Last Updated on December 6, 2020 by LawEuro
. The present case concerns lawfulness of imposition of an administrative fine on the applicant for violation of customs regulations and raises issues under Article 1 of Protocol No. 1.
FIRST SECTION
CASE OF ARTASHES ANTONYAN v. ARMENIA
(Application no. 24313/10)
JUDGMENT
Art 1 P1 • Peaceful enjoyment of possessions • Prescribed by law • Imposition of administrative fine for breaching customs regulations • Regulation not in itself insufficiently foreseeable • Judiciary expected to clarify applicable provision according to circumstances of each case • Government interpretation unsupported and contradicting findings of the Court of Cassation • Failure of domestic courts to properly assess vital circumstances of case • Application of regulation insufficiently foreseeable
STRASBOURG
22 October 2020
This judgment will become final in the circumstances set out in Article 44 § 2 of the Convention. It may be subject to editorial revision.
In the case of Artashes Antonyan v. Armenia,
The European Court of Human Rights (First Section), sitting as a Chamber composed of:
Ksenija Turković, President,
Linos-Alexandre Sicilianos,
Aleš Pejchal,
Armen Harutyunyan,
Pere Pastor Vilanova,
Tim Eicke,
Jovan Ilievski, judges,
and Abel Campos, Section Registrar,
Having regard to:
the application against the Republic of Armenia lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by an Armenian national, Mr ArtashesAntonyan (“the applicant”), on 3 May 2010;
the decision to give notice to the Armenian Government (“the Government”) of the complaint concerning the lawfulness of the fine imposed on the applicant and to declare inadmissible the remainder of the application;
the parties’ observations;
Having deliberated in private on 29 September 2020,
Delivers the following judgment, which was adopted on that date:
1. The present case concerns lawfulness of imposition of an administrative fine on the applicant for violation of customs regulations and raises issues under Article 1 of Protocol No. 1.
THE FACTS
2. The applicant was born in 1954 and lives in Kajaran. The applicant was represented by Ms M. Ghulyan and Mr A. Karakhanyan, lawyers practising in Yerevan.
3. The Government were represented by their Agent, Mr G. Kostanyan, and subsequently by Mr Y. Kirakosyan, Representative of the Republic of Armenia to the European Court of Human Rights.
4. The facts of the case, as submitted by the parties, may be summarised as follows.
5. On 20 September 2005 a company called ZPMK (“the Company”), which was the applicant’s employer, purchased technical equipment in the Russian Federation.
6. On 21, 24 and 26 October 2006 the equipment was imported into Armenia.
7. On 30 October 2006 the applicant, acting on behalf of the Company, filed a customs declaration with the State Customs Service (“the Customs Service”) for the imported technical equipment.
8. On an unspecified date the head of the Customs Service ordered a review of the lawfulness of the imports performed by the Company since 2006.
9. On 30 July 2008 officers of the Customs Oversight Department of the State Revenue Committee (“the Revenue Committee”), following the review, produced a statement, which revealed that the Company, on a number of occasions, had indicated inaccurate classifications and incorrect codes in respect of the imported goods. As regards the customs declaration of 30 October 2006, it was stated in the statement that the declared price of the imported equipment was 194,823 US dollars (USD), whereas the actual price of that equipment was USD 1,461,176.
10. On 16 October 2008 the officers of the Customs Oversight Department of the Revenue Committee transmitted the results of their review to the Investigative Department of the Revenue Committee, for further action.
11. On 17 October 2008 an officer of the Investigative Department of the Revenue Committee initiated administrative proceedings in respect of the applicant by drawing up a record of a breach of customs regulations, in which it was stated that on 30 October 2006 the applicant, acting on behalf of the Company, had declared the price of the imported equipment inaccurately. The applicant’s actions therefore appeared to amount to a breach of Article 203 of the Customs Code (“the CC”).
12. On 27 October 2008 the head of the Investigative Department of the Revenue Committee, with reference to the results of the review carried out by the officers of the Customs Oversight Department and the administrative proceedings initiated in respect of the applicant, held that the applicant, having inaccurately declared the price of imported goods, had committed an administrative offence under Article 203 of the CC and decided to fine the applicant in the amount equivalent to the value of the inaccurately declared equipment, that is to say 579,506,236.48 Armenian drams (AMD).
13. On 27 December 2008 the applicant lodged a claim with the Administrative Court, seeking partial invalidation of the decision of 27 October 2008. The applicant submitted that the contested decision had been unlawful as it had been adopted in breach of the two-month prescription period set down in Article 37 of the Code of Administrative Offences (“the CAO”). He argued that the review conducted by the Revenue Committee on 30 July 2008 had already revealed all the elements of a breach of customs regulations, and the deadline for imposing a fine for this breach had therefore expired on 30 September 2008. In such circumstances, the applicant argued, Article 247 of the CAO barred the Revenue Committee from initiating proceedings against him, while any pending proceedings should be terminated.
14. On 19 January 2009 the Revenue Committee, in its turn, lodged a claim with the Administrative Court against the applicant, seeking enforcement of the decision of 27 October 2008 and payment of the fine.
15. On 28 August 2009 the Administrative Court dismissed the applicant’s claim and allowed that of the Revenue Committee, finding that the applicant, as a representative of the Company, had violated Article 203 of the CC and ordering him to pay the fine imposed by the Revenue Committee, namely AMD 579,506,236.48. As regards the two-month prescription period set down in Article 37 of the CAO, the Administrative Court held as follows:
“… [T]he court concludes that the fact that the [the applicant] had breached customs regulations was discovered and became clear only on the basis of the record of a breach of customs regulations drawn up on 17 October 2008 by [the investigator of the Investigative Department of the Revenue Committee], which recorded the fact of [the applicant’s] committing the offence. The relevant administrative fine was imposed on [the applicant] within two months of the date of discovery of the offence, namely on 27 October 2008.”
16. On 28 September 2009 the applicant lodged an appeal on points of law with the Court of Cassation, which was the only appeal instance on those matters, where he raised arguments similar to those in his initial claim.
17. On 4 November 2009 the Court of Cassation declared the applicant’s appeal on points of law inadmissible for lack of merit.
18. Pursuant to the bailiff’s order of 27 June 2011 issued for the purpose of enforcement of the judgment of 28 August 2009, the applicant’s employer withheld 50% of his monthly salary from June 2011 to April 2012, amounting to a total of AMD 2,159,000.
19. On 18 October 2011 the bailiff seized and ordered a valuation of two flats belonging to the applicant for the purpose of enforcement of the judgment of 28 August 2009. The flats were valued at AMD 3,208,000 and AMD 3,713,000 respectively.
20. On an unspecified date the bailiff sold the flats at a public auction for AMD 689,527 and AMD 214,334 respectively.
21. On 9 June 2017 the bailiff seized and ordered a valuation of a third flat, which the applicant owned jointly with his family members, his share amounting to one fifth of the common property. The flat in question was valued at AMD 8,300,000.
22. On an unspecified date the bailiff sold the flat at a public auction for AMD 2,220,600. The applicant’s share, amounting to AMD 422,971, was used for payment of his judgment debt, while the remaining amount was given to his family members.
RELEVANT LEGAL FRAMEWORK AND PRACTICE
I. Code of Administrative Offences (1986)
23. Article 37 provides that an administrative penalty for a breach of customs regulations may be imposed within two months of the date on which the offence was discovered, but not later than three years after the date on which the offence was committed.
24. Article 247 provides that proceedings in respect of an administrative offence may not be initiated − and those that have already been initiated must be terminated – if, inter alia, the time-limit prescribed by Article 37 has expired at the time of examination of the case concerning the administrative offence.
II. Customs Code (2001-14)
25. Article 203 provides that failure to declare goods and means of transport crossing the customs borders of Armenia, that is to say failure to declare accurate information in an established format regarding those goods and means of transport, or declaring them under a wrong name, in the absence of appearance of a criminal offence, is punishable by a fine in the amount of the customs value of those goods and means of transport.
26. Article 207 lists, among the grounds for initiating proceedings concerning a breach of customs regulations, the discovery of a breach of customs regulations by customs officials when performing their duties.
27. Article 209 provides that the proceedings concerning a breach of customs regulations start with the drawing up of a record of a breach of customs regulations.
III. Decision of the Court of Cassation of 24 July 2009 in the case of State Revenue Committee v. Mekhak Martirosyan and Mkrtich Yaghubyan (no. VD/7703/05/08)
28. The business run by one of the two applicants in this case was subjected to a customs inspection ordered by the head of the Revenue Committee and it was revealed that a number of goods had been imported by that business under an inaccurate classification and with incorrect codes indicated, which was recorded in an inspection report produced on 18 October 2008. On 22 October 2008 a record of a breach of customs regulations was drawn up by an officer of the Revenue Committee, alleging that Article 203 of the CC had been breached. As a result of those administrative proceedings, on 28 November 2008 a fine was imposed on one of the applicants by the Revenue Committee for a breach of that Article. In its decision, the Court of Cassation found, inter alia, that the fine had been imposed in compliance with the two-month prescription period set out in Article 37 of the CAO, since the offence had been discovered on 18 October 2008, whereas the fine had been imposed on 28 November 2008.
THE LAW
I. ALLEGED VIOLATION OF ARTICLE 1 OF PROTOCOL No. 1 TO THE CONVENTION
29. The applicant complained that the administrative penalty had been imposed on him in breach of the requirements of Article 37 of the CAO and had thereby violated his property rights, as provided in 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 general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a state to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”
A. Admissibility
30. The Court notes that the application is not manifestly ill-founded within the meaning of Article 35 § 3 (a) of the Convention. It further notes that it is not inadmissible on any other grounds. It must therefore be declared admissible.
B. Merits
1. Submissions by the parties
31. The applicant submitted that the interference with his possessions had not been in compliance with the law. In particular, Article 37 of the CAO prescribed a two-month prescription period after the discovery of the offence within which an administrative penalty could be imposed on the offender. In his case, the Customs Oversight Department of the Revenue Committee had conducted a review and produced a statement on 30 July 2008 which had revealed all the errors contained in the customs declaration of 30 October 2006. The decision of 27 October 2008 to impose a fine had been based on the breaches disclosed in that statement, therefore the offence had been fully identified by the statement and nothing had prevented the relevant authority from carrying out further checks, if necessary, and imposing a fine within two months of the date of that statement. The fine, however, had been imposed only on 27 October 2008. Contrary to the Government’s assertions, Article 37 of the CAO did not specify the moment when an offence was considered to have been discovered, because this issue depended on the particular circumstances of each case, and that Article could not contain an exhaustive list of such situations. The Government were also mistaken in claiming that any act was first to be formally characterised as an offence before triggering the running of the two-month prescription period. In particular, Article 37 of the CAO used the term “discovered”, and it was the date of discovery of the offence which was crucial, and not the date of initiation of the administrative proceedings. Moreover, the formal characterisation of any act as an offence was made only by the decision to impose an administrative penalty taken at the close of the administrative proceedings and not at the moment when such proceedings were initiated. The administrative body, following such administrative proceedings, might as well have concluded that no offence had been committed. In sum, the interference with his possessions had been unlawful and arbitrary, while the rule prescribed by Article 37 of the CAO and the relevant domestic decisions were not foreseeable as it was not clear to him that a fine could be imposed on him after the expiry of the two-months prescription period.
32. The applicant lastly disagreed with the Government that the decision of the Court of Cassation in the case of State Revenue Committee v. Mekhak Martirosyan and MkrtichYaghubyan was not applicable to his case. In that decision the Court of Cassation had interpreted and applied the legal norm applicable to his case, namely Article 37 of the CAO, and determined the point in the proceedings to be regarded as the date of discovery of the offence. The two cases had been identical since in both of them a breach of customs regulations had been drawn up. However, in that case the offence had been considered discovered on the date when the authorities had revealed the breach for the very first time, that is to say when they had prepared the customs-inspection report. Hence, the date of discovery of the offence had been the date when the offence had been recorded for the first time by the authorities, regardless of the type of document, which in his case had been the statement of 30 July 2008. The Government’s position that this statement had been only an informative document and therefore could not be considered as the date of discovery of the offence contradicted the above decision of the Court of Cassation.
33. The Government argued that Article 37 of the CAO, read in conjunction with the relevant provisions of the CC, defined the moment when a record of a breach of customs regulations was drawn up and the relevant administrative proceedings were initiated as the date when a particular offence was considered as “discovered” within the meaning of that Article. This had been an established practice applied by the Revenue Committee in cases concerning breaches of customs regulations. Moreover, for the two-month prescription period set out in that Article to start running, any act had first to be characterised as an offence. Thus, a number of errors had been identified by the tax inspectors in their statement of 30 July 2008 but not all of them had been considered to amount to an offence under domestic law. The findings in question had been merely the opinion of the officers who had conducted the review and who had not been authorised to give a legal assessment to those acts. This had been possible only after a further thorough examination and analysis. Eventually, only the inaccurate declaration of the value of the imported equipment had been considered to be in breach of customs regulations. Hence, the statement of 30 July 2008 had been only an informative paper and could not be considered as the date on which the offence committed by the applicant had been discovered within the meaning of Article 37 of the CAO. It was for the domestic courts to dissipate any doubts about interpretation of domestic law and, in the present case, the Administrative Court had reached a similar conclusion by holding that the two-month prescription period set out in Article 37 of the CAO had started running from when the record of an administrative offence had been drawn up by the relevant official. Thus, the interference with the applicant’s possessions had been lawful.
34. The Government lastly submitted, as regards the case of State Revenue Committee v. Mekhak Martirosyan and MkrtichYaghubyan, that the Court of Cassation had not provided any authoritative interpretation of Article 37 of the CAO, including the manner of calculation of the prescription period set out in that Article, in its decision taken in that case. The mere fact that the Court of Cassation had found the date of the customs inspection to be the date of discovery of the offence within the meaning of Article 37 of the CAO had had no bearing on the applicant’s case and had not been prejudicial in respect of the calculation of the relevant prescription period in the applicant’s case since the two cases had been different as they had concerned two different types of customs-control procedures.
2. The Court’s assessment
35. The Court notes that it is not in dispute between the parties that the decision of 27 October 2008 imposing a fine on the applicant amounted to an interference with his right to the peaceful enjoyment of his possessions guaranteed by Article 1 of Protocol No. 1. The Court has no reason to hold otherwise, noting that, as a result of that decision, the applicant was deprived of his possessions, including immovable and movable property.
36. The Court further notes that the measure in question falls within the scope of the second paragraph of Article 1 of Protocol No. 1, which allows the Contracting States to control the use of property to secure the payment of penalties. However, this provision must be construed in the light of the general principle set out in the first sentence of the first paragraph (see, among other authorities, Perdigão v. Portugal [GC], no. 24768/06, § 57, 16 November 2010; ÜnspedPaketServisiSaN. VeTiC. A.Ş.v. Bulgaria, no. 3503/08, § 36, 13 October 2015; and Gyrlyan v. Russia, no. 35943/15, § 21, 9 October 2018).
37. The Court reiterates that the first and most important requirement of Article 1 of Protocol No. 1 is that any interference by a public authority with the peaceful enjoyment of possessions should be lawful. The existence of a legal basis in domestic law does not suffice, in itself, to satisfy the principle of lawfulness which, in addition, presupposes that the applicable provisions of domestic law are sufficiently accessible, precise and foreseeable in their application (see, among other authorities, Centro Europa 7 S.r.l. and Di Stefano v. Italy [GC], no. 38433/09, § 187, ECHR 2012, and Vistiņš and Perepjolkins v. Latvia [GC], no. 71243/01, § 96, 25 October 2012).
38. In particular, a norm is “foreseeable” when it affords a measure of protection against arbitrary interferences by the public authorities. Any interference with the peaceful enjoyment of possessions must, therefore, be accompanied by procedural guarantees affording to the individual or entity concerned a reasonable opportunity of presenting their case to the responsible authorities for the purpose of effectively challenging the measures interfering with the rights guaranteed by that provision. In ascertaining whether that condition has been satisfied, a comprehensive view must be taken of the applicable judicial and administrative procedures (see Lekić v. Slovenia [GC], no. 36480/07, § 95, 11 December 2018).
39. The Court has also acknowledged in its case-law that, however clearly drafted a legal provision may be, in any system of law there is an inevitable element of judicial interpretation. There will always be a need for elucidation of doubtful points and for adapting to changing circumstances. Again, whilst certainty is highly desirable, it may bring in its train excessive rigidity and the law must be able to keep pace with changing circumstances. Accordingly, many laws are inevitably couched in terms which, to a greater or lesser extent, are vague and whose interpretation and application are questions of practice. The role of adjudication vested in the courts is precisely to dissipate such interpretation doubts as remain (see OAO NeftyanayaKompaniya Yukos v. Russia, no. 14902/04, § 568, 20 September 2011).
40. In the present case, the parties disagreed as to whether the fine for a breach of customs regulations had been imposed on the applicant in compliance with the rule prescribed in Article 37 of the CAO and whether the rule itself had been foreseeable. The Court notes that that Article allowed imposition of a penalty for a breach of customs regulations at the latest within two months of the date on which the offence in question had been discovered. The Government argued that the date on which an offence was considered discovered within the meaning of Article 37 of the CAO was the date on which the record of a breach of customs regulations was drawn up and the administrative proceedings were initiated. That Article had been consistently interpreted and applied by the domestic authorities in such a manner, including in the applicant’s case, hence the interference had been lawful and foreseeable.
41. The Court notes, however, that the Government have failed to produce any evidence, including any examples of domestic judicial practice, in support of their interpretation of Article 37 of the CAO. Nothing suggests that that Article was ever interpreted by the domestic courts in such a manner and no such interpretation of that provision was provided in the present case by the Administrative Court in its decision of 28 August 2009 either. Moreover, such an interpretation of that provision would be in direct contradiction with the findings reached by the Court of Cassation in its decision in the case of State Revenue Committee v. Mekhak Martirosyan and MkrtichYaghubyan, in which the Court of Cassation concluded that the breach of customs regulations had been discovered on the date of the relevant customs inspection as opposed to the date on which the relevant record of a breach of customs regulations had been drawn up (see paragraph 28 above). It can be induced from that decision that assessment of the date of discovery of an offence was to be carried out in each case individually, in the light of its particular circumstances.
42. The Court does not consider that Article 37 of the CAO was in itself unforeseeable in that it was not sufficiently clearly drafted. As already noted above, it was for the domestic courts to clarify in each particular case the starting point of the prescription period specified in that Article. In the Court’s opinion, however, the domestic court failed to fulfil this obligation thoroughly and diligently, as the circumstances of the applicant’s case required. Having regard to the decision of the Administrative Court of 28 August 2009, the Court notes that the finding reached regarding the date of discovery of the offence does not appear to have been made as a result of proper assessment of that question, whereas such assessment was crucial for determination of lawfulness of the interference with the applicant’s possessions. While finding that the offence in the applicant’s case had been discovered on the date when the relevant official had drawn up the record of a breach of customs regulations, the Administrative Court failed to provide any explanation or reasoning whatsoever for its decision (see paragraph 15 above). It entirely ignored the fact that, prior to that date, a customs inspection had been carried out which had revealed the factual elements of the act committed by the applicant, including all the applicant’s submissions in that regard, despite the fact that, as already noted above, the results of a customs check had been previously found by the Court of Cassation to constitute the date of discovery of a customs breach within the meaning of Article 37 of the CAO. The Government argued that the customs inspection in the present case had been different from the one conducted in the case examined by the Court of Cassation. However, it was for the Administrative Court to determine that question, but its decision was entirely silent on that matter.
43. The Court reiterates that the Convention is designed to guarantee not rights that are theoretical or illusory but rights that are practical and effective (see, among other authorities, Salduz v. Turkey [GC], no. 36391/02, § 51, ECHR 2008).In the Court’s opinion, for the applicant to enjoy effective protection of his rights guaranteed by Article 1 of Protocol No. 1, the circumstances of his case required a more in-depth and thorough scrutiny of the question as to when the prescription period contained in Article 37 of the CAO had started running, especially in view of the manner in which that Article had been previously applied by the Court of Cassation. As already noted above, the Administrative Court carried out only a perfunctory examination and failed to address all the circumstances vital for determination of that question, which stripped the applicant, in the particular circumstances of his case, of the effective protection he should have enjoyed under Article 1 of Protocol No. 1. Nor can it be said that such application of Article 37 of the CAO was sufficiently foreseeable in the particular circumstances of the case.
44. The foregoing considerations are sufficient for the Court to conclude that the interference with the applicant’s peaceful enjoyment of possessions was not lawful within the meaning of Article 1 of Protocol No. 1.
45. There has accordingly been a violation of Article 1 of Protocol No. 1 of the Convention.
II. APPLICATION OF ARTICLE 41 OF THE CONVENTION
46. Article 41 of the Convention provides:
“If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party.”
A. Damage
47. The applicant claimed 17,380,000 Armenian drams (AMD – equivalent to 45,306.21 euros (EUR)) in respect of pecuniary damage. This sum included the estimated value of the three flats which he had lost as a result of the imposed fine and the amount of his salary seized (see paragraphs 18, 19 and 21 above). He also claimed EUR 20,000 in respect of non-pecuniary damage.
48. The Government contested the applicant’s pecuniary claims. Firstly, they argued that the applicant was not entitled to the estimated value of his flats but to the price of their actual sale at public auctions. Secondly, the third flat had been owned by the applicant jointly with his family members and, therefore, the applicant could only claim the amount of his share in that flat.
49. The Court considers that the applicant suffered pecuniary damage as a consequence of an interference with his rights guaranteed by Article 1 of Protocol No. 1. In particular, two flats belonging to him, a share in a third flat and part of his salary were seized for the purpose of payment of the imposed fine. As regards the amount to be awarded for the confiscated flats, the Court disagrees with the Government and considers that the applicant must be awarded compensation for his actual loss, as reflected in the valuations of those flats conducted upon the bailiff’s orders, and not the amount which the authorities managed to obtain through the forcible sale of those flats through public auctions. As regards the Government’s argument concerning the third flat, the Court agrees that the applicant must be awarded a sum equivalent to his share in that flat. Thus, having regard to all the material in its possession, the Court awards the applicant EUR 20,800 in respect of pecuniary damage.
50. The Court also finds that, as a result of the unlawful interference with the applicant’s property, he suffered non-pecuniary damage. Consequently, the Court awards the applicant EUR 3,000 in that connection.
B. Costs and expenses
51. The applicant also claimed AMD 1,200,000 (EUR 3,128) for the legal costs incurred before the domestic courts, submitting a copy of a contract entered into with his lawyer.
52. The Government argued that the applicant’s claim for costs and expenses must be rejected as not properly substantiated.
53. According to the Court’s case-law, an applicant is entitled to the reimbursement of costs and expenses only in so far as it has been shown that these have been actually and necessarily incurred and are reasonable as to quantum. Regard being had to the documents in its possession, the Court considers it reasonable to award the sum of EUR 2,000 for the legal costs incurred in the domestic proceedings.
C. Default interest
54. The Court considers it appropriate that the default interest rate should be based on the marginal lending rate of the European Central Bank, to which should be added three percentage points.
FOR THESE REASONS, THE COURT, UNANIMOUSLY,
1. Declares the application admissible;
2. Holdsthat there has been a violation of Article 1 of Protocol No. 1 to the Convention;
3. Holds
(a) that the respondent State is to pay the applicant, within three months from the date on which the judgment becomes final in accordance with Article 44 § 2 of the Convention, the following amounts,to be converted into the currency of the respondent State at the rate applicable at the date of settlement:
(i) EUR 20,800 (twenty thousand eight hundred euros), plus any tax that may be chargeable, in respect of pecuniary damage;
(ii) EUR 3,000 (three thousand euros), plus any tax that may be chargeable, in respect of non-pecuniary damage;
(iii) EUR 2,000 (two thousand euros), plus any tax that may be chargeable to the applicant, in respect of costs and expenses;
(b) that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amounts at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points;
4. Dismisses the remainder of the applicant’s claim for just satisfaction.
Abel Campos Ksenija Turković
Registrar President
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