CASE OF UKRAINE-TYUMEN v. UKRAINE
Violation of Art. 6-1;Violation of P1-1;Non-pecuniary damage - claim dismissed;Pecuniary damage - reserved
Peer Lorenzen
4. The applicant is a Ukrainian joint venture based in Kyiv, with legal personality under Ukrainian law. 5. In June 1995 the Governor of the Tyumen Region of the Russian Federation submitted a proposal to the President of Ukraine to co-fund a joint venture for strengthening and further improvement of trade links between Ukraine and the Tyumen Region. The Governor also suggested that Ukraine should transfer title to a building in Kyiv to the future company, so that it could be used as its head office. 6. In September 1995 the applicant company was founded by six companies, including the Ukrresursy State Enterprise. 7. On 20 August 1996 the applicant's articles of association were amended, the number of co-founders having increased to seven entities, including the Ukrresursy State Enterprise and the State Property Fund of Ukraine (“the Fund”). The Fund was stated to be acting on behalf of the Ukranaftoprodukt State Enterprise (“Ukranaftoprodukt”). Each founder was declared to hold 14.28% of the applicant's share capital. While six companies were to pay equal amounts of money for their shares (USD 71,542), the Fund undertook to transfer to the applicant company a title to the building valued at USD 71,542, and belonging, as was stated in the articles of association, to Ukranaftoprodukt. 8. On 30 August 1996 Ukranaftoprodukt, acting on the Fund's instructions, transferred title to an administrative building in Kyiv to the applicant. Ukranaftoprodukt continued to use the building as its premises. 9. According to the applicant's amended articles of association, it was established mainly for the purposes of obtaining profit for the shareholders and for the creation of an infrastructure for the cooperation between Ukrainian and Tyumen companies pursuant to intergovernmental decisions aiming at improving effectiveness of business links and implementation of joint programmes, such as the sale of oil, gas, wood, agricultural products; legal advice; organisation of exhibitions; other commercial activities necessary for achieving the goals of the company. The applicant company enjoyed all the rights of a separate legal entity. The applicant's shareholders were entitled to take part in its management, to receive a part of its profit, to be informed about its activities etc. The property of the applicant company consisted of the objects and money transferred to its share capital by the shareholders, as well as the funds received by the applicant from other sources. The shareholders did not enjoy separate rights over the objects transferred to the applicant as their contributions. 10. In October 1998 the Kyiv City State Administration (“the City Administration”) instituted proceedings in the Higher Arbitration Court of Ukraine against the Fund, Ukrnaftoprodukt and the applicant company, seeking recovery of title to the building, claiming that it owned the building and alleging that the title to the latter had been transferred to the applicant ultra vires. 11. On 29 December 1998 the court invalidated the transfer of 30 August 1996 and ordered Ukrnaftoprodukt to give the building back to the City Administration. The court found that that the building belonged to the Kyiv City Administration and that the Ukrnaftoprodukt had not been entitled to transfer it to the applicant. 12. Ukranaftoprodukt lodged a request for review of the decision of 29 December 1998 with the panel of the Higher Arbitration Court for the review of judgments, rulings and resolutions (the “Review Panel”). 13. On 11 March 1999 the Review Panel quashed the judgment of 29 December 1998 and rejected the claim of the City Administration. The panel held that the claim had been lodged out of time and that there was no evidence that the City Administration was the lawful owner of the building. 14. On 24 March 2000 the Presidium of the Higher Arbitration Court rejected the request for supervisory review (the “protest”) of the resolution of 11 March 1999, lodged by the President of that court, as unsubstantiated. 15. On 24 January 2001 the Prosecutor General of Ukraine, following the City Administration's request, lodged a protest with the Plenary Higher Arbitration Court (the “Plenary Court”), seeking supervisory review proceedings in the case. On 15 February 2001 the Plenary Court, in the presence of the representatives of the General Prosecutor's office, allowed the protest, quashed the resolutions of 11 March 1999 and 24 March 2000, and upheld the judgment of 29 December 1998. In its decision, the court summarised the Prosecutor General's arguments and found them substantiated. No other reasons were given for its decision. The parties were not invited to participate in the hearing before the Plenary Court. The applicant's comments on the protest of the Prosecutor General were not examined by the Plenary Court. 16. According to the applicant, on 2 November 2001 its articles of association were amended to the effect that the Ukrainian authorities were no longer a shareholder. 17. The Government contended that the State remained one of the founders of the applicant company and, hence, the owner of 28.56% of its share capital. 18. The relevant provisions of the Act read as follows: “A company shall be the owner of: [i] the property which its founders ... transferred to it; [ii] the objects which it produced...; [iii] the profit which it received...” “Participants and founders of a company may transfer to it as their contribution buildings ..., money ... The contribution expressed in karbovatsi shall constitute the founder's and participant's share in the [company's] statutory fund.” 19. The relevant provisions of the Act read as follows: “In accordance with the Constitution of Ukraine, the arbitration courts shall have jurisdiction over economic cases. The arbitration court is an independent body with jurisdiction over all economic disputes between entities, public and other bodies, and over litigation arising out of insolvency.” “The Higher Arbitration Court shall be composed of the President, the First Deputy President, the President's deputies, and the judges and [it] shall sit as: the Plenary Higher Arbitration Court; the Presidium of the Higher Arbitration Court; the panels for the consideration of disputes and for the review of judgments, rulings, resolutions.” 20. The relevant provisions of the Code of Arbitration Procedure provided: “The Higher Arbitration Court shall consider cases: 1) in which one of the parties is ... the Kyiv City State Administration...” “The lawfulness and reasoning of a judgment, ruling or resolution of an arbitration tribunal ... may be reviewed under the supervisory procedure upon the party's request or following a protest by a prosecutor or his deputy, in accordance with this Code and other laws of Ukraine. The party's request for review of a judgment ... shall be examined by ... the panel of the Higher Arbitration Court for the review of judgments, rulings and resolutions. The following persons are empowered to lodge a protest: The Prosecutor General and his deputies...” “The arbitration court shall be entitled to review under the supervisory procedure the lawfulness and reasoning of a judgment, ruling, resolution on its own initiative...” “... The panel ... shall review under the supervisory procedure: 1) a judgment and ruling concerning a dispute which was adjudicated by the Higher Arbitration Court...” “A judgment, ruling, resolution shall be reviewed by a panel of the President of the Higher Arbitration Court or his deputy and a judge of the Higher Arbitration Court. If they do not agree on the outcome of the review, the President of the Higher Arbitration Court or his deputy may report to the Presidium of the Higher Arbitration Court who decides the matter... A judgment, ruling, resolution shall be reviewed by the President of the Higher Arbitration Court or his deputy and two judges of the panel, if the application of law or assessment of evidence in the case is difficult. In such a case, the decision shall be adopted by a majority of votes. A judgment or ruling delivered by the Deputy President of the Higher Arbitration Court or delivered in the hearing in which he presided shall be reviewed by the President of the Higher Arbitration Court and two judges of the panel. In such a case, the resolution shall be adopted by a majority of votes. A judgment or ruling delivered by the President of the Higher Arbitration Court or in the hearing in which he presided shall be reviewed by the Presidium of the Higher Arbitration Court. If necessary, the parties may be invited to give their explanations at the panel's hearing.” “The President of the Higher Arbitration Court, the Prosecutor General of Ukraine or his deputies have a right to lodge with the Presidium of the Higher Arbitration Court a protest against the resolution delivered by the panel of the Higher Arbitration Court for economic disputes. A party to the proceedings has a right to lodge with the Presidium of the Higher Arbitration Court an application for supervisory review of the judgment or ruling delivered by the President of the Higher Arbitration Court in the hearing in which he presided...” “The President of the Higher Arbitration Court, the Prosecutor General of Ukraine have a right to lodge with the Plenary Higher Arbitration Court a protest against the resolution delivered by the Presidium of the Higher Arbitration Court. Following its deliberations, the Plenary Higher Arbitration Court shall adopt a resolution...” “An application for supervisory review ... shall be lodged with the arbitration court which adjudicated the case. If the supervisory review is to be carried out by the Higher Arbitration Court, the application, together with the case-file, shall be submitted by the relevant arbitration court to the Higher Arbitration Court within five days following the receipt of the application. The protest ... shall be lodged with the arbitration court competent to review the judgment... Copies of the application or protest shall be sent to the parties... The enforcement proceedings shall not be suspended if an application or a protest is lodged, save in the cases where the judgment ... concerns the transfer of money and the forced taking of property...” “An application ... and a protest must be lodged within two months of the date of the judgment...” “Upon the receipt of a copy of the application for supervisory review ... or of a protest, a party shall send to the arbitration court, other parties ... [its] observations [in reply]. ... The absence of the [parties'] observations ... shall not prevent [a court] from carrying out the review.” “The parties may participate in [the proceedings on] the review... The prosecutor ... shall take part in [the proceedings on] the review, which were initiated upon [his] protest. The non-appearance of the parties or the prosecutor ... shall not prevent [the court] from carrying out the review... The supervisory review ... shall be completed within two months of the receipt of an application or protest... A judgment, ruling, resolution of the arbitration court may be reviewed under the supervisory procedure no later than within one year after their delivery.” “... [T]he arbitration court has power: [i] to leave a judgment, ruling, resolution without changes; [ii] to change a judgment, ruling, resolution; [iii] to quash a judgment, ruling, resolution, and to adopt a new judgment, remit a case for a fresh consideration, discontinue the proceedings, or leave a case without consideration. A judgment, ruling, resolution ... shall be reviewed as a whole, irrespective of the grounds for an application for supervisory review or a protest. An arbitration court reviewing a judgment, ruling, resolution under the supervisory procedure shall have all the powers of an arbitration court considering an economic dispute. The supervisory review of a judgment, ruling, resolution by the Higher Arbitration Court shall be final, save when a party is outside the territory of Ukraine and there is an agreement between the relevant States for a different procedure of review.” “... 1) incomplete examination of the circumstances relevant to a case; 2) lack of proof of the relevant circumstances established by a court; 3) lack of conformity of the conclusions [of a court] ... with the circumstances of a case; 4) violation or incorrect application of substantive or procedural law...” “A judgment, ruling, resolution of an arbitration court shall be final and binding on the day of their delivery...”