CASE OF CINGILLI HOLDİNG A.Ş. AND CINGILLIOGLU v. TURKEY
Violation of Article 6 - Right to a fair trial (Article 6 - Civil proceedings;Enforcement proceedings;Article 6-1 - Access to court);Violation of Article 1 of Protocol No. 1 - Protection of property (Article 1 para. 1 of Protocol No. 1 - Peaceful enjoyment of possessions);Just satisfaction reserved (Article 41 - Non-pecuniary damage;Pecuniary damage;Just satisfaction)
András Sajó;Egidijus Kūris;Helen Keller;Jon Fridrik Kjølbro;Nebojša Vučinić;Robert Spano
3. The applicants were the main shareholders of Demirbank, established in 1953. In 1999 Demirbank was ranked the fifth largest private bank in Turkey, with 193 branches and 3,885 employees. 4. By a decision dated 6 December 2000 (no. 123), the Banking Regulation and Supervision Board (Bankalar Düzenleme ve Denetleme Kurulu – hereinafter referred to as “the Board”) decided to transfer the management and control of Demirbank to the Savings Deposit Insurance Fund (Tassarruf Mevduat Sigorta Fonu – hereinafter “the Fund”), pursuant to section 14 (3) of the Banking Activities Act (Law no. 4389). In its decision, the Board held that the assets of Demirbank were insufficient to cover its liabilities and that the continuation of its activities would threaten the security and stability of the financial system. Accordingly, Demirbank’s management and control, and the privileges of its shareholders except for dividends, were transferred to the Fund. The Fund also confiscated all properties belonging to Demirbank. 5. On 2 February 2001, the applicant company brought administrative proceedings against the Banking Regulation and Supervision Agency (Bankalar Düzenleme ve Denetleme Kurumu – hereinafter referred to as “the Agency”) before the Ankara Administrative Court, seeking the annulment of the decision of 6 December 2000 regarding the transfer of Demirbank to the Fund. 6. The Ankara Administrative Court found that it lacked jurisdiction and transferred the case to the Supreme Administrative Court. 7. In its submissions before the Supreme Administrative Court, the applicant company claimed that its property rights had been violated. It also raised a plea of unconstitutionality under section 14 of the Banking Activities Act. The applicant company further stated that prior to November 2000, Demirbank had never encountered major financial problems. It was pointed out that pursuant to section 14 (2) of the Act, a bank with financial difficulties should first be given a warning to strengthen its financial structure and be allowed time to take specific measures. However, no such warning had been given in the instant case. Secondly, the Board had not claimed that Demirbank’s financial situation was so weak that it could not be strengthened even if specific measures were taken. Lastly, the applicant company stated that following the transfer of the bank to the Fund, a General Assembly composed of the Fund’s officials had exonerated the former managers of Demirbank, holding that they had not been at fault in the incident leading to the bank’s transfer. 8. After examining the file, on 3 June 2003 the Supreme Administrative Court dismissed the case. It held that the takeover of the bank by the Fund had been in accordance with section 14 (3) of the Banking Activities Act. The applicant company lodged an appeal. 9. On 18 December 2003 the Joint Administrative Chambers of the Supreme Administrative Court decided to quash the decision of 3 June 2003. In its judgment, the court held that prior to ordering the transfer of Demirbank to the Fund, the Board should have carried out an objective evaluation of the bank’s financial situation. The court also concluded that the Board should first have ordered Demirbank to take specific measures in accordance with section 14 (2) of the Banking Activities Act before applying section 14 (3) of the Act. 10. On 29 April 2004 a request for rectification lodged by the Agency was refused. 11. The case was remitted to the Supreme Administrative Court, which delivered its decision on 5 November 2004, upholding the decision of the Joint Administrative Chambers of the Supreme Administrative Court. In its decision the Supreme Administrative Court held that: “... Demirbank did not have any serious financial problems until the economic crisis in November 2000. The amount of the bank’s risky credit in Government Bonds for Domestic Borrowing aimed at securing Treasury debt was not too high compared to its total credit, its asset quality was high due to its five affiliate banks abroad, and furthermore, the major shareholders had not targeted the resources of the bank. Although Demirbank had been able to resolve its liquidity problem and it had fulfilled all obligations towards individual and corporate clients using its own assets, it was decided that it fell within the scope of section 14 of the Banking Activities Law. It is therefore understood that the administrative act pertaining to the taking over of Demirbank by the Savings Deposit Insurance Fund based on paragraphs (b) and (d) of section 14 of the Banking Activities Act, without investigating any further possible options or specific measures to enable the Bank to establish a balance of liquidity, was unlawful. ... In the light of the foregoing, the Banking Regulation and Supervision Board’s decision of 6 December 2000 ordering the takeover of Demirbank by the Fund is unanimously annulled.” 12. A further appeal and a request for rectification lodged by the Agency were rejected on 14 April 2005 and 15 December 2005 respectively. The final decision was served on the applicant company’s representative on 13 March 2006. 13. In the meantime, while the proceedings against the Agency were still pending, on 20 September 2001 the Fund entered into an agreement with the HSBC bank, and sold Demirbank to the latter for 350,000,000 US Dollars. 14. On 20 September 2001 the second applicant brought administrative proceedings against the Fund in the Ankara Administrative Court, seeking the annulment of the agreement to sell Demirbank to HSBC. 15. Given that the transfer of Demirbank to the Fund had been found to be unlawful by the Joint Administrative Chambers of the Supreme Administrative Court, on 21 April 2004 the Ankara Administrative Court annulled the agreement entered into by the Fund and HSBC on 20 September 2001. In its decision the Ankara Administrative Court held that: “... It can be seen that, given the shareholding structure of Demirbank before the transfer, 72,55 % was owned by Cıngıllı Holding A.Ş., that the claimant who owned shares in this company was a shareholder of the aforementioned bank, that all shares of Demirbank were taken over by the Savings Deposit Insurance Fund pursuant to section 14 of the Law no. 4389, that the claim requesting the annulment of the Banking Regulation and Supervision Board’s decision dated 6 December 2000 regarding this taking over was dismissed by a judgment on 3 June 2003 delivered by the Supreme Administrative Court, and that this judgment was subsequently quashed by the judgment of 18 December 2003 of the Joint Administrative Chambers of Supreme Administrative Court. In its judgment, the Joint Chambers of the Supreme Administrative Court held that the taking over of Demirbank by the Savings Deposit Insurance Fund based on Section 14 paragraphs (b) to (d) of the Banking Activities Act was unlawful and it accordingly declared the act as null and void. It was decided that the decision regarding the taking over of the bank had been adopted without investigating the possible options to enable the bank to establish a balance of liquidity and taking the relevant precautions, given that it would have been possible for the bank to continue its banking activities since it did not have any serious financial problems until the financial crisis of November 2000, the amount of the bank’s risky credit in Government Bonds for Domestic Borrowing aimed at securing Treasury debt was not too high compared to its total credit, its asset quality was high compared to the five affiliate banks based abroad, the majority shareholders had not targeted the resources of the bank, the bank had been included within the scope of section 14 of Law no. 4389 to enable it to the resolve its liquidity problem and it had fulfilled all obligations towards individual and corporate clients using its own assets. It is therefore understood that, pursuant to the annulment of the decision pertaining the taking over of Demirbank by the Savings Deposit Insurance Fund by the Joint Chambers of the Supreme Administrative Court, the subsequent sale of Demirbank to HSBC Bank has also become unlawful and the decision that is the subject of these proceedings is therefore unlawful. This act is therefore declared null and void.” 16. An appeal and a request for rectification lodged by the Fund were rejected on 3 June 2005 and 24 February 2006 respectively. 17. On 11 May 2006 the second applicant requested the Agency to comply with the Supreme Administrative Court’s judgments and to enforce them. Relying on the restitutio in integrum principle, she requested that Demirbank be returned to its previous owners. 18. On 10 July 2006 the Agency informed the second applicant that it would be impossible to enforce the judgments as, following its sale to HSBC, Demirbank had been struck off the commercial register.