicant sent a letter to the Gliwice District prosecutor, asking to be informed of the reasons for his detention. That letter was deemed to be an application for release. It was examined as such and rejected on 12 February 1996.
10. On 11 March 1996 the applicant was indicted on the charge of robbery.
11. On 17 June 1996 the Gliwice District Court convicted the applicant as charged and sentenced him to four years and six months' imprisonment and three years' deprivation of his civic rights.
12. The relevant domestic law is described in the judgment Niedbała v. Poland, no. 27915/95, §§ 18-20 and 24-31, 4 July 2000, unreported.
VIOLATED_ARTICLES: 5
VIOLATED_PARAGRAPHS: 5-3


ITEMID: 001-57644
LANGUAGEISOCODE: ENG
RESPONDENT: CHE
BRANCH: CHAMBER
DATE: 1990
DOCNAME: CASE OF HUBER v. SWITZERLAND
IMPORTANCE: 2
CONCLUSION: Violation of Art. 5-3;Non-pecuniary damage - finding of violation sufficient;Costs and expenses award - domestic proceedings;Costs and expenses award - Convention proceedings
JUDGES: C. Russo;J.A. Carrillo Salcedo;N. Valticos;R. Pekkanen
TEXT: 10. Mrs Jutta Huber, a Swiss national, resides in Zürich.
A District Attorney (Bezirksanwalt) of Zürich, Mr J., issued instructions to the police (Vorführungsbefehl) requiring her to be brought to give evidence as a witness on 10 August 1983. He did so in connection with a criminal investigation concerning two persons - Mr K. of Hamburg and Mr B. of Zürich - suspected of living on the earnings of prostitution and of procuring.
11. On 11 August 1983 the applicant was taken by the Zürich municipal police to the District Attorneys’ Office (Bezirksanwaltschaft) in that town, where she was questioned as a witness by District Attorney J., although no summons to appear as a witness (Vorladung zur Zeugeneinvernahme) had been issued. In answer to his questions, she admitted making a living from prostitution, but maintained that she knew Mr K. and Mr B. only by name and that she did not pass on to them any of her earnings.
12. On concluding his examination, the District Attorney signed a detention order (Verhaftsverfügung) remanding the applicant in custody on grave suspicion of having given false evidence.
According to this order, members of the "Hell’s Angels" of Zürich and Hamburg were strongly suspected of having brought to Zürich German prostitutes, some of whom had married Swiss nationals who received payment for this. The women were then encouraged, partly under threat, to engage in prostitution under the protection of the "Hell’s Angels", who were paid a part of the proceeds in exchange. There were strong grounds for supposing that Mrs Huber was one of these women. When appearing as a witness, she had denied any contact with the "Hell’s Angels", which appeared unlikely to be true.
The order referred in particular to the danger of collusion and the possibility that evidence might be tampered with. It stated further that the applicant could appeal within 48 hours to the Public Prosecutor’s Office (Staatsanwaltschaft) of the Canton of Zürich.
13. Mrs Huber was released on 19 August 1983.
14. On 12 October 1984 District Attorney J. instituted proceedings before the Judge in Criminal Cases (Einzelrichter in Strafsachen) at the Zürich District Court (Bezirksgericht). His indictment (Anklageschrift) alleged that the applicant had given false evidence in judicial proceedings and, as a possible additional charge (eventualiter), that she had been an accessory to a criminal offence. He sought the imposition on Mrs Huber of a fine of 5,000 Swiss francs.
The trial took place on 10 January 1985, after the indictment had been accepted (zugelassen, Article 165 of the Zürich Code of Procedure - Strafprozessordnung, "StPO"); the District Attorney was not present. The accused’s lawyer stated on that occasion (translation):
"In this case we are confronted in the first place with a violation of ... Article 5 para. 3 (art. 5-3) of the European Convention for the Protection of Human Rights and Fundamental Freedoms which provides that anyone who is arrested or detained in accordance with the provisions of Article 5 para. 1 (c) (art. 5-1-c) ... must be brought promptly before a judge or other officer authorised by law to exercise judicial power. This never happened in the present case. Indeed the person who remanded the accused in custody, District Attorney J., is now also prosecutor [Ankläger]."
15. On 10 January 1985 the District Court acquitted Mrs Huber on the ground that she had never been validly summoned to appear as a witness (vorgeladen zur Zeugeneinvernahme), which made her testimony unlawful and inadmissible. The judgment did not refer to the defence argument based on Article 5 para. 3 (art. 5-3) of the Convention.
16. On appeal (Berufung) by the prosecution, the Court of Appeal (Obergericht) of the Canton of Zürich fined the applicant 4,000 Swiss francs for attempting to give false evidence.
In its judgment of 13 September 1985, the appeal court found that the accused’s testimony was not unlawfully obtained and could therefore be used in evidence. In addition, it referred to the monitoring of telephone conversations between Mrs Huber and Mr K., carried out by the German authorities who had communicated the transcript thereof to the Swiss judicial authorities in accordance with the system of mutual assistance in criminal matters. The court inferred from this evidence that the applicant in fact knew Mr K. and Mr B.
On the question of the issue raised under Article 5 para. 3 (art. 5-3) of the Convention, the appeal court said (translation):
"Finally, ... the appellant’s lawyer’s objection that, on her arrest and in contravention of Article 5 para. 3 (art. 5-3) of the Convention, the accused was not brought before a judge or other officer authorised by law to exercise judicial power is unfounded. For, according to the case-law of the Federal Court, the Zürich District Attorney also exercises judicial power within the meaning of Article 5 para. 3 (art. 5-3) of the Convention at the stage of the investigation (ATF [Arrêts du Tribunal fédéral suisse] 102 Ia 179)."
17. On 1 July 1986 the Court of Cassation (Kassationsgericht) of the Canton of Zürich dismissed Mrs Huber’s application for a declaration of nullity (Nichtigkeitsbeschwerde).
It took the view that the submission relating to Article 5 para. 3 (art. 5-3) could not be taken into account in this instance. If Mrs Huber had wished to challenge the District Attorney on this point, she should have done so during the investigation.
18. On 22 August 1986 Mrs Huber lodged a public-law appeal with the Federal Court. She complained, inter alia, that, notwithstanding Article 5 para. 3 (art. 5-3), the same District Attorney had both ordered her detention on remand and drawn up the indictment.
19. The Federal Court dismissed the appeal by a judgment of 24 November 1986, which was served on 18 December. As to the complaint based on Article 5 para. 3 (art. 5-3), it held as follows (translation):
"As the appellant has long since been released from detention on remand, she no longer has a current, practical interest in a ruling on [her] complaint, for which reason the Court can no longer deal with it. The objection would in any event be unfounded since both the Federal Court (ATF 102 Ia 179 et seq.) and the European Court of Human Rights (the Schiesser judgment of 4 December 1979) have declared that at the stage of the investigation the Zürich District Attorney qualifies as an ‘officer authorised by law to exercise judicial power’ within the meaning of Article 5 para. 3 (art. 5-3) of the Convention."
20. The Canton of Zürich is divided into eleven districts, each of which has a District Attorneys’ Office with one or more Attorneys. The status and powers of District Attorneys were laid down in the Courts Act of 13 June 1976 (Gerichtsverfassungsgesetz, "GVG"), which came into force on 1 January 1977 and which in substance re-enacted the provisions of an Act of 29 January 1911.
Ordinary District Attorneys are elected by universal suffrage for a term of office of four years (section 80 GVG). If necessary, the Cantonal Government appoints Special District Attorneys for a specified period (sections 81 and 87 GVG). Both Ordinary and Special District Attorneys are subordinate to the Principal Public Prosecutor who in turn comes under the authority of the Department of Justice and the Government (Regierungsrat) of the Canton of Zürich.
21. District Attorneys carry out three different functions.
22. The investigation (instruction) of criminal cases comes within the competence of the prosecuting authorities (section 73 GVG). The District Attorney conducts the investigation except in those cases where it is entrusted by law to the Principal Public Prosecutor or a judge (Article 25 StPO).
23. The District Attorney may make a detention order (Verhaftsbefehl - Article 55 StPO), the grounds for which he must state. He has to hear an arrested suspect within 24 hours (Article 64 StPO). During this first interrogation, at which the suspect’s lawyer is not normally present, the suspect must be clearly informed of the reasons prompting the suspicions held against him (Article 65 StPO) and of the existence of a right of appeal against the order (1956 Circular from the Public Prosecutor’s Office). Detention on remand ordered by the District Attorney may not exceed 14 days; this period may be extended by the President of the District Court or, in cases coming within the jurisdiction of the Assize Court, the President of the Indictments Division of the Court of Appeal (Article 51 StPO).
24. In carrying out the investigation, the District Attorney is under a duty to establish both incriminating and exonerating evidence with equal care (Article 31 StPO).
25. The District Attorney is the prosecuting authority before the "Judge in Criminal Cases" and before the District Courts in cases concerning petty offences and misdemeanours; for the higher cantonal courts (the Court of Appeal and the Assize Court - section 72 GVG), this function is performed by the Principal Public Prosecutor.
26. Unless he finds that there is no case to answer, the District Attorney, or, depending on the seriousness of the offence, the Principal Public Prosecutor, must institute the main proceedings (Hauptverfahren) by drawing up the indictment (Article 161 StPO). In preparing the indictment, he has to take account of both incriminating and exonerating evidence (Article 178 para. 2 StPO), without setting out the grounds of suspicion or any legal considerations (Article 162 para. 3 StPO).
The President of the District Court, or the President of the Indictments Division of the Court of Appeal, as the case may be, decides whether to accept or reject the indictment (Article 165 StPO).
27. Before the trial court, the District Attorney has the status of a party in the proceedings (Article 178 para. 1 StPO). He assumes the role of prosecuting authority, but is not required to attend the hearing unless the sentence sought exceeds eighteen months’ imprisonment or additional investigative measures are ordered.
28. Finally, the District Attorney is empowered to issue a punishment order (Strafbefehl) if the accused has admitted his guilt and if a fine (Busse) or a prison sentence of not more than one month is deemed sufficient (Article 317 StPO); however, the person concerned is entitled to enter an objection (Einsprache) to the punishment order, as is the Principal Public Prosecutor (Article 321 StPO).
29. The combination of the functions of investigation and prosecution has given rise to case-law - at cantonal and federal level - which has recently been confirmed.
30. In a judgment of 13 June 1988 (Ante Djukic gegen Staatsanwaltschaft des Kantons Zürich), the Cantonal Court of Cassation stated as follows (translation):
"In this connection, the Federal Court has held that the District Attorney of the Canton of Zürich exercises judicial power (ATF 102 Ia 180, confirmed by the European Court of Human Rights, Publications of the European Court of Human Rights, Series A no. 34, ...; see also ATF 107 Ia 254). However, the appellant considers ... that reference to these precedents is not relevant as in the instant case the District Attorney who had drawn up the indictment was the same as the one who had ordered the arrest.
This complaint is unfounded. What is decisive is whether at the time of the arrest the decision was taken by an official who satisfied the requirements of Article 5 para. 3 (art. 5-3) of the European Convention on Human Rights in other words by an officer who exercised judicial power. This question has been answered in the affirmative by the eminent courts referred to above. This finding that the functions discharged by that officer are compatible with the provisions of the Convention cannot subsequently be called in question on the sole ground that, once the investigation has been completed, the District Attorney assumes the role of prosecuting authority. The status of this officer at the time of and in relation to the decision to arrest remains the same, and the arrest, initially regarded as being lawful, cannot subsequently become unlawful on this sole ground. Furthermore, it is only natural that the District Attorney, as the investigating authority and acting within his powers, should draw up an indictment after the investigation has been completed if he considers that he possesses sufficient evidence of the accused’s guilt. Nor can it readily be seen what the accused would gain if the indictment had to be drawn up by an officer other than the District Attorney who, at the beginning of the investigation, had ordered his arrest. In other words, as far as Article 5 para. 3 (art. 5-3) of the Convention is concerned, the fact that the officer who ordered the arrest is the same as the officer who drew up the indictment is not decisive."
31. On a public-law appeal lodged against the judgment cited in the preceding paragraph, the Federal Court held as follows on 14 March 1989 (translation):
"It has to be recognised that it is possible - as the instant case demonstrates - that the District Attorney may subsequently have occasion to draw up the indictment and even to put the prosecution case before the court. The mere fact that this possibility exists is not, however, decisive in this respect. Firstly, the eventuality cannot put in question or negate the Attorney’s independence from the parties at the time of an arrest. As has been shown, it is far more a matter of looking at the position as it stands at the time when the detention is ordered. Secondly, the possibility in question was held not to be decisive by the European Court in its judgment in the Schiesser case. In that case it could also have happened that the District Attorney subsequently had to draw up the indictment, since the jurisdiction of the Public Prosecutor’s Office at the stage of beginning the investigation or at the time of the arrest had not been established. This eventuality did not, however, prevent the European Court from finding that there had been no breach of Article 5 para. 3 (art. 5-3) of the Convention in the Schiesser case. That fact likewise shows that the relevant officer’s independence and impartiality must be considered exclusively at the time of the arrest and not in the light of the mere possibility that he may play a role later in the proceedings and draw up the indictment."
32. In 1989, 108 District Attorneys in the Canton of Zürich dealt with 17,647 investigations, of which 20.3% resulted in an indictment, 33.8% in the case being discontinued, 42.2% in a punishment order and 3.7% in the referral of the case to a higher court.
33. The number of cases in which the District Attorney personally conducted the prosecution in court does not appear in the statistics, but according to the Government it is very low.
VIOLATED_ARTICLES: 5
VIOLATED_PARAGRAPHS: 5-3


ITEMID: 001-23856
LANGUAGEISOCODE: ENG
RESPONDENT: BGR
BRANCH: ADMISSIBILITY
DATE: 2004
DOCNAME: CAMBERROW MM5 AD v. BULGARIA
IMPORTANCE: 4
CONCLUSION: Inadmissible
JUDGES: Christos Rozakis
TEXT: The applicant, Camberrow MM5 AD, is a company with registered office in the village of Zeleni Dol, the Blagoevgrad region. It held approximately 98% of the shares of Dobrudjanska Commercial Bank AD (“DCB AD” or “the bank”), a bank with registered office in Dobrich. The applicant was represented before the Court by Mr Y. Yankov and Mr F. Martineau, lawyers practising in Sofia and Paris respectively.
On 23 September 1996 BNB found that as of 31 August 1996 DCB AD's capital adequacy had been minus 54.06%, which was significantly below the level set forth in the Banks and Credit Business Act 1992. The fact that the capital adequacy of the bank was negative indicated that the bank's riskweighted assets significantly exceeded the amount of its capital base. The bank experienced durable difficulties to perform its obligations on the date of their maturity, as evidenced by the high number of noncompleted payments. For a prolonged period the bank had not had enough liquid funds to perform its obligations to pay. For the period after 2 September 1996 the bank had had waiting payments every day. As of 20 September 1996 these payments had been 5,416 amounting in total to 587,872,561.76 old Bulgarian levs (“BGL”) [On 5 July 1999 the Bulgarian lev was denominated. One new Bulgarian lev (“BGN”) equals 1,000 old Bulgarian levs (“BGL”)]. Thus, BNB was of the opinion that there was a risk of DCB AD becoming insolvent within the meaning of section 64(1) and (2) of the Banks and Credit Business Act 1992. Therefore BNB placed the bank under special supervision („особен надзор“). It removed its board of directors from office and appointed special administrators („квестори“) to act in its place. It also limited the bank's activities, prohibiting it from taking deposits, extending loans, dealing with commercial papers, dealing with foreign currency and precious metals, making guarantees, effecting noncash payments, clearing cheques, acting as a stock broker and carrying out factoring operations. It also prohibited the bank to pay dividends and to dispose of its assets.
DCB AD did not seek judicial review of this decision.
On 10 November 1996 BNB petitioned the Dobrich Regional Court to open bankruptcy proceedings against DCB AD. The bank, which was respondent in these proceedings, was represented by the special administrators previously appointed by BNB.
On 2 September 1997 BNB found that during the period of special supervision, which had expired on 1 September 1997 (i.e. two months after the entry into force of the Banks Act 1997 – paragraph 13 of the transitional and concluding provisions of the Act), DCB AD's financial situation had improved through the efforts of the special administrators. Its debts towards other financial institutions had been paid off and the bank had collected more than BGL 4,000,000,000 it had extended as loans and had thus improved its capital adequacy. Also, it could be expected that its overall capital adequacy would improve sharply during the following month. However, as at that time the bank was still unable to pay off all its creditors, certain restrictions on its activities had to be maintained. Accordingly, BNB, exercising its powers under section 65 of the Banks Act 1997, reappointed the special administrators for a period of one month, ordered DCB AD to increase its capital adequacy to 2% of its tierone capital not later than 30 September 1997, and prohibited it from receiving deposits, extending loans, paying dividends, effecting noncash operations and clearing cheques until it had attained the said 2% ratio. The decision stated that it was not subject to judicial review.
On 12 September 1997 the general meeting of shareholders of DCB AD resolved to increase the bank's capital from BGL 1,404,480,000 to BGL 20,000,000,000 through the issuing of 18,595,520 new shares with par value of BGL 1,000 each. 8,045,520 new shares were to be subscribed exclusively by the applicant and the remaining 10,550,000 shares were to be subscribed by all shareholders of DCB AD pro rata their respective shareholdings. On 26 September 1997 the resolution was entered in the register of companies kept by the Dobrich Regional Court.
The applicant subscribed the shares and, accordingly, became liable to pay them up.
However, it sought to discharge this liability by other means. On 4 May 1997 it had purchased debts due by DCB AD to three other banks. By virtue of these debt assignments the applicant, apart from being shareholder of DCB AD, had become also its creditor. It advised DCB AD that it wished to set off its obligation to pay its newly subscribed shares against the debt that DCB AD now owed to it. Accordingly, on 26 September 1997 DCB AD made entries in its accounts whereby it effected the required setoff.
Also, on 27 August 1997 the applicant had made a contract with DCB AD whereby it had provided funds to the bank under the understanding that they were given as a hybrid capital instrument for the increase of the bank's capital base. The applicant had transferred to DCB AD BGL 2,258,096,800 pursuant to the contract.
On 3 November 1997 BNB, exercising its powers under section 65 of the Banks Act 1997, ordered DCB AD to cancel the abovementioned entries in its accounts and to return the amounts given by the applicant. It reasoned that the setoff had represented non-cash consideration for the shares and that it had been effected in breach of sections 72 and 73 of the Trade Act and of section 19(2)(5) of the Banks Act 1997. Further, BNB found that the contract whereby the applicant had provided a hybrid capital instrument to DCB AD had not been approved by BNB, as required by section 10(4) of its Regulation No. 8 on the capital adequacy of banks, and was thus invalid.
Meanwhile, on 30 September 1997 the Dobrich Regional Court, acting on the joint motion of BNB and DCB AD, decided to stay the proceedings under the bankruptcy petition against the bank. Also, on 3 October 1997 BNB, finding that the previous special administrators' mandate had expired, appointed new special administrators of DCB AD.
On 11 November 1997 BNB revoked DCB AD's licence by reason of insolvency. It found that a check up of its assets and liabilities as of 30 September 1997 indicated that the liabilities exceeded its assets by BGL 6,161,379,000. The decision stated that it was not subject to judicial review.
On an unspecified date in November 1997 BNB requested the Dobrich Regional Court to resume the proceedings for declaring DCB AD bankrupt.
On 2 December 1997 the Dobrich Regional Court held a hearing in chambers. DCB AD was represented by attorneys retained by the special administrators appointed by BNB. The attorneys for DCB AD argued that the bank's assets exceeded its liabilities and that BNB's determination in this respect had been erroneous. Also, DCB AD tried to commence an action for declaratory judgment to the effect that BNB's decision for revoking the bank's licence had been unlawful. The court rejected the action as inadmissible, holding that by section 21(5) of the Banks Act 1997 BNB's decisions for revoking a bank's licence were not subject to judicial review and that it was thus not competent to examine the action.
In a judgment of the same date the Dobrich Regional Court declared DCB AD insolvent and bankrupt, terminated the powers of its bodies, appointed trustees in bankruptcy („синдици“) (the companies Yavor Zartov AD and BDO Binder), divested the bank of its property and ordered the sale of its assets. It held that whereas under the Banks and Credit Business Act 1992 it had had the power to independently ascertain whether a bank was indeed insolvent either because its liabilities exceeded it assets or because it could not discharge a undisputed debt which had fallen due, under the new Banks Act 1997 it was precluded from verifying the existence of these prerequisites. According to section 82 of the Act, the court's task was only to ascertain whether BNB's bankruptcy petition complied with the requirements of sections 79(3) and 21(2) of the Act, i.e. whether it was facially valid and indicated the grounds on which the bank's licence had been revoked. In the case at hand BNB had revoked DCB AD's licence and had indicated the ground on which it had done that. Therefore its bankruptcy petition had to be allowed.
As the judgment was immediately enforceable, from that moment on the persons having the right to act on behalf of DCB AD were the courtappointed trustees.
Before the trustees had started performing their duties, the bank's attorneys filed appeals against the judgment for declaring DCB AD bankrupt and against the decision in which the Dobrich Regional Court had rejected the action for a declaratory judgment as inadmissible. However, once the trustees started performing their duties, they withdrew the powers of the attorneys and withdrew the appeals. Accordingly, in a decision of 12 February 1998 a threemember panel of the Supreme Court of Cassation discontinued the appeal proceedings and declared that the Dobrich Regional Court's judgment had entered into force.
On 8 June 1998 the applicant complained to the prosecution authorities about the actions of the vicegovernor of BNB who had signed BNB's decision of 3 November 1997 and had proposed the revoking DCB AD's licence on 11 November 1997. It argued that she had acted ultra vires with a view to causing prejudice to DCB AD. The prosecution authorities opened criminal proceedings against the vicegovernor and on 15 June 1998 charged her. However, on 23 April 1999 the Chief Prosecutor's Office discontinued the proceedings, holding that the vicegovernor had acted lawfully and had not abused her office.
On an unspecified date in June 1998 the applicant requested the Dobrich Regional Court to replace the trustees. It argued, inter alia, that their actions had prejudiced the creditors of DCB AD. In particular, the trustees had failed to collect a number of the bank's receivables and had deposited 1,200,000 United States dollars (“USD”) of the bank's money in a another bank which was experiencing financial difficulties.
On 22 June 1998 the Dobrich Regional Court rejected the motion, holding that the applicant did not have standing to make such a request and that the trustee of a bankrupt bank could only be removed if BNB had struck its name off the register of bank trustees it was keeping. The applicant did not appeal against this decision.
On 13 July 1998 the Dobrich Regional Court discharged Yavor Zartov AD and BDO Binder as trustees in bankruptcy. It appointed Ms A.G. as the new trustee of DCB AD. The applicant did not specify whether this was done on its motion, on the motion of another creditor or of the court's own motion. However, it appears that this was done because in June 1998 the Trade Act was amended to provide that only natural persons, and not juridical persons, could be trustees in bankruptcy.
On 16 December 1999 the applicant requested the Dobrich Regional Court to replace the new trustee. It argued, inter alia, that she had failed to collect a number of the bank's receivables, that she had been squandering the bank's assets, that she had deposited USD 1,200,000 of the bank's money in another bank which was experiencing financial difficulties and that she had made unnecessary expenses.
In a decision of 22 December 1999 the Dobrich Regional Court rejected the request. It held that the trustee had not failed to perform her duties. In particular, she had commenced a large number of actions to recover the bank's dues. The depositing of the USD 1,200,000 had been done by the previous trustees. Finally, the trustee had been making monthly reports about the expenses she had been incurring. The court instructed the trustee to reduce to a minimum the number of attorneys she had retained to prosecute actions on the bank's behalf. The applicant did not appeal against the decision.
On 11 October 2000 the applicant requested BNB to strike Ms A.G. out of its register of bank trustees in bankruptcy. It averred that she had deposited USD 1,200,000 in another bank which had gone bankrupt. The expenses (allegedly 3,000,000 Bulgarian levs (“BGN”)) she had incurred for administrating the bankruptcy estate – in particular, by retaining a high number of lawyers to prosecute cases on behalf of the bank – had been unreasonably high. Further, she had done nothing or very little to collect the bank's dues and had kept the bank's accounting books in a very poor manner.
BNB carried out an inspection in DCB AD and in a letter of 2 March 2001 rejected the applicant's request. As regards the deposit of USD 1,200,000 in another bank, BNB found it had been done by the previous trustees. Moreover, as of the date of the deposit the other bank had not experienced financial difficulties. At the time Ms A.G. had been appointed, she had tried to withdraw the amount from the other bank, but had succeeded only partially. She had made a claim before the trustees of the other bank in respect of the part of the amount which had remained at the other bank at the time it had been declared bankrupt. As regards the fact that Ms A.G. had commenced a large number of actions, the vast majority of those had been against debtors of DCB AD and for the avoidance of transfers, i.e. for the benefit of the bankruptcy estate. The number of lawyers retained by the trustee had been minimal and the expenses, compared to those for the administration of the estates of other bankrupt banks, had been smaller. The overall expenses incurred by the trustee had not been BGN 3,000,000, as claimed by the applicant, but BGN 1,554,647.92.
On 5 February 2001 the applicant requested the Dobrich Regional Court to replace the trustee. It argued that she had improperly filed actions against DCB AD and that she had been squandering the bank's assets.
On 5 March 2001 the trustee filed objections against the request, submitting that it was inadmissible and unfounded. As regards the actions she had filed against DCB AD, those were actions seeking to avoid transfers effected by the bank prior to becoming bankrupt; the court examining those actions had instructed the trustee to constitute the bank as a codefendant. The trustee further provided a detailed account of the expenses she had incurred.
In a decision of 13 March 2001 the Dobrich Regional Court rejected the applicant's request. It held that it was inadmissible, because a bank's trustee in bankruptcy could only be removed by the court if he or she had been stuck off the register of bank trustees kept by BNB. Nevertheless, the court proceeded to examine the request on the merits and held that it was also unfounded. It found that in 2000 the applicant had signalled BNB about alleged irregularities in the trustee's activities and that BNB had carried out an inspection and had not found any wrongdoing on the part of the trustee. The court went on to state that the fact that the trustee had constituted DCB AD as a codefendant in the actions she had filed was not improper; on the contrary, it had been done pursuant to the court's express instructions. The applicant's contention that the trustee had squandered the bank's assets was unsubstantiated. The trustee had provided a detailed account of the amounts she had expended. That account, as well as the results of BNB's inspection of 2000, indicated that she had not spent large amounts, as averred by the applicant.
The applicant appealed to the Varna Court of Appeals.
In a decision of 4 May 2001 the Varna Court of Appeals vacated the lower court's decision and declared the applicant's request inadmissible. It held that in proceedings for the bankruptcy of a bank the court could only remove the trustee if he or she had been struck off the register of bank trustees kept by BNB. Therefore the Dobrich Regional Court should have declared the request inadmissible and should not have examined its merits.
Despite an express request by the Court in a letter to the applicant of 3 December 2002, the applicant did not provide any information about the further course of these proceedings. However, the published caselaw of the Supreme Court of Cassation (определение № 586 от 9 ноември 2001 г. по ч.гр.д. № 535/2001 г., ВКС V г.о., БВС 9/2001, № 19, с. 34) indicates that the applicant appealed to that court and that in a decision of 9 November 2001 it quashed the Varna Court of Appeals' decision and remitted the case with instructions to the lower court to examine the request on the merits. It held that the striking of a trustee off the register kept by BNB and the removal of the trustee pursuant to a request by the debtor or a creditor – such as the applicant – were completely distinct hypotheses. The fact that BNB could bring about the discharging of a trustee did not mean that a creditor could not request her removal if she did not perform her duties properly or imperilled the creditor's interests through her actions.
Similarly, despite the above-mentioned express request by the Court, the applicant did not provide any information about the proceedings on remittal before the Varna Court of Appeals. Noting however that Ms A.G. was not removed as trustee, the Court concludes that apparently the Varna Court of Appeals examined the applicant's request on the merits and found it to be unfounded.
On 16 August 2001 the applicant requested the Dobrich Regional Court to annul certain actions of the trustee which it considered prejudicial to DCB AD's creditors. On 5 September 2001 the judge in charge of the bankruptcy proceedings informed the applicant that he did not have the power to annul actions of the trustee.
On 24 November 1999 some of DCB AD's assets were put on sale by the trustee, at a price fixed by experts appointed by BNB. The applicant submitted that it had tried to challenge that price as being too low, but that the courts examining its request had rejected it as inadmissible because they had considered that the experts' valuation was not subject to judicial review and that a creditor of the bankrupt bank did not have standing to appeal against the fixing of the sale price. Despite an express request by the Court in a letter to the applicant of 3 December 2002, the applicant did not provide any further details, not did it submit any documents relating to these events.
On an unspecified date in the end of 2001 or the beginning of 2002 DCB AD's trustee in bankruptcy asked the Dobrich Regional Court for permission to sell the bank as a going concern.
In a decision of 6 February 2002 the Dobrich Regional Court granted permission. On 20 May 2002 the trustee entered into a contract with the Central Cooperative Bank AD (“CCB AD”) whereby it agreed to purchase DCB AD as a going concern. The contract provided that CCB AD would pay BGN 1 for the bank and pay BGN 4,170,000 to the bank's fourth-tier creditors (all previous tiers having been already paid off), which consisted solely of the Ministry of Finance (which had indemnified all depositors of the bank and had subrogated itself in their claims). By an annex to the contract of 19 June 2002 CCB AD agreed to pay the creditors BGN 4,500,000 instead of BGN 4,170,000.
The trustee submitted the contract to the Dobrich Regional Court for approval. The court requested BNB to submit its observations on the contract. BNB submitted its observations on 26 June 2002. It maintained that CCB AD's offer to buy DCB AD was fully compliant with the Banks Act 1997 and that CCB AD had enough funds to pay the creditors of the bankrupt bank.
In a decision made in chambers on 10 July 2002 the court approved the contract, terminated the bankruptcy proceedings and struck DCB AD from the register of companies. It held, inter alia, that the sale of DCB AD as a going concern would not prejudice its creditors' interests and would not put them in a worse position than that which would have obtained in case the bank's assets were sold apiece. The net worth of DCB AD, as assessed by experts appointed by the trustee with the assent of the court, was a negative value. The total value of its assets, as assessed by the same experts, was BGN 4,169,000. Since the price agreed by CCB AD was BGN 4,500,000, the creditors were in fact placed in a better position. Moreover, the creditors would receive their dues much faster (within one month after the sale had been approved by the court) than if the bank's assets were to be sold apiece. The assets which had been sold apiece thus far had generated proceeds amounting only to BGN 874,766.28, whereas the aggregate of the creditors' claims against DCB AD amounted to BGN 22,185,355.
As provided by section 94(9) of the Banks Act 1997, the decision was not subject to appeal.
Under the Banks and Credit Business Act 1992 (superseded on 1 July 1997 by the Banks Act 1997) BNB could put a bank under special supervision, if it found that the bank was at a risk of becoming insolvent (section 65(1)). By section 64 of the Act, a bank was at such a risk when (a) its capital adequacy was below a certain minimal level or when (b) due to the state of its assets there was a risk that it could not pay its debts at maturity. When BNB placed a bank under special supervision, it could remove the members of its governing bodies from office and appoint special administrators with powers to act in their place (section 65(2) in limine and section 65(2)(7)). It could also limit the bank's activities and prohibit it from paying dividends or from disposing of its assets (section 65(2)(3), (4) and (5)).
Paragraph 13 of the transitional and concluding provisions of the Banks Act 1997 provides that the regime of special supervision imposed on a bank under the repealed Banks and Credit Business Act 1992 lapses if within two months after the entry of the Act into force (i.e. 1 September 1997) BNB does not revoke the bank's licence.
Section 65(1)(1) and (2)(3) of the Banks Act 1997 allows in broad terms BNB to order a bank to remedy violations it has made of the Act and of BNB's regulations and other acts and directives.
Under section 69 of the Banks Act 1997 BNB may, in certain circumstances (e.g. when placing a bank under compulsory administration or revoking its licence) appoint special administrators („квестори“). These special administrators act in place of the banks' board of directors (section 71(1)), i.e. on behalf of the bank. They are appointed and dismissed by BNB (section 69(1)), it may give them directions (section 71(3)), and they are accountable to it (section 71(5)).
BNB mandatorily revokes the licence of a bank on the ground of insolvency when (a) the bank does not discharge for more than seven working days a debt which has fallen due or (b) the total amount of the bank's debts is greater than the total amount of its assets (section 21(2) of the Banks Act 1997). The value of the assets and of the debts of the bank is determined by BNB in accordance with supervisory requirements and rules prescribed in regulations issued by it (section 21(3)).
When revoking a bank's licence, BNB appoints special administrators if such have not been appointed before that (section 21(4)). The administrators manage and represent the bank until the court appoints trustees in bankruptcy (section 69(3)). BNB's decision to revoke a banking licence is immediately enforceable (section 21(5)). In derogation of the general rules of administrative procedure, BNB does not have to inform the bank about the opening of the procedure for revoking its licence, nor does it have to examine and take into account the bank's explanations and objections, if any (ibid.).
After revoking a bank's licence on the ground of insolvency, BNB must mandatorily file with the competent court a petition for the opening of bankruptcy proceedings against the bank (section 79(1)).
Whereas BNB's decisions under the Banks and Credit Business Act 1992 were, without limitation, subject to review by the Supreme Administrative Court (section 88(2) and (3)), the Banks Act 1997 prohibits judicial review of a number of BNB's decisions. Thus, coercive measures ordered by BNB under section 65 of the Banks Act 1997 are not subject to judicial review (section 65(4)); neither are its decision to revoke a bank's licence (section 21(5)), or to appoint or replace special administrators (sections 65(4) and 69(4)).
A bank's “capital adequacy”: the ratio between its “capital base” – defined as its primary, or tierone, capital (including paid-up shares plus premiums and statutory and other reserves minus intangible assets, losses, and treasury shares – section 9 of BNB's Regulation No. 8 on the capital adequacy of banks) plus supplementary capital elements, or tiertwo capital (including retained earnings, special reserves, hybrid capital instruments, subordinated debt, etc. – section 10 of the Regulation) – and its riskweighted assets and offbalancesheet items may not be less than 12% (section 23(3) of the Regulation). Hybrid capital instruments may be included in the tiertwo capital of a bank only after the approval of the vicegovernor of BNB (section 10(4) of the Regulation).
Before 1 July 1997 bank bankruptcy was regulated by the Banks and Credit Business Act 1992. From that date onward the newly adopted Banks Act 1997 became applicable to such proceedings.[ On 29 December 2002 the provisions of the Banks Act 1997 relating to bank bankruptcy were superseded by the Bank Bankruptcy Act] The regime of bank bankruptcy set forth in the Banks Act 1997 contained a number of special features. Only BNB, and not just any creditor or the bank itself, could file a petition for the opening of bankruptcy proceedings against a bank (section 79(2) of the Banks Act 1997). BNB mandatorily filed such a petition after revoking a bank's licence on the ground of insolvency (section 79(1)). The petition needed only specify the grounds for revoking the bank's licence under section 21(2) (section 79(3)). The petition was examined by the court in chambers (section 81). There was no possibility for reorganisation of the bank (section 91), it was divested of all its assets (section 82(6)), and, when allowing the petition, the court had to also immediately order the sale of the assets and the distribution of the proceeds to the bank's creditors (section 82(7)). The court terminated the powers of the bank's bodies (general meeting of shareholders, board of directors, etc.) (section 82(4)) and appointed trustees in bankruptcy in whom these powers, including the right to represent the bank in court, vested (section 84(3) in conjunction with section 658(1)(6) [At present section 658(1)(7)] of the Trade Act). The court could appoint trustees only from a pool of persons featuring on a list drawn up by BNB (section 84(1)). The Trade Act applied only insofar as the Banks Act 1997 did not contain special rules and insofar as its provisions were compatible with the special features of bank bankruptcy (section 97). Section 634 of the Trade Act, which appears to have been thus applicable, provides that the court's judgment for declaring a debtor insolvent and for the opening of bankruptcy proceedings against it is immediately enforceable.
Section 657(2) of the Trade Act provides that upon the motion of the debtor or any creditor the bankruptcy court may discharge the trustee if he or she does not perform his or her duties or imperils the creditor's or the debtor's interests through his or her actions.
Section 663(3) of the Trade Act provides that the trustee is liable to indemnify the debtor and the creditors for all damage caused due to his or her fault.
Section 84(2) of the Banks Act 1997 provided that the bankruptcy court must discharge the trustee if he or she was struck off the list of bank trustees kept by BNB.
In Bulgarian law there are two methods for disposing of the assets of a bankrupt company in order to satisfy its creditors' claims: (a) selling them apiece or (b) selling the company as a going concern, i.e. as an aggregate of assets and liabilities. Section 94a of the Banks Act 1997 gave preference to the second method. It provided that the trustee of a bankrupt bank had to first try to sell it as a going concern. He or she had to opt for the other method and dispose of the bank's assets apiece only if the sale as a going concern was not possible within six months after all creditors' claims had been filed and allowed or if that would place the bank's creditors in a worse position.
A bankrupt bank could be sold only to another bank (section 94(1) of the Banks Act 1997). The buying bank had to pay directly to the creditors of the bankrupt bank by opening bank accounts in their names within one month after the sale had been approved by the court (section 94(6)). The issue which creditors were to be thus paid off and which not was to be determined in the sale contract. The buying bank was liable to pay only those creditors whose claims it had agreed to pay off. All other creditor's claims were extinguished (section 94(4)). The shareholders' rights, including the right to a share of the remaining assets of the bank, if any, were likewise extinguished, unless the buying bank had agreed to pay to the shareholders as well (section 94(5)).
The procedure for selling a bankrupt bank as a going concern was as follows: the trustee requested the bankruptcy court to allow the sale of the bank through direct negotiations (section 93(1)). After receiving permission from the court, the trustee approached potential buyers and entered into a contract with them. He or she then submitted the contract for approval by the court. The court had to call for observations from BNB (section 93(3)), and, after receiving them and verifying whether the sale did not contravene the law and did not prejudice the creditor's interests (section 93(4)), approved it, terminated the bankruptcy proceedings and struck the bank off the register of companies. The court's decisions were not subject to appeal (section 94(9)).