European Court of Human Rights

FIFTH SECTION

CASE OF LTD BEQANASI v. GEORGIA

(Application no. 28407/19)

JUDGMENT
 

STRASBOURG

11 July 2024

This judgment is final but it may be subject to editorial revision.

In the case of Ltd Beqanasi v. Georgia,

The European Court of Human Rights (Fifth Section), sitting as a Committee composed of:

 Stéphanie Mourou-Vikström, President,
 Lado Chanturia,
 Mykola Gnatovskyy, judges,
and Martina Keller, Deputy Section Registrar,

Having regard to:

the application (no. 28407/19) against Georgia lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms ("the Convention") on 23 April 2019 by Beqanasi Ltd., a company registered in Lissi, Georgia ("the applicant company"), which was represented by Ms T. Oniani, Mr D. Javakhishvili, and Ms M. Tchikadze, lawyers practising in Tbilisi;

the decision to give notice of the complaint under Article 1 of Protocol No. 1 to the Georgian Government ("the Government"), represented by their Agent, Mr B. Dzamashvili of the Ministry of Justice, and to declare the remainder of the application inadmissible;

the parties' observations;

Having deliberated in private on 20 June 2024,

Delivers the following judgment, which was adopted on that date:

SUBJECT MATTER OF THE CASE

1.  The case concerns, under Article 1 of Protocol No. 1, the confiscation by the State of a tractor belonging to the applicant company which had been classified as "an instrument of crime".

1. Administrative offence proceedings

2.  On 27 July 2018, a magistrate judge from the Mtskheta District Court, acting at the request of the Department for the Supervision of Environmental Protection ("the Ministry of Environment"), found the applicant company liable, in administrative offence proceedings, for exploiting natural resources without a valid permit (specifically, using the tractor outside the territory covered by its permit ) and ordered it to pay a fine of 1000 Georgian Laris ("GEL") (approximately 350 euros (EUR)) and an additional sum of GEL 201 (approximately EUR 70) as compensation for the damage the applicant company had caused to the environment.

3.  On 13 September 2018, on appeal by the State, the Tbilisi Court of Appeal remitted the case to the Mtskheta District Court. By a decision of 5 October 2018, a magistrate judge ordered, in addition to payment of the fine and compensation, that the applicant company's tractor (bought for 54,560 United States dollars (approximately EUR 49,087) in 2011) be confiscated. The magistrate judge ruled that under Article 571 of the Code of Administrative Offences ("the CAO") any object classified as an instrument of crime was subject to compulsory confiscation (see paragraph 8 below).

4.  On 29 November 2018 the Tbilisi Court of Appeal upheld the first-instance judgment. The appellate court noted that Article 571 of the CAO provided for blanket confiscation of all instruments of crime. No right of appeal lay against the above decision.

5.  The applicant company complained under Article 1 of Protocol No. 1 that the confiscation of its tractor had been a disproportionate measure.

2. Constitutional proceedings

6.  On 30 December 2019 the applicant company lodged a constitutional complaint with the Constitutional Court, arguing that Article 571 of the CAO did not comply with Article 19 §§ 1 and 2 of the Constitution (the right to property). It alleged, inter alia, that the compulsory nature of confiscation as provided for in Article 571 of CAO was unconstitutional inasmuch as it prevented the courts from conducting a balancing exercise between public and private interests in the light of the individual circumstances of each and every case. Moreover, the inability to individualise the administrative sanction ran counter to the proportionality principle embodied in the right to property, as envisaged in the Constitution and in the Convention.

7.  On 12 November 2020 the Constitutional Court granted the above-mentioned constitutional complaint, declaring the normative content of Article 571 of the CAO unconstitutional. It found, among other points, that the compulsory nature of confiscation was problematic because it did not allow for consideration of the individual circumstances of a case or for the application of individualised and proportionate sanctions.

RELEVANT LEGAL FRAMEWORK

8.  The relevant provisions of the Code of Administrative Offences of Georgia ("the CAO"), as in force at the material time, read as follows:

"Article 29. Confiscation of items which served as an instrument of or a direct object of an administrative offence

1.The confiscation of an item which served as an instrument for the commission of an administrative offence ... means its mandatory and free transfer into the State's possession. Unless otherwise provided for by the legislative acts of Georgia, only those items which are owned by an offender shall be confiscated.

..."

"Article 571. Exploitation of mineral resources without a permit

1. Exploitation of mineral resources without a valid license, shall be subject to a fine of 1,000 to 1,500 Georgian Lari, and shall result in the confiscation of the instrument of the offence ..."

THE COURT'S ASSESSMENT

1. ALLEGED VIOLATION OF ARTICLE 1 of protocol no. 1 to THE CONVENTION

9.  The Court dismisses the Government's argument that the applicant company should have claimed damages from the tractor driver responsible for the incident. It notes in this respect that the gist of the applicant company's complaint pertained to the compulsory nature of the confiscation of its property by the State authorities, and not to the imposition of the fine and/or the compensation for the damage caused as a result of the driver's actions (see Andonoski v. the former Yugoslav Republic of Macedonia, no. 16225/08, §§ 23-24, 17 September 2015, and B.K.M. Lojistik Tasimacilik Ticaret Limited Sirketi v. Slovenia, no. 42079/12, § 50, 17 January 2017, with further references).

10.  As to the second limb of the Government's non-exhaustion objection, which concerned the possibility of the applicant company to complain before the Constitutional Court in parallel and not after the finalisation of the administrative offence proceedings, the Court points out that it has already examined, in previous cases against Georgia, the effectiveness of the individual constitutional complaint for the purposes of Article 35 of the Convention and concluded that the Constitutional Court could not be considered an effective remedy which the applicants had been required to pursue (see A.D. and Others v. Georgia, nos. 57864/17 and 2 others, § 50, 1 December 2022, with further references). There is no reason to hold otherwise in the present case.

11.  The Court further notes that this complaint is not manifestly ill-founded within the meaning of Article 35 § 3 (a) of the Convention, nor is it inadmissible on any other grounds. It must therefore be declared admissible.

12.  The relevant general principles have been summarised in B.K.M. Lojistik Tasimacilik Ticaret Limited Sirketi v. Slovenia (no. 42079/12, §§ 35-38, 17 January 2017; see also Markus v. Latvia, no. 17483/10, §§ 64-67, 11 June 2020).

13.  It is not in dispute that the confiscation of the applicant company's property constituted an interference with its rights under Article 1 of Protocol No. 1. Furthermore, it was based on Article 571 of the CAO, that is, it was provided for by law. The applicant company challenges the Government's argument that the confiscation of the tractor, in the circumstances of the present case, had the legitimate aim of protecting the environment. The Court does not find it necessary to examine the above question, as the impugned confiscation was in violation of Article 1 of Protocol No. 1 for other reasons.

14.  The Court refers to the judgment of the Constitutional Court, which found that the normative reading of Article 571 of the CAO concerning the compulsory nature of the confiscation was unconstitutional, inasmuch as it did not allow for a balancing exercise to be carried out between the various interests at stake or for the assessment of the proportionality of the interference (see paragraph 7 above). The Court has similarly found, albeit in different but comparable contexts, that the mandatory nature of a confiscation measure in the form of a sanction is in itself incapable of ensuring the requisite fair balance between the requirements of the general interest and the protection of an individual's right to property and deprives the applicants concerned of any possibility of arguing their cases or of any prospect of success (see Andonoski, cited above, §§ 37-38, and B.K.M. Lojistik Tasimacilik Ticaret Limited Sirketi, cited above, §§ 44-49; see also G.I.E.M. S.r.l. and Others v. Italy [GC], nos. 1828/06 and 2 others, § 303, 28 June 2018; Gyrlyan v. Russia, no. 35943/15, §§ 31-33, 9 October 2018; and Krayeva v. Ukraine, no. 72858/13, §§ 30-33, 13 January 2022). The Court sees no reason to find otherwise in the present case.

15.  By virtue of Article 571 of the CAO as in force at the material time, confiscation of an instrument of crime was compulsory in nature. The lack of any discretion in that regard left no room for the national courts to undertake an assessment of individual situations, rendering any such assessment futile. The Court reiterates that in order to be proportionate, an interference must correspond to the severity of the infringement, and the sanction to the gravity of the offence it is designed to punish - in the present case, failure to comply with the terms of the permit. The harm that the applicant company had caused to the environment was minor (EUR 70, see paragraph 1 above), while the harm sustained on account of confiscation of the tractor, which had cost EUR 49,087, was undoubtedly substantial for the applicant company. Moreover, the confiscation measure was applied in addition to the pecuniary compensation for the damage sustained by the State (see ibid.). In view of those circumstances and noting that the assessment of proportionality was excluded from the domestic decisions, the Court finds that the requirement of striking a "fair balance", inherent in the second paragraph of Article 1 of Protocol No. 1, was not met.

16.  There has accordingly been a violation of Article 1 of Protocol No. 1 to the Convention.

2. APPLICATION OF ARTICLE 41 OF THE CONVENTION

17.  The applicant company claimed, in respect of pecuniary damage, EUR 49,087, as the value of the tractor, and EUR 64,232 on account of lost earnings.

18.  The Government maintained that the applicant company had failed to lodge a civil claim against the driver of the tractor. As for the lost earnings, the amount claimed was, in their view, unsubstantiated.

19.  The Court reiterates that the principle with regard to pecuniary damage is that the applicant should be placed as far as possible in the position in which he or she would have been had the violation found not taken place - in other words, restitutio in integrum. This can involve compensation for both loss actually suffered (damnum emergens) and loss, or diminished gain, to be expected in the future (lucrum cessans). It is for the applicant to show that pecuniary damage has resulted from the violation or violations alleged (see G.I.E.M. S.r.l. and Others v. Italy (just satisfaction) [GC], nos. 1828/06 and 2 others, §§ 37-39, 12 July 2023).

20.  In so far as the estimation of the pecuniary damage is concerned, the Court considers that the applicant company's reference to the price indicated in the 2011 purchase contract (see paragraph 3 above) should not be taken into consideration, as the damage should be determined with reference to the period of time when the confiscation took place, that is in 2018.

21.  The Court further considers that the restoration of the tractor, in the same condition as it was in at the time of confiscation, would place the applicant company in the position in which it would have found itself had the violation not occurred. In the alternative, if such restoration is impossible, the applicant company should receive adequate compensation. Concerning the applicant company's claim for loss of income, the Court, having regard to the documents in its possession, rejects it as unsubstantiated.

FOR THESE REASONS, THE COURT, UNANIMOUSLY,

1. Declares the application admissible;
2. Holds that there has been a violation of Article 1 of Protocol No. 1 to the Convention;
3. Holds

(a)  that the respondent State is to return to the applicant company, within three months from the date on which the judgment becomes final in accordance with Article 44 § 2 of the Convention, the confiscated tractor in the same condition as it was in at the time of the confiscation;

(b)  that, failing such restitution, the respondent State is to pay the applicant company, within the same three-month period, adequate compensation;

(c)  that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amount at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points;

4. Dismisses the remainder of the applicant company's claim for just satisfaction.

Done in English, and notified in writing on 11 July 2024, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.

 Martina Keller Stéphanie Mourou-Vikström
 Deputy Registrar President