Communicated on 19 May 2015
FIRST SECTION
Application no. 40559/12
Giuseppe TILOCCA
against Croatia
lodged on 25 May 2012
STATEMENT OF FACTS
The applicant, Mr Giuseppe Tilocca, is an Italian national, who was born in 1963 and currently lives in Alexandria (Egypt). He is represented before the Court by Mr D.S. Janković and Mr H. Grenac of Law Firm Abel & Grenac, advocates practising in Zagreb.
A. The circumstances of the case
The facts of the case, as submitted by the applicant, may be summarised as follows.
On 15 February 2010 the applicant was, while crossing the border between Serbia and Croatia, caught by the Croatian customs authorities carrying the sum of 563,300 euros (EUR) which he failed to declare, contrary to the law. The customs authorities immediately forfeited EUR 560,000.
On the same day the customs authorities instituted administrative offences 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, that is, the 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.
In his defence the applicant explained that he and his wife had been visiting her daughter in Serbia who had recently had a strong epileptic attack, and submitted documentary evidence suggesting that his wife’s daughter was indeed suffering from epilepsy. The money he had been carrying originated: (a) from the company (société civile immobilière) registered in France, of which he was the director and the only member, from whose account he had withdrawn EUR 326,008.03 with a view to starting another business, and (b) from the sale of their house in France (the remaining amount).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 into the 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 he would lose most of that money given that the French State guaranteed only up to 50,000 euros of bank deposits.
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, Serbian authorities informed the Ministry that neither the applicant nor his wife had been recorded in their register of suspicious transaction, and the French authorities only confirmed the authenticity of the transactions the applicant relied on to prove the origin of the money he had been carrying.
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 pursuant to section 69(2) of the Foreign Currency Act.
On the basis of the documentary evidence the Ministry established that: (a) on 6 July 2009 the applicant had indeed sold his house in France for which EUR 243,091.82 had been paid on his bank account on 29 July 2009 from which on the same day he had first transferred EUR 30,000 to his company’s account and then withdrawn EUR 211,500, and (b) on 21 December 2009 the applicant acting as his company’s director had sold its real estate for which EUR 326,008.03 had been paid on the company’s bank account on 19 January 2010, which sum had been withdrawn by the applicant the next day.
The Ministry held that the origin of the money the applicant had failed to report was irrelevant for the existence of the offence for which he had been convicted or for the imposition of the fine. However, that consideration had been relevant for the imposition of the protective measure of confiscation.
In particular, the Ministry decided not to confiscate EUR 241,500 the applicant had not declared because it found that this sum indeed originated from the sale of his house in France.
As regards the remaining EUR 318,500 (of the forfeited EUR 560,000) the Ministry held that this sum was a part of the funds the applicant had withdrawn from his company’s bank account (EUR 326,008.03) on 20 January 2010. The Ministry further held: (a) that since there was no evidence that the applicant had borrowed that money from his company, by carrying it across border he had disposed with it as if it belonged to him, which amounted to misappropriation of the company’s funds, an offence punishable in every country, and (b) that he had failed to pay the relevant taxes in France on that amount. It therefore decided to confiscate that sum.
The applicant appealed by arguing: (a) that 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) that the Ministry correctly assumed that he had not borrowed the confiscated sum from his company; it had actually been him who had lent EUR 358,600.81 to his company in 2008 and 2009, for which he had submitted documentary evidence, (c) that 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) that the Ministry embarked on the interpretation of foreign (French) law and so, in such complex areas such as tax and commercial law, of which it had known very little, and (e) that it was peculiar that the Ministry confiscated to 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.
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.
The applicant then, on 17 December 2010, lodged a constitutional complaint, alleging, inter alia, a violation of his constitutionally protected right of ownership.
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 relied in his constitutional complaint on the relevant Articles of the Constitution 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.
B. Relevant domestic law
1. Foreign Currency Act
The relevant part of the Foreign Currency Act (Zakon o deviznom poslovanju, Official Gazette no. 96/03 with subsequent amendments), in force at the material time, in so far as relevant, read as follows:
Movement of foreign or domestic currency cash and cheques
Section 36(1)
“Foreign currency cash and cheques in foreign currency may be freely brought into the Republic of Croatia, subject to a reporting obligation pursuant to section 40 of this Act.”
Prevention of money laundering and of counterfeiting of foreign currency
Section 40(1)
“Residents and non-residents crossing the State border are required to declare to a customs official ... cash in foreign or domestic currency or cheques of the value prescribed by the legislation regulating prevention of money laundering.”
Section 69
(1) A fine from HRK 5,000.00 to HRK 50,000.00 for an administrative offence shall be imposed on domestic or foreign natural person ... who attempts to take or takes across the State border cash or cheques of the value prescribed by the legislation regulating prevention of money laundering, without declaring them to a customs official.
(2) Cash and cheques which are the objects of the offence referred to in paragraph 1 of this section shall be confiscated to the benefit of the State budget.
(3) ...
(4) Exceptionally, in particularly justified situations where special mitigating circumstances exist, the authority deciding on the administrative offence may decide that the cash and cheques which are the objects of the administrative offence referred to in paragraph 1 of this section shall not be confiscated or shall be confiscated only in part.”
2. Prevention of Money Laundering and Financing of Terrorism Act
Section 74(1) of the Prevention of Money Laundering and Financing of Terrorism Act (Zakon o sprječavanju pranja novca i financiranja terorizma, Official Gazette no. 87/08 with the subsequent amendments) reads as follows:
“Customs [authorities]... shall inform the Office [for the Prevention of Money Laundering] of any declared transfer across the State border of cash or cheques in domestic or foreign currency of the value, in HRK equivalent, of EUR 10,000 or more, immediately or the latest within three days of the transfer ...”
COMPLAINT
The applicant complains 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 the customs was not justified.
QUESTIONS TO THE PARTIES
Was the confiscation of 318,500 euros, that is, some 57% of the amount the applicant did not declare to the Croatian customs authorities (560,000 euros), necessary to control the use of property in accordance with the general interest, within the meaning of Article 1 of Protocol No. 1 to the Convention? In particular, in the circumstances of the present case did that measure strike the requisite fair balance between the demands of the general interest and the requirements of the protection of the applicant’s right of property, and did it impose a disproportionate and excessive burden on him, regard being had in particular to the severity of the sanction (see, for example, Gabrić v. Croatia, no. 9702/04, 5 February 2009)?
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