KEFALAS AND OTHERS v. GREECE - 14726/89 [1995] ECHR 18 (8 June 1995)

judgment no. 1481/88) stayed the proceedings on account of the appeal pending in the Athens Court of Appeal (see paragraph 12 above). At the date of the hearing before the European Court the proceedings had not ended. 3. The proceedings to challenge the second increase in capital 22. The applications for judicial review of Ministerial Order no. 360/87 (see paragraph 15 above) made by the applicants to the Athens Administrative Court of Appeal and the Supreme Administrative Court on 12 June and 13 July 1987 and their two actions in the Athens Court of First Instance seeking a declaration that the second increase in capital was null and void were still pending at the date of the hearing before the European Court. D. The actions for damages against the OAE and the State 23. On 24 January 1990 and 29 May and 20 November 1991 the applicants brought four actions for damages against the OAE and the State in the Athens Court of First Instance and the Athens Administrative Court. In these they sought compensation for the damage allegedly caused them by the OAE's management of the company and by the unlawful increases in capital. These actions, which were still pending at the date of the hearing before the Court, were founded on the Civil Code provisions on the State's liability in tort and unjust enrichment. II. Relevant domestic law A. Law no. 1386 of 5 August 1983 establishing the Business Revival Agency 24. The OAE was established by Law no. 1386 of 5 August 1983 and is a public limited company under the supervision of the State. Designed to serve the public interest, it contributes to the country's economic and social development by putting businesses on a sound financial footing, importing and applying foreign technological know-how and developing Greek technological know-how, and setting up and running nationalised or semi-public businesses (section 2 (2) of the Law). To achieve these objectives the OAE may, among other things, take over the management of businesses being rehabilitated or nationalised, acquire shareholdings in businesses, grant loans to businesses in which it has an interest or give guarantees for such loans, issue debenture loans and transfer shares to employees or to organisations representing them, local authorities or other public-law entities (section 2 (3) of the Law). 25. The relevant provisions of Law no. 1386/83 provide: Section 5 "Conditions for making a business subject to the provisions of this Law 1. By an order of the Minister for the Economy, issued after consultation of the advisory committee ..., the provisions of this Law may be applied to businesses (a) which have suspended or ceased their activities for financial reasons; (b) which have suspended payments; (c) which are insolvent or have been placed under the management of their creditors or under provisional management or which have gone into liquidation ... (d) whose total liabilities are five times greater than the sum of their capital and apparent reserves and which are manifestly unable to meet their liabilities ... (e) which concern the country's defence or are of vital importance for the development of national resources or whose main object is the provision of public services and which are manifestly unable to meet their liabilities; (f) which request application of the provisions to them. 2. For the purposes of applying the preceding subsection, ... (c) 'Manifestly unable to meet their liabilities' means: (a) a fall in production and in the number of employees due to the lack of liquid assets; (b) an accumulation of debts due; and (c) a deterioration in the liquidity indicators. This situation may also be proved by a declaration by one or more banks which are the business's main source of finance to the effect that they will no longer maintain their financial support. ..." Section 6 "Procedure for making a business subject to the provisions of this Law 1. The order by the Minister for the Economy making the business subject to the provisions of this Law ... shall be made (a) at the request of the business; (b) ... (c) at the request of a bank or of the administrative authorities or of a public-law entity where these have matured claims against the business; (d) at the request of the business's creditors other than those mentioned in sub-paragraphs (b) and (c) whose claims represent at least 20% of the business's outstanding debts ... (e) at the request of the ... trustee in bankruptcy or of the insolvent firm. ..." Section 7 "Provisions on the rehabilitation of businesses The order by the Minister for the Economy ... may provide for 1. the taking over of the management of the business by the OAE, in accordance with section 8; 2. the satisfaction of the business's obligations in such a way as to ensure its viability (a) by a compulsory increase in the capital by means of contributions of new assets or by the conversion of existing debts into shares ... ... 3. winding-up, in accordance with section 9 of this Law." Section 8 "Taking over of management 1. ... When the ministerial order is published, the powers of the business's managerial bodies shall cease. The general meeting of shareholders ... shall continue to be held but may not decide to dismiss the directors appointed by the OAE. The approval of the Minister for the Economy shall be required for the distribution of profits and the establishment of reserves. ... 5. During the interim administration the OAE shall produce a report on the business's viability and negotiate with the shareholders and creditors in order to conclude an agreement on the business's survival ... ... 8. During the interim administration the OAE may, by a decision approved in an order of the Minister for the Economy published in the Official Gazette and as an exception to the provisions governing public limited companies, increase the business's capital. This increase may be made either in cash or by contributions in kind. Payment of the contribution may be made by set-off. All the particulars relating to the increase in capital shall be laid down in the aforementioned ministerial order. The existing shareholders retain a pre-emptive right, which shall be exercised within a period of time to be laid down by the ministerial order. 9. The OAE or the management appointed by it shall be liable only in the event of fraud or serious negligence." Section 12 "Transitional period While the secretariat of the OAE is being set up and until it comes into operation, the Minister for the Economy shall take the measures provided for in sections 7-10 of this Law by means of an order." B. The Court of Justice of the European Communities' judgment of 30 May 1991 26. A reference for a preliminary ruling having been made to it by the Greek Supreme Administrative Court, the Court of Justice of the European Communities gave judgment on issues relating to the compatibility of Law no. 1386/83 with the Second Council Directive (77/91/EEC) of 13 December 1976 (concerning the formation of public limited companies and the maintenance and alteration of their capital) and more particularly with Article 25 of the Directive, according to which "any increase in capital must be decided upon by the general meeting". In its judgment of 30 May 1991 (Marina Karella and Nikolaos Karellas v. Minister of Industry, Energy and Technology and Organismos Anasyngrotisseos Epikhirisseon, Reports of Cases before the Court of Justice and the Court of First Instance, 1991-5, I-2691) the Court of Justice held: "Article 25 in conjunction with Article 41 (1) of the Second Directive must be interpreted as meaning that they preclude national rules which, in order to ensure the survival and continued operation of undertakings which are of particular economic and social importance for society as a whole and are in exceptional circumstances by reason of their excessive debt burden, provide for the adoption by administrative act of a decision to increase the company capital, without prejudice to the right of pre-emption of the original shareholders when the new shares are issued." C. Law no. 2000/91 on the denationalisation, simplification of winding-up proceedings and strengthening of competition rules 27. In 1991 the legislature passed Law no. 2000/91 in order to facilitate the privatisation of certain businesses which had come under State control between 1982 and 1989. Section 54 of this Law provides that if the increase in the capital of a business in difficulties is quashed in a judgment of the Supreme Administrative Court or a final judgment of another court, the debts of the business that had been capitalised with a view to making the increase and which had been taken over by the business's creditors in the form of shares "revive and shall be deemed never to have been extinguished". D. Review of administrative decisions and the finality of judgments of the Supreme Administrative Court 28. Article 95 para. 1 (a) of the 1975 Constitution provides: "The Supreme Administrative Court's powers shall include the following: (a) setting aside, on an application for judicial review, of enforceable decisions by administrative authorities that are ultra vires or contrary to law. ..." 29. Under Article 48 of Legislative Decree no. 18/1989 codifying the statutory provisions relating to the Supreme Administrative Court, "The grounds on which an application for judicial review may be based are (a) lack of jurisdiction in the administrative authority that took the decision; (b) failure to comply with essential formalities required for the decision; (c) breach of substantive provisions of law; and (d) misuse of powers, where the administrative authority's decision, even though it appears lawful as such, was taken for reasons and for a purpose other than those contemplated by the legislature when making provision for such a decision." 30. The Supreme Administrative Court's review of administrative decisions is a review of lawfulness modelled on that carried out by the French Conseil d'Etat on applications for judicial review. 31. Nevertheless, where the question is one of determining whether statutory requirements have been complied with, the Supreme Administrative Court looks to see whether the findings of the administrative body responsible for the decision correspond with reality. If they do not, there has been a mistake of fact and the decision falls to be quashed. The Supreme Administrative Court also examines the reasons for the decision, in particular whether it is based on substantive provisions or an interpretation of them, the substantive assessment of the circumstances of fact and their possible legal classification and the administrative body's criteria and conclusions in respect of the exercise of its discretion. The reasoning must be derived from the case file; it must be precise and adequate and contain the essential circumstances of the case in order that it may be determined whether the administrative body's application of the legal rules was justified (E. Spiliotopoulos, Enkhiridion Diikitikou Dikeou ("Manual of Administrative Law"), 4th edition, Athens, A. N. Sakkoulas, pp. 475-82). The administrative authority's mistake of fact must be directly apparent from the file or from evidence produced by the parties (Supreme Administrative Court, judgment no. 3336/78). The applicant cannot rely on facts not previously submitted to the administrative body responsible for the impugned decision (Supreme Administrative Court, judgments nos. 1720/77 and 662/78). The administrative body's assessment of facts whose reality has not been disputed is not subject to review by the Supreme Administrative Court except where and in so far as the applicant alleges that that assessment went beyond the extreme limits of the administrative authority's discretion (Supreme Administrative Court, judgments nos. 1020/72, 1303/77 and 201/78). 32. Judgments of the Supreme Administrative Court are final. No appeal lies against them other than an application by a third party to set aside a judgment adversely affecting his interests or an application to the Special Supreme Court if there is doubt about the constitutionality of provisions on which a judgment is based. Consequently, an administrative decision held to be valid by the Supreme Administrative Court is covered by res judicata, which cannot be overturned in a judgment of the civil courts. E. Revocation of administrative decisions 33. The success of an action for a declaration brought in the civil courts against an administrative decision that has been held to be valid by the Supreme Administrative Court does not mean that the decision is quashed; it merely encourages the administrative authorities to cancel it or revoke it if they are so minded. Administrative case-law is well established on this point. The Supreme Administrative Court has held that, in accordance with a general principle, the administrative authorities are not obliged to revoke their unlawful decisions; this course is merely open to them - where, moreover, such revocation takes place within a reasonable time (which may not exceed five years, according to the Athens Administrative Court of Appeal - judgment no. 1003/82, Armenopoulos 38, p. 153) from the taking of the decision in issue (Supreme Administrative Court, judgments nos. 2575/82 and 2586/82, Epitheorissi Nomologias 1985, p. 502). Such an obligation would have the effect of creating and prolonging unstable situations as there would be no time-limit for challenges to unlawful administrative decisions (Athens Administrative Court of Appeal, judgment no. 334/83, Epitheorissi Nomologias 1983, p. 528). 34. Lastly, the authorities are not required to consider requests to revoke their unlawful decisions (Supreme Administrative Court, judgments nos. 4090/87, 4091/87 and 5352/87, Nomiko Vima no. 38, p. 758). Administrative decisions, even unlawful ones, are deemed valid and continue to take effect for as long as they are not judicially revoked or quashed (Supreme Administrative Court, judgment no. 1555/80, Nomiko Vima no. 30). PROCEEDINGS BEFORE THE COMMISSION 35. The applicants applied to the Commission on 23 August 1987 (application no. 14726/89). They made two separate complaints. The first of these concerned Ministerial Order no. 2544/84 of 30 March 1984 (see paragraph 7 above). The applicants complained that no court had jurisdiction to determine the question whether the conditions for making Athinaïki Khartopiia subject to the regime for businesses in difficulties had been satisfied and, in particular, whether the company really had large debts. They relied on Article (art. 6) of the Convention. The second complaint concerned the successive increases in the company's capital and the acquisition of new shares by the OAE and the National Bank of Greece (see paragraphs 13-16 above). The applicants alleged that they had been dispossessed of their property and deprived of an effective remedy before a national authority in order to complain of the infringement of their right to the peaceful enjoyment of their possessions. They relied on Article 1 of Protocol No. 1 (P1-1) and Article 13 of the Convention taken together with Article 1 of Protocol No. 1 (art. 13+P1-1). 36. On 20 May 1992 the Commission declared the first complaint admissible, taking the view that it related to the Supreme Administrative Court's judgment of 13 March 1987; the second complaint it declared inadmissible. In its report of 17 January 1994 (Article 31) (art. 31), it expressed the opinion by ten votes to four that there had been no breach of Article 6 para. 1 (art. 6-1) as the first complaint lay outside its jurisdiction ratione temporis. The full text of the Commission's opinion and of the three separate opinions contained in the report is reproduced as an annex to this judgment (1). _______________ 1. Note by the Registrar: for practical reasons this annex will appear only with the printed version of the judgment (volume 318-A of Series A of the Publications of the Court), but a copy of the Commission's report is obtainable from the registry. _______________ FINAL SUBMISSIONS TO THE COURT 37. In their memorial the Government asked the Court to reject totally the application brought before it as inadmissible or alternatively as unfounded on the merits. 38. The applicants asked the Court (a) to hold that their rights under Article 6 (art. 6) of the European Convention had been violated and to award fair compensation of 180,000,000,000 drachmas; and (b) to award them 15,000,000 drachmas in respect of costs and expenses. AS TO THE LAW THE GOVERNMENT'S PRELIMINARY OBJECTIONS 39. The Government argued, as their main submission, as they had before the Commission, that the applicants' complaint lay outside the Court's jurisdiction ratione temporis because it related to facts that had occurred before 20 November 1985, the date when Greece's acceptance of the right of individual petition had taken effect. Greece's declaration under Article 25 (art. 25) of the Convention provides: "... the Government of Greece recognises, for the period beginning on 20 November 1985 and ending on 19 November 1988, the competence of the European Commission of Human Rights to receive petitions addressed to the Secretary General of the Council of Europe, [after 19 November 1985,] by any person, non-governmental organisation or group of individuals claiming, in relation to any act, decision, facts or events subsequent to this date, to be the victim of a violation of the rights set forth in the Convention and in the Additional Protocol (P1) ..." 40. The Commission agreed with the Government. In its view, it was not the fact that Ministerial Order no. 2544/84 of 30 March 1984 had determined civil rights of the applicants which posed a problem under the Convention but the possible lack of any judicial remedy in respect of the order that would have given them an opportunity to have their rights established in full compliance with Article 6 (art. 6). Referring to the Court's judgment in the case of Stamoulakatos v. Greece (26 October 1993, Series A no. 271, p. 14, para. 33), it considered that, as regards ascertaining whether the applicants had available to them a judicial remedy in accordance with Article 6 (art. 6), account had to be taken of the situation at the time when Ministerial Order no. 2544/84 was adopted, namely 30 March 1984 (see paragraph 7 above). 41. A minority of five members, however, considered - as had the Commission when examining the admissibility of the application - that the applicants' complaint was directed not at the relevant ministerial order as such but at the scope of the review carried out by the Supreme Administrative Court in its judgment of 13 March 1987 (see paragraph 9 above), that is to say after 20 November 1985. The Commission should therefore have dealt with the merits of the case. 42. In their memorial to the Court the applicants claimed that the Commission's reasoning conflicted with the Supreme Administrative Court's judgments of 13 March and 3 April 1987 (see paragraphs 9 and 18 above). Ministerial Order no. 2544/84 had to be considered in the light of subsequent orders whereby the interim board of directors had managed to gain control of Athinaïki Khartopiia (see paragraphs 13-16 above). Although Order no. 2544/84 had been made before the critical date of 19 November 1985, it had not become final in Greek law until after that date, on 13 March 1987, when the Supreme Administrative Court had refused their application for judicial review (see paragraph 9 above). Furthermore, in its judgment of 3 April 1987 the Supreme Administrative Court had, they said, upheld the validity of Order no. 153/86, the most detrimental decision in regard to them (see paragraph 13 above), in reliance, inter alia, on its earlier conclusions as to the lawfulness of Order no. 2544/84 (see paragraph 9 above). The two judgments of the Supreme Administrative Court had thereby made any effective judicial review of the merits of the applicants' complaints impossible and had thus deprived them of their right of access to a court. 43. The Court points out that in their application to the Commission the applicants made two separate complaints. One of them, based on a breach of Article 6 (art. 6) of the Convention, related to Ministerial Order no. 2544/84; the other, based on a breach of Article 1 of Protocol No. 1 (P1-1) and of Article 13 of the Convention taken together with Article 1 of Protocol No. 1 (art. 13+P1-1) (see paragraph 35 above), related to the subsequent orders whereby their company's capital was successively increased and reduced. In its admissibility decision of 20 May 1992, which defines the scope of the case, the Commission declared the second complaint inadmissible; it declared the first complaint admissible, expressing the view that it was in reality directed against the Supreme Administrative Court's judgment of 13 March 1987 (see paragraph above). 44. Within the bounds thus laid down, the Court has jurisdiction to consider the complaint referred to it and is not bound by the Commission's interpretation of it (see, mutatis mutandis, the Kamasinski v. Austria judgment of 19 December 1989, Series A no. 168, p. 30, para. 59). 45. The Court shares the opinion of the majority of the Commission. In their only complaint before the Court the applicants essentially criticised the impossibility in Greek law of having Ministerial Order no. 2544/84 reviewed by a judicial body with full jurisdiction. Even supposing that this impossibility amounted to a breach of Article (art. 6) of the Convention (the only provision (art. 6) on which this complaint is based), the applicants would have become victims of it on 30 March 1984, when the order in issue was published in the Official Gazette and thereby became binding. However, Greece had not by then recognised the right of individual petition (see paragraph 39 above). The facts possibly constituting a breach are therefore covered by the time limitation in Greece's declaration of acceptance. Despite its continuing effects, such a breach would only have been momentary in regard to the applicants under Article 6 (art. 6). Consequently, contrary to what they maintained, it was not the Supreme Administrative Court's judgment of 13 March 1987 that deprived them of their right of access to a court: it was Greece's legislation which did not afford them such a right at the time when Ministerial Order no. 2544/84 of 30 March 1984 was adopted. In duly carrying out its review of lawfulness, the Supreme Administrative Court merely highlighted the aforementioned impossibility. As to the Supreme Administrative Court's subsequent judgments, which the applicants also relied on, the Court will do no more than point out that they lie outside the compass of the case before it. In short, the objection is well-founded. 46. This conclusion makes it unnecessary to consider the Government's other submissions. FOR THESE REASONS, THE COURT UNANIMOUSLY Holds that it cannot deal with the merits of the case. Done in English and in French, and delivered at a public hearing in the Human Rights Building, Strasbourg, on 8 June 1995. Signed: Rolv RYSSDAL President Signed: Herbert PETZOLD Registrar BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII