SECOND SECTION
FINAL DECISION
AS TO THE ADMISSIBILITY OF
Application no. 50664/99
by STRÄG DATATJÄNSTER AB
against Sweden
The European Court of Human Rights (Second Section), sitting on 21 June 2005 as a Chamber composed of:
MrJ.-P. Costa, President,
MrA.B. Baka,
MrR. Türmen,
MrK. Jungwiert,
MrM. Ugrekhelidze,
MrsA. Mularoni,
MrsE. Fura-Sandström, judges,
and Mrs S. Dollé, Section Registrar,
Having regard to the above application lodged on 16 June 1999,
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, Sträg Datatjänster AB, is a Swedish limited liability company, which was dissolved on 12 February 2002. It was represented before the Court by Mr J. Thörnhammar, a lawyer practising in Stockholm. The respondent Government were represented by Ms I. Kalmerborn, Ministry for Foreign Affairs.
A. The circumstances of the case
The facts of the case, as submitted by the parties, may be summarised as follows.
On 15 December 1997 the shares of the applicant company, which was then called MS Integrated Methods AB, were sold by S.E., its executive director, to another person, S.S. The company changed its name in February 1998 and S.S. was registered as its director in the official company register in March 1998. The applicant company was therefore represented by S.S. during the main part of the domestic proceedings in the present case.
Following a tax audit of the applicant company, the Tax Authority (skattemyndigheten) of the County of Stockholm, by a decision of 18 December 1997, revised upwards its taxable income for the assessment year 1996 by 992,087 Swedish kronor (SEK) and ordered it to pay a tax surcharge (skattetillägg) amounting to 40% of the increased tax liability. By another decision of the same date the Tax Authority also revised upwards S.E.'s taxable income, and ordered him to pay a tax surcharge. The whole of the amounts were payable on 14 April 1998.
On 27 January 1998 both the applicant company and S.E. appealed against the Tax Authority's decisions. They also requested that the execution of the amounts assessed be stayed.
By decisions of 18 March and, upon reconsideration, 25 March 1998 the Tax Authority rejected the requests for stays of execution, stating that the prerequisites laid down in section 49 of the Tax Collection Act (Uppbördslagen, 1953:272) had not been fulfilled. The matter was then automatically referred to the County Administrative Court (länsrätten) of the County of Stockholm for determination.
On 24 March and 8 April 1998 the Tax Authority reconsidered its decisions on taxes and tax surcharges but decided not to change them. In the latter reconsideration decision, it was stated that the taxation matter was forwarded to the County Administrative Court, to which further submissions should be made.
In a letter of 31 March 1998 the applicant company and S.E. requested the County Administrative Court to decide before the taxes and surcharges became due on 14 April 1998 on an interim stay of execution until that issue had been finally examined or to grant a stay pending the final examination of the tax cases. They maintained, inter alia, that, under Article 6 of the Convention, they had a right to a court determination of their tax liability before the amounts assessed by the Tax Authority were enforced, especially since such enforcement could lead to their being declared bankrupt. They also asked the court to hold an oral hearing on the stay-of-execution issue.
By judgments of 21 April 1998 the County Administrative Court quashed the Tax Authority's decisions regarding the requested stay of execution and referred the cases back to the Authority. Having found that the formal prerequisites for granting a stay under section 49, subsections 1 (2) (in respect of S.E.) and 1 (3) (in respect of the applicant company) of the Tax Collection Act had been fulfilled, the court noted that the granting of a stay of execution under these provisions was conditional on security being provided if it could be assumed that the amounts for which a stay had been sought would not be duly paid. As the Tax Authority had not ruled on the question whether security was required, the cases had to be referred back for such an examination. The court further found that, in view of this outcome, an oral hearing was unnecessary.
On 30 April 1998 the Tax Authority granted S.E. a stay of execution pending the County Administrative Court's examination of the appeal against the decision of 18 December 1997 regarding his taxation. However, by a decision of 27 May 1998, the Tax Authority rejected the applicant company's corresponding request. It found that the company's ability to pay was open to doubt, that a stay of execution could not therefore be granted unless security was provided and that, although given the opportunity to do so, the company had failed to provide security.
In a letter of 29 May 1998 the applicant company asked that the stay-of-execuation issue be examined in its entirety. The Tax Authority interpreted this as a new request for a stay and rejected it on 17 June and, upon reconsideration, on 26 June 1998, as the company still had not provided security. Noting that the County Administrative Court, in its judgment of 21 April 1998, had determined that the formal prerequisites for granting a stay had been fulfilled, the Tax Authority found no reason to examine this question.
On 17 June 1998 the applicant company again appealed to the County Administrative Court. It reiterated its request for either an interim stay of execution or a final stay pending the outcome of the tax assessment proceedings. In pointing out the potential damage that could be caused to the company, it noted that nothing prevented the Enforcement Office (kronofogdemyndigheten) from filing a petition for the company's bankruptcy. Stating that it intended to request an oral hearing in the tax assessment proceedings at which it would invoke oral evidence, the company also repeated that it wished the court to hold a hearing on the stay-of-execution issue.
By a decision of 11 September 1998 the County Administrative Court rejected the request for an interim stay of execution, finding that it had no legal basis.
On 16 September 1998 the County Administrative Court quashed the Tax Authority's decision of 17 June 1998 and again referred the case back to the Authority. The court stated that the applicant company, in its new application for a stay of execution, had requested that the issue be examined in its entirety and noted that the Tax Authority had not made a new examination of whether any of the prerequisites for granting a stay were at hand. The Tax Authority should therefore rule on this question as well as on the question of security. In view of this outcome, the court did not find it necessary to hold an oral hearing.
By a decision of 6 October 1998 the Administrative Court of Appeal (kammarrätten) in Stockholm found no reason to examine the applicant company's appeal against the County Administrative Court's decision of 11 September 1998 as the latter court had later taken a final decision on the stay-of-execution issue. The appeal was thus dismissed. On 11 January 1999 the Supreme Administrative Court (Regeringsrätten) refused leave to appeal against the appellate court's decision.
On 16 October 1998 the Enforcement Office of the County of Stockholm, representing the State, filed a petition with the District Court (tingsrätten) of Stockholm, requesting that the applicant company be declared bankrupt. According to a statement submitted by the Office, the company was registered as being in arrears with taxes and surcharges amounting to a total of SEK 478,576. The Office noted that an investigation had revealed that the value of the company's assets was insufficient to cover the debt. In fact, it had no known assets.
On 16 October 1998 the District Court attempted to serve the bankruptcy petition and a summons for a hearing on 26 November 1998 under the ordinary procedure for serving documents set out in section 9, subsection 1 of the Act on the Service of Documents (Delgivningslagen; 1970:428), by sending two letters, one to the applicant company's registered address and one to the registered address of S.S., its director. The letters contained a so-called “white card” to be signed and returned to the court within a specified time-limit. When that notice of delivery was not returned, the District Court proceeded to employ a special procedure for serving the documents (särskild delgivning med aktiebolag), set out in section 9, subsection 3 of the Act. Thus, on 26 October 1998 it sent the documents by mail to the applicant company's registered address and on the following day it sent a letter to the same address confirming the earlier dispatch.
The District Court held its hearing on 26 November 1998. No representative of the applicant company was present. Noting that the company had been notified of the Enforcement Office's bankruptcy petition and summoned to the hearing on 17 November – three weeks after the dispatch of the second letter sent in accordance with the special procedure –, the District Court proceeded with the hearing. On the merits, the District Court found that it had been shown that the State had a claim against the applicant company and that the company must be considered insolvent as it did not have sufficient assets to cover the full debt. Thus, the company was declared bankrupt.
By a judgment of 2 December 1998 the County Administrative Court, without having held an oral hearing, upheld the Tax Authority's reconsideration decision of 24 March 1998 concerning the underlying tax issues. It thus agreed with the Authority's assessments in regard to the applicant company's taxable income and the imposition of a tax surcharge. By another judgment of the same date the court also upheld the Tax Authority's decision on the taxation of S.E.
By a letter of 11 December 1998 the applicant company appealed against the District Court's bankruptcy decision to the Svea Court of Appeal (Svea hovrätt). It claimed, inter alia, that S.S., its present director, had been abroad for some time and had not been given an opportunity to reply to the bankruptcy petition. The District Court had therefore made a gross procedural error, for which reason the case should be referred back to that court.
On 28 December 1998 the Court of Appeal found that the applicant company had been notified of the bankruptcy petition and summoned to the District Court's hearing in due order and that there was thus no reason to refer the case back to the District Court. Further noting that the company had not shown that it was not insolvent, the appellate court upheld the declaration of bankruptcy. On 9 April 1999 the Supreme Court (Högsta domstolen) refused leave to appeal against the appellate court's decision. The bankruptcy proceedings were terminated on 12 February 2002 owing to a lack of assets.
On 1 February 1999 the applicant company and S.E. lodged appeals against the County Administrative Court's taxation judgments. They completed their appeals on 23 February 1999. They asked the Administrative Court of Appeal to stay the execution of the taxes and tax surcharges involved pending the final determination of the tax issues. In the first place, they requested that the judgments be quashed and the tax case be referred back to the County Administrative Court as that court had committed a grave procedural error by neither holding an oral hearing nor giving the company and S.E. the opportunity to make final submissions in the case. In the alternative, they asked the appellate court to give judgments in their favour.
On 29 March 1999 the Tax Authority, in the stay-of-execution case referred back to it by the County Administrative Court on 16 September 1998, informed the applicant company that it had found that the prerequisites for a stay were at hand but that, due to the company's economic situation as shown by the fact that it had been declared bankrupt, a stay required that security be provided. The company was therefore invited to provide security. The company having failed to do so, the Tax Authority, on 26 May 1999, refused to grant a stay. Already having been declared bankrupt, the company found that a stay of execution was no longer useful and thus did not appeal against the Tax Authority's decision.
By decisions of 11 June 1999 the Administrative Court of Appeal found, in response to the letter of 23 February 1999, that it could not rule on the question of a stay of execution as no decision on this matter had been brought before that court. It stated, however, that the matter was pending before the Tax Authority. On 22 September 1999 the Supreme Administrative Court refused leave to appeal against the appellate court's decisions.
By judgments of 28 May 2001 the Administrative Court of Appeal rejected the applicant company's and S.E.'s appeals against the County Administrative Court's taxation judgments. The appellate court found that their requests for an oral hearing at first instance had to be considered as having been made only in relation to the stay-of-execution issue. Consequently, neither the lack of an oral hearing on the tax issues nor any other part of the written procedure at first instance gave reason for the cases to be referred back. In regard to the substantive tax issues, the appellate court agreed with the assessments made by the County Administrative Court.
By letters of 29 August 2001 the applicant company and S.E. appealed against the appellate court's taxation judgments to the Supreme Administrative Court. While, on 9 March 2004, the court granted S.E. leave to appeal, it refused the applicant company leave to appeal by a decision of 19 March 2004.
B. Relevant domestic law and practice
1. Taxes and tax surcharges
The rules on taxes and tax surcharges relevant to the present case were primarily laid down in the Taxation Act (Taxeringslagen, 1990:324).
Income tax is determined by county tax authorities, to which taxpayers are obliged to submit information relevant to the assessment of taxes. For the purpose of securing timely, sufficient and correct information, there are provisions stipulating that, under certain circumstances, the tax authorities may impose penalties on the taxpayer in the form of tax surcharges.
A tax surcharge is imposed on a taxpayer in two situations: if he or she, in a tax return or in any other written statement, has submitted information of relevance to the tax assessment which is found to be incorrect (chapter 5, section 1 of the Taxation Act) or if, following a discretionary assessment, the tax authority decides not to rely on the tax return (chapter 5, section 2). It is not only express statements that may lead to the imposition of a surcharge; concealment, in whole or in part, of relevant facts may also be regarded as incorrect information. However, incorrect claims are not penalised; if the taxpayer has given a clear account of the factual circumstances but has made an incorrect evaluation of the legal consequences thereof, no surcharge is imposed. The burden of proving that the information is incorrect lies with the tax authority. A discretionary tax assessment is made if the taxpayer has submitted information which is so inadequate that the tax authority cannot base its tax assessment on it or if he or she has not filed a tax return despite having been reminded of the obligation to do so (chapter 4, section 3). In the latter case the decision to impose a tax surcharge will be revoked if the taxpayer files a tax return within a certain time-limit. The surcharge amounts to 40% of either the income tax which the Tax Authority would have failed to levy if it had accepted the incorrect information or the income tax levied under the discretionary assessment. In certain circumstances, the rate applied is 20%.
Notwithstanding the fact that the taxpayer has furnished incorrect information, no tax surcharge will be imposed in certain situations, for example when the tax authority has corrected obvious miscalculations or written errors by the taxpayer, when the information has been corrected or could have been corrected with the aid of certain documents that should have been available to the tax authorities, such as a certificate of income from the employer, or when the taxpayer has corrected the information voluntarily (chapter 5, section 4).
Moreover, in certain circumstances, a tax surcharge will be remitted. Thus, taxpayers will not have to pay a surcharge if their failure to submit correct information or to file a tax return is considered excusable owing to their age, illness, lack of experience or comparable circumstances. The surcharge should also be remitted when the failure appears excusable by reason of the nature of the information in question or other special circumstances, or when it would be manifestly unreasonable to impose a surcharge (chapter 5, section 6).
If dissatisfied with a decision concerning taxes and tax surcharges, the taxpayer may, before the end of the fifth year after the assessment year, request the tax authority to reconsider its decision (chapter 4, sections 7 and 9). The tax authority's decision may also be appealed against to a county administrative court. As with requests for reconsideration, an appeal must normally be lodged before the end of the fifth year after the assessment year (chapter 6, sections 1 and 3). Following the appeal, the tax authority shall reconsider its decision as soon as possible and, if it decides to vary the decision in accordance with the taxpayer's request, the appeal will become void (chapter 6, section 6). If the decision is not thus amended, the appeal is referred to the county administrative court. If special reasons exist, an appeal may be forwarded by the tax authority to the county administrative court without reconsidering the assessment (chapter 6, section 7). Further appeals lie to an administrative court of appeal and, subject to compliance with the conditions for obtaining leave to appeal, the Supreme Administrative Court.
If the proceedings before a county administrative court or an administrative court of appeal concern a tax surcharge, the appellant has the right to an oral hearing upon request in all cases except where there is reason to assume that no surcharge will be imposed (chapter 6, section 24). Normally, however, the proceedings before the administrative courts are in writing (section 9 of the Administrative Court Procedure Act (Förvaltnings-processlagen, 1971:291)).
2. Tax collection
At the material time, the collection of taxes and tax surcharges was regulated by the Tax Collection Act.
A request for reconsideration or an appeal against a decision concerning taxes and tax surcharges has no suspensive effect on the taxpayer's obligation to pay the amounts in question (section 103 of the Tax Collection Act and chapter 5, section 13 of the Taxation Act).
However, the tax authority may grant a stay of execution in respect of taxes and surcharges provided that one of the following three conditions is met: (1) if it may be assumed that the amount imposed on the taxpayer will be reduced or remitted, (2) if the outcome of the case is uncertain, or (3) if payment of the amount in question would result in considerable damage for the taxpayer or would otherwise appear unjust (section 49, subsection 1 of the Tax Collection Act).
If, in cases where the second or third condition just referred to is applicable, it may be assumed – due to the taxpayer's situation or other circumstances – that the amount for which a stay of execution is requested will not be duly paid, the request cannot be granted unless the taxpayer provides a bank guarantee or other security for the amount due. Even in these cases, however, a stay may be granted without security if the relevant amount is relatively insignificant or if there are other special reasons (section 49, subsection 2).
A taxpayer may request the tax authority to reconsider its decision concerning the stay-of-execution issue and may appeal against its decision to a county administrative court. The procedure is essentially identical to that followed in regard to requests for reconsideration and appeals concerning the main tax issues (sections 84, 96 and 99 of the Tax Collection Act). Further appeals to an administrative court of appeal and the Supreme Administrative Court are subject to leave to appeal being granted (section 102).
3. Enforcement and bankruptcy
The enforcement offices are under an obligation to levy execution on a debtor upon request, even if the tax authority's decision concerning tax and tax surcharges is not final (chapter 3, section 1 and chapter 4, section 1 of the Enforcement Code (Utsökningsbalken) in conjunction with sections 59 and 103 of the Tax Collection Act). If the debtor does not have enough distrainable property, the enforcement office may request a district court to declare the debtor bankrupt. The debtor will normally be considered insolvent if it is discovered during attempts to levy distress in the six months preceding the presentation of the bankruptcy petition that the assets are insufficient to pay the debt in full (chapter 2, section 8 of the Bankruptcy Act (Konkurslagen, 1987:672)). If the bankrupt's estate is not sufficient to defray all the existing and expected bankruptcy expenses and other liabilities that the bankrupt has incurred, the bankruptcy proceedings will be terminated (chapter 10, section 1 of the Bankruptcy Act).
If a bankruptcy petition is based on a tax debt determined by a decision that is not yet final, the court examining the petition is required to make an independent assessment of the alleged debt, having regard to the evidence adduced in the bankruptcy proceedings. The court accordingly has to make a prediction about the outcome of the pending tax assessment proceedings (judgment of the Supreme Court of 9 June 1981, case no. Ö 734/80).
If a limited liability company has been declared bankrupt and the bankruptcy proceedings are terminated without any remaining assets, the company is dissolved (chapter 13, section 19 of the Limited Liability Companies Act (Aktiebolagslagen, 1975:1385)).
As taxes and tax surcharges are payable even if the tax authority's decision is not final, the decision may be varied or quashed after the relevant amounts have been paid. In this situation and also if the tax decision is amended to the taxpayer's advantage by a court judgment, the amount overpaid is refunded with interest (chapter 18, section 2 and chapter 19, sections 1 and 12 of the Tax Payment Act). If distress has been levied on the taxpayer's property or the taxpayer has been declared bankrupt on account of the tax debt, the distress warrant or bankruptcy decision will be set aside on appeal. Should the warrant or decision have become final, the taxpayer may, upon request, have the case reopened and the warrant or decision quashed (chapter 58 of the Code of Judicial Procedure (Rättegångsbalken)). Any property that has been distrained upon will, if possible, then be restored (chapter 3, section 22 of the Enforcement Code). The same applies to property forming part of a bankrupt's estate to the extent that it is not required for the payment of the bankruptcy expenses and other liabilities (chapter 2, section 25 of the Bankruptcy Act). If the taxpayer's property has been sold and the amount obtained from the sale has been used to pay off the alleged tax debt, the taxpayer will receive financial compensation. In addition, it is open to the taxpayer to bring an action for damages against the State for the financial loss caused by the distress or the bankruptcy (chapter 3, section 2 of the Tort Liability Act (Skadestånds-lagen, 1972:207)), on the ground that the authorities or the courts have acted wrongfully or negligently.
4. Service of documents
Service of a document on a legal person shall be effected by delivering the document to someone who has the comptence to represent the legal person (section 9, subsection 1 of the Act on the Service of Documents). In the event of a failure to serve a document on a limited liability company in the manner mentioned or when such service is deemed to have no prospect of success and provided it is not considered inappropriate in view of the circumstances of the case, so-called special service may be used (section 9, subsection 3 of the Act). This means that service is effected by sending the document by mail to the company followed by a letter at least a day later informing it that the document has been dispatched. Both the letter containing the document and the information letter shall be sent to the company's registered address, as found in the official company register. Service of the document is considered to have taken place three weeks after the dispatch of the information letter unless it appears unlikely that the document has arrived at the registered address (section 19 of the Act). A precondition for employing the special service is usually that at least one attempt has been made at serving the document in accordance with the ordinary procedure. This may be done by sending the document to the company by ordinary mail including a notice of delivery, which is to be signed by a competent representative and sent back to the authority (Government Bill 1996/97:132, p. 20 et seq.).
COMPLAINTS
1. The applicant company complained of the fact that the Tax Authority's taxation decision had been enforced prior to a court determination of the dispute. The company considered that it had thereby been deprived of effective access to court under Article 6 of the Convention. In particular, it maintained that it could not obtain a fair hearing in the tax assessment proceedings since payment of the alleged tax debt and the tax surcharge had already been enforced and the company had been declared bankrupt.
2. Further under Article 6 of the Convention, the applicant company complained that the County Administrative Court, in the tax assessment proceedings, had failed to hold an oral hearing before issuing its judgment of 2 December 1998.
3. Maintaining that its director had been staying abroad and that therefore no representative of the company had been aware of the Enforcement Office's bankruptcy petition or the District Court's hearing on that matter, the applicant company claimed that the procedure employed by the District Court for serving documents on it had deprived it of an effective access to court also in regard to the bankruptcy issue and had denied it its right to “equality of arms” in those proceedings. Also in this respect, the company relied on Article 6 of the Convention.
4. The applicant company finally claimed that the decision to declare it bankrupt had involved an unlawful deprivation of property under Article 1 of Protocol No. 1 to the Convention.
THE LAW
In its observations in reply to the Government's observations, the applicant company stated that not only the company but also S.S. should be considered as an applicant in the present case.
The Court notes that the application form submitted to the Court on 18 August 1999 identified both the company and S.S. as applicants in the case. However, the form otherwise only referred to the initial letter submitted on 16 June 1999, in which the company alone was mentioned as the applicant. In any event, the Court notes that S.S. was not a separate party to the domestic proceedings but only acted as a representative of the company. The predominately parallel proceedings concerned the taxation of S.E., the earlier director of the company. Thus, S.S. was only affected by the proceedings indirectly as owner and representative of the company. In these circumstances, the Court cannot find any basis for including S.S. as an applicant in the present case.
1. The applicant company complained that it had been deprived of effective access to court and a fair hearing in the tax assessment proceedings due to the fact that the Tax Authority's taxation decision had been enforced prior to a court determination of the dispute. The company relied on Article 6 of the Convention, which in relevant parts states as follows:
“1. In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing ... by [a] ... tribunal...”
The respondent Government recognised that Article 6 was applicable to the tax assessment proceedings in so far as the latter concerned the tax surcharge. They maintained, however, that the complaints were manifestly ill-founded for the following reasons. The applicant company had rapid access to a court, as the Tax Authority reconsidered its taxation decision within less than two months of receiving the company's request for reconsideration, and the County Administrative Court delivered its judgment seven and a half months after being seized with the appeal against the reconsideration decisions. This was in sharp contrast to the cases of Janosevic v. Sweden and Västberga Taxi and Vulic v. Sweden (judgments of 23 July 2002, the Janosevic judgment having been published in Reports of Judgments and Decisions 2002-VII, p. 1). Moreover, while the applicant company was declared bankrupt before the County Administrative Court delivered its judgment in the taxation case, the bankruptcy decision was issued only six days previously and had not become final at the time of the delivery of the taxation judgment. Had the County Administrative Court granted the appeal against the taxation decision, the Court of Appeal would have quashed the bankruptcy decision. In this respect, too, the present case differed from the Janosevic and Västberga and Vulic cases, in which the bankruptcy decision had already become final and the bankruptcy proceedings terminated before there was a court determination of the taxation issue. In the present case, the bankruptcy proceedings were not terminated until 12 February 2002, at which time the taxation issue had been examined and determined by two courts.
Further, in assessing the seriousness of the implications for the applicant company of the “early” enforcement of the tax debt, the Government argued that regard had to be had to the fact that neither the tax nor the tax surcharge had been paid by the company. Moreover, as the applicant company lacked assets, it would have been declared bankrupt on the basis of the tax debt alone. Thus, a stay of execution in respect of the tax surcharge would not have made any difference, since this would not have prevented the bankruptcy declaration.
The applicant company maintained its complaint. It stated that it had not had access to a court as there had been no court examination of the debt on which the District Court's bankruptcy decision was based. Allegedly, a bankruptcy decision causes irreparable harm, often making it impossible to proceed with the taxation case.
The Court first finds that Article 6 § 1 of the Convention applies to the tax assessment proceedings in the case in so far as they concerned the tax surcharge, as in this respect they involved a determination of a “criminal charge” (see the above-mentioned Janosevic v. Sweden judgment, pp. 26‑28, §§ 65-71). The provision does not, however, apply to the dispute over the tax itself (ibid., p. 26, § 64, and Ferrazzini v. Italy [GC], judgment of 12 July 2001, Reports 2001-VII, p. 359, p. 29). The Court will accordingly consider the proceedings to the extent to which they determined a “criminal charge” against the applicant, although that consideration will necessarily involve the “pure” tax assessment to a certain extent.
The Court reiterates that Article 6 § 1 of the Convention embodies the “right to a court” – of which the right of access is one aspect – as a constituent element of the right to a fair trial. This right is not absolute, but may be subject to limitations permitted by implication. However, these limitations must not restrict or reduce a person's access in such a way or to such an extent that the very essence of the right is impaired. Furthermore, they will not be compatible with Article 6 § 1 if they do not pursue a legitimate aim or if there is not a reasonable relationship of proportionality between the means employed and the aim sought to be achieved (see, among other authorities, Deweer v. Belgium, judgment of 27 February 1980, Series A no. 35, pp. 24-26, §§ 48-49, Aït-Mouhoub v. France, judgment of 28 October 1998, Reports 1998-VIII, p. 3227, § 52, and the above-mentioned Janosevic v. Sweden judgment, p. 31, § 80).
The basis for the various proceedings in the present case was the Tax Authority's decision of 18 December 1997, which revised the applicant company's taxable income and ordered it to pay a tax surcharge. The tax authorities are administrative bodies which cannot be considered to satisfy the requirements of Article 6 § 1 of the Convention. The Court considers, however, that Contracting States must be free to empower tax authorities to impose sanctions like tax surcharges even if they involve large amounts. Such a system is not incompatible with Article 6 § 1 so long as the taxpayer can bring any such decision affecting him before a judicial body that has full jurisdiction, including the power to quash in all respects, on questions of fact and law, the challenged decision (see Bendenoun v. France, judgment of 24 February 1994, Series A no. 284, pp. 19-20, § 46, Umlauft v. Austria, judgment of 23 October 1995, Series A no. 328‑B, pp. 39-40, §§ 37-39, and the above-mentioned Janosevic v. Sweden judgment, p. 31, § 81).
Under Swedish law, appeals against the Tax Authority's taxation decision of 18 December 1997 as well as its decisions concerning the request for a stay of execution lay to the administrative courts. Indeed, the applicant company availed itself of that remedy. It is thus clear that the administrative courts are competent to examine questions relating to tax surcharges. It is true that, as a consequence, they sit in proceedings that contain elements of a criminal nature for the purposes of the Convention although they have no general jurisdiction to deal with issues that are classified as belonging to the criminal law under the Swedish legal system. However, the Court notes that the administrative courts – like the courts of general jurisdiction that determined the bankruptcy issue – have jurisdiction to examine all aspects of the matters before them. Their examination is not restricted to points of law but may also extend to factual issues, including the assessment of evidence. If they disagree with the findings of the Tax Authority, they have the power to quash the decisions appealed against. For these reasons, the Court finds that the judicial proceedings in the case have been conducted by courts that afford the safeguards required by Article 6 § 1 (see the above-mentioned Janosevic v. Sweden judgment, pp. 31-32, § 82).
It remains to be determined, however, whether the rules governing appeals against decisions of the tax authorities and, in particular, the application of those rules in the instant case, prevented the applicant company from having effective access to the courts. In this respect, the Court reiterates that the Convention is intended to guarantee not rights that are theoretical or illusory but rights that are practical and effective. This is particularly so of the right of access to the courts in view of the prominent place held in a democratic society by the right to a fair hearing (see Airey v. Ireland, judgment of 9 October 1979, Series A no. 32, pp. 12-14, § 24).
Under the tax laws relevant to the present case, notably chapter 6, sections 6 and 7 of the Taxation Act, when an appeal is lodged with a county administrative court the tax authority should reconsider its decision. Only if there are special reasons may the appeal be referred directly to the court. In the normal case, therefore, reconsideration by the tax authority is a precondition for the court's examination of the appeal.
On 27 January 1998 the applicant company appealed against the Tax Authority's taxation decision of 18 December 1997. On 24 March and 8 April 1998 the Tax Authority reconsidered the appealed decision and, as it did not amend it, stated that the taxation matter was forwarded to the County Administrative Court for examination. The company's request for a stay of execution was turned down several times by the Tax Authority between 18 March and 26 June 1998 before the County Administrative Court, for a second time, referred this issue back to Authority on 16 September 1998. Thereafter the Authority turned down the request again on 26 May 1999. No appeal was made against this decision as, in the meantime, the applicant company had been declared bankrupt and a stay of execution was no longer deemed useful. The bankruptcy decision had been taken by the District Court on 26 November 1998 following the Enforcement Office's petition of 16 October 1998. At the time when the applicant was declared bankrupt, the tax liability – including the tax surcharge – on which the bankruptcy petition was based had not yet been examined by a court. This examination occurred six days later, on 2 December 1998, when the County Administrative Court delivered its judgment in the tax assessment proceedings. The applicant company's appeal against the bankruptcy decision was determined by the Court of Appeal on 28 December 1998. Thus, at this point in time a first judicial examination of the underlying tax liability had been made. On 12 February 2002, when the bankruptcy proceedings were terminated owing to a lack of assets in the applicant company, the tax liability had been examined by a further judicial instance, the Administrative Court of Appeal, on 28 May 2001.
The Court reiterates that the tax surcharge imposed on the applicant company by the Tax Authority's decision of 18 December 1997 constituted a substantial amount of money. Moreover, together with the actual tax assessed by the same decision, the surcharge formed the basis of the District Court's bankruptcy decision of 26 November 1998. The impugned Tax Authority decision thus had serious implications for the applicant company. Indeed, they affected the company's very existence as it could not continue its business during the bankruptcy and was dissolved when the bankruptcy proceedings were terminated. By finding, in its judgment of 21 April 1998, that the prerequisites for a stay of execution under section 49, subsection 1(3) of the Tax Collection Act had been fulfilled, that is to say that requiring payment of the amount in question would result in considerable damage for the applicant company or would otherwise appear unjust, the County Administrative Court acknowledged the company's difficulties.
It is true that no money was recovered from the applicant company and that, due to the lack of distrainable assets, it would have been declared bankrupt on the basis of the tax debt alone. Consequently, the tax surcharges have in fact never been paid. Nevertheless, the Court considers that the enforcement measures taken – covering also the surcharges, which remained payable – and the situation in which the applicant company was placed made it indispensable if it was to have effective access to the courts for the procedures it had set in motion to be conducted promptly. The very essence of this right would otherwise be impaired.
Looking at the proceedings in the instant case, the Court notes that the Tax Authority reconsidered its taxation decision for the first time on 24 March 1998, less than two months after the applicant company had lodged an appeal against that decision. Following its second reconsideration, on 8 April 1998, the Tax Authority forwarded the taxation matter to the County Administrative Court, and the court deilivered its judgment on 2 December 1998, slightly more than ten months after the appeal had been lodged against the taxation decision. Thus, while no stay of execution was granted, both the Tax Authority and the County Administrative Court must be considered to have acted with the promptness required by the circumstances of the case. In this respect, the present case differs significantly from the above-mentioned cases of Janosevic v. Sweden and Västberga Taxi and Vulic v. Sweden, where it took the County Administrative Court about five years to examine the appeals against the respective Tax Authority decisions.
The Court notes, however, that the applicant company was declared bankrupt on 26 November 1998 due to the tax debt established by the Tax Authority's taxation decision, six days before there had been any court examination of that decision. Still, the District Court's bankruptcy decision was reviewed on appeal by the Court of Appeal on 28 December 1998, only a month later. At that time, the County Administrative Court's judgment, confirming the Tax Authority's decision, was available. It is clear that if the County Administrative Court had found that the applicant company was not liable to pay the tax and tax surcharge in question, the Court of Appeal would have quashed the appealed bankruptcy decision. Again, the present case differs from the cases of Janosevic v. Sweden and Västberga Taxi and Vulic v. Sweden. In those cases, all bankruptcy decisions (or – in respect of Vulic – the seizure of savings and income) were made several years before the first court examination of the underlying tax liabilities and the respective bankruptcy proceedings were terminated due to a lack of assets at least three years and ten months before that first court examination. It should further be noted in the present case that, while the Administrative Court of Appeal took almost two and a half years to examine the applicant company's appeal against the County Administrative Court's taxation judgment, the bankruptcy proceedings were at that time still ongoing.
In assessing the implications for the applicant company of the various decisions taken in the present case, the Court considers that account must still be taken of the fact, mentioned above, that the enforcement measures did not lead to any money being recovered, whether for payment of the actual tax or the tax surcharge.
In sum, the Court notes that the applicant company had a prompt first court examination of the tax and tax surcharge assessed by the Tax Authority, that the District Court's bankruptcy decision was reviewed on appeal after only a month, at a time when the tax debt had been examined by a court, and that the company did not pay any part of the tax and tax surcharge in question.
The Court does not overlook the fact that the applicant company's bankruptcy in itself was a serious consequence of the Tax Authority's taxation decision. However, the Court finds, having regard to the above circumstances, that the company had access to the courts for the determination of both the underlying tax liability and the bankruptcy which, on the whole, must be deemed to have been effective.
It follows that this complaint is manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 and 4 of the Convention.
2. The applicant company complained, under Article 6 of the Convention, that the County Administrative Court did not hold a hearing in the tax assessment proceedings.
The Government maintained that this complaint was also manifestly ill-founded. It argued that, while the applicant, on 17 June 1998, had requested an oral hearing in the stay-of-execution proceedings, it had only stated that it intended to request such a hearing in the tax assessment proceedings. The case file of the County Administrative Court showed, however, that no such request was made in the latter proceedings. This had been confirmed by the Administrative Court of Appeal in its judgment of 28 May 2001. Moreover, the applicant company had failed to request an oral hearing also before the appellate court. Finally, it did not appear that the present tax dispute had involved any questions of public interest, which could have made a public hearing necessary.
The applicant company claimed that an oral hearing had been necessary in order to have a comprehensive examination of the relevant tax issues, including the hearing of the person who had made the evaluation of the company's assets in its original tax returns. The County Administrative Court must have realised this and had been aware of the company's plans to ask for a hearing in the tax assessment proceedings. Moreover, the court had had an obligation to see to it that the case was investigated in a manner required by the circumstances.
The Court first finds that the entitlement to a “public hearing” in Article 6 § 1 necessarily implies a right to an “oral hearing”. However, the obligation under Article 6 § 1 to hold a public hearing is not an absolute one. Thus, a hearing may be dispensed with if a party unequivocally waives his or her right thereto and there are no questions of public interest making a hearing necessary. A waiver can be done explicitly or tacitly, in the latter case for example by refraining from submitting or maintaining a request for a hearing (see, among other authorities, Håkansson and Sturesson v. Sweden, judgment of 21 February 1990, Series A no. 171-A, p. 20, § 66, and Schuler-Zgraggen v. Switzerland, judgment of 24 June 1993, Series A no. 263, pp. 19-20, § 58).
As regards the present case, the Court notes that, while the proceedings involved the determination of a “criminal charge” in so far as they concerned a tax surcharge, they were conducted in the administrative courts and governed by the Administrative Court Procedure Act and the Taxation Act. According to chapter 6, section 24 of the latter Act, there is as a rule a right to an oral hearing if the proceedings before a county administrative court or an administrative court of appeal concern a tax surcharge. However, this right only arises if the individual actually requests an oral hearing. Normally, administrative court proceedings are in writing.
In its appeals against the Tax Authority's decisions on the stay-of-execution issue, lodged on 31 March and 17 June 1998, the applicant company asked the County Administrative Court to hold an oral hearing. In the latter appeal it also stated that it intended to request an oral hearing in the tax assessment proceedings (i.e. on the merits). However, there is no indication that such a request was actually made. In this connection, it should be noted that the Administrative Court of Appeal, on 28 May 2001, rejected the company's claim that the County Administrative Court had committed a grave procedural error by not holding a hearing, finding that the request for a hearing must be considered to have been made only in relation to the stay-of-execution issue. Furthermore, while the company thus complained about the lack of an oral hearing at first instance, it has not been shown that it asked this or the appellate court to hold a hearing on the merits of the case.
In view of the fact that section 9 of the Administrative Court Procedure Act provided that the proceedings before the administrative courts were normally in writing and that section 6, chapter 24 of the Taxation Act stated that the appellant as a rule had a right to an oral hearing upon request if the proceedings concerned a tax surcharge, the Court considers that the applicant company, which was represented by legal counsel throughout the tax assessment proceedings, could have been expected to request a hearing in those proceedings if it attached importance thereto. The company did not do so, however, and the Court therefore finds that it can reasonably be considered to have waived its right to a hearing in the proceedings in question.
Having regard to the above, the Court concludes that the failure of the County Administrative Court to hold an oral hearing in the tax assessment proceedings did not involve a breach of Article 6 § 1 of the Convention.
It follows that this complaint is also manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 and 4 of the Convention.
3. The applicant company further complained, under Article 6 of the Convention, that the procedure employed by the District Court for serving the bankruptcy petition and the summons for the court's hearing had deprived it of effective access to court also in regard to the bankruptcy issue, and had denied it its right to “equality of arms” in those proceedings.
The Government submitted that this complaint was also manifestly ill-founded. They stated that the procedure employed by the District Court had been in compliance with domestic legislation, that this procedure had been introduced as it had often proved difficult to serve documents on limited liability companies, that the letters in question had been sent to the applicant company's address as registered in the official company register and that the District Court had had no reason to believe that the address was wrong or that the information had not reached the company. Moreover, while the company had claimed that its director had been abroad during the relevant period, it had not adduced any evidence to this effect before the appellate instances. The Government further claimed that it must be required of a limited liability company to check its mail and that the applicant company must have been aware, in the circumstances, that it was very likely that a bankruptcy petition would be issued.
The applicant company stated that its director had been staying abroad and that therefore no representative of the company had been aware of the Enforcement Office's bankruptcy petition or the District Court's hearing on that matter. The claim that the director had been abroad, which had been made instantly after the bankruptcy decision, had not been questioned by the Tax Authority or the Court of Appeal. The applicant company maintained that the District Court had used a procedure for serving the documents in question which afforded no guarantees that the information actually reached the addressee. It further contended that, as it had legal representation in the related tax assessment proceedings, the District Court could have contacted that lawyer to secure the service of the documents.
The Court reiterates that the District Court made two attempts to serve on the applicant company the Enforcement Office's bankruptcy petition and the summons to the court's hearing. First, it used the ordinary procedure under section 9, subsection of the Act on the Service of Documents on 16 October 1998, and then it used the special procedure under section 9, subsection 3 of the Act on 26 and 27 October 1998. The letters were sent to the company's registered address. The company was considered to have been duly notified on 17 November 1998 and the hearing went ahead as planned on 26 November 1998, in the absence of a representative of the company.
It is clear that the procedures used were in conformity with domestic legislation. As was confirmed by the Court of Appeal on 28 December 1998, the applicant company was notified of the petition and the summons in due order. The Court further notes that the tax and the tax surcharge assessed by the Tax Authority were immediately enforceable. As is shown by the applicant company's submissions of 31 March and 17 June 1998 to the County Administrative Court in the stay-of-execution proceedings, it was aware of this and the possibility of the Enforcement Office filing a bankruptcy petition. In general, and in particular due to the risk of such a petition being filed, it could be expected of the applicant company to make the necessary arrangements for its mail to be checked and for the director to be notified of any important matter during his time abroad (see, mutatis mutandis, Hennings v. Germany, judgment of 16 December 1992, Series A no. 251-A, p. 11, § 26).
The Court has further regard to the fact that the District Court's bankruptcy decision was reviewed on appeal, and that there is no indication that the applicant company was unable to challenge the bankruptcy petition before the Court of Appeal.
In these circumstances, the Court finds that the District Court's service of the documents in question did not involve a breach of Article 6 § 1 of the Convention.
It follows that this complaint is also manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 and 4 of the Convention.
4. The applicant company finally complained that the decision to declare it bankrupt had involved an unlawful deprivation of property. It relied on Article 1 of Protocol No. 1 to the Convention, which provides the following:
“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.”
The applicant company argued that it had been declared bankrupt without there having been at that time a real examination of whether the underlying tax debt was accurate.
The Court reiterates that the decisions to declare the applicant company bankrupt as well as the decisions assessing its underlying tax liability were in conformity with domestic legislation. It further finds that they were taken for the purpose of securing the payment of taxes and penalties and that they must be deemed to have been necessary for that purpose.
The Court notes that the courts examining a bankruptcy petition based on a tax debt determined by a decision which has not yet acquired legal force are required to make an independent assessment of the alleged debt and thus have to make a prediction about the outcome of the pending tax assessment proceedings. Moreover, the Court reiterates what it has noted above under complaint no. 1, namely that that the District Court's bankruptcy decision was reviewed on appeal after a month, at a time when the County Administrative Court had delivered its judgment in the tax assessment proceedings.
In these circumstances, the Court cannot find any indication of a breach of the applicant company's rights under Article 1 of Protocol No. 1 to the Convention.
It follows that this complaint is also manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 and 4 of the Convention.
For these reasons, the Court, by a majority as regards the complaint concerning the lack of an oral hearing and unanimously as regards the remainder,
Declares the application inadmissible.
S. DolléJ.-P. Costa
RegistrarPresident
Full & Egal Universal Law Academy