CEDH · CASELAW;CLIN;ENG — 22 mai 2008

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Greece - 33977/06 Judgment 22.5.2008 [Section I] Article 1 of Protocol No. 1 Article 1 para. 1 of Protocol No. 1 Peaceful enjoyment of possessions Rate of default interest payable by State hospital lower than that payable by private individuals: violation   Facts : The applicant had brought proceedings in the Magistrates’ Court against the public hospital where he worked under a fixed-term private-law contract, to secure the payment of wages in arrears. He asked for default interest to be paid on the sums due, at the rates prescribed in the law governing interest on debts between private individuals or debts between private individuals and public corporations. In his case that rate would have been 27% for part of the period to be taken into account and 23% for the remainder. The court acknowledged the hospital’s obligation to pay the applicant the full amount claimed, plus interest at the legal rate of 6% per year, as provided for in Law no. 496/1974 on the debts of public corporations. The hospital and the applicant appealed. The court of first instance found that the distinction between debtors in the determination of default interest rates unduly favoured public corporations and served no public interest, as financial interest alone could not be considered as such an aim. It held that the application of Law no. 496/1974 violated the principle of equality of arms and violated Article 6 §   1 of the Convention and Article   1 of Protocol No.   1. It adjusted the amount of default interest due accordingly. The hospital appealed on points of law. The case was sent before the full Court of Cassation to rule on the conformity of Law no. 496/1974 with the Constitution and the Convention. The court ruled that applying lower default interest rates to the debts of public corporations than to those of private individuals did not infringe Article 6 §   1 of the Convention and Article   1 of Protocol No.   1. While admitting that Article   1 of Protocol No.   1 protected the creditor’s property, it held that the hospital’s assets also needed to be protected to enable it to provide a public service unimpeded. The Court of Cassation accordingly quashed the impugned judgment and remitted the case to the court of first instance for re-examination. Eight judges drafted dissenting opinions. Law : The courts had agreed that the hospital had a debt towards the applicant and that default interest should be paid on the sum owed. In so doing they had established that the applicant was owed default interest which was sufficiently well established to be claimed. The question was whether the difference between the default interest rates applicable to money owed by the State and to money owed by private individuals had caused the applicant to sustain a loss incompatible with Article   1 of Protocol No.   1. The hospital against which the applicant had taken action had not been acting as a public authority in the instant case, but as a private employer. The dispute had come about in the framework of a private-law contract, within which the hospital should have been able to assume the same duties towards its employees as any other private-sector employer, without relying on State privileges to alleviate its debts. However, relying on its public corporate status, the hospital managed to secure an interest rate almost four times lower than that applied to private individuals over the same period. The Court had therefore to consider this shortfall in the sum owed to the applicant, who complained about the difference in interest rates according to the identity of the debtor. It accepted that public entities might enjoy privileges and immunities in the course of their duties that helped them carry out their public service mission effectively. However, it considered that merely being part of the State structure was not sufficient in itself to justify the application of State privileges in all circumstances, but only where they were necessary for public services to function properly. The Court could not accept the Government’s argument that the difference in default interest rates had been essential in the instant case to the smooth functioning of the hospital. As the court of first instance and the judges of the Court of Cassation in their dissenting opinions rightly said, the mere financial interest of a public corporation could not be considered as a public or general interest and could not justify the violation of a creditor’s right to the peaceful enjoyment of his possessions caused by the impugned legislation. Furthermore, the Court noted that the Government had offered no other reasonable and objective justification for the distinction for the purposes of Article   1 of Protocol No.   1. That being so, the application of a default interest rate to the hospital, a public corporation, which was almost four times lower than the rate applied to private individuals over the same period had infringed the applicant’s right to the peaceful enjoyment of his possessions, enshrined in Article   1 of Protocol No.   1. Conclusion : violation (unanimously).   © Council of Europe/European Court of Human Rights This summary by the Registry does not bind the Court. Click here for the Case-Law Information Notes