Seizure and sale of products due to illegal inventory. Disproportionate interference with the right to peaceful enjoyment of possessions
JUDGMENT
Aktiva DOO v. Serbia 19.01.2021 (app. no. 23079/11)
SUMMARY
Seizure and sale of goods. Right to peaceful enjoyment of possessions and excessive burden.
Following an inspection of the applicant company’s warehouses, the State authorities seized goods for non-inventory. The goods were sold to other companies. The criminal proceedings against the CEO of the company were terminated due to limitation period.
The ECtHR held that there was no indication that the seizure in question was intended as compensation for any pecuniary damage caused by the applicant company’s non-compliance with the inventory rules. It has not been shown that simply imposing a fine would not be enough to prevent future breaches of the inventory requirement.
In those circumstances, the seizure in question was, in the Court ‘s view, disproportionate because it placed an excessive burden on the applicant company.
The ECtHR found a violation of the right to peaceful enjoyment of possessions (Article 1 of the First Additional Protocol).
PROVISION
Article 1 of the First Additional Protocol
PRINCIPAL FACTS
The applicant, Activa DOO, is a company based in Belgrade.
The case concerned seizure and sale by the State of goods owned by the applicant company.
In late 2004 the applicant company legally imported about 650 tonnes of smooth iron rods and 252
tonnes of corrugated iron rods for use in reinforced concrete. They were stored at other companies’
warehouses.
In January 2005 the warehouses were inspected. The authorities found record-keeping breaches
amounting to a misdemeanour. The seizure of the applicant company’s goods was ordered in
separate decisions of 28 and 31 January 2005.
The decision of 28 January was upheld by the relevant Government ministry. The applicant company
sought judicial review before the Supreme Court, which annulled the initial decisions. A new seizure
of the goods was ordered and upheld by the Supreme Court. The applicant company lodged an
appeal with the Constitutional Court, which asked the applicant company to state “clear legal
reasons under the constitution for its complaint”. The appeal was rejected, with the Constitutional
Court finding that the applicant company had merely reiterated its original appeal grounds.
The decision of 31 January went through a similar process before the lower courts. However, the
Constitutional Court on 15 May 2014 quashed the earlier decisions and ordered a fresh examination.
The Administrative Court ordered that the applicant company’s goods be returned to it on
31 January 2015, with the value being paid back in enforcement proceedings. The authorities
launched an appeal on points of law, which resulted in reinitiated proceedings, which are still
pending.
Misdemeanour proceedings were initiated against the applicant company and its managing director
for the book-keeping breaches. Before the matter could be finalised, the alleged offence became
time barred.
Relying on Article 1 of Protocol No. 1 (protection of property) to the European Convention, the
applicant company complained that the seizure and sale of its goods had violated its rights.
THE DECISION OF THE COURT…
The Court notes that it is not disputed between the parties that there has been an interference with the applicant company ‘s right to the peaceful enjoyment of its possessions.
With regard to the legality of the measure, the Court noted that in its initial confiscation order, the Inspectorate relied on Article 45 par. 1ed. 7 of the law, which provided for compulsory seizure of goods when they have not been inventoried and article 44 § 1 ed. 6, which provided for the temporary seizure of goods in the context of infringement proceedings and that the Inspectorate had also issued an act on the temporary seizure of goods. Usually, the difference in the legal basis for the seizure decision was the point at which the seized goods could be legally sold. Since the sale of the goods in the present case took place on 16 February 2005, it took place before the end of the court proceedings.
The government also claimed that the seizure of the goods pursued a legitimate aim, namely protection against the illegal and non-tariff sale of goods, which could have serious economic consequences for the state budget. The applicant disputed that legitimate aim as unfounded, as no possible damage from its actions had been identified at any stage.
In the present case, the Court has pointed out that the new provision which replaced the Law no longer provides for the seizure of goods simply because they were not legally inventoried, which raises doubts as to the alleged serious economic consequences.
Notwithstanding its doubts as to the lawfulness of the interference and the stated legitimate aim of the measure, the Court leaves these questions open, as in the present case the central issue is the proportionality of the interference in question. Possible deficiencies in the applicable domestic regulatory framework will, however, be addressed in relation to the proportionality of the interference.
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 company’s right to the peaceful enjoyment of its possessions. The Court must examine in particular whether the interference struck the requisite fair balance between the demands of the general interest of the public and the requirements of the protection of the applicant company’s right to the peaceful enjoyment of its possessions. The requisite balance will not be achieved if the applicant company has had to bear an individual and excessive burden.
The Court notes that the misdemeanour proceedings against the applicant company were terminated on the basis of the expiry of the applicable prescription period, without it having been found guilty of any misdemeanour. Nevertheless, the applicant company’s goods stored in the Pančevo warehouse had been seized and shortly thereafter sold to a third-party company, as it was held in the parallel administrative proceedings that the applicant company had engaged in trade of those goods without them having been properly recorded. It is important to note that the goods in issue in the present case had been imported lawfully. This fact distinguishes the instant case from certain other cases in which the confiscation measure applied to goods of which importation was prohibited, which were deemed to have been unlawfully acquired, or where confiscation orders had been made in the context of criminal proceedings concerning charges of serious or organised crime and where there was a strong suspicion or certainty confirmed by a judicial decision that the confiscated assets were the proceeds of an offence. Moreover, the Court notes that, despite the seizure of the applicant company’s goods, the authorities did not bring any criminal activities against the applicant company or its managing director other than misdemeanour proceedings which resulted in their acquittal.
The Court notes that since the applicant company did not store its goods in its own warehouses, no consideration was given in the administrative proceedings to whether the respondent State’s legitimate aim could have been achieved by some other means. The Government argued that it had not been possible to impose a fine on the applicant company and its managing director as an alternative to seizure of the goods, as the latter had been a mandatory measure under the legal framework in force at the relevant time. In this regard the Court reiterates that, in order to be proportionate, the interference should correspond to the severity of the infringement, and the sanction to the gravity of the offence it is designed to punish – in the instant case the failure to comply with the proper recording requirement – rather than to the gravity of any presumed infringement which has not actually been established, such as an offence that could have had “grave economic consequences for the State budget”.
In the present case, there is no indication that the seizure measure in question was intended as compensation for any pecuniary damage caused by the applicant company’s failure to comply with the regulations; it appears rather to have been deterrent and punitive in its purpose. It has not been convincingly shown or indeed argued by the Government that the fine alone would not have been sufficient to achieve the desired deterrent and punitive effect and to prevent future breaches of the recording requirement. Indeed, the Court notes that subsequent statutes do not even provide for goods to be seized for this breach of the regulations.
In these circumstances the confiscation in issue was, in the Court’s view, disproportionate, in that it imposed an excessive burden on the applicant company.
There has accordingly been a violation of Article 1 of Protocol No. 1.
