Business license is property protected by the European Convention of Human Rights

JUDGMENT

Gospodăria țărănească Chiper Terenti Grigore v. Democracy of Moldova 02.06.2020 (no. 71130/13)

see here 

SUMMARY

Limits of state intervention in business activity. Mining operation permit is conceptually included in the property.

The applicant company is engaged in the extraction of limestone, gravel and sand. In an investigation conducted by the competent Attorney General, the report of experts drafted contained questionable information that it had illegally mined 1,400 sq.m. sand and had not issued the necessary tax documents. The company’s license was revoked.

The Court pointed out that the applicant’s license was a property under Article 1 of the First Additional Protocol and concluded that in order to justify a measure that constitutes control of use, it must be lawful and serve the “general interest”.

The Court found that the applicant’s license had been revoked by the Prosecutor’s vague letters to the Chamber’s licensing department, which were based on inaccurate expertise on collecting sand from the company in unpaid and unregistered amounts.

The ECtHR also found that domestic courts had not examined the company’s well-founded arguments that it had not carried out any excessive sand mining and that it had not concealed its actions from the tax authority.

The ECtHR subsequently ruled that interfering with the applicant’s assets due to the revocation of the license could not be considered lawful and that a fair balance had not been struck between the claims of the public interest on the one hand and the applicant’s right to peaceful enjoyment. Violation of Article 1 of the First Additional Protocol.

COMMENT

The ECtHR clarifies that a business license is within the scope of the protection of property (Article 1 of the First Additional Protocol of the ECHR). This decision is useful for protecting businesses from state arbitrariness and interference.

PROVISION

Article 1 of the First Additional Protocol

PRINCIPAL FACTS

The applicant company, Gospodăria țărănească Chiper Terenti Grigore, is a company incorporated in
the Republic of Moldova.

The case concerned the withdrawal of its licence to operate a limestone, gravel and sand quarry.
In March 2012 the Prosecutor General’s office requested an expert report on the applicant
company’s activities, to find out in particular whether it had been extracting minerals outside the
area allocated to it. The report, issued in June, found that this was not the case, but went on to
conclude that the company had extracted 1,400 cubic metres of sand unlawfully.

The Prosecutor General’s Office wrote to the Licensing Chamber to inform it of the report, adding
that the unlawfully extracted sand had not been declared, and that the company had not filled in the
official forms for taxation.

After issuing the applicant company with two warnings about breaches of the Mining Code, in
September 2012 the Licensing Chamber revoked the company’s licence and applied to the domestic
courts to confirm the measure.

During the proceedings before the first-instance court, the applicant company argued that the
warnings they had received were unclear, and that they had in fact declared to the competent
authority the entire quantity of sand extracted and had submitted all the necessary official forms.
On that basis, the district court dismissed the Licensing Chamber’s request, pointing also to the fact
that the only evidence it had produced was the June 2012 report, which had been carried out by
experts who had not even visited the company’s quarry and whose conclusions were confusing.
However, in 2013 the Chişinău Court of Appeal and the Supreme Court went against that ruling,
ordering the revocation of the applicant company’s licence on the grounds that it had failed to
comply with the Licensing Chamber’s warning letters.

Relying in particular on Article 1 of Protocol No. 1 (protection of property) to the Convention, the
applicant company complained that the withdrawal of its licence had infringed its property rights
and that the related proceedings had been unfair.

THE DECISION OF THE COURT 

It is undisputed between the parties that the applicant companys licence constituted a possession for the purposes of Article 1 of Protocol No. 1 to the Convention and that its withdrawal constituted an interference with the applicant companys right to the peaceful enjoyment of their possessions. The Court reiterates that, according to its case-law, the termination of a valid licence to run a business amounts to an interference with the right to the peaceful enjoyment of possessions guaranteed by Article 1 of Protocol No. 1 to the Convention.

In order to justify such a measure which constitutes control of use, it must be lawful and serve the “general interest”. The measure must also be commensurate with the goal pursued.

With regard to the legality of the intervention, the Court found that the question of practical compliance with the law was closely related to whether the intervention was “necessary in a democratic society” and therefore further examined the issue.

The Court notes in the first place that the basis for the Licensing Chambers official warnings of 2 July and 2 August 2012 was a letter from the Prosecutor Generals Office which referred to an expert report of 1 June 2012. The latter report was produced by several experts who had been asked to give answers to several questions put by the Prosecutor Generals Office, the essence of which was to determine whether the applicant company had extracted minerals outside the area allocated to it in the licence and, if so, what was the quantity and the value of those minerals. In a report dated 1 June 2012, the experts replied that the applicant company had not exploited any area outside that allocated to it under its licence. In spite of that comprehensive answer, the experts went on by stating that the applicant had unlawfully extracted 1,400 cubic metres of sand valued at MDL 175,812. No explanation was provided as regards how the experts had reached the conclusion that the 1,400 cubic metres of sand had been extracted unlawfully or what relation that finding had with the questions asked. The court of first instance made the same observations in respect of the findings in the expert report

The Court notes from the materials before it that there is no evidence that the applicant had any knowledge about the expertise conducted at the request of the Prosecutor Generals Office in respect of its activity or that it was involved in any way in the appointment of the experts or asked to provide the experts with any documents or information. This finding is consistent with the finding of the court of first instance in its judgment of 6 December 2012 .

On the basis of the above expert report, the Prosecutor Generals Office wrote to the Licensing Chamber informing it about the 1,400 cubic metres of sand allegedly unlawfully extracted by the applicant company. The Prosecutor Generals Office added to the findings of the experts that the impugned quantity of sand had not been declared to the competent authority and that the applicant company had not filled in the required official forms for the purpose of taxation. The applicant company was thus accused of a breach of Article 39(b), (c) and (g) of the Mining Code. The Court notes that there is no evidence in the materials submitted by the parties that before writing to the Licensing Chamber the Prosecutor Generals Office had asked the applicant company for information on whether it had declared to the competent authority the impugned quantity of sand or whether it had filled in the required official forms.

Therefore, the Court can only point out that the applicant company was not aware of the charges against her, ie that she had not declared 1,400 sq.m. to the competent authority. sand and that it did not complete the required official tax forms for this amount of sand.

As a result, the court of first instance found, inter alia, that the applicant company had declared to the competent authority the full amount of sand that had been exported and had completed and submitted all the necessary official forms. He rejected the appeal of the Licensing Chamber for revoking the license of the applicant company.

The Court of Appeal quashed the above judgment and found in favour of the Licensing Chamber. In so doing, the Court of Appeal contented itself with finding that the applicant had not complied with the official warnings from the Licensing Chamber of 2 July and 2 August 2012. It did not examine any of the arguments and evidence brought by the applicant company to the effect that the warning letters were unclear, not to mention that the applicant company had in fact declared to the competent authority the entire quantity of sand extracted and had filled in and submitted all the necessary official forms. The Supreme Court of Justice did not react in any way to the applicant company’s arguments and dismissed its appeal on points of law in a judgment of 26 June 2013.

In the light of the foregoing, the Court comes to the conclusion that the warning letters of 2 July and 2 August 2012 were completely unclear to the applicant company and that the latter could not understand from them and from the text of Article 39 (b), (c) and (g) referred to in them, even with specialist advice, that it had been accused of not having declared to the competent authority 1,400 cubic metres of sand and of not having filled in the required official forms for the purpose of taxation in respect of that quantity of sand. Unlike the first instance court, the Chişinău Court of Appeal and the Supreme Court did not remedy the situation but merely took note of the fact that the applicant company had failed to comply with the warning letters of the Licensing Chamber and ordered the revocation of its licence.

In the light of the above, the Court comes to the conclusion that the interference with the applicants possessions which followed as a result of non-compliance with those unclear warning letters cannot be considered lawful and that no fair balance was struck between the demands of the public interest on the one hand and the applicants right to the peaceful enjoyment of its possessions on the other.

There has therefore been a violation of Article 1 of Protocol No. 1.

Just satisfaction: EUR 5,000 for non-pecuniary damage and EUR 2,500 for costs and expenses

 

 


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