It has been suggested in some circles that the Alfa Bank suit against Kommersant Publishing House was inspired by the Kremlin. The staff of Kommersant doesn't think so.
// The decision of the Ninth Arbitration Court of Decemer 27, 2005
Ninth Arbitration Court of Appeal, consisting of
Chief E.E.Justice Borisova
Judges A.A. Solopova, B.B. Popov
with minutes taken by clerk of the court session N. Gaidukovich
having examined in the court session the appeal of ZAO Kommersant Publishing House of the disposition of the Moscow
Arbitration Court of October 27, 2004, of case À40-40374/04-89-467
made by Judge Denisova N.D.
in the action of OAO Alfa Bank against ZAO Kommersant
Publishing House for protection of its business reputation, restriction of the respondent's abuses of freedom of the mass media, recovery of damages of 20,774,366.61 rubles, and recovery of reputational damage of 300,000,000 rubles.
with the participation of:
counsel for the plaintiff: G.B. Lyubarskaya, T.I. Kolcheva, O.A. Serov, E.A. Kulkov
counsel for the respondents: K.I. Sklovsky, P.A. Astakhov, G.A. Ivanov, K.A. Plotnikov, V.Yu. Raikin, D.F. Zharkov
The action filed by the plaintiff OAO Alfa Bank in the Moscow Arbitration Court for protection of its business reputation, restriction of the respondent ZAO Kommersant Publishing House's abuses of freedom of the mass media, recovery of damages of 20,774,366 rubles and 61 kopeks, and recovery of reputational damage of 300,000,000 rubles. The basis for its action was the publication of the lead article under the headline The Bank Crisis Comes Out into the Street. Customers Confront Backbone Banks in the newspaper Kommersant, No. 121 of July 7, 2004. In justification of the action, the plaintiff indicated that by said publication in the form of a lead article under the headline “The Bank Crisis Comes Out into the Street: Customers Confront Backbone Banks” and the subheading “Chain Reaction,” the respondent violated the provisions of Article 39 of the RF Law “On the Mass Media” establishing the responsibility of the mass media to verify the authenticity of information disseminated and prohibiting the use of mass media to distort socially significant information and circulate rumors in the guise of reliable reports. In the plaintiff's opinion, the main idea of the publication was contained in the actual headline of the disputed article: a bank crisis had set in; it had “come out into the street”; the bank crisis had struck the “backbone” of the banking establishment that constitutes the foundation of the banking system and symbolize its stability. The plaintiff also indicated that, in the first paragraph of the disputed publication, its situation was ranked on par with another bank, Guta Bank, which was experiencing major financial problems during this period. The plaintiff believes that, since Guta Bank's liquidity problems arose two weeks before the disputed publication and became a well-known fact, the article's comparison of the plaintiff with Guta Bank (by combining then into one word construction in which identical signs of crisis were listed for these two banks) undermined customers' trust in OAO Alfa Bank and damaged its business reputation as a reliable and stable bank that unfailingly fulfilled its obligations to customers. The plaintiff challenges the following information as contrary to fact and defamatory to its business representation:
1) “…by evening (July 6, 2004), hundreds depositors were besieging Alfa Bank branches”;
2) “Yesterday (i.e., July 6, 2004), for the first time since the beginning of the crisis on the interbank crediting market, serious problems appeared for two major retail banks – Alfa Bank and Guta Bank”;
3) “By yesterday evening (i.e., July 6, 2004), branches of Alfa Bank were literally attacked by depositors. By 7:30 p.m., as many as 80 people had gathered at the Sokol branch of Alfa Bank. Have you signed up for tomorrow?' asked a man in the line. What's the use?' they answered him. I signed up this morning at the downtown branch without results. I ended up coming here.' A girl near the entrance to the room packed with people said she had been in line for three hours to get money from an ATM, and there were still 40 people in front of her. But it's better than downtown. Our office went around to all the branches, but there were lines of nearly 200 people there and people were signing up for the following days.' At Sokolniki, they stopped signing for lines by 7:00 p.m. Several downtown branches closed, and the ATMs had run out of cash”;
4) “A source at the bank told Kommersant yesterday that only the clearing center was operating'.”
The plaintiff presented a demand obligating the respondent to retract the aforesaid information by publishing a report in Kommersant on the disposition of the Moscow Arbitration Court of the present case within a period of 10 days from the date of its entry into legal force.
In the court session before the decision was made, by way of Article 49 of the RF Code of Administrative Violations, the plaintiff declared a decrease in the amount of damages to 20,505,906 rubles and 69 kopeks, which consist of losses caused by: 1) uncollected interest income on loans amounting to 2,398,829 rubles and 80 kopeks; 2) the purchase of additional amounts of U.S. cash dollars amounting to 7,447,119 rubles and 73 kopeks; 3) conducting an unscheduled advertising campaign amounting to 8,496,327 rubles and 37 kopeks; 4) losses connected with additional expenses for security amounting to 1 694 791rubles and 93 kopeks; 5) losses connected with additional expenses to pay for collection services amounting to 169,874 rubles and 97 kopeks; 6) losses connected with additional expenses from increased labor costs amounting to 298,962 rubles and 89 kopeks, as well as nonmaterial (reputational) damage amounting to 300,000,000 rubles.
The Moscow Arbitration Court allowed the full amount of the claims: the aforementioned information published by Kommersant was declared to be contrary to fact and defamatory to the business reputation of OAO Alfa Bank; the obligation was imposed on the respondent to publish a report in Kommersant on the decision of the Moscow Arbitration Court declaring it invalid and defamatory to the business reputation of OAO Alfa Bank within a period of 10 days from the date of the decision's entry into legal force and the publication of a retraction; recovery of losses of 2,505,906 rubles and 69 kopeks from the respondent in compensation for damages caused by the dissemination of information contrary to fact and defamatory to the business reputation of Alfa Bank, as well as 300,000,000 rubles in compensation for reputational damage caused by denigration of its business reputation, for a total recovery of 320,505,906 rubles and 96 kopeks.
The respondent disagreed with the decision made by the Moscow Arbitration Court and filed an appeal in which it pointed to violations of the norms of material and procedural rights by the court and the presence of grounds for reversing the disputed decision. Thus, the respondent believes that the case was heard by a court of illegal composition, and that the respondent's application was unjustifiably refused. In addition, in the respondent's opinion, the court, in violation of Article 65 of the RF Code of Administrative Violations, did not examine all the questions included in the ultimate fact of the case. Thus the court of first instance did not reveal which word structures and semantic units of the text fell under the characteristic of “information contrary to fact”; the court did not analyze the contextual orientation of the disputed text, which is mandatory and follows from an interpretation of Article 152 of the RF Civil Code. The respondent is convinced that the information set out in the articles cannot be classified as information in the sense of Article 152 of the RF Civil Code; they contained an assessment of the situation, not a statement of fact. The court of first instance did not analyze specific word constructions of the text for the purpose of classifying them as information disseminated by the mass media, and considered as information the conclusions and subjective evaluations the plaintiff made on reading the indicated article. The court's decision violates the statutes of the European Convention for the Protection of Human Rights and Fundamental Freedoms, specifically, that “each person has the right to freely express his opinion”; liability for the expressed opinion is thereby excluded.
In addition, the respondent believes that the court's conclusions set out in the decision are inconsistent with the circumstances of the case and that the court's judgments of the inconsistency of this “information” with the facts are unproven. Meanwhile, as the respondent has indicated in the appeal, the information that was set out in the article “The Bank Crisis Comes Out into the Street” published in Kommersant of July 7, 2004, is fully consistent with fact. The respondent indicated as proof the testimony of witnesses E.A. Golikova and N.V. Kulakova, and the register of available cash funds of July 6, 2004, which the court did not evaluate properly.
In the respondent's opinion, an interview with the bank's president in Kommersant of July 8, 2004, in which he admitted the said fact the plaintiff's order for additional collection vehicles on July 6, 2004, to deliver cash to separate bank branches, as well as the fact that the comments of the plaintiff's press service in the article itself indicated that because depositors of other banks actively used Alfa Bank's ATMs, it was not always possible to load them with cash on time, is confirmation of the lines and the lack of cash in the ATMs.
In the appeal, the respondent also pointed out that the fact of the defamatory character of the information, which the court considered established, is unproven. The court incorrectly interpreted the provisions of the law on the defamatory character of information; none of the published information can be defamatory in character, since it does not point to the plaintiff's violation of the norms of current RF legislation, which, in the respondent's opinion, must exist. The court's interpretation that defamatory information is not only that which contains allegations of a violation of current legislation by a citizen or legal entity, but also any other information that defames industrial and economic or social activities, is not founded on a literal interpretation of Article 152 of the RF Civil Code and Ruling of the Plenary Session of the RF Supreme Court No. 11 of August 18, 1992.
In the respondent's opinion, the fact that the respondent's actions caused damage to the plaintiff, as well as the presence of a cause-and-effect relation between the respondent's actions and the plaintiff's losses, is also unproven. In its appeal, the respondent indicated that the plaintiff did not produce evidence in court that the publication in Kommersant in particular, and not the dissemination of information in other media, much less objective economic factors, were the reasons for its losses; i.e., the plaintiff did not prove the presence of a cause-and-effect relation between the respondent's publication and the losses. Refuting the plaintiff's argument concerning the presence of losses amounting to 5,098,048,794 rubles and 18 kopeks, the respondent pointed out that the plaintiff had sufficient funds to grant credits in the indicated amount, since the ingoing balance of account 31012 held 5,585,455,000 rubles, and the outgoing balance held 4,580,647,000 rubles. The bank did not produce evidence of the presence of circumstances facing borrowers on the basis of credit agreements and did not produce evidence of the signing of such agreements. In the respondent's opinion, the plaintiff's expenses for an unscheduled advertising campaign are also unproven, and the court's motives for accepting the plaintiff's arguments are not mentioned in the court decision. The presented agency agreement No. 01/04 from OOO BBDO Marketing concluded on January 5, 2004, and supplementary agreement No.1 of January 6, 2004, give reason to believe that a planned advertising campaign was conducted. The respondent also disagrees with the expenses for additional security, calling them expenses for the protection of consumers' rights to secure banking services, as fixed in Article 7 of the RF Law “On Consumer Protection.” In its opinion, expenses for the purchase of foreign cash currency are also unproven, in view of the absence of any causal relation between the publication and said expenses; the necessity of such expenditures is unproven, just as expenses for payment of staff services – the plaintiff's additional labor costs – since these expenses are not connected with the publication; no proof of the necessity of such expenditures was produced, and they are not connected with the plaintiff's usual activities; no estimate of losses in this regard was produced.
The respondent also indicated in the appeal the court's violation of the requirements of the law in settling the question of the respondent's release from liability, since the information set out in the article was obtained from the Iskra news agency, and that, in accordance with Paragraph 2 of Article 57 of the RF Law “On Mass Media,” is indisputable grounds for releasing the editors from liability. In addition, one of the arguments of the appeal is that nonmaterial, or so-called “reputational,” damage cannot be recovered by analogy with moral damage on the basis of current civil legislation. The decision of the Constitutional Court of the RF is applicable with consideration of the fact that Article 152 of the RF Civil Code makes provision for the possibility of recovering only moral damage to citizens, while making no provision for the possibility of recovering “reputational” damage in favor of citizens or legal entities. Since the category “moral damage” is not applicable to legal entities, the plaintiff must be denied the recovery of nonmaterial damage. The absence in the law of a direct indication of the means of protecting the business reputation of legal entities does not deprive them of the right to demand compensation for damages, including nonmaterial losses caused by denigration of their business reputation, or nonmaterial damage. The respondent believes that, in the stated Decision of the Constitutional Court of the RF, there is a reference to the European Court of Human Rights in the Comingersoll S.A. vs. Portugal case of April 6, 2000, but this cannot be applied without consideration of individual aspects, including the fact that amount of compensation is nothing else but losses; the fact of their infliction and the extent are substantiable by the plaintiff, as is the causal relation. In the respondent's opinion, the court's error in applying Article 152 of the RF Civil Code consists of the fact that the court considered it possible to estimate damage to a business reputation by analogy with moral damage. The respondent believes that, whereas the degree of intensity of physical and moral suffering is a subjective factor and is estimated primarily according to the court's inner convictions, reputation is an objective phenomenon and is a matter of verification and substantiation. The respondent also believes that the demand for compensation for nonmaterial (reputational) damage is not related to special jurisdiction of arbitration courts, and as a result, proceedings in this regard are subject to termination. The counsel for the respondent sustained the arguments of the appeal in the court session.
The plaintiff did not agree with the respondent's appeal and prepared a written opinion indicating the following fundamental arguments. The respondent's assertion that the court of first instance had violated procedural regulations, including the need to consider the case with the participation of arbitration assessors was contrary to fact, since the respondent filed an application for consideration of the case with the participation of jurors. In view of the absence of standards for consideration of a case with the participation of jurors in the RF Code of Administrative Violations, the court's refusal to allow the respondent's application was justified. In the plaintiff's opinion, there was no procedural violation, in particular, in the consideration of the merits of the claim for compensation of nonmaterial (reputational) damage to a legal entity by the court of first instance; at the same time, the plaintiff substantiated its position with reference to Article 28 of the RF Code of Administrative Violations, which stipulates the criteria for jurisdiction of cases to arbitration courts, as well as Articles 8 and 11 of the Civil Code of the Russian Federation.
The plaintiff stated the following arguments as points of fact of the dispute under consideration – the objection to the appeal. The court examined and justifiably rejected the argument that there were grounds for releasing the respondent from liability by virtue of Article 57 of the RF Law “On Mass Media” in connection with the use of materials obtained from the Iskra news agency in the disputed publication. There is no reference in the publication to the respondent obtaining information from said agency, and the respondent did not produce evidence to corroborate this fact. In addition, this is refuted by the testimony of witness E.A. Golikova, who visited the Bank's branch at Sokol on the editors' instructions. The Iskra news agency is not mentioned at all in any mass medium as the source of the distributed information, and the evidence produced by the respondent in corroboration of this fact is questionable.
The plaintiff considers erroneous the respondent's interpretation of the Decision of the Constitutional Court of the RF of December 4, 2003, set out in the appeal, believing that the Constitutional Court not only established the constitutionality of Paragraph 7, Article 152 of the RF Civil Code, but also pointed out that the corresponding legal precept applicable to the protection of the business reputation of legal entities gives the court the right to make a decision on this question within the limits of the freedom of discretion vested in a law enforcer by law, which cannot be considered a violation of any constitutional rights and freedoms. In the plaintiff's opinion, the law, particularly that pertaining to the protection of the business reputation of a citizen, correspondingly applies to the protection of the business reputation of legal entities; at the same time, the absence in the law of a direct indication of the means of protecting the business reputation of legal entities does not deprive them of the right to demand compensation for damages, including nonmaterial losses caused by denigration of their business reputation, or nonmaterial damage having its own substance. The Convention for the Protection of Human Rights and Fundamental Freedoms allows the recovery of fair compensation by an aggrieved party, including a legal entity, from a state guilty of violating its statutes in order to enforce the right to a fair hearing.
In the plaintiff's opinion, the respondent's argument that, when pronouncing judgment, the court did not examine the question of whether the reputation of the plaintiff was restored as a result of those means (costs) that it had, or the fact of retraction is enough to restore the business reputation of the plaintiff, does not meet the requirements of the law and contradicts the nature of the informational dispute. The indicated conditions, in their opinion, are not the subject to prove and the amount of compensation of the moral damage depends on the character of the disputable legal relationships and specific conditions worthy of notice.
The plaintiff did not agree with the arguments of the appeal that the court had not examined the words constructions and semantic units of the text that constitute material that does not represent fact. The court, during the disposition, had given an analysis of the substantial-semantic orientation of the disputable published report that was indicated in the text of its decree. Besides, the plaintiff considers the evidence of the appellee – the testimony of A. Golikova, N. Kulakova and S. Kubarova – not to have that meaning and to be refutable by other evidence in the case. In disseminating information that does not represent facts, denigrating the reputation of the plaintiff, the respondent did not know and did not want to know the peculiarities of the working loads of the Alfa Bank branches situated in the central transport zones of Moscow. In their opinion, the respondent's arguments that the report was not a statement of fact, for the fragment of the report was a dialog containing confirmations in the replies to a question are not sound. The information about long lines and lists of those who wanted to make withdrawals intensifies the information about Alfa Bank's crisis.
The written testimonial of the plaintiff on the respondent's appeal contains arguments concerning the grounds for the recovery of the damages lodged and satisfied. The plaintiff considers the presence of the unlawful behavior of the respondent and damage in a causal relationship between unlawful behavior and consequences, the respondent's guilt, and, accordingly, the reputational damage that was caused to the business reputation of the legal entity proven. In the plaintiff's opinion, they have provided grounds for the presence of the damage and the amount of it with the evidence produced. The plaintiff gave evidence to each type of damage and calculations. The plaintiff's representatives supported the arguments of written testimonial at the sitting of the court.
Having examined the materials of the case, having discussed the arguments of the complaint, having listened to the representatives of those in the court and having examined the legality of the appealed judicial act according to Article 34 of the Arbitration Procedure Code of the RF, the appeals court considers that there are grounds for the changing of the court decision in the part of the recovery of damages, leaving the rest of the decision without changes in connection with the following.
According to the case materials, the article “The Banking Crisis Comes Out on the Street: Customers Confront Backbone Banks,” Kommersant No. 121, July 7, 2004, became the grounds for the complaint lodged by Alfa Bank. In its opinion, the article does not represent the facts and denigrates its business reputation. For the violated nonmaterial right – the business reputation – to be defended, the plaintiff, on the basis of Article 152 of the Civil Code of the RF, chose to demand refutation of the facts denigrating its business reputation and also to receive compensation for the damages and nonmaterial “reputational” damage in the stated amounts.
When examining the demand of the plaintiff, the court of the first instance came to the conclusion that there were legal foundations for satisfying the suit in corpore, and the validity of the fact of dissemination of information not representing the facts and denigrating information about the plaintiff, and accordingly, there were grounds to recover damages and “reputational” damage. These conclusions, in the opinion of the appeal court, are well-grounded and correspond to the rule of law and the evidence that has been produced.
The right of a legal entity to defense of its business reputation is provided by the Article 152 of the Civil Code of the RF. According to Article 150 of the Code, business reputation is a nonmaterial good that is defended in accordance with the Code and other laws in the cases and on the bases it provides. According Paragraph 1 of Article 152 of the Civil Code of the RF, a citizen has the right to demand a refutation of information that denigrates his honor, dignity or business reputation if the one who has disseminated the information fails to prove it represents the facts. Paragraph 5 of Article 152 of the Civil Code of the RF indicates the protective devices for nonmaterial rights, among which there are refutation of the information and also payment of damages and moral damage that the disseminator has caused. Paragraph 7 of Article 152 of the Civil Code of the RF indicates that regulations on the defense of the business reputation of a citizen are applicable to the defense of the business reputation of a legal entity.
Taking into consideration that, for the usage of the indicated means, it is necessary to elicit the fact that the respondent has damaged the business reputation of the plaintiff, the court of first instance, based on the conditions of the indicated article has properly defined the circumstances that need to be proved. The court has to define the following circumstances: 1. the fact of the distribution of the information; 2. the detrimental character of the information; 3. discrepancy in the representation of the facts. Paragraph 2 of the Resolution of Plenum of the Supreme Court of the Russian Federation No. 11 of August 18, 1992, “Some Questions when Examining Cases of the Defense of the Business Reputation of Citizens” in the edition of Resolutions of the Plenum of the Supreme Court of the Russian Federation of December 21,1993, and April 25,1995, provides criteria for defining information that does not represent facts and recognizing it as detrimental, and Paragraph 7 establishes an assessment of the obligations on substantiation: the respondent has to prove that the disseminated information represents the facts, regardless of whether the suit claimed the protection of honor, dignity or business reputation or making the mass media responsible for publishing the plaintiff's response to the article; the plaintiff has to prove that the very fact of the dissemination of the information by a person the suit is made against.
Paragraph 2 of the Resolution named defines the criteria for recognizing information as detrimental, along with the assertion of a violation current legislation by a citizen or a legal entity; it is also indicated that this can be information that denigrates industrial or economic activity or public work that deprecates the honor and dignity of a citizen or the business reputation of a citizen or legal entity. In this connection, the court of first instance has soundly established the possibility of examination of the content of the contested article for the purpose of finding it detrimental to the industrial and economic activity of the plaintiff.
Information can be recognized as not representing the facts if it presents information about facts that did not occur or when facts that did occur are introduced falsely with negative color.
As follows from the case materials and court decision, the plaintiff presented a petition for the examination of witnesses E. Golikova, N. Kulakova, and S. Lubarova to prove the authenticity of the stated information in the article. Having evaluated the testimony of the witnesses questioned, the court came to the conclusion that their accounts did not prove the fact of the authenticity of the disseminated information.
In the appeal, for the confirmation of the fact, the respondent refers to the testimony of the named witnesses, but for all that does not disprove the stated evaluation of the court of the original jurisdiction. Meanwhile, the court soundly took into consideration the circumstances that characterize the witnesses' behavior and influencing on the establishing of the reality of the published information.
In the court decision, it is emphasized that witness N. Kulakova had work for Kommersant and witness E. Golikova had been a journalist there. Furthermore, N. Kulakova, after coming to the Sokolniki branch on July 6, 2004, was unable to cancel the contract on the bank deposit because of a line of some 20-25 people at the entrance to the lobby, but she did not enter the lobby and she did not prove she put her name on the clients' list for the withdrawal of money. The court examined the testimony of E. Golikova, who went to the Sokol branch at the behest of the respondent. Her account of the facts coincides with the information in the article regarding the the Sokol branch and cannot actually prove its content. Witness Lubarova's testimony has the information from July 7, 2004, and in that connection the court recognized it as irrelevant to the case in question.
During the examination of the testimonies of the witnesses named, the court took into consideration the arguments of the plaintiff that the apparatus of the electronic numeration of the clients had been functioning in the normal operating mode of Alfa Bank branches and recorded numbers starting not from “one” but from “hundred,” which was proved by a letter from the Europeum Co., No. 495/3 of October 19, 2004. The company delivered the system to manage the electronic line in Alfa Bank branches. In addition, according to the video recording from July, 6, 2004, made by the security cameras in the Baltiisky branch, the court came to the conclusion that the information in the disputable article that there was a “crowd of some 80 people” was inaccurate; the situation in the bank was not critical and the branch was working in its normal regime and money was available in the cash machines. Video recordings made by security cameras on July 6, 2004, in the central branches of the bank – Tverskaya-Yamskaya, Mayakovsky, Myasnitsky, Okhotny Ryad, Petrovsky, Bolshaya Polyanka, Rizhskaya, Varvarka, Presnensky Val – in the opinion of the court of the first instance, refuted the information in the article about the long lines in the bank branches, the closing of some of the central branches and the lack of cash in the cash machines.
The court of first instance evaluated the content of the activity log on cash withdrawals in the branches of Alfa Bank of July 6, 2004, that shows that, on July 6, 2004, all 22 branches of the plaintiff were working, and the number of cash transactions on withdrawal did not go beyond 100, including the supplemental Baltiisky branch.
The respondent did not provide any other testimony to the court of first instance or the appeals court.
Under these circumstances, the appeals court agrees with the conclusions of the court of first instance that the respondent did not prove its information. The appeals court did not recognize the arguments of the appeal as well-founded that the court had not displayed the word constructions and semantic text units that constitute information that represented facts and that the court had not analyzed the substantive-semantic orientation of the disputed published report.
On page 4 of the decision, there is an analysis of the substantive-semantic orientation of the disputed published report, and the court emphasized some assertions that carry semantic meaning and that fall into the category of information that did not represent the facts: Moscow branches of Alfa Bank were “attacked by clients,” the bank branches were “besieged” by the hundreds of depositors, who formed long lines, some branches stopped working (“some branches in the center were closed at the same time”), and, according to a source in the bank, “only the processing center was working,” there was no cash in the cash machines and there were lists of the line to get money the following day. The analysis of the assertions made, together with the headline “Banking Crisis Comes Out on the Street: Customers Confront Backbone Banks,” subtitle “Chain Reaction” and the information that system developing banks like Alfa Bank and Guta Bank, which ceased making transactions with its clients on July 6, 2004, faced serious problems, in the court’s opinion, lead to the wrong conclusion regarding the situation in Alfa Bank.
Herewith, the appeals court finds the arguments of the plaintiff well-founded that the position of the respondent is unsound, that the disputed article had no confirmation of the facts. The extract of the article starting from “‘Did you register for tomorrow?’ a man at the end of the line asked. ‘What’s the use?’ they answered him. I registered at the central branch this morning and it gave no results. I had to come here.’ A girl standing by the entrance to the lobby crowded with people says that the line for withdrawals has been standing for three hours and there are some 40 people before her. ‘But the situation here is better than in the center. My colleagues from the office visited all the branches. It’s worse there. They have some 200 people in the lines, they register for the following days’,” is a dialog system that has affirmations of the presence of definite circumstances, that are affirmative constructions.
The information that Alfa Bank’s clients want to withdraw en masse, stand in the long lines, some branches in the center are closed, there’s a list for the line, there’s no cash, testifies to the crisis financial state of Alfa Bank, and its inability to fulfill its duties. In this connection, the information stated in the article, as the court of first instance soundly indicated, not only does not represent the facts, but also denigrates the plaintiff as a credit organization. While evaluating the statements of the appeals court, the following should be taken into consideration: Paragraph 1 of the Resolution of the Plenum of the Supreme Court of the Russian Federation of August 18, 1992, No.11 (in the edition of the Resolutions of the Plenum of the Supreme Court of the Russian Federation of December 21,1993, March 25, 1995, No. 6), that drew the attention of the courts to the fact that the business reputation of legal entities was one of the conditions for their successful activity. The condition stated obliges the courts, when examining a dispute on the protection of the honor and dignity of citizens and the business reputation of citizens and legal entities, to analyze thoroughly all the circumstances of every case in that category. In this connection, in the opinion of the appeals court, to determine if information is detrimental, it is necessary to take into consideration the character if the plaintiff’s activity, how it raises funds, including natural persons-depositors. The possibility to do that, in accordance with Article12-FL of December 2, 1990, No. 395-1 of “On Banks and Banking Activity” depends on the presence of a license. That testifies to the definite conditions of this business, the aim of which is the reduction of risk in repayment of funds to depositors. The essence of Article 4-FL of August 8, 2001, No. 128-FL “On the Licensing of Certain Activities,” licensed activities are those activities that may entail damages to the rights, legal interests, health of citizens, etc. This also acknowledges the fact that depositing money in a bank has a certain risk for the parties involved. Dissemination of false information in the mass media about the breach by the bank of its obligations concerning repayment of funds due to financial crisis, i.e. about the risk of non-repayment, which can imply the inability to secure deposits on the part of the depositors, all of this adversely defines activity of the bank as a subject of entrepreneurial business unable to exercise accepted obligations duly. This influences the further successful exercise of statutory activity in view of probable reposal of confidence in the bank, as well as of the quitting of their contract relationships by depositors.
In addition, the plaintiff being in civil relations with the depositors has corresponding obligations before them, thus it is not simply a credit organization, but a main bank, with a high percent of clients investing their financial resources in it. As follows from the article in dispute, Alfa Bank was the fifth bank by the size of its own capital (26 billion rubles) and fourth by the sum of its net assets, deposits by individuals equaling 31.97 billion rubles. According to the OAO Alfa Bank charter, it has 30 branches in the largest cities of the Russian Federation, as well representative offices in Kazan and Great Britain.
It is important to take into account the fact that the subject of distribution of the invalid information is an authoritative print edition and, being a media outlet, it has influence on the formation of public opinion, including its view of the bank’s business reputation.
The respondent’s arguments in support of it having received the invalid information from information agencies do not provide enough grounds to release it from responsibility. The respondent refers to having received the disputable information from the Iskra information agency; however, there is no reference to it in the article. According to Article 23 of the law mentioned, in cases when a media source cites the material of an information agency, it is obligatory to make reference to the original source of the material. Besides that, the respondent did not present any proof confirming this fact.
Having established the circumstances of the distribution of invalid information discrediting the business reputation of the plaintiff, the measures chosen by the plaintiff for its protection were applied by the court of the first instance on valid grounds. In investigating the reasons for the respondent’s appeal, the complaint regarding the basis for loss and reputational damage claims, the Appeals Court has come to the following conclusions.
One of the main arguments of the appeal is that nonmaterial, the so-called “reputational” harm may not be charged by analogy to moral harm on the basis of current Civil Law. Nevertheless, according to the opinion of the appeals instance, the analysis of norms of the RF Constitution, the RF Civil Code, the positions of the Convention on Protection of Human Rights and Basic Freedoms used by the court on the basis of Article 13 of the RF Arbitration Process Code, judgment acts of the RF Constitutional Court, the RF Supreme Court, and the European Court on Human Rights allow a conclusion to be drawn on the possibility of applying the same rules to protect the business reputation of a legal entity as the ones applied for the protection of a physical entity, including those on indemnification of nonmaterial “reputational” harm.
Article 46 of the RF Constitution provides guarantees of court protection to any person’s rights and freedoms. According to Article 17 of the Constitution, realization of rights and freedoms of an individual must not violate the rights and freedoms of other individuals. Article 19 of the RF Constitution confirms that of all are equal before the law and court.
Article 150 of the RF Civil Code, defining the objects of nonmaterial rights of individuals and legal entities, implies that nonmaterial welfare is subject to protection in accordance with the Code in force and other laws, and also in those cases and those limits in which the use of ways of protection of civil rights follows from the essence of the violated nonmaterial right and character of consequences of its infringement.
Article 12 also stipulates that the protection of rights may be carried out in different ways provided by law. In developing the specified norm with clause 5 of Article 152 of the RF Civil Code, the physical entity discredited by distribution of invalid information may demand refutation of this information along with indemnification of moral harm caused by its distribution. Item 7 of the specified article provides a rule that these positions apply to the protection of the business reputation of a legal entity.
The denial issued by the RF Constitutional Court on December 4, 2003, No. 508-O of the complaint by Vladimir Arkadyevich Shlafman of infringement of the constitutional right specified in item 7 of Article 152 of the RF Civil Code, confirmed that the right to judicial protection by its nature can belong both to physical and legal entities. The application of the exact means of protection of the violated rights for protection of the business reputation of legal entities proceeds from the nature of the legal entity. The absence of direct mention in the law of the means of protection of the business reputation of legal entities does not deprive them of the right to present claims for compensation of damage, including that of a nonmaterial nature, inflicted by the demeaning of business reputation, or nonmaterial damage (its content different from the content of moral damage inflicted upon a physical entity), which flows from the essence of the violated nonmaterial right and the character of the consequences of this violation. The given conclusion as it is specified in Definition of the Constitutional Court of the Russian Federation is based on positions of Article 45 (part 2) the Constitution of the Russian Federation, according to which everyone has the right to protect rights and freedom in any way that has not been forbidden by the law.
Thus the Definition of the Constitutional Court contains an indication, according to which the Convention on Protection of Human Rights and Basic Freedoms, which in accordance with Article 15 (part 4) of the RF Constitution is the component of the RF legal system that allows for charges to be pressed against the state, when guilty of infringement of its provisions for fair indemnification to the dissatisfied party, including a legal entity, as maintenance of the right to fair proceedings (Article 41).
Based on that, the European Court on Human Rights, in the case of Comingersoll v. Portugal, ruled on April 6, 2000, that the court can not exclude a commercial company of indemnification for nonmaterial losses. Thus it is necessary to consider the company’s reputation, uncertainty in planning decisions, obstacles in managing the company, and inconveniences caused to the company’s administrative board.
In addition, in the resulting Decision of the European Court on the case specified (source: web site of the European Court on Human Rights, Russian translation by Vestnik Vysshego Arbitrazhnogo Suda RF, 2001, No.2), it is mentioned that, in view of its own judiciary practice and the practice in member states of the European Council, the Court cannot exclude the possibility that indemnification for nonmaterial losses can be awarded to a commercial company. The court recalls that the Convention should be interpreted and applied so as to guarantee rights that are real and effective. Therefore, since the basic form of indemnification is monetary compensation, the Courts must have the authority, if the right guaranteed by Article 6 of the Convention is to be realized, to award monetary indemnification for nonmaterial losses to commercial companies.
An analysis of the norms of the law and the specified judgments allow a conclusion to be made on the necessity of the court to maintain equal protection of the non-property rights of physical and legal entities, and on equal responsibility at their infringement, irrespective of their subject structure, and on the plaintiff’s right to collect nonmaterial "reputational" harm as a measure of protection.
At an estimation of the violated nonmaterial right and the nature of consequences of this infringement, the appeals court took into account both the value of the information discrediting the plaintiff, which was specified before, and the degree of the distribution of the invalid information, as well as the consequences suffered by the plaintiff from their distribution. From information provided by Kommersant newspaper, it follows that its circulation is 118,748 copies, printed in 18 cities of the Russian Federation: Vladivostok, Volgograd, Voronezh, Ekaterinburg, Irkutsk, Kazan, Krasnoyarsk, Moscow, Nizhny Novgorod, Novosibirsk, Omsk, Perm, Rostov-on-Don, Samara, St. Petersburg, Frankfurt-on-Main, Khabarovsk. From the explanations of the plaintiff, it follows that the sum of deposit withdrawals from July 7 to 12, 2004, was 6,031,816,000 rubles, which constitutes the material expression of the loss of trust on the part of investors. However, the respondent did not name the sum of “reputational” damage claimed by the plaintiff as ruinous or excessive, in essence not voicing objections to its size.
The respondent, challenging in essence the charge by the court of the sum of losses declared by the claimant, considers the conditions of civil responsibility not to have been proven, and in particular, the fact of infliction of damage by the actions of the respondent and presence of a cause-and-effect relationship between the actions of the respondent and the damage caused to the plaintiff, as well as the size of inflicted losses declared by the plaintiff.
As was mentioned earlier, the plaintiff declared the following losses: 1) loss from non-reception of interest on credits to the amount of 2,398,829 rubles and 80 kopeks; 2) loss of 7,447,119 rubles and 73 kopeks from the additional purchase of U.S. dollars in cash; 3) loss from an unplanned advertising campaign of 8,496,327 rubles and 37 kopeks; 4) loss for additional expenses for security of 1,694,791 rubles and 93 kopeks; 5) loss for additional expenses for collecting money of 169.874 and rubles 97 kopeks.; 6) loss for increased staff labor of 298,962 rubles and 89 kopeks.
According to Article 15 of the RF Civil Code, implied by losses are expenses which the person whose right is violated has incurred or should incur for the restoration of the violated right. The loss is defined by expenses that the person whose rights were violated had to pay, loss or damage of his property (real damage), and also income not received that this person would have received under usual conditions if his right had not been violated (the missed benefit).
For indemnification of damage, which is a measure of civil-law responsibility, it is necessary to prove the conditions under which it may be inflicted, as well as proof of the size of the inflicted damage.
Point 10 of the Decision of the Plenum of the RF Supreme Court and the Plenum of the RF Supreme Arbitration of July 1, 1996, No. 6/8 “On Certain Issues Connected with the Application of the First Part of the RF Civil Code” places special emphasis on the fact that real damage is constituted not only by the loss actually suffered by a person, but also expenses that the person must take to restore the violated right. The need for such expenses and their assumed size must be confirmed by accounts and proofs of the expenses for the elimination of damage of goods, works, and services: the contract determining the size of the responsibility for infringement of obligations, etc.”
As follows from the claim requirements, compensation for both real loss and losses, and the losses representing missed benefit, were satisfied by the court of the first instance in full. However, on examination of the stated reasons of the appeals court in this part, the appeals court agrees with the respondent in the part of lack of proof for charging of the following losses: 1) from purchase of additional U.S. dollars in cash of 7,447,119 rubles and 73 kopeks ; 2) loss for additional expenses for security of 1,694,791 rubles and 93 kopeks; 3) loss for additional expenses for collecting money of 169,874 rubles and 97 kopeks; 4) loss from additional staff labor of 298.962 rubles 89 kopeks. The plaintiff explained to the court that the specified expenses were made to restore its rights, violated by the respondent’s illegal actions. However, in the opinion of the appeals court, there is no cause-and-effect relation between the expenses incurred by the plaintiff and the actions of the respondent. In addition, the plaintiff being in civil relations with the depositors has corresponding obligations before them, thus it is not simply a credit organization, but a main bank, with a high percent of clients investing their financial resources in it. As follows from the article in dispute, Alfa Bank was the fifth bank by the size of its own capital (26 billion rubles) and fourth by the sum of its net assets, deposits by individuals equaling 31.97 billion rubles. According to the OAO Alfa Bank charter, it has 30 branches in the largest cities of the Russian Federation, as well representative offices in Kazan and Great Britain.
The recovery of losses caused by not receiving interest income on credits in the sum of 2,398,829 rubles and 80 kopeks and the launch of an unplanned advertising campaign at a sum of 8,496,327 rubles and 37 kopeks, in the opinion of the appeals court, was imposed with grounds, since the bases for these indemnifications has been demonstrated by the plaintiff by evidence presented in the case. Evidence was investigated by the court of the first instance concerning the impossibility of carrying out crediting in light of increased public activity in withdrawing monetary funds, which was caused by information published in the disputed article that did not correspond to reality. The court investigated the journals for the distribution of monetary funds in individual Alfa Bank Express retail sales branches on July 6 and 7, 2004, and the account signed by the chief accountant of the bank of the size of the monetary funds distributed to bank clients on July 6 and 7, 2004. The plaintiff, referring to the Instruction of the Bank of Russia “On the Procedure for Regulating the Activities of Banks” of October 1, 1997, No. 1, and the letter of the Bank of Russia “On Recommendations for the Analysis of the Liquidity of Credit Organizations” of July 7, 2000, No. 139-T, showed that a sharp drop in the volume of deposits from individuals led to the cessation from July 7 to 12, 2004, inclusive, of the Regulation on the Acquisition, Allocation and Funding of Resources, which had been passed by the bank, which meant cessation by the bank of the process of granting credit. The information presented by the plaintiff based on the accounting records of the credit organization for July 6, 2004, confirm that the aggregate sum of monetary funds in the corresponding accounts of Alfa Bank as of the end of the day of July 6, 2004, amounted to 6,534,244 rubles and 00 kopeks. Documents also presented by the plaintiff confirm the presence of demand to receive credit among the bank’s potential borrowers and the bank’s readiness to provide that credit. The total sum of the credits not provided by the plaintiff and the sum of the interest income not received from those credits has been confirmed by an account of ZAO BDO Unicon. In the opinion of the appeals court, the plaintiff has also proven the expenses connected with the unplanned advertising campaign. Services for the production and airing of the television advertising with content intended to restore the business reputation of the plaintiff were provided by OOO BBDO Marketing under Agency Contract No. 01/04 of January 5, 2004, but unplanned, caused by the distribution by the respondent of information not corresponding to reality. This is confirmed in a letter from the plaintiff of July 9, 2004, No. 323/007-1-6, as well as the response from BBDO Marketing dated July 9, 2004 and payment made according to payment instruction No. 1 of July 29, 2004. In this part, the arguments of the appeal are not subject to satisfaction. They cannot be acknowledged as having a basis, in the opinion of the appeals court, nor can arguments about violations of the norms of process law by the court of first instance. As can be concluded from the materials of the case, a petition was filed by the respondent for the reconsideration of the case by a grand jury, not arbitration assessors, in connection with which the petition was refused by the court of first instance because the Arbitration Procedure Code of the RF does not provide for the hearing of cases by a grand jury. In addition, an analysis of Article 28 of the Arbitration Procedure Code also does not allow the conclusion to be made that the jurisdiction of the dispute on reimbursement for “reputational” damage to a legal entity was violated by the court. The appeals court cannot agree with the arguments of the appeal of the non-jurisdiction of the arbitration court over the dispute. Article 33 of the Arbitration Procedure Code provides for cases pertaining to special jurisdiction of the arbitration court over cases, among which are listed cases of defense of business reputation in the sphere of enterprise and other economic activities. On the basis of the above, the appeals court, in accordance with Articles 266-268, item 2, Article 269 and Article 271 of the Arbitration Procedure Code of the RF.
The decision of the Arbitration Court of Moscow in case A40-40374/04-89-467 of the suit by OAO Alfa Bank against ZAO Kommersant Publishing House to change in part the indemnification for losses. Indemnification against respondent Kommersant Publishing House in favor of OAO Alfa Bank 10,895,157 rubles and 17 kopeks. The remainder of the decision remains without change.
E.E. Borisova, presiding
A.A. Solopova, V.V. Popov, judges
All the Article in Russian as of Jan. 31, 2005