Stebnitskiy and Komfort vs. Ukraine (Application no. 10687/02).

In this case, the ECHR took the following stance: the recognition of a decision as illegal, on the basis of which the person’s property right was restricted, testifies to the illegality of such restrictions throughout the validity of the decision.

The circumstances of the case:

In September 2003, the court declared the applicant company bankrupt for non-payment of taxes and assign a liquidator. The case was considered without noticing the company.

After the information about the case was found out, the company appealed the decision. Nevertheless, the applicant managed to have the case reconsidered on the basis of newly discovered circumstances. In December 2005, the decision to declare the company bankrupt was overturned as illegal, and the bankruptcy proceedings were terminated.

Thus, for more than 2 years the applicant company was in bankruptcy status and could not dispose of its property. The company claimed that as a result of the illegal bankruptcy decree its economic activity became impossible.

Legal assessment of the ECHR:         

The ECHR found a violation of Art. 1 of the First Protocol to the Convention guaranteeing the right to peaceful enjoyment of possessions, on the following grounds:

  1. The court noted that the first and most important requirement of Art. 1 of the First Protocol is that any interference by a public authority with the right to peaceful enjoyment of possessions must be lawful.
  2. The ECHR also noted that after the enterprise was declared bankrupt, its economic activity ceased, it could not manage its property, as such a function passed to the liquidator. The ECHR emphasized that such restrictions were applied on the basis of a bankruptcy decree, which the national court had declared illegal and revoked.
  3. Therefore, the restrictions imposed on the applicant company’s economic activity between September 2003 and December 2005 cannot be considered lawful.

Conclusions: any interference with the rights of a person, which is carried out on the basis of decisions that are subsequently declared illegal, is illegal. Such restrictions on rights and freedoms are illegal throughout the validity of the illegal decision.

This legal assessment can be applied in cases related to the restriction of property rights. Thus, it is illegal to restrict a person’s rights during the period of sanctions if the application of sanctions is found to be unlawful by the Supreme Court. It would also be unlawful to deprive a person of the opportunity to dispose of their property as a result of its arrest in criminal proceedings if the arrest is lifted as unjustified.

Author: Victoria Khilinichenko, lawyer