KETKO v. UKRAINE
Inadmissible
Isabelle Berro-Lefèvre;Karel Jungwiert;Mark Villiger;Mirjana Lazarova Trajkovska;Rait Maruste;Renate Jaeger;Volodymyr Butkevych
The applicant, Mr Viktor Mykolayovych Ketko, is a Ukrainian national who was born in 1942 and lives in Kyiv. He is represented before the Court by Ms M. Kudelya, a lawyer practising in Kyiv. The Ukrainian Government (“the Government”) are represented by their Agent, Mr. Y. Zaytsev. The facts of the case, as submitted by the parties, may be summarised as follows. The applicant owns a 50 % share in AB Imeks Ltd, a joint venture (hereinafter the “Company”). The Company was incorporated on 17 September 1992 as a joint venture with a 49 % share at all relevant times being owned by a Polish partner. The Company and its subsidiary were conducting a gas trading business. The Company also fell into the category of “companies with foreign investments”, within the meaning of the Foreign Investments Act 1992 (the “1992 Act”), until its repeal in 2000. The 1992 Act was adopted with a view to encouraging foreign investments and was applied to companies where a foreign partner had at least a 20% share. This Act established preferential treatment for such companies, including, inter alia, 10 years' immunity from changes in the law governing foreign investments (Section 9). This immunity was to be granted on the making of the relevant application and calculated from the date of its establishment. On 17 February 2000 Parliament passed the Companies set up with National Property and Assets (Termination of Discrimination) Act 2000 (the “2000 Act”), which provided that companies with a foreign shareholding were subject to general tax, customs and currency regulations, and repealed the 1992 Act. The 2000 Act affected all joint ventures irrespective of when the foreign investment had been made. In its judgment of 29 January 2002, the Constitutional Court gave a binding interpretation of Section 5 of the 2000 Act, holding that it provided valid grounds for refusing new and withdrawing previously granted taxation privileges. In November 1998 the Company instituted proceedings in the Lutsk City Court claiming immunity under Section 9 of the 1992 Act. On 18 January 1999 the court found for the Company and declared that, until 17 September 2002, the Company was exempted from any new taxes, duties, changes in the method of calculation or payment of taxes introduced after 17 September 1992. On 4 March 1999 the Volyn Regional Court, following the appeal of the customs authorities, quashed this decision and remitted the case. On 15 June 1999 the Company's claim was declared inadmissible. On 3 November 1999 the Supreme Court, upon the supervisory complaint of its Deputy President, quashed the decisions of 4 March 1999 and 15 June 1999, and upheld the judgment of 18 January 1999, thus reinstating the Company's immunity from any changes in tax and customs law. On 1 December 2000 the Lutsk City Court clarified its judgment of 18 January 1999 upon the Company's request. The court specified that the Company, as well as its subsidiaries, was immune from any changes in fiscal legislation, including that introduced by the 2000 Act. This ruling was upheld by the Volyn Regional Court on 25 June 2001 and by the Supreme Court on 12 October 2001. On 28 October 2002 the Supreme Court rejected the request of the Head of Volyn Customs Office to reopen the proceedings due to the new circumstances. On 17 June 2002 the Central Energy Customs Service (hereafter “CECS”) refused to allow the Company's subsidiary free transit of a certain amount of gas across the Ukrainian border. The Company's subsidiary together with the applicant and the Company's foreign shareholder challenged this decision before the courts. On 25 July 2002 the Podilsky District Court of Kyiv allowed this claim and ordered CECS to allow the gas to be imported, referring in this respect to the January 1999 judgment. On 7 February 2003 the Kyiv City Court of Appeal granted CECS's appeal, quashed the judgment of 25 July 2002 and rejected the claim as unfounded. The court indicated that the 2000 Act, as interpreted by the Constitutional Court, gave sufficient grounds for annulling the taxation privileges enjoyed by the Company and its subsidiary. On 6 May 2003 the Supreme Court rejected the cassation appeal against the judgment of the Kyiv City Court of Appeal as unfounded. Section 2 of that Act provided that it was applicable to companies of any type or form as long as a foreign investor owned at least a 20% share in such a company. According to Section 9 of that Act a “company with foreign investments” falling into the scope of this Act could be granted, upon submission of the relevant application, immunity for a period of ten years from changes in special legislation to do with the regulation of foreign investments. The Preamble specified that the Act's aim was to put companies with foreign shares in an equal position to those without foreign investments, thus protecting free competition and domestic industry. Section 1 of the Act declared that companies with foreign investments were subject to general tax, customs and currency regulations. Section 4 of the Act repealed the 1992 Act. According to Section 5, this Act applied to all joint ventures irrespective of when the foreign investment was made. Following a request from the Cabinet of Ministers, the Constitutional Court gave an official interpretation of Article 5 of the 2000 Act. The court explained that this provision constituted adequate grounds for refusing new and withdrawing previously granted applications for those privileges regarding taxes, customs duties and currency controls.