THIRD SECTION
DECISION
Application no. 31931/07
ELECTROSAN S.R.L.
against Romania
The European Court of Human Rights (Third Section), sitting on 19 November 2013 as a Chamber composed of:
Josep Casadevall, President,
Alvina Gyulumyan,
Corneliu Bîrsan,
Ján Šikuta,
Luis López Guerra,
Nona Tsotsoria,
Valeriu Griţco, judges,
and Santiago Quesada, Section Registrar,
Having regard to the above application lodged on 17 July 2007,
Having regard to the observations submitted by the respondent Government,
Having deliberated, decides as follows:
THE FACTS
1. The applicant, Electrosan S.R.L., is a Romanian limited liability company based in Zalău, which gained legal personality in 1998. It was represented before the Court by Bejenaru, Filip & Partners, located in Cluj‑Napoca.
2. The Romanian Government (“the Government”) were represented by their Agent, Ms C. Brumar, from the Ministry of Foreign Affairs.
A. The circumstances of the case
3. The facts of the case, as submitted by the parties, may be summarised as follows.
4. On 22 December 2005 the applicant company let one of its commercial spaces to a third party.
5. On 22 September 2006 the Sălaj Tax Office fined the applicant company 200 lei (RON) (approximately 60 euros (EUR)) and ordered the confiscation of the revenue the applicant company had obtained by letting its commercial space to the third party after payment of tax, namely RON 32,155 (approximately EUR 9,500).
6. According to an official report produced on the same date by the Sălaj Tax Office, the letting and sub-letting of immovable goods owned or leased by the applicant company was not listed in its statute as one of its activities. In addition, the rental income obtained by the applicant company from letting the said commercial space was, according to the invoices issued by it to the third party, RON 33,150 (approximately EUR 9,800). The applicant company paid RON 995 (approximately EUR 300) in tax on the rental income. The tax was deducted from the rental income and the remainder was confiscated as unlawfully obtained revenue. The applicant company contested the fine and the confiscation of the EUR 9,500 before the domestic courts on the grounds that the measure was unlawful and disproportionate. It argued, inter alia, that even if the fine were upheld, the letting activity could not be classified as unlawful and therefore the confiscation of its revenue was unjustified. In addition, at the time of the fine the applicant company had registered as an activity in its statute the rental of its personal and household goods, and the letting of the commercial space had been clearly shown in the company books.
7. By a judgment of 6 December 2006 the Zalău District Court dismissed the applicant company’s action. It held that under the relevant domestic legal provisions, a legal person could enjoy only those rights that were in accordance with its aims, which were determined, inter alia, by its statute. Any act carried out outside such aims would be deemed illegal. Given that the letting of immovable goods owned by the company and the rental of personal and household goods were classified as two separate economic activities, the letting of the commercial space in question had been done outside the applicant company’s aims as set out in its statute. The fact that the applicant company had erred with regard to the separate nature of the two activities did not amount to an absence of guilt in committing the offence. In addition, there was no valid reason, given the alleged lack of danger to society, to replace the punishment with a warning. Moreover, the applicant company had been under a legal duty to register the letting activity in the company books and there were insufficient mitigating circumstances to revoke the punishment. A failure to register the relevant activity in the company books would have had much more serious consequences. The applicant company appealed on points of law (recurs) against the judgment.
8. In its final judgment of 20 March 2007, the Sălaj County Court dismissed the applicant company’s appeal on points of law. It held that a legal person could enjoy only those rights that were in accordance with its aims, which were set out, inter alia, in its statute. In addition, the tax authorities had confiscated the revenue obtained by the applicant company from the unauthorised let after deducting the expenses incurred by it, in particular the tax it had paid. Lastly, the registering of the let in the company books did not amount to a sufficient reason to replace the punishment with a warning.
B. Relevant domestic law
9. Sections 1(a), 2(f) and 6(2) of Law no. 12/1990 on unlawful commercial activity prohibit the carrying out of commercial activities of the type regulated by the Romanian Commercial Code or by other laws if the conditions required by law have not been fulfilled. Section 1(a) sets out the activities that are prohibited. If they are committed by a legal person, but not in circumstances which would qualify them as offences under criminal law, they are punishable by a fine of between RON 60 and RON 200. The revenues obtained unlawfully by legal persons from the acts mentioned in section 1 must be confiscated.
COMPLAINTS
10. The applicant company complained, under Article 6 § 1 of the Convention, of the unfairness of the proceedings in so far as the domestic courts had failed to consider the arguments and evidence that it had put forward.
11. The applicant company also complained, under Article 1 of Protocol No. 1 to the Convention, that the Romanian authorities had breached its property rights, in that they had fined it for the alleged unlawful commercial activity and confiscated the large sum of money obtained from letting its commercial space to a third party.
THE LAW
A. Alleged violation of Article 1 of Protocol No. 1 to the Convention
12. The applicant company complained that the penalty imposed by the authorities had been disproportionate: it had been fined and had its rental income confiscated in breach of 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.”
1. The parties’ submissions
13. The Government submitted that while the measures imposed on the applicant company may be perceived as an interference with its right to property, they were provided for by law, namely Law no. 12/1990, and their purpose was to prevent unlawful commercial activities. Consequently, they constituted control of the use of property within the meaning of the second paragraph of Article 1 of Protocol No. 1 to the Convention and were proportionate to the aim pursued.
14. The applicant company failed to submit observations within the statutory time-limit.
2. The Court’s assessment
15. The Court observes that the “possessions” which form the object of this complaint are the sum of money imposed as a fine, namely RON 200, and the rental income of RON 32,155 confiscated from the applicant company. It considers that the two measures amount to an interference with the applicant company’s right to peaceful enjoyment of its possessions and that Article 1 of Protocol No. 1 is therefore applicable.
16 The fine and confiscation order constitute “penalties” within the meaning of the Convention. They therefore fall within the scope of the second paragraph of Article 1 of Protocol No. 1, which, inter alia, allows the Contracting 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 principle set out in the first sentence of the first paragraph and there must, therefore, exist a reasonable relationship of proportionality between the means employed and the aim sought to be realized (see, among many examples, Phillips v. the United Kingdom, no. 41087/98, § 51, 5 July 2001).
17. Consequently, a financial liability arising out of a fine may undermine the guarantee afforded by that provision if it places an excessive burden on the person or entity concerned or fundamentally interferes with his or its financial position (see, mutatis mutandis, Buffalo S.R.L. in liquidation v. Italy, no. 38746/97, § 32, 3 July 2003). It is in the first place for the national authorities to decide what kind of taxes or contributions are to be collected. The decisions in this area will commonly involve the appreciation of political, economic and social questions which the Convention leaves within the competence of the Contracting States. The margin of appreciation of the Contracting States is therefore a wide one (see Valico S.R.L. v. Italy (dec.), no. 70074/01, 21 March 2006).
18. The Court notes that in the instant case the two penalties were imposed on the applicant company under sections 1, 2 and 6 of Law no. 12/1990. Under the terms of those provisions, any legal person carrying out unlawful commercial activities was liable to a fine of RON 200 and confiscation of the unlawfully obtained revenue. The wording of the provisions is clear and gives no choice between the penalties; both must be applied together. The Court therefore finds that the interference was prescribed by law.
19. As to the aim pursued by the two penalties, the Court observes that their purpose was to prevent unlawful commercial activities.
20. It remains to be determined whether a fair balance was struck between the demands of the general interest and the requirements of the protection of the individual’s fundamental rights.
21. In this connection, the Court observes that the two penalties were imposed on the applicant company by the tax authorities following the commission of an offence. This element distinguishes the instant case from cases in which a confiscation measure was applied for acts which were not illegal under the respective domestic legislations (see Ismayilov v. Russia, no. 30352/03, 6 November 2008) or where the confiscation itself was unlawful (see Viktor Konovalov v. Russia, no. 43626/02, 24 May 2007).
22. The Court further notes, as regards the balance between the aim pursued and the applicant company’s fundamental rights, that where possessions that have been obtained unlawfully are confiscated, such a balance depends on many factors, including whether the procedure in the domestic legal system afforded the applicant company, in the light of the severity of the measure to which it was liable, an adequate opportunity to put its case to the responsible authorities, pleading, as the case might be, illegality or arbitrary and unreasonable conduct (see Yildirim v. Italy (dec.), no. 38602/02, § 1, 10 April 2003).
23. In the present case, the applicant company had the opportunity to challenge the offence report before the domestic courts. In this connection, it must be noted that the applicant company’s complaints were extensively examined by the domestic courts in adversarial proceedings fulfilling all the fair-trial guarantees, and were dismissed. In view of the above, the Court sees no reason to depart from the findings of the domestic courts in the present case.
24. Against this background, and given the importance of the aim pursued, the Court does not consider that the interference suffered by the applicant company with the peaceful enjoyment of its possessions was disproportionate.
25. It follows that this part of the application is manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 (a) and 4 of the Convention.
B. Other alleged violation of the Convention
26. The applicant company also raised another complaint before the Court under Article 6 of the Convention (see paragraph 10 above).
27. The Court has examined this complaint as submitted by the applicant company. However, having regard to all the material in its possession, and in so far as it falls within its jurisdiction, the Court finds that this complaint does not disclose any appearance of a violation of the rights and freedoms set out in the Convention or its Protocols. It follows that this part of the application must be rejected pursuant to Article 35 §§ 3 and 4 of the Convention.
For these reasons, the Court unanimously
Declares the application inadmissible.
Santiago QuesadaJosep Casadevall
RegistrarPresident
Full & Egal Universal Law Academy