In a judgment of 11 May 2021 (Stetsovv. Ukraine; final version: 11 August 2021), the European Court of Human Rights (ECtHR) ruled on whether commercial claims may be enforced by restraining the debtor from leaving the country which ordered the payment of the claim. It found that, in principle, enforcing commercial claims through such restrictions was compliant with the Convention for the Protection of Human Rights and Fundamental Freedoms (the Convention), but that the restriction in the case at hand was disproportionate and thus justified the finding that Ukraine had violated the Convention.
Background
Mr Stetsov, a Ukrainian national and resident, granted a personal guarantee to a bank that a company would reimburse a loan of USD 1.5 million. After the company defaulted, the bank sued Stetsov for payment in Ukrainian courts. The Court of Appeal of Kharkiv and a Ukrainian superior court eventually ordered Stetsov to pay about USD 950,000 and additional sums in hryvnias (Ukrainian currency) in judgments rendered in 2014.
As Stetsov would not pay, enforcement officers applied to courts in Kyiv for an order prohibiting Setsov from leaving Ukraine until full payment of the claim. The Kyiv Court of Appeal granted the remedy at the end of 2014, on the grounds that Stetsov knew about the judgment, and had not made any effort to start paying the judgment in four months.
Stetsov applied to replace the measure by establishing a payment of 20% of his monthly salary. The alternate remedy was established, but enforcement officers refused to lift the restriction until full payment of the judgment.
Article 1 – Prohibition of imprisonment for debt No one shall be deprived of his liberty merely on the ground of inability to fulfil a contractual obligation.
Article 2 – Freedom of movement 1 Everyone lawfully within the territory of a State shall, within that territory, have the right to liberty of movement and freedom to choose his residence. 2 Everyone shall be free to leave any country, including his own. 3 No restrictions shall be placed on the exercise of these rights other than such as are in accordance with law and are necessary in a democratic society in the interests of national security or public safety, for the maintenance of ordre public, for the prevention of crime, for the protection of health or morals, or for the protection of the rights and freedoms of others. 4 The rights set forth in paragraph 1 may also be subject, in particular areas, to restrictions imposed in accordance with law and justified by the public interest in a democratic society.
Judgment
Both parties agreed that Mr Stetsov suffered a restriction to his freedom of movement. They also agreed that such restriction was provided by law (a Ukrainian statute, the legal basis has changed since then) and served a legitimate goal, which was “the protection of the rights of others”. The ECtHR agreed.
The only debate between the parties was thus whether the restriction was proportionate. The ECtHR ruled that after a short initial period, the restriction could only be maintained after finding that the restriction could serve its purpose, i.e. ensuring the payment of the debt.
In this case, the ECtHR found that the decision of Ukrainian enforcement authorities was that the restriction could only be lifted after full payment of the debt. The ECtHR concluded that the restriction could thus not be reviewed to assess whether it was still justified, which made it a disproportionate restriction to the freedom of movement of the applicant.
The applicant sought EUR 10,000 in compensation for its ‘prejudice moral’. The ECtHR generously awarded him EUR 1,000.
Assessment
Some will find it disappointing that the ECtHR did not condemn more vigorously the use of restrictions to the freedom of movement for the purpose of enforcing civil and commercial claims (French human rights scholar Margenaud has made it clear in a short commentary he has written on this case). It seems, however, that the comparison between Articles 1 and 2 of the protocol makes it clear that legislative intent was not to ban restrictions from leaving a territory, but rather to give significant discretion to the Contracting States.
In contrast, imprisonment for the purpose of paying a debt seems to be banned in principle, irrespective of the proportionality of such remedy. An interesting question is whether the prohibition would extend to imprisonment for failing to comply with an injunction aiming at securing the payment of a debt, such as a Cyprus or Irish Mareva injunction.
Background
Mr Stetsov, a Ukrainian national and resident, granted a personal guarantee to a bank that a company would reimburse a loan of USD 1.5 million. After the company defaulted, the bank sued Stetsov for payment in Ukrainian courts. The Court of Appeal of Kharkiv and a Ukrainian superior court eventually ordered Stetsov to pay about USD 950,000 and additional sums in hryvnias (Ukrainian currency) in judgments rendered in 2014.
As Stetsov would not pay, enforcement officers applied to courts in Kyiv for an order prohibiting Setsov from leaving Ukraine until full payment of the claim. The Kyiv Court of Appeal granted the remedy at the end of 2014, on the grounds that Stetsov knew about the judgment, and had not made any effort to start paying the judgment in four months.
Stetsov applied to replace the measure by establishing a payment of 20% of his monthly salary. The alternate remedy was established, but enforcement officers refused to lift the restriction until full payment of the judgment.
Stetsov sued Ukraine before the ECtHR.
Protocol 4
Ukraine has ratified Protocol No. 4 to the Convention securing certain rights and freedoms other than those already included in the Convention and in the first Protocol thereto, which provides
Article 1 – Prohibition of imprisonment for debt
No one shall be deprived of his liberty merely on the ground of inability to fulfil a contractual obligation.
Article 2 – Freedom of movement
1 Everyone lawfully within the territory of a State shall, within that territory, have the right to liberty of movement and freedom to choose his residence.
2 Everyone shall be free to leave any country, including his own.
3 No restrictions shall be placed on the exercise of these rights other than such as are in accordance with law and are necessary in a democratic society in the interests of national security or public safety, for the maintenance of ordre public, for the prevention of crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.
4 The rights set forth in paragraph 1 may also be subject, in particular areas, to restrictions imposed in accordance with law and justified by the public interest in a democratic society.
Judgment
Both parties agreed that Mr Stetsov suffered a restriction to his freedom of movement. They also agreed that such restriction was provided by law (a Ukrainian statute, the legal basis has changed since then) and served a legitimate goal, which was “the protection of the rights of others”. The ECtHR agreed.
The only debate between the parties was thus whether the restriction was proportionate. The ECtHR ruled that after a short initial period, the restriction could only be maintained after finding that the restriction could serve its purpose, i.e. ensuring the payment of the debt.
In this case, the ECtHR found that the decision of Ukrainian enforcement authorities was that the restriction could only be lifted after full payment of the debt. The ECtHR concluded that the restriction could thus not be reviewed to assess whether it was still justified, which made it a disproportionate restriction to the freedom of movement of the applicant.
The applicant sought EUR 10,000 in compensation for its ‘prejudice moral’. The ECtHR generously awarded him EUR 1,000.
Assessment
Some will find it disappointing that the ECtHR did not condemn more vigorously the use of restrictions to the freedom of movement for the purpose of enforcing civil and commercial claims (French human rights scholar Margenaud has made it clear in a short commentary he has written on this case). It seems, however, that the comparison between Articles 1 and 2 of the protocol makes it clear that legislative intent was not to ban restrictions from leaving a territory, but rather to give significant discretion to the Contracting States.
In contrast, imprisonment for the purpose of paying a debt seems to be banned in principle, irrespective of the proportionality of such remedy. An interesting question is whether the prohibition would extend to imprisonment for failing to comply with an injunction aiming at securing the payment of a debt, such as a Cyprus or Irish Mareva injunction.
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