Loretta SIMONJAN-HEIKINHEIMO v Finland - 6321/03 [2008] ECHR 876 (2 September 2008)

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The European Court of Human Rights (Fourth Section), sitting on 2 September 2008 as a Chamber composed of:

Nicolas Bratza, President,
Giovanni Bonello,
David Thór Björgvinsson,
Ján Šikuta,
Päivi Hirvelä,
Ledi Bianku,
Nebojša Vučinić, judges,
and Fatoş Aracı, Deputy Section Registrar,

Having regard to the decision to examine the admissibility and merits of the case together (Article 29 § 3 of the Convention),

Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicant,

The applicant, Ms Loretta Simonjan-Heikinheimo, is a Finnish national who was born in 1951 and lives in Vantaa, Finland. She was represented before the Court by Ms S. Rautio, a lawyer practising in Helsinki. The Finnish Government (“the Government”) were represented by their Agent, Mr Arto Kosonen of the Ministry for Foreign Affairs.

The facts of the case, as submitted by the parties and as they appear from the documents on the file, may be summarised as follows.

The applicant moved to Russia in 1991. She returned to live in Finland in 1994, bringing with her a Mercedes-Benz 600 SE, which was cleared through customs on 26 July 1994. The car was brought into Finland tax free, because the applicant completed a declaration to the effect that she had lived abroad for over a year and that, during this time, she had spent less than 72 days in Finland.

On 4 May 1995, the applicant was questioned by the police on suspicion of aggravated tax fraud. On the same day, customs officials temporarily confiscated her car as security. On 13 June 1995, the Lahti District Court, in connection with the criminal proceedings, ordered that it be kept until further notice.

On 10 October 1995, the Lahti City Customs Office (tullikamari, tullkammaren) reassessed the circumstances and levied a duty on the car, ordering the applicant to pay customs duty, car tax, value-added tax, and a surcharge on these amounts, to a total of FIM 920,662 (EUR 154,844). It noted that the applicant had not been in possession of the car abroad for the required period of one year. Also, she had not limited her stays in Finland to the 72 days allowed during the year before the move, but had stayed in Finland for a total of 117 days. She had informed the customs authorities that she had spent 70 days in Finland. The customs office noted that practice regarding the number of days allowed was flexible. However, by law, attention had to be paid to the length of and reason for the stays. Holidays and stays in order to prepare for the move were acceptable, but the applicant had also stayed in Finland for her work for several days at a time, which could not be regarded as an acceptable reason.

On 27 September 1996, the Uusimaa County Administrative Court (lääninoikeus, länsrätten), on an appeal by the applicant, upheld the decision, but reduced the amount payable due to the circumstances of the case.

On 23 June 1997, again on an appeal by the applicant, the Supreme Administrative Court (korkein hallinto-oikeus, högsta förvaltningsdomstolen) quashed the previous decisions. It noted that the applicant had lived in Russia from 1991 until her move to Finland on 26 July 1994 and that there had been an acceptable reason for her stays in Finland.

Meanwhile, the public prosecutor had brought charges against the applicant for aggravated tax fraud.

On 14 August 1997, the District Court (käräjäoikeus, tingsrätten) discontinued the confiscation measure and the car was subsequently returned to the applicant.

On 21 August 1997, due to the Supreme Administrative Court’s decision, the District Court rejected the charge for aggravated tax fraud.

On 16 August 1999 the applicant instituted proceedings against the State. Relying on the Tort Liability Act and the Execution Act and alleging that the customs office’s decision, and as a consequence the confiscation, had been erroneous since they were based on a wrong interpretation of the law, she claimed compensation for various items such as loss of the use of the car, repair costs, depreciation, expenses and so on to a total of some FIM 533,000 (EUR 89,644).

On 14 April 2000, the Lahti District Court, under Chapter 3, section 2, of the Tort Liability Act, ordered the State to pay the applicant a total of FIM 302,089 (EUR 50,808) on the ground that the customs office had failed to observe due thoroughness in examining a case which involved such a large amount of money and was consequently of great importance to the applicant.

On 20 December 2001, the Kouvola Court of Appeal (hovioikeus, hovrätten) quashed the District Court’s decision, exonerating the State from any liability. Contrary to the District Court, it held that the actions of the customs authorities had met the reasonable requirements set and therefore the State was not responsible under the Tort Liability Act for the damage alleged. As to the Execution Act, it found that the applicant had introduced her claims after the statute of limitations had expired and thus too late.

On 27 August 2002, the Supreme Court (korkein oikeus, högsta domstolen) refused leave to appeal.

Chapter 3, section 2, of the Tort Liability Act (vahingonkorvauslaki; skadeståndslagen, Act no. 412/1973) provides that a public corporation is vicariously liable for damages for injury or damage caused through an error or negligence in the exercise of public authority. The same liability also applies to other corporations performing a public task under an Act, a Decree or an authorisation given in an Act. However, the liability of the corporation arises only if the performance of the activity or task, in view of its nature and purpose, has not met the reasonable requirements set.

Article 15 of the Constitution (Suomen perustuslaki, Finlands grundlag; Act no. 731/1999) provides that the property of everyone is protected. Provisions on the expropriation of property, for public needs and in consideration of full compensation, are laid down by an Act. Article 118(3) provides that everyone who has suffered a violation of his or her rights or sustained loss through an unlawful act or omission by a civil servant or other person performing a public task has the right to request that the civil servant or other person in charge of a public task be sentenced to a punishment and that the public organisation, official or other person in charge of a public task be held liable for damages, as provided in more detail by an Act.

In a Supreme Court precedent (no. 2002:78) it was held that Chapter 3, section 2(1), of the Tort Liability Act does not give rise to liability for damages on the sole ground that a decision based on a judicial assessment is subsequently overturned as erroneous following reassessment by an appellate body. In order for a judicial assessment to be considered so wrong as to give rise to liability for damages, regard must be had to various factors, in particular to the nature of the legal provisions, the application of which is the subject of the case. The clarity and unambiguous nature of the provisions is to be assessed, as are the complexity of the case and whether the case leaves room for discretion.

Section 14 of the Customs Tax Act (tulliverolaki, tullskattelagen; Act no. 575/1978 in force at the relevant time) provided that the private property of a person immigrating to Finland was exempt from duty on the condition that the immigrant had, immediately before the immigration, stayed abroad for at least one year continuously. In addition it was required, inter alia, that an imported vehicle had been in the ownership, or in the possession leading to ownership, of the immigrant or his or her spouse or in the immigrant’s use abroad for at least one year prior to the immigration. Exemption from duty was granted when the immigrant had, prior to the immigration, stayed temporarily in Finland in order to look for work or a dwelling or for a reason which, considering his or her circumstances, was deemed compelling, or because of an ordinary holiday or comparable short stay. When applying this provision, the authorities paid attention to both the duration of the immigrant’s stays and their reason. Although the provision did not explicitly provide for a maximum duration of temporary stays, the authorities took account of the so-called “72 days rule” applied in cases of income taxation. Although the wording of the provision did not permit actual work-related visits, short working visits were permitted in practice and were not as such deemed to interrupt the stay abroad.

Section 35 of the Customs Act (tullilaki, tullagen; Act no. 1165/1987) provides that if customs duties have not been paid or have been paid only in part because the declarant has entirely or in part failed to comply with the obligation to declare goods, or has intentionally or unintentionally provided a defective, misleading or false customs declaration or other information or documents for customs taxation, or if too much duty has been repaid for a similar reason, the relevant customs office shall charge the duty not paid or the duty repaid in excess for the aforementioned reasons (post-clearance duty).

Chapter 3, section 14, of the Execution Act (ulosottolaki; utsökningslagen; Act no. 389/1973 in force at the material time) provided that when a judgment was reversed, the applicant had to cover all damage caused by the implementation of, inter alia, a confiscation. Chapter 3, section 37, provided that any request for compensation for costs and damage caused by a reversed implementation must be brought within one year of the date on which the judgment on the matter to which the implementation related gained legal force and the implementation was completed or reversed.

The applicant complained under Article 1 of Protocol No. 1 to the Convention that her right to the peaceful enjoyment of her possessions had been violated because the courts had not awarded her compensation for the damage that she had incurred due to an erroneous decision on the part of the authorities to levy a customs duty and other charges on her car.

The applicant complained about the confiscation of her car for security and that the damage which she suffered as a result of the confiscation remains uncompensated.

“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.”

The Government argued that the applicant had not exhausted domestic remedies as she had not lodged an appeal against the District Court’s decision of 13 June 1995 on the confiscation of her car for security. Following the Supreme Administrative Court’s decision she could also have brought an action under Chapter 3, section 14, of the Execution Act to obtain compensation for damage caused by the confiscation. Liability for damages under the provisions of the Execution Act was based on the principle of objective liability. The applicant had brought such an action but it had not been examined by the Court of Appeal as the statute of limitations had expired.

The Government conceded that there had been an interference and considered that the impugned measures related to the control of the use of property. The confiscation had been in accordance with the law, namely, the Coercive Measures Act. The legitimate aim had been to secure the payment of taxes or other contributions or penalties. The State’s liability for damages presupposed that the damage had been caused in the exercise of public authority through an error or negligence. The wording “through an error or negligence” was used as a synonym for “intentionally or through negligence”. Liability only arose if the performance of an activity or task, in view of its nature and purpose, had not met the reasonable requirements set. The question of the requirements with which an authority was expected to comply within its activities was to be determined case by case by having due regard to the circumstances as a whole, to how explicit and unambiguous the rules and regulations applied by the authority were, and to the extent of assessment and interpretation required in their application. In this case the County Administrative Court had rejected the applicant’s appeal and the Supreme Administrative Court’s decision was not unanimous. It was evident from its reasons that the quashed decision had not been based on an erroneous interpretation of the law but on an assessment of the evidence adduced. The Supreme Administrative Court had stated that “it must be considered that there has been a reason referred to in section 14, subsection 3, of the Customs Tax Act for the applicant’s stay in Finland”. In other words, it considered that there were special compelling reasons for the applicant’s stays. Accordingly, the Court of Appeal’s subsequent assessment in the compensation proceedings had been correct as no error or negligence had occurred, the Supreme Administrative Court had only assessed the evidence differently. It also appeared from the customs office’s decision that the applicant had stated that the question at stake was that of interpretation of the law.

With regard to the confiscation, the Government noted that the conditions in Chapter 3 of the Coercive Measures Act for the confiscation of property as a protective measure had been fulfilled, although the Supreme Administrative Court had quashed the customs office’s decision of 10 October 1995 on post-clearance duties. The confiscation of property was possible if there was “reason to suspect an offence”.

The Government noted that the administrative seizure of a vehicle subject to taxation and the confiscation of a vehicle in criminal proceedings were intended to control the use of property. In the first-mentioned case, the purpose was to secure taxation and/or the implementation of a claim for damages related to tax receivables. In the present case, the purpose of securing the payment of receivables had been particularly significant, as the amount subject to confiscation was substantial, considering that there were grounds to suspect that the applicant had attempted to destroy her property. The applicant has stated that the alleged damage was caused by the confiscation and not by the decision on post-clearance duties. The confiscation was, however, an ancillary measure intended expressly to secure the enforcement of the decision on post-clearance duties. When the order for confiscation for security was examined in the District Court, the applicant had not objected to the application. She had also submitted deficient and contradictory information concerning the vehicle with regard to customs procedure, which was a fact of relevance for the purposes of taxation. Moreover, the applicant could have prevented the confiscation for security by providing sufficient security. The extent and effectiveness of the measures used had been unexceptional. The vehicle had subsequently been returned to the applicant without undue delay.

The applicant contested the Government’s view that she had not complied with Article 35 § 1 of the Convention. The threshold for issuing a decision on confiscation under the Coercive Measures Act was quite low and, in practice, it was always reached when there was reason to believe that an offence had been committed. The impugned coercive measure had been of an ancillary nature and it had been clear that an appeal would have been unsuccessful as the investigation and the principal case had still been pending. An appeal would only have caused the applicant additional costs. While it was true that the applicant had not instituted proceedings pursuant to the Execution Act, it had in the circumstances been sufficient to institute proceedings pursuant to the Tort Liability Act as all aspects of the case were covered by the relevant provision on the State’s liability for damage caused in the exercise of public authority.

The applicant argued that there had been a lack of adequate guidance concerning the calculation of her stays in Finland. The customs authority had not provided adequate advice in accordance with good practices in administrative matters. The customs office had not taken any steps in order to find out whether the conditions for bringing the vehicle into the country tax-free had been met, by inviting the applicant to submit further information or through judicial assistance. Instead, and about a year after the car had been brought into the country, the applicant had been questioned on suspicion of tax fraud.

The applicant had not been given an opportunity to avoid the sanction by, for instance, returning to Russia or producing information on the grounds for her stays in Finland. The coercive measure applied had been out of all proportion and as a result the applicant had lost the control of her property. That could have been avoided had the customs authorities tried to find out the facts of the case, a fact to which the District Court had paid due regard in the compensation proceedings.

The applicant agreed that the question of the requirements to be complied with by an authority in its activities was to be determined case by case and having due regard to the circumstances as a whole. In her case, a considerable price had been at stake. Having regard to that and the fact that the practice had been unclear, the authority should have applied more thoroughness both when the applicant brought the car into the country and at the time of issuing the decision in October 1995. As the authority had failed to do so, its performance could not be said to have met the reasonable requirements set.

The applicant rejected the Government’s argument that she could have kept the car had she given security, since the average person was unlikely to be in possession of the sum required in this case, some EUR 130,000.

Having regard to the above, the applicant submitted that the authority had failed to comply with the principles laid down in the legislation and good practices in administrative matters.

As to the Government’s argument that the applicant had been prevented from using her property for only a short period of time, she argued that the financial value of a car went down rather quickly and, that being the case, more than two years was a substantial period. The applicant had been prevented from selling the car and thereby profiting from it as planned.

The Court considers that in the circumstances of the present case, it need not decide whether the applicant has complied with Article 35 § 1 of the Convention, as the application is in any event inadmissible for the following reasons.

Article 1 of Protocol No. 1 comprises three distinct rules. They have been described thus (see AGOSI v. the United Kingdom, judgment of 24 October 1986, Series A no. 108, p. 17, § 48):

“The first rule, set out in the first sentence of the first paragraph, is of a general nature and enunciates the principle of the peaceful enjoyment of property. The second rule, contained in the second sentence of the first paragraph, covers deprivation of possessions and subjects it to certain conditions. The third rule, stated in the second paragraph, recognises that the Contracting States are entitled, amongst other things, to control the use of property in accordance with the general interest However, the three rules are not “distinct” in the sense of being unconnected: the second and third rules are concerned with particular instances of interference with the right to peaceful enjoyment of property and should therefore be construed in the light of the general principle enunciated in the first rule.”

“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.”

The Court reiterates that any interference with the peaceful enjoyment of possessions must strike a fair balance between the demands of the general interests 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. The requisite balance will not be found if the person concerned has had to bear an individual and excessive burden (see Sporrong and Lönnroth v. Sweden, judgment of 23 September 1982, Series A no. 52, pp. 26 and 28, §§ 69 and 73). In other words, there must be a reasonable relationship of proportionality between the means employed and the aim sought to be achieved (see James and Others v. the United Kingdom, judgment of 21 February 1986, Series A. no. 98, p. 34, § 50).

The Court first observes that the confiscation of the car for security amounted to control of the use of property (see, mutatis mutandis, AGOSI v. the United Kingdom, cited above, p. 17, § 51).

The Court notes that the customs duty and other charges were levied due to the fact that it was considered that the applicant had not been in possession of the car abroad for the requisite period of one year, nor had she limited her stays in Finland to the permitted 72 days during the year before the move although she had declared to the customs authorities that she had been in Finland for only 70 days. Thus, the Finnish customs authorities considered that the applicant had not fulfilled the requirements laid down in the Customs Tax Act. Accordingly, they exercised their powers under the law and levied customs duty and other charges and temporarily confiscated the car for security. Thus, the interference was based on law. The mere fact that the Supreme Administrative Court quashed the customs office’s decision does not render the measures unlawful (see, mutatis mutandis, Benham v. the United Kingdom, judgment of 10 June 1996, Reports of Judgments and Decisions 1996 III, § 42). The confiscation of the car was intended to secure the payment of customs duty and other charges. It was therefore carried out in accordance with the general interest within the meaning of Article 1 of Protocol No. 1.

The Court observes that the essence of the applicant’s complaint is that, notwithstanding the subsequent lifting of the customs duty and other charges, she could not obtain compensation for damage alleged as a result of the confiscation. Whether or not the refusal by the domestic courts to order compensation to be paid to the applicant struck a fair balance between the interest of the authorities in confiscating the car and the applicant’s proprietary interest must be examined in the light of the particular circumstances of the case.

In this case, the State’s liability for damages was examined by the District Court and the Court of Appeal in adversarial proceedings which concerned both the customs office’s decision and the confiscation for security. During those proceedings the applicant had the opportunity to submit the evidence and arguments which she thought necessary to protect her interests. It is obvious that different interpretations of the conditions for bringing the vehicle into the country tax-free were possible. This is shown by the contradictory conclusions drawn by the customs office and the Administrative Court on the one hand and by the Supreme Administrative Court on the other. It is also clear that different interpretations were possible as to whether the State was liable for damages as is evidenced by the differing conclusions drawn by the District Court and the Court of Appeal in the subsequent compensation proceedings. The Court of Appeal concluded that the requirements set for the performance of the customs authorities had been met and dismissed the applicant’s action.

For the Court, it does not follow from Article 1 of Protocol No. 1 that the subsequent lifting of the customs duty and other charges must of itself give rise to an entitlement to compensation for any loss alleged to have been suffered as a result of the confiscation of the car. It is in principle for the Contracting States to define the conditions of entitlement to compensation in such circumstances and it cannot be said that the scope of the compensatory remedy in the instant case was such as to impose on the applicant an individual and excessive burden (see Adamczyk v. Poland (dec.), no. 28551/04, 7 November 2006).

Having regard to the above considerations, the Court finds that the authorities or the courts cannot be said to have failed in their duty to strike a fair balance between the applicant’s property rights and the general interests of the community.

It follows that the application is manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 and 4 of the Convention. In view of the above, it is appropriate to discontinue the application of Article 29 § 3.

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You are here: BAILII >> Databases >> European Court of Human Rights >> Loretta SIMONJAN-HEIKINHEIMO v Finland - 6321/03 [2008] ECHR 876 (2 September 2008) URL: http://www.bailii.org/eu/cases/ECHR/2008/876.html Cite as: [2008] ECHR 876