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On 23 March 2016, the First Section of the Constitutional Court held with regard to the individual application lodged by Halis Toprak and Others (no. 2013/4488) that there had been no breach of the right to property guaranteed in Article 35 of the Constitution.
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III. THE FACTS
[9-26]. The applicants are shareholders of Toprakbank A.Ş. which was liquidated after having been seized (“the Bank”). Before their transfer to the Savings Deposit Insurance Fund (“the TMSF”), 95% of the bank shares were belonging to the applicants and the Toprak Companies Group owned by the applicants. By the decision of the Banking Regulation and Supervision Agency (“the Agency”) dated 11 December 2000, the Bank was decided to be closely monitored on the ground that their assets became frozen due to the loans supplied to the companies belonging to the Toprak Group and due to income-expense disequilibrium and insufficiency of capital structure. In the course of the close monitoring period, the Agency recommended that the Bank would increase its capital; the loans supplied to the Toprak Group companies would be re-paid; cash inflow to the bank would be immediately ensured; the structure of the organization would be rendered efficient and profitable; and that Toprak Off-Shore’s activities would be terminated and its accounts would be transferred to the Bank. The Agency issued such warnings: this situation impaired the income-expense balance of the Bank; a deficit in the equity had been caused; and that the facilities supplied to the Toprak Off-Shore had exceeded the loan limits. The Agency also suggested the Bank to find fund through a strategic partner or the sale of Toprak Group firms; to settle the Toprak Group loans through cash proceeds or to secure such loans on collateral.
The Agency decided that the partnership rights, except for the dividend, and management and control of the Bank, which failed to comply with the warnings and recommendations, be transferred to the TMSF. The Fund Board of the TMSF decided that 45.5 million Turkish liras, the part of the Bank’s loss corresponding to the paid-up capital, be taken over in return for the payment at the same amount to be made to the Bank; and that the share certificates be requested to be registered in the Bank’s stock register in the name of the TMSF. The Bank’s Board of Directors were replaced by the TMSF. Upon its transfer to the TMSF, the Bank was subject to an independent audit with a view to establishing its real financial status. It was accordingly revealed that the loss of the Bank of which size of assets was 1,905 million Turkish Liras was approximately 1,306 million Turkish Liras; and that the long-term loans supplied to the Toprak Group firms were approximately 678 million Turkish Liras. Pursuant to the decisions dated 26 March 2002 of the Agency and the Fund Board of Directors, the Bank was merged with the Bayındırbank, and its banking license was revoked on 30 September 2002.
The real estate properties included among the Bank assets and its subsidiaries were sold by the TMSF, and it was especially tried to collect the Bank’s losses by means of signing a protocol at the amount of 453 million USD with the applicants who were controlling shareholders of the Bank with a view to collecting the debts owed to the Bank due to the loans of the Toprak Group firms. Y.P., who was the holder of the 1.000 lot share certificates, brought an action for annulment before the Thirteenth Chamber of the Supreme Administrative Court in 2005 and requested annulment of the transfer of the Bank to the TMSF. The Thirteenth Chamber of the Supreme Administrative Court decided to dismiss the case, and the appellate review was also dismissed by the Plenary Session of the Chambers for Administrative Cases. Thereafter, a request for rectification of the judgment was made. While the process of rectification of the judgment was pending, the defendant Y.P. transferred 1.000 lot share certificates of the Bank to the applicants for a total amount of 1,000 Turkish Liras by virtue of the Share Certificates Transfer and Assignment Letter. The parties were accepted to become a party to the proceedings at the stage of rectification of the judgment due to the transfer and assignment in question; however the Supreme Administrative Court decided to reject the request for rectification of the judgment.
IV. ASSESSMENT AND GROUNDS
27. The Constitutional Court, at its session of 23 March 2016, examined the application and decided as follows.
A. The Applicants’ Allegations
28. The applicants maintained that the rights to a fair trial and to property along with the principle of equality had been violated by indicating that the seizure of Toprakbank Inc., where they were the controlling shareholder, through the decision of the Banking Regulation and Supervision Agency (“the Agency”) constituted an interference with their property; that Article 14 § 3 of the abolished Law no. 4389, which is the basis of the interference, set forth that the losses of banks exceeding their equity must be in accordance with the “evaluation principles” to be determined by the Agency; however, the Bank was transferred to the Saving Deposit Insurance Fund (“the Fund”) without clearly specifying the aforementioned evaluation principles, which should be determined by the Authority according to the provisions of the law; and that therefore, there was an interference with the right to property without abiding by the explicit provision of the law. They further claimed that the Supreme Administrative Court also determined that the transfer of a bank to the Fund without specifying the “evaluation principles” was manifestly inconsistent with the law as was the case with the decision on Demirbank concerning the same issue; that even though it was necessary to “take as the basis the balance sheet of the transferred bank which is to be drawn as of the date of transfer” according to Article 14 § 5 of the abolished Law no. 4389 which constituted the basis of the Bank’s transfer to the Fund, a balance sheet (real asset balance sheet), which was to be drawn based on the actual values of the items forming the Bank’s real assets on the balance sheet day, was not prepared; that had the balance sheet been prepared, it would have been seen that their assets covered their debts, that as a result, the interference with the property did not meet the criteria for lawfulness; that there are tangible data (e-mails sent by the IMF executives to the executives of the Authority) demonstrating that the interference was carried out not for the public interest but through the imposition of the International Monetary Fund (IMF); that according to the statistics released immediately after the seizure of the Bank, the Bank’s profit was even considerably higher than the profit of Vakıflar Bankası T.A.O .,which is a public bank, and constituted 26% of the total profit of the thirty-three banks operating in Turkey at the time; that an interim injunction was also imposed upon their estates along with the decision to seize the Bank; that they were placed under an international travel ban; that their right to establish a bank in the future was revoked, and that the interference with their property was thus disproportionate; that even though there was a previous judgement rendered by the Supreme Administrative Court on the same issue in line with their allegations, the Supreme Administrative Court held an incomplete examination during the prosecution process concerning the seizure of Toprakbank Inc., and despite being presented in concrete terms, their substantial allegations were not investigated and addressed by the Supreme Administrative Court. Accordingly, the applicants requested the Court to find a violation of the rights at stake and award the applicants an amount of 36 million Turkish Liras (TRY).
B. The Court’s Assessment
29. The applicants request to be awarded a compensation of 36 million Turkish Liras on the ground that they were aggrieved due to the transfer of the Bank, within which they were the controlling shareholder, to the Fund with the decision of the Authority. It is understood that the amount of the requested compensation is the value of the Bank estimated by the applicants corresponding to their shares prior to the seizure of the Bank.
30. The applicants did not complain, in their individual application, of an action for compensation requesting the corresponding amount to their shares prior to the seizure of the Bank or an action for annulment against the decision of the Authority on the transfer of the shares. The subject matter of the application is the lawsuit filed in the 13th Chamber of the Supreme Administrative Court in 2005 in request for the cancellation of the transfer of the Bank to the Fund on the basis of the 1,000 lots of bank stocks owned by Y.P. who is the junior partner of the Bank. The applicants became involved in the present case within the course of rectification of the judgment by purchasing the 1,000 lots of bank stocks pertaining to Y.P. through the letter of conveyance dated 20 August 2009 in exchange for 1,000 Turkish Liras. The Plenary Session of the Administrative Law Chambers of the Supreme Administrative Court acknowledged the applicants as a party with the decision dated 1 October 2012 however unanimously rejected the request of rectification of judgement.
31. In the present case, the individual application of the applicants must be examined in respect of the right to property, limited to the 1,000 lots of bank stocks which were previously subject to administrative action.
32. Since the complaints of the applicants that an interim injunction was imposed upon their estates along with the decision to seize the Bank, that they were placed under an international travel ban, that their right to establish a bank in the future was revoked, are not the subject matter of the lawsuit constituting the subject of the application, remedies with regard to these complaints cannot be said to be exhausted. Therefore, the aforementioned complaints shall not be examined in the present application.
33. Furthermore, the applicants maintained that their rights to a reasoned decision were violated, indicating that the Bank was transferred to the Fund without the “evaluation principles” stipulated in Article 14 § 3 (c) of the abolished Law no. 4389 being clearly specified, that even though it was necessary to “take the balance sheet of the transferred bank which is to be drawn as of the date of transfer as the basis” according to Article 14 § 5 of the abolished Law no. 4389, which constituted the basis of the Bank’s transfer, this was not presented, and that the above-mentioned matters were not examined in the decision of the Supreme Administrative Court.
34. Upon the examination of the case-file, which is subject to the application, it is seen that there were no allegations set forth concerning the evaluation principles either in the lawsuit petition presented by Y.P., the owner of the 1,000 lots of bank stocks, to the Supreme Administrative Court in 2005 or in the petition of appeal presented to the Plenary Session of the Administrative Law Chambers of the Supreme Administrative Court on 17 April 2006 upon the dismissal of action. However, the aforementioned allegation was included on page 10 of the petition dated 15 September 2008 in request for rectification of judgment submitted by Y.P. and on page 13 of the petition dated 11 September 2008 in request for rectification of judgement and for becoming an intervening part submitted by Toprak Kağıt Inc.. By the decision dated 1 October 2012 of the Plenary Session of the Administrative Law Chambers of the Supreme Administrative Court, which conclude the requests for rectification of judgment, these requests were rejected on the grounds that they did not rest upon one of the reasons stated in Article 54 of Law no. 2577.
35. It is understood that the applicants’ allegations regarding the evaluation principles were examined neither by the 13th Chamber of the Supreme Administrative Court dealing with the case in the capacity of the first instance court nor by the Plenary Session of the Administrative Law Chambers of the Supreme Administrative Court at the appellate stage due to the fact that the allegations were not duly set forth, and that the requests for rectification of judgement was rejected on the ground that they did not rest upon one of the reasons stated in Article 54 of the Law no. 2577.
36. In the present case, since it is understood that the applicants’ allegations regarding the evaluation principles, indicated as the reason behind the violation of their rights to a reasoned decision, were not subject to an examination by a competent court, it is not possible to consider that, in the present application, the available remedies with regard to these allegations have been duly exhausted. Hence, the allegations with regard to the right to a reasoned decision shall not be examined in this application.
37. While the applicants maintained that the principle of equality was violated, they did not disclose on the basis of which reason indicated in Article 10 of the Constitution they were subject to different treatment. Within this framework, the applicants complained that while the seizure procedure of another bank in an essentially different case was cancelled, the seizure procedure concerning their own Bank, which is claimed to be of similar quality, was not cancelled. However, since the present matter shall be examined in terms of the right to property, there shall be no examination in terms of the principle of equality.
38. The applicants’ allegations regarding the transfer of the Bank to the Fund and the proceedings following the transfer were examined within the scope of the right to property.
1. Admissibility
39. The allegation regarding the violation of the right to property is not manifestly ill-founded and there exists no ground to declare it inadmissible, therefore it must be declared admissible.
2. Merits
40. The applicants maintained that their rights to property had been violated, by indicating that the Bank was transferred to the Fund by the Authority without the “evaluation principles” set forth in Article 14 § 3 of the abolished Law no. 4389 being specified, that the balance sheet constituting the basis of the Bank’s transfer was a result-based balance sheet while the real asset balance sheet should have been taken as the basis, that had this balance sheet been taken as the basis, it would have been seen that their assets covered their debts and the Bank could not be seized, that there were also tangible data demonstrating that the interference was carried out through the imposition of the IMF and not for the public interest, that the interference was disproportionate since there existed other measures which were less substantial than the transfer of the Bank to the Fund and since their assets could cover their liabilities, that the transfer process of Demirbank, which was in a similar situation, to the Fund was cancelled by the Supreme Administrative Court.
a. Existence of Property, Interference and Victim Status
41. Article 35 of the Constitution, titled “Right to Property”, is as follows:
“Everyone has the right to own and inherit property.
These rights may be limited by law only in view of public interest.
The exercise of the right to property shall not contravene public interest.”
42. Article 1 of the Protocol No. 1 to the European Convention on Human Rights (the Convention), titled “Protection of property”, is as follows:
“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”
43. Pursuant to the provisions of Article 148 § 3 of the Constitution and Article 45 § 1 of the Law no. 6216, in order for an examination to be made on the merits of an individual application lodged with the Constitutional Court, the right alleged to be interfered with by the public force must not only be safeguarded by the Constitution but it must also fall under the scope of the Convention and the additional protocols thereto to which Turkey is a party. (see the judgment of the Court, Onurhan Solmaz, no. 2012/1049, 26 March 2013, § 18).
44. The right to property falling into the common protection area of the Constitution and of the Convention is a guarantee that protects existing property and assets. The right to acquire ownership of a property, which a person does not currently own, is not included within the concept of property protected by the Constitution and the Convention, no matter how strong the individual’s interest in this issue is. As an exception to this, in certain circumstances, an “economic value” or a “legitimate expectation” aimed at claiming a legally enforceable “liability” may draw upon the right to property falling into the common protection area of the Constitution and of the Convention (see the judgment of the Court, Kemal Yeler and Ali Arslan Çelebi, no. 2012/636, 15 April 2014, § 36-37). The right to claim is one of the fundamental rights of the individuals under the right to property (see the judgement of the Court, no. E.2008/58 K.2011/37, 10 February 2011).
45. There exists no dispute as to whether the Bank operated in the banking sector with its extensive branch network, thousands of personnel and an authorized capital stock of 45.5 million Turkish Liras until the date of transfer of the Bank to the Fund. The Bank possessed not only a certain clientele but also the licence to establish and operate a bank in addition to its moveable and immoveable properties. All of the above-mentioned assets are active assets required to be considered within the concept of “property and possessions” within the scope of the right to property falling into the common protection area of the Constitution and of the Convention (for similar judgements of ECHR, see Buzescu v. Romania, no. 61302/00, 4 May 2005, § 81; Van marle and Others v. the Netherlands, 26 June 1986, § 41; Capital Bank AD v. Bulgaria, no. 49429/99, 24 February 2006, § 130; Megadat.com v. Moldavia, no. 21151/04, §§ 62, 63; Bimer S. A. v. Moldavia, no. 15084/03, 10 July 2007, § 49; Tre Traktörer AB v. Sweden, no. 10873/84, 7 July 1989, §§ 53-55).
46. The applicants are the shareholders of the Bank, which is undoubtedly included within the concepts of property and possession within the scope of the right to property. Since the share certificate, which is a security accorded by corporations to their stockholders in order to certify their shares, provides its holder/owner with the rights to property of the corporation that issues the certificate at the rate/in the percentage indicated on the bond in varying forms depending on the type, it is unquestionable that the Bank is a property within the scope of the Article 35 of the Constitution.
47. On the other hand, pursuant to the provisions of Article 148 § 3 of the Constitution and Article 45 § 1 of the Law no. 6216, every natural and legal person with civil rights who think that any one of his / her fundamental rights and freedoms, guaranteed in the Constitution and included within the scope of the Convention and its Protocols to which Turkey is a party, has been violated by the public authorities, is conferred the capacity to sue in terms of individual applications to the Constitutional Court. It is prescribed in Article 46 § 1 of Law no. 6216 that the individual application may only be lodged by those, whose current and personal right is directly affected due to the act, action or negligence that is claimed to result in the violation.
48. Article 46 of the Law no. 6216, titled “Persons who have the right of individual application”, lists the persons who may lodge an individual application. According to this provision, three basic preconditions must exist concurrently in order for a person to submit an individual application to the Constitutional Court. These preconditions are as follows; a “current right of the applicant must be violated” due to the act, action or negligence of the public authority which is subject to the application and is alleged to have caused a violation, the individual must be “personally” and “directly” affected by this violation and as a result, the applicant must bring himself / herself forward as a “victim” (see the judgement of the Court, Onur Doğanay, no. 2013/1977, 9 January 2014, § 42).
49. The European Court of Human Rights (ECHR) interprets the concept of “victim” autonomously and as independent from the notions of domestic law such as concepts related to an interest or the capacity to act (Sanles Sanles v. Spain, no. 48335/99, 26 October 2000) however pays regard to whether the applicant is party to domestic proceedings (Micallef v. Malta [GC], no. 17056/06, 15 October 2009).
50. Since it is understood that the applicants have 1,000 lots of bank stocks, which are the subject matter of the case before the Supreme Administrative Court, and that they were acknowledged as a party with the decision of Plenary Session of the Administrative Law Chambers of the Supreme Administrative Court dated 1 October 2012 for the above-mentioned reason, in the present case, the applicants have the right to property limited to the 1,000 lots of bank stocks. Hence, even though the applicants were the controlling shareholders of the Bank prior to its transfer to the Fund, with regard to the present application, it is understood that the applicants have a worthwhile advantage limited to 1,000 lots of bank stocks within the scope of the right to property, falling into the common protection area of the Constitution and of the European Convention on Human Rights (the Convention).
51. The shareholder rights, except for dividends, along with the management and inspection of the Bank, which was taken under close monitoring with the decision of the Authority dated 11 December 2000, were transferred to the Fund with the decision of the Authrotiy dated 30 November 2001; and based on the decisions of the Fund dated 26 March 2002, the Bank was merged under Bayındırbank and its banking license was abolished as of 30 September 2002. It is clear that there was an interference with the right to property of the applicants since it is understood that all the aforementioned procedures impacted the rights to property conferred by the shares of the applicants, who were the former controlling shareholders of the Bank, and that eventually their shares completely lost their value.
b. Nature of the Interference
52. The right to property, which is guaranteed as a fundamental right in the Article 35 of the Constitution, is a right that provides the individual with the opportunity to utilize and dispose his/her possession at will and to benefit from its products so as long he / she does not encroach on someone else’s rights and abides by the restrictions imposed by laws. According to the Constitution, this right may be limited only by law in view of public interest. Article 35 of the Constitution stipulates that the right to property is not an absolute right and may be limited in view of public interest (see judgment of the Court, Mehmet Akdoğan and Others, no. 2013/817, 19 December 2013, § 28,32).
53. Article 35 of the Constitution and Article 1 of the Protocol No. 1 to the Convention incorporate the right to property under similar provisions. Both regulations consist of three rules. While the first sentence of the Convention vests individuals with the right to peaceful enjoyment of their possessions, the Constitution recognizes the right to property in broader terms. The second sentences of the provisions stipulate the conditions, under which persons may be deprived of their property or under which conditions their property may be restricted (see judgement of the Court, Necmiye Çiftçi and Others, no. 2013/1301, 30 December 2014, § 46).
54. The third sentences of both provisions pertain to the control or regulation of the use of property. While Article 35 § 3 of the Constitution includes a general principle on the exercise of the right indicating that the exercise of the right to property shall not contravene public interest, Article 1 § 2 of the Protocol No. 1 to the Convention acknowledges the authority of the contracting states to “control the use of property” in accordance with the general interest, reserving the right to regulate the property in view of public interest and to enforce such laws as they deem necessary to secure the payment of taxes or other contributions or penalties. However, numerous articles of the Constitution authorize the state to control the use of property or to regulate the property where necessary (see judgement of the Court, Necmiye Çiftçi and Others, § 47).
55. According to the ECHR, the second and third rules are specific manifestations of the first rule, expressed as the principle of peaceful enjoyment of one’s possessions, and therefore must be understood in the light of the first rule, which holds a general qualification (James and Others v. the United Kingdom [GC], no. 8793/79, 21 February 1986, § 37).
56. Article 167 § 1 of the Constitution reads as follows, “The State shall take measures to ensure and promote the sound and orderly functioning of the markets for money, credit, capital, goods and services; and shall prevent the formation of monopolies and cartels in the markets, emerged in practice or by agreement.” Article 1 of the abolished Law no. 4389 identifies the objective as follows, “The objective of this law is to regulate the principles regarding the establishment, management, operation, transfer, merger, liquidation and supervision of banks in order to ensure the protection of the rights and interests of depositors and the effective functioning of the credit system by taking into consideration the requirements of establishing confidence and stability and economic development in financial markets.”
57. The abolished Law no. 4389 and Law no. 5411 along with numerous other laws created public institutions (such as the Authority, Fund and Capital Markets Board (“the CMB”)) so as to achieve this objective and allocated to the State the duty of establishing confidence and stability in financial markets and protecting the rights of depositors through the agency of these institutions. For this purpose, systems such as deposit insurance have been adopted.
58. In the present case, the Bank, whose shareholder rights except for dividends along with its management and inspection were transferred to the Fund with the decision of the Authority dated 30 November 2001, was merged with other banks under Bayındırbank pursuant to the decisions of the Fund dated 26 March 2002. The banking license of the Bank was abolished as of 30 September 2002. As a result of these procedures, the Bank was dissolved and its assets, debts and claims were liquidated with subsequent procedures.
59. While the applicants were deprived of their property at the end of the above-mentioned process, the assets of the Bank were not expropriated for public interest or the Bank was not nationalized and transformed into a state bank. It is clear that the process of Bank’s transfer to the Fund dated 30 November 2001 was carried out for the purpose of establishing confidence and stability in the banking sector, ensuring the effective functioning of the credit system and protecting the rights and interests of the depositors as prescribed in Article 167 of the Constitution and Article 1 of the abolished Law no. 4389 within the scope of the regulatory and supervisory powers granted to the Authority. As a matter of fact, these objectives are stated in the decision of the Authority dated 30 November 2001. In the present case, it is required to examine the interference within the scope of the authority of the State to control the use of property or to regulate the property.
60. At this stage, it is necessary to examine the lawfulness, legitimate aim and proportionality of the interference with the right to property of the applicant.
c. Whether the Interference Constitutes a Violation
i. Lawfulness
61. Article 35 of the Constitution prescribes that everyone has the right to property, that this right may be limited by law only in view of public interest, that the exercise of the right to property shall not contravene public interest.
62. Articles 35 and 13 of the Constitution stipulate that the limitations on the right to property shall be made in view of public interest and by law. While the ECHR recognizes that the principles developed through jurisprudence on the basis of stabilized judicial decisions may meet the requirement of lawfulness by interpreting the conditions set forth by the law, in other words, lawfulness in broader terms (Malonei v. the United Kingdom, no. 8691/79, 2 August 1984, §§ 66-68), the Constitution provides a broader protection compared to the Convention by prescribing that all limitations may be made only by law under absolute terms and conditions (see judgement of the Court, Mehmet Akdoğan and Others, § 31).
63. The text of the law and its enforcement must have legal clarity and definiteness, as much as the existence of the law itself, to the degree to which the individuals may foresee the consequences of their actions. In other words, the quality of the law is also essential in determining whether or not the requirement of lawfulness is met (see the judgement of the Court, Necmiye Çiftçi and Others, § 56).
64. Principles of legal security, clarity and definiteness are among the preconditions of a state of law. The principle of legal security aimed at ensuring the legal security of persons requires that the legal norms should be foreseeable, that individuals can trust the state in all their actions and operations, and that the state should refrain from methods that would undermine this sense of security in its legal arrangements. The principle of clarity and definiteness indicates that legal arrangements must be clear, comprehensible and enforceable in a way that shall allow for any hesitation or doubt on the part of neither the individuals nor the administration and that they must include protective measures against arbitrary practices of public authorities. In this respect, the text of the law must be formulated in such a way to enable individuals to foresee, at a certain degree of clarity and definiteness, which concrete actions and facts are associated to which legal sanctions or consequences by means of receiving legal assistance if necessary. Therefore, the possible effects and consequences of the law must be sufficiently foreseeable prior to its enforcement (see the judgment of the Court, no. E.2013/39, K.2013/65, 22 May 2013).
65. The applicants maintained that even though Article 14 § 3 of the abolished Law no. 4389 which is the basis of the interference, stipulates that the losses of banks exceeding their equity must be in accordance with the “evaluation principles” to be determined by the Authroity, the Bank was transferred to the Fund without the aforementioned evaluation principles, which should be determined by the Authority according to the provisions of the law, being clearly specified, that in the decision on Demirbank, the transfer of this Bank to the Fund was determined to be manifestly inconsistent with the law, that even though it was necessary to “take the balance sheet of the transferred bank which is to be drawn as of the date of transfer as the basis” according to Article 14 § 5 of the abolished Law no. 4389, which constituted the basis of the Bank’s transfer to the Fund, a balance sheet (real asset balance sheet), which was to be drawn based on the actual values of the items forming the Bank’s real assets on the balance sheet day, was not prepared, that had the balance sheet been prepared, it would have been seen that their assets covered their debts, that as a result, the interference with the property did not meet the criteria for lawfulness.
66. First and foremost, the differences in jurisprudence concerning similar cases between coordinate judicial authorities arising from the characteristics of the concrete case cannot be solely regarded as a violation of rights. Nor can the differences of interpretation between inferior courts or courts of appeal regarding the parties’ demands and evidences with respect to disputes be solely recognized as a violation of rights (see judgement of the Court, Miraş Mümessillik İnş. Taah. Reklam. Paz. Yay. San. Tic. A.Ş., no. 2012/1056, 16 April 2013, § 36).
67. Demirbank Trading Inc. and Toprakbank Inc. are two different legal entities and their process of being transferred to the Fund with the decision of the Agency occurred on different dates and in different ways. The prosecution processes of the lawsuits filed in request for the cancellation of the transfer are also different from each other. Therefore, in two separate cases, where the concrete circumstances are different from each other, the fact that the courts did not reach the same verdict cannot per se be recognized as violation of rights.
68. It is clear from the present case that the rights to property of the applicants were interfered with by the decision of the Agency dated 30 November 2001 and numbered 538. The basis of interference in the decision to interfere was referred to in Article 14 §§ 3, 4 of the abolished Law no. 4389. Paragraph (3) of the aforementioned Article establishes the opportunity to interfere if the Bank does not take the required measures in accordance with the paragraph (2) or if there is no potential to reinforce its financial structure despite having taken the necessary measures.
69. In the Demirbank case, which is cited by the applicants as a precedent, the 10th Chamber of the Supreme Administrative Court deemed the administrative act as lawful, however with the decision dated 3 June 2003 and numbered 2003/783, K.2003/960, the Supreme Administrative Court Plenary Session of the Administrative Law Chamber determined by majority of votes that the transfer decision, which was made within the scope of Article 14 § 2 of the abolished Law no. 4389 and without investigating the options that would ensure net liquidity balance of the Bank, is not in compliance with laws, indicating that even though the report prepared by certified bank examiners prior to the transfer recommended the removal of public papers from the Bank’s portfolio through clearing for the purpose of betterment, no clearing took place, that after the transfer, banks were disburdened by resorting to a voluntary clearing practice for all banks, that the report of State Supervisory Council and the reports on the financial structure stated that the Bank would have experienced no problems regarding profit and liquidity had the clearing process took place, that the risky loans of the Bank did not amount to much compared to its total credits, and that its active quality was high.
70. The reasons cited in the decision of the Agency dated 30 November 2001 for the transfer of the Bank to the Fund in the subject matter of the application are referred to in Article 14 §§ 3, 4 of the abolished Law no. 4389. In the study prepared by the Fund (TMSF Raf temizliği çalışması, 25 Bankaya ne oldu?, Toprakbank, www.tmsf.org.tr – the Fund Stacks Cleaning Study, What happened to 25 Banks, Toprakbank, www.tmsf.org.tr), the fact that the Bank’s resources were primarily extended as long-term credit to Toprak Group companies (approximately 678 million Turkish Liras), that the resources of the Bank’s foreign depository (Toprakbank Offshore) were again extended as credit to the Group companies and that the shareholders were paid dividends by over-reporting the profits even though the Bank derived no profit in the years of 1998 and 1999 (approximately 25 million and 60 million Turkish Liras) are cited as the principal reasons behind the seizure of the Bank.
71. In the letter dated 31 December 2015 of the Department of Legal Affairs of the Agency, it is set forth that the Bank was instructed by letters, submitted by the Agency on numerous occasions after the Bank was taken under close monitoring with the decision dated 11 December 2000, to put an end to extending credits to controlling shareholders, to secure, collect and liquidate the credits provided to Toprak Group companies, to increase the capital, to shut down the Toprak Offshore depositories, to terminate fiduciary transactions and to avoid profit distribution, that even though the Bank was requested with the letter dated 18 April 2001 to present a realistic and feasible plan concerning the measures to be taken due to the deterioration of the financial structure following the crises of November 2000 and February 2001, the submitted plan was insufficient or did not meet the requirements, that the Agency appointed a board member to the Bank on 9 July 2001 and instructed to not enforce decisions that were not signed by this person, that the Bank was requested with the letter dated 19 July 2001 to eliminate the maturity mismatch in the structure of assets and liabilities, to redress the balance of income and expenditures and to boost its equities, however sufficient progress could not be achieved within the one-year close monitoring period, that in the reports of the certified bank examiners dated 11 March 2002 prepared as a result of the analysis of financial statements dated 30 November 2001, when the Bank was transferred to the Fund, it is stated that the Bank had a loss of 1,306 million Turkish Liras arising from outstanding loans primarily provided to Toprak Group companies, that the equities of the Bank amounted to (-) 1,222 million Turkish Liras, that the Bank’s shareholders, who were directly or indirectly in charge of the management and supervision of the Bank, exploited the resources of the Bank in a way that would endanger the Bank, that they caused losses for the Bank in this manner, and that as a result, the financial structure of the Bank was undermined beyond repair.
72. In the present case, aside from Article 14 § 3 of the abolished Law no. 4389, it is seen that the primary reason behind the seizure of the Bank rests upon paragraph (4) of the aforementioned Article with regard to extending the resources of the Bank to controlling shareholders. It is understood that there is no obligation to specify evaluation principles in order to draw conclusions regarding the present paragraph and that the present situation may easily be put forth with the identification of the loan amount and the debtors.
73. The applicants maintain that it is necessary to “take the balance sheet of the transferred bank which is to be drawn as of the date of transfer as the basis” according to Article 14 § 5 of the abolished Law no. 4389 and that this is required to be a real asset balance sheet. In the present case which is subject to the application, the Fund drew a transfer balance sheet as of 30 November 2001 which was the date of transfer and determined that the Bank’s loss amounted to 1,306 million Turkish Liras. In the decision of the Agency dated 30 November 2001, it is indicated that the primary reason behind the seizure of the Bank is the intensive extension of credits to Group companies and that the loss set forth in the aforementioned Fund study arose from the outstanding loans extended to Group companies. It is understood that even if the real estates of the Bank were worth higher than the figure cited in the balance sheet as claimed by the applicant, there exist no statements clarifying how the loss of 1,306 million Turkish Liras would be covered. Within this framework, it is seen that the operations conducted by the Fund for the purpose of collecting the Bank’s loss lasted for years and the applicants acknowledged their debts arising from Group credits, that the applicants signed a protocol with the Fund by acknowledging the debt of 453 million USD and in the long term, they were able to repay their debts arising from the credits that they had received from the Bank on behalf of Group companies.
74. Moreover, it is understood that even though the Bank was taken under close monitoring with the decision of the Agency dated 11 December 2000 pursuant to Article 14 § 2 of the abolished Law no. 4389 and was requested to take the necessary measures, no measures were taken to improve the Bank’s condition for about a year, and on the contrary, the Bank’s financial situation deteriorated and its losses increased; and it is possible to observe this situation on the balance sheets recognized by the Bank itself prior to its transfer. The above-mentioned matters were examined by the 13th Chamber of the Supreme Administrative Court and by the Supreme Administrative Court Plenary Session of the Administrative Law Chamber and it was concluded that the decision of the Agency on the transfer of the Bank to the Fund was lawful.
75. The aforementioned explicit arrangements were published in the Official Gazette and on the websites of the relevant institutions and they were accessible and comprehensible on the date of publication. In the present case, it has been concluded that the legal basis of the operation subject to interference is comprehensible and its probable outcomes are foreseeable; in conclusion the operation subject to interference do have a legal basis.
76. At the present stage, whether the interference pursued a legitimate aim in view of public interest shall be examined.
ii. Legitimate Aim
77. The notion of public interest refers, in general terms, to the benefit of society that is separate from and superior to private or self-interests. All public actions must ultimately lead to the objective of achieving public interest. By its very nature, public interest is a broad concept. The legislative and executive bodies have wide discretion in determining what is in the public interest by taking into account the needs of the society. In the case of a dispute on the issue of public interest, it is clear that specialized courts of first instance and courts of appeal are in a better position to resolve the dispute. Interference with the discretion of authorized public bodies in determining what is in the public interest is out of the question unless it is understood that it is manifestly ill-founded or arbitrary in the individual application examination of the Constitutional Court. The obligation to prove that the interference is not in the public interest belongs to the person submitting this allegation (see judgment of the Court, Mehmet Akdoğan and Others, §§ 34, 35, 36).
78. By its very nature, public interest is a broad concept. It is unavoidable that there would be a wide array of opinions on what is in the general interest of the public. What is in the public interest might not only vary with the political, economic and social preferences of the legislative and executive bodies, but the changing economic, social and political conditions may also require altering an action or service carried out in view of public interest (see judgement of the Court, Habibe Kalender and Others, no. 2013/3845, 1 December 2015, § 33).
79. The applicants have maintained that there are tangible data (e-mails sent by the IMF executives to the executives of the Agency) demonstrating that the interference was carried out not for the public interest but through the imposition of the IMF.
80. First and foremost, no documents were submitted to indicate that the applicants’ allegations concerning the e-mails sent by the IMF executives to the executives of the Agency were subject to a lawsuit prior to the individual application. In the examination, it is not possible to pay regard to these allegations which are purely speculative.
81. It was decided to transfer the Bank to the Fund, the Bank, which did not take the measures requested in the decision of the Agency dated 30 November 2001 and subject to application, which extended the resources of the Bank to Group companies in a way that undermined the secure functioning of the Bank, whose losses accumulated to exceed its equities and which would have undermined the rights of the depositors and the confidence and stability of the financial system due to the weakness of its financial structure had it continued to operate in that particular state. It is clear that the objectives of securing the rights of the depositors and ensuring the confidence and stability of the financial system as cited in the decision serve the public interest. The aforementioned objective of public interest is in line with the objectives of ensuring that private enterprises operate in accordance with national economic requirements and social objectives and that the markets for money, credit, capital, goods and services function in a sound and orderly manner as prescribed in Articles 48 and 167 of the Constitution which stipulate that the State may interfere with the market economy under certain circumstances.
82. At the present stage, it is required to examine the proportionality of the interferences, which have been established to be in public interest.
iii. Proportionality
83. Article 13 of the Constitution, titled “Restriction of Fundamental Rights and Freedoms”, is as follows:
“Fundamental rights and freedoms may be restricted only by law and in conformity with the reasons mentioned in the relevant articles of the Constitution without infringing upon their essence. These restrictions shall not be contrary to the letter and spirit of the Constitution and the requirements of the democratic order of the society and the secular republic and the principle of proportionality.”
84. According to Article 35 of the Constitution, right to property may only be limited by procedures stipulated by law and in view of public interest. In accordance with the principle of proportionality contained in Article 13 of the Constitution, in the case of limiting the rights to property of persons, a fair balance must be struck between the public interest to be ensured and the rights of the individual.
85. The principle of proportionality consists of three sub-principles; “suitability”, “necessity” and “proportionality”. “Suitability” suggests that the interfering action must be suitable for attaining its aim, “necessity” indicates that the interference must be imperative in terms of the desired aim, which means that it should not be possible to attain the same objective with a less substantial interference, and “proportionality” refers to the requirement of striking a reasonable balance between the interference with the right of the individual and the desired aim (see judgment of the Court, Mehmet Akdoğan and Others, § 38).
86. When examining whether an interference with the right to property is in conformity with the Convention, the ECHR not only stresses that the interference must serve the public interest or general interest but also that a fair balance must be struck between the general interest of the society and the protection of individual rights. Within this framework, the ECHR concludes that the interference is disproportionate if the individuals are deprived of their property without receiving a reasonable payment in proportion to the worth of their property. However, the right to property protected by the Convention does not guarantee the payment of the full price in all cases. The ECHR may find a payment lower than the market value of the property divested in view of legitimate public interest to be in conformity with the principle of proportionality in exceptional cases oriented towards enforcing extensive measures such as making an economic reform or establishing social justice (see Sporrong and Lönnroth v. Sweden, no. 7151/75; 72/52/75, 23 September 1982, § 69; James and Others v. the United Kingdom, no. 8793/79, 21 February 1986, § 54; Papachelas v. Greece, no. 31423/96, 25 March 1999, § 48; and Lithgow and Others v. the United Kingdom, no. 9006/80, 9262/81, 9263/81, 9265/81; 9266/81; 9313/81; 9405/81, 8 July 1986, § 120, 121).
87. The aforementioned third rules contained in the Constitution and in the Convention authorize the State to control and regulate the exercise of property or the right to property. In the exercise of the regulatory authority which provides a broader discretion compared to the authority to limit property, it is established as a rule that the requirements of the principles of lawfulness, legitimacy and proportionality must be met (for a similar judgment of the ECHR, see Depalle v. France [GC], no. 34044/02, 29 March 2010, §§ 83 and 84). Accordingly, the authority to regulate the right to property must also be exercised by law and in view of public interest. Furthermore, the obligation to pay compensation for divestment of property in line with the principle of proportionality may not be required when the regulatory authority is exercised depending on the circumstances of litigation (see Depalle v. France, § 91).
88. The applicants maintained that according to the statistics released immediately after the seizure of the Bank, the Bank’s profit was considerably high, that an interim injunction was also imposed upon their assets along with the decision to seize the Bank, that they were placed under an international travel ban, that their right to establish a bank in the future was revoked, and that the interference with their property was thus disproportionate.
89. In the Demirbank case, which is cited by the applicants as a precedent, the recommendation to remove public papers from the Bank’s portfolio through clearing as indicated in the decision dated 3 June 2003 of the Supreme Administrative Court Plenary Session of the Administrative Law Chamber is a less substantial interference specific to the Demirbank case and as set forth in the decision, it is concluded that the seizure of the Bank, without trying a clearing procedure to resolve the problem arising from the high number of government debt securities (GDDS) in the portfolio of Demirbank and the liquidity squeeze due to the economic crisis, was not in compliance with laws.
90. It is set forth in the documents submitted in the appendix to the application that the Bank was taken under close monitoring by the Agency on 11 December 2000 within the scope of Article 14 of the abolished Law no. 4389 and was requested to take a series of measures, however no progress was made and on the contrary, the financial situation of the Bank deteriorated and its loses increased; in the decision of the Agency dated 30 November 2001 and the decision of the Plenary Session of the Administrative Law Chamber dated 26 June 2008, it is also indicated that the Bank was transferred to the Fund due to the fact that the requisite measures were not taken and its financial situation constituted a risk for the rights of depositors and for the confidence and stability of the financial market. In the present case, it is understood that the applicants’ allegations with regard to the necessity to employ less substantial measures is not pertinent as the financial situation of the Bank did not improve but rather deteriorated in spite of the employment of a less substantial measure.
91. In the present case subject to the application, the less substantial interference foreseen for the Bank was tested with the decision of close monitoring dated 11 December 2000 and the Bank was requested to increase the capital, to collect the credits provided to Group companies, to promptly ensure cash inflow to the Bank, to make the organizational structure effective and efficient and to terminate the activities of Toprak Offshore and to transfer its accounts to the Bank. Moreover, the Bank was also recommended by the Agency to generate funds through the sale of strategic partners and Group companies, to liquidate Group credits through cash collection or to secure them on collateral.
92. Although the applicants claim that the Bank was in profit, the financial statements dated 30 September 2001, which were prepared prior to the seizure of the Bank, disclose that while the Bank’s losses amounted to 123 million Turkish Liras, its equities were (-) 38 million Turkish Liras. In the audit reports, prepared with the aim of revealing the real financial structure after the transfer, it is established that the Bank’s actual amount of loss was 1,306 million Turkish Liras on the day of transfer and that the primary reason behind this situation was the outstanding loans extended to Group firms (678 million principal and 108 million rediscount), that the equities of the Bank amounted to (-) 1,222 million Turkish Liras.
93. In the letter dated 11 December 2015 of the Fund, it is elucidated that as of the date of transfer, Toprak Group’s debts to the Bank amounted to 792 million Turkish Liras (approximately 534 million USD), that 395 million USD were collected once the reductions, granted through the protocols signed with Toprak Group after the transfer, and payments to third parties were deducted, that the total transfer of funds by the Fund to the Bank, so that the Bank fulfils its deposit liabilities among others and covers its loss, amounted to 846 million Turkish Liras (approximately 629 million USD at the exchange rates of CBRT), that the Bank’s loss was 1,306 million Turkish Liras on the date of transfer, which corresponded to approximately 30 times the capital of the Bank, that it is not possible for a bank in this condition to carry any economic added value and accordingly, to effect payments to its shareholders.
94. The reasons behind the seizure of the Bank are not confined to the fact that the equities of the Bank could not cover its losses, as a matter of fact, the reasons are elaborated as follows; the failure to repay the loans extended to Group companies which constituted the main source of losses, hence, the employment of the Bank’s resources for the benefit of its controlling shareholders, furthermore, the disturbance of the Bank’s liquidity balance, the maturity mismatch in the structure of assets and liabilities, the lack of efficiency and effectiveness in the organizational structure, the transfer of funds to Toprak Offshore and extension of these funds to Group companies, the lack of balance in income and expenditures, the existence of fiduciary transactions, and the payment of dividends to the shareholders by reporting profits despite the fact that the Bank was losing money.
95. Not only did the applicants not take necessary measures to reinforce the Bank’s financial condition in the course of the close monitoring period, but they also did not clarify with which less substantial measures a bank with such a disordered financial structure could have continued to operate without being transferred to the Fund and without bringing damages to the financial markets, to the economy and to its depositors in the atmosphere of an economic crisis. Even though the applicants maintain that their personal estates and the estates of the Group companies which they own would have been enough to cover the Bank’s losses, they have not been able to explain why they did not repay the Group credit debts and improve the financial condition of the Bank by making the above-mentioned sales despite the instructions and recommendations of the Agency during the close monitoring period, which lasted for approximately a year.
96. Furthermore, based on the documents prepared by the Fund, it is understood that protocols were signed with the applicants, who were the controlling shareholders of the Bank, on 18 December 2004, 6 February 2008 and 8 June 2012 for the purpose of settling their debts to the Bank arising from the credits extended to Group companies, that these protocols were signed by the applicants, who were the controlling shareholders of the Bank, hence they acknowledged the debts, that upon failure to comply with the protocols, collections were made from the estates of the controlling shareholders of the Bank pursuant to the Law no. 6183 and that the repayment of the applicants’ debts within the scope of the protocols extended over a period of time that lasted until recently, and that a total of 395 million USD were repaid following the reductions and netting . In the present case, it is clear that it was not possible to improve the financial condition of the Bank through simple measures such as the sale of real estates and subsidiaries and to cover its losses in the short term.
97. Moreover, once banks are transferred to the Fund, deposit liabilities and obligations to cover the banks’ debts and losses are also transferred to the Fund. Since the resources of the Fund are not sufficient, the deposits, debts and losses of the transferred banks are compensated through government domestic debt securities provided by the Treasury to the Fund and as a result, the Fund becomes indebted to the Treasury. The Fund then pays its debt to the Treasury with the funds obtained by selling the assets and collecting the debts of the transferred Banks. However, the expenditures arising from the transferred banks have resulted in a cost significantly higher than the revenue acquired through the liquidation of these banks. With the Law no. 5787 for the uncollected Treasury receivables and with the first paragraph of the provisional Article 17 of the Law no. 4749, the Minister of Finance has been authorized to cancel the Treasury receivables born and/or shall be born from the government domestic debt securities (GDDS) provided to the Fund until the date of 31 December 2007 without being associated with the income and expense accounts of the budget, and with the approval of the Minister of Finance dated 11 November 2008, Treasury receivables born and/or shall be born from GDDS amounting to a total of 93,292 million Turkish Liras, of which 50,666 million Turkish Liras, is principal, 20,170 million Turkish Liras is interest and 22,456 million Turkish Liras is default interest, have been cancelled (see Turkish Court of Accounts; 2008 Treasury Transaction Report, pp. 72 and 73).
98. It is hereby concluded that the fair balance to be struck is not disturbed when the interference with the applicants’ right to property is compared to the public interest observed in the transfer of the Bank to the Fund in an effort to avoid damages to the financial markets and to protect the rights of depositors by transferring the losses and deposit liabilities of the Bank to the Fund, considering the fact that the Bank’s losses, primarily arising from unpaid Group credits, amounted to 1,306 million Turkish Liras as of the date of transfer and its condition continued to deteriorate even though the applicants were warned and granted time to take the necessary measures for the Bank which they owned.
99. For the elaborated reasons, it must be held that the applicants’ right to property guaranteed under Article 35 of the Constitution was not violated.
V. JUDGMENT
For the above-mentioned reasons, the Constitutional Court UNANIMOUSLY held on 23 March 2016 that
A. The alleged violation of the right to property be DECLARED ADMISSIBLE;
B. The right to property safeguarded by Article 35 of the Constitution was NOT VIOLATED; and
C. The court expenses be COVERED by the applicants.
