FIFTH SECTION
DECISION
AS TO THE ADMISSIBILITY OF
Application no. 57656/00
by Blagoi Ivanov PORYAZOV
against Bulgaria
The European Court of Human Rights (Fifth Section), sitting on 27 November 2006 as a Chamber composed of:
MrP. Lorenzen, President,
MrsS. Botoucharova,
MrK. Jungwiert,
MrsM. Tsatsa-Nikolovska,
MrJ. Borrego Borrego,
MrsR. Jaeger,
MrM. Villiger, judges,
and Mrs C. Westerdiek, Section Registrar,
Having regard to the above application lodged on 4 May 2000,
Having regard to the decision to apply Article 29 § 3 of the Convention and examine the admissibility and merits of the case together,
Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicant,
Having deliberated, decides as follows:
THE FACTS
The applicant, Mr Blagoi Ivanov Poryazov, is a Bulgarian national who was born in 1955 and lives in Plovdiv. He was represented before the Court by Mr M. Ekimdjiev, a lawyer practising in Plovdiv.
The respondent Government were represented by their Agent, Ms M. Karadjova, of the Ministry of Justice.
A. The circumstances of the case
The facts of the case, as submitted by the parties, may be summarised as follows.
1. The applicant’s registration as a sole trader
On an unspecified date, the applicant was registered as a sole trader with the trade name “Rita-Blagoi Poryazov” and obtained a value-added tax (VAT) registration also on an unspecified date.
2. The registration of the applicant’s wife as a sole trader
On 1 June 1992 the applicant’s wife was registered as a sole trader with the Plovdiv Regional Court with the trade name “Rita-29-Margarita Poryazova” (the “sole trader”).
On 18 May 1993 the applicant was authorised to represent the sole trader under a power of attorney, which granted him, inter alia, the following powers:
“...to represent [the sole trader] before all bodies, organisations, firms, companies, traders, juridical and private persons in connection with all legal relationships of my [sole trader], as well as to negotiate, send and receive offers, draft and sign contracts on my behalf, whereby for the purposes of the present power of attorney he has the power to sign on my behalf [whatever] is necessary...”
On 16 March 1994 the sole trader obtained a VAT registration.
3. Termination of the sole trader’s VAT registration
On 13 January 1998 the applicant filed the sole trader’s VAT return for the year 1997 with the tax authorities. At the time of making the filing he was verbally informed that the VAT return was incomplete, that following an amendment of the VAT Act the sole trader’s VAT registration was subject to termination and that he had to make additional filings in order to complete that procedure. The applicant did not make an additional filing or a correction of the tax return.
On an unspecified date he was invited by the tax authorities to present the additional documents and to make the necessary filings in order to terminate the VAT registration of the sole trader.
The applicant made those filings on 12 May 1998 and the VAT registration of the sole trader was terminated on the same day. At the same time, the tax authorities made a preliminary finding of a tax filing violation in respect of the applicant’s failure to comply with the VAT filing requirements in respect of the sole trader.
4. The fining of the applicant and his appeals against it
On the basis of the preliminary finding of 12 May 1998, the Plovdiv Regional Tax Office issued a penal decree of 4 November 1998 against the applicant in the capacity of “manager of the sole trader”. It found that, in respect of the sole trader, he had failed (1) to inform the tax authorities that as a result of its activities and turnover during 1997 the sole trader no longer met the prerequisites for having a VAT registration, (2) to make an accurate VAT filing for the tax period ending on 31 December 1997 and (3) to return the VAT registration certificate of the sole trader. A fine of 5,000,000 old Bulgarian levs [BGL: approximately 2,564 euros (EUR)] was imposed on the applicant. He was served with a copy of the penal decree on 24 March 1999.
The applicant, using the title of “manager of the sole trader”, appealed against the penal decree on 25 March 1999. He claimed that the sole trader’s business activities had been in decline for some time and that they had ceased after 30 April 1997. Nevertheless, the applicant noted that he had continued to file, on behalf of the sole trader, the required monthly VAT statements with the tax authorities for the remaining months of that year. Considering that he had made adequate attempts to comply with the sole trader’s VAT filing requirements and arguing that no losses had resulted for the State budget from his alleged filing infraction, the applicant claimed that the fine imposed was excessive. He also considered that it was imposed in reference to the wrong provision of the VAT Act, namely that it referred to paragraph 18 of the VAT Act, while it should have referred to Article 16.
A hearing was conducted before the Plovdiv District Court on 9 June 1999. The applicant was represented by counsel who stated that he maintained the grounds of the appeal as filed on 25 March 1999. In disputing the grounds and merits of imposing the fine on the applicant his counsel referred to him as the “manager of the sole trader”.
In a judgment of the same day, 9 June 1999, the Plovdiv District Court dismissed the applicant’s appeal. It found the actions of the applicant, as “manager of the sole trader”, to have violated the provisions of the VAT Act and the regulations for its implementations by having failed to file all the required documents and statements in order to terminate the VAT registration, that the Tax Office had correctly classified the offence of the applicant. It also considered that the size of the fine was properly set, insofar as the relevant provisions did not provide for an adjustment of the amount.
The applicant appealed against the judgment on 29 June 1999, referring to himself as the “manager” of the sole trader. He argued that he was wrongly fined BGL 5,000,000 when for the offence in question the applicable fine was allegedly BGL 250,000 (approximately EUR 128). He also claimed that the Plovdiv District Court had allegedly been confused between the provisions of the VAT Act and the regulations for its interpretation, that it had wrongly examined the grounds for his appeal and had therefore come to the wrong conclusions.
At a hearing on 7 December 1999, at which a prosecutor took part, the applicant reiterated his previous arguments and claimed that the VAT Act envisaged that the registered entities should be fined but not their representatives. The applicant did not claim nor argue that he was not a legal representative of the sole trader.
By final judgment of 23 December 1999 the Plovdiv Regional Court dismissed the applicant’s appeal and upheld the lower court’s judgment. It found that the applicant, in his capacity of “manager of the sole trader”, had not complied with the tax filings requirements under the VAT Act and had not presented all the required documents for the termination of the VAT registration of the trader. It also found that the fine was correctly determined because its size was in reference to an offence committed in respect of the tax period ending on 31 December 1997.
B. Relevant domestic law
1. The VAT Act (1994-1998)
By amendment of 27 June 1997 the prerequisites for maintaining a registration under the VAT Act were amended. Accordingly, special provisions were introduced for those persons and entities which no longer met the new requirements (§§ 16-18 of the Final Provisions of the Act) detailing the procedure, deadlines and filing requirements for terminating their registrations and for returning their VAT registration certificates. For non-compliance with these requirements, Paragraph 19 of the Final Provisions of the Act envisaged a fixed fine of BGL 5,000,000 (approximately EUR 2,564) for the offenders.
The imposing of fines under the VAT Act by way of penal decree and the appeals against them followed the procedure under the Administrative Offences and Penalties Act (section 52).
2. The VAT Act (1999-2006)
The VAT Act (1994) was abolished with the entry into force, as of 1 January 1999, of the new VAT Act (1999).
Section 132 (1), as in force at the end of 1999, envisaged a sanction applied directly on the sole trader or entity for failing to register or de-register under the Act or to inform the tax authorities of any changes affecting such registration. The sanction was in the range from 250 to 2,500 new Bulgarian levs (approximately from EUR 128 to EUR 1,282).
3. The Administrative Offences and Penalties Act (1969)
Section 24 (2) of the Act provides that for offences perpetrated in the course of commercial activities the persons liable to be penalised under the Act are the employees or officers who perpetrated them or the managers who ordered them or allowed the offences to be committed.
COMPLAINTS
1. The applicant complained, relying on Article 6 §§ 1 and 3 of the Convention, that the appeal proceedings were unfair, because (1) a prosecutor took part in them; (2) he was not culpable for the VAT filing violations of the sole trader because he was not its legal representative; (3) he was not and could not have been promptly informed of the nature and cause of the accusation against him, because the legal provisions themselves (paragraphs 16-19 of the Final Provisions of the VAT Amendment Act of 27 June 1997) were not sufficiently clear and it was not possible for him to foresee that he could be punished for the sole trader’s failure to comply with the VAT filing requirements contained therein; and (4) the courts failed to apply a more favourable law to the applicant because the VAT Act (1994) had been amended prior to the penal decree entering into force and a lower fine was allegedly envisaged for the offence for which the applicant was sanctioned.
2. The applicant complained under Article 1 of Protocol No. 1 of the Convention that the fine imposed on him deprived him of his possessions and was excessive for the alleged offence.
3. The applicant complained under Article 13 of the Convention that he had no effective remedy for his Convention complaints.
THE LAW
1. The Court notes that the applicant’s complaints that he was not culpable for the VAT filing violations of the sole trader because he was not its legal representative and that he was unlawfully deprived of his possessions as a result thereof may fall to be examined under Article 7 of the Convention, rather than Article 6, and Article 1 of Protocol No. 1 to the Convention. However, it considers that it is not required to definitively decide on this issue, as it finds these complaints to be in any event inadmissible for the following reasons.
The Government maintained that the applicant had failed to exhaust the domestic remedies in respect of these complaints because he did not raise the arguments, presented before the Court, in the proceedings before the domestic authorities. They noted that neither he nor his lawyer ever challenged the notion before the national authorities that the applicant was empowered to act and was acting in the capacity of manager of the sole trader. They further noted that in his appeals to the courts he referred to himself as the “manager of the sole trader”, argued only on the merits of imposing the fine on him and never questioned his role as a party to the proceedings. In addition, the Government stressed that the applicant had acted on behalf of the sole trader in its dealings with the tax authorities by preparing, signing and filing tax statements as well as apparently receiving official documents on its behalf. For all intents and purposes, the Government argued, the applicant considered himself as the manager of the sole trader and acted as such in its dealings with the authorities. They, therefore, accepted him as such and sanctioned him on the occasion when he failed to perform his obligations to submit the required documents for the termination of the VAT registration of the sole trader. Additionally, the Government considered that the applicant could have sought to have the proceedings reopened on the basis of section 44 of the Administrative Procedures Act and section 41 of the Supreme Administrative Court Act, which he failed to do.
The applicant did not expressly challenge the Government’s contentions but simply replied that they had failed to substantiate their argument that the procedures under the Administrative Procedures Act and the Supreme Administrative Court Act represented effective domestic remedies to be exhausted. He noted that these were reopening proceedings which were possible only in exceptional instances and did not apply to the applicant.
The Court reiterates, at the outset, that the purpose of Article 35 of the Convention is to afford the Contracting States the opportunity of preventing or putting right the violations alleged against them before those allegations are submitted to the Convention institutions (see, for example, Hentrich v. France, judgment of 22 September 1994, Series A no. 296‑A, p. 18, § 33, and Remli v. France, judgment of 23 April 1996, Reports of Judgments and Decisions 1996‑II, p. 571, § 33). Consequently, States are dispensed from answering for their acts before an international body before they have had an opportunity to put matters right through their own legal system. That rule is based on the assumption, reflected in Article 13 of the Convention – with which it has close affinity – that there is an effective remedy available in respect of the alleged breach in the domestic system. In this way, it is an important aspect of the principle that the machinery of protection established by the Convention is subsidiary to the national systems safeguarding human rights (see Handyside v. the United Kingdom, judgment of 7 December 1976, Series A no. 24, p. 22, § 48, and Akdivar and Others v. Turkey, judgment of 16 September 1996, Reports 1996‑IV, p. 1210, § 65). Thus the complaint intended to be made subsequently to the Court must first have been made – at least in substance – to the appropriate domestic body, and in compliance with the formal requirements and time-limits laid down in domestic law (see Cardot v. France, judgment of 19 March 1991, Series A no. 200, p. 18, § 34).
In respect of the applicant’s complaints that he was not culpable for the VAT filing violations of the sole trader because he was not its legal representative and that he was unlawfully deprived of his possessions as a result thereof, the Court observes that he never raised an objection before the domestic bodies that he was not an employee or manager of the sole trader and that he should not, therefore, be responsible for the latter’s failure to comply with its VAT filing obligations. To the contrary, in his dealings and communications with the authorities and the courts the applicant constantly referred to himself as the “manager of the sole trader” and acted as the person responsible for its VAT compliance. In addition, he was the contact person of the sole trader with the tax authorities in respect of the latter’s VAT registration and he prepared and filed the VAT monthly statements on its behalf. Thus, it is reasonable for the authorities to have accepted and considered the applicant as the person administratively responsible for complying with the VAT filing requirements of the sole trader despite of the fact that only his wife, as president, had the power to represent it.
The Court recognises that the applicant’s lawyer argued at the hearing of 7 December 1999 before the Plovdiv Regional Court that the VAT Act entailed that only the VAT registered entities should be fined and not their representatives. However, it finds that that argument cannot be equated with the argument raised by the applicant before this Court – that he was not culpable for the VAT filing violations of the sole trader because he was not its legal representative. The first argument relates to the question of who is culpable under domestic legislation for a VAT filing violation, the VAT registered entities or their representatives. The second argument meanwhile addresses the issue whether the applicant, based on his individual legal relationship with the sole trader and his powers to represent it, was correctly identified by the authorities as the legal representative of the VAT registered entity culpable for its VAT filing violations. The Court observes that such an argument was never raised by the applicant at the hearing of 7 December 1999 before the Plovdiv Regional Court nor at any other time.
In view of the above, the Court finds that the applicant’s complaints that he was not culpable for the VAT filing violations of the sole trader because he was not its legal representative and that he was unlawfully deprived of his possessions as a result thereof were not first made, expressly or in substance, to the appropriate domestic bodies or courts.
It follows that these complaints must be rejected under Article 35 §§ 1 and 4 of the Convention for non-exhaustion of domestic remedies.
2. In respect of the applicant’s complaints regarding the unfairness of the proceedings before the domestic authorities, the Court considers that they fall to be examined under Article 6 and 7 of the Convention which provides:
“In the determination of ... any criminal charge against him, everyone is entitled to a fair ... hearing ... by [a] ... tribunal...”
In respect of the complaint that the participation of a prosecutor affected the fairness of the proceedings, the Court finds that the applicant failed to indicate how that participation did in practice have a detrimental affect on the said proceedings. Thus, it considers this complaint to be unsubstantiated.
In respect of the complaint that the courts failed to apply a more lenient provision, introduced subsequently to the offence and allegedly envisaging a lower fine, the Court reiterates that Article 7 of the Convention does not guarantee the right to have a subsequent and favourable change in the law applied to an earlier offence (see X. v. Germany, no. 7900/77, Commission decision of 6 March 1978, Decisions and Reports 13, p. 70; Le Petit v. the United Kingdom (dec.), no. 35574/97, 5 December 2000; and Zaprianov v. Bulgaria (dec.), no. 41171/98, 6 March 2003). The Court therefore finds that the applicant is in essence complaining of the outcome of the proceedings. It reiterates in this respect its established case law that it is not its task to act as a court of appeal or, as sometimes said, as a court of fourth instance, from the decisions of domestic courts. It is the role of the latter to interpret and apply the relevant rules of national procedural and substantive law. Furthermore, the domestic courts are best placed for assessing the credibility of witnesses and the relevance of evidence to the issues in the case (see, amongst many authorities, Vidal v. Belgium, judgment of 22 April 1992, Series A no. 235‑B, pp. 32-33, § 32, and Edwards v. the United Kingdom, judgment of 16 December 1992, Series A no. 247‑B, § 34). Moreover, the Court notes that the Plovdiv Regional Court addressed and dismissed this argument of the applicant in its judgment of 23 December 1999.
It follows that the applicant’s complaints about the alleged unfairness of the proceedings are manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 and 4 of the Convention.
3. In respect of the complaint under Article 13 of the Convention, the Court reiterates that this provision applies only where an individual has an “arguable claim” to be the victim of a violation of a Convention right (see Boyle and Rice v. the United Kingdom, judgment of 27 April 1988, Series A no. 131, p. 23, § 52; Voyager Limited v. Turkey (dec.), no. 35045/97, 4 September 2001; and Ivison v. the United Kingdom (dec.), no. 39030/97, 16 April 2002).
The Court has found above that the other complaints of the applicant are inadmissible for failure to exhaust the available domestic remedies and for being manifestly ill-founded. Thus, the applicant did not have an “arguable claim” for the purposes of Article 13 of the Convention, and the latter provision is therefore inapplicable in the present case (see, mutatis mutandis, Halford v. the United Kingdom, judgment of 25 June 1997, Reports 1997‑III, p. 1022, § 70; Riener v. Bulgaria, no. 46343/99, § 159, 23 May 2006; and Ellersiek v. Germany (dec.), no. 77151/01, 23 June 2005).
It follows that this complaint is incompatible ratione materiae with the provisions of the Convention within the meaning of Article 35 § 3 and must be rejected in accordance with Article 35 § 4.
4. In view of the above findings, it is appropriate to discontinue the application of Article 29 § 3 of the Convention and to reject the application.
For these reasons, the Court unanimously
Declares the application inadmissible.
Claudia WesterdiekPeer Lorenzen
RegistrarPresident
Full & Egal Universal Law Academy