GEO

The Court Order regarding the appointment of the Special Manager at “Georgian Manganese” LLC is unsubstantiated

04 July, 2017

“Transparency International - Georgia” examined Tbilisi City Court Order dated May 11, 2017, according to which a special manager was appointed at “Georgian Manganese” LLC, for the purpose of complying with licenses and permits. We believe that taking into account the volume and complexity of the case, the dispute may have been reviewed in an accelerated pace, with a number of procedural violations and without considering the interests of the party. In addition, the part of the Court Order with which the special manager is granted unjustifiably broad authority deserves special emphasis.

Substance of the Court Order and Existing Problems: 

The Ministry of Environment and Natural Resources Protection of Georgia and LEPL National Environmental Agency addressed Tbilisi City Court on May 10, 2017 and requested the appointment of the special manager at Georgian Manganese LLC, which request was satisfied by the Court. According to the law, appointment of a special manager at a company is possible if the company repeatedly fails to fulfill the prescribed license/permit terms and the court deems that the only way to resolve the dispute is to appoint a special manager. 

The Court reviewed the case in an accelerated manner. Despite the fact that the motion, including the evidences, was 1195 pages and fell under the complex legal category, the judge reviewed the case in 24 hours without oral hearing and without notifying the party.

It can be said that with the mentioned action the Court limited the party’s right to fair trial, as in the process of adjudication of dispute, it deprived the party of the opportunity to present its own position and evidences within the reasonable time-frame.

The judge settled the issue with Temporary Order. Temporary Order represents one of the types of the interim measures. According to the law, while applying the interim measures, the court relies on the assumption that the claim may be satisfied. It is worth mentioning that the party may use the interim measures prior to submitting claim to the court, however in such case it is mandatory that the party shall submit the main claim to the court within the 10 day term from the date of issuance of the Order. In case of failure to fulfill the mentioned obligation, the Order concerning the use of interim measures shall be annulled.

In the conditions when there is no main claim in the case and the dispute is substantively resolved, it is unclear what should have been secured by the court by using the Temporary Order. From this perspective, the court’s motivation is so vague that it creates grounds for legitimate doubts, which will definitely have negative impact on the court’s reputation and lead to the proportional decrease of trust towards this institution. [1]

With the court decision, the Order was designated for immediate enforcement. The special manager was designated as the authorized person for managing/representing the company before the Order entered into legal force. And all of the mentioned limited the party’s access to those evidences which may be kept at the company and could have been used by the party during the review of the dispute at appellate instance. 

According to the operative part of the Order, the management of the company shall be fully executed by the special manager. Without any substantiation, the Court has granted to the special manager the authority of all the three branches of the company’s management – the Director, the Supervisory Board and the General Meeting of Shareholders, while according to the law, the special manager should be appointed only for the purpose of carrying out license/permit activities.

Therefore, the purpose of granting the special manager such authority, which is not related to the fulfillment of permit/license conditions, is unclear. Such as, for instance, making the decision concerning the selling of the products of Georgian Manganese LLC. With this decision, the impression was created that the Court acted against the interests of Georgian Manganese LLC and the aim of the decision was to remove the company management and the holder of the majority of the shares from the management. 

Conclusion

Despite the fact that the practice of appointing special managers is established by the Supreme Court[2], we believe that the review of the voluminous and legally complex case in 24 hours without notifying the party and consequently, designating such Order for immediate enforcement, harms the interest of another party and limits the right to fair trial. Although, the laws do not contain the norms regulating the appointment of special manager, nevertheless, the Court could have relied on the norms most related to the substance of the dispute and reviewed the case in such a manner that would provide the party with the opportunity to present its own position and evidences in reasonable time-frame.

In addition, we deem it significant that the ruling must contain whole and comprehensive reasoning as to why it was necessary to grant the special manager such broad authority.

Moreover, we would like to underline that in the given case the subject of our examination was not the issue of whether Georgian Manganese LLC violated the norms established under the law “On Licenses and Permits” and to what extent the motion submitted to the Court by the Ministry of Environment and Natural Resources Protection of Georgia and LEPL National Environmental Agency was substantiated. This case indicates at the alleged violation of procedural and internationally recognized norms by the Court. 

It is worth mentioning, that “Transparency International - Georgia” has been monitoring the processes undergoing in the court system for years. The mentioned case is not the first that caught the interest of the organization. In 2017 our organization, also, examined a civil law dispute where the signs of alleged conflict of interests and corruption were identified.


[1] It has to be noted that Georgian Manganese LLC has one of their cases against the state at the Kutaisi Appeals Court. The case concerned the penalty issued in 2015 by the Revenue Service. The penalty was cancelled by the court and the case has been referred back to the Revenue Service for reconsideration.  

[2] Decision of the Supreme Court of Georgia, Case N ბს-689-655(კ-კს-09), 13 July, 2009.