I incorrectly predicted that there's no violation of human rights in PREBIL v. SLOVENIA.

Judgment

FOURTH SECTION

CASE OF PREBIL v. SLOVENIA

(Application no. 29278/16)

JUDGMENT

STRASBOURG

19 March 2019

FINAL

19/06/2019

This judgment has become final under Article 44 § 2 of the Convention. It may be subject to editorial revision. In the case of Prebil v. Slovenia,
The European Court of Human Rights (Fourth Section), sitting as a Chamber composed of:
Jon Fridrik Kjølbro, President, Paulo Pinto de Albuquerque, Egidijus Kūris, Iulia Antoanella Motoc, Georges Ravarani, Marko Bošnjak, Péter Paczolay, judges,and Marialena Tsirli, Section Registrar,
Having deliberated in private on 26 February 2019,
Delivers the following judgment, which was adopted on that date:
PROCEDURE
1. The case originated in an application (no. 29278/16) against the Republic of Slovenia lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by a Slovenian national, Mr Andrej Prebil (“the applicant”), on 10 May 2016. 2. The applicant was represented by Mr M. Šušmelj, a lawyer practising in Ljubljana. The Slovenian Government (“the Government”) were represented by their Agent, Mrs V. Klemenc, State Attorney. 3. The applicant alleged, in particular, that he had not been able to participate in the proceedings against him in breach of Article 6 § 1. 4. On 14 January 2018 notice of the complaints concerning the applicant’s inability to participate in proceedings against him was given to the Government and the remainder of the application was declared inadmissible pursuant to Rule 54 § 3 of the Rules of Court. THE FACTS
I. THE CIRCUMSTANCES OF THE CASE
5. The applicant was born in 1974 and lives in Ljubljana. 6. The applicant was a member of the supervisory board of company A from 11 November 2013, with a four-year term. 7. On 12 March 2014, the chairman of the supervisory board of company A resigned: following this the supervisory board had only three members (of the required statutory six members). 8. On 20 March 2014, the Ljubljana District Court in Ljubljana adopted a decision on the initiation of “preventive restructuring” of company A (see paragraph 24 below). 9. On 13 May 2014 a session of the supervisory board of company A was held. One of the members, T. H., proposed to extend the agenda with a point on the dismissal of the chair of the management board. Allegedly, physical violence occurred between the members of the supervisory board, as some of them did not allow one member to leave the premises, to maintain the required quorum. It would appear that a resolution was passed dismissing the chair of the management board. 10. On 15 May 2014, a claim was brought before the Ljubljana District Court seeking to establish nullity of the supervisory board’s resolution of 13 May 2014. Company A agreed to the claim and the court consequently issued a decision annulling the impugned resolution. 11. In the meantime, on 29 May 2014, company P, who held a 91.42% share in company A, filed a motion to deprive the applicant and another supervisory board member, T.H., of their membership, and appoint provisional members. The motion was lodged against the applicant and T.H., who acted as opposing parties (nasprotna udeleženca). Company P relied on, inter alia, section 276 (2) of the Companies Act (see paragraph 24 below) and grounded the motion on the allegedly unacceptable personal qualities of the applicant and T.H., referring in particular to the incident that had occurred during a supervisory board meeting on 13 May 2014 (see paragraph 9 above). It requested the court to proceed to a decision without delay, without notifying the opposing parties of the proceedings and without holding a hearing. In particular, company P argued as follows: the applicant’s and T.H.’s conduct was unacceptable and therefore they should have not continued with their four-year mandate; there were well-founded reasons for depriving them of their membership; their membership should be terminated immediately and they should be replaced by provisional members so as to ensure lawful functioning of the supervisory board and company A; though company P had enough shares to request the management board to convene a general meeting of shareholders this was impossible due to the uncertainty as to who was the company manager; company A was undergoing reconstruction and there were deadlines to be met in this connection; calling a general meeting would thus not ensure a sufficiently prompt response to the situation; and so the court’s intervention was necessary. 12. On 4 June 2014 the Ljubljana District Court upheld company P’s motion. Referring to company P’s submissions and the case file in the proceedings concerning nullity of the resolution of 13 May 2014 (see paragraph 10 above) the court established that one member of the supervisory board had not been voluntarily present at the session of the supervisory board on 13 May 2014 (see paragraph 9 above) because of the conduct of the two remaining members of the supervisory board. In particular, it established that the applicant had clearly allowed T.H.’s conduct, had agreed with it, and had fully cooperated with her. The court explained that the law required that the supervisory board’s members act diligently and responsibly, and that this was particularly important in the present case, where company A was undergoing a process of “preventive restructuring”. It found that the conduct of two of the supervisory board members was harmful to company A’s functioning and that they should therefore not continue in their function until the end of their four-year term. It considered the case to be of an urgent nature, because company A was at risk, and the supervisory board with the applicant and T.H. as members was not in a position to perform its function until the first general meeting of company A. The decision also contained notice that an appeal was allowed against it within eight days of the notice of the decision. The court noted that the decision was effective immediately, and that any appeal would not stay its execution. 13. On 5 June 2014 a journalist asked the applicant to comment on the aforementioned decision. According to the applicant, he received a copy of it only a few days later. 14. On 24 June 2014 the applicant lodged an appeal arguing, inter alia, that he had been unlawfully denied the opportunity to participate in the proceedings. He referred to, inter alia, section 4 of the Non-Litigious Civil Procedure Act (see paragraph 25 below). He also disputed company P’s allegations concerning his conduct during the incident of 13 May 2014 (see paragraph 9 above), and gave his own version of events. He argued that the court’s intervention was not called for and that no grounds had been given for his dismissal. He also emphasised that the protection of his reputation required that he be involved in the proceedings and able to submit evidence. 15. On 3 July 2014 company P replied to the appeal, arguing that the case had been of an urgent character because it could have incurred losses had company A gone into insolvency. In its view, the impugned decision was a kind of interim injunction, and the adversarial principle could be ensured through appeal proceedings. 16. On 5 August 2014 company P informed the court that, on 4 August 2014, company A had held an assembly and appointed two new members to replace the applicant and T.H. It invited the court to reject the appeal, because the applicant could not be considered to have any legal interest in its outcome. 17. The applicant replied to the above pleadings on 25 August 2014. He argued that the supervisory board’s member’s dismissal at a general meeting of the shareholders could not be equated with the judicial termination of his term of office, because for the latter there had to be well-founded reasons, which had not been established in his case. 18. On 3 November 2014 the applicant submitted examples of the domestic jurisprudence, with a view to demonstrating that the domestic law had required that he be given an opportunity to participate in the proceedings. 19. On 21 January 2015 the Ljubljana Higher Court rejected the applicant’s appeal, finding that he could not have had any legal interest in the outcome of the proceedings because in the meantime company A had at its general meeting appointed new members to replace him and T.H. It noted that the appointment and dismissal of the members of the supervisory board, whose role it was to represent the interests of the shareholders, fell within the discretion of the assembly. The latter could dismiss supervisory board members any time during their term of office without having to provide any reason for doing so. Therefore, in the court’s view, even had the applicant succeeded in the appeal proceedings he could not have obtained reinstatement in his previous position. 20. The applicant lodged a constitutional complaint. Relying on, inter alia, Articles 6 and 13 of the Convention, he complained about being unable to participate in the proceedings. He argued that had he had an opportunity to reply to company P’s allegations the court would have reached a different conclusion. 21. On 10 November 2015 the Constitutional Court decided not to accept the applicant’s constitutional complaint for consideration pursuant to section 55b (2) of the Constitutional Court Act (see paragraph 27 below). This decision was served on the applicant on 13 November 2015. 22. A major Slovenian financial newspaper, Finance, reported the court’s dismissal of the applicant from its membership in company A’s supervisory board and the issues on which it had been based. II. RELEVANT DOMESTIC LAW
23. The Slovenian Constitution (Official Gazette no. 33/91) provides in its Article 21:
(Protection of Human Personality and Dignity)
“Respect for human personality and dignity shall be guaranteed in criminal and in all other legal proceedings, as well as during the deprivation of liberty and enforcement of punitive sanctions. Violence of any form against any person whose liberty has been restricted in any way is prohibited, as is the use of any form of coercion in obtaining confessions and statements.”
24. The relevant provisions of the Companies Act (Official Gazette no. 42/2006) provide as follows:
Section 50(Cases decided by the court in a non-litigious civil procedure)
“The court shall decide the following matters by non-litigious civil procedure:
...
appointment or dismissal of members of the management or supervisory bodies (256 and second paragraph of Article 276) ...”
Section 256(Appointment by the court)
“If ... one or more of the members of the management or supervisory body are not appointed, a court should when urgent appoint a member upon a proposal from interested persons. The position of a court-appointed member of the management or supervisory body shall cease when a new member is appointed in his place in accordance with the articles of association. Court-appointed members of the management or supervisory body shall be entitled to receive payment for their work and reimbursement of expenses ...”
Section 262(Contract with a member)
“(1) The rights and obligations of a member of a management or supervisory body which are not laid down by this Act shall be defined in a contract concluded with the company. (2) The contract shall be approved by the supervisory board or the board of directors; otherwise the member of a management or supervisory body shall return the benefits arising therefrom.”
Section 263(Diligence and responsibility)
“(1) In the performance of their duties on behalf of the company, members of a management or supervisory body shall act with the diligence of a conscientious and fair manager and shall safeguard the trade secrets of the company ...”
Section 274(Election of supervisory board members)
“(1) Members of the supervisory board, which represents the interests of the shareholders, are elected by the [shareholders’] assembly ...”
Section 275(Dismissal of supervisory board’s member)
“(1) [Shareholders’] assembly may recall members of a supervisory board ... before the expiry of their term of office. [Such a decision] ... requires at least 75% of the votes casted. The articles of association may set a higher majority and other requirements ...”
Section 276(Appointment and dismissal of supervisory board members by a court)
“(1) In the event that the number of members present is insufficient for a quorum, the management board shall immediately submit a proposal for the appointment of a member of the supervisory board to the court. (2) Where good reasons exist for doing so, a court may dismiss a member of the supervisory board at the request of the supervisory board itself or of shareholders whose shares account for at least 10% of the share capital.”
25. Section 4 of the Non-Litigious Civil Procedure Act (Official Gazette of the Socialist Republic of Slovenia no. 30/86, with relevant amendments) provides that the courts should, unless otherwise provided in law, afford participants an opportunity to comment on the allegations of other participants and to participate in the evidence-taking procedure. 26. Financial Operations, Insolvency Proceedings and Compulsory Dissolution Act (Official Gazette no. 13/14 - official consolidated text, and further relevant amendments, hereinafter “the Financial Operations Act”) provides, inter alia, for the procedure of “preventive reconstruction”, which is aimed at enabling a company at risk of insolvency to take measures aimed at avoiding insolvency proceedings. The Financial Operations Act also stipulates the principle of promptness of proceedings, which binds courts to treat as a priority matters which involve a debtor in insolvency as a party to proceedings, or when the results affect the progress of insolvency proceedings. 27. Section 55b, paragraph 2, of the Constitutional Court Act (Official Gazette no. 15/94, with relevant amendments) provides as follows:
“(2) A constitutional complaint shall be accepted for consideration: if there has been a violation of human rights or fundamental freedoms which has had serious consequences for the complainant; or if it concerns an important constitutional question which exceeds the importance of the particular case in question.”
THE LAW
I. ALLEGED VIOLATION OF ARTICLE 6 § 1 OF THE CONVENTION
28. The applicant complained under Article 6 of the Convention that he had been unable to participate in the proceedings in which he had been deprived of his membership of company A’s supervisory board. Under Article 13 the applicant also complained that the Ljubljana Higher Court had not considered his appeal on the merits. Bearing in mind that the role of Article 6 in relation to Article 13 is that of a lex specialis, the requirements of Article 13 being absorbed by the more stringent requirements of Article 6 (see Baka v. Hungary [GC], no. 20261/12, § 181, ECHR 2016), the Court will examine the applicant’s complaints solely under Article 6 § 1 of the Convention (see Lupeni Greek Catholic Parish and Others v. Romania [GC], no. 76943/11, § 65, 29 November 2016), the relevant parts of which read as follows:
“In the determination of his civil rights and obligations ... everyone is entitled to a fair ... hearing ... by [a] ... tribunal ...”
A. Admissibility
1. The parties’ arguments
29. The Government argued that Article 6 did not apply to the present case. They emphasised that the present case concerned non-litigious proceedings. Referring to Ferrazzini v. Italy ([GC], no. 44759/98, § 25, 12 July 2001), the Government argued that while the supervisory board’s members exercised their function for payment, this should not be sufficient to bring Article 6 into play. They further submitted that membership of a supervisory board was not a ‘profession’. 30. Referring to Regner v. the Czech Republic ([GC], no. 35289/11, 19 September 2017), the applicant argued that Article 6 applied to the proceedings at issue because the domestic law recognised his civil right and provided for its protection in judicial proceedings. In particular, a dismissal of a supervisory board member by a court was not at the latter’s discretion. Such a dismissal required a prior finding that there were well-founded reasons for it (these were reasons pertaining to the personality of an individual, especially when a supervisory board member did not act in accordance with the principles of due care, good faith and fair dealing, professionalism, independence and equal treatment of the shareholders). Thus, in such proceedings, the court was obliged to establish that there were well-founded reasons and explain its finding. 31. The applicant further argued that he had carried out his function of a supervisory board member professionally and in return for payment. He had expected to carry out this function until the end of his term of office, and had therefore not sought other employment. Referring to Ternovskis v. Latvia (no. 33637/02, § 44, 29 April 2014), the applicant argued that although he had been appointed and not employed, the rights and obligations he enjoyed in that role had been similar to those in an employment relationship: in particular, he had the right to be paid for his work. Moreover, the applicant submitted that he had held important roles in large companies in the tourism sector in Slovenia and his dismissal, which had been reported in the media, had importantly affected his reputation. 2. The Court’s assessment
32. The Court refers to the principles set out in Regner (cited above, §§ 99 to 112). It reiterates, however, that there can be no doubt about the fact that there is a right within the meaning of Article 6 § 1 where a substantive right recognised in domestic law is accompanied by a procedural right to have that right enforced through the court (ibid, § 102). Moreover, in some cases, national law, while not necessarily recognising that an individual has a subjective right, does confer the right to a lawful procedure for examination of his or her claim, involving matters such as ruling whether a decision was arbitrary or ultra vires, or whether there were procedural irregularities. This is the case regarding certain decisions where the authorities have a purely discretionary power to grant or refuse an advantage or privilege, with the law conferring on the person concerned the right to apply to the courts, which may set the decision aside if they find it unlawful. In such a case Article 6 § 1 of the Convention is applicable, on condition that the advantage or privilege, once granted, gives rise to a civil right (ibid., § 105, and the case-law cited therein). 33. The Court further notes that in Mirovni Inštitut v. Slovenia (no. 32303/13, §§ 28-30, 13 March 2018), which concerned a call for tenders for the award of a research grant, the applicant institute had had no right to an award of funding. The Court however found that Article 6 was applicable because the applicant institute had clearly enjoyed a procedural right to the lawful and proper adjudication of the bids and had its bid been accepted it would have thereby acquired a civil right. 34. As regards the present case, the Court notes that while the applicant’s appointment to the position of supervisory board member laid within the discretionary powers of the company’s shareholders at the time (see paragraph 24 above), the dismissal of the applicant was the subject of a judicial decision. The Court takes note of the Government’s reliance on Ferrazzini (cited in paragraph 29 above), but does not consider that any meaningful parallel could be drawn between that case, which concerned the applicability of Article 6 to tax disputes, and the present one. In the absence of any other relevant argument on the part of the Government, the Court cannot consider the mere domestic legal qualification of the impugned proceedings as non-litigious proceedings (see paragraphs 24 and 29 above) to mean that they did not involve a determination of the applicant’s civil right within the meaning of Article 6 (see Ferrazzini, cited above, § 24; see also Šakanovič v. Slovenia, no. 32989/02, §§ 14 and 26, 13 December 2007, and Šorgić v. Serbia, no. 34973/06, §§ 48 and 74, 3 November 2011, in which the Court found Article 6 applicable to non-litigious proceedings, namely inheritance proceedings). The Court notes that the applicant was dismissed because, following a request from a main shareholder, the Ljubljana District Court had determined that there were good reasons for such a course of action, establishing, inter alia, that his conduct was harmful to company A’s functioning (see paragraph 12 above). Under the domestic legislation (see paragraphs 24 and 25 above) the applicant, who was the opposing party in the proceedings, should have been in principle able to participate in the proceedings, including being able to comment on the allegations made against him as well as to lodge an appeal and have such an appeal determined by the second-instance court (see paragraph 12 above). This is in the Court’s view sufficient for it to conclude that the present case concerned a determination of the applicant’s “right” for the purposes of Article 6 (see Regner, cited above, § 105). 35. As regards the “civil” nature of the right, the Court notes that once the applicant was appointed as a member of a supervisory board, which was for a term of four years, he had responsibilities and rights, including a right to payment for his work, based on a contract which appears to be of a civil law nature (see paragraph 24 above). Additionally, the Court notes that the findings of the Ljubljana District Court (see paragraph 12 above) could arguably have had repercussions for the applicant’s reputation, particularly in his professional life (see, mutatis mutandis, Pocius v. Lithuania, no. 35601/04, §§ 41 and 43, 6 July 2010, and Helmers v. Sweden, 29 October 1991, §§ 27 and 29, Series A no. 212‐A). 36. Having regard to the above considerations, the Court finds that Article 6 applies to the present case under its civil limb. Accordingly, the Government’s objection must be dismissed. 37. The Court further notes that this complaint is not manifestly ill‐founded within the meaning of Article 35 § 3 (a) of the Convention. It further notes that it is not inadmissible on any other grounds. It must therefore be declared admissible. B. Merits
1. The parties’ submissions
38. The applicant argued that the fact that company A had been undergoing restructuring was irrelevant to his complaint (see paragraph 41 below). The principle of promptness was to be applied to the cases where a party was undergoing insolvency proceedings, which was not the case here. In any event, the principle of promptness did not absolve a domestic court from the responsibility to respect the principle of adversarial proceedings. 39. The applicant further disputed the facts as established by the Ljubljana District Court, and argued that he had never had a chance to tell his side of the story, let alone be heard at a public hearing. He argued that under the domestic law he should have been given an opportunity to participate in the proceedings. He submitted that the Companies Act required that the general provisions of the Non-Litigious Civil Procedure Act applied to the proceedings in the present case (see paragraphs 24 and 25 above). In his view, the judge deciding the case had consciously acted in breach of law, expecting that his decision would not be subject to any further scrutiny. 40. In the applicant’s view, the restriction on his right to adversarial proceedings was neither temporary (see paragraph 41 below) nor proportionate. His right to appeal was illusory. None of the courts involved in the proceedings had ever addressed his arguments on the merits. 41. The Government argued that the rights of access to court and to adversarial proceedings were not absolute. They pointed out that company A was at risk of insolvency and therefore it was important that the question concerning its management and supervision be resolved as quickly as possible. They also submitted that the Ljubljana District Court considered it to be sufficient for the adversarial principle to be applied by means of appeal. They were of the view that the proceedings in question could be compared to those concerning interim measures. The restriction on the right of access to court was only of a temporary nature. 2. The Court’s assessment
42. The Court reiterates that the adversarial principle and the principle of equality of arms, which are closely linked, are fundamental components of the concept of a “fair hearing” within the meaning of Article 6 § 1 of the Convention. They require a “fair balance” between the parties: each party must be afforded a reasonable opportunity to present his case under conditions that do not place him at a substantial disadvantage vis-à-vis his opponent or opponents (see Regner, cited above, § 146). 43. In the present case, the Ljubljana District Court upheld company P’s application, which included factual allegations about the applicant’s behaviour, and dismissed the applicant from the position of supervisory board member (see paragraph 11 above). It did so without ever giving the applicant an opportunity to comment on company P’s submissions (see, mutatis mutandis, APEH Üldözötteinek Szövetsége and Others v. Hungary, no. 32367/96, § 42, ECHR 2000‐X). Having regard to the domestic law submitted to it (see paragraphs 24 to 26 above), the Court cannot discern any proper legal basis on which the domestic court had decided to dispense with the adversarial principle in the present case. It understands that not notifying the applicant and not giving him an opportunity to participate in the proceedings might have been calculated to save time and expedite the proceedings. As its case-law bears out, the Court attaches great importance to that objective, which does not, however, justify disregarding such a fundamental principle as the right to adversarial proceedings and the principle of equality of arms. In fact, Article 6 § 1 is intended above all to secure the interests of the parties and those of the proper administration of justice (see Nideröst-Huber v. Switzerland, 18 February 1997, § 30, Reports of Judgments and Decisions 1997‐I). 44. The Court further notes that the applicant had in principle a right to appeal against the decision of the Ljubljana District Court and he in fact did appeal against it (see paragraphs 11 and 14 above). However the Ljubljana Higher Court did not assess the applicant’s appeal on the merits, finding that he could not have had any legal interest in the outcome of the proceedings because in the meantime company A had at its general meeting appointed new members to replace him (see paragraph 19 above). The Constitutional Court likewise rejected his constitutional appeal without entering into the merits of his constitutional complaint (see paragraphs 20 and 21 above). Accordingly, the shortcoming found to exist in respect of the procedure before the Ljubljana District Court was not capable of being remedied at a later stage (see, mutatis mutandis, Feldbrugge v. the Netherlands, 29 May 1986, § 46, Series A no. 99, and, by contrast, Schuler-Zgraggen v. Switzerland, 24 June 1993, § 52, Series A no. 263). 45. In view of the above, the Court concludes that the adversarial principle and the principle of equality of arms have not been respected in the present case. Having regard to the fact that the applicant had not had any possibility to participate in any meaningful way in the proceedings against him, the Court finds that the fair balance between the parties was affected to such an extent that the very essence of the applicant’s right to a fair trial was impaired. 46. Accordingly, there has been a violation of Article 6 § 1 of the Convention. In view of this conclusion, the Court does not find it necessary to examine the present case also from the perspective of the right to a public hearing, cited by the applicant (see paragraph 39 above). II. APPLICATION OF ARTICLE 41 OF THE CONVENTION
47. Article 41 of the Convention provides:
“If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party.”
A. Damage
48. The applicant claimed 15,000 euros (EUR) in respect of non‐pecuniary damage. He argued that his reputation as a businessman, who had held managerial positions in some of the largest tourist companies in Slovenia and had received awards for his successful work in the tourism industry, had been seriously undermined by the impugned decision of the Ljubljana District Court. 49. The Government disputed the claim and invited the Court to find that a finding of a violation constituted a sufficient just satisfaction. 50. Making its assessment on an equitable basis, the Court awards the applicant EUR 8,000 in respect of non‐pecuniary damage. B. Costs and expenses
51. The applicant also claimed EUR 954 for the costs and expenses incurred before the domestic courts and EUR 1,606 for those incurred before the Court. In this connection, he submitted an agreement signed between him and his representative concerning the lawyer’s fees and informed the Court that the sums would be due only after the termination of the proceedings before the Court. 52. The Government argued that no receipt had been submitted and left the matter to the Court to decide in line with its case-law. 53. According to the Court’s case-law, an applicant is entitled to the reimbursement of costs and expenses only in so far as it has been shown that these have been actually and necessarily incurred and are reasonable as to quantum. In the present case, regard being had to the documents in its possession and the above criteria, the Court considers it reasonable to award the full sum claimed, that is EUR 2,560, covering costs under all heads. C. Default interest
54. The Court considers it appropriate that the default interest rate should be based on the marginal lending rate of the European Central Bank, to which should be added three percentage points. FOR THESE REASONS, THE COURT, UNANIMOUSLY,
1. Declares the application admissible;

2. Holds that there has been a violation of Article 6 § 1 of the Convention;

3. Holds
(a) that the respondent State is to pay the applicant, within three months from the date on which the judgment becomes final in accordance with Article 44 § 2 of the Convention, the following amounts:
(i) EUR 8,000 (eight thousand euros), plus any tax that may be chargeable, in respect of non-pecuniary damage;
(ii) EUR 2,560 (two thousand five hundred and sixty euros), plus any tax that may be chargeable to the applicant, in respect of costs and expenses;
(b) that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amounts at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points;

4. Dismisses the remainder of the applicant’s claim for just satisfaction. Done in English, and notified in writing on 19 March 2019, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court. Marialena Tsirli Jon Fridrik Kjølbro Registrar President

FOURTH SECTION

CASE OF PREBIL v. SLOVENIA

(Application no. 29278/16)

JUDGMENT

STRASBOURG

19 March 2019

FINAL

19/06/2019

This judgment has become final under Article 44 § 2 of the Convention. It may be subject to editorial revision. In the case of Prebil v. Slovenia,
The European Court of Human Rights (Fourth Section), sitting as a Chamber composed of:
Jon Fridrik Kjølbro, President, Paulo Pinto de Albuquerque, Egidijus Kūris, Iulia Antoanella Motoc, Georges Ravarani, Marko Bošnjak, Péter Paczolay, judges,and Marialena Tsirli, Section Registrar,
Having deliberated in private on 26 February 2019,
Delivers the following judgment, which was adopted on that date:
PROCEDURE
1. The case originated in an application (no. 29278/16) against the Republic of Slovenia lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by a Slovenian national, Mr Andrej Prebil (“the applicant”), on 10 May 2016. 2. The applicant was represented by Mr M. Šušmelj, a lawyer practising in Ljubljana. The Slovenian Government (“the Government”) were represented by their Agent, Mrs V. Klemenc, State Attorney. 3. The applicant alleged, in particular, that he had not been able to participate in the proceedings against him in breach of Article 6 § 1. 4. On 14 January 2018 notice of the complaints concerning the applicant’s inability to participate in proceedings against him was given to the Government and the remainder of the application was declared inadmissible pursuant to Rule 54 § 3 of the Rules of Court. THE FACTS
I. THE CIRCUMSTANCES OF THE CASE
5. The applicant was born in 1974 and lives in Ljubljana. 6. The applicant was a member of the supervisory board of company A from 11 November 2013, with a four-year term. 7. On 12 March 2014, the chairman of the supervisory board of company A resigned: following this the supervisory board had only three members (of the required statutory six members). 8. On 20 March 2014, the Ljubljana District Court in Ljubljana adopted a decision on the initiation of “preventive restructuring” of company A (see paragraph 24 below). 9. On 13 May 2014 a session of the supervisory board of company A was held. One of the members, T. H., proposed to extend the agenda with a point on the dismissal of the chair of the management board. Allegedly, physical violence occurred between the members of the supervisory board, as some of them did not allow one member to leave the premises, to maintain the required quorum. It would appear that a resolution was passed dismissing the chair of the management board. 10. On 15 May 2014, a claim was brought before the Ljubljana District Court seeking to establish nullity of the supervisory board’s resolution of 13 May 2014. Company A agreed to the claim and the court consequently issued a decision annulling the impugned resolution. 11. In the meantime, on 29 May 2014, company P, who held a 91.42% share in company A, filed a motion to deprive the applicant and another supervisory board member, T.H., of their membership, and appoint provisional members. The motion was lodged against the applicant and T.H., who acted as opposing parties (nasprotna udeleženca). Company P relied on, inter alia, section 276 (2) of the Companies Act (see paragraph 24 below) and grounded the motion on the allegedly unacceptable personal qualities of the applicant and T.H., referring in particular to the incident that had occurred during a supervisory board meeting on 13 May 2014 (see paragraph 9 above). It requested the court to proceed to a decision without delay, without notifying the opposing parties of the proceedings and without holding a hearing. In particular, company P argued as follows: the applicant’s and T.H.’s conduct was unacceptable and therefore they should have not continued with their four-year mandate; there were well-founded reasons for depriving them of their membership; their membership should be terminated immediately and they should be replaced by provisional members so as to ensure lawful functioning of the supervisory board and company A; though company P had enough shares to request the management board to convene a general meeting of shareholders this was impossible due to the uncertainty as to who was the company manager; company A was undergoing reconstruction and there were deadlines to be met in this connection; calling a general meeting would thus not ensure a sufficiently prompt response to the situation; and so the court’s intervention was necessary. 12. On 4 June 2014 the Ljubljana District Court upheld company P’s motion. Referring to company P’s submissions and the case file in the proceedings concerning nullity of the resolution of 13 May 2014 (see paragraph 10 above) the court established that one member of the supervisory board had not been voluntarily present at the session of the supervisory board on 13 May 2014 (see paragraph 9 above) because of the conduct of the two remaining members of the supervisory board. In particular, it established that the applicant had clearly allowed T.H.’s conduct, had agreed with it, and had fully cooperated with her. The court explained that the law required that the supervisory board’s members act diligently and responsibly, and that this was particularly important in the present case, where company A was undergoing a process of “preventive restructuring”. It found that the conduct of two of the supervisory board members was harmful to company A’s functioning and that they should therefore not continue in their function until the end of their four-year term. It considered the case to be of an urgent nature, because company A was at risk, and the supervisory board with the applicant and T.H. as members was not in a position to perform its function until the first general meeting of company A. The decision also contained notice that an appeal was allowed against it within eight days of the notice of the decision. The court noted that the decision was effective immediately, and that any appeal would not stay its execution. 13. On 5 June 2014 a journalist asked the applicant to comment on the aforementioned decision. According to the applicant, he received a copy of it only a few days later. 14. On 24 June 2014 the applicant lodged an appeal arguing, inter alia, that he had been unlawfully denied the opportunity to participate in the proceedings. He referred to, inter alia, section 4 of the Non-Litigious Civil Procedure Act (see paragraph 25 below). He also disputed company P’s allegations concerning his conduct during the incident of 13 May 2014 (see paragraph 9 above), and gave his own version of events. He argued that the court’s intervention was not called for and that no grounds had been given for his dismissal. He also emphasised that the protection of his reputation required that he be involved in the proceedings and able to submit evidence. 15. On 3 July 2014 company P replied to the appeal, arguing that the case had been of an urgent character because it could have incurred losses had company A gone into insolvency. In its view, the impugned decision was a kind of interim injunction, and the adversarial principle could be ensured through appeal proceedings. 16. On 5 August 2014 company P informed the court that, on 4 August 2014, company A had held an assembly and appointed two new members to replace the applicant and T.H. It invited the court to reject the appeal, because the applicant could not be considered to have any legal interest in its outcome. 17. The applicant replied to the above pleadings on 25 August 2014. He argued that the supervisory board’s member’s dismissal at a general meeting of the shareholders could not be equated with the judicial termination of his term of office, because for the latter there had to be well-founded reasons, which had not been established in his case. 18. On 3 November 2014 the applicant submitted examples of the domestic jurisprudence, with a view to demonstrating that the domestic law had required that he be given an opportunity to participate in the proceedings. 19. On 21 January 2015 the Ljubljana Higher Court rejected the applicant’s appeal, finding that he could not have had any legal interest in the outcome of the proceedings because in the meantime company A had at its general meeting appointed new members to replace him and T.H. It noted that the appointment and dismissal of the members of the supervisory board, whose role it was to represent the interests of the shareholders, fell within the discretion of the assembly. The latter could dismiss supervisory board members any time during their term of office without having to provide any reason for doing so. Therefore, in the court’s view, even had the applicant succeeded in the appeal proceedings he could not have obtained reinstatement in his previous position. 20. The applicant lodged a constitutional complaint. Relying on, inter alia, Articles 6 and 13 of the Convention, he complained about being unable to participate in the proceedings. He argued that had he had an opportunity to reply to company P’s allegations the court would have reached a different conclusion. 21. On 10 November 2015 the Constitutional Court decided not to accept the applicant’s constitutional complaint for consideration pursuant to section 55b (2) of the Constitutional Court Act (see paragraph 27 below). This decision was served on the applicant on 13 November 2015. 22. A major Slovenian financial newspaper, Finance, reported the court’s dismissal of the applicant from its membership in company A’s supervisory board and the issues on which it had been based. II. RELEVANT DOMESTIC LAW
23. The Slovenian Constitution (Official Gazette no. 33/91) provides in its Article 21:
(Protection of Human Personality and Dignity)
“Respect for human personality and dignity shall be guaranteed in criminal and in all other legal proceedings, as well as during the deprivation of liberty and enforcement of punitive sanctions. Violence of any form against any person whose liberty has been restricted in any way is prohibited, as is the use of any form of coercion in obtaining confessions and statements.”
24. The relevant provisions of the Companies Act (Official Gazette no. 42/2006) provide as follows:
Section 50(Cases decided by the court in a non-litigious civil procedure)
“The court shall decide the following matters by non-litigious civil procedure:
...
appointment or dismissal of members of the management or supervisory bodies (256 and second paragraph of Article 276) ...”
Section 256(Appointment by the court)
“If ... one or more of the members of the management or supervisory body are not appointed, a court should when urgent appoint a member upon a proposal from interested persons. The position of a court-appointed member of the management or supervisory body shall cease when a new member is appointed in his place in accordance with the articles of association. Court-appointed members of the management or supervisory body shall be entitled to receive payment for their work and reimbursement of expenses ...”
Section 262(Contract with a member)
“(1) The rights and obligations of a member of a management or supervisory body which are not laid down by this Act shall be defined in a contract concluded with the company. (2) The contract shall be approved by the supervisory board or the board of directors; otherwise the member of a management or supervisory body shall return the benefits arising therefrom.”
Section 263(Diligence and responsibility)
“(1) In the performance of their duties on behalf of the company, members of a management or supervisory body shall act with the diligence of a conscientious and fair manager and shall safeguard the trade secrets of the company ...”
Section 274(Election of supervisory board members)
“(1) Members of the supervisory board, which represents the interests of the shareholders, are elected by the [shareholders’] assembly ...”
Section 275(Dismissal of supervisory board’s member)
“(1) [Shareholders’] assembly may recall members of a supervisory board ... before the expiry of their term of office. [Such a decision] ... requires at least 75% of the votes casted. The articles of association may set a higher majority and other requirements ...”
Section 276(Appointment and dismissal of supervisory board members by a court)
“(1) In the event that the number of members present is insufficient for a quorum, the management board shall immediately submit a proposal for the appointment of a member of the supervisory board to the court. (2) Where good reasons exist for doing so, a court may dismiss a member of the supervisory board at the request of the supervisory board itself or of shareholders whose shares account for at least 10% of the share capital.”
25. Section 4 of the Non-Litigious Civil Procedure Act (Official Gazette of the Socialist Republic of Slovenia no. 30/86, with relevant amendments) provides that the courts should, unless otherwise provided in law, afford participants an opportunity to comment on the allegations of other participants and to participate in the evidence-taking procedure. 26. Financial Operations, Insolvency Proceedings and Compulsory Dissolution Act (Official Gazette no. 13/14 - official consolidated text, and further relevant amendments, hereinafter “the Financial Operations Act”) provides, inter alia, for the procedure of “preventive reconstruction”, which is aimed at enabling a company at risk of insolvency to take measures aimed at avoiding insolvency proceedings. The Financial Operations Act also stipulates the principle of promptness of proceedings, which binds courts to treat as a priority matters which involve a debtor in insolvency as a party to proceedings, or when the results affect the progress of insolvency proceedings. 27. Section 55b, paragraph 2, of the Constitutional Court Act (Official Gazette no. 15/94, with relevant amendments) provides as follows:
“(2) A constitutional complaint shall be accepted for consideration: if there has been a violation of human rights or fundamental freedoms which has had serious consequences for the complainant; or if it concerns an important constitutional question which exceeds the importance of the particular case in question.”
THE LAW
I. ALLEGED VIOLATION OF ARTICLE 6 § 1 OF THE CONVENTION
28. The applicant complained under Article 6 of the Convention that he had been unable to participate in the proceedings in which he had been deprived of his membership of company A’s supervisory board. Under Article 13 the applicant also complained that the Ljubljana Higher Court had not considered his appeal on the merits. Bearing in mind that the role of Article 6 in relation to Article 13 is that of a lex specialis, the requirements of Article 13 being absorbed by the more stringent requirements of Article 6 (see Baka v. Hungary [GC], no. 20261/12, § 181, ECHR 2016), the Court will examine the applicant’s complaints solely under Article 6 § 1 of the Convention (see Lupeni Greek Catholic Parish and Others v. Romania [GC], no. 76943/11, § 65, 29 November 2016), the relevant parts of which read as follows:
“In the determination of his civil rights and obligations ... everyone is entitled to a fair ... hearing ... by [a] ... tribunal ...”
A. Admissibility
1. The parties’ arguments
29. The Government argued that Article 6 did not apply to the present case. They emphasised that the present case concerned non-litigious proceedings. Referring to Ferrazzini v. Italy ([GC], no. 44759/98, § 25, 12 July 2001), the Government argued that while the supervisory board’s members exercised their function for payment, this should not be sufficient to bring Article 6 into play. They further submitted that membership of a supervisory board was not a ‘profession’. 30. Referring to Regner v. the Czech Republic ([GC], no. 35289/11, 19 September 2017), the applicant argued that Article 6 applied to the proceedings at issue because the domestic law recognised his civil right and provided for its protection in judicial proceedings. In particular, a dismissal of a supervisory board member by a court was not at the latter’s discretion. Such a dismissal required a prior finding that there were well-founded reasons for it (these were reasons pertaining to the personality of an individual, especially when a supervisory board member did not act in accordance with the principles of due care, good faith and fair dealing, professionalism, independence and equal treatment of the shareholders). Thus, in such proceedings, the court was obliged to establish that there were well-founded reasons and explain its finding. 31. The applicant further argued that he had carried out his function of a supervisory board member professionally and in return for payment. He had expected to carry out this function until the end of his term of office, and had therefore not sought other employment. Referring to Ternovskis v. Latvia (no. 33637/02, § 44, 29 April 2014), the applicant argued that although he had been appointed and not employed, the rights and obligations he enjoyed in that role had been similar to those in an employment relationship: in particular, he had the right to be paid for his work. Moreover, the applicant submitted that he had held important roles in large companies in the tourism sector in Slovenia and his dismissal, which had been reported in the media, had importantly affected his reputation. 2. The Court’s assessment
32. The Court refers to the principles set out in Regner (cited above, §§ 99 to 112). It reiterates, however, that there can be no doubt about the fact that there is a right within the meaning of Article 6 § 1 where a substantive right recognised in domestic law is accompanied by a procedural right to have that right enforced through the court (ibid, § 102). Moreover, in some cases, national law, while not necessarily recognising that an individual has a subjective right, does confer the right to a lawful procedure for examination of his or her claim, involving matters such as ruling whether a decision was arbitrary or ultra vires, or whether there were procedural irregularities. This is the case regarding certain decisions where the authorities have a purely discretionary power to grant or refuse an advantage or privilege, with the law conferring on the person concerned the right to apply to the courts, which may set the decision aside if they find it unlawful. In such a case Article 6 § 1 of the Convention is applicable, on condition that the advantage or privilege, once granted, gives rise to a civil right (ibid., § 105, and the case-law cited therein). 33. The Court further notes that in Mirovni Inštitut v. Slovenia (no. 32303/13, §§ 28-30, 13 March 2018), which concerned a call for tenders for the award of a research grant, the applicant institute had had no right to an award of funding. The Court however found that Article 6 was applicable because the applicant institute had clearly enjoyed a procedural right to the lawful and proper adjudication of the bids and had its bid been accepted it would have thereby acquired a civil right. 34. As regards the present case, the Court notes that while the applicant’s appointment to the position of supervisory board member laid within the discretionary powers of the company’s shareholders at the time (see paragraph 24 above), the dismissal of the applicant was the subject of a judicial decision. The Court takes note of the Government’s reliance on Ferrazzini (cited in paragraph 29 above), but does not consider that any meaningful parallel could be drawn between that case, which concerned the applicability of Article 6 to tax disputes, and the present one. In the absence of any other relevant argument on the part of the Government, the Court cannot consider the mere domestic legal qualification of the impugned proceedings as non-litigious proceedings (see paragraphs 24 and 29 above) to mean that they did not involve a determination of the applicant’s civil right within the meaning of Article 6 (see Ferrazzini, cited above, § 24; see also Šakanovič v. Slovenia, no. 32989/02, §§ 14 and 26, 13 December 2007, and Šorgić v. Serbia, no. 34973/06, §§ 48 and 74, 3 November 2011, in which the Court found Article 6 applicable to non-litigious proceedings, namely inheritance proceedings). The Court notes that the applicant was dismissed because, following a request from a main shareholder, the Ljubljana District Court had determined that there were good reasons for such a course of action, establishing, inter alia, that his conduct was harmful to company A’s functioning (see paragraph 12 above). Under the domestic legislation (see paragraphs 24 and 25 above) the applicant, who was the opposing party in the proceedings, should have been in principle able to participate in the proceedings, including being able to comment on the allegations made against him as well as to lodge an appeal and have such an appeal determined by the second-instance court (see paragraph 12 above). This is in the Court’s view sufficient for it to conclude that the present case concerned a determination of the applicant’s “right” for the purposes of Article 6 (see Regner, cited above, § 105). 35. As regards the “civil” nature of the right, the Court notes that once the applicant was appointed as a member of a supervisory board, which was for a term of four years, he had responsibilities and rights, including a right to payment for his work, based on a contract which appears to be of a civil law nature (see paragraph 24 above). Additionally, the Court notes that the findings of the Ljubljana District Court (see paragraph 12 above) could arguably have had repercussions for the applicant’s reputation, particularly in his professional life (see, mutatis mutandis, Pocius v. Lithuania, no. 35601/04, §§ 41 and 43, 6 July 2010, and Helmers v. Sweden, 29 October 1991, §§ 27 and 29, Series A no. 212‐A). 36. Having regard to the above considerations, the Court finds that Article 6 applies to the present case under its civil limb. Accordingly, the Government’s objection must be dismissed. 37. The Court further notes that this complaint is not manifestly ill‐founded within the meaning of Article 35 § 3 (a) of the Convention. It further notes that it is not inadmissible on any other grounds. It must therefore be declared admissible. B. Merits
1. The parties’ submissions
38. The applicant argued that the fact that company A had been undergoing restructuring was irrelevant to his complaint (see paragraph 41 below). The principle of promptness was to be applied to the cases where a party was undergoing insolvency proceedings, which was not the case here. In any event, the principle of promptness did not absolve a domestic court from the responsibility to respect the principle of adversarial proceedings. 39. The applicant further disputed the facts as established by the Ljubljana District Court, and argued that he had never had a chance to tell his side of the story, let alone be heard at a public hearing. He argued that under the domestic law he should have been given an opportunity to participate in the proceedings. He submitted that the Companies Act required that the general provisions of the Non-Litigious Civil Procedure Act applied to the proceedings in the present case (see paragraphs 24 and 25 above). In his view, the judge deciding the case had consciously acted in breach of law, expecting that his decision would not be subject to any further scrutiny. 40. In the applicant’s view, the restriction on his right to adversarial proceedings was neither temporary (see paragraph 41 below) nor proportionate. His right to appeal was illusory. None of the courts involved in the proceedings had ever addressed his arguments on the merits. 41. The Government argued that the rights of access to court and to adversarial proceedings were not absolute. They pointed out that company A was at risk of insolvency and therefore it was important that the question concerning its management and supervision be resolved as quickly as possible. They also submitted that the Ljubljana District Court considered it to be sufficient for the adversarial principle to be applied by means of appeal. They were of the view that the proceedings in question could be compared to those concerning interim measures. The restriction on the right of access to court was only of a temporary nature. 2. The Court’s assessment
42. The Court reiterates that the adversarial principle and the principle of equality of arms, which are closely linked, are fundamental components of the concept of a “fair hearing” within the meaning of Article 6 § 1 of the Convention. They require a “fair balance” between the parties: each party must be afforded a reasonable opportunity to present his case under conditions that do not place him at a substantial disadvantage vis-à-vis his opponent or opponents (see Regner, cited above, § 146). 43. In the present case, the Ljubljana District Court upheld company P’s application, which included factual allegations about the applicant’s behaviour, and dismissed the applicant from the position of supervisory board member (see paragraph 11 above). It did so without ever giving the applicant an opportunity to comment on company P’s submissions (see, mutatis mutandis, APEH Üldözötteinek Szövetsége and Others v. Hungary, no. 32367/96, § 42, ECHR 2000‐X). Having regard to the domestic law submitted to it (see paragraphs 24 to 26 above), the Court cannot discern any proper legal basis on which the domestic court had decided to dispense with the adversarial principle in the present case. It understands that not notifying the applicant and not giving him an opportunity to participate in the proceedings might have been calculated to save time and expedite the proceedings. As its case-law bears out, the Court attaches great importance to that objective, which does not, however, justify disregarding such a fundamental principle as the right to adversarial proceedings and the principle of equality of arms. In fact, Article 6 § 1 is intended above all to secure the interests of the parties and those of the proper administration of justice (see Nideröst-Huber v. Switzerland, 18 February 1997, § 30, Reports of Judgments and Decisions 1997‐I). 44. The Court further notes that the applicant had in principle a right to appeal against the decision of the Ljubljana District Court and he in fact did appeal against it (see paragraphs 11 and 14 above). However the Ljubljana Higher Court did not assess the applicant’s appeal on the merits, finding that he could not have had any legal interest in the outcome of the proceedings because in the meantime company A had at its general meeting appointed new members to replace him (see paragraph 19 above). The Constitutional Court likewise rejected his constitutional appeal without entering into the merits of his constitutional complaint (see paragraphs 20 and 21 above). Accordingly, the shortcoming found to exist in respect of the procedure before the Ljubljana District Court was not capable of being remedied at a later stage (see, mutatis mutandis, Feldbrugge v. the Netherlands, 29 May 1986, § 46, Series A no. 99, and, by contrast, Schuler-Zgraggen v. Switzerland, 24 June 1993, § 52, Series A no. 263). 45. In view of the above, the Court concludes that the adversarial principle and the principle of equality of arms have not been respected in the present case. Having regard to the fact that the applicant had not had any possibility to participate in any meaningful way in the proceedings against him, the Court finds that the fair balance between the parties was affected to such an extent that the very essence of the applicant’s right to a fair trial was impaired. 46. Accordingly, there has been a violation of Article 6 § 1 of the Convention. In view of this conclusion, the Court does not find it necessary to examine the present case also from the perspective of the right to a public hearing, cited by the applicant (see paragraph 39 above). II. APPLICATION OF ARTICLE 41 OF THE CONVENTION
47. Article 41 of the Convention provides:
“If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party.”
A. Damage
48. The applicant claimed 15,000 euros (EUR) in respect of non‐pecuniary damage. He argued that his reputation as a businessman, who had held managerial positions in some of the largest tourist companies in Slovenia and had received awards for his successful work in the tourism industry, had been seriously undermined by the impugned decision of the Ljubljana District Court. 49. The Government disputed the claim and invited the Court to find that a finding of a violation constituted a sufficient just satisfaction. 50. Making its assessment on an equitable basis, the Court awards the applicant EUR 8,000 in respect of non‐pecuniary damage. B. Costs and expenses
51. The applicant also claimed EUR 954 for the costs and expenses incurred before the domestic courts and EUR 1,606 for those incurred before the Court. In this connection, he submitted an agreement signed between him and his representative concerning the lawyer’s fees and informed the Court that the sums would be due only after the termination of the proceedings before the Court. 52. The Government argued that no receipt had been submitted and left the matter to the Court to decide in line with its case-law. 53. According to the Court’s case-law, an applicant is entitled to the reimbursement of costs and expenses only in so far as it has been shown that these have been actually and necessarily incurred and are reasonable as to quantum. In the present case, regard being had to the documents in its possession and the above criteria, the Court considers it reasonable to award the full sum claimed, that is EUR 2,560, covering costs under all heads. C. Default interest
54. The Court considers it appropriate that the default interest rate should be based on the marginal lending rate of the European Central Bank, to which should be added three percentage points. FOR THESE REASONS, THE COURT, UNANIMOUSLY,
1. Declares the application admissible;

2. Holds that there has been a violation of Article 6 § 1 of the Convention;

3. Holds
(a) that the respondent State is to pay the applicant, within three months from the date on which the judgment becomes final in accordance with Article 44 § 2 of the Convention, the following amounts:
(i) EUR 8,000 (eight thousand euros), plus any tax that may be chargeable, in respect of non-pecuniary damage;
(ii) EUR 2,560 (two thousand five hundred and sixty euros), plus any tax that may be chargeable to the applicant, in respect of costs and expenses;
(b) that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amounts at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points;

4. Dismisses the remainder of the applicant’s claim for just satisfaction. Done in English, and notified in writing on 19 March 2019, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court. Marialena Tsirli Jon Fridrik Kjølbro Registrar President