Customs clearance of products at a lower price than their real value due to an incorrect sales invoice. Imposition of a fine equal to the value of the goods. Violation of respect for property
JUDGMENT
Krayeva v. Ukraine 13.01.2022 (app. no. 72858/13)
SUMMARY
Imposition of a fine for administrative violation and right to property. Proportionality principle and a fair balance between the requirements of the general interest and the protection of an individual’s right to property.
The case concerned a breach of the customs regulations allegedly committed by the applicant in her capacity as a customs agent, during the customs clearance of products which she had procured from a commercial company in Switzerland. An administrative fine equal to the value of the imported goods (48,661.56 euros) was imposed on it and their confiscation was ordered. The domestic courts rejected her appeal for annulment of the fine.
The Court reiterated that the imposition of a fine constitutes in principle an interference with the right guaranteed by the first paragraph of Article 1 of the First Additional Protocol to the Convention, as it deprives the person concerned of his/her assets, and in this case of the imposed fine.
In the present case, it found that throughout the proceedings the applicant consistently asserted that she had inadvertently provided incorrect information to the customs authorities, which was also supported by the seller of the goods.
The ECtHR accepted that the measure imposed on the applicant had an overriding public interest in securing the payment of taxes. Nevertheless, the domestic courts did not make any assessment of the situation and her arguments in order to satisfy the requirement of seeking a “fair balance” inherent in the Convention. The mandatory nature of the sanction, as provided for in domestic law, left no discretion to the courts to judge the case as an individual situation and deprived the applicant of any prospect of success in the proceedings against it.
The ECtHR ruled by a majority that the amount of the fine imposed was a disproportionate interference with the applicant’s property rights contrary to the requirements of Article 1 of the First Additional Protocol to the Convention.
PROVISIONS
Article 1 of the First Additional Protocol
Artice 6 par. 1
PRINCIPAL FACTS
At the time of the events the applicant worked as a customs clearance officer at D. company. On 23 April 2013, on behalf of her employer, the applicant submitted to the customs office a customs clearance declaration, an invoice and other documents in respect of certain goods bought from a Swiss company (“the seller”). In the customs declaration the applicant indicated 46,298 United States dollars (USD) as the value of the goods. The same amount was indicated by the seller in the invoice. However, the contract for the sale of the goods set their value at 48,661.56 euros (EUR).
According to the applicant, she discovered the above-mentioned discrepancy in the documents on the following day. On that same day she received a letter from the seller in which it admitted having sent the wrong invoice to her and apologised for the error. She informed the customs office of the mistake and requested the opportunity to rectify it. However, the customs office refused to accept her written submission and drew up an administrative offence report instead. In her written explanation to the customs office, the applicant submitted, inter alia, that she had provided the wrong data to the customs office by negligence, having overlooked the mistake made by the seller in the invoice.
According to the Government, who relied on the facts as established by the customs authorities, it was the customs office which had revealed the discrepancy at issue after the applicant had provided, at their request, additional documents regarding the customs clearance, which had included the correct invoice. It was only after being contacted on the subject by the customs office that the applicant had confirmed, in her written explanations, that she had made a mistake in the declaration and provided the customs office with the explanatory note from the seller.
On 24 April 2013 the customs authority issued a decision finding the applicant liable under Article 483 § 1 of the Customs Code for having provided false data to the customs office which had resulted in underpaid import duties in the amount of 22,477.44 Ukrainian hryvnias (UAH – about EUR 2,000 at the time). The applicant challenged that decision before a court, arguing, inter alia, that she had not been deliberately seeking to circumvent the customs regulations, but that her actions had resulted from incorrect data in the invoice provided to her by the seller, which she had initially overlooked.
On 15 July 2013 the Leninskyy District Court of Zaporizhzhya discontinued the administrative offence proceedings against the applicant on account of the lack of constituent elements of an administrative offence in her actions. Relying in particular on the written explanation by the seller, the court found that the mistake in the invoice had been made by the seller and that at the time when the applicant had started the customs clearance procedure and had submitted the declaration and the invoice at issue to the customs office, she had been unaware of the mistake. There was also no evidence that the applicant herself had forged any document. The customs office appealed, arguing that the applicant had knowingly submitted incorrect data and an incorrect invoice to the customs office.
During the appeal proceedings the applicant admitted she had made an error and asked the court not to impose too severe a punishment on her. The applicant’s lawyer reiterated the arguments raised by her before the first‑instance court.
By a final judgment of 23 August 2013, the Zaporizhzhya Regional Court of Appeal (“the Court of Appeal”) quashed the decision of the first‑instance court and upheld that of the customs office. In doing so, it mainly relied on the administrative offence report in respect of the applicant, her responsibility as the declarant, her acknowledgment that she had submitted incorrect data to the customs office, and the fact that the State had suffered pecuniary losses as a result of her actions.
The Court of Appeal went on to note, in a general way, that when deciding on the sanction, it had taken into account the nature of the offence, the degree of the applicant’s guilt, information about her character and her property status, and other aggravating and mitigating factors. It ordered that the applicant pay a fine in the amount equal to the value of the imported goods (EUR 48,661.56) and that the goods be confiscated as prescribed by the relevant Article of the Customs Code.
It appears from the parties’ submissions that the above-mentioned decision of 23 August 2013 has not yet been enforced, and that the enforcement proceedings have been opened and closed on a number of occasions. According to the latest information submitted by the Government, on 24 December 2020 the relevant writ of execution was again sent back by the bailiffs to the customs office on account of the applicant’s lack of funds.
THE DECISION OF THE COURT…
The Court considers that customs duties or charges for imported goods must be regarded as falling within the realm of taxation, a matter which forms part of the hard core of public‑authority prerogatives (see Polimerkonteyner, TOV v. Ukraine, no. 23620/05, § 25, 24 November 2016. It therefore accepts that the measure imposed on the applicant had a compelling public interest to ensure payment of taxes.
Accordingly, the remaining question for the Court to determine is whether there was a reasonable relationship of proportionality between the means employed by the authorities to achieve the stated legitimate aim and the protection of the applicant’s right to the peaceful enjoyment of her possessions. The requisite balance will not be achieved if the applicant has had to bear an individual and excessive burden (see, in general, Depalle v. France [GC], no. 34044/02, § 83, ECHR 2010, and Perdigão v. Portugal [GC], no. 24768/06, § 67, 16 November 2010).
The Court is not convinced by the Government’s argument that an assessment of proportionality was incorporated in the judgment of the Court of Appeal. That court merely referred in a general manner to the “nature of the offence and the way in which it had been committed”, “information on the [applicant’s] character”, and “her financial situation”, without giving further details. No assessment of the relevant circumstances, including the diligence and behaviour of the applicant, the relationship between her conduct and the offence or her financial situation, was incorporated in the text of the judgment. Accordingly, the Court finds that the scope of the review carried out by the domestic courts was too narrow to satisfy the requirement of seeking a “fair balance” inherent in the second paragraph of Article 1 of Protocol No. 1 (compare Sadocha v. Ukraine, no. 77508/11, § 33, 11 July 2019).
Moreover, by virtue of Article 483 § 1 of the Customs Code, under which the applicant was found guilty, the fine in an amount equal to the value of the goods – a very high amount in itself – and the confiscation of the goods were mandatory measures with no exceptions allowed. The lack of any discretion in this regard left no room to the Ukrainian courts for the assessment of individual situation, making any such assessment futile. The Court has already noted that such a rigid system is in itself incapable of ensuring the requisite fair balance between the requirements of the general interest and the protection of an individual’s right to property (see, mutatis mutandis, Gyrlyan v. Russia, no. 35943/15, § 31, 9 October 2018, in which the domestic legislation prevented the courts from considering a more lenient sanction than a fine equivalent to at least the undeclared amount or confiscation of the undeclared cash). It has no reason to find otherwise in the present case.
The mandatory nature of the sanction, in the circumstances of the present case – the amount of the fine, – deprived the applicant of any possibility of arguing her case with any prospect of success in the proceedings against her.
The foregoing considerations are sufficient to enable the Court to conclude that, in the circumstances of the present case, the sanction imposed on the applicant, in particular the amount of the fine which she was ordered to pay as a result of the decision of the Court of Appeal applying Article 483 § 1 of the Customs Code, constituted a disproportionate interference with her property rights contrary to the requirements of Article 1 of Protocol No. 1 to the Convention.
In so far as the Government implied that the applicant could have claimed compensation for her pecuniary losses from the Swiss company (the seller of the goods), that argument has no bearing on the Court’s conclusion in the circumstances of this case. Indeed, the Court has not ruled out possibility that such a remedy, when proved effective, might induce it to conclude that there was a fair balance between the means used by the authorities to safeguard the general interest and the protection of the person’s right to the peaceful enjoyment of his property (see, e.g., S.C. Service Benz Com S.R.L. v. Romania, cited above, § 37). However, the Government raised such a possibility as a general remark and had not supported it by reference to any specific legal provision or relevant court practice that would demonstrate that such a remedy had been available to the applicant, let alone effective (compare Andonoski v. the former Yugoslav Republic of Macedonia, no. 16225/08, § 39, 17 September 2015).
There has accordingly been a violation of Article 1 of Protocol No. 1 to the Convention.
On the basis of the same facts and arguments as set out above, the applicant complained that the administrative offence proceedings against her had been unfair. She relied on Article 6 § 1 of the Convention in that respect.
Having regard to its findings under Article 1 of Protocol No. 1 (see paragraph 35 above), the Court considers that it has already addressed the main issue at the heart of the applicant’s complaint, specifically the disproportionate nature of the interference with her property rights following the sanction imposed on her in the administrative proceedings, and that it is not necessary to give a separate ruling on the admissibility and merits of the allegation of a breach of Article 6 of the Convention mentioned in the previous paragraph.
