Bankrupt tour operator had right to pursue infringement claim, court hears

A man, whose tour operator allegedly went bankrupt following a decision by the Central Bank of Malta, had a personal legal interest in pursuing his rights violation claim, the Constitutional Court has heard.

The statement marked a partial victory for Lawrence Borg who has brought constitutional proceedings both in his personal capacity as well as on behalf of Cerviola Hotel Limited and Cerviola Holidays Limited, years after a turn of events would have put his business on your knees.

It all started with a scheme introduced by the government in 1986, known as the Sterling Guaranteed Special Rate or Forward Purchase Rate, administered by the Central Bank and aimed at securing a more favorable exchange rate for tour operators carrying tourists to Malta.

Through his UK-based company, Cerviola Holidays Limited, Borg has benefited from this program when booking charter flights with Air Malta and arriving tourists from the UK.

Borg’s other company registered in Malta, Cerviola Hotel Limited, also operated in the tourism industry.

Things took a negative turn when the Central Bank pointed out some irregularities in Borg’s business, which even led to criminal charges against the businessman.

In 1994, he was acquitted of all alleged wrongdoing related to the running of the scheme and that acquittal was upheld two years later by the superior court presiding over an appeal by the Attorney General.

Still, Borg’s situation regarding the Central Bank scheme remained unchanged.

His lucrative business is running out of steam, his businesses are suffering “enormous” financial losses as several charter flights have had to be canceled and operations curtailed, while bank accounts are frozen by the bank.

Finally, in 2016, Cerviola Hotel Limited was delisted as ‘defunct’ while Cerviola Holidays Limited was dissolved.

Borg, who owned a “substantial” number of shares in both companies, lost his stake and his value.

Complex and long saga

The issue was the subject of a complex and long saga that unfolded in local courts, which also reached the ECHR where Borg claimed that his rights had been violated due to the length of the proceedings, the the low compensation awarded and the lack of compensation for non-pecuniary damages. damage.

This court dismissed his complaints in part in view of a government statement in 2011 which acknowledged the unreasonable delay in the criminal proceedings against Borg and thus offered to pay €1,500 as part of an out-of-court settlement.

Borg persevered by filing a petition in the first chamber of the civil court in his constitutional jurisdiction in 2019, claiming that his rights had been violated when he had been slapped with “disguised punishment” and also because he was allegedly the victim of discrimination.

Borg claimed that other participants who benefited from the program continued to do so after their irregularities “were forgiven”.

This is not the case in his case, asserted Borg.

The first court rejected these requests, finding that he was not the sole shareholder and that, moreover, the two companies had been deregistered before the filing of the case.

The problem with the Central Bank dates back to 1990 and Borg had enough time in all those years to seek redress for the alleged rights violation, the court heard, finding that neither Borg nor his companies had a legal interest in the procedure.

Borg appealed and the dispute ended up in the Constitutional Court which declared the appeal void with respect to the non-existent companies but valid with respect to Borg in his personal capacity.

Counsel for the appellant argued that his client was a victim since he was “the only person affected by the measures and [one] who had a direct, real and personal interest” in the matter.

His businesses went bankrupt and he lost all his shares and the money invested.

The Constitutional Court, presided over by interim president Giannino Caruana Demajo and judges Anthony Ellul and Grazio Mercieca, referred extensively to ECHR case law that it is only in exceptional circumstances that a violation of human rights of the company amounts to a violation of shareholders’ rights. rights.

Such circumstances were deemed to exist when the company and its shareholders were “so intrinsically linked that it would be artificial to distinguish them from each other”.

The state’s attorney, in responding to Borg’s claims, argued that the shareholders did not have collateral victim status “unless the damages affect their personal property.”

And that is what it was all about, the judges observed, pointing out that the claimant’s claim related to the loss of shares he had suffered.

Although the merits of his claim relating to the alleged violation of his rights remained to be decided, it was sufficient at this stage to say that Borg had a legal interest in asserting his complaints before the courts.

And while the court could not say whether he was the sole shareholder or the actual number of shares, Borg’s “substantial” stake in the company was not disputed.

To say that the companies should have taken legal action before being struck off was irrelevant since the issue of the statute of limitations had never been raised, the court said.

Once the companies no longer existed, Borg could only seek relief in his personal capacity, the court found, upholding the appeal against him and returning the cases to the first court for further proceedings.

Lawyer Tonio Azzopardi assists the appellant.

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