CASE OF BTS HOLDING, A.S. v. SLOVAKIA
CASE OF BTS HOLDING, A.S. v. SLOVAKIA
JUDGMENT
STRASBOURG
30 June 2022
This judgment will become final in the circumstances set out in Article 44 § 2 of the
Convention. It may be subject to editorial revision.
BTS HOLDING, A.S. v. SLOVAKIA JUDGMENT
INTRODUCTION
1. Raising mainly issues under Article 1 of Protocol No. 1, this case
concerns the non-enforcement against the National Property Fund of Slovakia
(“NPF”), the country’s privatisation agency, of an arbitration award made by
the International Court of Arbitration (“the ICA”) of the International
Chamber of Commerce in Paris (“the ICC Tribunal”).
2. The award was for the payment of a principal amount plus interest
based on the rescinding by the NPF of a contract with the applicant company
for the purchase by the latter of shares in Bratislava Airport in the process of
its privatisation.
THE FACTS
3. The applicant company was established in 2005 and has its registered
seat in Bratislava. It was represented by Mr W. Plesser, succeeded by
Mr T. Kustor, lawyers practising in Vienna (Austria).
4. The Government were represented by their Agent, Ms M. Bálintová.
5. The facts of the case may be summarised as follows.
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I. BACKGROUND
6. The applicant company was the successful bidder for the purchase of
a majority share in Bratislava Airport in the process of its privatisation. This
resulted in the conclusion in 2006 of a share-purchase agreement (“the SPA”)
between the applicant company and the NPF. The latter is a body established
by special legislation to implement the privatisation of State-owned property
under the supervision of the government and Parliament.
7. The SPA contained an arbitration clause to the effect that disputes
arising out of the agreement were to be referred to the ICC Tribunal and to be
resolved under the ICC Rules of Arbitration. The seat of arbitration was to be
Paris.
8. Under the SPA, the applicant company paid a large sum of money to
the NPF as the first tranche of the purchase price (“the first tranche”).
9. However, the NPF then rescinded the SPA and paid the amount of the
first tranche back to the applicant company, on the grounds that the time-limit
defined in the SPA for the approval of the transaction by the Anti-Monopoly
Office of Slovakia (“the AMO”) had expired without approval having been
granted.
10. In 2008 the NPF, the applicant company, the State in the person of the
respective ministry and another party agreed (“the 2008 settlement”) that the
NPF’s rescission of the SPA was valid and effective as of a certain date
(21 September 2006). In so far as can further be established from the ensuing
judicial decisions, the parties also agreed that their mutual commitments were
terminated, in particular for the payment of the purchase price in return of the
transfer of the to-be-privatised shares, and it was declared that there were no
outstanding mutual claims for damages. However, in order to avoid doubts,
matters of return of the purchase price and interests were excluded from the
scope of the settlement. No understanding concerning the dispute-resolution
mechanism was included.
11. In 2009 the NPF paid another amount of money to the applicant
company intended to cover interest on the amount of the first tranche in the
period between rescinding the SPA and the repayment of that amount.
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around; since what date and at what rate the interest had started to accrue;
and, consequently, whether there were any further amounts due by the NPF.
15. The dispute was resolved in an award of 8 June 2012.
16. The ICC Tribunal found that the payments made constituted, first,
payment of the interest and, only thereafter, payment towards the principal
amount of the first tranche, precisely determining the interest rates applicable
to the various stages at which the payments had been claimed and made, as
well as the outstanding amount of the principal sum on which interest was to
be paid with regard to the said stages.
17. In sum, the ICC Tribunal ruled that the NPF was to pay the applicant
company (i) a principal amount of 1,894,597.52 euros (EUR), and (ii) interest
of 14.25% per annum on EUR 1,853,584.45 for the period from
13 March 2009 until full payment of the award.
18. On 19 December 2012 the Secretary General of the ICA issued
a written statement certifying, inter alia, that the award had been notified to
the parties on 21 June 2012 and that it had been received by the NPF on
25 June 2012. The statement further cited Article 28 § 6 of the ICC
Arbitration Rules, as in force at the relevant time, pursuant to which:
“Every Award shall be binding on the parties. By submitting the dispute to arbitration
under these Rules, the parties undertake to carry out any Award without delay and shall
be deemed to have waived their right to any form of recourse insofar as such waiver
can validly be made.”
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likewise arbitrary because this was not a part of the dispute, there was nothing
at play that could endanger competition, and the Regional Court had
completely distorted the applicable rules and principles. Lastly, the reasoning
of the Regional Court concerned matters that had not been debated at the
earlier stages of the proceedings and the applicant company had had no
opportunity to take a position on them.
32. On 8 November 2016 the Constitutional Court declared the complaint
inadmissible. Any complaint in relation to the District Court fell within the
jurisdiction of the Regional Court and, under the principle of subsidiarity, not
within that of the Constitutional Court. As to the Regional Court, it had
exercised its jurisdiction within its remit, interpreting and applying the
relevant legal rules in a constitutionally acceptable manner. Its conclusions
followed from the established facts and were logical and legitimate.
33. There had been no obstacle for the Regional Court to uphold the
decision of the District Court in that it had supported the latter’s conclusions
by supplementing substantial argumentation of its own.
34. There was nothing in the challenged decision to show that there had
been an interference with the applicant company’s right to protection of
property.
35. As an aside (nad rámec uvedeného), the Constitutional Court
observed that the enforcement proceedings had been terminated in the
meantime and that the applicant company had not challenged that decision by
an appeal. It had accordingly not exhausted ordinary remedies, which
precluded it from seeking the protection of its rights before the Constitutional
Court.
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40. At the relevant time and until 30 June 2016, the rules of procedure
before the ordinary courts were embodied in the Code of Civil Procedure
(Law no. 99/1963 Coll, as amended). Under Article 160 § 1, if a judgment of
a court of law imposed a duty, it was to be complied with within three days
of the judgment becoming final and binding, with the court having the power
to define a longer period for compliance.
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THE LAW
A. Admissibility
1. Compatibility
47. Referring to the domestic courts’ conclusion that the applicant
company’s arbitration award was unenforceable, the Government contended
that none of them had “upheld” the applicant company’s “claim” and that,
accordingly, that claim was not “arguable” and therefore did not amount to
a possession for the purposes of Article 1 of Protocol No. 1. The applicant
company’s complaint under that provision was therefore incompatible with it
ratione materiae. In their view, the present case was similar to ALMEDIA
spol. s r.o. v. Slovakia ((dec.) [Committee], no. 55631/12, 6 November 2018),
which had been rejected on precisely that ground.
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2. Domestic remedies
56. The Government also relied on the Constitutional Court’s observation
that the applicant company had not challenged the decision to terminate the
enforcement and argued that it had therefore failed to exhaust domestic
remedies as required by Article 35 § 1 of the Convention.
57. The applicant company disagreed and argued, relying on
Article 50 § 5 of the Enforcement Code, that no appeal against the decision
to terminate the enforcement proceedings had been available.
58. The Court notes first of all that Article 50 § 5 of the Enforcement
Code, as applicable at the relevant time, clearly and directly excluded the
availability of an appeal against a decision to terminate enforcement
proceedings (see paragraph 42 above). In fact, the enforcement court in the
present case acknowledged that in the reasoning of its decision (see paragraph
29 above). The Constitutional Court’s observation in passing to the contrary
(see paragraph 35 above) does not address in any way this statutory rule and
the Government have failed to respond to the applicant company’s argument
essentially submitting that the suggestion that an appeal had been available
was in fact mistaken.
59. Irrespective of that, the Court notes that the observation of the
Constitutional Court in issue was made as an aside which did not prevent it
from examining the substance of the applicant company’s arguments against
the decision to allow the NPF’s objection, and the termination of the
enforcement proceedings was a direct consequence of that decision (see
paragraphs 29 and 42 above).
60. In these circumstances, there is no room for accepting the
Government’s objection and it must be dismissed.
3. Conclusion
61. The Court notes that the complaint is neither manifestly ill-founded
nor inadmissible on any other grounds listed in Article 35 of the Convention.
It must therefore be declared admissible.
B. Merits
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68. Concerning point (ii), it cannot be brought into question that the award
contained an order for payment which was binding on the parties and that by
submitting their dispute to the ICC Tribunal the parties had undertaken to
abide by the award without delay, as provided for by the ICC Arbitration
Rules and certified by the ICA Secretary General in his statement of
19 December 2012. The Court likewise notes that, under the general rules of
procedure before the ordinary courts in Slovakia at the relevant time, which
were to be used if the given matter was not addressed by the specific rules
concerning arbitration, a tribunal’s order was to be complied with within three
days of it becoming final and binding, unless the order provided otherwise
(see paragraphs 38 and 40 above). Furthermore, the Court observes that this
ground for refusing enforcement was established by the court of appeal
beyond and above the grounds advanced by the NPF in its objection without
giving the applicant company an opportunity to respond.
69. In relation to point (iii), the Court notes that the debtor under the
award was the NPF, that this entity was in fact an agency of the State, that the
payments it was ordered to make under the award originated from
an investment transaction it had entered into with the applicant company on
the basis of a contract of a private-law nature, and that, as noted by the courts
themselves, the payment under the award would ultimately have to be made
from the State budget. However, as previously recognised by the Court, a lack
of funds cannot justify an omission by a State authority to honour a judgment
debt (see Burdov v. Russia, no. 59498/00, § 41, ECHR 2002-III).
70. As to points (iv) and (v), the Court observes first of all that, similarly
to point (ii), they had not been advanced by the NPF but had been relied on
by the court of appeal without giving the applicant company an opportunity
to respond. The former of these grounds relied on the provision of
Article 28 § 6 of the ICC Arbitration Rules concerning a waiver by the parties
to an ICC arbitration of the right to recourse. However, under the provision
in question, any such waiver was clearly intended only “insofar as [it could]
validly be made”. To the extent the court of appeal referred to the notion of
the protection of competition as a component of point (v), the Court likewise
finds it difficult to follow its rationale. It is uncontested that the transaction
intended under the SPA necessitated approval by the AMO and that no such
approval was issued within the time frame defined by the SPA, which was
the reason for the NPF’s rescinding of that contract. However, there is no
indication that the lack of approval within a given time frame amounted to
an actual refusal of the transaction. In fact, no decision on the merits of this
matter was ever taken by the AMO. There is accordingly no indication that
the intended transaction was contrary to the rules on competition. Moreover,
and irrespective of that, the transaction was effectively rescinded, the
payment to be made under the award concerned claims related to that
rescission, and there has not been any suggestion that the satisfaction of those
claims would in any way impact on competition.
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71. In view of the above considerations, it would appear that the grounds
relied on by the domestic courts were not given and/or fell outside the legal
framework for denying enforcement of a foreign arbitration award allowed
by the provisions of the domestic law and the New York Convention (see
paragraphs 37, 41 and 44 above). Be that as it may, and even assuming that
denying enforcement of the award on these grounds served a general interest,
it has not been shown that it was proportionate to that aim. In that regard, the
Court notes again that the Government have advanced no arguments on this
aspect of the case and that, while focusing on elements which purportedly
precluded the enforcement by reason of public policy or procedural
formalities, the domestic courts took no account of the requirements of the
protection of the applicant company’s fundamental rights and the need for
a fair balance to be struck between them and the general interest of the
community rights (see Sporrong and Lönnroth v. Sweden,
23 September 1982, § 69, Series A no. 52).
72. The foregoing considerations are sufficient to enable the Court
to conclude that the refusal to enforce the applicant company’s arbitration
award was not justified for the purposes of Article 1 of Protocol No. 1.
73. There has accordingly been a violation of Article 1 of Protocol No. 1.
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A. Damage
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relevant circumstance in the light of which the principle of res judicata should
not preclude the opening of new enforcement proceedings.
83. As regards the second part of the claim, the Government contested its
causal link to the violations of the applicant company’s rights alleged in the
present proceedings before the Court.
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89. The applicant company also claimed EUR 33,257.79 for the legal and
translation costs at the domestic level and EUR 287,316.38 for legal fees and
associated expenses incurred before the Court.
90. The Government requested that the matter be resolved in accordance
with the Court’s case-law. As to the claim concerning the proceedings before
the Court, the Government contested the amount as being manifestly
excessive and “speculative”. To that effect, while acknowledging that the
claim had been supported by invoices, they pointed out that no evidence had
been submitted that those invoices had actually been settled. Moreover,
arguing that the applicant company was in fact making a financial loss, the
Government found it incomprehensible that it should be hiring the most
expensive lawyers even though lawyers with Convention experience working
at much more reasonable rates were available on the market.
91. 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 were actually and necessarily incurred and are reasonable as to quantum
(see, for example, Iatridis, cited above, § 54).
92. Regard being had to the documents in its possession and the above
criteria, the Court considers it reasonable to award the sum of EUR 30,000,
plus any tax that may be chargeable to the applicant company, covering costs
under all heads, incurred up to the adoption of the present judgment.
C. Default interest
93. The applicant company submitted that the default interest in relation
to the above claims should be set at 9% per annum.
94. 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.
2. Holds that there has been a violation of Article 1 of Protocol No. 1 to the
Convention;
3. Holds that there is no need to examine on the merits the complaints under
Articles 6 and 13 of the Convention;
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5. Holds
(a) that the respondent State is to pay the applicant company, within three
months from the date on which the judgment becomes final in
accordance with Article 44 § 2 of the Convention, EUR 30,000 (thirty
thousand euros), plus any tax that may be chargeable to the applicant
company, in respect of costs and expenses incurred up to the adoption
of this judgment;
(b) that from the expiry of the above-mentioned three months until
settlement simple interest shall be payable on the above amount at
a rate equal to the marginal lending rate of the European Central Bank
during the default period plus three percentage points;
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