FOURTH SECTION
CASE OF S.E.F.T. TRAFIK KFT AND OTHERS v. HUNGARY
(Application no. 65845/13)
JUDGMENT
STRASBOURG
30 October 2018
This judgment is final but it may be subject to editorial revision.
In the case of S.E.F.T. Trafik Kft and Others v. Hungary,
The European Court of Human Rights (Fourth Section), sitting as a Committee composed of:
Paulo Pinto de Albuquerque, President,
Egidijus Kūris,
Iulia Antoanella Motoc, judges,
and Andrea Tamietti, Deputy Section Registrar,
Having deliberated in private on 9 October 2018,
Delivers the following judgment, which was adopted on that date:
PROCEDURE
1. The case originated in an application (no. 65845/13) against Hungary lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by two Hungarian limited liability companies, S.E.F.T. Trafik Kft. „v.a.“ and S.E.F.T. Kft. „v.a.“, and by four Hungarian nationals, Mr Tibor Benkő, Mrs Tiborné Benkő, Ms Adrienn Benkő and Mr Tibor Benkő Jr. (“the applicants”), on 11 October 2013.
2. The applicants were represented by Mr T. Bihary, a lawyer practising in Budapest. The Hungarian Government (“the Government”) were represented by Mr Z. Tallódi, Agent, Ministry of Justice.
3. On 23 September 2016 the complaint concerning Article 1 of Protocol No 1 to the Convention was communicated to the Government and the remainder of the application was declared inadmissible pursuant to Rule 54 § 3 of the Rules of Court.
THE FACTS
THE CIRCUMSTANCES OF THE CASE
4. The first and second applicants, S.E.F.T. Trafik Kft. „v.a.“ and S.E.F.T. Kft. „v.a.“, are Hungarian limited liability companies with their seats in Budapest. The first and second applicants are partly owned by the fourth applicant. The third, fourth, fifth and sixth applicants, Mr Tibor Benkő, Mrs Tiborné Benkő, Ms Adrienn Benkő and Mr Tibor Benkő Jr., are Hungarian nationals, close family members who were born in 1956, 1957, 1983 and 1981 respectively and live in Budapest.
5. The applicants had been active in the tobacco retail business for several years. The first and second applicant companies operated 39 distinct tobacco shops in Hungary with the direct participation of the third, fourth, fifth and sixth applicants and several further employees.
6. On 11 September 2012 the Parliament enacted Act no. CXXXIV of 2012 on the Repression of Smoking of the Youth and on Tobacco Retail. The Act was published on 24 September 2012. According to the Act, tobacco retail was to become a State monopoly (exercised through a State‑owned company, ND Nemzeti Dohánykereskedelmi Nonprofit Zrt), and tobacco retailers would become authorised through a concession tender, advertised on 15 December 2012. Entities or persons previously engaged in tobacco retail had no privileges in the tender. Legal persons were not entitled to apply. One individual was eligible to apply for five concessions at most.
7. Since the first and second applicant companies were not entitled to apply for a concession under the new law, the third, fourth, fifth and sixth applicants applied personally for concessions, but none of them was successful. Together with their distant family members and employees, they submitted altogether 155 tenders for concession, and only five of these were successful. Currently they participate in the tobacco retail businesses of a distant family member who was granted concession.
THE LAW
I. ALLEGED VIOLATION OF ARTICLE 1 OF PROTOCOL No. 1 TO THE CONVENTION
8. The applicants complained under Article 1 of Protocol No. 1 to the Convention that the effective removal of the tobacco retail licences of their family business, that is, the legislative exclusion of the first and second applicants from tobacco retail and the refusals concerning the third, fourth, fifth and sixth applicants, amounted to an unjustified deprivation of possessions.
Article 1 of Protocol No. 1 provides as follows:
“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”
A. Admissibility
9. The Government argued that only the fourth applicant could be regarded as a victim in the case. Considering that the first and second applicants as companies could not participate in the concession tender and that the third, fifth and sixth applicants were not owners of the two companies, the complaints in respect of them should be declared incompatible ratione personae with the provisions of the Convention within the meaning of Article 35 § 3 (a).
10. The applicants argued that all of them had victim status. Regarding the first and second applicant companies, they argued that since the grievances suffered by these two business entities due to the impugned legislation had never been remedied, their victim status should be unquestionable. In respect of the third, fifth and sixth applicants, they emphasised that the applicants’ victim status should be based on their direct involvement in the business and not on the ownership in any of the companies.
11. The Court observes that the first and second applicants were not eligible to apply for a new tobacco retail concession and therefore they had not been directly affected by any aspects of the concession tender process. The Court further notes that the third, fourth, fifth and sixth applicants did apply personally for concession tenders that could have effectively remedied the grievances suffered by the first and second applicants. However, none of these tenders was successful. The concession tender process which, in the Court’s view, appeared to be on the verge of arbitrariness, was the primary subject of the scrutiny in the Vékony case (see Vékony v. Hungary, no. 65681/13, § 36, 13 January 2015) and, in essence, led to the violation that was found by the Court in that case. Therefore, the Court is satisfied that the third, fourth, fifth and sixth applicants, who participated in the tender process but to no avail, can claim to be the victim of the violation alleged, whilst the first and second applicants cannot. In regard to the first and second applicants, the application is therefore incompatible ratione personae with the provisions of the Convention within the meaning of Article 35 § 3 (a) and must be rejected in accordance with Article 35 § 4.
12. The Court notes that in respect of the third, fourth, fifth and sixth applicants the complaint is not manifestly ill-founded within the meaning of Article 35 § 3 (a) of the Convention. It also notes that it is not inadmissible on any other grounds. It must therefore be declared admissible.
B. Merits
13. The Government submitted that the fourth applicant continued to enjoy the profits of tobacco retail business through the concession granted to her distant family member and, in any event, the first and second applicant companies were operating without generating any profit before the introduction of the impugned law, therefore the applicants cannot claim to have suffered a loss of property as a result of the change of the system of tobacco retail in July 2013.
14. The applicants disagreed. They argued that although the fourth applicant had acquired ownership in a small tobacco retail shop that operates on the basis of the concession granted to a distant family member, the size of this business cannot be compared to the previous course of business run by the first and second applicants with the average yearly revenue of approximately 14 billion Hungarian forints (approximately 42 million euros). Further, they argued that the first and second applicant companies had been generating losses in the first half of 2013 only because of the impugned legislation, whose effects could be felt on the market long before the effective deadline for termination of the activity in 2013.
15. The Court considers that the findings outlined in paragraphs 29 to 37 of the Vékony judgment equally hold true in the present case. It notes that the arguments raised by the Government could affect only the amount of just satisfaction due to the applicants, but not the fact that the impugned legislation deprived them, indeed, of their previous business and did not offer realistic prospects to continue it within the new regime, at least in a somewhat comperable volume.
Therefore the Court finds that there has been a violation of Article 1 of Protocol No. 1.
II. APPLICATION OF ARTICLE 41 OF THE CONVENTION
16. Relying on Article 41, the fourth applicant claimed EUR 1,162,075 in respect of pecuniary damage. The third and fourth applicants each claimed HUF 100,000,000 (approximately EUR 312,600) and the fifth and sixth applicants each claimed HUF 35,000,000 (approximately EUR 110,000) in respect of non-pecuniary damage.
17. The Government contested these claims.
18. Without speculating on the profits which the fourth applicant would have achieved if the violation of the Convention had not occurred, the Court observes that a real loss of business had been suffered. It therefore considers it appropriate to award the fourth applicant an aggregate sum of EUR 50,000 in respect of pecuniary damage.
19. In addition, the Court considers that the violation it has found of Article 1 of Protocol No. 1 in the instant case must have caused the third, fourth, fifth and sixth applicants prolonged uncertainty in the conduct of business and feelings of helplessness and frustration. Thus, the Court considers it reasonable to award them each EUR 5,000 in respect of non‑pecuniary damages.
20. The applicants made no costs claim. It is therefore not necessary to rule on the matter.
21. The Court considers it appropriate that the default interest rate should be based on the marginal lending rate of the European Central Bank, to which should be added three percentage points.
FOR THESE REASONS, THE COURT, UNANIMOUSLY,
1. Declares the application admissible in respect of the third, fourth, fifth and sixth applicants and inadmissible for the remainder;
2. Holds that there has been a violation of Article 1 of Protocol No. 1 in regard to the third, fourth, fifth and sixth applicants;
3. Holds
(a) that the respondent State is to pay, within three months, the following amounts, to be converted into the currency of the respondent State at the rate applicable at the date of settlement:
(i) EUR 50,000 (fifty thousand euros) to the fourth applicant, plus any tax that may be chargeable, in respect of pecuniary damage;
(ii) EUR 5,000 (five thousand euros) to each of the third, fourth, fifth and sixth applicants, plus any tax that may be chargeable, in respect of non-pecuniary damage;
(b) that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amounts at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points;
4. Dismisses the remainder of the applicants’ claim for just satisfaction.
Done in English, and notified in writing on 30 October 2018, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.
Andrea TamiettiPaulo Pinto de Albuquerque
Deputy RegistrarPresident
Full & Egal Universal Law Academy