Gambling games. The unannounced suspension of all gambling licenses, without prior compensation, without notice and without justification for reasons of public interest, violated the right to property.
Svit Rozvag, Tov and others v. Romania 27.06.2019 (no. 13290/11, 62600/12 and 49432/16)
Right to property. Protection from arbitrary state interference.
The applicant companies run gambling business. For cause of an unfortunate incident that happened in a shop, parliament passed into law a bill gambling all together and the Ministry of Finance had also suspended all gambling licences with immediate effect. They lodged claim for compensation before the domestic Courts which were all dismissed.
The Court held that there has been a violation of Article 1 of the First Protocol because the measure applied to the applicants was disproportionate, on account primarily of the quality of the decision-making process which led to it, the lack of any compensatory measures, even in respect of the direct costs imposed by the State itself, and the lack of a meaningful transition period, therefore, a fair balance between the public interest and the rights of the individual was not guaranteed.
particularly important decision for business and entrepreneurship. The right to property does not allow for sudden withdrawals of licenses without notice, without valid information, without compensation and without such interference being justified by the public interest and provided for by law. State arbitrariness is not tolerated in the property of citizens and corporations. The Strasbourg Court creates a sufficient protective net of property in that judgment.
Article 1 of the First Additional Protocol
The case concerned the ban on gambling introduced in Ukraine in 2009.
The applicants are two Ukrainian companies, Svit Rozvag, TOV, based in Kharkiv, and Igro-Bet, PP,
based in Lviv; and one Ukrainian national, Nataliya Stanko, born in 1975 and living in Loza of the
Irshavsky District, Zakarpattya Region (all in Ukraine). Two of the applicants operated gambling
businesses, while the third (Igro-Bet, PP), who had obtained a licence shortly prior to the ban, was
prevented from launching an actual business.
In response to a fire in May 2009 in a gambling establishment in Dnipro, killing nine people and
injuring eleven, Parliament passed into law a bill banning gambling altogether. Just prior to that total
ban, the Ministry of Finance had also suspended all gambling licences with immediate effect.
Parliament overrode a veto on the law by the President of Ukraine in June 2009, and it immediately
entered into force. All of the applicants’ gambling licences were revoked under the new law. They
lodged claims for compensation, which were all dismissed.
All the applicants relied in particular on Article 1 of Protocol No. 1 (protection of property) to
complain about the revocation of their gambling licences without compensation. Ms Stanko also
complained under the same article about the suspension of her licence in May 2009.
Svit Rozvag, TOV and Ms Stanko also brought complaints under Article 6 § 1 (right to a fair hearing)
about the proceedings for compensation, alleging in particular that the domestic courts had failed to
comment on their arguments in support of their claims which had relied on the Convention and the
Strasbourg Court’s case-law
THE DECISION OF THE COURT
It is well established in the Court’s case-law that the termination of a valid licence to run a business constitutes an interference with the right to the peaceful enjoyment of possessions guaranteed by Article 1 of Protocol No. 1, and that it falls to be examined under the second paragraph of that Article as a measure to control the use of property.
he 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 second sentence of the first paragraph authorises a deprivation of possessions only “subject to the conditions provided for by law” and the second paragraph recognises that States have the right to control the use of property by enforcing “laws”. Moreover, the rule of law, one of the fundamental principles of a democratic society, is inherent in all the Articles of the Convention.
The second applicant’s main argument in respect of the suspension of her licence was that an exhaustive list of grounds and a procedure for the revocation of licences were laid down in the Licensing Law and that the Cabinet of Ministers’ and the Ministry of Finance’s decisions suspending her licence had been issued in disregard of those rules. That view was shared by the domestic first-instance court.
To the extent that the domestic courts appeared to imply that the recognition of such inherent power was justified by compelling interests such as the protection of human life, health and the environment, the applicant could be justified in considering that those concerns were sufficiently covered by the well-established powers of the fire, workplace‑safety and public-health authorities to suspend the operations of particular gambling establishments in the event of danger. It has never been suggested that there were grounds for any such suspension in the applicant’s case. The suspension applied to all gambling licences, not just those of the entities which had operated the establishment where a fire had taken place, and it applied without either an individual or even a general assessment of the health and safety and fire concerns which the Ministry of Finance, the body which issued the order, might have had in relation to gambling establishments and licence-holders.
These considerations are sufficient for the Court to conclude that the domestic legal provisions did not meet the requirements of the quality of “law” and, therefore, that the suspension was not lawful.
There has accordingly been a violation of Article 1 of Protocol No. 1 on account of the suspension of the second applicant’s licence.
The applicants also alleged that the Prohibition Law had created uncertainty because it was framed as a temporary measure, whereas in fact it had instituted a permanent and total ban.
The Court reiterates that Article 1 of Protocol No. 1 requires of any interference that there should be a reasonable relationship of proportionality between the means employed and the aim pursued. This fair balance will be upset if the person concerned has to bear an individual and excessive burden.
In the present case, this means that the Court is not concerned with the wisdom, propriety or otherwise of allowing or banning gambling in general or in Ukraine in particular. Its only concern in the present case is the specific legislation applied to the applicants and how it was implemented.
The previous licensing legislation provided that licences would remain in effect for a certain period of time, could not be revoked at will and could only be revoked in a limited range of circumstances, none of which occurred in the applicants’ cases. That being so, the applicants were entitled to expect that they would be allowed to continue to operate their businesses at least until the end dates of their licences and, if the legislation changed in the meantime, to obtain a certain form of compensation for any unused time remaining on the licence. This distinguishes their situation from that of the applicants in the McKenna and Depalle cases referred to by the Government who knew from the outset that their licence and authorisation to use land respectively remained subject to unilateral revocation at all times.
The transitional period amounted, in theory, to forty days, from the enactment of the Prohibition Law until its entry into force. However, for most of that period, which was already too short, the applicants’ licences were suspended through a measure which itself violated Article 1 of Protocol No. 1 in respect of the second applicant. In essence, there was no transitional period to speak of. This was further aggravated by the fact that policy on gambling had changed in a particularly rapid fashion, with the previously announced policy of tighter regulation changing to total prohibition in the space of just two months.
If anything, far from giving the applicants notice that their activity would soon need to be discontinued, the Government’s previous legislative proposal in the field of gambling may have led them to believe that they needed to invest more in their businesses in order to be able to continue to operate under the new regulatory regime.
There was no monetary compensation and no compensatory measures of any other kind. This failure to compensate extended even to the direct costs imposed by the State itself for the right to operate, for a certain period of time, the businesses which the State later decided to prohibit, most notably the licence fees.
180. Under such circumstances, the measure applied to the applicants was disproportionate, on account primarily of the quality of the decision-making process which led to it, the lack of any compensatory measures, even in respect of the direct costs imposed by the State itself, and the lack of a meaningful transition period.
There has accordingly been a violation of Article 1 of Protocol No. 1 on account of the manner in which the applicants’ licences were revoked.
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 following sums, covering costs under all heads:
(i) EUR 17,000 to the first applicant;
(ii) EUR 2,200 to the second applicant;
(iii) EUR 214 to the third applicantechrcaselaw.com).