CASE OF PSMA, SPOL. S.R.O. v. SLOVAKIA
Violation of Article 6 - Right to a fair trial (Article 6 - Civil proceedings;Article 6-1 - Fair hearing;Equality of arms)
Branko Lubarda;Ján Šikuta;Johannes Silvis;Josep Casadevall;Kristina Pardalos;Luis López Guerra
5. The applicant company was established in 1995 and has its registered office in Bratislava. 6. On 17 March 1995 the applicant company concluded a contract with Slovak Radio (Slovenský rozhlas), Slovakia’s national public-service radio broadcaster, a publicly funded institution with its own legal personality, the status of which is regulated by law (at that time Law no. 619/2003 Coll., as amended, presently Law no. 532/2010 Coll., as amended). 7. Under the contract, in return for a fee, the applicant company agreed to act as exclusive agent for Slovak Radio as the principal (“the principal”) for the sale of broadcasting time for the purposes of advertising. 8. The venture worked well and the contract was amended several times. The amended contract was valid until 31 December 2007. 9. However, in 2004 the relationship between the applicant company and the principal began to sour because the principal was not content with the amount of business acquired by the applicant company in 2003. 10. The principal had accordingly issued the applicant company with a bill for the difference between the estimated profit and the real profit from such business. 11. As the applicant company did not pay the bill, the principal served the applicant company with a notice of termination of the contract, considering the applicant company’s failure to pay the bill to be a fundamental breach of the contract. 12. The notice period expired on 30 September 2005, following which the principal arranged for the sale of its broadcasting time by other means. 13. On 20 October 2005 the applicant company challenged the validity of the principal’s notice of termination of the contract in court, but later withdrew the action. 14. The principal, for its part, sued the applicant company for payment of the difference between the estimated profit and the real profit. No information has been made available about the current state and outcome of those proceedings. 15. On 5 December 2006 the applicant company demanded that the principal pay it the equivalent of some 693,000 euros (EUR), according to the exchange rate applicable at that time, by way of indemnity for termination of the contract. With reference to the contract, the amount of the indemnity had been calculated as the applicant company’s average yearly commission for the preceding five years, taking into account both financial and non-financial transactions between the principal and third parties, the latter being referred to as barter transactions. 16. As the principal did not satisfy the applicant company’s claim, on 1 June 2006 the applicant company sued it for the above-mentioned amount and late-payment interest. 17. On 29 March 2007 a copy of the action was served on the principal for observations. Hearings were scheduled for 13 and 27 April and 14 May 2007, in the course of which the Bratislava I District Court (Okresný súd) examined complex documentary evidence and heard the statutory representative of the applicant company and four witnesses. 18. However, the principal submitted no written observations and appeared at none of the hearings. The circumstances of its absence were disputed (see below). 19. On 14 May 2007 the Bratislava I District Court (Okresný súd) granted the action in full. It observed that despite having been represented by a lawyer, the principal had failed to submit any observations or to present a good excuse for its failure to appear at any of the hearings. It therefore proceeded to examine the case under Article 101 § 2 of the Code of Civil Procedure (Law no. 99/1963 Coll., as amended – “the CCP”), which in the event of a party’s unjustified failure to cooperate, allows for the examination of the case on the basis of the elements available. As a preliminary issue, the District Court examined the question of validity of the notice of termination of the contract issued by the principal. It observed that the notice had not been contested and concluded that it was valid. There were no reasons disqualifying the applicant company from being eligible for the indemnity, and the barter transactions had rightly been taken into account in its calculation. 20. The principal appealed (odvolanie) to the Bratislava Regional Court (Krajský súd). In terms of form, it contested the first-instance judgment in its entirety. Nevertheless, in terms of substance, it acknowledged the existence of the legal basis of the applicant company’s entitlement to indemnity, disputing solely its scope, in so far as the barter transactions were concerned. Without those transactions, the acknowledged amount of the indemnity was equivalent to some EUR 526,000, according to the exchange rate applicable at that time. In support of its challenge to the claim exceeding that amount, the principal pointed out that, in the proceedings in its action for payment of the difference between the estimated profit and the real profit (see paragraph 14 above), the applicant company had lodged a counter-claim for compensation for the barter transactions. The principal also contended that the decision to determine the action in its absence had been arbitrary. 21. Having examined the appeal, the Regional Court upheld the firstinstance judgment on 28 November 2007. It considered that, except for the part related to the barter transactions, the applicant company’s claim had been acknowledged by the principal. As to those transactions, it observed that the applicant company had offset a claim for compensation for them against the claims asserted by the principal in its above-mentioned action. The claim for compensation for those transactions was however a different matter from a claim for indemnity for the termination of the contract, which was asserted in the present proceedings, and which the Regional Court found to be wellfounded. Lastly, as regards the principal’s absence from the first-instance proceedings, the Regional Court observed (i) that the principal had requested the adjournment of the hearing of 13 April 2007; (ii) that the summons for the hearing of 27 April 2007 had not been deliverable to the principal’s lawyer prior to that hearing; and (iii) that on 11 May 2007 the principal’s new lawyer had requested that the hearing of 15 May 2007 be adjourned so as to allow him to study the case file, although the summons for that hearing had already been served on the principal on 3 May 2007 at the latest. In those circumstances, the District Court’s assessment that the principal had been “absolutely passive” in the proceedings was right and the examination of the case in the principal’s absence had been justified. 22. As no ordinary appeal lay against the Regional Court’s judgment, following its service on the parties, the matter was resolved with the force of a final and binding decision (právoplatnosť) on 9 January 2008. On the expiry of a period of grace for voluntary payment, the judgment became enforceable (vykonateľnosť) on 12 January 2008. 23. On 10 March 2008 the principal challenged the Regional Court’s judgment by way of a complaint under Article 127 of the Constitution (Constitutional Law no. 460/1992 Coll., as amended). Asserting its rights of access to a court and to a fair hearing, it contended that the impugned judgment was grossly arbitrary and contrary to European Union law. In the latter respect, the Regional Court had arbitrarily refused to ask the Court of Justice of the European Union for a preliminary ruling. 24. On 3 July 2008 the Constitutional Court (Ústavný súd) declared the complaint inadmissible. It held that an unjustified refusal to ask for a preliminary ruling may in certain circumstances give rise to a ground for appealing on points of law (dovolanie) under Article 237 (g) of the CCP. As that remedy had not been exhausted, the Constitutional Court lacked jurisdiction to deal with the complaint. 25. On 25 April 2008 the principal filed a petition with the Office of the Prosecutor General (“the PG”) requesting the latter to exercise his discretionary power to challenge the above-mentioned judgments by way of an extraordinary appeal on points of law (mimoriadne dovolanie – “extraordinary appeal”). 26. The PG decided to accede to the request and on 23 October 2008 challenged the contested judgments in the Supreme Court (Najvyšší súd). He argued primarily that the courts had erred in finding the notice of termination of the contract valid because it had not been disputed by the parties. This was a point of law and it could not have been resolved simply with reference to the lack of disagreement of the parties over it. The courts therefore should have examined that question independently and properly. As for the substance, in his view, had the notice been invalid, there would have been no reason for an indemnity. On the other hand, had the notice been valid, the indemnity could have been refused, because it had been based on a breach of contract by the applicant company. Moreover, the PG pointed out that the contract had neither provided for nor excluded compensation for barter transactions. In such circumstances, the contract should have been interpreted in terms of the parties’ subsequent practice, which had not involved the payment of compensation for such transactions. They should accordingly not have been taken into account for the purpose of calculation of the indemnity. 27. Simultaneously, the PG applied for a ruling to suspend the enforceability of the impugned judgments pending the outcome of the extraordinary appeal. The Supreme Court acceded to that request on 8 December 2008. 28. Meanwhile, on 26 November 2008, the applicant company had submitted observations in reply; it submitted further observations on 3 February and 3 September 2009. The latter observations were not submitted until after the Supreme Court had determined the extraordinary appeal (see paragraph 30 below), as the applicant company did not know of its decision at the time. 29. In its observations, the applicant company raised numerous arguments, including the following. There was no justification for protecting the principal’s rights by way of an extraordinary appeal because it had failed to protect its own rights with due diligence in the lower courts and because, even at the cassation level, it had left the protection of its rights to the public authorities. In that regard, it had been open to the principal to assert its rights before the Supreme Court directly by way of an appeal on points of law. It had not done so simply in order to avoid incurring court fees for such an appeal. Moreover, under Article 243e § 1 of the CCP, the availability of an indirect remedy, an extraordinary appeal (on points of law), was excluded by the availability of a direct remedy, an (ordinary) appeal on points of law. At the appellate level, the only point in dispute had been the part of the applicant company’s claim concerning the barter transactions. The PG’s challenge to the ordinary courts’ findings as regards the validity of the notice to terminate the contract therefore exceeded the grounds of the principal’s petition for an extraordinary appeal. Indeed, it was contrary to it because the principal had not challenged the notice but rather had relied on it. In any event, the PG’s challenge was ill-founded because there was no correlation between the validity of the notice and the fact that it had been based on the applicant company’s refusal to pay the bill submitted by the principal. Lastly, with reference to Convention case-law, the applicant company submitted that the extraordinary appeal as a remedy against a final and binding judgment in its favour was incompatible with the principles of the rule of law and legal certainty. 30. On 12 August 2009, sitting in chambers, the Supreme Court allowed the extraordinary appeal. It quashed the judgments of both the District Court and the Regional Court and remitted the matter to the former for a new examination. It concluded that the courts had erred in that, firstly, they had omitted to examine the validity of the contract itself and secondly, depending on the outcome of that examination, they had failed properly to examine the validity of the notice. In view of those errors it had not been possible to deal in concreto with the questions of the basis and scope of the applicant company’s claim. 31. The Supreme Court’s decision was served on the applicant company’s lawyer on 22 September 2009. As a result, the case was remitted to the first instance, where it has been pending ever since. 32. On 20 November 2009 the applicant company lodged a complaint with the Constitutional Court, contesting the Supreme Court’s decision of 12 August 2009. It relied on its rights to access to a court, equality of arms, adversarial proceedings, legal certainty and a fair hearing. The applicant company argued that the admissibility requirements for the extraordinary appeal had not been met, and that the extraordinary appeal had not only been belated but had exceeded the scope of the principal’s petition. In addition, by the mere fact of admitting the extraordinary appeal, the Supreme Court had set at naught the entire preceding judicial process, in violation of the principle of legal certainty. The applicant company further argued that in view of the Supreme Court’s decision, a brand new hearing of the case had been called for, even though no procedural irregularities of the previous hearing had been established. In addition, the contested decision was biased in favour of the principal and was not amenable to review on account of lack of reasoning. The applicant company also contended that the Supreme Court had completely ignored its observations in reply to the extraordinary appeal. Lastly, the applicant company complained that it had been denied access to the Supreme Court’s case file in the extraordinary appeal. 33. On 25 November 2010 the Constitutional Court declared the applicant company’s complaint inadmissible as being manifestly illfounded. In so far as the applicant company had sought to contest the extraordinary appeal in principle, the Constitutional Court observed that the statutory framework for examination of individual complaints did not allow it to examine the compliance of statutes with the Constitution and international instruments as such. To the extent that the applicant company might be understood as wishing to object to any action on the part of the PG, no such objection could be considered because the applicant company had only identified the Supreme Court as the defendant of its complaint. As for the remainder of the complaint, which concerned the Supreme Court, the Constitutional Court found that the applicant company had failed to show any constitutionally relevant arbitrariness in the interpretation and application of the relevant rules. As regards the applicant company’s argument that the extraordinary appeal had been lodged belatedly, it was based on the premise that the principal had appealed against the first-instance judgment only in so far as it concerned the barter transactions. That premise was however mistaken because the principal had defined the target of its appeal as the firstinstance judgment as a whole (see paragraph 20 above). As to the Supreme Court’s failure to give a specific answer to the applicant company’s arguments, the Constitutional Court considered that the right to an answer to submitted arguments was related not to a person but to substance. The Supreme Court had thus been under a duty not to reply to the arguments submitted by the applicant company as such, but rather to address the relevant aspects of the case. On the latter point, the applicant company had failed to show that any of the relevant aspects of the case had gone unanswered. Lastly, the Constitutional Court accepted that it had been a mistake to deny the applicant company access to the Supreme Court’s case file. However, it held that that had no constitutional significance because, in view of the character of the extraordinary appeal proceedings, access to the case file or the lack of it would have had no impact on the outcome of the proceedings. 34. A copy of the Constitutional Court’s decision was served on the applicant company on 21 January 2011.