The delay or even the non-enforcement of judgments seeking the payment of delayed or unpaid salary, violated the right to property and the right to a fair trial.
Kuzhelev and others v. Russia 15.10.2019 (no. 64098/09, 64891/09, 65418/09, 67406/09, 67697/09, 66035/09 and 1504/10)
Judgment and salary.
The applicants were employed by a State shipbuilding company which was transferred to another equivalent. The transfer was canceled, the newly formed company was put into liquidation and the employees – workers, were claiming their unpaid salaries, dismissal compensation and re-employment by the original company. They were solemnly vindicated, but the judgments were not executed or executed with delay.
The Court recalls that a delay of less than one year in the payment of a court order is in principle compatible with the Convention, but any longer delay is prima facie unreasonable. It has therefore decided that in the present case, the total delay of one year and ten months is incompatible with the requirements of the convention, in particular because of the nature of the requirements – employees’ paid salary and the inability of the authorities to take the necessary measures to compliance with the final decisions amounted to a disproportionate interference with the peaceful enjoyment of the applicants’ rights and violate the Article 6 par. 1 of the Convention and Article 1 of the First Protocol.
Article 1 of the First Additional Protocol
The applicants, Viktor Kuzhelev, Yelena Pavlova, Valeriy Smirnov, Galina Kudryashova, Vera Petrova,
Natalya Lebedeva, and Valeriy Tomilin, are Russian nationals who were born in 1946, 1953, 1940,
1954, 1947, 1957, and 1946 respectively and live in St Petersburg (Russia).
The case concerned the lack of enforcement of court judgments in their favour on unpaid salary and
other work-related payments.
The applicants worked for a shipbuilding and ship repair company in St Petersburg called the
Kronstadt Marine Plant, a State Unitary Enterprise (“the FGUP”) of the Ministry of Defence. Owing to
financial difficulties the company was placed under external administration in March 2005. A
decision was subsequently taken to transfer the company’s assets to a new company called OAO
Kronstadt Marine Plant Awarded the Order of Lenin (“the OAO”) within the substitution of assets’
procedure, which took place in February 2007. FGUP employees were also transferred to the OAO.
The courts subsequently declared the transfer of the assets and the creation of the new company
invalid and the assets went back to the FGUP. The OAO in turn dismissed the applicants in August
The applicants brought proceedings against both companies for unpaid or delayed salary and to be
reinstated by the FGUP. They were wholly or partially successful in those claims and received
judgments in their favour. Judgments against the OAO were never enforced while those against the
FGUP were enforced with a delay.
Relying on Article 6 § 1 (right to a fair hearing) of the European Convention on Human Rights and
Article 1 of Protocol No. 1 (protection of property) to the Convention the applicants complained
about the non-enforcement of judgments in their favour against the FGUP for unpaid wages in 2008
and for damages owing to a delay in the payment of severance packages.
They relied on the same provisions to complain about the lack of enforcement of judgments against
the OAO on unpaid salaries for June to July 2008, as subsequently index-linked.
THE DECISION OF THE COURT…
The applicants complained about the non-enforcement of the decisions against the FGUP. They referred to Article 6 § 1 of the Convention and Article 1 of the First Additional Protocol.
he Court has no reason to doubt that the core business of the company – one of the leading Russian shipyards that maintained and repaired military vessels and weapons, as well as ships built for Russia, is a public purpose and that the FGUP is of strategic importance to the Russian navy. It functioned in a highly regulated state defense area and its position, thanks to its functions and objectives and specific tasks, under the strict control of the authorities, namely the Ministry of Defense. Consequently, the assets disposed of in the business are treated in accordance with domestic law, as evidenced, inter alia, by the FGUP rules.
In the Court’s view, these facts are sufficient to establish that the public control was actually exercised by the authorities over the debtor’s reserve at the time of the events, that is, during the non-enforcement period.
The Court concludes that the FGUP did not have sufficient institutional and operational independence from the State at the time of the events and rejects the Government’s objection. The State must therefore be held liable under the Convention for the judgment of the debtors at the discretion of the applicants.
As to the complaint concerning the delayed execution of domestic benefits awarded in the second set of proceedings against FGUP for delay in payment of dismissal compensation for four of the applicants, the Court notes that benefits range from 3 to 29 euros and imposed with a maximum delay of one year and four months. In view of the secondary nature of the benefits, the Court concludes that the applicants have not suffered significant damage as a result of the authorities’ failure to enforce the benefits in a timely manner. The Court also notes that it has already dealt with the issue of non-enforcement of decisions against consolidated undertakings on several occasions and concludes that respect for human rights, as set out in the Convention and its Protocols, does not require an examination of the substance of the present complaint.
Conclusion on other judgments against the FGUP
The Court notes that the decisions taken in favor of the applicants were executed with a delay of one year and ten months.
The Court recalls that a delay of less than one year in the payment of a court order is in principle compatible with the Convention, whilst any delay is prima facie unreasonable. While the complex insolvency procedure involving many creditors may objectively justify certain limited delays in enforcement, the overall delay is, in the Court’s view, incompatible with the contract’s requirements, in particular due to the nature of the claims – accrued earnings. transfer of the company’s assets to the UAE and back to FGUP. By their inability to take the measures necessary to comply with the final judgments in the present case, the authorities failed to apply the relevant provisions of Article 6 § 1 and also prevented the applicants from receiving the money in which they were justified in due time. it amounted to disproportionate interference with their peaceful enjoyment.
There has accordingly been a breach of Article 6 (1) of the Convention and Article 1 of Protocol No. 1 to the Convention, for failure to comply with the final and binding decisions against FGUP in favor of the applicants in the seven cases.
The applicants complained about the non-enforcement of the salary judgments against the OAO from June to July 2008. They relied on Article 6 § 1 of the Convention and Article 1 of Protocol No. 1 of the Convention.
The Court notes at the outset that the insolvency proceedings in respect of the OAO were terminated on 29 March 2012 and that the claims which were not satisfied during the liquidation process were considered settled (see paragraph 44 above). Accordingly, it appears that, contrary to the Government’s initial submissions, the debts could no longer be recovered from the OAO.
The Court further notes the Government’s argument that the applicants failed to request to include their claims in the list of the creditors’ claims. However, it transpires from both the applicants’ inquiry lodged with the prosecutor’s office and the prosecutor’s respective reply that their claims were included in the second priority line to be repaid. Accordingly, this argument is to be rejected.
The Court notes at the outset that the OAO was formed in a specific procedure of replacing (substitution of) the debtor’s assets on the basis of the debtor’s property. Even though the decision to replace the assets was taken within the external administration procedure, it is crucial that the State, as the owner of the property of the debtor unitary enterprise, was entitled to decide on replacing (substituting) the debtor’s assets (see paragraphs 13 and 71, as well as the Court’s analysis in paragraph 97 above).
In accordance with domestic law, the debtor FGUP was the sole founder of the joint-stock company and the entirety of the OAO’s shares were to be initially transferred to the FGUP . Nothing in the parties’ submissions indicates that the shares were subsequently sold on the open market or otherwise prior to the decision to annul the OAO’s creation, and it appears accordingly that the substitution of assets procedure has not been completed. Furthermore, no information on the OAO’s pursuit of independent entrepreneurial activity at the material time was submitted by the parties. Indeed, as early as in April 2008, that is, several months before the court orders in the applicants’ favour, the domestic court in the final instance had declared invalid the decision to create the OAO pursuant to the State authorities’ court action. The Court can only discern from the documents submitted by the parties that the OAO was required to return all assets to the FGUP and was proceeding with the transfer at the material time, having “discontinued production activities” .
However, while the assets were returned under the FGUP’s economic control – and, accordingly, State ownership – without delay, the debt accumulated in respect of the unpaid salaries remained in the OAO created as a result of an invalid transaction, stripped of all property as a result of the order for the return of the assets and awaiting inevitable liquidation at the material time.
In view of the above factors taken cumulatively, the Court considers that at least by the dates of the court orders in the applicants’ favour and during the ensuing period until the company’s liquidation the OAO’s assets and activities were, as a matter of fact, controlled and managed by the State to a decisive extent. Therefore, the OAO did not enjoy sufficient institutional and operational independence from the State to absolve the latter from its responsibility under the Convention for the OAO’s debts in respect of the salary arrears in the applicants’ favour .
The Court therefore concludes that the applicants’ complaints are compatible ratione personae with the provisions of the Convention and dismisses the Government’s objection in this regard.
Accordingly, the Court finds that there have been violations of Article 6 § 1 of the Convention and Article 1 of the First Additional Protocol concerning Mr Kuzhelev, Mrs Kudryashova, Mrs Petrova, Mrs Lebedeva and Mr Tomilin, having regard to the non-enforcement of the judgments and the decisions in favor of the applicants in respect of wages for the months June to July 2008 against the CSE, as referred to in column 3 of Appendix II. Furthermore, it finds that there has been a violation of Article 6 § 1 of the Convention and Article 1 of the First Additional Protocol to Ms Petrova, Ms Lebedeva and Ms Tomilin, for failure to comply with the OAO-related benchmark benefits listed in column 5 of Appendix II.
Violation of Article 6 § 1 – in respect of all applications, on account of the delayed enforcement of the judgments against the FGUP for unpaid wages in 2008
Violation of Article 1 of Protocol No. 1 – in respect of all applications, on account of the delayed enforcement of the judgments against the FGUP for unpaid wages in 2008
Violation of Article 6 § 1 –in respect of Mr Kuzhelev, Ms Lebedeva, Ms Petrova, Ms Pavlova, Ms Kudryashova and Mr Tomilin, on account of the non-enforcement of the court orders in the
applicant’s favour in respect of salaries for June to July 2008 against the OAO
Violation of Article 1 of Protocol No. 1 – in respect of Mr Kuzhelev, Ms Lebedeva, Ms Petrova, Ms Pavlova, Ms Kudryashova and Mr Tomilin, on account of the non-enforcement of the court orders in the applicant’s favour in respect of salaries for June to July 2008 against the OAO
Violation of Article 6 § 1 – in respect of Ms Petrova, Ms Lebedeva and Mr Tomilin, concerning the index-linking proceedings against the OAO
Violation of Article 1 of Protocol No. 1 – in respect of Ms Petrova, Ms Lebedeva and Mr Tomilin, concerning the index-linking proceedings against the OAO
Just satisfaction: For details of the amounts awarded to the applicants in respect of pecuniary damage, see the tables appended to the judgment. The Court further held that Russia was to pay
2,000 euros (EUR) to each applicant for non-pecuniary damage and EUR 21 to Mr Kuzhelev for costs and expenses.(echrcaselaw.com).