Michael.1
Insolvency and related law and policy, and more

Michael Murray is an Australian author and commentator on corporate and personal insolvency law and related issues, in Australia and internationally. He has a strong law and policy background, is independent of any connections, and his views are his own. He gives no legal advice. 

‘Your place or mine, and for how long?’ – a lack of judicial independence

We might have noticed that courts in Australia and indeed in most comparable countries are usually housed in their own buildings, one reason being the need to keep the administration of justice separate and independent from any commercial or government environment and arrangements – both in reality and in perception.

The decisions of trial and appeal insolvency courts in the Ukraine were successfully challenged because they were housed in the premises owned by a litigant before the court which had offered those premises to the courts in order to secure the courts’ cooperation in accelerating the examination of the litigant company’s cases.

This created what we would call a perceived lack of judicial independence. This and the length of time the courts took to resolve the insolvency proceedings were found by the European Court of Human Rights to breach Art 6 of the European Convention on Human Rights, guaranteeing a right to a fair hearing within a reasonable time.

Cosmos Maritime and Blasco

Some background was that Cosmos Maritime had brought long contested insolvency proceedings against the Ukrainian State-owned Black Sea Shipping Company (“Blasco”). Blasco had been one of the largest shipping companies in the world until the late 1980s when it ran into legal and financial difficulties.

In 2003 Cosmos applied to the Ukrainian Commercial Court seeking recognition of a debt of over US$2 million owed to it by Blasco for services provided to its vessels. Those claims were recognised in 2012. However, that decision was quashed by the Court of Appeal in 2013.

Blasco offers its premises to the Courts

The Courts were housed in a building in Odessa that had been transferred from Blasco for the Courts’ use in 2005, while Cosmo’s insolvency proceedings were pending.

A newspaper article reported Blasco’s CEO saying, at a press conference, that the company was transferring the building to the Courts in order to secure the courts’ cooperation in accelerating the examination of Blasco’s cases.

In 2013, the Ukrainian judge presiding over the insolvency proceedings dismissed a request for her withdrawal from the case, ruling that she was not affected by the transfer as she had only taken over the case much later, in 2011.

On Cosmos’ appeal, the European Court of Human Rights said that even appearances alone may be enough to allow a finding of lack of impartiality:

“justice must not only be done, it must also be seen to be done”. What is “at stake is the confidence which the courts in a democratic society must inspire in the public”.

Despite the absence of reasons to doubt the impartiality of the individual judges concerned, Cosmos’ perception that the Ukrainian Courts dealing with its case lacked impartiality could only be seen, by an objective observer, as having some merit.

Long proceedings

The insolvency proceedings had been ongoing for fifteen years. They were said to be complex, with many parties, and with the documents involved “running to 120 volumes”

The European Court emphasised that the reasonableness of the length of proceedings must be assessed in the light of their complexity, the conduct of the parties and what was at stake for the applicants.

Having regard to these criteria, the Court considered that the length of the proceedings was excessive and failed to meet the “reasonable time” requirement

Damages?

Cosmo sought US$3.9 million as pecuniary damage, and US$65,000 for non-pecuniary damage.

The European Court saw no causal link between the violations found and the pecuniary damage alleged and it rejected this claim; but it awarded Cosmo EUR 10,000 in respect of non-pecuniary damage.

Cosmos Maritime Trading and Shipping Agency v Ukraine [2019] ECHR 493 (27 June 2019).

 

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