CASE OF FREITAG v. GERMANY
Preliminary objection joined to merits and dismissed (non-exhaustion of domestic remedies);Violation of Art. 6;Remainder inadmissible;Non-pecuniary damage - financial award;Costs and expenses partial award
Peer Lorenzen
4. The applicant was born in 1954 and lives in Cologne in Germany. 5. The applicant is the manager of the M GmbH (the “M-Company”). He held registered shares of the V-Holding AG (the “target company”), an insurance company which was seated in Berlin. 6. On 1 and 2 December 1997, respectively, the shareholder's meetings approved the merging of the target company into the E-Versicherungsgruppe AG (the “acquiring company”), which was seated in Hamburg. The shareholders of the target company were to receive shares in the acquiring company. 7. On 25 February 1998 the merger of the two companies was announced pursuant to section 19, subsection 3 of the Law of Reorganisation (Umwandlungsgesetz, see relevant domestic law, below) in the Official Bulletin of the Municipality of Hamburg (Amtlicher Anzeiger der Stadt Hamburg). The applicant maintains that he was unaware of this publication. 8. Meanwhile, on 28 January 1998 a shareholder of the target company lodged a motion with the Berlin Regional Court (Landgericht) with the aim of being allocated an additional number of shares. Having been informed that he did not have such a claim under the applicable law, the shareholder withdrew his request on 15 July 1998. 9. On 5 March 1998 the M-Company, which was represented by counsel, lodged a motion against the acquiring company before the Hamburg Regional Court with the aim of obtaining compensation (bare Zuzahlung) for the alleged loss of value of the shares incurred by the merger pursuant to section 15 of the Law of Reorganisation. The company further requested the Regional Court to order the defendant party to submit the date of the most recent announcement of the merger in the public bulletin. Finally, the company requested the Hamburg court to transfer the case-file to the competent court in case it should lack jurisdiction. 10. On 12 March 1998 the Hamburg Regional Court informed both parties that, pursuant to section 306 § 1 of the Law of Reorganisation, the court at the seat of the target company, which was not Hamburg, appeared to be locally competent. The Regional Court invited both parties to submit their comments within four weeks. This letter was served on the M-Company on 20 March 1998. 11. By telefax of 21 March 1998 the plaintiff maintained that the Hamburg Regional Court should be regarded as having jurisdiction. In case the Regional Court should not follow this opinion, the plaintiff alternatively requested to transfer the case-file to the Berlin Regional Court. 12. The applicant's counsel further declared that he lodged all requests in the pending proceedings also on behalf of the applicant, as it was not clear whether the shares were owned by the M-Company or by the applicant personally. 13. On 9 April 1998 the acquiring company requested an extension of the time-limit until 27 April 1998 with regard to the upcoming Easter holidays. 14. On 14 April 1998 the Hamburg Regional Court, without having heard the applicant, granted the requested extension. The applicant's counsel was informed of this decision by court-letter dated 15 April 1998. 15. By letter dated 24 April 1998, which reached the Hamburg Regional Court on 27 April 1998, the acquiring company maintained that, according to the relevant provisions, the Berlin Regional Court as the court at the seat of the target company was locally competent. It further pointed out that the action had been lodged out of the statutory time-limit of two months following the final announcement of the merger in an official bulletin, which had expired on 27 April 1998. As the motion had been lodged with an incompetent court, it had not been properly lodged within that time-limit. 16. On 5 May 1998 the applicant replied that the acquiring company had been acting in bad faith as it was the only party to the proceedings which knew about the impending expiry of the time-limit and had purposefully delayed the proceedings. 17. By order of 5 June 1998 the Hamburg Regional Court transferred the case to the Berlin Regional Court, where it arrived on 1 July 1998. 18. On 2 September 1998 the Berlin Regional Court declared the actions lodged on behalf of the M-Company and of the applicant inadmissible for having been lodged outside the statutory time limit. That court noted that the registration of the two companies' merger had been announced on behalf of the Berlin Commercial Register on 12 February 1998 by publication in the Federal Bulletin and in a Berlin daily newspaper and on behalf of the Hamburg Commercial Register on 20 February 1998 in the Federal Bulletin and on 25 February 1998 in the Official Bulletin of the Municipality of Hamburg. It followed that the two month time-limit started to run on 25 February 1998. The Regional Court noted that the plaintiffs had filed their requests within the statutory time-limit with the Hamburg Regional Court. However, as that court had transferred the case to the competent Berlin Regional Court only after expiry of the time-limit, it had not been lodged in time. According to the Berlin Regional Court, Section 281 of the Code of Civil Procedure, which provided that a law-suit remained pending even if it was transferred from a court which lacked jurisdiction, did not apply to the proceedings aimed at determining a shareholder's compensation (aktienrechtliches Spruchstellenverfahren). 19. On 10 September 1998 the applicant lodged a complaint with the aim to declare his action admissible. Alternatively, he requested to be granted reinstitution into the proceedings (Wiedereinsetzung in den vorigen Stand) with respect to the time-limit. The applicant pointed out that he had not known at which date the merger had been announced in the official bulletin. Accordingly, he could not have known at which date the time-limit would expire. The Hamburg Regional Court had awaited the defending parties' submissions without referring the case to the Berlin Regional Court, as requested by the applicant. Under these circumstances, the applicant claimed that section 281 of the Code of Civil Procedure should be applicable by analogy to the effect that the lodging with the Hamburg Regional Court had to be regarded as sufficient in order to comply with the statutory time-limit. Alternatively, the applicant claimed that he should be granted a reinstitution into the proceedings with regard to the fact that the delays which had occurred before the Hamburg Regional Court before the case was transferred to the Berlin Regional Court were not imputable to him. Finally, the applicant maintained that the Berlin Regional Court had failed to publicly announce the request filed by the other shareholder on 28 January 1998 and to appoint a joint representative in order to safeguard the other external shareholders' rights. He further maintained that his complaint should be declared admissible as a follow-up request to the first request lodged in January 1998. 20. On 22 November 1999 the Berlin Court of Appeal (Kammergericht) rejected the applicant's complaint. It noted that the merger had been announced on 20 February 1998 in the Federal Bulletin and on 25 February 1998 in the Official Bulletin of the Municipality of Hamburg. Confirming the Regional Court's finding relating to the expiry of the statutory time-limit and to the applicability of section 281 of the Code of Civil Procedure, the Regional Court considered that only a strict application of sections 305 and 306 of the Law of Reorganisation guaranteed that the shareholders could have certain knowledge within a short period of time as to whether compensation would be paid. The Court of Appeal further considered that the request lodged by the other shareholder in January 1998 was inadmissible. Accordingly, this request did not allow to file a follow-up request within the time-limit of section 307 § 3. 21. The Court of Appeal expressed its doubts as to whether the rules on reinstitution into the proceedings were applicable to the present proceedings. In any event, the applicant had not been hindered to comply with the statutory time-limit through no fault of his own. Even though section 305 § 1 of the Law of Reorganisation contained a clear and unambiguous provision on jurisdiction, he had insisted that the Hamburg Regional Court had been competent. 22. On 2 August 2000 the Federal Constitutional Court, sitting as a panel of three judges, refused to accept the applicant's constitutional complaint. According to that court, the applicant's complaint did not have fundamental constitutional significance. Neither was the acceptance of the complaint indicated in order to enforce the constitutional rights which the applicant claimed had been violated. While it could not be excluded that the Berlin Court of Appeal, when deciding on the applicant's request for reinstitution into the proceedings, failed in a constitutionally questionable way sufficiently to consider the conduct of the Hamburg Regional Court, the applicant – who had learned in time about the extension of the time-limit granted to the defendant on 14 April 1998 – had failed to apply for a reduction of that extended time-subsidiarity. The remainder of the complaint did not have any prospect of success, as the applicant's submissions did not disclose a violation of his rights under the Basic Law. This decision was served on the applicant on 14 August 2000. 23. The merging of shareholder companies was, at the relevant time, governed by the Law of Reorganisation (Umwandlungsgesetz), which provided as follows: According to section 15, a shareholder could request compensation (bare Zuzahlung) if the value of the shares he was allocated in the acquiring company did not equal the value of the shares he held in the target company. Section 19 provided that the merger of two companies had to be registered first in the commercial register at the seat of the target company and, subsequently, in the commercial register at the seat of the acquiring company. Each registration had to be announced by publication in the Federal Bulletin and in one further periodical. The second publication organ was chosen by the commercial court by December for the following year and made public by notifying, inter alia, the chamber of commerce. The merger had to be regarded as being publicly announced by the end of the day of the latest publication (see section 19 § 3). The provisions on procedure read as follows: Section 305 Time-limit “A motion for a court decision pursuant to section 15...has to be lodged within two months following the date on which the registration has been publicly announced pursuant to the provisions of this law.” Section 306 Competent court “(1) The competent court is the Regional Court at the seat of the company whose shareholder is entitled to lodge the motion.” Section 307 Court proceedings “(1) The proceedings are governed by the law on matters of non-contentious jurisdiction (freiwillige Gerichtsbarkeit)... (2) The motion has to be lodged against the acquiring company... (3) The Regional Court has to announce the motion in the Federal Bulletin (Bundesanzeiger) and, if the statutes of the respective company so provide, in other public bulletins. Other shareholders may lodge their own motions within two months following publication. This has to be pointed out in the publication. A request lodged after expiry of this time-limit is inadmissible...” Section 308 Joint representative “(1) The Regional Court has to appoint a representative in order to safeguard the rights of those external shareholders who did not lodge an own motion...” 24. In proceedings governed by the Code of Civil Procedure, an action complies with a time-limit even if it has been lodged with an incompetent court and is only later on transferred to the competent court (section 281 of the Code of Civil Procedure). 25. In separate proceedings the Federal Court of Justice (Bundesgerichtshof, case no. II ZB 26/04) ruled on 13 March 2006 that section 281 of the Code of Civil Procedure should also apply by analogy to proceedings aimed at determining a shareholder's compensation. This decision was based on considerations of legal certainty and the interest of an acceleration of the proceedings. The Federal Court of Justice further noted that a court was generally obliged rapidly to inform the parties about its own lack of jurisdiction and swiftly to process a request to transfer the case-file to the competent court.