Viktor Nikolayevich OLESHKEVICH v Russia - 27568/04 [2010] ECHR 602 (30 March 2010)

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The European Court of Human Rights (First Section), sitting on 30 March 2010 as a Chamber composed of:

Nina Vajić, President,
Anatoly Kovler,
Elisabeth Steiner,
Khanlar Hajiyev,
Dean Spielmann,
Giorgio Malinverni,
George Nicolaou, judges,
and André Wampach, Deputy Section Registrar,

Having regard to the decision to grant priority to the above application under Rule 41 of the Rules of Court,

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

The applicant, Mr Viktor Nikolayevich Oleshkevich, is a Russian national who was born in 1953 and lives in the town of Brekhovo in the Moscow Region.

The Russian Government (“the Government”) were represented by Mr G. Matyushkin, Representative of the Russian Federation at the European Court of Human Rights.

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

In the Soviet times agriculture was organised in the Russia-wide system of State-owned (советское хозяйство, совхоз) and collectively owned (коллективное хозяйство, колхоз) farms.

The applicant is a former employee of a formerly State-owned farm, Kryukovskiy (“the farm”) situated in the Solnechnogorskiy District of the Moscow Region.

The Presidential Decree of 27 December 1991 “On pressing measures in carrying out the land reform in the Russian Socialist Federal Socialist Republic” and the Decree of the Government of Russia dated 29 December 1991 no. 86 “On reorganisation of collective and State-owned farms” required farm employees to make a choice between opting out of the farms to continue on their own or investing their shares in the farm’s property in a joint-stock company and becoming the company’s shareholders.

The reorganisation was to be carried out in line with the requirements of Law of the RSFSR “On enterprises and entrepreneurial activity” of 25 December 1990, which at the time regulated the activity of jointstock companies. This Law provided that the property of a joint-stock company and the property of its shareholder were distinct and that the shareholders had no direct claims to the company’s property and only owned shares in the company (see the relevant domestic law section below).

On 25 February 1992, by a majority of votes of its employees including the applicant, the farm was privatised and transformed into a closed jointstock company, APF Kryukovo (АОЗТ АПФ «Крюково», “the company”).

The applicant, along with other employees, became a shareholder in the company, owning thirteen ordinary shares, corresponding to his share of 1.91 ha (valued nominally at 5,320 Russian roubles) in the farm’s land.

Under the company’s Charter of 1992 the company’s property was defined in the following manner:

“12.1 The property of the company belongs its the shareholders as their common and joint property. ...

12.3 The land resources belonging to the company are in collective shared ownership (коллективно-долевая собственность) and collective ownership of its shareholders. ...”

This position was confirmed by a decision of the local council dated 17 March 1993 no. 854/08, according to which the company obtained 1,268 ha of the agricultural land. The land in question was transferred to the company, but was designated in the property certificate as the collective property of the company’s shareholders.

Further to the decision of 17 March 1993, on 25 July 1994 the local council took a decision to issue certificates to all of the company’s shareholders confirming their collective rights to the land in question.

As a result of this decision on 26 April 1995 the applicant, among other employees of the company, received a certificate confirming his rights of common and joint property (право общей совместной собственности) to the equivalent of 1.9 ha of the total, 1,268 ha belonging to the company. It does not appear that the plot was ever intended to be physically partitioned or allocated.

By a Decree dated 1 February 1995 no. 96 “On the administration of shares in the form of land plots and shares of a pecuniary nature” the Government of Russia decided that “the property certificate in respect of the share of land of the person who had invested his share of land in the capital of the mentioned organisation lost its legal value” and that it could not serve as an unconditional proof that the person in question had not disposed of his share in the form of the land plot earlier.

The case file contains the second edition of the company’s Charter dated 2001. This edition fully omits Section 12 of the first edition of the Charter and does not mention any specific property rules on the company’s agricultural land.

In 2003 the applicant sued the company, requesting it to allocate to him 1.9 ha from the company’s agricultural lands near Yurlovo or Fedorovka villages. The claim was based on the certificate of 26 April 1995.

By a judgment of 26 August 2003 the Commercial Court of the Moscow Region rejected the applicant’s claim, having stated in particular that he had given up all of his property rights to the farm’s land by taking part in the incorporation of the company and becoming its shareholder. The court further noted that he had never had any property rights in respect of the company’s land as under Section 14 of the Law on Property in RSFSR and Article 48 and Part 3 of Article 213 of the Civil Code the company’s property belongs to the company only and could not belong simultaneously to the company’s shareholders. Lastly, the court noted that under the domestic law the applicant as the company’s shareholder had no right to claim allocation of any of the company’s property to him.

On 19 December 2003 the Appeal Commercial Court of the Moscow Region examined and dismissed his appeal as groundless. The court disagreed with the finding of the first-instance court that the applicant had given up his property right to the farm’s land in exchange for the company’s shares. The court established that the case file did not contain sufficient factual evidence to support the above conclusion. The mentioned disagreement did not affect the outcome of the case since the applicant’s claim was unfounded for a different reason.

The court ruled that even on the assumption that the company’s land was indeed the collective property of the applicant and other shareholders, the domestic legislation adopted in 1996 (Decree of the Moscow Region Governor no. 466-PG of 24 September 1996 based on Decree of the President of Russia of 7 March 1996 no. 137) introduced a special legal regime in respect of the company at issue and other agricultural entities which activity was only viable without allocation of land lots in kind and effectively banned such claims. The only known exception from this regime was provided for in Decree of the Moscow Region Governor dated 26 March 2001 no. 80-PG in respect of situations where the land to be allocated did not participate in the main economic activity of the entity in question. The court noted that the applicant had not presented any proofs that his case fell into the latter exception.

The applicant appealed against the court decisions in his case before the cassation instance court.

By decision of 17 March 2004 the Federal Commercial Court of the Moscow Circuit acting as a cassation instance in the applicant’s case rejected the applicant’s argument and essentially upheld the lower courts’ decisions. The court noted that the first-instance judgment was correct in both its assessment of the facts and application of the domestic law and that the appeal court erred in interpretation of the applicable law and, as a result, made erroneous findings in respect of the facts concerning the existence of the applicant’s property rights in respect of the law owned by the company.

The court cited Section 10 of Decree of the Government of Russia dated 29 December 1991 no. 86 “On reorganisation of collective and State-owned farms” which required farm employees to make a choice between opting out of the farms to continue on their own or investing their shares in the farm’s property in a joint-stock company and becoming the company’s shareholders, and noted that the case file indicated conclusively that the applicant had made such a choice by preferring the latter option. The court further noted in respect of the certificate dated 26 April 1995 that Section 20 of Decree of the Government of Russia dated 1 February 1995 no. 96 had provided that any certificate confirming property rights in respect of the land which was invested into a capital of a company had no legal value and this rule applied in the situation at hand. The court concluded that the applicant did not have any property rights in respect of the company’s agricultural land and that therefore his claims were without basis.

Section 3 of the Presidential Decree of 27 December 1991 “On pressing measures in carrying out the land reform in the Russian Socialist Federal Socialist Republic” stated that:

“3. State-owned and collectively owned farms are obliged in 1992 to reorganise and to bring their status in conformity with Law of the RSFSR ‘On enterprises and entrepreneurial activity’ and to register in respective State bodies.”

Decree of the Government of Russia dated 29 December 1991 no. 86 “On reorganisation of collective and State-owned farms” stated that:

“1. State-owned and collectively owned farms are obliged to reorganise and to bring their status in conformity with the Law of the RSFSR ‘On enterprises and entrepreneurial activity’ and other legislative acts and to register in the established order by 1 January 1993 ...

9. All members of collectively owned farms and employees of State-owned farms have the right to a share of land and to a share of property in the common and joint property [of the respective farm].

A farm’s staff may decide to give a share of the farm’s property also to the employees situated on the territory of the farm.

The size of the share of land is set in kind and also valued in monetary form ...

10. The owner of the share has an obligation to make an application to a farm’s internal commission and indicate one of the following options for the use of the share:

- acquisition of land and means of production with a view to creating a farm, a private enterprise in the sphere of renovation, building, service or commerce or in other spheres;

Decree of the Government of Russia dated 1 February 1995 no. 96 read as follows:

“20. After the shares of land are invested in the capital of the agricultural commercial organisation, this organisation as a juridical person is issued with a property certificate in respect of the land plot, which area corresponds to the invested shares of land, as well as a plan of the land plot. The property certificate in respect of the share of land of the person who has invested his share of land in the capital of the mentioned organisation loses its legal value ...

Persons who have invested their shares of land... in the capital of the agricultural commercial organisation on the basis of the charter, are issued with a document confirming his share in the capital.”

Law of the RSFSR of 25 December 1990 “On enterprises and entrepreneurial activity” regulated the status and activities of commercial entities, including joint-stock companies. In its Section 11, the law stated that:

“1. A limited liability partnership (closed joint-stock company) is an association of citizens and juridical persons for common economic activity. The capital of the partnership (joint-stock company) is formed exclusively on the basis of investments (shares) of its founders.

2. All participants of the limited liability partnership (closed joint-stock company) have a limited liability in the amount of their investments. The shares of the participants ... may only change hands with the consent of other participants in the order set out in the partnership’s charter.

3. The property of the limited liability partnership (closed joint-stock company) is formed from the investments of its participants, the received profits and other lawful sources and belongs to its participants as their common and joint property.

4. The limited liability partnership (closed joint-stock company) is a juridical person acting on the basis of the charter approved by its founders and having its own name containing the indication of its legal form. ...”

By Law of 30 November 1994 no. 52-FZ “On entry into force of the first part of the Civil Code of the Russian Federation” the Law of the RSFSR of 25 December 1990 “On enterprises and entrepreneurial activity” was repealed and replaced with the Civil Code of 30 November 1994 (no. 51FZ). The new legal regime was to apply starting from 1 January 1995.

In its section 6 Law of 30 November 1994 no. 52-FZ provided in respect of the closed joint-stock companies created under the previous legislation that they would be regulated by the new Civil Code and that the charters of these companies would only remain in force in so far as they did not contradict the new Civil Code. These companies were to bring their charters in compliance with the requirements of the new legislation until the date specified in the new law on joint-stock companies.

Law of 26 December 1995 no. 208-FZ “On joint-stock companies” later specified that the deadline for bringing the companies’ charters into compliance with the new rules was 1 July 1997.

Articles 48, 66 and 96 of the Civil Code define a joint-stock company as a juridical person that owns its property and is capable of acquiring rights and carrying out obligations in its own name.

Section 2 of the Law “On joint-stock companies” (no. 208-FZ of 26 December 1995) provides, among other things, that a joint-stock company is a commercial organisation whose capital is divided into a definite number of shares of stock certifying the rights and obligations of the members (shareholders) vis-à-vis the company. Shareholders are not liable for the company’s obligations, and bear the risk of losses associated with its activity only to the extent of the value of the shares owned by them.

Without referring to any specific Convention provision, the applicant complained essentially about the unsuccessful outcome of the case and further maintained that his property had been taken away from him.

The applicant complained about the courts’ refusal to recognise his claim to a portion of the farm’s land. The Court finds that this complaint should be examined under Article 1 of Protocol No. 1, which reads as follows:

“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

The Government argued that the case is incompatible ratione temporis with the provisions of the Convention, since it concerned in large parts events pre-dating 5 May 1998, which is the date of entry into force of the Convention in respect of Russia. In the Government’s view, in 1992 the applicant voluntarily disposed of his share of land by investing it in the capital of the farm and received thirteen shares in this farm in exchange. After this investment was made, the applicant could not claim his land back, but could rather dispose of his shares in the company as he liked. Thus, there was no interference with the applicant’s property rights as a result of the domestic courts’ decisions.

The applicant disagreed with the Government’s position and cited the wording of his property certificate, which explicitly recognised his rights to the land in question, the wording of the Charter which allegedly failed to mention the investment of the shareholders’ shares of the land in the farm’s capital and the alleged lack of documentary proof of the actual transfer of the shares to the farm. The applicant considered that he had property rights in respect of the land plot of 1.9 ha currently in the farm’s possession and that the domestic courts had breached his property rights by denying his claim to this land.

The Court would observe that in 1992 the applicant participated in the privatisation of the formerly State-owned farm and its transformation into the closed joint-stock company APF Kryukovo. As a result of this process the applicant became a shareholder of the company, owning thirteen shares, corresponding to his share of 1.91 ha in the farm’s land.

It appears that at that time there was a certain ambiguity in the legislation and the company’s incorporation documents as to the distinction between the company’s property and that of the company’s shareholders. The parties before the Court were in disagreement on the exact interpretation of the laws in question. The applicant insisted that under the then legislation the shareholders not only owned shares in the respective companies, but also owned the companies’ assets as their common and joint property (see paragraph 3 of Section 11 of the Law of the RSFSR of 25 December 1990 “On enterprises and entrepreneurial activity” in Relevant domestic law section above, and the applicant’s property certificate of 26 April 1995), whilst the Government argued that the applicant, as the company’s shareholder, could only own the company’s shares, and not the company’s property, and that the company’s property was totally distinct from the property of its shareholders.

The Court would note that even assuming that the applicant’s interpretation of the domestic law is correct, on 1 January 1995 the domestic legal regime applicable to the relations between the closed joint-stock companies and the shareholders changed, in that the shareholders were no longer considered common and joint owners of the company’s property, the company now owning its property in its own name with the shareholders owning the company’s shares, giving them a certain number of rights and imposing on them some obligations. This position was reflected in the Civil Code of 30 November 1994 (no. 51-FZ), Section 2 of Law “On jointstock companies” (no. 208-FZ of 26 December 1995) and Decree dated 1 February 1995 no. 96 “On the administration of shares in the form of land plots and shares of pecuniary nature”. The companies in question were given until 1 July 1997 to bring their charters in line with the new legislation.

The applicant in the present case essentially complained about the effects of this new legislation on his relations with the company. The Court notes that any interference with his property rights which could have resulted from the operation of this new legislation took place on 1 July 1997 at the latest, whilst the Convention entered into force in respect of Russia on 5 May 1998. The Court reiterates in this connection that, as a general rule, it has no jurisdiction ratione temporis in respect of events which occurred before the ratification of the Convention or its Protocols by the respondent State. It may, however, have regard to facts prior to ratification inasmuch as they could be considered to have created a situation extending beyond that date or may be relevant for the understanding of facts occurring after that date (see Broniowski v. Poland (dec.) [GC], no. 31443/96, ECHR 2002-X). In particular, the Court has found that it has temporal competence to examine cases where, having interfered with the applicant’s property rights before the ratification of the Convention, the respondent State then recognises the applicant’s entitlement to the property in question by legal acts that remained in force on the date of the State’s ratification of the Convention, or were adopted after that date (see Broniowski v. Poland [GC], no. 31443/96, § 125, ECHR 2004-V, or Kovačić and Others v. Slovenia (dec.), nos. 44574/98, 45133/98 and 48316/98, 9 October 2003 and 1 April 2004). In the present case, however, there is nothing to suggest the existence of any continuing situation, given that in the post-ratification period from 5 May 1998 onwards the State has done nothing to ratify the applicant’s claims to the company’s property. Moreover, his claims were consistently refused by the domestic courts at three instances. The Court thus considers that the alleged interference with the applicant’s property rights was of an instantaneous nature, and therefore the Court has no jurisdiction ratione temporis to examine the applicant’s complaint in so far as it relates to the events that took place prior to 5 May 1998.

As regards his complaint about the unsuccessful outcome of court proceedings in the case that took place in 2003, the Court observes that it is not called upon to examine alleged errors of fact and law committed by the domestic judicial authorities, provided that there is no indication of unfairness in the proceedings and provided the decisions reached cannot be considered arbitrary. On the basis of the materials submitted by the applicant the Court notes that the applicant was able to present his arguments as he wished, and the judicial authorities gave them due consideration. The Court does not find it necessary to depart from the findings and conclusions of the domestic courts, given that, in any event, Article 1 of Protocol No. 1 does not guarantee, as such, the right to acquire property (see, for example, Grishchenko v. Russia (dec.), no. 75907/01, 8 July 2004).

It follows that this part of the application is manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 and 4 of the Convention.

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You are here: BAILII >> Databases >> European Court of Human Rights >> Viktor Nikolayevich OLESHKEVICH v Russia - 27568/04 [2010] ECHR 602 (30 March 2010) URL: http://www.bailii.org/eu/cases/ECHR/2010/602.html Cite as: [2010] ECHR 602