The European Court of Human Rights (the ECtHR) has found that in delaying recognition of an arbitral award against it, the Republic of Albania breached its obligations under Article 6 (Right to a Fair Trial) of the European Convention on Human Rights (ECHR). Article 6(1) states that proceedings must be determined “within a reasonable time”. Iliria SRL (Iliria) spent 17 years and 9 months attempting to obtain legal recognition of an arbitral award in the Albanian domestic courts. After various proceedings in the Tirana Court of Appeal, the Albanian Supreme Court and the Albanian Constitutional Court, recognition of the arbitration award was denied on public policy grounds. Iliria successfully argued that Albania had breached its obligations under Article 6(1) by failing to resolve Iliria’s application within a reasonable time and was awarded compensation of €10,800.

While the ECtHR did find in favour of Iliria, it is questionable whether this route provides an effective remedy for delays and non-enforcement of awards by domestic courts. Iliria’s application to the ECtHR took 8 years to be determined and Iliria was awarded less than the sum claimed. Award creditors have also looked to claims under investment treaties to address difficulties in recognition and enforcement of awards. This route, where available, appears to provide a more effective remedy.

Background

On 3 September 1993, an arbitral tribunal issued an award ordering the Albanian Government to pay Iliria 48,239,000,000 Italian Lira (about 500,000,000 euros at the time) and 13% annual interest. On 11 March 1998, Iliria applied to the Tirana Court of Appeal for recognition of the arbitral award. The Tirana Court of Appeal approved the recognition request in relation to the principal amount on 2 April 1998 and in relation to the interest on 5 May 2000.

The Albanian Council of Ministers applied to appeal the recognition decision out of time on the grounds that the decision was not served on the Council of Ministers. The application was granted on 26 December 2003 and the Council of Ministers lodged an appeal on certain points of law.

The case was twice referred to the Supreme Court which quashed the decision of the lower courts on both occasions and remitted the case for re-examination, on 10 February 2005 and 9 May 2007. The Supreme Court found against Iliria on 12 April 2012. The Albanian Constitutional Court quashed the decision and remitted the case to the Supreme Court. The Supreme Court ruled against Iliria again on 4 October 2013.

Iliria again appealed to the Albanian Constitutional Court, arguing (amongst other things) that the proceedings had been unduly delayed. The Constitutional Court rejected Iliria’s argument and dismissed its case on 22 December 2015, over 17 years after the original application. Iliria applied to the ECtHR under Article 6(1) of the Convention alleging that the length of the proceedings concerning the recognition of the Arbitral Award was unreasonable. Iliria did not challenge the outcome of the enforcement proceedings.

The European Court of Human Rights decision

As a threshold point, the ECtHR determined that Iliria’s claim was admissible despite the fact the Constitutional Court had rejected its application for recognition of the award. The ECtHR held that irrespective of the outcome, Iliria could claim to be a victim of unreasonably long proceedings.

The ECtHR determined that the following factors must be considered when assessing the reasonableness of the length of proceedings under Article 6(1) of the ECHR:

  1. the circumstances of the case;
  2. the complexity of the case;
  3. the conduct of the applicants; and
  4. the relevant authorities and what was at stake for the applicants in the dispute.

Relevant period of delay

The ECtHR rejected Albania’s assertion that there had not been an unreasonable delay.

The Constitutional Court had determined that the proceedings could be split into two relevant periods: 1) spanning from 31 March 2009 to 12 April 2012, which Iliria did not complain about, and 2) spanning from 10 July 2013 to 4 October 2013, which was held not to have been subject to undue delays.

The ECtHR disagreed with the Constitutional Court’s distinction and found that the relevant period started when Iliria lodged an application for recognition of the arbitral award in the Albanian domestic courts (11 March 1998) and ended when the Constitutional Court finally dismissed Iliria’s claim (22 December 2015) ending the proceedings. The relevant period was therefore 17 years and 9 months.

Conduct of the applicant

The ECtHR rejected the Albanian Government’s argument that lliria was to blame for certain delays. The ECtHR noted the following delays:

  • the delay between the 1998 initial recognition decision and the 2003 Tirana Court of Appeal decision allowing the Council of Ministers to appeal out of time, which it found was not attributable to Iliria;
  • the delays due to the case being remitted for re-examination twice by the Supreme Court and once by the Constitutional Court; and
  • lengthy delays in the proceedings in which the Albanian courts did not hold any hearings nor make any procedural orders.

The ECtHR also noted that while it was not appropriate to analyse the decision-making of domestic courts, serial remittals within the same set of proceedings (as in this case) may indicate a serious deficiency in the judicial system.

Complexity of the case

The ECtHR also rejected the argument that the delays were due to the complexity of the case. Even if the process of enforcing this arbitral award entailed some complexity, the ECtHR decided that this cannot justify legal proceedings lasting nearly 18 years.

Outcome

Iliria did not seek pecuniary damages but sought 100,000 euros in respect of non-pecuniary damages in respect of the delays and 21,000 euros (supported by invoices) in respect of the costs and expenses incurred in the domestic proceedings. The ECtHR ordered 10,800 euros to be paid to Iliria, to compensate for both non-pecuniary damage (4,800 euros) and costs and expenses (6,000 euros).

Comment

Award creditors are increasingly employing different strategies to monetise awards in a timely and effective way. Enforcement should, of course, be a consideration from the outset of a transaction but, particularly where the award debtor is a state or state-related entity, challenges may nonetheless ensue.

The Iliria decision of the ECtHR comes after the 2022 decision in BTS Holding, as v. Slovakia, in which the ECtHR found that Slovakia violated BTS Holding’s rights when the Slovak courts arbitrarily refused to enforce an arbitral award against the Slovak National Property Fund. The ECtHR found that an arbitral award constitutes a “possession” under Article 1 of Protocol 1 of the ECHR, and failure to enforce an arbitral award could be an unjustified and unlawful interference with possessions.

Both the BTS and Iliria decisions show that the ECHR may offer award creditors a remedy in relation to difficulties enforcing awards in the domestic courts of ECHR State parties. However, there are still open questions about the viability of this avenue. Notably, the level of compensation may not compensate for the award or reimburse claimants for the costs of bringing such claims. The ECtHR process is not a short one.

The decisions in Saipem S.p.A v The People’s Republic of Bangladesh and White Industries v India  demonstrate the willingness of award creditors to look to international law remedies to compensate for extensive judicial delays and failures to enforce awards in domestic courts. In these cases, the award debtor brought a claim under an international investment treaty – in Saipem the claim arose out of the actions of the Bangladeshi court in connection with a commercial arbitration and its non-enforcement of the award and in White (covered in our blog post here) the claim arose out of judicial delays by India that left the claimant unable to enforce an award for over nine years. In each of these cases, the claimant was awarded, among other things, damages in respect of the amount due under the award. Where available, international investment treaties may offer a better prospect of recovery.

For more information, please contact Hannah Ambrose, partner, Rosalind Axbey, Senior Associate, or your usual Herbert Smith Freehills contact.

Hannah Ambrose
Hannah Ambrose
Partner
+44 20 7466 7585
Rosalind Axbey
Rosalind Axbey
Senior Associate
+44 2074 662 874

The authors would like to thank Wajih Jaroudi for his contribution to this blog post.