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FOURTH
SECTION
CASE OF
BURDEN and BURDEN v. THE UNITED KINGDOM
(Application
no. 13378/05)
JUDGMENT
STRASBOURG
12
December 2006
This
judgment will become final in the circumstances set out in Article 44
§ 2 of the Convention. It may be subject to editorial
revision.
In the case of Burden and Burden v. the United Kingdom,
The
European Court of Human Rights (Fourth Section), sitting as a Chamber
composed of:
Mr J. Casadevall,
President,
Sir Nicolas Bratza,
Mr G. Bonello,
Mr K.
Traja,
Mr S. Pavlovschi,
Mr L. Garlicki,
Ms L. Mijović,
judges,
and Mr T.L. Early, Section Registrar,
Having
deliberated in private on 12 September and 21 November 2006,
Delivers
the following judgment, which was adopted on the last-mentioned date:
PROCEDURE
- The
case originated in an application (no. 13378/05) against the United
Kingdom of Great Britain and Northern Ireland lodged with the Court
under Article 34 of the Convention for the Protection of Human Rights
and Fundamental Freedoms (“the Convention”) by two
British nationals, Ms J.M. and Ms S.D. Burden (“the
applicants”), on 29 March 2005.
- The
applicants were represented by Ms E. Gedye of Wood, Awdry and Ford,
solicitors practising in Chippenham. The United Kingdom Government
(“the Government”) were represented by their Agent,
Mr J. Grainger, Foreign and Commonwealth Office.
- The
applicants complained under Article 14 taken in conjunction with
Article 1 of Protocol No. 1 that, when the first of them died, the
survivor would be required to pay inheritance tax on the dead
sister’s share of the family home, whereas the survivor of a
married couple or a homosexual relationship registered under the
Civil Partnership Act 2004, would be exempt from paying inheritance
tax in these circumstances.
- The
application was allocated to the Fourth Section of the Court (Rule 52
§ 1 of the Rules of Court). Within that Section, the
Chamber that would consider the case (Article 27 § 1 of the
Convention) was constituted as provided in Rule 26 § 1.
- On
30 June 2005 the President decided to give the case priority
treatment under Rule 41 of the Rules of Court and that the
admissibility and merits should be examined jointly, in
accordance with Article 29 § 3 of the Convention and Rule 54A.
- The
applicants and the Government each filed written observations (Rule
59 § 1). On 11 April 2006 the Chamber decided, after consulting
the parties, to hold a hearing on the admissibility and merits (Rule
59 § 3 in fine).
- The
hearing on admissibility and merits took place in public in the Human
Rights Building, Strasbourg, on 12 September 2006.
There
appeared before the Court:
(a)
for the Government
Ms K.
McCLEERY, Agent,
Mr J.
CROW Counsel,
Mr J.
COUCHMAN, Adviser,
Ms S.
TARIQUE, Adviser,
Mr R.
LINHAM, Adviser,
(b)
for the applicant
Mr S.
GRODZINSKI, Counsel,
Ms E.
STRADLING Solicitor,
The
Court heard addresses by Mr Crow and Mr Grodzinski, as well as their
answers to questions put by Judge Bratza.
THE FACTS
I. THE CIRCUMSTANCES OF THE CASE
- The
facts of the case, as submitted by the parties, may be summarised as
follows.
- The
applicants are unmarried sisters, born on 26 May 1918 and 2 December
1925 respectively. They have lived together all their lives; for the
last 30 years in a house built on land inherited from their parents
in Wiltshire.
- The
house is owned by the applicants in their joint names. According to
an expert valuation, the property is currently worth GBP 875,000.
Each sister, in addition to her GBP 437,500 joint share in the house,
owns investments and other property worth over GBP 150,000. Each
sister has made a will leaving all her property to the other.
- The
applicants submitted that the value of the house had increased to the
point that each sister’s one-half share was worth more than the
current exemption threshold for inheritance tax (see paragraph 13
below), and that the survivor might have to sell the house in order
to pay the tax.
II. RELEVANT DOMESTIC LAW
A. Inheritance tax
- By
sections 3, 3A and 4 of the Inheritance Tax Act 1984 (“the 1984
Act”), inheritance tax is charged at 40% on the value of a
person’s property, including his or her share of anything owned
jointly, passing on his or her death, and on lifetime transfers made
within seven years of death. The charge is subject to a nil rate
threshold of GBP 275,000 for transfers between 5 April 2005 and 5
April 2006; GBP 285,000 for transfers during the tax year 2006-2007;
and GBP 300,000 for 2007-2008 (section 98 of the Finance Act 2005).
- Interest
is charged, currently at 4%, on any tax not paid within six months
after the end of the month in which the death occurred, no matter
what caused the delay in payment. Any inheritance tax payable by a
person to whom land is transferred on death may be paid, at the
tax-payer’s election, in ten equal yearly instalments, unless
the property is sold, in which case outstanding tax and interest must
be paid immediately (1984 Act, section 227(1)-(4)).
- Section
18(1) of the 1984 Act provides that property passing from the
deceased to his or her spouse is exempt from charge. With effect from
5 December 2005, this exemption was extended to a deceased’s
“civil partner” (see paragraphs 16-18 below).
B. The Civil Partnership Act 2004 (“2004 Act”)
- The
purpose of the 2004 Act was to provide same-sex couples with a formal
mechanism for recognising and giving legal effect to their
relationships, and to confer on them, as far as possible, the same
rights and obligations as entailed by marriage.
- A
couple is eligible to form a civil partnership if they are (i) of the
same sex; (ii) not already married or in a civil partnership; (iii)
over the age of 16; (iv) not within the prohibited degrees of
relationship.
- A
civil partnership is, like marriage, indeterminate in nature and can
end only on death, dissolution or annulment. The 2004 Act created a
comprehensive range of amendments to existing legislation, covering
inter alia pensions, tax, social security, inheritance and
immigration. The courts have similar powers to control the ownership
and use of the civil partners’ property upon dissolution of a
civil partnership as upon dissolution of a marriage.
- When
the Civil Partnership Bill was passing through Parliament, an
amendment to it was passed in the House of Lords by 148 votes to 130,
which would have had the effect of extending the availability of
civil partnership, and the associated inheritance tax concession, to
family members within the “prohibited degrees of relationship”,
if (i) they were over 30 years of age; (ii) they had co-habited for
at least 12 years; and (iii) they were not already married or in a
civil partnership with some other person. The amendment was reversed
when the Bill returned to the House of Commons.
- During
the course of the debate in the House of Lords, Lord Alli, a Labour
Peer, stated:
“I have great sympathy with the noble Baroness,
Lady O’Caithlin [the Conservative Peer who proposed the
amendment], when she talks about siblings who share a home or a carer
who looks after a disabled relative. Indeed, she will readily
acknowledge that I have put the case several times—at Second
Reading and in Grand Committee—and I have pushed the Government
very hard to look at this issue. There is an injustice here and it
needs to be dealt with, but this is not the Bill in which to do it.
This Bill is about same-sex couples whose relationships are
completely different from those of siblings.”
During
the same debate, Lord Goodhart, Liberal Democrat Peer, stated:
“There is a strongly arguable case for some kind
of relief from inheritance tax for family members who have been
carers to enable them to continue living in the house where they have
carried out their caring duties. But that is a different argument and
this is not the place or the time for that argument. This Bill is
inappropriate for dealing with that issue.”
During
the course of the debate in the Standing Committee of the House of
Commons, Jacqui Smith MP, Deputy Minister for Women and Equality,
stated:
“As I suggested on Second Reading, we received a
clear endorsement of the purpose of the Bill—granting legal
recognition to same-sex couples, ensuring that the many thousands of
couples living together in long-term committed relationships will be
able to ensure that those relationships are no longer invisible in
the eyes of the law, with all the difficulties that that invisibility
brings.
We heard a widespread agreement from Members across
almost all parties that the Civil Partnership Bill is not the place
to deal with the concerns of relatives, not because those concerns
are not important, but because the Bill is not the appropriate
legislative base on which to deal with them.”
C. The Human Rights Act 1998 (“the 1998 Act”)
- The
1998 Act entered into force on 2 October 2000. Section 3(1) provides:
“So far as it is possible to do so, primary
legislation and subordinate legislation must be read and given effect
in a way which is compatible with the Convention rights.”
Section
4 of the 1998 Act provides (so far as relevant):
“(1) Subsection (2) applies in any proceedings in
which a court determines whether a provision of primary legislation
is compatible with a Convention right.
(2) If the court is satisfied that the provision is
incompatible with a Convention right, it may make a declaration of
that incompatibility. ...
(6) A declaration under this section ... -
(a) does not affect the validity, continuing operation
or enforcement of the provision in respect of which it was given; and
(b) is not binding on the parties to the proceedings in
which it is made.”
Section
6 of the 1998 Act provides:
“(1) It is unlawful for a public authority to act
in a way which is incompatible with a Convention right.
(2) Subsection (1) does not apply to an act if -
(a) as a result of one or more provisions of primary
legislation, the authority could not have acted any differently; or
(b) in the case of one or more provisions of ... primary
legislation which cannot be read or given effect in a way which is
compatible with the Convention rights, the authority was acting so as
to give effect to or enforce those provisions. ...”
Section
10 of the 1998 Act provides:
“(1) This section applies if –
(a)
a provision of legislation has been declared under section 4 to be
incompatible with a Convention right and, if an appeal lies –
(i)
all persons who may appeal have stated in writing that they do not
intend to do so; or
(ii)
the time for bringing an appeal has expired and no appeal has been
brought within that time; or
(iii)
an appeal brought within that time has been determined or abandoned;
or
(b)
it appears to a Minister of the Crown or Her Majesty in Council that,
having regard to a finding of the European Court of Human Rights made
after the coming into force of this section in proceedings against
the United Kingdom, a provision of legislation is incompatible with
an obligation of the United Kingdom arising from the Convention.
(2) If a Minister of the Crown considers that there are
compelling reasons for proceeding under this section, he may by order
make such amendments to the legislation as he considers necessary to
remove the incompatibility.”
- The
Government submitted that the objective of giving the national courts
the power under section 4 had been to provide a formal means for
notifying the Government and Parliament about a situation in which
legislation was found not to comply with the Convention, and to
provide a mechanism for speedily correcting the defect. Once a
declaration had been made (or once the European Court of Human Rights
had found a violation based on a provision of domestic law), there
were two alternative avenues for putting right the problem: either
primary legislation could be introduced in Parliament, or the
Minister concerned could exercise his summary power of amendment
under section 10 of the 1998 Act.
- When
the Human Rights Bill passed through the House of Lords on
27 November 1997, the Lord Chancellor explained that:
“we expect that the government and Parliament will
in all cases almost certainly be prompted to change the law following
a declaration of incompatibility.”
One
of the Ministers with responsibility for the 1998 Act explained to
the House of Commons on 21 October 1998 that:
“Our proposals [for remedial orders] safeguard
parliamentary procedures and sovereignty, ensure proper supervision
of our laws and ensure that we can begin to get the ability both to
enforce human rights law and to create a human rights culture. They
also ensure that we can do it in the context of not having to worry
that if something is decided by the Strasbourg court or by our courts
that creates an incompatibility, we do not have a mechanism to deal
with it in the quick and efficient way that may be necessary.”
The
most recent report of the Joint Committee on Human Rights, published
on 4 August 2006, showed that declarations of incompatibility had
been made in twenty cases between December 2000 and December 2004. In
seven of these cases the declaration had been overturned on appeal,
or the judgment on appeal was pending. In ten cases the offending
legislation had been amended or repealed (in one case by a remedial
order), and in the remaining three cases, amendments to the offending
legislation were pending or under consideration.
THE LAW
- The
applicants complained under Article 1 of Protocol No. 1, taken in
conjunction with Article 14 of the Convention, that when one of them
died, the survivor would face a significant liability to inheritance
tax, which would not be faced by the survivor of a marriage or a
civil partnership. Article 1 of Protocol No. 1 provides:
“Every natural or legal person is entitled to the
peaceful enjoyment of his possessions. No one shall be deprived of
his possessions except in the public interest and subject to the
conditions provided for by law and by the general principles of
international law.
The preceding provisions shall not, however, in any way
impair the right of a State to enforce such laws as it deems
necessary to control the use of property in accordance with the
general interest or to secure the payment of taxes or other
contributions or penalties.”
Article
14 of the Convention provides:
“The enjoyment of the rights and freedoms set
forth in [the] Convention shall be secured without discrimination on
any ground such as sex, race, colour, language, religion, political
or other opinion, national or social origin, association with a
national minority, property, birth or other status.”
I. ADMISSIBILITY OF THE APPLICATION
- The
Government contested the admissibility of the application on a number
of grounds under Articles 34 and 35 § 1 of the Convention.
Article 34 provides:
“The Court may receive applications from any
person ... claiming to be the victim of a violation by one of the
High Contracting Parties of the rights set forth in the Convention or
the Protocols thereto. ... ”
Article
35 § 1 states:
“The Court may only deal with the matter after all
domestic remedies have been exhausted, according to the generally
recognised rules of international law, and within a period of six
months from the date on which the final decision was taken.”
A. The applicants’ victim status
- The
Government submitted that the complaint was prospective and
hypothetical, because no liability to inheritance tax had yet
accrued, and might never accrue. The present applicants could not,
therefore, claim to be “victims” of any violation, and
their complaint represented a challenge to the tax regime in
abstracto, which the Court could not entertain.
The
present case was on that ground distinguishable from
Marckx v. Belgium, judgment of 13 June 1979, Series
A no. 31, where the applicants had been complaining about certain
provisions of Belgian law that applied automatically to the
illegitimate child and her mother, and Inze v. Austria,
judgment of 28 October 1987, Series A no. 126, where the
complaint concerned rights of inheritance where the parent had
already died. In contrast, the requirement to pay inheritance tax did
not apply automatically. The applicants were not so affected by the
risk of a future liability to tax as to bring them into a comparable
position to the applicants in Campbell and Cosans v. the United
Kingdom, judgment of 25 February 1982, Series A no. 48,
where the Court found that a threat of inhuman and degrading
punishment could in itself breach Article 3 of the Convention,
or Norris v. Ireland, judgment of 26 October 1988, Series A
no. 142, where the existence of criminal sanctions for homosexual
acts must necessarily have affected the applicant’s daily
conduct and private life.
- The
applicants responded that it was all but inevitable that one of them
would predecease the other, and similarly certain that the value of
the deceased’s estate would exceed the nil rate threshold for
inheritance tax (see paragraph 13 above). Thus, as in Marckx
(cited above), or Johnston and Others v. Ireland, judgment of
18 December 1986, Series A no. 112, both of which concerned
complaints about the effect of illegitimacy on succession rights
under domestic law, the applicants ran a very high risk of a
violation of their Convention rights. Even before either had died,
the legislation had an impact on them, as it affected their choices
about disposing of their property. They had “an awful fear”
hanging over them that the house would have to be sold to pay the
tax, and they should not have to wait until one of them died before
being able to seek the protection of the Convention.
- The
Court recalls that under Article 34 of the Convention it may receive
applications from individuals and others “claiming to be the
victim of a violation by one of the High Contracting Parties of the
rights set forth in the Convention or the protocols thereto”.
In order to claim to be a victim of a violation, a person must be
directly affected by the impugned measure (see, for example, Cornwell
v. the United Kingdom, no. 36578/97, decision of 11 May
1999).
- It
is true that neither of the applicants is, at the present time, under
an obligation to pay inheritance tax, since no such liability can
arise until one of them dies. However, the sisters are aged 88 and 81
respectively. The property owned by each, principally each sister’s
half-share in the house, far exceeds the current nil-rate band for
inheritance tax. The Court agrees with the applicants that, from the
present perspective, it appears virtually certain that one of them
will in the not too distant future be required to pay substantial
inheritance tax on the property inherited from her sister. In this
respect the present case is closer to Marckx than to, for
example, Willis v. the United Kingdom, no. 36042/97, § 49,
ECHR 2002-IV, where the Court found the applicant’s complaint
about discrimination concerning the future non-payment to him of a
Widow’s Pension or equivalent to be “hypothetical”,
because of the lack of certainty that the applicant would satisfy the
statutory conditions for entitlement by the time he reached the age
at which a woman in his position would be eligible to apply.
- The
Court concludes, therefore, in the light of the applicants’
advanced age and the very high probability that one will be liable to
pay inheritance tax upon the death of the other, that they can claim
to be directly affected by the impugned law. It follows that the
Court rejects the first of the Government’s objections to the
admissibility of the application.
B. Domestic remedies
- The
Government further contended in the alternative that, if the
applicants had an arguable complaint under the Convention, they could
and should have brought a claim for a declaration of incompatibility
under section 4 of the 1998 Act (see paragraph 21 above).
- The
applicants were both currently alive and neither had yet incurred any
liability to inheritance tax. Since no pecuniary loss had been
suffered, the Court could not make a pecuniary award in their favour,
and would, at most, make a declaration that there had been a
violation of the applicants’ Convention rights. If a
declaration by this Court would constitute just satisfaction for any
breach of the applicants’ rights, a declaration of
incompatibility by the High Court should similarly be regarded as an
effective remedy.
- The
Government argued that, consistently with the Court’s approach
and with the generally accepted principles of international law, they
did not have to demonstrate either (i) that an application for a
declaration of incompatibility under section 4 of the 1998 Act would
necessarily have succeeded, or (ii) that provisions on inheritance
tax in the 1984 Act would necessarily have been amended in any
identified manner within any specific time period, even if a
declaration of incompatibility were made. It was sufficient, for
Article 35 § 1 to be engaged, that there was an available
domestic remedy with a realistic prospect of success which the
applicants had failed to pursue.
- They
noted that in Hobbs v. the United Kingdom (dec.),
no. 63684/00, 18 June 2002, the Court had found that, in the
circumstances of that case, a declaration of incompatibility under
section 4 of the 1998 Act was not sufficiently certain to be capable
of providing redress, such as to require exhaustion by the applicant,
on the grounds that: (i) a declaration of incompatibility is not
binding on the parties to the litigation; (ii) the Minister has a
power, but not a duty, to amend the relevant legislation; and (iii)
the Minister could exercise his power to change the law only if there
were “compelling reasons” for so doing. Hobbs,
however, was a decision on its particular facts and could not
be regarded as authority for any general proposition that a
declaration of incompatibility under section 4 of the 1998 Act would
never be capable of providing an effective remedy. In particular, the
applicant in Hobbs had already suffered a financial
disadvantage for which he was seeking monetary compensation. The
present application was different because neither applicant had yet
suffered any financial disadvantage. Moreover, the decision in Hobbs
had inevitably been based on the extremely limited evidence and
submissions then before the Court. Since the Court had now been
provided with more information about the domestic law, in particular
the ministerial statements set out in paragraph 23 above, it was both
possible and appropriate for it to revisit its previous decision.
- The
applicants referred to the Commission’s case-law to the effect
that the remedies an applicant is required to make use of must not
only be effective but also independent of discretionary action by the
authorities (for example, Montion v. France, no. 11192/84,
Commission decision of 14 May 1987, Decisions and Reports (DR)
52, p. 227 and G. v. Belgium, no. 12604/86,
Commission decision of 10 July 1991, DR 70, p. 125). They argued that
a declaration of incompatibility could not be regarded as an
effective remedy because the procedures to change the law could not
be initiated by those who had obtained a declaration or enforced by
any court or organ of State. The Court had accepted a similar
argument in Hobbs and also in Dodds v. the United Kingdom
(dec.), no. 59314/00, 8 April 2003, Walker v. the United
Kingdom (dec.), no. 37212/02, 16 March 2004, Pearson v. the
United Kingdom (dec.), no. 8374/03, 27 April 2004 and, finally,
B. and L. v. the United Kingdom (dec.), no. 36536/02, 29 June
2004, where the Government had made submissions almost identical to
those in the present case.
- The
Court is very much aware of the subsidiary nature of its role and
that the object and purpose underlying the Convention, as set out in
Article 1—that rights and freedoms should be secured by
the Contracting State within its jurisdiction—would be
undermined, along with its own capacity to function, if applicants
were not encouraged to pursue the means at their disposal within the
State to obtain available redress (see the B. and L. decision,
cited above). The rule of exhaustion of domestic remedies referred to
in Article 35 § 1 of the Convention thus obliges applicants to
use first the remedies that are normally available and sufficient in
the domestic legal system to enable them to obtain redress for the
breaches alleged. The existence of the remedies must be sufficiently
certain, in practice as well as in theory, failing which they will
lack the requisite accessibility and effectiveness (Akdivar and
Others v. Turkey, no. 21893/93, §§ 65-67, Reports
1996-IV; Aksoy v. Turkey, no. 21987/93, §§ 51-52,
Reports of Judgments and Decisions 1996-VI).
- The
Government argue that the remedy under the Human Rights Act allowing
an applicant to seek a declaration from a domestic court that
legislation is incompatible with the Convention is sufficiently
certain and effective for the purposes of Article 35 § 1. Such a
declaration creates a discretionary power in the relevant government
minister to take steps to amend the offending provision, either by a
remedial order or by introducing a Bill in Parliament.
- The
Court found in its Hobbs decision (cited above) that this
remedy was not sufficiently effective, essentially for two reasons:
first, because a declaration was not binding on the parties to the
proceedings in which it was made; and, secondly, because a
declaration provided the appropriate minister with a power, not a
duty, to amend the offending legislation by order so as to make it
compatible with the Convention. Moreover, the minister concerned
could exercise that power only if he considered that there were
“compelling reasons” for doing so.
- The
Court considers that the instant case is distinguishable from Hobbs,
where the applicant had already suffered financial loss as a result
of the discrimination about which he complained but could not have
obtained monetary compensation through the grant of a declaration of
incompatibility. It is closer to B. and L., where there had
been no financial loss, although those applicants had already been
prevented by the impugned legislation from marrying each other. In
the present case, as in B. and L., it is arguable that, had a
declaration of incompatibility been sought and made, the applicants
might have been able to benefit from a future change in the law.
- However,
it remains the case that there is no legal obligation on the minister
to amend a legislative provision which has been found by a court to
be incompatible with the Convention. The Court notes that, according
to the information provided by the Government, by August 2006 such
amendments had occurred in ten out of the thirteen cases where a
declaration had been finally issued by the courts, and in the
remaining three, reforms were pending or under consideration (see
paragraph 23 above). It is possible that at some future date
evidence of a long-standing and established practice of ministers
giving effect to the courts’ declarations of incompatibility
might be sufficient to persuade the Court of the effectiveness of the
procedure. At the present time, however, there is insufficient
material on which to base such a finding.
- The
Court does not consider that these applicants could have been
expected to have exhausted, before bringing their application to
Strasbourg, a remedy which is dependent on the discretion of the
executive and which the Court has previously found to be ineffective
on that ground.
It
therefore rejects the Government’s second objection to
admissibility.
C. Delay
- In
the alternative, the Government submitted that the application was
inadmissible under the six-months rule. The discrimination of which
the applicants complained arose when an exemption for spouses was
first introduced by the Finance Act 1975, and it first impacted on
the applicants when they began co-habiting.
- The
applicants contended that the violation about which they complained,
arising out of legislative measures, was continuing, so that the
six-months time-limit did not apply (see Norris, cited above).
Further and in the alternative, the discrimination has intensified
since the coming into force of the 2004 Act on 5 December 2005.
- The
Court repeats that it has found the applicants to be directly
affected by a provision of domestic law, given the high probability
that it will automatically apply to the survivor following the first
sister’s death. In these circumstances and since there is no
domestic remedy which the applicants can be required to exhaust, the
six-months time-limit does not apply.
D. The Court’s conclusion on admissibility
- The
Court considers that the application as a whole raises questions of
law which are sufficiently serious that their determination should
depend on an examination of the merits. No other ground for declaring
it inadmissible has been established. The application must therefore
be declared admissible. Pursuant to Article 29 § 3 of the
Convention, the Court will now consider the merits of the applicants’
complaint.
II. ALLEGED VIOLATION OF ARTICLE 14 OF THE CONVENTION IN CONJUNCTION
WITH ARTICLE 1 OF PROTOCOL NO. 1
A. The parties’ submissions
1. The Government
- The
Government emphasised that there was no right under Article 1 of
Protocol No. 1 to acquire possessions; in the Court’s case-law
on domestic inheritance laws, it had consistently held that, before
the relevant death occurred, the presumptive heir had no property
rights and that his or her hope of inheriting in the event of death
could not therefore amount to a “possession” (see Marckx,
§ 50; and also Inze v. Austria, judgment of 28 October
1987, Series A no. 126, § 38; Mazurek v. France, no.
34406/96, §§ 42-43, ECHR 2000-II). Since each applicant was
still alive and her complaint, as surviving sister, concerned the
potential future impact of domestic law on their power to inherit,
Article 1 of Protocol No. 1 did not apply, and nor therefore did
Article 14. The complaint made by each sister as the prospective
first-to-die was also outside the ambit of Article 1 of Protocol No.
1, because there was no restriction under domestic law on the
applicants’ ability to dispose of their property, only a
potential liability to tax arising after death, when the deceased
would no longer be in a position to enjoy her former possessions.
- In
the alternative, if the Court were to find that the complaint fell
within the ambit of Article 1 of Protocol No. 1, the Government
denied that domestic law gave rise to any discrimination contrary to
Article 14.
First,
the applicants could not claim to be in an analogous situation to a
couple created by marriage or civil partnership (“a couple”).
The very essence of their relationship was different, because a
couple chose to become connected, whereas for sisters it was an
accident of birth. In choosing to become a couple by entering into a
formal relationship recognised by law, the partners also made a
financial commitment to each other, and agreed to give the courts
powers to divide their property and to order one partner to provide
for the other on separation. The special legal status of parties to a
marriage had been recognised by the Commission in Lindsay v. the
United Kingdom, no. 11098/84, Commission decision of 11 November
1986, Decisions and Reports 49, p. 181 and by the Court in Shackell
v. the United Kingdom (dec.), no. 45851/99, 27 April 2000. No
such financial commitment arose by virtue of the relationship between
siblings.
- The
Government accepted that, if the applicants could be described as in
an analogous position to a couple, there was a difference in
treatment as regards exemption from inheritance tax. However, this
difference in treatment did not exceed the wide margin of
appreciation enjoyed by the State, both in the field of taxation and
when it came to financial measures designed to promote marriage (see
Lindsay and Shackell).
The
policy underlying the inheritance tax concession given to married
couples was to provide the survivor with a measure of financial
security, and thus promote marriage. The purpose of the 2004 Act was
to provide same-sex couples with a formal mechanism for recognising
and giving legal effect to their relationships, and the inheritance
tax concession for civil partners served the same legitimate aim as
it did in relation to married couples. Given the development of
society’s attitudes, the same arguments justified the promotion
of stable, committed same-sex relationships. That objective would not
be served by extending similar benefits to unmarried members of an
existing family, such as siblings, whose relationship was already
established by their consanguinity, and recognised by law. The
difference in treatment thus pursued a legitimate aim.
- The
difference in treatment was, moreover, proportionate, given that the
applicants, as siblings, had not undertaken any of the burdens and
obligations created by a legally recognised marriage or civil
partnership. If the Government were to consider extending the
inheritance tax concession to siblings, there would be no obvious
reason not to extend it also to other co-habiting family members.
Such a change would have considerable financial implications, given
that the annual income from inheritance tax was approximately GBP 2.8
billion.
2. The applicants
- The
applicants argued that if, as they had previously argued, they could
claim to be victims of discrimination, the fact that neither had yet
died could not provide a separate and substantive defence. Unlike the
applicants in Marckx, the present applicants were not
complaining about a provision of the English law of inheritance and,
the principle that the Convention does not guarantee the right to
acquire possessions on intestacy or through voluntary disposition was
irrelevant. In circumstances where it was effectively inevitable that
there would be significant tax to pay by the surviving sister, the
facts fell within the scope of Article 1 of Protocol No. 1, and
Article 14 was thus also applicable.
- The
applicants could properly be regarded as being in a similar situation
to a married or same-sex Civil Partnership Act couple. While it was
true, as the Government had asserted, that many siblings were
connected by nothing more than their common parentage, this was far
from the case with the present applicants, who had chosen to live
together in a loving, committed and stable relationship for several
decades, sharing their only home, to the exclusion of other partners.
Their actions in so doing were just as much an expression of their
respective self-determination and personal development as would have
been the case had they been joined by marriage or a civil
partnership. The powers of the domestic courts to make property
orders upon the breakdown of a marriage or civil partnership did not
entail that the applicants were not in an analogous situation to such
couples as regards inheritance tax. Moreover, the very reason that
the applicants were not subject by law to the same corpus of legal
rights and obligations as other couples was that they were prevented,
on grounds of consanguinity, from entering into a civil partnership.
The one significant difference between the applicants and a married
couple was that the applicants, being sisters, would not lawfully be
entitled to have a sexual relationship. This difference was not,
however, relied upon by the Government, nor could it be, given that
there was no requirement in the 2004 Act for those wishing to enter
into a civil partnership to be in a sexual relationship with each
other.
- Given
that, as the Government asserted, the purpose of the inheritance tax
exemption for married and civil partnership couples was the promotion
of stable and committed relationships, the denial of an exemption to
co-habiting adult siblings served no legitimate aim. The mere fact of
being sisters did not entail a stable, committed relationship, and
only a small minority of adult siblings were likely to share the type
of relationship enjoyed by the applicants, involving prolonged mutual
support, commitment and co-habitation.
- The
applicants agreed with the Government that there was no obvious
reason why, if the exception were granted to siblings, it should not
also be extended to other family members who co-habit, but argued
that this did not support a conclusion that the difference in
treatment bore any relationship of proportionality to any legitimate
aim. Such an exemption would, in fact, serve the policy interest
invoked by the Government, namely the promotion of stable, committed
family relationships among adults. Whilst the applicants
accepted that the Court had no jurisdiction to dictate to the
Government how best to remedy the discrimination, the amendments to
the Civil Partnership Bill passed by the House of Lords (see
paragraph 19 above) showed that it would be possible to construct a
statutory scheme whereby two siblings or other close relations who
had co-habited for a fixed number of years and chosen not to enter
into a marriage or civil partnership could obtain certain fiscal
rights or advantages. The Government’s reliance on the margin
of appreciation was misplaced in the light of the recognition given
to the injustice faced by those in the applicants’ position
when the 2004 Act was passing through Parliament (ibid.). The
applicants pointed out that the Government had been unable to provide
an estimate of the loss of revenue which would flow from an
inheritance tax exemption along the lines proposed in the House of
Lords. They could not estimate the cost either, but pointed out that
the lost revenue would have to be offset by the potential gains, for
example, those flowing from an increased tendency, encouraged by the
exemption, of close relations to care for disabled or elderly
relatives, thus avoiding the need for State-funded care.
B. The Court’s assessment
- The
applicants do not complain, as in Marckx, that they will be
prevented from acquiring property; they complain instead that the
survivor will be required to pay tax on property they jointly own; an
outcome which the Court has held to be highly probable (see paragraph
30 above). Since the duty to pay tax on existing property falls
within the scope of Article 1 of Protocol No. 1, Article 14 is
applicable.
- It
is for the national authorities to make the initial assessment, in
the field of taxation, of the aims to be followed and the means to be
used (Lindsay, cited above). The State enjoys a wide margin of
appreciation in this field, as is usual when it comes to general
measures of economic or social strategy (see, for example, James
and Others v. the United Kingdom, judgment of 21 February
1986, Series A no. 98, § 46; National and Provincial Building
Society and Others v. the United Kingdom, judgment of 23 October
1997, Reports 1997-VII, § 80). A government may often
have to strike a balance between the need to raise revenue and the
need to reflect other social objectives in its taxation policies.
Because of their direct knowledge of their society and its needs, the
national authorities are in principle better placed than the
international judge to appreciate what is in the public interest on
social or economic grounds. The Court will generally respect the
legislature’s policy choice in this field unless it is
“manifestly without reasonable foundation” (ibid.; and
see also Lindsay, cited above) and subject to the proviso
that, in creating and implementing a scheme of taxation, the State
must not discriminate between tax-payers in a manner which is
inconsistent with Article 14 of the Convention (see, mutatis
mutandis, Stec and Others v. the United Kingdom (dec.),
[GC], nos. 65731/01 and 65900/01, §§ 54-55, ECHR
2005-...).
- Article
14 safeguards individuals placed in similar positions from
discrimination in the enjoyment of the rights and freedoms set out in
the Convention and Protocols (see Marckx, § 32 and Darby
v. Sweden, judgment of 23 October 1990, Series A no. 187, §
31). A difference of treatment is discriminatory if it has no
objective and reasonable justification; in other words, if it does
not pursue a legitimate aim or if there is not a reasonable
relationship of proportionality between the means employed and the
aim sought to be realised. The Contracting State enjoys a margin of
appreciation in assessing whether and to what extent differences in
otherwise similar situations justify a different treatment (Stec
and Others v. the United Kingdom [GC], nos. 65731/01 and
65900/01, § 51, ECHR 2006-...).
- The
applicants claim to be in a similar or analogous position to
co-habiting married and civil partnership couples for the purposes of
inheritance tax. The Government, however, argue that there is no true
analogy because the applicants are connected by birth rather than by
a decision to enter into a formal relationship recognised by law.
- The
Court recalls that in Shackell, while observing that there
might well be an increased social acceptance of stable relationships
outside the traditional relationship of marriage, it found that the
situations of married and unmarried heterosexual cohabiting couples
were not analogous for the purposes of survivors’ benefits,
citing the Commission’s opinion in Lindsay that
“[m]arriage continues to be characterised by a corpus of rights
and obligations which differentiate it markedly from the situation of
a man and woman who co-habit.” Since the coming into force of
the 2004 Act in the United Kingdom, a same-sex couple now also has
the choice to enter into a legal relationship designed by Parliament
to correspond almost exactly to marriage (see paragraphs 16-18
above).
- It
is true that the decisions in Shackell and Lindsay were
made in the knowledge that a man and a woman outside the prohibited
degrees of family relationship are generally free to choose whether
or not to take on the “corpus of rights and obligations”
involved in marriage. The applicants, as sisters, do not have this
choice, and indeed it goes to the heart of their complaint that,
despite their decision to live together in an exclusive relationship
for many years, English law does not accord a level of recognition to
their co-habitation approaching that given to a married or civil
partnership couple. The Court does not, however, have to decide if
that lack of choice has any bearing on the question whether, for the
purposes of inheritance tax, the applicants can be regarded as being
in an analogous position to married and civil partnership couples,
because, for the reasons set out below, it considers that, even
assuming that the applicants can be compared to such a couple, the
difference in treatment is not inconsistent with Article 14.
- In
this regard, the Court recalls its finding in Shackell that
the difference of treatment for the purposes of the grant of social
security benefits, between an unmarried applicant who had a long-term
relationship with the deceased, and a widow in the same situation,
was justified, marriage remaining an institution that was widely
accepted as conferring a particular status on those who entered it.
The Court decided in Shackell, therefore, that the promotion
of marriage by way of the grant of limited benefits for surviving
spouses could not be said to exceed the margin of appreciation
afforded to the respondent State. In the present case, it accepts the
Government’s submission that the inheritance tax exemption for
married and civil partnership couples likewise pursues a legitimate
aim, namely to promote stable, committed heterosexual and homosexual
relationships by providing the survivor with a measure of financial
security after the death of the spouse or partner. The Convention
explicitly protects the right to marry in Article 12, and the Court
has held on many occasions that sexual orientation is a concept
covered by Article 14 and that differences based on sexual
orientation require particularly serious reasons by way of
justification (see, for example, Karner v. Austria, no.
40016/98, § 37, ECHR 2003-IX and the cases cited therein). The
State cannot be criticised for pursuing, through its taxation system,
policies designed to promote marriage; nor can it be criticised for
making available the fiscal advantages attendant on marriage to
committed homosexual couples.
- In
assessing whether the means used are proportionate to the aim
pursued, and in particular whether it is objectively and reasonably
justifiable to deny co-habiting siblings the inheritance tax
exemption which is allowed to survivors of marriages and civil
partnerships, the Court is mindful both of the legitimacy of the
social policy aims underlying the exemption, and the wide margin of
appreciation that applies in this field (see paragraph 55 above). Any
system of taxation, to be workable, has to use broad categorisations
to distinguish between different groups of tax payers (see Lindsay,
cited above). The implementation of any such scheme must, inevitably,
create marginal situations and individual cases of apparent hardship
or injustice, and it is primarily for the State to decide how best to
strike the balance between raising revenue and pursuing social
objectives. The legislature could have granted the inheritance tax
concessions on a different basis: in particular, it could have
abandoned the concept of marriage or civil partnership as the
determinative factor and extended the concession to siblings or other
family members who lived together, and/or based the concession on
such criteria as the period of cohabitation, the closeness of the
blood relationship, the age of the parties or the like. However, the
central question under the Convention is not whether different
criteria could have been chosen for the grant of an inheritance tax
exemption, but whether the scheme actually chosen by the legislature,
to treat differently for tax purposes those who were married or who
were parties to a civil partnership from other persons living
together, even in a long-term settled relationship, exceeded any
acceptable margin of appreciation.
- In
the circumstances of the case, the Court finds that the United
Kingdom cannot be said to have exceeded the wide margin of
appreciation afforded to it and that the difference of treatment for
the purposes of the grant of inheritance tax exemptions was
reasonably and objectively justified for the purposes of Article 14
of the Convention. There has accordingly been no violation of the
Article, read in conjunction with Article 1 of Protocol No. 1 to the
Convention, in the present case.
FOR THESE REASONS, THE COURT
- Declares unanimously the application admissible;
- Holds by four votes to three that there has been
no violation of Article 14 of the Convention taken in
conjunction with Article 1 of Protocol No. 1.
Done in English, and notified in writing on 12 December 2006,
pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.
T.L. Early Josep Casadevall
Registrar President
In accordance with Article 45 § 2 of the Convention and Rule 74
§ 2 of the Rules of Court, the following dissenting opinions are
annexed to this judgment:
(a) The
joint dissenting opinion of Mr Bonello and Mr Garlicki;
(b) The
dissenting opinion of Mr Pavlovschi.
J.C.M.
T.L.E.
JOINT DISSENTING OPINION OF
JUDGES BONELLO AND
GARLICKI
1. We
decided to dissent because we are convinced that the prospective
imposition of “full” inheritance tax on the surviving
sister violates Article 14 of the Convention taken in
conjunction with Article 1 of Protocol No. 1. In particular, we
are not persuaded by the manner in which the “margin of
appreciation” doctrine has been applied to this case.
We do
agree that there must be a wide margin of appreciation offered to the
national authorities in tax matters. We further agree that any system
of taxation, to be workable, has to use broad categorisations to
distinguish between different groups of taxpayers. We would also be
prepared to agree that, with regard to tax matters, there may be some
kind of presumption that the solutions adopted by the national
legislature remain within this margin of appreciation. Such
presumption would mean that it is, in principle, the applicant who
must demonstrate that the application of the tax legislation in his
or her case exceeded the State’s margin of appreciation and led
to unreasonable und unjustified effects.
However,
this “burden of proof” is not unlimited. In our opinion,
once an applicant is able to demonstrate that the way in which the
tax legislation was applied created a situation of apparent hardship
or injustice, the onus shifts towards the Government, who must then
show that there were good reasons for their actions. Furthermore, if
our Court decides to accept that such a situation of apparent
hardship or injustice remains compatible with the Convention
standards, it must give a full explanation as to how it applied the
“margin of appreciation” concept.
2.
The majority seems to agree that there has been a marginal situation
or an individual case “of apparent hardship or injustice”
(paragraph 60) in respect of the applicants. What seems to us,
however, to be missing in the majority’s position is a full
explanation as to why and how such injustice can be justified. A mere
reference to the margin of appreciation is not enough. It should also
be recalled that, in the absence of such explanation, a problem of
discriminatory treatment may arise, even outside the traditional
arena of the Convention rights (see, mutatis mutandis, Stec
and Others v. the United Kingdom (dec.) [GC], cited in paragraph
54 of the majority’s judgment, §§ 54-55).
The
national legislature is, generally speaking, free to adopt any
reasonable policy of inheritance tax exemptions. As long as the
United Kingdom confined the exemptions to married couples, such
categorisation might have been justified under Article 12 of the
Convention. However, once the UK legislature decided to extend the
exemption to permanently cohabiting same-sex couples, the problem
left the specific sphere of Article 12. Thus, any further
categorisation in the area of inheritance tax exemptions has to
satisfy general standards of reasonableness and non arbitrariness
resulting from Article 14. Of course, we do not want to cast doubt
upon the reasonableness of extending exemptions to those same sex
couples choosing to form a civil partnership and denying such
exemption to mixed-sex couples preferring not to enter into any form
of official union. But once the legislature decides that a permanent
union of two persons could or should enjoy tax privileges, it must be
able to justify why such a possibility has been offered to some
unions while continuing to be denied to others. The problem of
siblings living together permanently did not escape the attention of
the UK legislators and an appropriate amendment was proposed by the
House of Lords. It was, however, rejected in the House of Commons on
the basis of widespread agreement that the Civil Partnership Bill “is
not the appropriate legislative base on which to deal with [the
problem]” (see paragraph 19 of the judgment). Such an approach
may have been correct from the perspective of parliamentary
technique, but it could not absolve the legislature from providing an
equitable solution to the problem at a later stage.
3.
The situation of permanently cohabiting siblings is in many
respects emotional as well as economical – not
entirely different from the situation of other unions, particularly
as regards old or very old people. The bonds of mutual affection form
the ethical basis for such unions and the bonds of mutual dependency
form the social basis for them. It is very important to protect such
unions, like any other union of two persons, from financial disaster
resulting from the death of one of the partners.
The
national legislature may establish a very high threshold for such
unions to be recognised under tax exemption laws; it may also provide
for particular requirements to avoid fraud and abuse. But unless some
compelling reasons can be shown, the legislature cannot simply ignore
that such unions also exist.
The
situation of permanently cohabiting siblings under the UK legislation
has also been negatively affected by the fact that – being
within the prohibited degrees of relationship – they cannot
form a civil partnership. In other words, they have been deprived of
the possibility of choice offered to other couples. That is why the
present case cannot be determined by reference to the Shackell v.
the United Kingdom decision (see paragraph 46 of the judgment),
since the latter was based on the fact that the persons affected were
generally free to choose whether or not to enter into a formal union.
4. The
injustice generally inherent in the UK approach appears particularly
striking in the circumstances of this case. Both sisters have already
attained a rather advanced age; they have been together for several
decades and neither of them has children. It is obvious that the
State will be
able to collect its tax in full upon the death of the surviving
applicant. But the State wants to do it twice: first upon the death
of the first sister and later by imposing a new inheritance tax on
what still remains of the estate. As we see it, this is scarcely
compatible with Article 14 taken in conjunction with Article 1 of
Protocol No. 1. It may also raise problems under Article 8 if the
extent of her tax obligations compels the surviving sister to leave
her house or otherwise sacrifice the lifestyle to which she has been
accustomed.
DISSENTING OPINION OFJUDGE PAVLOVSCHI
This
case confirms, yet again, the truth of the words uttered by Benjamin
Franklin many, many years ago, to the effect that “nothing in
this world is certain but death and taxes”. Practice shows that
this statement is still valid, even in our 21st century.
There
is a well-known opinion that all judicial decisions can, in theory,
be split into four categories: (a) legal and fair; (b) illegal, but
fair; (c) illegal and unfair; and (d) legal, but unfair.
In my
view, the decision reached by the majority in this case may be placed
in the fourth category. I am firmly convinced that a judicial
decision, which represents, by its very nature, the highest
expression of justice, cannot be unfair. Yet I have genuine
difficulty in accepting the fairness of the judgment delivered in the
case of Burden and Burden v. the United Kingdom.
Unfortunately,
in reaching their conclusion that
“... the United Kingdom cannot be said to have
exceeded the margin of appreciation afforded to it and that the
difference of treatment for the purposes of the grant of inheritance
tax exceptions was reasonable and objectively justified...”
(see paragraph 61),
the
majority failed to adduce any reason or argument for doing so. This
circumstance prevents me from expressing my opinion concerning the
legal aspects of the above conclusion.
Therefore,
I will focus only on the issue of the general unfairness of this
judgment.
In
particular, this unfairness leads me to disagree with the judgment
and prevents me from sharing the majority’s opinion that there
has been “no violation” in the instant case.
In my
opinion, the decisive element in the case before us is the nature of
the property belonging to the applicants, and their personal attitude
to it.
Had
assets purchased by the applicants during their co-habitation been at
stake, I would have had no difficulty in accepting the majority’s
approach and, moreover, I would have readily agreed that part of such
shared assets, inherited by a surviving sibling, could and should be
considered as taxable property. In the case before us, however, we
are faced with a qualitatively different situation. The case concerns
the applicants’ family house, in which they have spent all
their lives and which they built on land inherited from their late
parents. This house is not simply a piece of property - this house is
something with which they have a special emotional bond, this house
is their home.
It
strikes me as absolutely awful that, once one of the two sisters
dies, the surviving sister’s sufferings on account of her
closest relative’s death should be multiplied by the risk of
losing her family home because she cannot afford to pay inheritance
tax in respect of the deceased sister’s share of it.
I
find such a situation fundamentally unfair and unjust. It is
impossible for me to agree with the majority that, as a matter of
principle, such treatment can be considered reasonable and
objectively justified. I am firmly convinced that in modern society
there is no “pressing need” to cause people all this
additional suffering.
