The non-implementation of court decisions by the tax authorities violated the right to property of the taxpayer. The ECtHR calls for immediate enforcement of decisions and threatens with compensation
Maria Mihalache v. Romania 30.06.2020 (app. no. 68851/16)
Right to property, public interest and enforcement of court decisions.
The applicant was charged with tobacco smuggling. The tax authorities imposed a huge fine and signed a mortgage on her property. The prosecutor filed the case due to lack of criminal liability. The Administrative Courts ruled that after her criminal acquittal there was no tax liability and that the fines and measures imposed should be lifted. However, the state failed to enforce the court’s rulings.
The Court pointed out that an intervention, resulting from a measure to ensure the payment of taxes, must achieve a “fair balance” between the requirements of the general interest and the requirements for the protection of the fundamental rights of the individual.
In this case, the Court found that in the absence of criminal liability, the domestic courts had irrevocably ruled that the applicant was not responsible for paying taxes, but the competent authorities failed to fully implement domestic court decisions and correct a mistake. in the reasoning of their decisions. The retention of the fine and the mortgage on the applicant’s property violated the right to peaceful enjoyment of her property (Article 1 of the First Additional Protocol). Obligation of the state for indirect execution of the decision otherwise in payment of compensation 14,100 euros. The ECtHR also awarded the applicant EUR 4,000 for non-pecuniary damage and legal costs.
Article 1 of the First Additional Protocol
The applicant, Maria Mihalache, is a Romanian national who was born in 1970 and lives in Straja
The case concerned the Romanian authorities’ failure to enforce a final judgment in the applicant’s
favour finding that she was not liable to pay damages for tax evasion when criminal proceedings
against her for cigarette smuggling were dropped.
Criminal proceedings were initiated against the applicant and her husband in 2013 after the police
raided their property and found 5,450 packets of cigarettes with Ukrainian tax stamps in an
The prosecutor decided to terminate the proceedings in 2014 for lack of evidence.
In the meantime, the tax authorities had issued a decision against the applicant for payment of the
damage caused by evasion of customs charges for the smuggled goods, amounting to 61,780
Romanian lei (approximately 13,730 euros). They subsequently requested that a mortgage be placed
on three plots of land owned by the applicant as enforcement of that decision.
In 2015 and 2016 courts at two levels partly accepted the applicant’s claims challenging the
enforcement measures against her, considering that she could not be obliged to cover damage for
tax evasion in the absence of any criminal liability.
However, the judgment of 2016 in her favour has still not been enforced and the tax authorities
have maintained their position that the applicant has to pay the debt.
Relying on Article 1 of Protocol No. 1 (protection of property), the applicant complained, on the one
hand, that the mortgage placed on her property had not been lifted, and, on the other hand, that
the tax authorities had completely disregarded the domestic courts’ judgments in her favour.
THE DECISION OF THE COURT…
The Court emphasises 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 requirement of lawfulness, within the meaning of the Convention, demands compliance with the relevant provisions of domestic law and compatibility with the rule of law, which includes freedom from arbitrariness
According to the Court’s well-established case-law, an interference, including one resulting from a measure to secure the payment of taxes, must strike a “fair balance” between the demands of the general interest of the community and the requirements of the protection of the individual’s fundamental rights. The concern to achieve this balance is reflected in the structure of Article 1 as a whole, including the second paragraph: there must therefore be a reasonable relationship of proportionality between the means employed and the aims pursued. Furthermore, in determining whether this requirement has been met, it is recognised that a Contracting State, not least when framing and implementing policies in the area of taxation, enjoys a wide margin of appreciation and the Court will respect the legislature’s assessment in such matters unless it is devoid of reasonable foundation.
Turning to the present case, the Court notes that the applicant’s complaints concerning the non-enforcement of the judgment of 29 June 2016 are twofold: on the one hand, she complained that the mortgage placed on her property had not been lifted, as ordered by the outstanding judgment; on the other hand, she complained that the findings of the domestic courts which related to the lack of any tax obligation in respect of her to pay for damage caused by somebody else had been completely disregarded by the tax authority, who had continued enforcement proceedings against her.
The Court therefore held that the applicant’s enforcement measures constituted an interference with the exercise of her right to the peaceful enjoyment of her property. This was not disputed by the parties.
The Court held that the intervening intervention, which was intended to ensure the payment of taxes, falls under the second rule of Article 1 of the First Additional Protocol, ie the control of the use of property.
The Court must take into account the fact that the judgment of 29 June 2016 (see paragraph 30 above) was the result of contentious proceedings between the applicant and the tax authority, before two levels of jurisdiction. Both courts essentially accepted the applicant’s claims challenging the enforcement started against her, on the basis of the consideration that in the absence of any criminal liability, no tax liability could be established in respect of her either. These findings were binding on the parties, as they were res judicata, pursuant to domestic law, in so far as they were directly determinative of the disputed right .
Moreover, the appellate court also referred to Article 148 of the TPC to conclude that direct enforcement ended when the tax debt could be considered as extinguished, as it was in the applicant’s case. The Court reiterates that the principle of legal certainty dictates that, where a dispute has been examined on the merits by competent courts, it should be decided once and for all and its findings should become operative, including by being fully enforced to the benefit of the successful party.
However, in the present case, as already mentioned above that outstanding judgment had, at the date of the latest information available to the Court, remained unenforced. Moreover, the Court notes that the domestic court’s decisive findings concerning the lack of any obligation of the applicant to cover the impugned damage caused by an alleged tax evasion remained completely inoperative to her detriment; in fact, the outstanding judgment as a whole was rendered devoid of any legal effect on account on the tax authority’s consistent position as to the existence of a debt to be paid by the applicant, in spite of the findings of the prosecutor and of the court which had absolved her of any such liability in that regard.
The Court reiterates that particular importance must be attached to the principle of good governance, requiring that public authorities act in an good time, in appropriate manner and with the utmost consistency, when an issue in the general interest is at stake. However, the Court observes that in the present case the domestic authorities have not complied with their above‑mentioned obligations, since they failed to give full effect to the findings of the domestic courts and to thus remedy an error that was attributable to the Customs, as implied by the domestic courts in their reasoning
Moreover, the Court cannot see any reasonable justification for the authorities’ continuous calling into question of the rulings of 29 June 2016 by the Suceava County Court.
It cannot be maintained, therefore, that the control of the use of the property at issue was lawful, in the sense of the Convention. The present case concerns a failure to recognise the res judicata effect of a final judgment delivered in contentious proceedings. It cannot be considered that a public interest overriding the fundamental principle of legal certainty and the applicant’s rights justified the constant calling into question of the court’s findings that she was no longer a tax debtor, as well as the resulting constant interference with the applicant’s right to peacefully enjoy her property.
The above is, in principle, sufficient for the Court to conclude that the interference with the applicants’ “possessions” fell foul of the requirements of Article 1 of Protocol No. 1.
Nevertheless, the Court also takes note of the facts put forward by the Government to justify that interference, specifically that the seizure was necessary to secure the payment of taxes, and that it was proportional in so far as the applicant had the possibility to challenge it. However, as already mentioned, no reasonable justification was provided by the Government as to why a final judgment rendered in the applicant’s favour and which considered that the seizure needed to be lifted and that the applicant was not a tax debtor has remained unenforced.
The foregoing considerations are sufficient to enable the Court to dismiss the preliminary objection of non-exhaustion of domestic remedies lodged by the Government and to conclude that the nature of the failings of the State authorities to recognise the res judicata effect of the final judgment of 29 June 2016 and to implement its findings by fully enforcing that outstanding judgment, resulted in an excessive burden being imposed on the applicant.
It follows from the above that there has been a violation of Article 1 of Protocol No. 1 in this case.
Just satisfaction: The Court held that Romania was to ensure the full enforcement of the
outstanding judgment of 29 June 2016, failing which it would have to pay the applicant EUR 14,100
in respect of pecuniary damage. The Court further awarded the applicant EUR 4,000 in respect of
non-pecuniary damage and EUR 1,000 in respect of costs and expenses