PYROBATYS, A.S. V RESTRUKTURALIZACII v. SLOVAKIA
Inadmissible
Alvina Gyulumyan;Egbert Myjer;Ján Šikuta;Josep Casadevall;Luis López Guerra;Mihai Poalelungi;Nona Tsotsoria
1. The applicant, PYROBATYS, a.s. v reštrukturalizácii (“the applicant company”), is a joint-stock company established under the laws of Slovakia with its head office in Batizovce. The applicant company was represented before the Court by Mr Š. Kseňák, a lawyer practising in Košice. 2. The Government of the Slovak Republic (“the Government”) were represented by their Agent, Ms M. Pirošíková. The facts of the case, as submitted by the parties, may be summarised as follows. 3. The applicant company was established in 1995 in the legal form of a limited-liability company with the name of PYROBATYS, s.r.o. It later changed its legal status to that of a joint-stock company under the name of PYROBATYS, a.s. It then entered the process of restructuring, which is reflected in its name, as indicated in paragraph 1 above. The restructuring was concluded in April 2011. 4. On 7 December 1994 two separate contracts were entered into between a joint-stock company, A., and, respectively, the applicant company and a limited-liability company B. (“the contract”). 5. Under the contract A. let property to the applicant company and B. in return for payment of rent. The property consisted of an administration building, factory premises and garages. Leases were concluded for fifty years. 6. On 26 May 1999 the Košice Regional Court (Krajský súd) declared A., which had meanwhile changed its name, insolvent and appointed a receiver. 7. Later in 1999 B. was merged with the applicant company. 8. The applicant company and company A. had the same address, which was formerly also the address of company B. It appears from a publicly available official source (http://www.orsr.sk) that there were also ownership and personal connections between these companies. 9. By a letter of 6 June 2001 A., acting through the intermediary of its receiver, unsuccessfully requested an amicable settlement with the applicant company in respect of an amount of money that was allegedly owed by the latter by way of outstanding rent under the contract. 10. On 1 August 2001 A., acting through its receiver, sued the applicant company before the Poprad District Court (Okresný súd) for payment of rent under the contract. 11. The claimant sought an order for the payment of the equivalent of some 620,000 euros (EUR) and a ruling to the effect that neither party be awarded costs. 12. Despite the claimant’s failure to pay the court fees, the District Court went on to examine the action, inter alia by seeking the applicant company’s written observations in reply to the action and in respect of expert evidence, as well as by twice hearing the action on its merits. 13. To defend the action the applicant company appointed an advocate, for whose services up to 2005 it paid him the equivalent of some EUR 3,840. 14. Meanwhile, on 24 July 2003, the District Court had ordered that the claimant pay the court fees, amounting to the equivalent of some EUR 2,360. 15. On 22 August 2003 the claimant requested an exemption from the obligation to pay the court fees on the ground that, being insolvent, it had no means to pay. 16. On 30 January 2004 the District Court refused the request of 22 August 2003. No copy of the decision was served on the applicant company. Despite a specific written request, to which they have responded, the respondent Government have failed to provide the Court with a copy of this decision and of any other documents or information enabling the Court to ascertain the decision’s content. 17. The decision of 30 January 2004 could have been challenged by way of an appeal on the part of the claimant, in the absence of which it became final and binding on 2 March 2004. 18. By way of an order that was served on the claimant on 10 February 2005, it was again asked to pay the court fees. No payment was made. 19. On 7 March 2005, following a hearing of the action held on the same day, the District Court discontinued the proceedings and ruled that no party was entitled to have its costs reimbursed. The ruling has the procedural form of a decision (uznesenie). 20. The District Court observed that the claimant had neither been granted an exemption from the obligation to pay the court fees nor had it paid the court fees, despite having been ordered to do so. The District Court held that, in such circumstances, pursuant to section 10(1) of the Court Fees Act (Law no. 71/1992 Coll., as amended), the action could not be examined. 21. As to the ruling on costs, the District Court observed that: - the action had not been withdrawn, - the situation was not such as to call for an examination of procedural responsibility for the discontinuation of the proceedings (Article 146 § 2 of the Code of Civil Procedure (Law no. 99/1963 Coll., as amended - “the CCP”) and for the application of the criterion of success in the proceedings (Article 142 of the CCP), - Article 150 of the CCP was to be applied, which allowed for moderation of the repercussions of the rules on costs, - the case was “exceptional and worthy of particular consideration” in terms of Article 150 of the CCP, in view of the circumstances in which the contract had been concluded and the fact that the validity of the contract was being examined in another set of proceedings before the District Court, which had the aim of securing vacant possession of the premises in question. 22. The applicant company appealed against the ruling on costs, claiming compensation in an amount equivalent to some EUR 10,500 in respect of legal representation and costs reimbursable under the applicable statutory rules, plus the costs of the appeal. 23. The applicant company contended that the District Court’s findings of fact were erroneous and that its conclusions were not susceptible of review on account of lack of reasoning. 24. Furthermore, the applicant company submitted that its costs were the responsibility of the claimant, who had provoked them. Article 150 of the CCP could only be applied in situations which fell within the purview of one or more of the remaining rules on costs, if all conditions for their application had been met, but their application would produce an intolerable outcome. In so far as the District Court had referred to the other set of proceedings, in which the validity of the contract was to be examined, their subject matter was in fact not the validity of the contract but the amount of the rent set out in it. 25. On 9 February 2006 the Prešov Regional Court upheld the relevant part of the District Court’s decision. The ruling has the procedural form of a decision (uznesenie), in which the Regional Court found that: - the District Court had erred in making reference to the criterion of success in the proceedings (Article 142 of the CCP); - the rule that would normally have had to be applied was that costs are to be borne by the party which had caused the discontinuation of the proceedings (Article 146 § 2 of the CCP); - the District Court had been right in taking account of the financial standing of both parties; - in view of the circumstances the question of the validity of the contract, which was being examined in another set of proceedings, could be considered a ground “worthy of particular consideration”; - by applying Article 150 of the CCP the first-instance court had rightly moderated the repercussions of the application of Article 146 § 2 of the CCP for the claimant, whose only objective was to realise and distribute fairly its estate in insolvency; - the Court of Appeal was also of the opinion that “the amount of the costs would not have existential consequences for [the applicant company] and would not jeopardise its property holdings”. 26. On 19 May 2006 the applicant company lodged a complaint with the Constitutional Court (Ústavný súd) under Article 127 of the Constitution. 27. The complaint was directed against the Regional Court’s decision of 9 February 2006, the applicant company arguing that that decision had violated its rights to a fair hearing, procedural equality and protection of property, as well as prohibition of discrimination. 28. In particular, the applicant company contended that the amount at stake in the proceedings was rather significant from its perspective and that it had accordingly needed to acquire legal representation. It also advanced the following arguments. 29. The Court of Appeal’s conclusion concerning the lack of dramatic effects of the costs ruling on the applicant company was without any foundation in fact and evidence whatsoever and, as such, plainly arbitrary. 30. The claim for reimbursement of costs was independent of the financial standing of the party making it. In so far as financial standing of a party was to be taken into account, it was only the standing of the party that would otherwise be liable to reimburse another party’s costs. 31. As regards the claimant, at the relevant time it had been the owner of real property. 32. There was no statutory provision for exemption of an insolvent claimant from obligation to pay court fees and neither was there any provision exempting it from reimbursement of procedural costs it had itself provoked. 33. In the present case the claimant had been liberated from responsibility for the consequences of its actions and the burden of this responsibility had arbitrarily been placed on the applicant company. 34. In other words, the applicant company’s property holdings had been interfered with, in that it had been denied a proprietary claim without any legal basis. 35. On 14 December 2006 the Constitutional Court declared the complaint admissible. 36. On 29 March 2007 the Constitutional Court found that there had been no violation of the applicant company’s rights in issue. 37. The Constitutional Court observed that the applicant company had no right to a favourable outcome of the litigation it had been a party to. The reasons given by the Regional Court for its decision were such that any arbitrariness was ruled out. On the one hand, it had upheld the reasons given by the District Court, and on the other it had reinforced those reasons by adding further reasons of its own, in particular the reasons related to the financial standing of both parties to the proceedings. 38. In addition, the Constitutional Court observed that the decision not to exempt the claimant from the obligation to pay the court fees was not the subject matter of the present proceedings and that the relevant circumstances might have changed between that decision and the contested decision not to award the applicant company reimbursement of its costs. 39. In so far as the applicant company had contended that the Regional Court had drawn conclusions concerning its financial standing without actually examining that standing, the Constitutional Court reiterated that, as a matter of principle, it had no power to examine whether the ordinary courts had adequately established and assessed the facts. It emphasised, in particular, that “[t]he fact that the applicant company disagreed with the Regional Court’s view could not give rise to a conclusion that the latter was manifestly ill-founded or arbitrary, nor did it provide for a basis for the Constitutional Court to substitute its own legal opinion for that of the Regional Court.” 40. In accordance with its existing doctrine, the Constitutional Court held that since there had been no violation of the applicable procedural rights of the applicant company, by definition there could not have been any violation of the applicant company’s substantive proprietary rights. In those circumstances, there was no basis for the prohibition of discrimination to be applied either. 41. Article 127 provides that: “1. The Constitutional Court shall decide complaints by natural or legal persons alleging a violation of their fundamental rights or freedoms ... unless the protection of such rights and freedoms falls within the jurisdiction of a different court. 2. If the Constitutional Court finds a complaint justified, it shall deliver a decision stating that a person’s rights or freedoms as set out in paragraph 1 have been violated by a final decision, specific measure or other act and shall quash such a decision, measure or act. If the violation that has been found is the result of a failure to act, the Constitutional Court may order [the authority] which has violated the rights or freedoms to take the necessary action. At the same time it may remit the case to the authority concerned for further proceedings, order that authority to refrain from violating the fundamental rights and freedoms ... or, where appropriate, order those who have violated the rights or freedoms set out in paragraph 1 to restore the situation to that existing prior to the violation. 3. In its decision on a complaint the Constitutional Court may grant appropriate financial compensation to a person whose rights under paragraph 1 have been violated.” 42. Under Article 138 § 1, at the request of the party concerned, the party to the proceedings may be fully or partly exempt from the obligation to pay court fees where it is justified by the situation of that party and provided that the claim at issue is neither frivolous nor clearly devoid of any prospect of success. 43. A party which has been entirely successful is to be awarded costs necessary for purposeful assertion or defence of its rights against the unsuccessful party (Article 142 § 1). In the event of success in part, the costs are normally to be split proportionally (Article 142 § 2). However, even in the event of success in part, full award of costs may be granted if the party was unsuccessful in merely a negligible proportion or if the scope of the substantive claim depended on expert evidence or judicial discretion (Article 142 § 3). 44. A party which is liable for the necessity of discontinuing proceedings is obliged to reimburse the costs of such proceedings (Article 146 § 2). 45. Article 150, as in force at the relevant time, provides that: “If there are reasons worthy of particular consideration, the court exceptionally does not need to award reimbursement of costs or their part.” 46. In a commentary on Article 150, with reference to a previous yearbook of judicial decisions, the view was expressed that, when assessing “reasons worthy of particular consideration”, regard should be had to personal, proprietary, income and other circumstances applying to all parties to the proceedings, and also the circumstances which caused the parties to assert their rights before the court, as well as to their attitude in the proceedings (see Občiansky súdny poriadok, Jaroslav Krajčo a kolektív, Eurounion, spol.s r.o., Bratislava 2004, p. 294). 47. The position described in the preceding paragraph forms part of settled case-law (see, for example, judgment (rozsudok) of the Supreme Court in case file no. M Cdo 14/99, judgment of the Constitutional Court of 23 August 2006 in case file no. III. ÚS 53/06, decision (uznesenie) of the Supreme Court of 30 November 2009 in case file no. 4 MCdo 18/2008 and decision of the Supreme Court of 28 January 2010 in case file no. 2 M Cdo 17/2009). In the decisions quoted, the courts also opined that the application of Article 150 must be rather exceptional and adequately reasoned. The existence of the special circumstances has to be established on the basis of the situation of all parties to the proceedings. It is necessary to take into account not only the situation of the person liable to pay the costs but also the impact of the decision refusing the reimbursement of costs on the property of the party who is entitled to reimbursement under normal circumstances. 48. Court fees are collected, inter alia, for individual procedural steps or for proceedings before the courts, provided that these have to be initiated by an application (section 1(1)). 49. The fee payer (poplatník) is the person making the application for a procedural step which is subject to court fees if the tariff scale provides that the fee is payable on the making of the application (section 2(1)(a)). 50. The duty to pay the court fees arises when the application is made, if made by the fee payer (section 5(1)(a)). In such a case, the court fees become payable at the same time (section 8(1)). 51. If the court fees payable on the making of an application have not been paid, the first-instance court is to order the fee payer to pay the fees within a given period, usually ten days. If the fees have not been paid within this period, the court is to discontinue the proceedings (section 10(1)).