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FIFTH
SECTION
CASE OF
BENET CZECH, SPOL. S R.O. v. THE CZECH REPUBLIC
(Application
no. 31555/05)
JUDGMENT
STRASBOURG
21 October
2010
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 Benet Czech, spol.
s r.o. v. the Czech Republic,
The
European Court of Human Rights (Fifth Section), sitting as a Chamber
composed of:
Peer Lorenzen, President,
Renate
Jaeger,
Karel Jungwiert,
Rait Maruste,
Mark
Villiger,
Isabelle Berro-Lefèvre,
Zdravka
Kalaydjieva, judges,
and Claudia
Westerdiek, Section
Registrar,
Having
deliberated in private on 28 September 2010,
Delivers
the following judgment, which was adopted on that date:
PROCEDURE
- The
case originated in an application (no. 31555/05) against the Czech
Republic lodged with the Court under Article 34 of the Convention for
the Protection of Human Rights and Fundamental Freedoms (“the
Convention”) by a Czech company, Benet Czech, spol. s r.o.
(“the applicant company”), on 26 August 2005.
- The
applicant company was represented by Mr P. Klimeš, a lawyer
practising in Prague. The Czech Government (“the Government”)
were represented by their Agent, Mr V.A. Schorm, of the Ministry of
Justice.
- The
applicant company alleged a violation of its right to property under
Article 1 of Protocol No. 1 to the Convention.
- On
10 September 2007 the President of the Fifth Section decided to give
notice of the application to the Government. It was also decided to
examine the merits of the application at the same time as its
admissibility (Article 29 § 1).
THE FACTS
I. THE CIRCUMSTANCES OF THE CASE
- The
applicant, Benet Czech, spol. s r.o., is a limited liability company
incorporated under Czech law with its registered seat in Prague.
- In
April 2001 criminal proceedings were instituted against Mr B., who
was manager of the applicant company until July 2001 and its sole
shareholder until October 2008, on suspicion of having committed tax
evasion (zkrácení daně, poplatku a jiné
povinné platby). According to the Government the damage
caused to the State exceeded CZK 200,000,000 (EUR 8,000,000). Mr. B
was replaced as manager and shareholder by Mrs. B.
- On
13 September 2001 the prosecuting authorities seized CZK 8,861,401.13
(EUR 319,942) and USD 41,677.80 (EUR 29,769) deposited in the
applicant company’s bank accounts on the suspicion that these
assets represented the profits of Mr B.’s criminal activities.
- Mr
B. was prosecuted for acts which are not related to the business
pursued by the applicant company. On 4 June 2009 Mr B. was acquitted
by the Prague Municipal Court (městský soud), and
on 30 April 2010 the Prague High Court (vrchní soud)
upheld the judgment. During the investigation the prosecuting
authorities, inter alia, collected over 100,000 pages of
documentary evidence, interviewed several hundred witnesses,
including homeless persons with unknown whereabouts whose names the
accused had allegedly used in sham transactions to evade customs and
other duties, and requested legal assistance from the competent
authorities of 16 countries.
- On
15 November 2002 the applicant company requested that the seizure be
lifted. Its request was dismissed by the Prague High Prosecutor
(vrchní státní zástupce) on 17
March 2003. In his view, the investigation so far confirmed that
there was a reasonable suspicion that the assets represented the
profits of Mr B.’s alleged criminal activities.
- The
applicant company appealed to the Prague High Court which dismissed
its complaint on 2 July 2003.
- On
19 September 2003 the applicant company lodged a constitutional
appeal (ústavní stíZnost) in which it
alleged that the reasoning of the High Court’s decision was
insufficient. It further complained of an excessive length of the
seizure of its assets.
- On
23 February 2005 the Constitutional Court (Ústavní
soud) declared the applicant company’s constitutional
appeal inadmissible for being manifestly ill-founded. It held that
unjustified prolonged seizure of assets could in principle constitute
a disproportionate interference with property rights. Nevertheless it
did not find that the seizure which had lasted over three years to
that date was, in the circumstances of the case, disproportionate. It
found the challenged decisions to be neither arbitrary nor in any
other way unconstitutional. The decision was served on the applicant
company’s lawyer on 28 February 2005.
Subsequent developments
- On
9 October 2006 the Prague High Prosecutor dismissed a further request
of the applicant company to lift the seizure, at least in part. The
Prague High Court (vrchní soud) upheld the decision on
21 November 2006. On 30 January 2008 the Constitutional Court,
however, quashed that decision finding a violation of the applicant
company’s right to property. The court held that the length of
the seizure, over six years, was already unreasonable, which thus
disrupted the fair balance between the general interest of fighting
serious crime and the protection of the rights of the applicant
company. Consequently on 11 March 2008 the Prague High Prosecutor
lifted fully the seizure of the applicant company’s bank
accounts.
II. RELEVANT DOMESTIC LAW
Code of Criminal Procedure (Act no. 141/1961) as in force at the
material time
- Pursuant
to Article 9, prosecuting authorities shall assess on their own
preliminary issues arising in course of proceedings; should a final
and binding decision on such an issue be already adopted by a court
or another State authority, prosecuting authorities shall be bound by
it unless it concerns an issue of guilt of accused.
- Article
42 provides for rights of a concerned person. According to it anyone
whose property was seized, or ought to be seized pursuant to a
motion, must be provided with an opportunity to comment on the given
case, may attend a hearing, raise own motions, consult the case file
within the meaning of Article 65, and file appeals provided for by
this law.
- Article
79a provides for a seizure of financial instruments deposited on a
bank account. Under paragraph 1, if the facts indicate that the
financial instruments on a bank account are destined for the
commission of a crime, or have already been used for such purposes,
or represent the profit from criminal activities, a president of a
chamber and a prosecutor, or the police authority at the pre-trial
stage of criminal proceedings, are empowered to seize them.
- Pursuant
to Article 79a(3), the State authority listed in paragraph (1) lifts
or reduces the seizure if such a measure is no more necessary, or it
is not necessary to maintain it at the given amount.
- Under
Article 79a(4) the owner of a bank account, whose assets are seized,
has the right to request at any time that the seizure be lifted or
reduced. A decision on such a request must be given without delay. If
the request is dismissed, the owner of the bank account can lodge a
new request that does not contain new reasons no sooner than 14 days
after the dismissal became final.
- Article
79a(5) provides that decisions adopted pursuant to paragraphs (1),
(3) and (4) may be appealed by a complaint.
THE LAW
- The
applicant company complained that the seizure of its financial assets
deposited in its bank accounts had infringed its property rights, in
breach of Article 1 of Protocol No. 1, which states:
“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 contested that argument.
A. Admissibility
- The
Government submitted that the application was premature since at the
time of lodging it there was a constitutional appeal of the applicant
company regarding the seizure pending before the Constitutional
Court.
- The
applicant company disputed this argument.
- The
Court reiterates that the only remedies which an applicant is
required to exhaust are those that relate to the breaches alleged and
which are at the same time available and sufficient. The existence of
such remedies must be sufficiently certain not only in theory but
also in practice, failing which they will lack the requisite
accessibility and effectiveness. Moreover, an applicant who has
exhausted a remedy that is apparently effective and sufficient cannot
be required also to have tried others that were available but
probably no more likely to be successful (see T.W. v. Malta
[GC], no. 25644/94, § 34, 29 April 1999).
- The Court notes that as regards the seizure and its
length to 23 February 2005, the applicant company pursued the
natural remedies in respect of a seizure, namely, it asked for the
seizure to be lifted, and pursued the subsequent refusals through the
courts, in accordance with the rules of domestic law, up to the
Constitutional Court. To that extent, the applicant company has
exhausted domestic remedies. As regards the continuing seizure beyond
that date, the Court notes that the applicant company again requested
the prosecutor to lift the seizure, and again pursued refusals
through the courts. The applicant company’s complaints in
respect of that period have been registered under application no.
38333/06, and do not fall to be considered in the present
application.
- The
Court therefore rejects the Government’s contention that the
applicant company has not exhausted domestic remedies.
- The
Court notes that the application is not manifestly ill-founded within
the meaning of Article 35 § 3 of the Convention. It further
notes that it is not inadmissible on any other grounds. It must
therefore be declared admissible.
B. Merits
- The
applicant company claimed in the present application that the seizure
of its assets deposited in its bank accounts was unreasonably long,
that there were unreasonable delays in the investigation by the
authorities and that the authorities had not presented any evidence
justifying the seizure.
- The
Government admitted that there had been an interference with the
applicant company’s property rights but maintained that it was
necessary for the efficient fight against organised crime and was
proportionate to that aim. The Government referred particularly to
the possibility of the applicant company at any time to petition the
authorities and courts, to terminate the seizure and maintained that
the length of the seizure had been necessitated by the complexity and
extensiveness of the investigation.
- The
Court recalls that Article 1 of Protocol No. 1, which guarantees in
substance the right of property, comprises three distinct rules. The
first, which is expressed in the first sentence of the first
paragraph and is of a general nature, lays down the principle of
peaceful enjoyment of property. The second rule, in the second
sentence of the same paragraph, covers deprivation of possessions and
makes it subject to certain conditions. The third, contained in the
second paragraph, recognises that the Contracting States are
entitled, among other things, to control the use of property in
accordance with the general interest. The second and third rules,
which are concerned with particular instances of interference with
the right to peaceful enjoyment of property, must be construed in the
light of the general principle laid down in the first rule (see
Immobiliare Saffi v. Italy [GC], no. 22774/93, § 44,
ECHR 1999 V).
- The
applicant company did not specify which rule should be used. The
Government maintained that the seizure was justified under the third
rule.
- The
Court notes that the seizure had the effect that the applicant
company could not dispose of the relevant parts of its bank accounts.
Consequently, the Court agrees with the Government that the seizure
constituted a control of the use of property and that the paragraph 2
of Article 1 of Protocol No. 1 is applicable (see Atanasov and
Ovcharov v. Bulgaria, no. 61596/00, § 74, 17 January
2008).
- The
Court reiterates that any control of the use of property by a public
authority should be lawful (see Iatridis v. Greece [GC],
no. 31107/96, § 58, ECHR 1999 II) and pursue a
legitimate aim (see Immobiliare Saffi, cited above, §
48).
- The
Court has no reason to doubt that the interference complained of was
in accordance with Czech law since it had a clear basis in the Code
of Criminal Procedure, in particular Article
79a thereof. Similarly, the Court notes that the impugned
measure was taken in the context of criminal investigation with a
suspicion that the assets have constituted a profit from criminal
activities of the accused manager. The purpose of fighting crime
undoubtedly falls within the general interest as envisaged in Article
1 of Protocol No. 1 (see Denisova and Moiseyeva
v. Russia, no. 16903/03, § 58, 1
April 2010).
- Lastly,
the Court recalls that an interference must strike a “fair
balance” between the demands of the general interest 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, and therefore also in its second
paragraph. There must be a reasonable relationship of proportionality
between the means employed and the aim pursued. In determining
whether this requirement is met, the Court recognises that the State
enjoys a wide margin of appreciation with regard both to choosing the
means of enforcement and to ascertaining whether the consequences of
enforcement are justified in the general interest for the purpose of
achieving the object of the law in question (see e.g.
Immobiliare Saffi v. Italy, cited above; Allan
Jacobsson v. Sweden (no. 1), 25 October 1989, § 55,
Series A no. 163 and AGOSI v. the United Kingdom, 24 October
1986, § 52, Series A no. 108).
- In
cases of wide margin of appreciation the Court will respect the State
authorities’ judgment as to what is in the general interest
unless that judgment is manifestly without reasonable foundation (see
Immobiliare Saffi, cited above, § 49 and
Antonopoulou and Others v. Greece,
no. 49000/06, § 57, 16 April 2009), or unless it is
devoid of reasonable foundation (see “Bulves” AD
v. Bulgaria, no. 3991/03, § 63, 22 January 2009 and
National & Provincial Building Society, Leeds
Permanent Building Society and Yorkshire Building Society v. the
United Kingdom, 23 October 1997, § 80, Reports 1997 VII).
- The
applicant company maintained that the seizure of its bank accounts
was disproportionate because of its unreasonable duration.
- The
Government maintained that the interference was necessary as there
was a reasonable suspicion that the assets originated in criminal
activities of the former manager of the applicant company and that it
was proportionate even considering its length due to the importance
of the general interest at stake and the very complex and extensive
nature of the crime that had to be investigated. The Government
further argued that a violation should be found only were the
procedure manifestly arbitrary or the duration of the seizure
manifestly unreasonable.
- The
Court notes that the interference had its origin in a measure of
prosecuting authorities in the context of investigating a serious
crime in the area of customs duty and tax evasions with a damage of
millions of euros. The crux of the interference concerns the
continuing assessment of a reasonable suspicion that the seized funds
originated in criminal activities. The national authorities are
clearly in a better position than the Court to evaluate these issues
because they have a direct access to the available evidence, which in
the present case included thousands of pages of documentary evidence,
hundreds of witnesses and transactions of several companies including
foreign and off-shore companies. Faced with such a complex
investigation it is up to the national authorities in the first place
to decide whether, and if so what, further investigatory measures are
necessary in order to effectively fight this type of serious and
carefully premeditated crime.
- Thus,
the Court considers that the above mentioned principles in its
case-law are fully applicable to the present case. The State
should in the present circumstances enjoy a wide margin of
appreciation and the Court must respect its judgment as to what is
necessary in the general interest unless that judgment is manifestly
unreasonable. Consequently, it is not the Court’s task to
conduct anew a full analysis of whether the interference was
proportionate given that the national authorities, especially the
Constitutional Court, themselves carried out an analysis of the
proportionality of the measure. The nature and scope of the Court’s
supervision, mindful of its subsidiary role, is thus to assess
whether the interference with the applicant company’s property
rights was manifestly unreasonable.
- The
Court notes in this regard that the accused Mr B. was at the material
time the sole manager and the sole shareholder of the applicant
company, that he remained sole shareholder until October 2008, and
that his successor in both positions was Mrs B., who appears to be
related to him. There was therefore a close nexus between Mr B. and
the applicant company, and it was not prima facie unreasonable
for the prosecutor to consider that the applicant company’s
accounts might be used for Mr B.’s
transactions. The Government argued that the investigation conducted
to January 2008 had led to the conclusion that the accused had
established the seized applicant company’s accounts
specifically for the purpose of covering up his criminal activities.
In view of the submissions of the parties, the Court has no reason to
hold that the prosecuting authorities’ suspicion about the
origin of the seized funds would be manifestly unreasonable.
- Yet,
a reasonable suspicion at the beginning of the investigation cannot
justify an indefinite interference with the applicant company’s
rights. The Court agrees with the applicant company that the ensuing
investigation must be sufficiently diligent and speedy so that the
interference lasts only a limited time. Thus it is the Court’s
task to evaluate whether in view of the conduct of the prosecuting
authorities the length of the seizure, namely three and a half years
(see paragraph 25 above), was manifestly unreasonable.
- The
Court notes that the Government referred to several objective factors
that complicated the investigation. According to the Government it
was first of all the nature and extent of the alleged crime covering
a total of 809 transactions involving an import of goods into the
Czech Republic. The Government further referred to the amount of
evidence that the prosecuting authorities had to collect and
evaluate, in particular over 100,000 pages of documentary evidence,
including several hundred purchase agreements, and the need to
examine several hundred witnesses, including persons of unknown
whereabouts. Moreover, the alleged criminal activities had been
conducted using over a dozen of companies some of them foreign and
off-shore and the police had requested legal assistance from the
competent authorities of 16 countries.
- The
applicant company nevertheless maintained that the prosecuting
authorities did not show a maximum diligence in their investigation
which was full of unnecessary delays and argued that some of the
above evidence taking, including interviewing homeless persons, was
unnecessary and irrelevant to the charges of the accused manager.
- The
Court reiterates that it is not its role to evaluate whether the
Czech prosecuting authorities conducted the investigation with
maximum possible diligence but only to assess whether the length of
the investigation was so unreasonable as not to be compatible with
Article 1 of Protocol no. 1. Similarly it is not its task
to assess whether some of the evidence gathering of the national
authorities was irrelevant to the case unless the irrelevance were
manifest.
- In
this regard the Court is satisfied that the extent of the
investigation was indeed considerable. As the above information
suggests the prosecuting authorities were faced with an alleged crime
that was highly sophisticated and extensive. It was suspected that
the alleged perpetrators used an international network of numerous
companies in several countries to conduct their financial operations
and cover their crimes. The Court notes that faced with such a
complexity the prosecuting authorities far from remaining passive
actually collected extensive evidence, heard dozens of witnesses and
contacted many countries with requests for assistance in the matter.
- The
Court is unable to reach a conclusion that interviewing the homeless
persons would be manifestly irrelevant to the case. The Government
argued that the accused paid them to conclude fictitious sale
agreements. Such practice is not unknown and the prosecuting
authorities could have reasonably assumed that these testimonies were
important to prove the guilt of the accused.
- The
Court is of the same opinion regarding the applicant company’s
argument that it should have been sufficient for the prosecuting
authorities to review the financial documents of the applicant
company in order to determine whether the seized funds originated in
criminal activities. The Court reiterates that it is primarily for
the national authorities to choose the best way of conducting
criminal investigations. As pointed out by the Government the amount
of documentary evidence to be assessed was vast. Moreover the
Government maintained that the crux of the alleged criminal
activities lay in falsifying accounting and customs documents and
thus it was necessary first to verify the authenticity and validity
of all the seized documents and the data included therein.
- The
Court further notes that at any given time the applicant company had
at its availability an effective remedy, which included access to
courts, by which it could challenge the continuing seizure of its
bank accounts. Thus the present case is materially different from
those cases as Immobiliare Saffi, cited above, or Denisova
and Moiseyeva, cited above,
where the Court found a violation of Article 1 of Protocol
No. 1 on the ground, inter alia, that the applicants did not
have access to an effective remedy regarding the interference with
their property rights (Immobiliare Saffi, cited above, §
56 and Denisova and Moiseyeva, cited
above, § 64).
- Thus,
in view of the complexity and extent of the investigation the Court
does not consider that the length of the investigation into Mr B.,
who had close links with the applicant company, and thus the seizure
of the applicant company’s assets until 23 February 2005, was
manifestly unreasonable. For the same reasons the judgment of the
Constitutional Court of 23 February 2005 that the interference was
still proportionate cannot be held to be manifestly unreasonable.
- The
foregoing considerations are sufficient to enable the Court to
conclude that there has been no violation of Article 1 of Protocol
No. 1 to the Convention.
FOR THESE REASONS, THE COURT UNANIMOUSLY
- Declares the application admissible;
- Holds that there has been no violation of
Article 1 of Protocol No. 1 to the Convention.
Done in English, and notified in writing on 21 October 2010, pursuant
to Rule 77 §§ 2 and 3 of the Rules of Court.
Claudia Westerdiek Peer Lorenzen
Registrar President
