LAMOVEC v. SLOVENIA
Inadmissible
Aleš Pejchal;André Potocki;Angelika Nußberger;Ganna Yudkivska;Mark Villiger;Vincent A. De Gaetano
1. The applicant, Mr Andrej Lamovec, is a Slovenian national, who was born in 1970 and lives in Ljubljana. He was represented before the Court by Mrs V. Holec, a lawyer practising in Ljubljana. 2. The Slovenian Government (“the Government”) were represented by their Agent, Mrs B. Jovin Hrastnik, State Attorney. 3. The facts of the case, as submitted by the parties, may be summarised as follows. 4. The applicant was a stockbroker working as the head of trading in a brokerage firm. In January 2003 the Securities Market Agency (hereinafter “the Agency”), an independent authority vested with supervisory powers in the field of securities market operations, requested from the applicant a number of records of securities transactions he had made in previous years. 5. After examining these documents and the records of the stockexchange trading system, on 3 December 2003 the Agency adopted a decision to initiate proceedings for revocation of the applicant’s stockbroker’s trading licence (hereinafter “the initial decision”), on the ground that in the period between 4 December 2000 and 20 December 2001 he had carried out twenty-one fictitious securities transactions and thereby breached the Ljubljana Stock Exchange Rules and the Securities Market Act. In its decision, the Agency specified the controversial transactions, explaining in detail the circumstances which in its opinion implied their fictitious character. 6. These transactions all involved cross-trading, the brokerage firm acting as both the seller and buyer of securities for its clients’ or its own accounts. In certain cases the applicant carried out multiple clients’ orders to sell securities, which were followed almost simultaneously by these same clients’ orders to buy an equal amount of the same type of securities. Moreover, in some cases the brokerage firm itself had bought securities from clients and subsequently sold them back to them. Other types of crosstrade transactions involved alternate sale and purchase of securities of the same type between a client and the brokerage firm, where the two first sold and bought from each other a certain amount of securities of equivalent type, only to subsequently – approximately a minute later – sell/buy them back from each other under almost the same conditions. 7. According to the Agency the orders were executed by means of a special “cross-user” function key which ensured that the transactions were, as intended, carried out simultaneously between two specific parties submitting matched offers, and no third party could intervene in the prearranged transaction. Given that the sales and subsequent purchases were carried out at very short intervals, that the securities were bought and sold at almost the same prices and that the transactions did not result in any change in the economic ownership of the relevant securities, the Agency took the view that they were prearranged and that the applicant, the very person who had carried them out, must have been aware of their content. 8. Furthermore, the Agency’s decision included a detailed list of sixtyfive documents, among them copies of the trading records relating to the controversial transactions, which had given rise to its suspicion that the applicant had repeatedly breached the law, as well as the dates on which the alleged violations had occurred. Finally, the applicant was notified that he could make a statement on the reasons for initiating proceedings and submit evidence in support of his statement within thirty days of receiving the decision. 9. In his reply to the Agency’s initial decision on 13 January 2004, the applicant contested the version of events presented by the Agency, as well as the application and interpretation of the substantive and procedural law. As regards his objection to the facts, the applicant, while not contesting that he had in fact carried out the transactions in question or that these sales and purchases had been carried out between the same clients or between clients exchanging roles as buyers and sellers, argued that he had not been acquainted with the details of the transactions in question. The orders had allegedly been placed with another department, whereas the trading department had only carried them out. The applicant maintained that in the four-day period from 14 to 19 December 2000, during which four of the controversial transactions had been made, the trading department had carried out 559 securities transactions. Thus, the applicant alleged that he had not known, nor had he been required to check, whether each of these transactions was made in a correct manner. In support of his submissions, the applicant provided copies of the records of relevant transactions and balance of securities in the accounts of the relevant clients. 10. Moreover, the applicant claimed that the documents identified in the Agency’s initial decision did not justify the conclusion that he had actually used the “cross-user” function key to carry out the controversial transactions. In so far as the Agency disagreed with his view, the applicant suggested that an expert in securities trading be appointed to examine this issue. He also suggested that that expert submit his report at an oral hearing, enabling the applicant to ask him or her relevant questions, or in written form, in which case the applicant would submit written comments. 11. The applicant also joined to his reply an initiative for a review of the constitutionality of certain provisions of the Securities Market Act applicable to his case, explaining that he would be lodging this initiative with the Constitutional Court. In the initiative he challenged, inter alia, a number of provisions regulating proceedings before the Agency and judicial review proceedings, including the provision stipulating that the Agency’s decisions were, in principle, rendered without holding a hearing. The applicant requested that the initiative be considered a constitutive part of his reply. 12. On 14 January 2004 the applicant lodged his initiative for the review of constitutionality of certain provisions of the Securities Market Act with the Constitutional Court. 13. On 21 January 2004 the Agency refused the applicant’s request for an oral hearing and the appointment of an expert, without giving any reasons. 14. On 11 February 2004 the Agency, sitting in a panel composed of eight members of its Council of Experts, rendered a decision revoking the applicant’s trading licence (hereinafter “the final decision”) on the ground that he had carried out twenty-one fictitious securities transactions and thereby had repeatedly breached the law and stock-exchange trading rules. As regards, firstly, the applicant’s request for an oral hearing and the appointment of an expert, the Agency held that the information on fictitious transactions through the use of the “cross-user” function key had been obtained from the records of the stock-exchange trading system, which had been presented to the applicant. According to the Agency, the tabular extracts from the trading system records, where all controversial transactions featured the “cross-user” status, clearly manifested that the “cross-user” function key had been used in these sales and purchases. 15. In this connection, the Agency considered that the manner in which the transactions had been carried out was sufficiently established by the documentary evidence already included in its decision to initiate proceedings for revocation of the applicant’s trading licence, as well as by the records of transactions and other documents submitted by the applicant. According to the Agency, there was no controversy regarding the facts which would have necessitated an oral hearing or the appointment of an expert. 16. The applicant sought leave for judicial review before the Supreme Court, challenging the Agency’s final decision, as well as its decision rejecting his procedural requests for the appointment of an expert and for an oral hearing. In his request, the applicant essentially repeated the pleas made in his reply to the initial decision, and added a number of new complaints. Complaining that his earlier requests to this effect had been refused by the Agency without cause, the applicant requested that an expert be appointed and that an oral hearing be held, although a hearing in these proceedings was excluded by law. Nevertheless, the applicant argued that the statutory exclusion of oral submissions was unconstitutional, and proposed that this issue be raised before the Constitutional Court and that the judicial review proceedings be suspended pending the decision of the Constitutional Court. Moreover, the applicant maintained that the documents relied upon by the Agency did not prove that he had actually carried out the transactions at issue by using the “cross-user” function key, and that the Agency must have based its conclusion to this effect on other documents which had not been referred to in its decisions. 17. On 13 October 2004 the Constitutional Court rendered a decision on the review of constitutionality of certain provisions of the Securities Market Act, in which it joined several applications regarding the same matter. Some of the challenged provisions of the Act were found to be unconstitutional; however, none of those pertained to procedural matters, including the provisions on holding of oral hearings. 18. On 14 February 2006 the Supreme Court dismissed the applicant’s action for judicial review without holding an oral hearing. Having found that the controversial transactions had all involved cross-trading between what were essentially the same clients, the Supreme Court held that the Agency’s conclusions as to the facts were correct. Moreover, considering that the purchases and sales had followed each other at very short intervals, the Supreme Court agreed with the Agency that the applicant must have been aware of the irregularity of the transactions in question. The court pointed out that the applicant had failed to adduce any arguments capable of rebutting the Agency’s conclusions. Also, the court dismissed the applicant’s complaint against the Agency’s decision not to appoint an expert and/or hold an oral hearing, reiterating that the Agency had sufficiently established the facts of the case. Finally, regarding the alleged failure of the Agency to indicate all evidence on which its conclusion as to the use of the “cross-user” function key had been made, the Supreme Court held that, as the applicant had not previously challenged the initial decision, it was only possible to examine his complaints regarding the final decision of the Agency. 19. The applicant lodged a constitutional complaint against the judgment of the Supreme Court, challenging the refusal of the Agency and the Supreme Court to hold an oral hearing and appoint an expert. He also claimed that the Agency had failed to indicate all evidence used in the proceedings, and that the Supreme Court erroneously rejected his complaint in that regard without addressing its merits. 20. On 6 December 2007 the Constitutional Court dismissed the applicant’s constitutional complaint, finding, first of all, that the Agency had indicated all the documents used as evidence in the proceedings to revoke his trading licence, first in its initial decision and then in its final decision. Accordingly, the court was of the view that the Agency’s conclusions as to the applicant’s use of the “cross-user” function key were clearly based on the documentary evidence and thus did not require a complex assessment of opposing and contradictory evidence. Moreover, the applicant had been provided with sufficient opportunity to comment on the evidence which was the basis for the revocation of his licence. Therefore, although the Constitutional Court agreed with the applicant that the Supreme Court had erred in concluding that he should have challenged the Agency’s initial decision to initiate the proceedings at an earlier time, it considered that remitting the case back to the Supreme Court for further examination could not lead to a different conclusion with regard to the documentary evidence used in the proceedings before the Agency. 21. As regards the applicant’s complaint that the Agency had refused to appoint an expert, the Constitutional Court reiterated that the Agency had given an adequate explanation of the use of the “cross-user” function key and the records of the stock-exchange trading system. Therefore, in the Constitutional Court’s opinion, the Supreme Court had not been required to make a specific pronouncement on this question. 22. Finally, as regards the applicant’s complaint that the Agency had also refused to hold an oral hearing, the Constitutional Court held that he had not put forward this complaint in his application for judicial review before the Supreme Court, thereby failing to use that remedy in substance. As regards the lack of an oral hearing in the judicial review proceedings, the Constitutional Court emphasised that a hearing in those proceedings was excluded by law. Nevertheless, the Constitutional Court took the view that the applicant’s right to be heard was not affected either, as he had had the opportunity to present his submissions in written form. 23. At the time of the events at issue the securities market operations and the powers of the Agency in respect thereof were regulated by the Securities Market Act. The Act designated the Agency as an independent legal entity, led by a Council of Experts which was composed of the president and eight members appointed by the Government. The members of the Council were required to hold a university degree and enjoy the reputation of renowned experts in the field of finance or commercial law. 24. Proceedings in individual matters before the Agency were conducted pursuant to the General Administrative Procedure Act, unless otherwise provided by the Securities Market Act. The parties to the proceedings were invited to make their statements in writing. An oral hearing was held only exceptionally, the Act providing as follows: “(1) The Agency shall adopt decisions without a hearing. (2) Notwithstanding the first paragraph, the president of the senate may convene a hearing if he or she considers that this is necessary in order to explain or establish relevant facts. (3) The president of the senate may, without a hearing, hear parties to the action and other persons if he or she considers that this is necessary in order to explain or establish relevant facts.” 25. Oral hearings in judicial review proceedings were specifically ruled out by Article 331 of the Act. 26. Moreover, with regard to the reasons for revoking an individual’s trading licence, the Act provided as follows: “(1) The Agency shall withdraw a licence to provide services ... 7. if a stockbroker acts in severe contravention of the rules pertaining to the organised market (Article 247). (2) The following shall be deemed a severe violation of the provisions referred to in items 6 and/or 7 of the first paragraph of this Article ... 2. recurring violations of the said provisions.” “In providing services with regard to the securities on the organised securities market, brokerage firms shall be obliged to comply with the trading rules and other general acts of the stock exchange and with the requirements of the responsible bodies of the stock exchange.”