Branko KAVAJA and Dragutin MILJANIC v Montenegro - 43562/02 [2010] ECHR 2138 (23 November 2010)

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Applications no. 43562/02 and 37454/08
by Branko KAVAJA and Dragutin MILJANIĆ
against Montenegro

The European Court of Human Rights (Fourth Section), sitting on 23 November 2010 as a Chamber composed of:

Nicolas Bratza, President,
Lech Garlicki,
Ljiljana Mijović,
Ján Šikuta,
Mihai Poalelungi,
Nebojša Vučinić,
Vincent A. de Gaetano, judges,
and Lawrence Early, Section Registrar,

Having regard to the above applications lodged on 18 November 2002 and 30 July 2008, respectively,

1. Following the financial crisis in the former Socialist Federal Republic of Yugoslavia, as well as the subsequent collapse of the banking system in the 1990s, in 1998, 2002, 2003 and 2006 the Federal Republic of Yugoslavia, as well as the respondent State itself, adopted specific legislation accepting the conversion of foreign currency deposits in certain banks, including the Jugobanka in Podgorica, into a public debt. The legislation set the time-frame (2017) and the amounts, including interest, to be paid back to the banks’ former clients (see paragraphs 20-25 below).

2. The applicants are Mr Branko Kavaja (the first applicant), at the time a national of the State Union of Serbia and Montenegro, who was born in 1940 and lives in Nikšić, and Mr Dragutin Miljanić (the second applicant), a Montenegrin national, who was born in 1949 and has a registered residence in Podgorica. The second applicant was represented before the Court by Mr M. Čizmović, a retired lawyer from Podgorica.

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

4. On a number of separate occasions the applicant deposited a certain amount of his foreign currency savings with the Jugobanka in Podgorica (Montenegro), the Inos bank in Paraćin (Serbia) and the Karić bank in Belgrade (Serbia).

5. On 17 February 2003 the applicant was informed that his savings, including interest, had been converted into a public debt pursuant to the 1998 and 2002 legislation and that the method of its payment would be further regulated by Montenegrin law, which was to be adopted shortly (see paragraphs 14-25 below).

6. In October 2003 Montenegro passed the Act on the Citizens’ Foreign-Currency Savings, envisaging that the savings would be released gradually, in annual instalments, by 2017 (see paragraphs 20-25 below).

7. As of 2004 the applicant appears to be receiving regularly his savings in specified annual instalments.

8. On an unspecified date the applicant sought the release of his funds deposited with the Inos bank. In November 2003 the insolvency committee of the bank contested the debt and instructed the applicant to initiate civil proceedings in order to have the debt established. There is no information in the case file as to whether the applicant actually did so.

9. There is no information in the case file as to what happened to the funds deposited with the Karić bank.

10. In July 1982 the applicant deposited 55,000 German Marks in total with the Jugobanka in Podgorica with the stipulated interest rate of 12.5%.

11. On 19 April 2005 the applicant instituted proceedings against the State seeking the release of his funds.

12. On 26 October 2006 the Court of First Instance (Osnovni sud) in Podgorica ruled against the applicant stating that his funds were being released gradually in annual instalments as specified in the Act on the Citizens’ Foreign-Currency Savings 2003.

13. On 12 February 2008 and 10 May 2008, respectively, the High Court (Viši sud) and the Supreme Court (Vrhovni sud) in Podgorica upheld this judgment.

1. Act on the Settlement of Obligations Arising from the Citizens’ Foreign-Currency Savings (Zakon o izmirenju obaveza po osnovu devizne štednje građana; published in the Official Gazette of the Federal Republic of Yugoslavia - OG FRY - nos. 59/98, 44/99 and 53/01)

14. Articles 1, 2, 3 and 4 provided that all foreign-currency savings deposited with the “authorised banks”, including the Jugobanka in Podgorica, before 18 March 1995 were to become a public debt.

15. Under Article 10 the State’s responsibility in that respect was to be fully honoured by 2012 through the payment of specified amounts, plus interest, and according to a certain time-frame.

16. Pursuant to Articles 13 - 19 the banks’ clients could make use of their deposits converted into Government bonds in order to pay taxes or, in advance of the said time-frame, for a number of purposes such as buying State property or taking part in the privatisation of State-owned businesses and banks. The former clients of the banks in question could also sell the said bonds, such trading being exempted from taxation.

2. Act on the Settlement of the Public Debt of the Federal Republic of Yugoslavia Arising from the Citizens’ Foreign-Currency Savings (Zakon o regulisanju javnog duga Savezne Republike Jugoslavije po osnovu devizne štednje građana; published in OG FRY no. 36/02)

17. This Act repealed the Act described above. It modified the time-frame for honouring the debt in question (from 2012 to 2016) and specified amended amounts, plus 2% interest, to be paid annually. The annual amounts were EUR 276,10 in 2002, EUR 380 in 2003 and EUR 530 in 2004, while the exact amount of the remaining instalments was to be calculated applying a geometrical progression rate of 10% and a corresponding coefficient for that particular year, the coefficients themselves also increasing annually. The minimum such amount could not be less than EUR 500.

18. Pursuant to Article 13, the banks’ clients could make use of their deposits converted into Government bonds in order to pay taxes or, under Articles 12 and 14, in advance of the said time-frame, for a number of purposes such as buying State property, taking part in the privatisation of State-owned businesses and banks, as well as, under certain conditions and up to a specified amount, for the payment of medical treatment, medication and funeral costs. In accordance with Articles 10 and 11, the former clients of the banks in question could also sell the said bonds, such trading being exempted from taxation.

19. This Act was subsequently amended on two occasions, but these amendments concerned peripheral issues unrelated to the savers’ above-described status.

3. The Act on the Citizens’ Foreign-Currency Savings 2003 (Zakon o regulisanju obaveza i potraZivanja po osnovu ino duga i devizne štednje građana; published in the Official Gazette of the Republic of Montenegro - OG RM - no. 55/03 and no. 11/04)

20. Article 3, inter alia, defines “foreign-currency savings” as all foreign currency deposited by natural persons with one of the “authorised banks based in the territory of the Republic of Montenegro” as recognised as a public debt of the Federal Republic of Yugoslavia (see paragraphs 14 and 17 above).

21. Articles 14 and 15 provide that Montenegro shall honour this debt by 2017, and specify the amounts, plus 2% interest, to be paid annually in Euros. The annual amounts were EUR 380 in 2004 and EUR 530 in 2005, while the exact amount of the remaining instalments shall be calculated applying a geometrical progression rate of 10% and a corresponding coefficient for that particular year, the coefficients themselves also increasing annually. The minimum such amount may not be less than EUR 500 should the instalment be less than that.

22. Pursuant to Article 18, the banks’ clients may, in advance of the said time-frame and under certain conditions, make use of their deposits converted into Government bonds in order to pay taxes, buy State property or take part in the privatisation of State-owned businesses.

23. Under Articles 16 and 17 former clients of the banks in question can also sell the said bonds to other natural or legal persons. Such trading is exempt from property taxation and capital gains taxation.

24. Articles 16 § 5 and 18 § 2 provide that the Government of Montenegro shall adopt additional technical regulations concerning the bonds in question.

25. This Act entered into force on 9 October 2003 and its amendments on 28 February 2004.

4. The Act on Foreign-Currency Savings Deposited with the Authorised Banks based outside Montenegro (Zakon o isplati devizne štednje građana poloZene kod ovlašćenih banka sa sjedištem van Crne Gore; published in the OG RM no. 81/06 and 20/09)

26. Articles 1, 2 and 3 provide that this Act shall regulate the reimbursement of foreign-currency savings deposited by individuals residing in Montenegro with the authorised banks based outside Montenegro, which funds were then further deposited with the National Bank of Yugoslavia (Narodna banka Jugoslavije).

27. Article 8 provides that Montenegro shall honour this debt by 2017, and specifies the amounts, plus 2% interest, to be paid annually in euros. The first instalment, to be paid within 90 days as of this Act’s entry into force, was EUR 380, the second instalment due in 2008 was EUR 530, while the exact amount of the remaining instalments shall be calculated by multiplying the foreign-currency deposits with a corresponding coefficient for that particular year, the coefficients themselves increasing annually. The minimum such amount may not be less than EUR 500, except for the last instalment.

28. Article 4 explicitly provides that the foreign-currency sums deposited with, inter alia, the Inos bank in Paraćin and “other private banks” are not considered foreign-currency savings within the meaning of this Act.

29. The first applicant does not invoke any Article of the Convention. The second applicant relies on Article 1 of Protocol No. 1. In substance, however, both applicants complain about the continuing refusal of the respondent State to release instantaneously all of their foreign-currency savings deposited with the Jugobanka together with the interest initially stipulated. The first applicant further complains about the respondent State’s refusal to reimburse him the deposits he made with the Inos bank and the Karić bank.

A. Jurisdiction of the Court in respect of the first applicant’s complaints

30. Although the case has not been communicated to the Government and therefore no objection has been raised in this regard, the Court has to satisfy itself that it has jurisdiction in any case brought before it (see, mutatis mutandis, Blečić v. Croatia [GC], no. 59532/00, § 67, ECHR 2006 III).

31. While the applicant had initially lodged his application against the State Union of Serbia and Montenegro, he subsequently stated that he wanted to pursue it against Montenegro only. In this respect, the Court notes that Montenegro ratified Protocol No. 1 to the Convention on 3 March 2004, whereas the first applicant lodged his application with the Court on 18 November 2002, that is more than one year and three months earlier. However, the Court also notes that the complaints made initially, that is before the respondent State’s ratification of Protocol No. 1, were repeatedly reaffirmed thereafter. It follows, therefore, that the first applicant’s complaints cannot be declared inadmissible on this ground (see, mutatis mutandis, Čeh v. Serbia, no. 9906/04, §§ 38-39, 1 July 2008).

B. Alleged violation of Article 1 of Protocol No. 1 in respect of the applicants’ savings in the Jugobanka

32. The Court first considers that the contested measures, in so far as they affect the applicants’ savings, amount to a control of use of property (see, mutatis mutandis, Trajkovski v. the Former Yugoslav Republic of Macedonia (dec.), no. 53320/99, 7 March 2002, p. 12).

33. As regards the instantaneous release of the funds sought by the applicants, the Court has already considered similar issues in Molnar Gabor v. Serbia (no. 22762/05, §§ 43-51, 8 December 2009) and found, inter alia, that the impugned legislation, providing for the gradual reimbursement of the deposits at issue (see paragraphs 14-19 above), had struck a fair balance between the general interest of the community and the applicant’s persisting legitimate claim to his original savings, as well as the property rights of all others in the same situation as him (see Molnar Gabor v. Serbia, cited above, § 50).

34. The Court notes that the current Montenegrin legislation provides for almost the same conditions in respect of the release of the foreign-currency deposits as the Serbian legislation considered in Molnar-Gabor (cited above; see also paragraphs 20-25 above). In particular, it provides for a gradual reimbursement of the said funds in annual instalments, with 2% interest, the entire debt to be honoured by 2017, as well as a possibility of the debt to be converted into Government bonds which could be used before the envisaged time-frame (the only difference being that the legislation which has remained in force in Serbia provides for the debt to be honoured by 2016). As there are no significant differences between the Montenegrin legislation and the legislation already examined in Molnar Gabor, the Court does not see any reason to depart from the conclusion reached in that case.

35. This being so, the Court finds that the means chosen were suited to achieving the legitimate aim pursued and therefore compatible with Article 1 of Protocol No. 1. It follows that this complaint is manifestly ill-founded and must be rejected pursuant to Article 35 §§ 3 and 4 of the Convention.

36. The Court notes that the respondent State has never accepted to convert into a public debt the foreign currency deposits held by the Inos bank and the Karić bank. Furthermore, the Act on Foreign-Currency Savings Deposited with the Authorised Banks based outside Montenegro explicitly excludes its responsibility for funds deposited with the Inos bank and other private banks (see paragraphs 26-28 above).

37. Therefore, the Court finds that the first applicant’s complaints in this respect are incompatible ratione personae with the provisions of the Convention within the meaning of Article 35 § 3 and must be rejected pursuant to Article 35 § 4 (see, mutatis mutandis, Ilić v. Serbia (dec.) no. 21811/09, §§ 37-41, 14 September 2010).

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You are here: BAILII >> Databases >> European Court of Human Rights >> Branko KAVAJA and Dragutin MILJANIC v Montenegro - 43562/02 [2010] ECHR 2138 (23 November 2010) URL: http://www.bailii.org/eu/cases/ECHR/2010/2138.html Cite as: [2010] ECHR 2138