CASE OF CREDIT AND INDUSTRIAL BANK v. THE CZECH REPUBLIC
Violation of Art. 6-1;Not necessary to examine P1-1;Pecuniary damage - claim dismissed;Non-pecuniary damage - finding of violation sufficient;Costs and expenses partial award - domestic proceedings;Costs and expenses partial award - Convention proceedings
Nicolas Bratza
8. The applicant is a bank, a joint stock company with its registered office in Prague. 9. On 27 September 1993 the Czech National Bank (Česká národní banka) (“the CNB”), pursuant to section 26(1)(a) of the Banks Act (no. 21/1992) (zákon o bankách) (“the Act”), placed the applicant bank in compulsory administration with effect from 30 September 1993 to 31 March 1994, on the grounds that the financial situation and liquidity of the applicant bank had repeatedly been unsatisfactory and that the previous measures had not remedied the situation. A compulsory administrator (nucený správce) was appointed to replace the applicant bank's statutory body. The decision (rozhodnutí) contained a notice to the effect that the provisions of administrative procedure did not apply to it and that no appeal lay against it. 10. On 29 September 1993 the compulsory administration decision was published in the Commercial Bulletin (obchodní vĕstník). 11. In a ruling (usnesení) of 30 September 1993 the Prague 1 District Court (obvodní soud) (“the District Court”), upon the CNB's proposal, decided to allow an entry concerning the compulsory administration and the appointment of the compulsory administrator to be made in the Companies Register (obchodní rejstřík). The ruling fixed the date of 30 September 1993 as the date of the entry in the Companies Register and stated that the compulsory administrator represented the applicant bank. The ruling was not served on the applicant bank. On the same date, the compulsory administrator and a representative of the CNB came to the bank and informed all employees that the applicant bank had been placed in compulsory administration. The representative of the CNB served the CNB's decision of 27 September 1993 on Mr Moravec, the chairman of the bank's Board of Directors and its majority shareholder. On 4 October 1993 the District Court confirmed its ruling of 30 September 1993 by issuing a certificate of legal validity (právní moc). 12. On 18 March 1994 the CNB extended the compulsory administration until 30 June 1994. 13. On 22 March 1994 the applicant bank's legal representative, Mr Choděra, sent his power of attorney to the District Court, and requested that the proposal for an entry concerning the compulsory administration and the District Court's decision delivered in this regard be sent to his office. He noted that under Article 200(a) of the Code of Civil Procedure, the applicant bank was a party to the proceedings. 14. On 30 March 1994 notice of the extension was published in the Commercial Bulletin. In a ruling of 30 March 1994 the District Court, upon a proposal of the CNB, approved an entry concerning the extension in the Companies Register. The court did not hold a public hearing. On the same day it confirmed the ruling by a certificate of legal validity. The ruling was not served on the applicant bank. 15. On 1 and 6 April 1994 respectively, the applicant bank, represented by the chairman of its Board of Directors and Mr Choděra, its legal representative, having become aware of the existence of the rulings of 30 September 1993 and 30 March 1994, appealed against them to the Prague Municipal Court (městský soud) (“the Municipal Court”). It claimed that it should have been treated as a party to the proceedings in which the court had approved the entries concerning the compulsory administration and its extension in the Companies Register, and contended that the rulings had not been served on it. The applicant bank also claimed that the CNB's decision of 27 September 1993 had not been sufficiently reasoned and that it was therefore not able to say whether the compulsory administration had been imposed in accordance with the law or not, and that the decision contained an incorrect notice to the effect that no appeal lay against it. It added that when the rulings of the District Court were served on it, it would make more complete submissions. 16. In a ruling of 17 May 1994, rejecting the appeals against the rulings of 30 September 1993 and 30 March 1994 without holding a public hearing, the Municipal Court stated, inter alia: “... the decisions of the [CNB] concerning the imposition of compulsory administration and its extension were fully within its competence under section 25 of [the Act]. ... In the light of the decision of 27 September 1993, compulsory administration was imposed because of the repeatedly unsatisfactory financial situation ... of the bank. Section 26(4) of [the Act] expressly states that administrative law applies to the procedure concerning the imposition of penalties ... Administrative law does not, therefore, apply to other decisions taken under section 26 of this Act ... It is true that the court of first instance acted incorrectly when it did not notify both rulings to the appellant. However, it is apparent from the appeals which the appellate court considered to have been lodged in time that [the appellant] has become familiar with both of them ... [Moreover], the entries in the Companies Register were made [by the court of first instance] in accordance with section 29 [of the Act].” 17. On 21 June 1994 the applicant bank, represented by the chairman of its Board of Directors and Mr Choděra, filed an appeal on points of law (dovolání) with the Prague High Court (Vrchní soud) against the Municipal Court's ruling of 17 May 1994, pursuant to Articles 237(f) and 241 § 2(d) of the Code of Civil Procedure. 18. On 22 June 1994 the bank lodged a constitutional appeal (ústavní stížnost) with the Constitutional Court (Ústavní soud) against the District Court's rulings of 30 September 1993 and 30 March 1994 and the Municipal Court's ruling of 17 May 1994, with a proposal to repeal sections 26(4) and 41(2) of the Act. 19. On 23 June 1994 the CNB extended the compulsory administration until 31 December 1994. On 29 June 1994 notice of the extension was published in the Commercial Bulletin. In a ruling of 30 June 1994 the District Court, upon a proposal by the CNB, approved an entry concerning the extension in the Companies Register. The court did not hold a public hearing. On the same day, it approved the ruling by issuing a certificate of legal validity. The ruling was sent to the office of Mr Choděra. On 21 July and 15 August 1994 the applicant bank, represented by Mr Choděra, appealed against the ruling to the Municipal Court. 20. In the meantime, on 29 June 1994, the Constitutional Court had declared the applicant bank's constitutional appeal inadmissible, finding, inter alia, that the ruling of 17 May 1994 had not been served on the parties to the proceedings and, therefore, had not become final. 21. On 29 July 1994 Act No. 156/1994, which amended the Act as regards, inter alia, the procedure on compulsory administration, came into force. Section IV provided that the Act was applicable in all cases where compulsory administration had been imposed before that date. 22. On 30 August 1994 the ruling of the Municipal Court of 17 May 1994 was served on the applicant bank and thereby became final. 23. On 31 August 1994 the applicant bank, represented by the chairman of its Board of Directors and Mr Choděra, renewed its appeal on points of law against the Municipal Court's ruling of 17 May 1994. The appeal contained the same arguments as in the previous appeal, which appeal had, however, been lodged before the notification of the ruling. 24. On the same day the applicant bank, represented by the chairman of its Board of Directors and Mr Choděra, lodged a second constitutional appeal against the Municipal Court's ruling of 17 May 1994. It pointed out that the ruling had become final by its notification and that, therefore, an appeal lay against it to the Constitutional Court. It submitted that it should have been a party to the proceedings on entries in the Companies Register and that all decisions relating to these proceedings should have been served on it. It further challenged an allegedly wrong interpretation of section 26(4) of the Act by the Municipal Court and suggested that this provision, together with section 41(2) of the Act, should be repealed. 25. On 13 October 1994 the Municipal Court dismissed the applicant bank's appeal against the District Court's ruling of 30 June 1994 as being lodged by an unauthorised person. The court found that the applicant bank's statutory body had, pursuant to section 29(2) of the Act as amended, been replaced by the compulsory administrator, who alone could represent the bank or authorise a legal representative, but who had not granted such authorisation to Mr Choděra. 26. On 1 December 1994 the CNB decided that the compulsory administration would not finish on 31 December 1994, but would be terminated for one of the reasons indicated in section 33 of the Act as amended. On 7 December 1994 that decision was entered in the Companies Register. 27. In the meantime, on 6 December 1994, the applicant bank, represented by the chairman of its Board of Directors and by Mr Choděra, had lodged a third constitutional appeal, this time against the Municipal Court's ruling of 13 October 1994. It complained, in particular, that the Municipal Court had violated the applicant bank's right to be protected by a court considering that its appeal had been lodged by an unauthorised person. It further suggested that section IV(3) of Act No. 156/1994 should be repealed. 28. On 13 December 1994 the Constitutional Court declared inadmissible the applicant bank's second constitutional appeal against the Municipal Court's ruling of 17 May 1994, holding in particular that when the constitutional appeal had been lodged, the Municipal Court had been dealing with the applicant bank's appeal and the appeal on points of law filed in the meantime had still been pending. Accordingly, no final decision had been given at that stage. 29. On 31 January 1995 the Constitutional Court dismissed the applicant bank's third constitutional appeal as being unsubstantiated and as being lodged by an unauthorised person. The court stated, in particular: “... the Prague Municipal Court founded its decision expressly on section 29(2) of [the Act] ... according to which a compulsory administrator replaces the statutory body of a bank during compulsory administration. ... [The applicant bank's legal representative] was not authorised by the compulsory administrator of the bank to make an appeal or lodge a constitutional appeal. ... The Constitutional Court found from the case file of the Prague 1 District Court that the decision imposing compulsory administration ... was ordered by the [CNB] on 27 September 1993 ... The compulsory administration became effective, in accordance with section 29(1) of [the Act], by its registration in the Companies Register, pursuant to the Prague 1 District Court's ruling of 30 September 1993 which became final on 4 October 1993. ... Moreover, according to [the Act], administrative law was not applicable to proceedings concerning compulsory administration, with the exception of cases explicitly referred to in this Act (sections 26(4) and 41). Administrative law became applicable only after the entry into force of Act No. 156/1994 (section 26(4)). To that end, an administrative complaint could be lodged against a decision given by the [CNB] (section 26(8)). An administrative complaint could also be made under section 41(1) of [the Act]. However, only by section 26(7) of the [Act] as amended did the [CNB] become obliged to notify its decision on compulsory administration to [the bank]. In addition the administrative complaint does not have suspensive effect (section 8) ...” 30. On 15 June 1995, pursuant to section 33(1) of the Act as amended, the CNB withdrew the applicant bank's banking licence (povolení působit jako banka) and on 15 August 1995, on an appeal of the applicant bank, it confirmed that decision. 31. On 2 October 1995 the Commercial Court instituted bankruptcy proceedings against the applicant bank. 32. On 6 January 1997 the District Court stayed the proceedings instituted on 6 October 1995 by the applicant bank, represented by Mr Choděra, against the CNB and the compulsory administrator, requesting the latter to fulfil his obligation (o splnění povinnosti nuceného správce). It stated that the applicant bank had not submitted a power of attorney. 33. On 7 January 1997 the Commercial Court, to which the appeal on points of law against the Municipal Court's ruling of 17 May 1994 had been referred, stayed the proceedings on the ground that Mr Moravec had not paid the court fees despite having been ordered to do so by the court's ruling of 22 May 1995, which was modified on 10 July 1996 and served on him on 12 August 1996. 34. On 2 April 1998 the Municipal Court quashed the District Court's ruling of 6 January 1997, stating, inter alia: “There is no doubt that the claim was made on 6 October 1995 and that a power of attorney issued by the applicant bank's statutory body was attached to it. There is also no doubt that on 2 October 1995 bankruptcy proceedings were instituted against the bank ... (By that date) the company that had been declared bankrupt had not lost its capacity to act in legal proceedings but only the right to dispose of property forming part of the estate of the company. By section 14(1)(h) of Bankruptcy and Equalisation Act No. 328/1991 [(zákon o konkurzu a vyrovnání)], powers of attorney relating to the property forming part of the estate of a company declared bankrupt lose their validity. However, that was not so in the present case ...”. 35. On 30 November 2000 the Supreme Court declared inadmissible the applicant bank's appeal on points of law against the Municipal Court's ruling of 17 May 1994. It held that pursuant to Article 237(f) of the Code of Civil Procedure, an appeal on points of law was admissible if a party to the proceedings could not act as a result of a procedural step taken by the court. According to the law then in force, compulsory administration became effective on the date on which the relevant entry was made in the Companies Register; the applicant bank's own statutory body was therefore empowered to act on its behalf until that date and to appeal against the ruling of the District Court on the registration of the compulsory administration in the Companies Register. The District Court had then to notify its ruling to the applicant bank. However, in the present case the applicant bank had validly appealed against the ruling concerned to the Municipal Court, which had considered it on the merits. Seeing that the ruling was not reasoned, notification of it could not improve the procedural position of the applicant bank. The Supreme Court added that the fact that the applicant bank had not received the text of the CNB's proposal for the entry concerning the compulsory administration in the Companies Register did not remove the applicant bank's right to act in proceedings before the court as provided for in Article 237(f) of the Code of Civil Procedure. In so far as the appeal on points of law concerned the entry of the first extension of the compulsory administration in the Companies Register, the Supreme Court pointed out that section 29 of the Act as in force at the time when compulsory administration had been imposed provided that compulsory administration became effective on the date on which the relevant entry was made in the Companies Register, the functions of the statutory body of the bank being suspended by the appointment of a compulsory administrator until the compulsory administration ended. In the present case, on 30 September 1993 the statutory body of the applicant bank had been replaced by the compulsory administrator, who alone was entitled to appeal in the proceedings concerning the proposal for an entry concerning the extension of compulsory administration to be made in the Companies Register. However, the appeal against the District Court's ruling of 30 March 1994 had been lodged by Mr Choděra who had acted on the basis of a power of attorney issued by Mr Moravec, chairman of the applicant bank's Board of Directors, on 9 February 1994. 36. On 30 November 2000 the Supreme Court likewise declared inadmissible the applicant bank's appeal on points of law against the Municipal Court's ruling of 13 October 1994. It stated, inter alia, that Article 237(b) of the Code of Civil Procedure provided that an appeal on points of law was admissible if the person who acted as a party to the proceedings lacked the capacity to be the party to those proceedings. The applicant bank claimed that the compulsory administrator had not had the capacity to be the party to the proceedings. The Supreme Court stated that in the present case the applicant bank had the capacity to be a party to the proceedings; another question was who could act on its behalf before the court. The Supreme Court then examined the conditions of admissibility of the applicant bank's appeal on points of law under Article 237(f) of the Code of Civil Procedure. It stated that according to the law then in force, compulsory administration became effective on the date on which the relevant entry was made in the Companies Register; on that date the statutory body of the bank was replaced by the compulsory administrator. Article 200(b) § 2 of the Code of Civil Procedure provided that the court decided on the contents of the entry in the Companies Register without holding a hearing. It specified the date of the entry in its decision. The entry had to be effected within one month after the decision had been taken. The Supreme Court underlined that the date of the entry in the Companies Register was not to be confused with the date on which the decision authorising the entry was delivered, with the date of its notification, or with the date on which the court approved the decision by issuing the certificate of legal validity. The court concluded that the compulsory administrator alone was entitled to appeal in the proceedings concerning the proposal to make an entry in the Companies Register of the second extension of the period of compulsory administration. However, the appeal against the District Court's ruling of 30 June 1994 had been lodged by Mr Choděra who had acted on the basis of a power of attorney issued by Mr Moravec, chairman of the applicant bank's Board of Directors, on 9 February 1994. Consequently, the applicant bank had not had the right to have its appeal examined on the merits by the appellate court. 37. On 19 March 2001 the applicant bank, represented by Mr Choděra, lodged a fourth constitutional appeal, this time against two decisions of the Supreme Court, alleging a violation of Article 6 § 1 of the Convention. 38. Until 29 July 1994 compulsory administration proceedings were governed by the Banks Act (No. 21/1992) (“the Act”). Section 26(1)(a) of the Act provided that compulsory administration was a measure which the Czech National Bank (“the CNB”), as an administrative authority under section 1(3) of the Czech National Bank Act (No. 6/1993), could impose upon a bank if it did not comply with the conditions laid down in its banking licence and/or if it infringed the law. Under section 27, the CNB was empowered to impose compulsory administration on a bank if the bank's financial situation and liquidity failed considerably or repeatedly to satisfy the conditions laid down in the Act, and previous measures or sanctions had not remedied the situation. Under section 29(1), compulsory administration became effective on the date of the relevant entry in the Companies Register, the CNB not being required to notify the bank of its decision to place it in compulsory administration. Before registration, the decision to impose compulsory administration was published in the Commercial Bulletin. Section 29(2) provided that the functions of the bank's statutory body were suspended by the appointment of a compulsory administrator until the end of the compulsory administration. Under section 30, the compulsory administrator was entitled to take measures necessary to restore the stability and liquidity of the bank concerned, including closure of its branches or other administrative units. Under section 33, compulsory administration could be terminated by: (a) revocation, if there were no longer any reasons for its continuance; (b) expiry of the period originally fixed by the CNB, if that period had not been extended; and (c) withdrawal of the bank's banking licence. The Banks Act did not oblige the CNB to notify its decision concerning the imposition of compulsory administration to the bank concerned. It did not specify the maximum period of compulsory administration, did not contain any reference to the application of administrative law to compulsory administration proceedings, did not specify the parties to the proceedings and did not indicate any remedy against a decision imposing compulsory administration. 39. Compulsory administration proceedings were modified by Act No. 156/1994 (“the Act as amended”) which entered into force on 29 July 1994. It was applied to all cases in which compulsory administration had been imposed before that date. Pursuant to the new section 26(4), administrative law applies, inter alia, to proceedings concerning the imposition and withdrawal of compulsory administration, unless the Banks Act provides otherwise. The bank is the sole party to the proceedings (section 26(5)) which can also be institute by the notification of the decision (section 26(6)). Pursuant to the new section 26(7), the CNB shall notify a member of the bank's Board of Directors (představenstvo) or a member of its Supervisory Board (dozorčí rada) or a person empowered to direct the bank of its decision imposing compulsory administration on the bank. The bank can lodge an administrative complaint (rozklad) against such a decision. The complaint does not have suspensive effect (section 26(8)). Pursuant to section 29(1), the functions of all organs of the bank are suspended upon the notification of the compulsory administration decision. The compulsory administrator assumes the functions of the statutory organ. Section 33(c) limits the maximum period of compulsory administration to twenty-four months. 40. Article 14 of the Code of Administrative Procedure (Act No. 71/1967) recognises as a party to proceedings any person whose rights, obligations or interests protected by law are to be dealt with, or whose rights, obligations or interests protected by law may be directly affected by an administrative decision. Article 61 provides that any administrative decision taken by a central State administrative authority at first instance may be contested by an administrative complaint lodged within 15 days from the date on which the administrative decision was served. 41. Certain provisions of the Code of Civil Procedure were also applied in the present case. Article 167 provides, inter alia, that “unless otherwise provided by law, the court shall decide in the form of a ruling (usnesení)”. Article 168 § 2 provides, inter alia, that “the court shall serve a ruling on the parties if such ruling may be appealed against or an appeal on points of law is filed ...” Article 171 § 2 provides, inter alia, that “if the ruling does not impose a duty of performance, it becomes enforceable (vykonatelný) as soon as it is served”. Article 200(b) provides that “(1) In proceedings concerning an entry in the Companies Register, the court shall examine whether all the conditions required by the statutory provisions for making such entry are met. (2) The court decides on the content of a particular entry by a ruling without holding a hearing. The verdict in the ruling shall state the date of the entry. The entry is to be made within one month of issuing the decision on the content of such entry. (3) The provisions on disciplinary fines shall apply if a company fails to comply with the court's request to notify the court of the facts, or to submit the documents, required for making an entry under Article 200(a) § 2.” Article 237 provides that “An appeal on points of law (dovolání) is admissible against a decision of an appellate court if: ... (b) a person who acted as a party in the proceedings lacked the capacity to be such party; ... (f) a party to the proceedings was deprived from acting before the court through a faulty procedure applied by the court.” Article 241 § 2(d) provides that an appeal on points of law may be filed “if a decision was based on incorrect legal consideration of the case.” Chapter II of the Code governs the conditions for the review of decisions of administrative authorities (správní žaloba). Article 247 provides: “(1) The provisions of this Chapter shall apply to cases when an individual or a legal entity claims that his or its rights were curtailed by a decision of an administrative authority and a request for review is filed with the court seeking a review of that decision from the viewpoint of its legality. (2) Regarding a decision issued as part of administrative proceedings by an administrative organ, the provisions of this Chapter shall only apply to a review of that decision in respect of which all ordinary legal remedies admitted by law have been made use of and the decision in question has become final. Article 250(b) § 1 provides that the request for review shall be filed within two months of the notification of the decision of the administrative authority in the last instance, unless the law provides otherwise. Under Article 250(i) § 1, the facts at the time when the decision in question was given are decisive. No examination of evidence takes place. Article 250(j) § 1 provides, inter alia, that the court, upon finding that the decision in question has been made in accordance with law, shall reject the request for review. Article 250(j) § 2 provides, inter alia, that the court, upon finding that the administrative authority did not consider the matter correctly from the legal point of view or that the facts on which it founded its decision were contrary to the content of the file, shall quash the decision and may return the matter to the indicated administrative authority for further proceedings. The court shall also quash a decision when it emerges during a hearing that the decision cannot be reviewed because it is incomprehensible or because of lack of reasons. 42. Finally, Article 27 § 2 of the Commercial Code (Act No. 513/1991) provides that the facts entered in the Companies Register become effective with respect to everyone from the date on which the entry is made.