Pannon Plakát Kft and Others v. Hungary (European Court of Human Rights)

Information Note on the Court’s case-law
December 2022

Pannon Plakát Kft and Others v. Hungary – 39859/14

Judgment 6.12.2022 [Section I]

Article 1 of Protocol No. 1
Article 1 para. 2 of Protocol No. 1
Control of the use of property

Disproportionate statutory ban on roadside advertising hoardings outside built-up areas extinguishing substantial part of applicant companies’ businesses: violation

Facts – The applicant companies (“the applicants”) are advertising companies which operated roadside advertising hoardings and derived a substantial part of their income from that activity. A series of legislative amendments to the Road Traffic Act (Act no. I of 1988 on Traffic on Public Roads) starting in 2011 led to the ban of roadside advertising hoardings outside built-up areas. As a result of the ban, the applicants lost the possibility to use and rent out a significant number of their previously installed hoardings and therefore significant income. The applicants referred the legislation to the Constitutional Court which dismissed their complaints.

Law – Article 1 of Protocol No.1:

(a) – The second and fifth applicants – After the second and fifth applicants became insolvent but prior to deletion from the company register, they assigned their claim pending before their Court to another company and a shareholder respectively, who had sought to take over, by a deed of assignment the right of individual petition from those applicants. However, the right of individual petition under Article 34 was neither a proprietary right nor transferable as if it were. Whatever the validity in terms of domestic law of the transaction in issue, it would have been out of keeping with the nature of the Convention as an instrument protecting basic human rights and the Court itself as its guardian to allow the status of applicant to be transferred at will. Further, there were no special circumstances relating to respect for human rights requiring the Court to continue the examination of the application in respect of the second and fifth applicants in accordance with Article 37 § 1 in fine, given that they had become insolvent, and their claim had been predominantly pecuniary in nature.

Conclusion: Inadmissible as to the two assignees (incompatible ratione personae) (unanimously); struck out in respect of the second and fifth applicants (unanimously).

(b) The first, third, fourth, sixth and seventh applicants –

(i) Applicability of Article 1 of Protocol No.1 to the Convention and the existence of interference – The applicants’ business had been within a specific segment of the out-of-home advertising sector, namely roadside advertising which required assets, in this case roadside advertising hoardings, specifically designed and only suitable for roadside use; thus, an inflexible and non-variable type of asset. Due to the impugned legislative measure, which had interfered with the applicants’ economic freedom, they had lost the ability to use and rent out a significant number of their previously installed hoardings. They consequently had had to terminate or amend contracts with existing clients who had publicised their products on the applicants’ affected assets. In addition, the applicants had had to cover the costs of removing the hoardings which could not have been used for other revenue-generating purposes. This, in turn, had substantially diminished their income and had resulted in a loss of their investments’ value.

The applicants had lost opportunities on the market which had inevitably entailed a loss of chances for them to make profit, which could translate into a decrease in the equity value of their shares; shares in a public company had an economic value and, therefore, were to be regarded as “possessions” within the meaning of Article 1 of Protocol No. 1. Moreover, the applicants had been the owners of the roadside advertising hoardings – physical goods eligible for protection under that provision – which had lost most of their economic value as a result of the impugned measure. Given its serious economic consequences, the impugned measure had amounted to an interference with their property rights. There had been no formal expropriation of their assets or de facto expropriation of possessions, on the grounds that property had become wholly unusable, since the hoardings while losing their economic value in terms of their primary purpose, could have still been sold for parts. Therefore, there had been an interference with the applicants’ rights under that provision consisting of a measure entailing control of the use of their property.

(ii) Lawfulness and aim of the interference – The impugned measure had been lawful and had pursued the legitimate aim of ensuring an important public interest, namely, reducing traffic accidents by removing advertising hoardings from the vicinity of public roads so as to ensure that the attention of drivers was not distracted and that road signs were clearly visible. The goals of the impugned measure could not be said to be “manifestly without reasonable foundation” but had been in line with the respondent State’s international obligations under the Vienna Convention on Road Traffic of 8 November 1968.

(iii) Proportionality of the measure – The transitory period provided to the applicants to make adequate arrangements to respond to the impending change to their major source of revenue, had been very short and could not be regarded as sufficient, in the context of businesses operating under a legal framework that had been essentially stable for more than ten years. Only two days had passed between the promulgation and the entry into force of the first amendment introducing the ban on the installation of new roadside hoardings. This measure undisputedly had had a direct effect on the applicants’ businesses by impelling them to terminate or amend their already existing contractual relationships with their clients and the limitations on signing new contracts. Further, the competent authority could have, from the entry into force of the ban, forcibly removed the applicants’ roadside advertising hoardings at their expense, thereby placing an immediate financial burden on them. The subsequent statutory amendments had prohibited the “presence” of roadside hoardings outside built-up areas and had allowed less than two months for the removal of already installed holdings. In reality these measures had had retroactive effect.

Moreover, considering that the Road Traffic Act, prior to the adoption of the impugned measure, had already prohibited the placement of roadside hoardings in so far as they presented a risk to traffic safety, the applicants had had a legitimate expectation of continuing their business activity. Therefore, while the impugned measure had been sufficiently foreseeable from a qualitative perspective, that was to say, its formulation had been made with sufficient precision, it had been unexpected in the context of the present case.

The burden placed on the applicants as a result of the statutory ban on part of their business activity, although heavy, had to be weighed against the general interest of the community, that was, public safety considerations, in the context of which the States enjoyed a wide margin of appreciation. Although the interference with the applicants’ possessions had been a control of use of possessions and as such the case-law on compensation for deprivation was not directly applicable, a disproportionate and arbitrary control measure could not satisfy the requirements of Article 1 of Protocol No. 1. The very short transitory period had not been alleviated by any positive measures on the part of the State, for example, the adoption of a scheme of reasonable compensation. The Government had not made reference to any pressing economic or social need which could have prevented a longer period being afforded. The aim of road traffic safety, albeit undoubtedly relevant, could not be considered to correspond to an exceptional circumstance which would allow the transitory period to be shortened.

In sum, having regard to the partly retroactive nature of the impugned measure, its unexpected nature, the short transitory period, the lack of any compensatory scheme and the importance that the extinguished business activity had had for the applicants, even bearing in mind the wide margin of appreciation afforded to the State in this type of policies and the importance of road traffic safety – the interference with the applicants’ rights had been disproportionate to the aim pursued and they had had to bear an individual and excessive burden.

Conclusion: violation (unanimously).

Article 41: EUR 240,000 to the first applicant, EUR 170,000 to the fourth applicant, EUR 150,000 to the sixth applicant and EUR 130,000 to the seventh applicant, in respect of pecuniary and non-pecuniary damage combined, for loss of opportunities and frustration suffered as a result of the violation found.

(See also Vékony v. Hungary, 65681/13, 13 January 2015, Legal Summary; Könyv-Tár Kft and Others v. Hungary, 21623/13, 16 October 2018, Legal Summary)

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