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When is a state responsible for what its companies do? The European Court of Human Rights' approach to state-owned enterprises

Under the case law of the European Court of Human Rights, a state can in some circumstances be held responsible for the acts and omissions of a state-owned enterprise. This applies where that conduct breaches the European Convention on Human Rights. The key concept is attribution: whether a company's conduct can be legally linked to the state.

The Court's leading statement of the criteria is in Liseytseva and Maslov v. Russia (ECtHR, First Section, Application Nos. 39483/05; 40527/10, 9 October 2014), building on earlier cases such as Mykhaylenky & Others v. Ukraine (ECtHR, Second Section, Application Nos. 35091/02, 35196/02, 35201/02, 35204/02, 35945/02, 35949/02, 35953/02, 36800/02, 38296/02 and 42814/02, 30 November 2004). Much of this case law arose from states' failure to pay judgment debts owed by state-owned companies to their employees and creditors.

The Court looks at several factors together. No single one is decisive.

• Legal status. Was the enterprise created under public law, and does it have special powers or functions normally reserved for public authorities?
• Nature of the activity. Does it provide essential public services, such as water or sanitation, under government control? This can count even where private companies offer similar services.
• Context of operation. Is it heavily regulated, a monopoly, or shielded from market competition? These features point towards a public function.
• Independence. Does the government appoint the board, control major decisions or finance operations? If so, the enterprise may be treated as an arm of the state.

In short, the more an enterprise lacks real independence and performs public functions under state control, the more likely its conduct will be attributed to the state.

Dr Mihaela Maria Barnes of Nomos Strategy advised the Council of Europe on the development of this explainer, produced under its project "Human Rights and Environmentally Responsible Business Practices" and funded by the Human Rights Trust Fund.

This post is for information purposes only and does not constitute legal or professional advice. Readers should obtain advice from their own counsel before acting on its content.