GRANOS ORGANICOS NACIONALES S.A. v Germany - 19508/07 [2010] ECHR 1760 (12 October 2010)

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The European Court of Human Rights (Fifth Section), sitting on
12 October 2010 as a Chamber composed of:

Peer Lorenzen, President,
Renate Jaeger,
Karel Jungwiert,
Rait Maruste,
Mark Villiger,
Isabelle Berro-Lefèvre,
Zdravka Kalaydjieva, judges,
and Claudia Westerdiek, Section Registrar,

Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicant,

The applicant company, Granos Orgánicos Nacionales S.A., is a Peruvian corporation based in Lima. The applicant company is represented before the Court by Mr E. Gómez de Larrain, a lawyer practising in Hamburg. The respondent Government are represented by their Deputy Agent, Mr H.-J. Behrens, of the Federal Ministry of Justice.

The facts of the case, as submitted by the parties, may be summarised as follows.

The applicant company exports organic bananas to Europe. In 2001/2002 it concluded a commission contract with two German companies, agreeing that all legal disputes would be brought before the courts in Hamburg.
The contract also included a clause that legal disputes be settled by an arbitration tribunal in Hamburg.

On 31 December 2005 the applicant company requested legal aid to bring a civil action against the two German companies for breach of the commission contract before the Hamburg Regional Court (Landgericht), submitting that the applicant company and its shareholder were insolvent and could thus not afford an advance payment of the court fees.

On 4 January 2006 the Hamburg Regional Court dismissed the request for legal aid. It held that, according to the relevant provision of the German Code of Civil Procedure (Zivilprozessordnung), only legal persons founded and based in one of the member states of the European Union or the European Economic Area were entitled to legal aid.

On 17 January 2006 the Regional Court rejected the objection of the applicant company. It held that the relevant provision of the German Code of Civil Procedure exhaustively determined which legal persons were entitled to receive legal aid, and it was not for the court to extend this provision to include companies outside Europe. Germany was not obliged to enable all legal persons in the world to benefit from legal aid.

On 23 January 2006 the Hanseatic Court of Appeal (Oberlandesgericht) confirmed the Regional Court's decisions. It added that the interference in the applicant's right of access to a court was justified. The unequal treatment of foreign legal persons was legitimized by the principle of reciprocity: if equal treatment was codified under constitutional law, there would be no incentive for foreign states to provide German legal persons with the same legal standard. The court also held that, even if the applicant company was to be put on a par with a domestic legal person, the
non-litigation of the applicant's case did not run counter to the general interest. Relying on a ruling of the Federal Constitutional Court of
3 July 1973 (no. 1 BvR 153/69, Report BVerfGE 35, 356), it considered in this regard that even a domestic legal entity retained its right to exist under the legal order only if it was able to pursue its objectives by virtue of its own strength and means. This decision was served on the applicant company's counsel on 4 February 2006.

On Monday, 6 March 2006 the applicant company, represented by counsel, lodged a constitutional complaint, in which it gave a full account of the proceedings and alleged that the denial of legal aid violated its right of access to a court under the German Basic Law and under Article 6 of the Convention.

On 25 October 2006 the Federal Constitutional Court refused to admit the constitutional complaint, declaring it inadmissible without providing any further reasons. This decision was served on the applicant company on
2 November 2006.

“Parties who on account of their personal and economic circumstances are unable to pay the costs of litigation, who can only pay these costs in part or in instalments shall, upon their application, be granted legal aid if the intended litigation of the case offers sufficient prospects of success and does not appear wanton.(...)”

(2) legal persons or associations capable of being a party founded or based in another Member State of the European Union or in another State party to the Agreement on the European Economic Area if the costs can be paid neither by them nor by those financially involved in the object of the legal dispute and if non-litigation of the case would run counter to the general interest. Section 114, first sentence last half sentence, shall apply.”

“(1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if the respondent raises an objection prior to the beginning of the oral hearing on the substance of the dispute, reject the action as inadmissible unless the court finds that the arbitration agreement is null and void, inoperative or incapable of being performed.”

The relevant provisions of the Court Fees Act (Gerichtskostengesetz) read as follows:

“In civil legal disputes the action shall not be served until the fees for the general proceedings have been paid (...)”

3. the intended litigation of the case does not lack prospect of success and does not appear wanton and where it can be substantiated that

(a) in view of the applicant's financial situation or other reasons, immediate payment of the costs would cause difficulties...”

“An appeal can be lodged against the decision to make the court action contingent upon the advance payment of costs and against the amount of the fees...”

The applicant company complained under Articles 6 and 14 of the Convention about the German courts' refusal to grant its request for legal aid.

The applicant company complained that the refusal of the German courts to grant its request for legal aid infringed its right of access to court under Article 6, both taken alone and taken together with Article 14 of the Convention which, insofar as relevant, read as follows:

“In the determination of his civil rights and obligations ... everyone is entitled to a fair ... hearing ... by [a] ... tribunal ...”

“The enjoyment of the rights and freedoms set forth in [the] Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.”

The applicant company considers that it had been discriminated against vis-à-vis domestic legal persons, which were entitled to legal aid.
The domestic courts' argument concerning the principle of reciprocity was in its case unpersuasive because in the Peruvian legal system the payment of court fees in advance was not required to bring a court action.

According to the Government, the applicant company has in several respects failed to exhaust domestic remedies.

Firstly, in accordance with the arbitration clause included in the contract, the applicant company should have submitted its legal dispute to an arbitration tribunal in Hamburg.

Secondly, the constitutional complaint lodged by the applicant company had been declared inadmissible because the applicant had failed to exhaust prior remedies to the lower courts. In particular, the applicant company could have lodged an appeal under Article 67 of the Court Fees Act against the decision to make the service of the action contingent upon the advance payment of the court fees. The applicant company could have opposed the amount of the advance payment. Furthermore, it could have asserted that its specific situation and the general right to be granted access to the courts warranted an exception from the general obligation to pay an advance fee.

In the event of temporary financial difficulties, the applicant would also have had the possibility of filing a request under Article 14 no. 3 (a) of the Court Fees Act to be exempted from the obligation to pay an advance fee.

With regard to the merits, the Government considered that the legal restrictions imposed on the granting of legal aid were legitimate and did not violate the applicant company's right of access to a court. Having regard to the fact that a legal person, in particular a limited company, profited from a limitation of liability, it was justified to make greater requirements of legal persons in regard to the granting of legal aid. Furthermore, even a domestic company in the applicant's position would not have been granted legal aid, as the applicant company did not submit that the non-litigation of the case would run counter to general interest, as required under Article 116 § 1 (2) of the Code of Civil Procedure. Furthermore, the granting of legal aid required as further unwritten constituent fact that the legal person was able to pursue its objectives by virtue of its own strength and means. This was not the case, as the applicant company, according to its own submissions, had been insolvent. These arguments had already been taken into account by the Hanseatic Court of Appeal.

As regarded the complaint under Article 14, the Government submitted that the different treatment of natural and legal persons with respect to legal aid was justified by objective reasons. Furthermore, the applicant company would not have been eligible for legal aid even it were a domestic company.

The applicant company submits that it exhausted domestic remedies.
The Federal Constitutional Court did not assert why it considered the applicant company's complaint to be inadmissible, it was not even certain that the term “inadmissible” had been used in a strictly procedural sense or whether it considered the complaint as being manifestly ill-founded. In any event, the constitutional complaint had not been inadmissible for reasons of non-compliance with time, form or other procedural requirements.

The applicant had not been under an obligation to refer the case to an arbitration tribunal. According to the applicant, the arbitration clause contained in the contract was void as it did not comply with the domestic law. The German courts were not allowed to consider the arbitration clause on their own motion. The defendant party would have been free to engage in the proceedings before the state courts or to invoke the arbitration agreement. Only in the latter case the state court would have had to decide on the validity of the arbitration clause. Furthermore, the applicant was, for lack of financial means, not in a position to put its claim to an arbitration court.

An appeal under Article 67 of the Court Fees Act would not have freed the applicant company from the obligation to pay its own legal expenses and to render collateral for the defendant's legal expenses for each consecutive court instance. Furthermore, such remedy would lack prospect of success even in its restricted scope of protection as the same arguments which would be relevant for the appeal under Article 67 had already been rejected by the same courts in the legal aid proceedings.

The reasons put forward by the Government to justify the limitation on granting legal aid to legal persons did not justify a limitation on the right of access to a court. Denying legal aid to legal persons who were unable to conduct litigation with their own means violated the principle of equality of arms. Furthermore, the denial would amount to discriminatory treatment within the meaning of Article 14. The right of access to a court could not be made dependant on considerations of a general and political nature.

The applicant had been discriminated against because legal aid was expressly denied on the ground that legal aid was only granted to domestic and European legal persons. Even if it should be true that domestic legal persons would have been denied legal aid for the same reasons, this would amount to a violation of their right of access to a court.

The Court notes at the outset that the Federal Constitutional Court considered the applicant's constitutional complaint to be inadmissible without, however, giving any indication which admissibility requirement the applicant failed to comply with.

In determining whether, in these circumstances, the applicant can be considered to have exhausted domestic remedies, the Court reiterates that, whereas Article 35 § 1 of the Convention must be applied with some degree of flexibility and without excessive formalism, it normally requires that the complaints intended to be brought subsequently before the Court should have been made to the appropriate domestic courts, at least in substance and in compliance with the formal requirements and time-limits laid down in domestic law (see, among other authorities, Cardot v. France, judgment of 19 March 1991, Series A no. 200, p. 18, § 34; Elçi and others v. Turkey, nos. 23145/93 and 25091/94, § 604, 13 November 2003 and Jalloh
v. Germany (dec.), no. 54810/00, 26 October 2004).

Having regard to the material before it, the Court notes that the applicant company, represented by counsel, in its submissions to the Federal Constitutional Court, raised in substance the complaints it then brought before this Court. It is not obvious that it failed to comply with a particular formal requirement for lodging its constitutional complaint.

As regards the procedural requirement to exhaust prior domestic remedies before lodging a constitutional complaint, the Court will examine whether the remedies proposed by the Government can be regarded as effective for the purpose of averting the alleged violation of the applicant's constitutional rights.

As regards the Government's allegation that the applicant company should have lodged its motion with an arbitration tribunal the Court notes that it was up to the State courts to decide whether the arbitration clause was void, as alleged by the applicant. Under these circumstances, and taking into account the legal costs and expenses to be borne by the plaintiff party in arbitration proceedings, the Court does not consider that the applicant company was obliged to put its case before an arbitration tribunal before invoking the State courts.

With regard to the appeals under Articles 67 and 14 no. 3 (a) of the Court Fees Act the Court observes, at the outset, that both motions had a more limited scope than the request for legal aid as they would not liberate the applicant company from the obligation to pay its own costs and expenses, but would merely lift or suspend the obligation to pay an advance fee before the motion was served on the defendant. Furthermore, the preconditions set out for an exception from the advance payment are couched in more general terms than for the request for legal aid and appear to leave a wider margin of appreciation to the domestic courts. Under these circumstances, and having regard to the reasons put forward by the domestic courts when denying legal aid, the Court is not convinced that these same courts would have granted a request lodged by the applicant company under Articles 67 or 14 of the Court Fees Act. It follows that the applicant company could not have been reasonably expected to exhaust these remedies before lodging its constitutional complaint.

The Court recalls that it has previously considered, in the special circumstances of several cases, that domestic remedies have been exhausted for the purposes of Article 35 § 1 of the Convention despite the fact that the applicant's constitutional complaint had been dismissed as inadmissible (see, inter alia, Uhl v. Germany (dec.), no. 64387/01, 6 May 2004;
Jalloh, cited above; Schwarzenberger v. Germany, no. 75737/01, § 31,
10 August 2006 and Luig v. Germany (dec.), no. 28782/04,
25 September 2007).

As the Court is not in a position in the present case to establish the reason why the applicant company's constitutional complaint has been considered as inadmissible, the applicant company has to be regarded as having exhausted domestic remedies within the meaning of Article 35 § 1 of the Convention.

As regards the merits of the complaint the Court considers, in the light of the parties' submissions, that the complaint raises issues of fact and law under the Convention, the determination of which requires an examination of the merits. The Court concludes therefore that this complaint is not manifestly ill-founded within the meaning of Article 35 § 3 of the Convention. No other ground for declaring it inadmissible has been established.

Declares the application admissible, without prejudging the merits of the case.

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You are here: BAILII >> Databases >> European Court of Human Rights >> GRANOS ORGANICOS NACIONALES S.A. v Germany - 19508/07 [2010] ECHR 1760 (12 October 2010) URL: http://www.bailii.org/eu/cases/ECHR/2010/1760.html Cite as: [2010] ECHR 1760