CASE OF LAPTYEV v. UKRAINE

 

 

FIFTH SECTION

CASE OF LAPTYEV v. UKRAINE

(Application no. 30666/13)

 

 

 

 

 

 

JUDGMENT
 

STRASBOURG

13 April 2023

 

This judgment is final but it may be subject to editorial revision.

In the case of Laptyev v. Ukraine,

The European Court of Human Rights (Fifth Section), sitting as a Committee composed of:

 Mārtiņš Mits, President,
 María Elósegui,
 Kateřina Šimáčková, judges,
and Martina Keller, Deputy Section Registrar,

Having regard to:

the application (no. 30666/13) against Ukraine lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) on 29 April 2013 by a Ukrainian national, Mr Vadym Ivanovych Laptyev, born in 1967 and living in Kyiv (“the applicant”) who was represented by Mr R. A. Shchedrin, a lawyer practising in Kyiv;

the decision to give notice to the Ukrainian Government (“the Government”), represented by their agent, Ms M. Sokorenko, of the complaint under Article 1 of Protocol No. 1 and to declare the remainder of the application inadmissible;

the parties’ observations;

Having deliberated in private on 23 March 2023,

Delivers the following judgment, which was adopted on that date:

SUBJECT MATTER OF THE CASE

1.  The case concerns an alleged breach of customs regulations during the customs clearance of goods imported by the applicant’s company and the sanction imposed on the applicant, as the company’s managing director, in that connection, namely the confiscation of the goods combined with a fine in an amount equal to the value of the imported goods. The case raises an issue under Article 1 of Protocol No. 1 to the Convention.

2.  The applicant was the sole owner and managing director of the private company Finance-Business-Investments (“FBI”), based in Kyiv.

3.  On 12 November 2012 the Kyiv customs office conducted a customs check on an express shipment of documents sent by All Star Link Logistics Ltd in Taiwan to Mr Sl of Slaig Medical Ltd in Kyiv. The correspondence included an original commercial invoice (no. АТ 121017) dated 17 October 2012 issued by the company Zh in China to FBI. It concerned medical equipment (wheelchairs and their components) for the amount of 42,708.70 United States Dollars (USD). No copy of the invoice has been made available to the Court.

4.  On 30 November 2012 the limited liability company Inter Consulting (“IC”), represented by Mr V, conducted customs clearance of goods (wheelchairs and their components) imported by FBI. The value of the goods was declared as 69,290.40 euros (EUR). The documents submitted to the customs authorities together with the customs clearance declaration included a trade agreement of 3 September 2012 between FBI and Slige s.r.o (“S”), a company registered in the Czech Republic, concerning the equipment in issue and a pro-forma invoice No. AT121017 dated 17 October 2012 issued by S to FBI for the amount of EUR 69,290.40. The latter document has been made available to the Court.

5.  On 5 December 2012 the customs authority issued an administrative offence report finding the applicant liable under Article 483 § 1 of the Customs Code of Ukraine (“the CC”) for having concealed the goods imported by FBI from customs control by providing false data concerning their customs value. According to the report, a comparative analysis of the documents discovered in the international shipment on 12 November 2012 (see paragraph 3 above) and those submitted during the customs clearance of the goods imported by FBI showed that they concerned the same batch of goods, which FBI had bought from Zh for USD 42,708.

Noting further that the delivery address of the correspondence inspected on 12 November 2012 was the same as the actual and registered address of FBI and that the applicant was FBI’s managing director with first signature authority, the customs authorities concluded that there was sufficient evidence to conclude that he had committed the imputed offence.

It was also indicated in the report that by virtue of the relevant legislation FBI was exempted from paying value-added tax (VAT) on the imported medical equipment and that a zero-rate import duty was applicable to its transactions.

6.  The applicant challenged the administrative offence report before a court, arguing, inter alia, that he had not committed any offence. In particular, neither he nor his company had had any contractual relationships with Zh and he was unaware why, by whom and under what circumstances the original invoice referred to by the customs authorities had been sent to Sl (see paragraph 3 above).

Citing extensively the terms of the trade agreement of 3 September 2012 (see paragraph 4 above), the applicant submitted that FBI had bought the medical equipment from S for an agreed price which was indicated in the pro‑forma invoice issued by S. It was also agreed that the shipment of goods bought in China by S for FBI be carried out, at S’s request, by the company Zh directly to FBI. Both the trade agreement and the pro-forma invoice issued by S had been duly submitted at the customs clearance. According to the applicant, the difference in the amount indicated in the invoice issued by Zh and that issued by S was explained by the fact that the final price of the goods indicated in the pro-forma invoice issued by S took into account the delivery costs borne by S in accordance with the agreement of 3 December 2012.

The applicant further submitted that the customs authorities had not defined what the “correct” value of the goods was and why they thought that was the case. He further argued that, whatever the customs value of the imported medical equipment, his company was under no obligation to make payments to the State budget; thus no harm could have been caused to the State.

Lastly, the applicant submitted that he had not been “the declarant”, within the meaning of the CC, since he had been neither the person who had filled in and submitted documents for customs clearance nor the employee at FBI in charge of customs clearance issues. Accordingly, he could not be held responsible for the alleged breach of customs regulations.

7.  On 11 February 2013 the Solomyanskyi District Court of Kyiv (“the District Court”) discontinued the administrative offence proceedings against the applicant on account of the lack of constituent elements of an administrative offence in his actions. Relying on the relevant provisions of the CC and the Ruling of the Plenary Supreme Court No. 8 (see paragraphs 11 and 13 below), it pointed out that guilt in the form of direct intent to conceal goods was a sine qua non condition for engaging a person’s liability under Article 483 § 1. However, the administrative offence report did not indicate any particular acts that were carried out by the applicant with direct intent to conceal imported goods from customs control.

The District Court noted in this connection that the correspondence inspected on 12 November 2012 had not been addressed to the applicant and that a number of companies had been registered at the same address. It also observed that it had not been the applicant but rather IC which had conducted the customs clearance, and that M had been the employee at FBI in charge of customs issues and who had furnished IC with the necessary documents.

The District Court dismissed as speculative the customs authorities’ assumption, apparently made in the course of the hearing, of possible tax evasion by the applicant. It held that no over- or under-reporting of FBI’s tax liabilities had been established by the customs office on the basis of the customs inspection and pointed out that the applicant’s company was exempt from paying taxes and payments to the State budget. The court likewise dismissed the authorities’ argument that the applicant had submitted a forged invoice for the customs clearance. In this connection, the court held that that there was no evidence that criminal proceedings had ever been brought against the applicant on account of the alleged forgery.

Relying further on the terms of the agreement of 3 September 2012, the District Court established that the applicant had bought the goods at issue from S at the agreed price and that the customs value indicated in the customs declaration was based on that agreement, which was the correct method for calculation of the customs value according to the CC.

8.  The customs office appealed, reiterating their arguments set out in the administrative offence report and invoking the existence of two invoices for the same goods but for different values. The applicant lodged his objections to the appeal. In addition to his earlier arguments, he submitted that the offence was time-barred since the three-month statutory time-limit set out in the CC, as in force at the date when the alleged offence had been committed, had passed.

9.  By a final judgment of 3 April 2013, the Kyiv Court of Appeal (“the Court of Appeal”) overturned the decision of the first‑instance court and held that the applicant, being the owner and head of FBI, was liable for the provision of false data to the customs authorities in respect of the goods imported by his company. In doing do, it mainly reiterated the facts and arguments given in the administrative offence report. Citing further Articles 467 and 488 of the CC, as in force at the time of the examination of the case, the Court of Appeal noted that since the administrative offence report in respect of the applicant had been drawn up on 5 December 2012, the six‑month limitation period had not yet expired.

The Court of Appeal ordered that the applicant pay a fine in the amount of 341,639.70 Ukrainian hryvnias (UAH) which was equal to the value of the imported goods – USD 42,708.7 according to the court – and that the goods be confiscated as prescribed by the relevant Article of the CC. In doing so, it noted that it was the applicant’s responsibility to bear the negative consequences of a pecuniary and personal nature entailed by the offence he had committed.

10.  According to the applicant, the judgment of the Court of Appeal has not been enforced as far as the fine is concerned.

RELEVANT LEGAL FRAMEWORK

11.  The CC, as in force on 30 November 2012, provided as follows.

Article 4 defined the declarant as the person who carried out the declaration in person or on whose behalf the declaration was made.

Pursuant to Article 266 § 5, a person authorised to declare goods on behalf of a declarant had the same responsibilities and rights and bore the same liability as the declarant.

Pursuant to Article 459 § 2, the subjects of administrative liability for the violation of customs rules by enterprises might be employees of those enterprises; Article 4 defined employees of enterprises as managers and other employees who, by virtue of their work duties, were responsible for compliance with the requirements established by the CC, laws and other regulatory legal acts of Ukraine.

Pursuant to Article 467 § 2, a penalty for a breach of customs regulations could be imposed at the latest three months after the date on which the offence in question had been committed.

Pursuant to Article 483 § 1, the transfer of goods, or actions aimed at transferring goods, across the customs border of Ukraine, while concealing them from customs control by means of, inter alia, submitting to the customs office forged documents or documents containing false data relevant for determining the customs value of the goods, was punishable by a fine in an amount equal to the value of the goods which were the object of the customs offences, and by the confiscation of those goods and of any goods or means of transport containing a specific hiding place used in transferring such goods across the customs border of Ukraine.

Article 488 provided that proceedings concerning a breach of customs regulations started with the drawing up of a record of a breach of customs regulations.

12.  Article 467 § 2 of the CC, as amended on 1 December 2012, allowed the imposition of a penalty for a breach of customs regulations at the latest six months after the date on which the offence in question had been committed.

13.  In its ruling no. 8 of 3 June 2005 “On judicial practice concerning smuggling and breaches of customs rules”, the Plenary of the Supreme Court provided that liability for smuggling can arise only in the case of intentional concealment of goods from customs control.

THE COURT’S ASSESSMENT

PRELIMINARY ISSUES

14.  The Court notes that in its judgment of 3 April 2013 the Court of Appeal ordered the confiscation of the goods imported by the applicant’s company and imposed a fine on the applicant. The applicant lodged the present application with the Court in his own name. The Court finds in this connection that as the sole owner of the company the applicant may also claim to be a “victim”, within the meaning of Article 34 of the Convention, of the measures taken in respect of his company, that is the confiscation of the imported goods (see, among other authorities, Ankarcrona v. Sweden (dec.), no. 35178/97, ECHR 2000-VI, and Glas Nadezhda EOOD and Elenkov v. Bulgaria, no. 14134/02, § 40, 11 October 2007). The Government did not dispute this.

ALLEGED VIOLATION OF ARTICLE 1 of Protocol No.1 TO THE CONVENTION

15.  The applicant complained under Articles 6 and 13 of the Convention and Article 1 of Protocol No.1 to the Convention that the administrative penalty imposed on him had been time-barred, unlawful and disproportionate. Bearing in mind that it is master of the characterisation to be given in law to the facts of a case (see Lopes de Sousa Fernandes v. Portugal [GC], no. 56080/13, § 145, 19 December 2017, and Elena Cojocaru v. Romania, no. 74114/12, § 74, 22 March 2016), the Court considers that the complaints at hand should be examined from the standpoint of Article 1 of Protocol No. 1 to the Convention alone.

16.  The Government admitted that the sanction imposed on the applicant had amounted to an interference with his right of property. However, that interference had been lawful and proportionate. In particular, they submitted that the sanction had been provided for by Article 483 § 1 of the CC and had been mandatory; the Court of Appeal had comprehensively examined the case and found that such a sanction had been absolutely necessary and corresponded to the gravity of the administrative offence at issue.

17.  The Court notes that this complaint is not manifestly ill-founded within the meaning of Article 35 § 3 (a) of the Convention or inadmissible on any other grounds. It must therefore be declared admissible.

18.  The Court observes that it is not in dispute between the parties that the sanction imposed on the applicant constituted an interference with his peaceful enjoyment of his possessions. The Court sees no reason to hold otherwise. Although it appears from the applicant’s submission that to date he has not paid the fine ordered by the Court of Appeal, it has not been suggested by the parties that he is no longer under an obligation to pay it.

19.  The Court further notes that the impugned interference falls within the scope of the second paragraph of Article 1 of Protocol No. 1, which expressly allows States to control the use of property to secure the payment of taxes or other contributions or penalties. However, this provision must be construed in the light of the general rule set out in the first sentence of the first paragraph (see Krayeva v. Ukraine, no. 72858/13, § 24, 13 January 2022). It remains for the Court to determine whether the interference was lawful and in the public interest, and whether it struck a fair balance between the demands of the general interest and the applicant’s rights (see Beyeler v. Italy [GC], no. 33202/96, §§ 108-114, ECHR 2000-I).

20.  As regards the lawfulness of the interference, the applicant’s complaint is twofold. First, he complained that the sanction had been imposed on him after the expiry of the three-month limitation period. Second, the applicant alleged that Court of Appeal had failed to duly establish that he had committed the offence at issue.

21.  As regards the limitation period, the Court observes that according to the administrative offence report, the applicant had committed the offence by submitting, on 30 November 2012, a customs clearance declaration and an invoice which had contained false data as regards the value of the goods. Article 467 of the CC, as in force on the date in question, prescribed a three‑month limitation period after the commission of the offence within which an administrative penalty could be imposed on the offender (see paragraph 11 above). Hence, the limitation period had already expired on the date when the Court of Appeal delivered its decision in the applicant’s case, that is on 3 April 2013. When dismissing the applicant’s arguments in this respect and deciding not to close the case as time-barred, the Court of Appeal appears to have defined the moment when the record of a breach of customs regulations was drawn up and the relevant administrative proceedings were initiated as the date when the offence was “committed” within the meaning of Article 467 of the CC (see paragraph 9 above). The Court of Appeal failed to provide any explanation or reasoning for its interpretation of the relevant provision of the domestic law, despite proper assessment of that question being crucial for the determination of the lawfulness of the interference with the applicant’s possessions. The Government provided no comments on that matter.

22.  In those circumstances, and in the absence of any examples on the part of the Government of domestic judicial practice in support of the Court of Appeal’s interpretation of the moment when an offence was considered to have been committed, the Court has serious doubts that the application of the above provisions, in the light of the applicant’s submission suggesting that his punishment had indeed been time-barred, was sufficiently foreseeable (see and compare, Artashes Antonyan v. Armenia, no. 24313/10, §§ 40-44, 22 October 2020).

23.  The Court further notes that the wording of Article 483 § 1 of the CC under which the applicant was convicted referred to the “illegal aim of concealing goods from customs control” (see paragraph 11 above). Thus, the aim or intent of the declarant to provide false data and documents is one of the constituent elements of the administrative offence which needed to be established before a sanction could be imposed.

24.  The Court observes in this respect that the applicant consistently and coherently argued at the domestic level that the invoice which had been provided for the customs clearance had been correct: it had been issued to his company by S in accordance with the trade agreement between the two companies concerning the goods at issue. He provided an extensive explanation in this respect and also emphasised that his company had had no obligation to pay taxes or import duties in respect of the goods at issue (see paragraph 6 above). However, while the District Court extensively examined the case and discontinued the proceedings because the crucial element of deliberate concealment had not been made out, the Court of Appeal overturned this decision in a judgment which merely reproduced what had been stated in the administrative offence report and did not provide any particular consideration of the applicant’s arguments on this point.

25.  While the Court has limited power to assess the facts and review compliance with domestic law, in the present case, regard being had to the facts and arguments of the parties, it cannot conclude that the Court of Appeal, which considered the case at last instance, proved the applicant’s intent to conceal goods or sufficiently established that his actions had constituted the offence provided for by the relevant Article of the CC.

26.  Having regard to all the above considerations, the Court finds that the impugned interference with the applicant’s right to peaceful enjoyment of his possessions cannot be regarded as having been “lawfully” imposed within the meaning of Article 1 of Protocol No. 1 to the Convention. This finding makes it unnecessary to examine whether a fair balance was struck between the demands of the general interest of the community and the requirements of the protection of the applicant’s fundamental rights.

27.  There has accordingly been a violation of Article 1 of Protocol No. 1 to the Convention.

APPLICATION OF ARTICLE 41 OF THE CONVENTION

28.  The applicant claimed 69,290.40 euros (EUR) in respect of pecuniary damage, which represented the value of the confiscated goods. He provided a certificate issued by the company S confirming that the price for the goods, as indicated in the pro-forma invoice no. АТ 121017 of 17 October 2012, had been paid by FBI in full, in several instalments. The applicant further claimed EUR 10,000 in respect of non‑pecuniary damage and 10 percent of the total amount awarded by the Court, but not less than EUR 2,000, in respect of the costs and expenses incurred before the Court. In respect of the latter claim, he relied on the terms of the legal aid agreement signed with his representative before the Court in 2013 according to which the applicant was obliged to make the payment not later than thirty days after receipt of the Court’s judgment in the present case.

29.  The Government considered the claim unsubstantiated, arguing mainly that there had been no violation of the Convention in the applicant’s case. They also noted that according to the domestic court the value of the seized items was UAH 341,639.70, which corresponded to EUR 34,000.

30.  As regards non-pecuniary damage, the Court considers that the finding of a violation of Article 1 of Protocol No. 1 constitutes in itself sufficient just satisfaction. As regards pecuniary damage, in view of the Court’s conclusions relating to the lawfulness of the interference with the applicant’s property rights and given the fact that the Government did not provide evidence to refute the information provided by him concerning the amount his company had paid to the K for the goods in issue, the Court finds it appropriate to award the applicant EUR 69,290.40 in respect of pecuniary damage, plus any tax that may be chargeable.

31.  Lastly, regard being had to the documents in its possession and to its case‑law, the Court rejects the claim for costs and expenses as unsubstantiated since the applicant failed to provide an itemised invoice which would have enabled the Court to determine whether the alleged expenses were “reasonable as to quantum”.

FOR THESE REASONS, THE COURT, UNANIMOUSLY,

Declares the application admissible;Holds that there has been a violation of Article 1 of Protocol No. 1 to the Convention;Holds

(a)  that the respondent State is to pay the applicant, within three months, EUR 69,290.40 (sixty nine thousand, two hundred and ninety euros and forty cents), plus any tax that may be chargeable, in respect of pecuniary damage, to be converted into the currency of the respondent State at the rate applicable at the date of settlement;

(b)  that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amount at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points;

Dismisses the remainder of the applicant’s claim for just satisfaction.

Done in English, and notified in writing on 13 April 2023, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.

 Martina Keller  Mārtiņš Mits
 Deputy Registrar President

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