CASE OF TILOCCA v. CROATIA

FIRST SECTION

CASE OF TILOCCA v. CROATIA

(Application no. 40559/12)

JUDGMENT

STRASBOURG

5 April 2018

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

In the case of Tilocca v. Croatia,

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

Kristina Pardalos, President,
Ksenija Turković,
Pauliine Koskelo, judges,
and Renata Degener, Deputy Section Registrar,

Having deliberated in private on 13 March 2018,

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

PROCEDURE

1. The case originated in an application (no. 40559/12) against the Republic of Croatia lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by an Italian national, Mr Giuseppe Tilocca (“the applicant”), on 25 May 2012.

2. The applicant was represented before the Court by Mr D.S. Janković and Mr H. Grenac of Abel & Grenac Law Firm, advocates practising in Zagreb. The Croatian Government (“the Government”) were represented by their Agent, Ms Š. Stažnik.

3. On 19 May 2015 the complaint concerning the right of property was communicated to the Government and the remainder of the application was declared inadmissible pursuant to Rule 54 § 3 of the Rules of Court.

4. The Government of Italy did not make use of their right to intervene in the proceedings (Article 36 § 1 of the Convention).

THE FACTS

I. THE CIRCUMSTANCES OF THE CASE

5. The applicant was born in 1963 and currently lives in Alexandria (Egypt).

6. On 15 February 2010, while crossing the border between Serbia and Croatia with his wife, the applicant was caught by the Croatian customs authorities carrying the sum of 563,300 euros (EUR) which he had failed to declare, contrary to the law. The customs authorities immediately seized the EUR 560,000.

7. On the same day the customs authorities instituted administrative‑offence proceedings (prekršajni postupak) against the applicant before the Financial Inspectorate of the Ministry of Finance (Ministarstvo financija, Financijski inspektorat – “the Ministry”) for failing to declare EUR 560,000 – a sum exceeding EUR 10,000 – an administrative offence defined in section 40(1) of the Foreign Currency Act and section 74 of the Prevention of Money Laundering and Financing of Terrorism Act.

8. In his defence, the applicant explained that he and his wife had been visiting her daughter in Serbia who had recently had a serious attack of epilepsy, and submitted documentary evidence suggesting that his wife’s daughter did indeed suffer from epilepsy. The money he had been carrying originated from: (a) a company called SCI (société civile immobilière) M. registered in France, of which he was the director and the only member, from whose account he had withdrawn EUR 326,008.03 with a view to starting another business; and (b) the sale of their house in France (the remaining amount). The applicant submitted relevant documents as evidence of those transactions. He also explained that he had not wished to deposit the money in a bank account because, in the wake of the global financial crisis of 2007-2008, he had been afraid that his bank would go bankrupt and that he would lose most of that money, given that the French State only guaranteed up to EUR 50,000 of bank deposits.

9. During the proceedings the Ministry requested information from the relevant authorities in Serbia, France and Italy. While the Italian authorities did not reply at all, the Serbian authorities informed the Ministry that neither the applicant nor his wife had been recorded in their register of suspicious transactions, and the French authorities only confirmed the authenticity of the transactions on which the applicant relied to prove the origin of the money he had been carrying.

10. By a decision of 9 July 2010 the Ministry found the applicant guilty of having committed the administrative offence in question and fined him 5,000 Croatian kunas (HRK). At the same time, the Ministry imposed a protective measure (zaštitna mjera) confiscating EUR 318,500 under section 69(2) of the Foreign Currency Act.

11. On the basis of the documentary evidence, the Ministry established that: (a) the company SCI M. had been founded in 2002 and recorded in the business and companies register in Strasbourg, and under French law its members were liable for its debts in proportion with their share in the company, that is, the applicant in respect of 99.75% and his wife in respect of 0.25%; (b) on 6 July 2009 the applicant had indeed sold his house in France, and EUR 243,091.82 from the proceeds of sale had been paid into his bank account on 29 July 2009, from which he had first transferred EUR 30,000 to his company’s account on the same day and then withdrawn EUR 211,500; and (c) on 21 December 2009 the applicant, acting as the company’s director, had sold its real estate, and EUR 326,008.03 from the proceeds of sale had been paid into the company’s bank account on 19 January 2010, a sum which had been withdrawn by the applicant the next day.

12. The Ministry held that the origin of the money which the applicant had failed to declare was irrelevant in relation to the commission of the offence of which he had been convicted or the imposition of the fine. However, that consideration was relevant in relation to the imposition of the protective measure of confiscation.

13. In particular, the Ministry decided not to confiscate EUR 241,500 of the money which the applicant had not declared, because it found that this sum did indeed originate from the sale of his house in France.

14. As regards the remaining EUR 318,500 (of the EUR 560,000 which had been seized), the Ministry held that this sum was part of the funds which the applicant had withdrawn from his company’s bank account (EUR 326,008.03) on 20 January 2010 (see paragraph 11 above). The Ministry further held that: (a) since there was no evidence that the applicant had borrowed that money from his company, by carrying it across border he had disposed of it as if it had belonged to him, which amounted to misappropriation of the company’s funds, an offence punishable in every country; and (b) he had failed to pay the relevant taxes in France on that amount. It therefore decided to confiscate that sum.

15. The applicant appealed by arguing that: (a) the evidence collected indicated that the French authorities had been aware of the transaction from which the confiscated sum originated, but had done nothing about it, which suggested that they considered that it originated from a legitimate source, (b) the Ministry correctly assumed that he had not borrowed the confiscated sum from his company, as he had actually lent EUR 358,600.81 to his company in 2008 and 2009, for which he had submitted documentary evidence; (c) under French law, he was fully liable for the debts of his company, the payment of which, including taxes, he therefore could not have avoided by misappropriating the company’s funds as the Ministry implied; (d) the Ministry had attempted to interpret foreign (French) law, and in such a complex area as tax and commercial law, about which it had known very little; and (e) it was peculiar that the Ministry had confiscated for the benefit of the Croatian State budget the amount on which he had, in the Ministry’s own view, not paid the relevant taxes in France.

16. By a decision of 17 September 2010 the High Court for Administrative Offences (Visoki prekršajni sud Republike Hrvatske) dismissed the applicant’s appeal and upheld the Ministry’s decision, endorsing the reasons given therein.

17. The applicant then, on 17 December 2010, lodged a constitutional complaint, alleging, inter alia, a violation of his constitutionally protected right of ownership.

18. By a decision of 17 November 2011 the Constitutional Court (Ustavni sud Republike Hrvatske) declared the applicant’s constitutional complaint inadmissible and served its decision on his representative on 2 December 2012. It found that, even though the applicant had relied on the relevant Articles of the Constitution in his constitutional complaint, he had not substantiated his complaint by any constitutional-law arguments, but had merely repeated the arguments raised in the proceedings before the Ministry and the High Court for Administrative Offences. Therefore, the Constitutional Court had been unable to examine the merits of his constitutional complaint.

II. RELEVANT CROATIAN AND INTERNATIONAL LAW

19. The relevant domestic and international law and practice is summarised in the case of Boljević v. Croatia, no. 43492/11, §§ 16-21, 31 January 2017.

III. RELEVANT FRENCH LAW

20. Under French law, a société civile immobilière (SCI) is a civil (non‑commercial) company constituted for the ownership and management of real estate (Articles 1845 to 1870-1 of the French Civil Code). It is a legal entity, meaning it has a legal personality distinct from that of its members. The members are, however, liable for the debts of the company without limitation, meaning that they may be liable in relation to their personal assets (Article 1857 of the French Civil Code).

THE LAW

I. ALLEGED VIOLATION OF ARTICLE 1 OF PROTOCOL No. 1 TO THE CONVENTION

21. The applicant complained that the decision of the domestic authorities in the administrative-offence proceedings to confiscate EUR 318,500 from him for having failed to declare the sum of EUR 560,000 at customs had not been justified. The Court decided to examine this complaint under Article 1 of Protocol No. 1 to the Convention, which reads 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

1. The parties’ submissions

22. The Government submitted that the amount of EUR 318,500 which had eventually been confiscated from the applicant was part of the funds which he had withdrawn from his company’s bank account (EUR 326,008.03) on 20 January 2010 (see paragraphs 11 and 14 above). The confiscated sum had thus not belonged to him personally, but to his company. The Government therefore argued that the applicant could not be considered a victim of the violation complained of.

23. The applicant emphasised that the protective measure of confiscation had been imposed on him and the amount of EUR 318,500 confiscated from him personally. He had therefore been directly affected by the confiscation. The applicant further stressed that, in order to ensure that protection of the rights guaranteed by the Convention did not remain ineffectual and illusory, the interpretation of the term “victim” must not be excessively formalistic (see Gorraiz Lizarraga and Others v. Spain, no. 62543/00, § 38, ECHR 2004‑III, and Stukus and Others v. Poland, no. 12534/03, § 35, 1 April 2008). In any event, the applicant submitted that he had been a creditor of his company, as he had lent it a total amount of EUR 358,600.81 in 2008 and 2009 (see paragraph 15 above). The confiscated sum of EUR 326,008.03 which he had withdrawn from his company’s bank account on 20 January 2010 (see paragraphs 11 and 14 above) represented the reimbursement of that loan. The sum had thus belonged to him and not to his company.

2. The Court’s assessment

24. For the reasons set out below (see paragraphs 25-29), the Court does not find it necessary to decide whether the confiscated sum belonged to the applicant or to his company.

25. In that connection, it first reiterates that an applicant can allege a violation of Article 1 of Protocol No. 1 to the Convention only in so far as the impugned decisions relate to his “possessions” within the meaning of this provision (see Von Maltzan and Others v. Germany (dec.) [GC], nos. 71916/01, 71917/01 and 10260/02, § 74 (c), ECHR 2005‑V).

26. The Court further reiterates that where the acts or omissions complained of affect a company, the application should be brought by that company. Disregarding a company’s legal personality as regards the question of being a “victim” will be justified only in exceptional circumstances (see, notably, Agrotexim and Others v. Greece, 24 October 1995, § 66, Series A no. 330‑A). On the other hand, the sole owner of a company can claim to be a “victim” within the meaning of Article 34 of the Convention in so far as the impugned measures taken in respect of his or her company are concerned, because in the case of a sole owner there is no risk of differences of opinion among shareholders or between shareholders and a board of directors as to the reality of infringement of Convention rights, or as to the most appropriate way of reacting to such an infringement (see, for example, Ankarcrona v. Sweden (dec.), no. 35178/97, 27 June 2000, Gubiyev v. Russia, no. 29309/03, § 53, 19 July 2011, and Beguš v. Slovenia, no. 25634/05, § 25, 15 December 2011).

27. In the present case, the applicant claimed that he was the sole member and the director of the company in question, whereas in the domestic proceedings it was established that his share in the company was 99.75% and his wife’s share was 0.25% (see paragraphs 8 and 11 above).

28. The Court considers that, while formally the applicant thus might not have been the only member of the company, he was certainly its only legal representative (director), and held such a substantial share in it (see, for example, G.J. v. Luxembourg, no. 21156/93, § 24, 26 October 2000) that for all practical purposes he has to be seen as its sole owner. Specifically, it is clear that there is no risk of any competing interests and/or differences of opinion which could create difficulties as reflected in the Court’s relevant case-law (see the preceding paragraph). It would therefore be artificial to distinguish the present case from those in which the Court has held that the sole owner of a company could claim to be a “victim” within the meaning of Article 34 of the Convention (see the preceding paragraph).

29. In the instant case, this conclusion is further reinforced by the fact that the applicant was liable for the company’s debts in relation to his personal property (see paragraph 20 above). The Court has already held that where an individual and a professional entity are so closely connected, such an individual applicant could be considered to be directly affected by the measures taken in respect of such an entity (see Oklešen and Pokopališko Pogrebne Storitve Leopold Oklešen S.P. v. Slovenia, no. 35264/04, § 40, 30 November 2010).

30. It follows that the Government’s objection based on the applicant’s lack of victim status must therefore be dismissed.

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

B. Merits

32. The Court notes that it has already found violations of Article 1 of Protocol No. 1 to the Convention in cases raising similar issues to those in the present case (see, for example, Ismayilov v. Russia, no. 30352/03, 6 November 2008; Gabrić v. Croatia, no. 9702/04, 5 February 2009; Grifhorst v. France, no. 28336/02, 26 February 2009; Moon v. France, no. 39973/03, 9 July 2009; and Boljević, cited above).

33. Having examined all the submitted material, the Court considers that the Government have not put forward any fact or argument capable of persuading it to reach a different conclusion in the present case.

34. In particular, what is relevant is that: the applicant was never charged with any criminal offence; bringing the money into Croatia was not prohibited; and the only illegal (but not criminal) conduct which could be attributed to him in respect of the money was his failure to declare it (see Gabrić, cited above, § 38, and Boljević, cited above, §§ 42-46).

35. Having regard to its case-law on the matter (see paragraph 32 above), the Court therefore finds that there has been a breach of Article 1 of Protocol No. 1 to the Convention in the present case.

II. APPLICATION OF ARTICLE 41 OF THE CONVENTION

36. Article 41 of the Convention provides:

“If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party.”

A. Damage

37. The applicant claimed the total of 521,500 euros (EUR) in respect of pecuniary damage, of which EUR 318,500 represented the sum confiscated from him. As to the remaining amount sought, the applicant explained that in order to maintain the same level of support for his family, he had been forced to sell two items of his immovable property approximately a month after the confiscation at prices which, as certified by a chartered surveyor, had been EUR 203,000 below their market value.

38. The applicant also claimed 400,000 in respect of non-pecuniary damage.

39. The Government contested these claims.

40. The Court has found that an amount of EUR 318,500 was confiscated from the applicant in breach of Article 1 of Protocol No. 1 to the Convention. Therefore, in so far as the applicant’s claim in respect of pecuniary damage concerns that amount, the Court accepts it and awards him EUR 318,500 under this head, plus any tax that may be chargeable. On the other hand, the Court rejects the remainder of this claim, as it does not discern any causal link between the violation found and the pecuniary damage alleged.

41. As regards non-pecuniary damage, the Court considers that, in the circumstances of the present case, the finding of a violation of Article 1 of Protocol No. 1 to the Convention constitutes in itself sufficient just satisfaction (in that sense, see Gabrić, cited above, § 49, and Boljević, cited above, § 54).

B. Costs and expenses

42. The applicant also claimed EUR 36,661.36 for costs and expenses incurred before the domestic courts, and EUR 2,617.33 for those incurred before the Court.

43. The Government contested these claims.

44. According to the Court’s case-law, an applicant is entitled to the reimbursement of costs and expenses only in so far as it has been shown that these have been actually and necessarily incurred and are reasonable as to quantum. In the present case, regard being had to the information in its possession and the above criteria, the Court considers it reasonable to award the sum of EUR 1,770 for costs and expenses in the domestic proceedings and EUR 1,780 for those incurred in the proceedings before the Court.

C. Default interest

45. 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;

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

3. Holds that the finding of a violation constitutes in itself sufficient just satisfaction for the non-pecuniary damage sustained by the applicant;

4. Holds

(a) that the respondent State is to pay the applicant, within three months, the following amounts:

(i) EUR 318,500 (three hundred and eighteen thousand five hundred euros), plus any tax that may be chargeable, in respect of pecuniary damage;

(ii) EUR 3,550 (three thousand five hundred and fifty euros), plus any tax that may be chargeable to the applicant, in respect of costs and expenses;

(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;

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

Done in English, and notified in writing on 5 April 2018, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.

              Renata DegenerKristina Pardalos
Deputy RegistrarPresident

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