In the case of OAO Neftyanaya Kompaniya Yukos v. Russia,
The European Court of Human Rights (First Section), sitting as a Chamber composed of:
Christos Rozakis, President,
Nina Vajić,
Khanlar Hajiyev,
Dean Spielmann,
Sverre Erik Jebens,
Giorgio Malinverni, judges,
Andrey Bushev, ad hoc judge,
and Søren Nielsen, Section Registrar,
Having deliberated in private on 24 June 2011,
Delivers the following judgment, which was adopted on that date:
(...)
A. The
complaints about the Tax Assessments 2000-2003
(...)
1. Compliance
with Article 1 of Protocol No. 1
(a) Whether
the Tax Assessments 2000-2003 complied with the Convention requirement of
lawfulness
(...)
i. The
allegation that the prosecution for the alleged tax evasion during the year
2000 was time-barred
α. The
applicant company’s submissions
561. The applicant company complained that in the Tax
Assessment proceedings for the year 2000 the domestic courts had failed to
apply the three-year statutory time-bar set out in Article 113 of the Tax Code.
Since the relevant claims by the Ministry had been time-barred by virtue of
Article 113 of the Tax Code, the Tax Assessment 2000 had been unlawful,
unforeseeable and retroactive in the light of the decision of the
Constitutional Court of 14 July 2005. It also noted that this domestic
provision applied to tax assessments proceedings in general and not just to
fines and that the doubling of the fines for the year 2001 had also been
unlawful.
β. The
Government’s submissions
562. The Government disagreed. They underlined that the
issue only concerned the fines for the year 2000, and not reassessed taxes or
surcharges. They argued that the decision of the Constitutional Court of 14 July
2005 had simply confirmed the proper application of Article 113 of the Tax Code
for all taxpayers, that it explained the meaning of this norm, that this
meaning had been in line with international practice and that it had not been
aimed at the applicant individually. The Government also stated that the
decision had concerned the specific situation of a bad-faith tax evasion where
a taxpayer hinders and obstructs tax inspections, and also relied on examples
from foreign jurisdictions, where specific rules apply to taxpayers in such
situations. They quoted certain Russian cases where the courts applied the
Constitutional Court’s ruling in a manner similar to that in the applicant
company’s case and also referred to the Court’s judgment in the case of National & Provincial
Building Society, Leeds
Permanent Building Society and Yorkshire Building Society v. the UK.
They also noted that the three-year time-limit had not been particularly long
and that in other countries time-limits were even longer.
γ. The
Court’s assessment
563. The
Court finds at the outset that this grievance concerns the outcome of the Tax
Assessment proceedings for the year 2000 only in the part concerning the
imposition of penalties, since Article 113 of the Tax Code which provided for
the time-limit in question, only applied to the collection of fines (see
paragraph 403) and that no similar Convention issues arise in respect of the
collection of additional taxes and interest payments (see paragraph 404). The Court further notes that Article 113 of the Tax Code provided
for a three year time-limit for holding a taxpayer liable and that this period
ran from the first day after the end of the relevant tax term. According to the
practice directions of the Supreme Court dated 28 February 2001, the
moment at which a taxpayer was held liable within the meaning of Article 113 of
the Tax Code was the date of the relevant decision of the tax authority (see
paragraph 405 and 406).
564. On the facts, such a decision in connection with the
company’s activities in the year 2000 was adopted on 14 April 2004 (see
paragraph 21), which was clearly outside the above-mentioned three year
time-limit. In response to the argument raised by the applicant company during
the court proceedings, the lower courts decided that the rules on a statutory
time-bar were inapplicable because the applicant company had been acting in bad
faith (see paragraph 49). Thereafter the supervisory review instance decided that such an
interpretation of the rules on the statutory time-limits had not been in line
with the existing legislation and case-law (see paragraph 80) and referred the issue to the Presidium of the Supreme Commercial
Court, which, in turn, referred it to the Constitutional Court (see paragraph 81).
565. Having initially refused to consider the applicant
company’s individual complaint concerning the same issue (see paragraphs 76 and 77), the Constitutional Court accepted the reference from the
Presidium of the Supreme Commercial Court and on 14 July 2005 gave a decision
in which it disagreed with the lower courts (see paragraphs 82-88), noting that the rules on the limitation period should apply in
any event and that, exceptionally, if a taxpayer impeded the inspections by the
tax authorities, and thereby delayed the adoption of the relevant decision, the
running of the time-limit could be suspended by the adoption of a tax audit
report setting out the circumstances of the tax offence in question and
referring to the relevant articles of the Tax Code. Thereafter the case was
referred back to the Presidium of the Supreme
Commercial Court which applied this interpretation
to conclude that the applicant company had been actively impeding the tax
inspections (see paragraphs 17 and 90). Since the audit report in respect of the year 2000 had been
adopted and served on 29 December 2003, the court decided that the
Ministry’s claims for 2000 had been brought on time. The Court notes that the
Constitutional Court’s decision of 14 July 2005 resulted in a change in the
interpretation of the relevant rules on the statutory time-limits of the
proceedings. Accordingly, an issue arises as to whether such a change was
compatible with the requirement of lawfulness of Article 1 of
Protocol No. 1.
566. In making its assessment the Court will take into
account its previous finding that the 2000 Tax Assessment proceedings were
criminal in character (see OAO Neftyanaya
kompaniya Yukos (dec.), cited above, § 453) and will also bear in mind
that the change in question concerned the collection of fines for intentional
evasion of tax. In this connection, it would again reiterate that the third
rule of this Convention provision explicitly reserves the right of Contracting
States to pass “such laws as they may deem necessary to secure the payment of
taxes” which means that the States are afforded an exceptionally wide margin of
appreciation in this sphere (see Tre Traktörer AB v. Sweden, 7 July 1989, §§ 56-63, Series A
no. 159).
567. The Court reiterates the principle, contained primarily
in Article 7 of the Convention but also implicitly in the notion of the rule of
law and the requirement of lawfulness of Article 1 of Protocol No. 1, that only
law can define a crime and prescribe a penalty. While it prohibits, in
particular, extending the scope of existing offences to acts which previously
were not criminal offences, it also lays down the principle that the criminal
law must not be extensively construed to an accused’s detriment, for instance
by analogy. It follows that offences and the relevant penalties must be clearly
defined by law. This requirement is satisfied where the individual can know
from the wording of the relevant provision and, if need be, with appropriate legal
assistance, what acts and omissions will make him criminally liable (see Coëme and Others v. Belgium, nos. 32492/96, 32547/96, 32548/96, 33209/96 and 33210/96, §§ 145-146,
ECHR).
568. Furthermore, the term “law” implies qualitative
requirements, including those of accessibility and foreseeability (see, among
other authorities, Cantoni v. France, 15 November 1996, § 29, Reports of Judgments and Decisions 1996‑V;
and E.K. v. Turkey,
no. 28496/95, § 51, 7 February 2002). These
qualitative requirements must be satisfied as regards both the definition of an
offence and the penalty the offence in question carries (see Achour v. France [GC], no.
67335/01, § 41, ECHR 2006‑IV). The Court has
acknowledged in its case-law that however clearly drafted a legal provision may
be, in any system of law, including criminal law, there is an inevitable element
of judicial interpretation. There will always be a need for elucidation of
doubtful points and for adaptation to changing circumstances. Again, whilst
certainty is highly desirable, it may bring in its train excessive rigidity and
the law must be able to keep pace with changing circumstances. Accordingly,
many laws are inevitably couched in terms which, to a greater or lesser extent,
are vague and whose interpretation and application are questions of practice
(see, mutatis mutandis, Sunday Times v. the United
Kingdom (no. 1), 26 April 1979, § 49, Series A no. 30
and Kokkinakis v. Greece, 25 May
1993, § 40, Series A no. 260‑A). The role of
adjudication vested in the courts is precisely to dissipate such
interpretational doubts as remain (see Cantoni, cited above, § 29).
569. Thus, the requirement of lawfulness cannot be read as
outlawing the gradual clarification of the rules of criminal liability through
judicial interpretation from case to case, “provided that the resultant development
is consistent with the essence of the offence and could reasonably be foreseen”
(see Kafkaris v. Cyprus
[GC], no. 21906/04, § 141, ECHR 2008‑...).
570. The Court previously defined limitation as the
statutory right of an offender not to be prosecuted or tried after the lapse of
a certain period of time since the offence was committed. Limitation periods,
which are a common feature of the domestic legal systems of the Contracting
States, serve several purposes, which include ensuring legal certainty and
finality and preventing infringements of the rights of defendants, which might
be impaired if courts were required to decide on the basis of evidence which
might have become incomplete because of the passage of time (see Stubbings and Others v. the United Kingdom, 22 October 1996, § 51, Reports 1996‑IV).
571. Turning to the facts of the case, the Court would note
firstly that the rule which, in the present case, underwent changes as a result
of the decision of 14 July 2005, was contained in Article 113 of Chapter 15
“General provisions concerning the liability for tax offences” of the Tax Code
(see paragraph 403) and thus formed a part of the domestic substantive law. Even though
the rule in itself did not describe the substantive elements of the offence and
the applicable penalty, it nevertheless constituted a sine qua non condition with which the authorities had to comply in
order to be able to prosecute the relevant taxpayers in connection with the
alleged tax offences. Accordingly, Article 113 of the Tax Code defined a crime
for the purposes of the Court’s analysis of lawfulness. It remains to be determined
whether in the circumstances the decision of 14 July 2005 could be seen as a
gradual clarification of the rules on criminal liability which “[was] consistent with the essence of the offence and could
reasonably be foreseen” (see Kafkaris,
cited above, § 141).
572. In this connection the Court may accept that the change
in question did not change the substance of the offence. The Constitutional Court
interpreted the existing rules on time-limits in relation to taxpayers who
acted abusively. At the same time, the Court is not persuaded that the change in
question could have been reasonably foreseen.
573. It observes that the decision of 14 July 2005 had
changed the rules applicable at the relevant time by creating an exception from
a rule which had had no previous exceptions (see paragraphs 86 and 88). The decision represented a reversal and departure from the
well-established practice directions of the Supreme Commercial Court (see, by
contrast, Achour, cited
above, § 52) and the Court finds no indication in the
cases submitted by the parties suggesting a divergent practice or any previous difficulty
in connection with the application of Article 113 of the Tax Code at the
domestic level (see paragraphs 407-408). Although the previous jurisprudence of the Constitutional Court contained some
general references to unfavourable legal consequences which taxpayers acting in
bad faith could face in certain situations, these indications, as such, were
insufficient to provide a clear guidance to the applicant company in the
circumstances of the present case.
574. Overall, notwithstanding the State’s margin of
appreciation in this sphere, the Court finds that there has been a violation of
Article 1 of Protocol No. 1 on account of the change in interpretation of the
rules on the statutory time-bar resulting from the Constitutional Court’s
decision of 14 July 2005 and the effect of this decision on the outcome of
the Tax Assessment 2000 proceedings.
575. Since the applicant company’s conviction under Article
122 of the Tax Code in the 2000 Tax Assessment proceedings laid the basis for
finding the applicant company liable for a repeated offence with a 100%
increase in the amount of the penalties due in the 2001 Tax Assessment
proceedings, the Court also finds that the 2001 Tax Assessment in the part
ordering the applicant company to pay the double fines was not in accordance
with the law, as required by Article 1 of Protocol No. 1.
(Due to the above clear and precise Court's assessment in the OAO Neftyanaya Kompaniya YUKOS v. Russia judgement, the Court's majority opinion in VEGOTEX clearly -in our opinion- departs from such precedent without any reference to it and, as stated by the partly dissentig opinion however not invoking YUKOS either, "contradicts existing case law, restoring criminal liability for an offence that has become time-barred (...) and it makes no difference whether criminal liability is restored by means ofa legislative intervention, as in the present case, or by means of a change in the case-law.". As it clearly was in the YUKOS case, we must add.
We can not find any valid reason for the omission by both the majority and dissenting opinions of the Court's assessment in YUKOS. Furthermore, we are of the opinion that an article 1 (Protocol 1) complaint in the VEGOTEX case should have affected not only the tax penalties (under article 7) but also the time-barred taxes. Although such violation was referred to as an article 6 infringement in VEGOTEX, this article was also considered in the YUKOS judgement.
None of the Court's judges in Yukos remained as judges in VEGOTEX)
