European court orders Armenian government to pay €3,600 to German company

The European Court of Human Rights (ECHR) has satisfied the Scholz AG company’s claim against the Republic of Armenia, urging the government to pay a fine in the amount of € 3,600.

The applicant which, according to the official case records, has a registered office in Essingen, Germany, filed the appeal on March 19, 2010, insisting on a violation of Article 34 of the European Convention on Human Rights (Jurisdiction of the Court).  

From the 1990s onwards the applicant company regularly purchased scrap metal from A. Safaryan and Associates LLC, a limited liability company registered in Armenia. On 8 February 1999, 10 April 2000 and 2 April 2003 Scholz AG  and KBKS (another German company owned by the applicant company) concluded three contracts with the respondent, under which KBKS and the applicant company were to make advance payments to the respondent in return for scrap metal.

On 8 April 2002 KBKS and the applicant company concluded an assignment agreement whereby KBKS transferred all its contractual rights, including those towards the LLC, to the applicant company. On 8 November 2002 the applicant company provided the LLC with a loan in the amount of 100,000 euros (EUR), which was due to be repaid by 31 January 2003. The purpose of the loan was to assist Associates LLC in paying off a bank loan, but it was not aparently paid back to the applicant company.

It further appeared that the respondent failed to meet its contractual obligations vis-à-vis the applicant company, in that it supplied less scrap metal than the advance payments that it had already received.

On 28 October 2005, representatives of the applicant company and the Associates LLC made a calculation of their liabilities as at that date and it was revealed that the respondent owed 1,213,824 US dollars (USD) to the applicant company. As a result of negotiations, the applicant company agreed to provide debt relief in the amount of USD 613,824 on the condition that the Associates LLC paid off the rest of the debt, namely USD 600,000, in accordance with a debt repayment schedule which was set up in a separate agreement signed on the same day by the directors of both companies.

According to this agreement, the respondent undertook to repay the debt in five instalments, with the first payment due by 15 December 2005. If the Armenian company failed to meet its obligations as set out in the repayment schedule, it would be immediately liable to repay the entire debt, and any disputes with regard to repayment would be resolved through litigation.

But the respondent failed to meet its obligations within the assigned timeframes, causing the applicant to a claim with the Commercial Court against the LLC (on 15 January 2007), seeking to recover USD 10,000 from the initial debt of USD 1,213,824. According to a preliminary agreement, the parties separately turned to Arbitration Tribunal of the Armenian Chamber of Commerce, which, however, rejected the appeal. 

In the case filed with the ECHR, the applicant claimed USD 1,213,824 and EUR 116,000 plus interest in respect of pecuniary damage, and EUR 100,000 in respect of non‑pecuniary damage.

The Government considered that the claim for pecuniary damage should be rejected, as there was no causal link between the alleged violation and the pecuniary damage claimed by the applicant company. They also submitted that it was not for the Court to speculate about the actual outcome of the domestic proceedings or any pecuniary damage the applicant company might have sustained in that connection. As to the claim for non-pecuniary damage, the Government considered the amount exaggerated in the light of the Court’s case-law and considered that it should be completely rejected.

The respondent is to pay the assigned fine within three months.