SOMICO OOD v. BULGARIA
Inadmissible
David Thór Björgvinsson;George Nicolaou;Ineta Ziemele;Ledi Bianku;Paul Mahoney;Vincent A. De Gaetano;Zdravka Kalaydjieva
1. The applicant company, Somico OOD, is a Bulgarian limited liability company, which was set up in 1993 and is based in Sofia. It was represented before the Court by Ms S. Margaritova-Vuchkova, a lawyer practising in Sofia. 2. The Bulgarian Government (“the Government”) were represented by their Agent, Ms R. Nikolova, of the Ministry of Justice. 3. The facts of the case, as submitted by the parties, may be summarised as follows. 4. On 1 February 1993 the applicant company entered into a lease agreement with the Bureau for Servicing the Diplomatic Corps (“the BSDC”), a body of the Ministry of Foreign Affairs, renting from it a Stateowned shop. It appears that the term of the lease agreement was periodically renewed until 31 December 1996. 5. On 30 May 1996 the applicant company submitted a proposal to the Privatisation Agency to purchase the shop under the preferential privatisation procedure available to lessees of State and municipality-owned properties, provided for in section 35 (1) of the Privatisation Act (see paragraph 31 below). 6. In a decision of 22 October 1996 the Privatisation Agency declined the proposal. It reasoned that the conditions under section 35 (1) of the Privatisation Act had not been met, because the BSDC was not a State enterprise and real property included in its assets could not be sold or exchanged. 7. The applicant company applied for judicial review of the Privatisation Agency’s refusal. In a judgment of 14 January 1997, which was considered final, the Supreme Administrative Court (“the SAC”) quashed the decision of 22 October 1996 and instructed the Agency to open a privatisation procedure. The SAC held that the shop was owned by the State and had been assigned to the BSDC for use and management only. 8. Following that judgment, on 13 March 1997 the Privatisation Agency opened a procedure for the shop’s privatisation. On 4 April 1997 its decision to that effect was published in the State Gazette. 9. On an unknown date the BSDC submitted a petition for review (преглед по реда на надзора) of the judgment of 14 January 1997. 10. On 18 September 1997 a five-member panel of the SAC quashed the judgment of 14 January 1997 and remitted the case to a three-member panel of the same court. The five-member panel noted that, notwithstanding the fact that the shop was owned by the State, it was not subject to privatisation because the BSDC did not have the status of a State enterprise. 11. Following a fresh examination, in a judgment of 2 December 1997 a three-member panel of the SAC dismissed the applicant company’s application for judicial review. However, on appeal, in a final judgment of 23 June 1998 a five-member panel of the same court quashed the decision of 22 October 1996 and instructed the Privatisation Agency to open a privatisation procedure aimed at selling the shop to the applicant company. It considered, most notably, that the shop was the property of the State and that the BSDC’s legal status was not an obstacle to the privatisation. It considered, in addition, that the applicant company met all the requirements to benefit from the preferential conditions under section 35 (1) of the Privatisation Act. 12. Following that decision, on 3 August 1998 the Privatisation Agency wrote to the applicant company proposing a price for the shop, inquiring whether the applicant company accepted to buy the shop and inviting it to propose payment conditions. 13. On 6 August 1998 the applicant company informed the Privatisation Agency that it agreed to buy the shop at the price proposed. In addition, it suggested a payment scheme. 14. The signing of the privatisation contract was scheduled for 3 September 1998; however, several hours before the meeting an employee of the Privatisation Agency informed the applicant company by telephone that it would be postponed. 15. Meanwhile, on 2 September 1998 the Privatisation Agency inquired with the Sofia municipality as to whether there were any restitution claims in respect of the shop. On 11 November 1998 the regional governor of Sofia replied that on 19 October 1998 he had decided to transfer the shop to a third party in compensation for their expropriated property (see below). 16. It transpired subsequently that on 27 July 1998 the BSDC had transferred ownership of the shop to the Sofia municipality. On the same day the Sofia municipal council included it in the assets of the municipallyowned company managing municipal real properties. It is unclear whether the Privatisation Agency had been informed of those developments at the time. 17. It also transpired that on 16 April 1998 a third party – the heirs of Ms E.P. – had requested the transfer of the shop in compensation for expropriated real property. As already mentioned, in a decision of 19 October 1998 the regional governor granted their request. 18. The applicant company applied for judicial review of that latter decision. However, on 29 December 1999 the Sofia City Court found its application inadmissible, holding that the applicant company had not been a party to the restitution proceedings and therefore had no standing to challenge the impugned decision. 19. The parties have not informed the Court whether it was possible for the applicant company to challenge the transfer of the property from the State to the municipality, or resort to any other remedy directed against the municipality. 20. On 1 February 2000 the applicant company sought judicial review of the Privatisation Agency’s failure to finalise the privatisation transaction in compliance with the judgment of 23 June 1998. However, on 19 June 2000 the SAC rejected the application for judicial review as inadmissible, holding that the impugned failure to execute a final judicial act did not represent an administrative decision in itself and therefore was not subject to judicial control. 21. On an unspecified date the applicant company requested the assistance of the Ministry of Economy to finalise the privatisation transaction. In a letter of 21 September 2000 the Minister of Economy invited the Privatisation Agency to comply with the judgment of 23 June 1998. 22. In letters of 20 October 1998, 6 April 2000 and 9 January and 22 February 2001 the applicant company also invited the Privatisation Agency to finalise the privatisation procedure. 23. On 2 March 2001 the Privatisation Agency informed the applicant company that the shop had been transferred to the Sofia municipality and that the regional governor’s subsequent decision to transfer it in compensation to a third party represented a new circumstance which impeded the finalisation of the privatisation transaction. 24. The applicant company applied for judicial review of the Privatisation Agency’s refusal. In a judgment of 11 July 2001 a threemember panel of the SAC quashed the refusal and instructed the Agency to transfer title to the shop to the applicant company. It reasoned that the applicant company had acquired the right to buy the shop and the Agency was therefore obliged to sign the privatisation agreement. However, upon an appeal by the Privatisation Agency, in a final judgment of 8 January 2002 a five-member panel of the SAC found the applicant company’s application for judicial review inadmissible. It held that the Agency’s refusal to sign a privatisation agreement had not amounted to an administrative decision because, at that stage of the privatisation procedure, the two parties had been acting on an equal footing. Thus, the existing dispute between them could not be settled in administrative proceedings. 25. On 25 June 2001 the applicant company brought a civil action against the Privatisation Agency, seeking to have declared final the preliminary contract which it considered had been reached between them. Mr Y.P. and Ms S.P., heirs of Ms E.P., intervened in the proceedings with a claim for a declaratory judgment against the applicant company and the Privatisation Agency that they were the owners of the shop on the basis of the regional governor’s decision of 19 October 1998. 26. On 23 June 2003 the Sofia City Court dismissed the action of the applicant company and declared that Mr Y.P. and Ms S.P. were the owners of the shop. Upon an appeal by the applicant company, on 23 June 2004 the Sofia Court of Appeal upheld that judgment. It considered, in particular, that following the judgment of 23 June 1998 (see paragraph 11 above) the applicant company and the Privatisation Agency had exchanged correspondence in which they had reached an agreement on the main conditions of the sale of the shop, which represented a preliminary contract. However, the Privatisation Agency had not been the owner of the shop, which meant that the preconditions for declaring the preliminary contract final had not been present. 27. Following an appeal, in a final judgment of 21 July 2005 the Supreme Court of Cassation upheld the lower courts’ judgments. It considered, in particular, that the correspondence between the applicant company and the Privatisation Agency did not represent a preliminary contract. 28. In the meantime, on 5 April 2002 a notary public, acting with the assistance of the police, put Mr Y.P. and Ms S.P. in possession of the shop. It appears that by this time the applicant company, which was still holding the property, was no longer using it and it was in a state of abandon. 29. The Transformation and Privatisation of State and Municipal Enterprises Act (Закон за преобразуване и приватизация на държавни и общински предприятия: “the Privatisation Act”) of 1992 provided for the transformation of public property and the privatisation of State and municipality-owned enterprises. It was superseded by other legislation in March 2002. 30. Section 3 of the Act indicated the bodies competent to take decisions on privatisation. As concerns State-owned properties, the competent bodies were either the Privatisation Agency, or, for the most important objects, the Council of Ministers. The body competent to decide on the privatisation of municipally-owned properties was the relevant municipal council. 31. Under section 35 (1) of the Privatisation Act, lessees of State and municipality-owned property could propose to buy the property rented by them, without a public auction or competition and for a price equal to the property’s value assessed by certified experts in accordance with rules adopted by the Government. Those preferential conditions were applicable to lessees of State and municipality-owned property who had concluded lease contracts before 15 October 1993 and where the said contracts were still in force on the date of the respective privatisation proposal. 32. Section 35 (2) of the Privatisation Act, as worded after October 1997, provided that where a refusal by the competent administrative body to initiate a privatisation procedure following a proposal by the interested party had been quashed by means of a final court judgment, the relevant administrative body was obliged, within two months of the judgment becoming final, to initiate the privatisation procedure, prepare the privatisation of the property at issue and offer to sell the property to the entitled party. 33. Paragraph 6 of the transitional and concluding provisions of the Privatisation Act addressed different situations of conflict of competing privatisation and restitution interests. It provided, in particular, that in cases where a privatisation contract had already been concluded, the parties claiming to have restitution rights were to be compensated through shares in the companies which had acquired the property, if any such shares were owned by the State or municipalities, or through compensation bonds.