Stran Greek Refineries and Stratis Andreadis v. Greece

Facts:

Back in 1972 when Greece was governed under a military Junta, Mr. Andreadis proceeded to construct a crude oil refinery in the Megara region near Athens. The contract with Greece was dated on July 22, 1972, was ratified and published in the official gazette by July 26 that same year.

Stran Greek Refineries would perform the project; a company soon to be established. The total cost for it was 76 million US Dollars, all rights and obligations were to be transferred upon the incorporation of the company.

One of the obligations mentioned in the contract was that the State was to purchase a plot of land for the purpose of the refinery. The deadline for it was the end of year 1972. Through the issuance of Royal Decree no. 450, the State has authorized Mr. Andreadis to import 58 Million US Dollars to finance the project.

Issues however occurred as the State was not able to purchase the plot of land. This was expressed through a press conference by the end of February 1974. The failed purchase was due to the government’s (followed by the Ministers of Industry and Agriculture) decision to return land that had already been expropriated. The following day, the Megara police ordered that the work in the plot of land should cease. Stran nevertheless protested and issued an extra judicial summons inviting the State to ratify the purchase of the land in question. The State still refused to revoke the Megara police order.

After Greece’s democracy was restored, the contract and decree no. 450 was reviewed since it was considered harmful to the national economy. The State intended to terminate the contract by relying on law no. 141/1975 on “termination of preferential contracts concluded under the military regime”. This particular law possessed superior force.

By Mid November 1975, the Applicants were called upon by the Minister of Coordination to either revise or terminate the contract; however it followed with no response. Prior to the contract termination in October 14, 1977, Stran had demanded expenditures in connection with the project since it had taken out loans.

The dispute rose on November 10, 1978, in which Stran brought an action in the Athens Court of first instance, demanding a claim of a certain sum. Stran argued that the State had breached its obligations; first, by prohibiting the ongoing work in the refinery construction and second, the failure to purchase the land required. Stran also sought for the return cheque of 240 million drachmas as security for the proper performance of the contract; and claimed reimbursement of the commission and the fiscal stamp fee.

The State responded by challenging court’s jurisdiction and implied that the dispute should be brought to arbitration as mentioned in the contract. The court however rejected the challenge since the arbitration clause was void due to the contract termination.

The State then made its next move on June 12, 1980, by appointing an arbitrator in hopes for the compensation declared by the Athens Court of First Instance to be unfounded. Stran, however argued (after appointing their own arbitrator) that the arbitration court lacked jurisdiction and requested the arbitration to wait until the proceedings in Athen’s court of first instance ended.

The arbitration court however found that it had jurisdiction to the dispute since the total failure to perform the contract was also subject to arbitration. Through evidence set out in Athens court of first instance, the arbitration court found that the responsibility of the loss sustained by Stran was shared 30% and 70% to Stran and the State respectively. Stran was burdened part of the loss due to working on the expropriated land without the necessary permits. Regarding the cheque, the arbitration court is of opinion that the cheque lodged as security was retained unlawfully by the State.

This is where it gets complicated: after the arbitration proceedings and award of February 27, 1984; the State then asked the Athens Court of First Instance to set aside the arbitration award. The State argued that the arbitration court lacked jurisdiction, since the limit of jurisdiction concerns the performance, interpretation, rights, and duties deriving from the contract. Therefore, the arbitration court lacked jurisdiction was confirmed by the fact that Stran’s claims against it and had become statute-barred following the termination of the contract.

The Athen’s court of first instance gave judgment on April 21, 1985. They dismissed the State’s argument because the arbitration clause in the contract continued to produce the effects to disputes, which had risen during the validity period of the contract.

On December 19, 1986, Stran withdrew its first action in the Athens court of first instance, but still sought to pursue the cheque lodged as security. The State opposed this discontinuance since it maintained that the latter action would have resulted unfavorable to Stran and that the State had a legitimate interest in seeking a final decision.

Through the Athens court of appeal, they upheld the judgment of April 21, 1985 in which they stated that even though the contract was terminated, the arbitration clause in relation to the contract prevails.

On December 15, 1986, the State appealed to the court of cassation. The hearing was initially meant to be on May 4, 1987 however was postponed to June 1, 1987 due to law 1701/1987 which was issued on May 22, 1987. It entered into force upon its publication in the official gazette of May 25, 1982.

This new law dealt with renegotiation on businesses involving extraction of oil and natural gas in an area of the sea of Thrace. Article 12 of law 1701/1987 however was unfavorable to Stran, since in short it declares that arbitration tribunal has no jurisdiction and that awards shall not be enforceable on claims against the Greek State on contracts that were terminated between April 21, 1967 and July 24, 1974. Lastly, any court proceedings at whatever level pending at time of the enactment of this law are declared void.

The court of cassation took view that article 12 (paragraph 2) was not unconstitutional since it deprived the effects of any arbitration awards made after the termination of contracts. The court of cassation revoked the court of appeal’s judgment and declared the arbitration award of February 27, 1984 to be void.

After the decision and revocation made by the Court of Cassation, Stran Greek refineries and Mr. Stratis Andreadis (the Applicant) took the next step to the commission (European Court of Human Rights) on November 20, 1987. Their arguments were based on a breach of article 6 of the convention for having a non-fair trial within a reasonable time. They also argued that their right of property had been infringed due to article 12 of Law no. 1701/ 1987.

In their submission, the State argued that the Applicant (Stran) had failed to exhaust domestic remedies. If the Athens court of first instance were to dismiss the application filed by the Applicant on December 19, 1986, the Applicant  would then be in a position to plead the incompatibility of article 12 paragraph 3 of law no. 1761/1987, its constitutionality of which had not been determined by the plenary court of cassation. The government also argued that the Applicant should have shown signs of protest against the termination of contract.

The court finds that effective remedies which have not been taken by the Applicant should be mentioned in relation to exhaustion of domestic remedies. The court also notes the arbitration proceeding was initiated by the government rather than taking it through ordinary courts and the Applicant was able to claim damages through the arbitration court. Concerning fair trial, the court notes that in order to be considered as fair trial, each party must be afforded a reasonable opportunity to present his case that does not put him in a disadvantage.

The Applicant then argued that they have been deprived of their property rights. The State responded otherwise since no. 13910/79 and the arbitration award could not be equated. The court however is of opinion that the Applicant’s right of property as guaranteed was interfered since it was impossible for the Applicants to secure enforcement of an arbitration award. The court also concluded that a State does have sovereign power to amend or terminate a contract with private individuals, provided it pays compensation.

The court unanimously declared as follows: (i) Dismisses the government’s preliminary objections; (ii) Holds that there has been a breach to a fair trial; (iii) Holds that there is no breach on the length of proceedings; (iv) Holds that the State must pay the Applicants within three months and (v) Dismisses the remainder of the claim for just satisfaction.

This summary is made based on http://www.menschenrechte.ac.at/orig/95_1/Stran_Greek.pdf

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