EHRM, 04-03-2014, nr. 34129/03

On 31 July 2000 the applicant company entered into a contract with a sole trader, Ms T.Z., to jointly operate a billiards club. The contract stipulated, in particular, that the sole trader would operate the club against an undertaking on the part of the applicant company to supply the club with alcohol. The contract also made provision for the manner in which profits would be shared between the parties, and set out penalties in case of breach.

On 7 August 2000 the applicant company obtained a licence to sell alcoholic beverages in the billiards club.

On 18 January 2001 the applicant company entered into a similar contract with another sole trader, Ms V.G., for the joint operation of an electronic games club. At that time the applicant company had already obtained a licence to sell alcoholic beverages in that club.

Both the billiards club and the electronic games club were operated in premises leased by the applicant company.

On 3 July 2002 the tax authorities carried out an inspection at the billiards club. They found that the sole trader, Ms T.Z., was selling alcohol without the requisite licence. The next day, 4 July 2002, the authorities drew up a report accusing her of trading in excise goods without the requisite licence, contrary to section 17a(2) of the Excise Act 1994 (see paragraph 23 below), and impounded the alcohol (eighteen bottles) that they had found in the club. The applicant company was not notified of those events.

On 8 July 2002 Ms T.Z. objected to the report, saying she had been selling the alcohol on behalf of the applicant company, which had a licence to do so. She further claimed that the impounding had been unlawful.

On 16 July 2002 the regional tax director dismissed the objection, observing that the impounding could not be challenged separately as it had been ancillary to the opening of administrative-penal proceedings and had amounted to a measure intended to prevent tampering with evidence. On an appeal by Ms T.Z., on 25 October 2002 the Dobrich District Court upheld that decision, finding that the impounding could not be challenged in separate judicial review proceedings; only the penal order which would conclude the administrative-penal proceedings was capable of being challenged by way of judicial review.

In the meantime, on 17 July 2002 the regional tax director issued a penal order against Ms T.Z. The penalties imposed thereby were a fine and forfeiture of the impounded alcohol. The applicant company was not served with a copy of the order.

Ms T.Z. sought judicial review of the order. On 29 January 2003 the applicant company applied to intervene in the proceedings as a third party, arguing that it was the owner of the forfeited alcohol. The next day, 30 January 2003, the Dobrich District Court discontinued the judicial review proceedings, finding that Ms T.Z.'s application was out of time.

A subsequent appeal by the applicant company against the discontinuance was rejected by the Dobrich District Court on 17 February 2003 on the grounds that, not being a party to the proceedings, the company did not have standing to appeal against their discontinuance. On an appeal by the applicant company, in a final decision of 22 April 2003 the Dobrich Regional Court upheld that decision, holding that the company did not have standing to intervene in the proceedings. The court found it irrelevant to now discuss whether or not the company could have claimed to be a victim of the administrative offence. Ensuing attempts by the company to obtain re-opening of the proceedings were unsuccessful.

On 3 July 2002 the tax authorities carried out an inspection at the electronic games club jointly operated by the applicant company and Ms V.G. They found that Ms V.G. was selling alcohol without the requisite licence. The next day, 4 July 2002, they drew up a report accusing her of trading in excise goods without the requisite licence, contrary to section 17a(2) of the Excise Act 1994 (see paragraph 23 below). They impounded the alcohol (forty-six bottles) that they had found in the club. The applicant company was not notified of those events.

Ms V.G. sought judicial review of the impounding, arguing that she had been selling the alcohol on behalf of the applicant company, which had a licence to do so. On 23 October 2002 the Dobrich District Court rejected her application as inadmissible, holding that the impounding could not be challenged in separate judicial review proceedings; only the penal order which would conclude the administrative-penal proceedings was capable of being challenged by way of judicial review.

In the meantime, on 19 August 2002 the regional tax director issued a penal order against Ms V.G. The penalties imposed thereby were a fine and forfeiture of the impounded alcohol. The applicant company was not served with a copy of the order.

The sole trader sought judicial review of the order.

At a hearing held on 4 November 2003 the applicant company applied to intervene in the proceedings as a third party, arguing that it was the owner of the forfeited alcohol. However, the Dobrich District Court turned its application down, finding that it had not been party to the administrative-penal proceedings. It held that the business relations between the applicant company and Ms V.G. were irrelevant for the proceedings. It also instructed the applicant company to bring separate proceedings in the civil courts.

On 10 February 2004 the Dobrich District Court upheld the penal order. It found that the alcohol had been properly forfeited. It reiterated that considerations concerning the business relations between Ms V.G. and the applicant company were irrelevant for the administrative-penal proceedings. The Dobrich Regional Court upheld that judgment in a final judgment of 7 June 2004.

At the relevant time, a mayor of a municipality, acting at the request of a sole trader or a company, was empowered to issue a licence for selling alcohol (section 40 of the Wine and Spirits Act 1999 and sections 27–28 of the regulations issued in 2000 under section 40(6) of that Act). The licensing regime for the sale of alcohol was later lifted.

Section 17a(2) of the Excise Act 1994, as in force at the relevant time, made it an administrative offence punishable with a fine for a company or a sole trader to, inter alia, sell excise goods without licence. For the procedure to be followed with a view to punishing an administrative offence, the Excise Act 1994 referred to the Administrative Offences and Punishments Act 1969 (‘the 1969 Act’).

When punishing an administrative offence, the authorities must, if the relevant statute so provides, also seek to have forfeited, inter alia, the goods which are the subject of the offence and which belong to the offender or which have been used to commit the offence (section 20(1) and (3) of the 1969 Act). At the relevant time section 17a(11) of the Excise Act 1994 (superseded by section 124(1) of the Excise and Tax Warehouses Act 2005), read in conjunction with section 17a(2) of the same Act, provided that excise goods sold by a company or a sole trader without a licence were subject to forfeiture. It did not specify whether that was the case if the goods belonged to the offender alone.

The 1969 Act does not make provision for third parties who claim to be the owners of forfeited goods to take part in the proceedings against an offender, and the courts have turned down requests for intervention on that basis (oпp. № 338 oT 10 аbгycT 2004 г. пo h. а. x. д. № 222/2004 г., PC — ПеTpич, пoTb. c oпp. № 8 oT 25 mай 2005 г. пo д. № 1247/2004 г., OC — Благoеbгpад).

When drawing up a report accusing an individual or a legal person of an administrative offence, the relevant authority must indicate the names and the addresses of the persons, if any, who have suffered damage as a result of the offence (section 42(9) of the 1969 Act). Before issuing a penal order in respect of the offence, the relevant authority must give notice of the proceedings to the persons, if any, who have suffered damage as a result of the offence (section 52(3)). Those persons can then ask the authority to award them compensation, provided the claim does not exceed two Bulgarian levs, unless another statute makes provision for a higher amount (section 45(1)). As a rule, compensation must be awarded simultaneously with the issuing of the penal order (section 55(1)). However, if the authority encounters difficulties in resolving the issue of compensation, it can discontinue that part of the proceedings and direct those concerned to bring their claims by way of civil actions (section 56).

Section 1 of the State Responsibility for Damage Caused to Citizens Act 1988 (renamed in July 2006 the State and Municipalities Responsibility for Damage Act — ‘the 1988 Act’), as originally enacted and in force until the end of 2005, provided that the State was liable for damage suffered by individuals (гpаждаhи) as a result of unlawful decisions, actions or omissions by civil servants, committed in the course of or in connection with the performance of their duties. The Supreme Court of Cassation's case-law (pеш. № 2139 oT 12 декеmbpи 1997 г. пo гp. д. № 1649/1996 г., BКC; pеш. № 1807 oT 14 яhyаpи 2002 г. пo гp. д. № 97/2001 г., BКC; pеш. № 1307 oT 21 oкTombpи 2003 г. пo гp. д. № 2136/2002 г., BКC, V г. o.), fully confirmed in a binding interpretative decision of that court of 22 April 2005 (Tълк. pеш. № 3 oT 22 апpил 2005 г. пo T. гp. д. № 3/ 2004 г., OCГК hа BКC), was that solely individuals, not legal persons, could claim compensation under that provision. On 21 December 2005 Parliament decided to amend section 1(1) by adding ‘legal persons’ to the category of those entitled to bring a claim. The amendment came into force on 1 January 2006. In their ensuing case-law the Supreme Court of Cassation and the Supreme Administrative Court have held that it conferred on legal persons a substantive right to claim damages, and has no retroactive effect (oпp. № 9134 oT 3 oкTombpи 2007 г. пo адm. д. № 8175/2007 г., BАC, ІІІ o.; oпp. № 1046 oT 6 аbгycT 2009 г. пo гp. д. № 635/2009 г., BКC, ІІІ г. o.; oпp. № 1047 oT 7 аbгycT 2009 г. пo гp. д. № 738/2009 г., BКC, III г. o.; pеш. № 335 oT 31 mай 2010 г. пo гp. д. № 840/2009 г., BКC, III г. o.; pеш. № 329 oT 4 юhи 2010 г. пo гp. д. № 883/2009 г., BКC, IV г. o.).

The Government submitted that the applicant company had failed to exhaust domestic remedies for the following reasons:

The applicant company contested those arguments. It submitted that it had missed the time-limit for intervening in the proceedings concerning the billiards club because the authorities had not notified it of those proceedings. It further submitted that the 1988 Act was not applicable to its case because until 1 January 2006 legal persons could not bring claims under it and because it presupposed the unlawfulness of the authorities' actions, whereas no such unlawfulness had been established in the case at hand.

The Court considers that the question of exhaustion of domestic remedies is closely related to the merits of the complaint, and therefore joins the Government's objection to the merits.

The Court further considers that the complaint is not manifestly ill-founded within the meaning of Article 35 § 3 (a) of the Convention or inadmissible on any other grounds. It must therefore be declared admissible.

In respect of pecuniary damage, the applicant company claimed 34,000 Bulgarian levs (BGN) (17,383.08 euros (EUR)): BGN 4,000 (EUR 2,045.05) that it had paid for the licence to sell alcohol in the electronic games club, and BGN 30,000 (EUR 15,338.03) for non-fulfilment of lease agreements for the use of the electronic games club due to the allegedly protracted administrative-penal proceedings.

The applicant company further claimed EUR 15,338.76 in respect of non-pecuniary damage which it claimed had arisen from detriment to its relations with other business partners caused by the alleged deprivation of property and from its inability to participate in the judicial proceedings.

The Government contested the claims as exorbitant.

Concerning the claim for pecuniary damage, the Court does not discern a sufficient causal link between the violation found and the pecuniary damage alleged. It therefore rejects this claim. Concerning the claim for non-pecuniary damage, the Court notes that it has indeed not ruled out that a commercial company could be awarded compensation in respect of non-pecuniary damage, which may include heads of claim that are to a greater or lesser extent ‘objective’ or ‘subjective’. Among these, account should be taken of the company's reputation, uncertainty in planning and decision making, disruption in the management of the company and lastly, albeit to a lesser degree, anxiety and inconvenience caused to the members of the management team (see, among other authorities, Comingersoll S.A. v. Portugal [GC], no. 35382/97, §§ 32–36, ECHR 2000-IV, and Shesti Mai Engineering OOD and Others v. Bulgaria, no. 17854/04, § 115, 20 September 2011). However, in the present case there is no indication that the events in issue negatively affected in any significant way the reputation, the planning, the decision making or the management of the applicant company, or caused significant anxiety and inconvenience to members of its management team. The Court therefore rejects this claim.

The applicant company claimed EUR 2,846.92 for costs and expenses incurred before the Court, comprising EUR 204.53 in translation costs, EUR 34.80 for postage and EUR 2,607.59 for work on the case by its lawyer. In support of its claim the company presented invoices for the translation of documents, postal receipts and a contract for legal representation.

The Government contested the claim as excessive.

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. In the present case, regard being had to the documents in its possession and the above criteria, the Court considers it reasonable to award the sum of EUR 2,000 covering costs under all heads.

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.