OLCZAK v. POLAND
Inadmissible
Georg Ress;Mark Villiger
1. The applicant, a Polish citizen residing in Stoczek Łukowski, is an engineer. 2. The facts of the case, as submitted by the parties, may be summarised as follows. 3. On 24 November 1990 the President of the National Bank of Poland issued a decision under the provisions of the 1989 Banking Act authorising the establishment of the Lublin First Commercial Bank (Pierwszy Komercyjny Bank S.A. w Lublinie), a public company with foreign capital. 4. In January 1991 the company was registered in the public companies register at the Lublin District Court. The share capital of the company was 56 billion Polish zlotys (PLZ - “old”, equivalent to 5,600,000 new Polish zlotys as from 1 January 1995). 97,5 % of the shares were owned by one D.B. 5. On 8 April 1992 the applicant bought shares in the Lublin First Commercial Bank from D.B. The parties fixed the price for the shares at PLZ 40,000,000,000, to be paid in three instalments. The applicant thus acquired 40 % of the bank’s equity capital. 6. On 17 June 1992 the applicant and D.B. agreed to rescind this contract. On 22 June 1992 the bank, having regard to D.B.’s failure to pay it the sums he owed, took over a number of his shares in order to cover his unpaid obligations. Later on, the applicant deposited with the bank 307 shares which he had purchased from D.B. The bank sought the consent of the President of the National Bank of Poland to a re-transfer of ownership from the applicant to D.B. 7. By a letter of 17 July 1992 the President refused. She stated in her letter that the bank was an institution of public trust, using the assets of private persons. Under the provisions of the 1989 Banking Act, and in particular its Article 100, the activities of banks were supervised by the National Bank of Poland in order to protect savings and investments entrusted to them. D.B., who had meanwhile been arrested and extradited to the United States, where he had been convicted of financial fraud, did not give any guarantee that the interests of the bank’s customers would be properly protected if he remained a majority shareholder in the bank. It was also noted that a conflict of interest arose, as, in addition to being the bank’s majority shareholder, D.B. had been the sole or joint owner of a number of companies which had defaulted on loans from the bank, thus undermining its financial standing. 8. By a letter of 7 August 1992 the President of the National Bank drew the attention of the bank’s board to the necessity of preparing a recovery and restructuring programme in order to improve the bank’s financial standing. 9. The bank’s losses for 1992 totalled PLZ 1,063,043,000,000, its capital resources being PLZ 888,336,000,000. 10. On 4 February 1993 T. company, owned by the applicant, took out a loan of PLZ 4,000,000,000 from the bank, repayable within a year. 11. By a decision no. 2/93 of 6 February 1993 the President of the National Bank of Poland appointed a Board of Receivers (Zarząd Komisaryczny) which was to replace the existing governing and supervisory bodies of the company for a period of six months. In so doing, she had regard to the continuing deterioration of the bank’s financial situation and to the danger of its becoming insolvent. The measure was intended to improve the bank’s financial standing and to preserve the assets deposited with it. Regard was also had to the fact that the bank’s board had failed to submit the recovery programme requested by the National Bank. It was further pointed out that the composition of the bank’s board had been changed many times, which made it difficult for any coherent management policy to be adopted, and that the new board, elected in December 1992, had also failed to devise a recovery programme and to show that it would be able to prepare and implement it. True, it had undertaken to do so within three months, but in the bank’s dramatic situation that was far too long and late. It was further noted that the bank could only be saved by external financing, but no institutions prepared to fund a rescue operation had been found. 12. In the external auditors’ report for 1992, subsequently prepared at the request of the Board of Receivers, it was stated, inter alia, that before 10 August 1992 the bank’s governing bodies and its principal shareholder, D.B., had acted in an unprofessional manner which brought about considerable losses. The losses had been caused, in particular, by transactions between the bank and companies owned by the principal shareholder, D.B. A number of ill-advised loans had been made, in particular to companies and private individuals linked to D.B. It was necessary to re-assess the bank’s strategy, in particular by finding an external investor willing to improve the bank’s financial standing by increasing its share capital. However, the chances of finding an investor willing to invest approximately USD 60,000,000 were practically non-existent. Another option was to seek institutional support from the National Bank of Poland, the World Bank or a different source. Any new investor would have to take control of the bank in order to manage it until its financial standing improved. Accordingly, the existing shareholders would lose their dominant position. 13. According to an extract from the bank’s books, on 31 May 1993 the applicant’s company, T., owed the bank PLZ 1,524,757,500. On 1 June 1993 the bank instituted enforcement proceedings against that company. 14. On 3 August 1993 the mandate of the Board of Receivers was prolonged until 7 November 1993. It was subsequently renewed again. 15. On 23 October 1993 the Board of Receivers adopted a resolution by virtue of which the bank’s memorandum of association was amended. The nominal value of its share capital was first reduced from PLZ 50,000,000,000 to PLZ 1,098,000,000 by cancelling 31,350 Class A shares worth PLZ 1,000,000 each. The value of 27,450 remaining Class A shares A was reduced from PLZ 1,000,000 to PLZ 40,000. The sum of PLZ 57,702,000,000 thus generated was to be used in its entirety to cover the bank’s losses. Next the bank’s share capital was increased by PLZ 250,000,000,000 through the issue of 6,250,000 new Class B non-transferable shares of PLZ 40,000 each, with extra voting rights. Class B shares were to be paid up entirely by funds provided by the National Bank of Poland in order to improve the standing of the bank, which was on the verge of bankruptcy; they were consequently allotted to the National Bank of Poland, to be owned by it. The existing shareholders, in order to protect the bank’s interests, were prevented from acquiring new shares. 16. As a result of these operations, the applicant’s shareholding decreased from approximately 45 % to 0,4 %. 17. On the same day the Board of Receivers adopted another resolution by deleting the provision in the bank’s memorandum of association which prohibited the cancellation of shares, and introduced a provision to the effect that the shares could be cancelled by reducing the share capital. 18. On 25 November 1993 the applicant lodged a civil action with the Lublin Regional Court seeking an order setting aside the resolution of 23 October 1993. He submitted that the resolution had arbitrarily decreased the value of his shares and deprived him of the right to acquire new shares; consequently, he had sustained a heavy financial loss. He also argued that the resolution contravened applicable laws, in particular banking laws and the Commercial Code. 19. On 10 December 1993 the Lublin Regional Court ordered that the pleadings be returned to the applicant on the ground that he had not complied with the relevant procedural requirements under the Code of Civil Procedure, as he had failed to indicate the value of the claim. It considered that that claim was clearly of a pecuniary character, its value being equivalent to the loss he had sustained as a result of the resolution of 23 October 1993. 20. On 23 December 1993 the applicant appealed against that order, submitting that pursuant to the regulation on court fees, only a fixed fee was to be paid to commence an action for an order quashing corporate resolutions. Thus, it was unnecessary for him to indicate the amount in dispute. 21. On 27 January 1994 the Lublin Regional Court, acting as an appellate court, dismissed the applicant’s appeal, considering that the lower court had been right to find that his claim was of a pecuniary character, since his aim was to obtain compensation for his alleged loss resulting from the resolution. 22. On 16 February 1994 the applicant again lodged a civil action with the Lublin Regional Court, seeking an order quashing the resolution of 23 October 1993. He submitted that the amount in dispute was PLZ 30,690. On 25 October 1994 the Lublin Regional Court requested the applicant to pay court fees of PLZ 1,000,000,000. 23. On 1 November 1994 the applicant requested an exemption in respect of the court fees. He submitted that his property had been seized by a bailiff in the context of enforcement proceedings which had been instituted against him by the Lublin First Commercial Bank on 31 May 1993. 24. On 28 December 1994 the Lublin Regional Court refused to grant the applicant an exemption, considering that he had failed to submit to the court detailed information regarding his financial situation. The applicant lodged an interlocutory appeal against that decision. 25. On 11 January 1995 the Lublin Court of Appeal dismissed the appeal. It examined the documents submitted in support of the appeal and considered that, as the applicant had significant assets, including two companies and real property, he did not qualify for an exemption. 26. On 30 December 1993 the Lublin District Court (Commercial Division) ordered that entries be made in the Companies Register, reflecting the results of the Board of Receivers’ resolution of 23 October 1993. 27. On 20 January 1994 the applicant lodged an appeal against that decision. 28. On 10 June 1994 the Lublin Regional Court referred a question on points of law to the Supreme Court (Sąd Najwyższy). The Supreme Court was requested to rule on the correct interpretation of the scope of the Board of Receivers’ power to adopt resolutions on matters reserved to the company’s shareholders’ general meeting, in particular as regards reducing the share capital. 29. On 22 July 1994 the Supreme Court, by resolution no. III CZP 92/94, stated that the Board of Receivers appointed under the provisions of the Banking Act was empowered to adopt resolutions on all matters reserved by statute or by the company’s memorandum of association to the company’s shareholders in general meeting. It held that, with regard to banks, the provisions of the Banking Act, which was a lex specialis, took precedence over the provisions of the Commercial Code governing public companies which contained certain limitations on the powers of the Board of Receivers. 30. On 23 September 1994 the Lublin Regional Court dismissed the applicant’s appeal. 31. On 7 October 1994 the Lublin Regional Court dismissed an action brought by the Lublin Forestry Enterprise LAS (Lubelskie Przedsiębiorstwo Produkcji Leśnej LAS) against the Lublin First Commercial Bank. The plaintiff company, which had been a shareholder of the bank, sought an order quashing the resolution of 23 October 1993. It argued that the resolution should be quashed in pursuance of Article 414 of the Commercial Code which allowed shareholders to seek an order setting aside resolutions of the shareholders’ general meeting if taken deliberately to their detriment. 32. On 9 November 1994 the applicant requested the Lublin Regional Court’s permission to join these proceedings as a co-plaintiff. On the same date he lodged an appeal against the judgment of 7 October 1994. The applicant contended in his appeal that the impugned judgment was in breach of substantive law in that the court had wrongly held that the provisions of the Banking Act took precedence over the provisions of the Commercial Code concerning shareholders’ power to challenge before the courts certain resolutions of a shareholders’ general meeting. The applicant further submitted that the court had failed to draw reasonable conclusions from the evidence, in particular in that it had not concluded that the impugned resolution had been taken deliberately to the shareholders’ detriment. 33. On 23 June 1995 the Lublin Court of Appeal dismissed the applicant’s appeal. It found that the National Bank of Poland had appointed the Board of Receivers in view of the heavy losses which the First Commercial Bank had sustained in 1992, mostly as a result of bad debts. It was not in dispute that the bank had sustained such losses. The purpose of the resolution of 23 October 1993 had been to improve the bank’s financial standing in the interest of its customers and in order to prevent it from becoming insolvent. The court further referred to the resolution of the Supreme Court of 22 July 1994. It considered that, in the light of that resolution, the judgmentLublin First Commercial Bank. 34. On 7 August 1995 the judgment was served on the applicant. He requested the Minister of Justice to lodge an extraordinary appeal on his behalf. By a letter of 20 December 1995 the Minister of Justice declined to do so, considering that the impugned judgment was in conformity with the law. 35. Pursuant to Article 104 of the Banking Act 1989 as in force at the material time, if a bank suffers or is in danger of suffering losses or of becoming insolvent, its board must promptly inform the President of the National Bank of Poland and take appropriate recovery measures. A recovery programme must be submitted to the President of the National Bank for approval within thirty days. 36. If the board fails to do so, or if such programme does not appear to guarantee an improvement in the bank’s standing, the President of the National Bank may place the bank under compulsory receivership. 37. The board of receivers has powers to make decisions in all matters concerning the bank. Its primary task is to prepare a recovery programme for approval by the National Bank of Poland and to ensure its implementation. 38. On 28 May 1996 the Constitutional Tribunal gave a decision under which Article 105 of 1989 Banking Act was to be construed as meaning that the board of receivers had the power of taking any decisions that the suspended statutory organs of the bank were empowered to take (W 9/95 OTK 1996/3/24). 39. Under Article 418 of the Civil Code, as worded at the material time, if damage was caused by a public servant as a result of him/her giving a decision or accomplishing another official act, the State Treasury was to be held liable only if that decision or act amounted to a breach punishable under criminal law or under any disciplinary regulations, and if the fault of the public servant had been confirmed by a judgment of a criminal court or of a competent disciplinary authority, or was otherwise established by a superior authority. 40. Article 76 of the Code of Civil Procedure provides that any person who has a legal interest in the outcome of a case may join proceedings as a co-plaintiff or co-defendant at any stage prior to the end of the hearings before the court of second instance.