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You are here: BAILII >> Databases >> European Court of Human Rights >> HENTRICH v. FRANCE - 13616/88 [1994] ECHR 29 (22 September 1994)
URL: http://www.bailii.org/eu/cases/ECHR/1994/29.html
Cite as: [1994] ECHR 29, (1994) 18 EHRR 440, 18 EHRR 440
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In the case of Hentrich v. France*,
The European Court of Human Rights, sitting, in accordance with
Article 43 (art. 43) of the Convention for the Protection of Human
Rights and Fundamental Freedoms ("the Convention") and the relevant
provisions of the Rules of Court, as a Chamber composed of the
following judges:
Mr R. Ryssdal, President,
Mr F. Gölcüklü,
Mr L.-E. Pettiti,
Mr J. De Meyer,
Mr N. Valticos,
Mr S.K. Martens,
Mr A.B. Baka,
Mr L. Wildhaber,
Mr J. Makarczyk,
and also of Mr M.-A. Eissen, Registrar, and Mr H. Petzold, Deputy
Registrar,
Having deliberated in private on 24 February and
25 August 1994,
Delivers the following judgment, which was adopted on the
last-mentioned date:
_______________
* Note by the Registrar. The case is numbered 23/1993/418/497. The
first number is the case's position on the list of cases referred to
the Court in the relevant year (second number). The last two numbers
indicate the case's position on the list of cases referred to the Court
since its creation and on the list of the corresponding originating
applications to the Commission.
_______________
PROCEDURE
1. The case was referred to the Court by the European Commission
of Human Rights ("the Commission") on 12 July 1993, within the
three-month period laid down by Article 32 para. 1 and Article 47
(art. 32-1, art. 47) of the Convention. It originated in an
application (no. 13616/88) against the French Republic lodged with the
Commission under Article 25 (art. 25) by a French national,
Mrs Liliane Hentrich, on 14 December 1987.
The Commission's request referred to Articles 44 and 48
(art. 44, art. 48) and to the declaration whereby France recognised the
compulsory jurisdiction of the Court (Article 46) (art. 46). The
object of the request was to obtain a decision as to whether the facts
of the case disclosed a breach by the respondent State of its
obligations under Articles 6 paras. 1 and 2, 13 and 14 (art. 6-1,
art. 6-2, art. 13, art. 14) of the Convention and Article 1 of
Protocol No. 1 (P1-1).
2. In response to the enquiry made in accordance with
Rule 33 para. 3 (d) of the Rules of Court, the applicant stated that
she wished to take part in the proceedings and designated the lawyer
who would represent her (Rule 30).
3. The Chamber to be constituted included ex officio
Mr L.-E. Pettiti, the elected judge of French nationality (Article 43
of the Convention) (art. 43), and Mr R. Ryssdal, the President of the
Court (Rule 21 para. 3 (b)). On 25 August 1993, in the presence of the
Registrar, the President drew by lot the names of the other seven
members, namely Mr F. Gölcüklü, Mr J. De Meyer, Mr N. Valticos,
Mr S.K. Martens, Mr A.B. Baka, Mr L. Wildhaber and Mr J. Makarczyk
(Article 43 in fine of the Convention and Rule 21 para. 4) (art. 43).
4. As President of the Chamber (Rule 21 para. 5), Mr Ryssdal,
acting through the Registrar, consulted the Agent of the French
Government ("the Government"), the applicant's lawyer and the Delegate
of the Commission on the organisation of the proceedings
(Rules 37 para. 1 and 38). Pursuant to the order made in consequence,
the Registrar received the applicant's and the Government's memorials
on 20 and 23 December 1993 respectively. On 6 January 1994 the Deputy
Secretary to the Commission informed the Registrar that the Delegate
would submit his observations at the hearing.
5. In accordance with the President's decision, the hearing took
place in public in the Human Rights Building, Strasbourg, on
22 February 1994. The Court had held a preparatory meeting beforehand.
There appeared before the Court:
(a) for the Government
Miss M. Picard, magistrat, on secondment to the
Department of Legal Affairs,
Ministry of Foreign Affairs, Agent,
Mr J.-M. Sommer, Head of the Office of
Real Property Law, Department of Civil Affairs,
Ministry of Justice,
Mr E. Bourgoin, Chief Inspector of Taxes,
Department of Revenue, Ministry of the Budget, Counsel;
(b) for the Commission
Mr A. Weitzel, Delegate;
(c) for the applicant
Mr G. Alexandre, avocat, Counsel.
The Court heard addresses by Miss Picard, Mr Bourgoin,
Mr Weitzel and Mr Alexandre, and also replies to questions put by it
and by one of its members.
The Government and the applicant filed various documents at the
hearing.
AS TO THE FACTS
I. The circumstances of the case
6. Mrs Liliane Hentrich, who is a French national, lives in
Strasbourg.
7. On 11 May 1979 she and her husband, Mr Wolfgang Peukert, bought
6,766 square metres of land in Strasbourg for a total sum of
150,000 French francs (FRF). Further building was not permitted on the
land, which was entered in the land register in several different
parcels: 2,126 sq. m of land, 406 sq. m of ground, house and
appurtenant buildings, 130 sq. m of ground and cowshed, 2,353 sq. m of
garden, ground and shed, and 1,751 sq. m of garden.
8. The sale was concluded on the condition precedent that the
SAFER (Regional Development and Rural Settlement Corporation) of Alsace
did not exercise its right of pre-emption over the property within two
months. The main tax office at Molsheim registered the sale on payment
of duties, firstly on 28 May 1979 and then on 13 August 1979, when the
sale took effect on expiry of the statutory time allowed for the SAFER
to exercise its right, which it had not done.
A. The pre-emption
9. On 5 February 1980 Mrs Hentrich and her husband were notified
by a bailiff of the following decision:
"As [the Commissioner of Revenue] considers the sale price
declared in the contract of sale ... to be too low, he is
exercising, for the benefit of the Treasury and with all the
effects it entails, the right of pre-emption provided for in
Article 668 of the General Tax Code over all the real property
and appurtenant rights [acquired by them] ... [the
Commissioner of Revenue] offers to pay [the buyers] or any
other rightful claimant
(a) the price specified in the contract of sale,
(b) the ten per cent premium provided for in law, and
(c) the costs and fair expenses of the contract on production
of all the appropriate vouchers."
B. The challenging of the pre-emption in the courts
1. The proceedings in the Strasbourg tribunal de grande
instance
10. On 31 March 1980 the applicant and her husband instituted
proceedings in the Strasbourg tribunal de grande instance against the
Commissioner of Revenue for the département of Bas-Rhin. They sought
to have the pre-emption set aside on the grounds that the time-limit
for exercising the right had not been complied with, the notification
had been null and void (this ground was not pursued at the hearing) and
there had been a misuse of powers and a breach of the Convention and
of Protocol No. 1. In the alternative, they applied for an assessment
by a court expert of the market value of the property in issue and an
examination of the sellers.
11. The tribunal de grande instance gave judgment against them on
16 December 1980. It ruled that the time allowed for exercising the
right of pre-emption had begun to run on 13 August 1979 and it held
that the State could not be blamed for not having exercised its right
of pre-emption so long as the sale had not taken effect and was subject
to the condition precedent.
12. It rejected the complaints based on the Convention in the
following terms:
"As to the breach of the Convention ... allegedly
constituted by the right of pre-emption in Art. 668 of the GTC
[General Tax Code]
...
If the Court were to conclude on that account that
Article 668 GTC conflicted with the provisions of the Human
Rights Convention, [the plaintiffs] could legitimately
maintain that the French courts must in future refuse to apply
Article 668 GTC.
...
[The plaintiffs] began by arguing that Article 668 GTC was
blatantly inconsistent with Article 1 para. 1 of the Protocol
to the Convention (P1-1), which provides that every natural or
legal person is entitled to the peaceful enjoyment of his
possessions and that no one shall be deprived of his
possessions except in the public interest.
But the Article referred to has a second paragraph, which
provides: 'The preceding provision shall not, however, in any
way impair the right of a State to enforce such laws as it
deems necessary ... to secure the payment of taxes ...'
It so happens that the French State, faced with tax evasion
on an increasingly large scale, has felt obliged to enact the
provisions of Article 668 GTC.
By means of that Article the State hopes to ensure proper
payment of the duties levied on contracts of sale.
The impugned enactment is therefore not inconsistent with
the provisions relied on.
[The plaintiffs] went on to argue that Article 668 fell foul
of Article 6 para. 2 (art. 6-2) of the Convention ..., which
provides that everyone charged with a criminal offence shall
be presumed innocent until proved guilty according to law;
that the exercise of the right of pre-emption by the Revenue
was a penalty for a 'presumed offence of tax evasion'; and
that they were therefore regarded, by the very fact of the
right of pre-emption having been exercised, as tax evaders
with all that that implies in the way of disgrace and without
their having any possibility of exculpating themselves.
Article 668, however, states that the Revenue may exercise
a right of pre-emption over property sold at a price it
considers too low.
It is therefore not necessary to prove tax evasion before
this provision can be applied.
It is sufficient for the price to appear to the Revenue to
be too low without its having to determine the reason why it
is too low, which may in fact have nothing to do with tax
evasion (e.g. ignorance of the real value or kindness).
Admittedly, the provision was enacted solely to counter tax
evasion, but those to whom it is applied are nevertheless not
necessarily tax evaders and cannot be regarded as such; no
penalty is imposed on them and the State even pays them 10%
more than the price they paid.
This 10% premium has been provided for precisely because it
may inadvertently happen that the right of pre-emption is
applied in cases where there has been no attempt to evade tax
by the persons concerned.
[The plaintiffs] are therefore wrong to regard themselves as
disgraced and as having been punished for committing tax
evasion.
[The plaintiffs] also alleged a breach of Article 6 para. 1
(art. 6-1) of the Convention ..., which lays down that a
punishment can be imposed only after a hearing of the person
whose rights are disputed or who is charged with a criminal
offence.
But Article 668 GTC in no way disputes the rights of anyone
who has acquired a property and the purchaser is not charged
with any offence.
The provision merely confers a privilege on the State for
the purpose of ensuring that taxes are paid.
It is therefore not necessary, as [the plaintiffs]
maintained, to allow them to prove that they paid the proper
price and did not conceal any payment.
Lastly, [the plaintiffs] asserted that they were the victims
of a discriminatory measure prohibited by Article 14 (art. 14)
of the Convention ...; and
that the measure was discriminatory in relation to other
buyers of neighbouring properties at almost identical prices,
against whom the Revenue had not exercised its right of
pre-emption.
But the Revenue has complete freedom to exercise its right
of pre-emption as it wishes.
There is no evidence before the Court to support the
contention that the State was influenced by considerations of
race, nationality, language, political opinion or any of the
other criteria referred to in Article 14 (art. 14) of the
Convention.
..."
2. The proceedings in the Colmar Court of Appeal
13. The applicant and her husband appealed to the Colmar Court of
Appeal on 23 January 1981. On 4 December 1981 the judge responsible
for preparing the case for trial directed them to make their
submissions by 5 February 1982.
After securing an extension of time until 7 May, the applicants
filed pleadings on 29 April 1982 in which they reiterated the arguments
they had adduced at first instance. They supplemented their complaint
of discriminatory treatment by pointing out that there was another
piece of land that could, they said, have been pre-empted and by
criticising the Revenue for having chosen the special procedure of
pre-emption instead of the ordinary procedure of making a supplementary
tax assessment. Lastly, they argued that the decision to exercise the
right of pre-emption did not contain the reasons required by section
3 of Law no. 79-587 of 11 July 1979 (see paragraph 22 below).
14. The Revenue filed its pleadings on 3 February 1983, as the
judge responsible for preparing the case for trial had requested on
5 November 1982. The time-limit of 5 May 1983 that was given to the
applicant and her husband for their reply was put back to 3 June and
then 7 October. They filed their submissions on 19 September 1983.
The pre-trial proceedings were concluded on 6 January 1984.
15. The Colmar Court of Appeal held a hearing on 21 January 1985
and gave judgment on 19 February 1985. It upheld the lower court's
determination of the date on which the time allowed for exercising the
right of pre-emption had begun to run and dismissed the appeal for the
following reasons:
"The ground of appeal alleging that the notification of
5 February 1980 was unlawful because it did not, as required
by section 3 of Law no. 79-587 of 11 July 1979, give any
reasons must be rejected, account having been taken of the
fact that it does not appear sufficiently substantial to
constitute a preliminary point of administrative law, seeing
that the notification appears to set out the legal basis and
the reason of fact which prompted the Revenue to exercise the
right of pre-emption.
For the rest, the Court, without the slightest hesitation,
adopts the excellent reasons for which the court below
rejected the grounds relating, firstly, to the misuse of
powers of which the Revenue was allegedly guilty by acting
speculatively and, secondly, to the contravening by
Article 668 of the General Tax Code of several fundamental
principles laid down in the Convention ..."
3. The proceedings in the Court of Cassation
16. The applicant and her husband appealed on points of law on
13 June 1985 and filed supplementary pleadings on 13 November.
They argued two grounds of appeal, the first based on failure
to comply with the time-limit for exercising the right of pre-emption
and the second on breaches of Article 1 of Protocol No. 1 (P1-1) and
Article 6 paras. 1 and 2 (art. 6-1, art. 6-2) of the Convention.
In support of the second ground - the only relevant one here -
they maintained, firstly:
"...
It appears from reading these provisions [Article 1 of
Protocol No. 1 and Article 6 para. 1 of the Convention
(P1-1, art. 6-1)] together that no one can be deprived of his
property, even by a tax law, without being able to defend
himself in court proceedings. The fact remains, however, that
the right of pre-emption conferred by Article 668 of the GTC
(which has become Article L.18 of the Tax Proceedings Code) is
exercised at the discretion of the State, which does not have
to prove the allegation that the price was too low, and that
this provision does not allow a dispossessed purchaser to show
that he acted in good faith or that the price in question was
a normal one. In the instant case the Court [of Appeal],
which noted that the State's right was a discretionary one and
that it was impossible for the expropriated party to be heard
in his own defence and still concluded that Article 668 of the
GTC conformed with the provisions of Article 1 of the First
Protocol and Article 6 para. 1 (P1-1, art. 6-1) of the ...
Convention ..., did not draw from its own findings the legal
conclusions which followed from them and thus breached the
aforementioned provisions ..."
They went on:
"Article 6 para. 2 (art. 6-2) of the ... Convention ...
provides: 'Everyone charged with a criminal offence shall be
presumed innocent until proved guilty according to law.' It
is established that the purpose of Article 668 of the GTC is
to prevent tax evasion and it provides for a penalty in
respect of those guilty of it. In the instant case the Court
[of Appeal], which refused to recognise that this was the
purpose and nature of the State's pre-emption so as not to
apply to the State the provisions of Article 6 para. 2
(art. 6-2) of the Convention, misunderstood the meaning and
scope of Article 668 of the GTC (which has become Article L.18
of the Tax Proceedings Code) and accordingly breached that
provision.
Lastly, the Court [of Appeal], which noted that the Revenue
could exercise its right of pre-emption without having to
prove the expropriated party's guilt and without that party
being able to prove his innocence, but still considered that
such a measure did not contravene Article 6 para. 2 (art. 6-2)
of the Convention, breached that provision in refusing to
apply it."
17. The Revenue's defence was registered on 7 March 1986. The
reporting judge, who was appointed on 18 April 1986, filed his report
on 18 November 1986. The advocate-general was chosen on
2 January 1987. Initially heard on 31 March 1987, the case was
transferred on 19 May 1987 to a full court of the Court of Cassation's
Commercial Division.
18. On 16 June 1987 the Court of Cassation (Commercial Division)
delivered four leading judgments, including one dismissing the
applicant and her husband's case.
As to the ground of appeal relating to the breach of provisions
of the Convention, it said:
"... in the first place, where the Revenue exercises the
powers vested in it by Article 668 of the General Tax Code,
the dispossessed purchaser may ask a court to rule on a
challenge by him seeking to establish that the conditions for
applying the aforementioned provision were not satisfied.
In the second place, exercising the State's right of
pre-emption as provided by the aforementioned Article 668 does
not imply that the dispossessed purchaser has committed a
criminal offence, from which it follows that the exercise of
this right was not within the contemplation of Article 6
para. 2 (art. 6-2) of the Convention ...
The ground of appeal is therefore unfounded in every limb."
19. Since 1981, it has been possible to build on the land, subject
to conditions. The land has not been resold but has been left at the
disposal of a neighbouring market gardener. Its current value is in
the region of FRF 330 per square metre.
II. Relevant domestic law and practice
A. The Revenue's right of pre-emption
20. At the time of the pre-emption in question, Article 668 of the
General Tax Code provided:
"Without prejudice to the provisions of Article 1649
quinquies A and for a period of six months from the date on
which the formality of registration for tax purposes or the
combined formality [simultaneous registration for tax purposes
and entry in the land charges register] is completed, the
Revenue may exercise for the benefit of the Treasury a right
of pre-emption over real property, real-property rights,
businesses or goodwill, rights to leases or to the benefit of
a promise of a lease of all or part of a property where it
considers the sale price to be too low, by offering to pay the
rightful claimants the price in question and a premium of ten
per cent.
The six-month period shall be reduced to three months where
the formality is completed at the office for the area in which
the property is situated.
The decision to exercise the right of pre-emption shall be
served by a bailiff."
21. On 1 January 1982 Article 668 became Article L.18 of the Tax
Proceedings Code and now provides:
"For a period of six months from the date of registration
for tax purposes or the date on which the combined formality
[simultaneous registration for tax purposes and entry in the
land charges register] is completed, the State, represented by
the Revenue, may exercise a right of pre-emption over real
property, real-property rights, businesses or goodwill, rights
to leases or to the benefit of a promise of a lease of all or
part of a property where the Revenue considers the sale price
to be too low, by offering to pay the purchaser or his
successors in title the price in question and a premium of ten
per cent.
The six-month period shall be reduced to three months where
the formality is completed at the office for the area in which
the property is situated.
The decision to exercise the right of pre-emption shall be
served on the purchaser, vendor or their successors in title
by a bailiff.
The exercise of this right shall not prejudice the Revenue's
right to bring, where appropriate, adversarial supplementary
assessment proceedings as provided for in Article L.55."
22. The administrative decision to exercise the right of
pre-emption provided for in this Article must - so it is stated in the
Prime Minister's circular of 10 January 1980 - contain reasons in
accordance with Law no. 79-587 of 11 July 1979, which came into force
on 11 January 1980 and whose relevant sections provide:
Section 1
"Natural or legal persons shall have the right to be
informed without delay of the reasons for unfavourable
individual administrative decisions concerning them.
To this end, reasons must be given for decisions which:
(a) restrain the exercise of civil liberties or generally
amount to a policing measure;
(b) impose a penalty;
(c) make the grant of an authorisation subject to restrictive
conditions or impose obligations;
(d) withdraw or rescind decisions creating rights;
(e) assert prescription, an estoppel or a forfeiture;
(f) refuse a benefit to which persons who satisfy the
statutory conditions for receiving it are entitled."
Section 3
"The reasons required by this Law must be in writing and
include a statement of the considerations of law and fact on
which the decision is based."
B. The extent of review by the courts
23. Jurisdiction to hear appeals against pre-emption decisions
under Article 668 of the General Tax Code is vested in the ordinary
courts.
Firstly, in a judgment of 22 December 1950 (Dalloz 1951,
jurisprudence, p. 547) the Conseil d'Etat held that it had no
jurisdiction, stating that "by reason of the serious interference with
the right of ownership which the power granted to the Revenue ... to
exercise a right of pre-emption over sold real property entails ...,
it is for the ordinary courts ... to deal with cases concerning the
right of pre-emption". Secondly, the ordinary courts have agreed to
rule on challenges to pre-emption decisions. They initially reviewed
only the formal correctness of pre-emption decisions (Lyons Court of
Appeal, judgment of 14 April 1947, Gazette du Palais 1947, 2, 48).
Subsequently they extended their review so as to satisfy themselves
that pre-emptions had not had a speculative purpose and that they did
not disclose any misuse of powers (Court of Cassation, Commercial
Division, Lucan judgments of 5 February 1957, Juris-Classeur périodique
1957, I, 9875 and 9876).
Having regard to the discretionary nature of the right of
pre-emption, the Court of Cassation held, however, that the courts
could not review the Revenue's assessment that a declared price was too
low.
In its four leading judgments delivered on 16 June 1987 (see
paragraph 18 above) the Court of Cassation considerably widened the
scope of judicial review. Explicitly abandoning its earlier view of
the discretionary nature of the right of pre-emption, it held that the
reasons given for decisions to exercise the right must be in writing
and contain a statement of the considerations of law and fact on which
the decisions were based. It concluded from this that reasoning which
stated only "the Revenue considers the sale price to be too low" was
inadequate as it was too summary and too general, the Revenue being
required to specify the facts on which it based its assessment that the
stipulated sale price was too low, in order to enable a dispossessed
purchaser to challenge the assessment and establish that the agreed
price corresponded to the real market value of the property.
In two of these cases the Court of Cassation quashed the
impugned judgments for having contravened the provisions thus
construed; in the other two, including the case of the applicant and
her husband, it dismissed the appeals. The applicant and her husband
were the only dispossessed purchasers who did not win their case in the
Court of Cassation.
C. Pre-emption in practice
24. In 1980 the Revenue exercised its right of pre-emption only
once in the département of Bas-Rhin - against the applicant and her
husband - and twenty-five times in the rest of France.
Between 1980 and 1986 it carried out eighty-eight operations
of this kind.
Since the judgments of 1987 (see paragraph 18 above) it has
refrained from resorting to pre-emption.
PROCEEDINGS BEFORE THE COMMISSION
25. Mrs Hentrich applied to the Commission on 14 December 1987.
In her submission, the exercise of the right of pre-emption had been
an unjustified interference with her right of property, in breach of
Article 1 of Protocol No. 1 (P1-1). It had raised a presumption that
she was guilty of tax evasion, contrary to Article 6 para. 2 (art. 6-2)
of the Convention. She had been denied the benefit of the right of
access to a court that would give her a fair trial within a reasonable
time, in disregard of Articles 6 and 13 (art. 6, art. 13) of the
Convention. Lastly, she submitted that there had been discriminatory
treatment, contrary to Article 14 (art. 14) of the Convention, in the
enjoyment of the rights secured in the aforementioned provisions.
26. The Commission declared the application (no. 13616/88)
admissible on 5 December 1991. In its report of 4 May 1993
(Article 31) (art. 31), it expressed the opinion that
(a) there had been a violation of Article 1 of Protocol No. 1
(P1-1) (twelve votes to one);
(b) there had been a violation of Article 6 para. 1 (art. 6-1)
of the Convention as regards the fairness and length of the proceedings
(twelve votes to one);
(c) there had been no violation of Articles 6 para. 2 and 14
(art. 6-2, art. 14) of the Convention (twelve votes to one); and
(d) it was unnecessary to examine separately the complaint
based on Article 13 (art. 13) of the Convention (unanimously).
The full text of the Commission's opinion and of the four
partly dissenting opinions contained in the report is reproduced as an
annex to this judgment*.
_______________
* Note by the Registrar. For practical reasons this annex will appear
only with the printed version of the judgment (volume 296-A of
Series A of the Publications of the Court), but a copy of the
Commission's report is obtainable from the registry.
_______________
FINAL SUBMISSIONS TO THE COURT BY THE GOVERNMENT
27. In their memorial the Government asked the Court to
"dismiss the application lodged by Mrs Hentrich by holding
that the complaints based on breaches of Article 6 para. 1 of
the Convention and Article 1 of Protocol No. 1 (art. 6-1,
P1-1) are inadmissible for failure to exhaust domestic
remedies or, in the alternative, that they are unfounded; that
Article 6 para. 2 (art. 6-2) of the Convention is not
applicable in this case or, in the alternative, that the
complaint based on it is ill-founded; that the complaint based
on the failure to try the case within a reasonable time is
unfounded; and, lastly, that the complaints based on breaches
of Articles 13 and 14 (art. 13, art. 14) of the Convention are
unfounded".
AS TO THE LAW
I. INTRODUCTION
28. Essentially, Mrs Hentrich claimed to be the victim of a
violation of Article 1 of Protocol No. 1 (P1-1) on account of the
Revenue's exercise of the right of pre-emption conferred on it by
Article 668 of the General Tax Code. She also maintained that the
national proceedings had not afforded her an adequate opportunity to
present her case to the French courts, contrary to Article 6 paras. 1
and 2 (art. 6-1, art. 6-2) of the Convention.
II. THE GOVERNMENT'S PRELIMINARY OBJECTIONS
29. As they had done before the Commission, the Government
submitted that domestic remedies had not been exhausted.
The first limb of the second ground of appeal in the Court of
Cassation, they said, mentioned Article 1 of Protocol No. 1 (P1-1) but
did not refer to public interest or to the proportionality of the
interference. Its thrust was to impugn Article 668 of the General Tax
Code in that it did not allow a dispossessed purchaser to show his good
faith, not to argue that the right of pre-emption infringed the right
of individuals to the peaceful enjoyment of their possessions.
Furthermore, Mrs Hentrich had not put the Court of Cassation
in a position to remedy the shortcomings of the national proceedings,
since she had not alleged before it that Law no. 79-587 of 11 July 1979
had been contravened.
30. The Court points out, firstly, that Article 26 (art. 26) of the
Convention must be applied "with some degree of flexibility and without
excessive formalism" (see the Castells v. Spain judgment of
23 April 1992, Series A no. 236, p. 19, para. 27).
It notes, like the Commission, that at all stages of the
national proceedings the applicant expressly relied on the relevant
provisions of the Convention and indicated to the domestic courts in
substance the complaints now made at Strasbourg.
31. As regards the applicant's submissions based on the
incompatibility of Article 668 of the General Tax Code with Article 1
of Protocol No. 1 (P1-1), the Court notes that these were not new
complaints as Mrs Hentrich confined herself before the Convention
institutions to developing the argument already considered by the
French courts, namely that Article 668 did not comply with, inter alia,
the provisions of Article 1 of Protocol No. 1 P1-1).
32. As regards the complaints relating to the proceedings, the
applicant admittedly did not rely on Law no. 79-587 in the Court of
Cassation as she had done in the Court of Appeal. It cannot be
overlooked, however, that the Colmar Court of Appeal (see paragraph 15
above), like others at the time, had adopted the restrictive approach
that had been taken up to then by the Court of Cassation. The
applicant's omission could therefore only justify this limb of the
objection if the Government had persuaded the Court that at the time
of the appeal on points of law an allegation that the Law in question
had been contravened would have afforded a prospect of success such
that there was an effective remedy. The Government, however, did not
cite a single contemporaneous decision of the Court of Cassation to
that effect.
Lastly, the Government did not provide a convincing explanation
of the Court of Cassation's position. On the one hand, the Court of
Cassation did not doubt that the exercise of the right of pre-emption
was compatible with Article 6 (art. 6) of the Convention and
Article 1 of Protocol No. 1 (P1-1) as long as a dispossessed purchaser
could have a court review whether the conditions of its exercise had
been satisfied (see paragraph 18 above); and on the other hand, it
could not be unaware that in the instant case, as a result of the
application of its own earlier principles, the dispossessed purchasers
had been deprived of this possibility. Yet it did not quash the Court
of Appeal's judgment for infringing the Convention provisions.
33. Accordingly, Mrs Hentrich gave the French courts the
opportunity which is in principle intended to be afforded to
Contracting States by Article 26 (art. 26), namely the opportunity of
preventing or putting right the violations alleged against them (see,
among other authorities, the Guzzardi v. Italy judgment of
6 November 1980, Series A no. 39, p. 27, para. 72).
The objections must therefore be dismissed.
III. ALLEGED VIOLATION OF ARTICLE 1 OF PROTOCOL No. 1 (P1-1)
34. In the applicant's submission, the pre-emption of her property
by the Revenue amounted to a de facto expropriation and infringed
Article 1 of Protocol No. 1 (P1-1), which 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."
35. Because the right of pre-emption was exercised, Mrs Hentrich
was deprived of her property within the meaning of the second sentence
of the first sub-paragraph of Article 1 (P1-1); the Government did not
contest that.
36. The Court therefore has to satisfy itself that the requirements
of the provision in question were complied with.
A. Purpose of the interference
37. In the applicant's view, the prevention of tax evasion would
only be an aim in the public interest if the owner was presumed guilty
of tax evasion and if his property was subsequently used for a purpose
that was in the public interest. A purchaser of real property could
only be deprived by the Revenue of any profit made at the time of
purchase in the event of fraud. That a price was too low might be
explained by innocuous factors, such as goodwill, ignorance or urgency.
38. The Government maintained that the pre-emption procedure was
the only means available to the Revenue for regulating, and raising
moral standards in, the property market and preventing tax evasion.
The value of the procedure, which the Revenue considered to be
particularly effective, lay in its deterrent nature and the fact that
it was exceptional, being used only when - as in the instant case - the
price was manifestly too low.
39. Like the Commission, the Court notes that the right of
pre-emption is exercised only where the declared price falls short of
the Revenue's valuation of the real property purchased. The right of
pre-emption is not designed to punish tax evasion, and it applies even
where the declared price corresponds to the price actually paid, but
its purpose is to prevent non-payment of higher registration fees. The
purchaser's good or bad faith is therefore immaterial.
The Court reiterates that the notion of "public interest" is
necessarily extensive and that the States have a certain margin of
appreciation to frame and organise their fiscal policies and make
arrangements - such as the right of pre-emption - to ensure that taxes
are paid. It recognises that the prevention of tax evasion is a
legitimate objective which is in the public interest. It does not have
to decide in the instant case whether the right of pre-emption could
legitimately be designed also to regulate the property market.
B. Lawfulness of the interference
40. In Mrs Hentrich's submission, the pre-emption procedure was
arbitrary as the Revenue had not given reasons for its decision and the
taxpayer had not been able to know or criticise the reasons for it
subsequently.
41. The Government maintained that the pre-emption measure had to
comply with Law no. 79-587 of 11 July 1979 and was reviewable by the
courts. Admittedly, the concept of a price being too low was
imprecise, but it was to be assessed with reference to transfers of the
same type in similar circumstances and the assessment could be
challenged by the dispossessed owner.
42. Unlike the Commission, the Court considers it necessary to rule
on the lawfulness of the interference.
While the system of the right of pre-emption does not lend
itself to criticism as an attribute of the State's sovereignty, the
same is not true where the exercise of it is discretionary and at the
same time the procedure is not fair.
In the instant case the pre-emption operated arbitrarily and
selectively and was scarcely foreseeable, and it was not attended by
the basic procedural safeguards. In particular, Article 668 of the
General Tax Code, as interpreted up to that time by the Court of
Cassation and as applied to the applicant, did not sufficiently satisfy
the requirements of precision and foreseeability implied by the concept
of law within the meaning of the Convention.
A pre-emption decision cannot be legitimate in the absence of
adversarial proceedings that comply with the principle of equality of
arms, enabling argument to be presented on the issue of the
underestimation of the price and, consequently, on the Revenue's
position - all elements which were lacking in the present case.
The Court notes that the French legal system has in fact been
modified in this respect, it now being mandatory for the reasons for
administrative pre-emption decisions to be subject to the adversarial
principle. It must, however, observe that this development did not
avail the applicant, although it could have done.
C. Proportionality of the interference
43. According to Mrs Hentrich, the fact that it was impossible to
defend herself against the effect of the pre-emption - which she
described as dishonouring - made the measure a disproportionate one,
as did the inadequacy of the compensation paid for the expropriation.
44. The Government disagreed with the Commission's opinion that the
measure was disproportionate to the objective sought to be achieved
because of the existence of the adversarial procedure of a
supplementary tax assessment. They said that this procedure had
neither the same purpose nor the same effects. Pre-emption, which was
more markedly exemplary in character, was designed essentially to
ensure that the sale price of the real property concerned was not taken
as a bench-mark, whereas supplementary tax assessments, which were of
more general application, were unsuited to this type of situation. A
revised assessment was a tax penalty which had no impact on the general
organisation of the property market and whose legal consequences
affected only the parties to the sale and more particularly the
purchaser.
In the Government's submission, dispossessed purchasers did not
sustain any financial loss since they received, in addition to the
price paid to acquire the real property, a supplementary payment of 10%
and could claim reimbursement of the costs and fair expenses of the
contract and, on production of vouchers, reimbursement of sums
committed before the pre-emption. Any purely non-pecuniary damage that
might be suffered would certainly not be disproportionate to the aim
pursued.
Whatever the reason for the declared price being too low, the
community suffered a substantial loss of transfer duty, and this called
for an appropriate response.
45. In order to assess the proportionality of the interference, the
Court looks at the degree of protection from arbitrariness that is
afforded by the proceedings in this case.
46. In this instance the trial and appeal courts interpreted the
domestic law as allowing the State to avail itself of its right of
pre-emption without having to indicate the reasons of fact and law for
its decision.
47. The Court notes, firstly, that the Revenue may, through the
exercise of its right of pre-emption, substitute itself for any
purchaser, even one acting in perfectly good faith, for the sole
purpose of warning others against any temptation to evade taxes. This
right of pre-emption, which does not seem to have any equivalent in the
tax systems of the other States parties to the Convention, does not
apply systematically - in other words, every time the price has been
more or less clearly underestimated - but only rarely and scarcely
foreseeably. Furthermore, the State has other suitable methods at its
disposal for discouraging tax evasion where it has serious grounds for
suspecting that this is taking place; it can, for instance, take legal
proceedings to recover unpaid tax and, if necessary, impose tax fines.
Systematic use of these procedures, combined with the threat of
criminal proceedings, should be an adequate weapon.
48. The Court considers that the question of proportionality must
also be looked at from the point of view of the risk run by any
purchaser that he will be subject to pre-emption and therefore
penalised by the loss of his property solely in the interests of
deterring possible underestimations of price. The exercise of the
right of pre-emption entails sufficiently serious consequences for the
measure to attain a definite level of severity. Merely reimbursing the
price paid - increased by 10% - and the costs and fair expenses of the
contract cannot suffice to compensate for the loss of a property
acquired without any fraudulent intent.
49. Having regard to all these factors, the Court considers that,
as a selected victim of the exercise of the right of pre-emption,
Mrs Hentrich "bore an individual and excessive burden" which could have
been rendered legitimate only if she had had the possibility - which
was refused her - of effectively challenging the measure taken against
her; the "fair balance which should be struck between the protection
of the right of property and the requirements of the general interest"
was therefore upset (see, mutatis mutandis, the Sporrong and Lönnroth
v. Sweden judgment of 23 September 1982, Series A no. 52, p. 28,
para. 73, and the AGOSI v. the United Kingdom judgment of
24 October 1986, Series A no. 108, p. 19, para. 55, and p. 21,
para. 62).
D. Conclusion
50. Accordingly, there has been a breach of Article 1 of
Protocol No. 1 (P1-1).
IV. ALLEGED VIOLATION OF ARTICLE 6 PARAS. 1 AND 2 (art. 6-1,
art. 6-2) OF THE CONVENTION
51. Mrs Hentrich claims to be the victim of violations of
Article 6 paras. 1 and 2 (art. 6-1, art. 6-2) of the Convention, which
provide:
"1. In the determination of his civil rights and
obligations or of any criminal charge against him, everyone is
entitled to a fair and public hearing within a reasonable time
by an independent and impartial tribunal established by law
...
2. Everyone charged with a criminal offence shall be
presumed innocent until proved guilty according to law."
52. Like those appearing before it, the Court considers that
Article 6 para. 1 (art. 6-1) applies in the instant case.
A. Fairness of the proceedings
53. The applicant complained that the Revenue and the courts had
not given her a "fair" hearing. She had not been able to challenge
effectively the authorities' assessment by adducing evidence to show
that she had acted in good faith and that the proper price had been
paid. In short, the principle of equality of arms had been
contravened.
54. This was also the opinion of the Commission.
55. The Government conceded that Mrs Hentrich had been unable to
defend herself in the Strasbourg tribunal de grande instance and the
Colmar Court of Appeal, as those courts had held that Article 668 of
the General Tax Code conferred a discretionary power on the Revenue and
that accordingly a dispossessed purchaser could not validly challenge
a pre-emption. The Government considered, however, that she had not
taken advantage of the opportunity afforded her by the appeal on points
of law to have any shortcomings of the tribunals of fact remedied, and
maintained at all events that the trial had been fair.
56. The Court notes, firstly, that as their sole defence on this
point the Government merely reiterated the objection that has already
been dismissed (see paragraphs 32 and 33 above).
Secondly, it points out that one of the requirements of a "fair
trial" is "equality of arms", which implies that each party must be
afforded a reasonable opportunity to present his case under conditions
that do not place him at a substantial disadvantage vis-à-vis his
opponent (see the Dombo Beheer B.V. v. the Netherlands judgment of
27 October 1993, Series A no. 274, p. 19, para. 33). In the instant
case, the proceedings on the merits did not afford the applicant such
an opportunity: on the one hand, the tribunals of fact allowed the
Revenue to confine the reasons given for its decision to exercise the
right of pre-emption to stating "the sale price declared in the
contract of sale [is] too low" (see paragraphs 9 and 15 above) -
reasons that were too summary and general to enable Mrs Hentrich to
mount a reasoned challenge to that assessment; and on the other hand,
the tribunals of fact declined to allow the applicant to establish that
the price agreed between the parties corresponded to the real market
value of the property.
There has therefore been a breach of Article 6 para. 1
(art. 6-1) in this respect.
B. Length of the proceedings
57. Mrs Hentrich also complained of the length of the proceedings.
58. The period to be taken into consideration began on
31 March 1980, when proceedings were instituted in the Strasbourg
tribunal de grande instance, and ended on 16 June 1987, with the
delivery of the Court of Cassation's judgment. It therefore amounted
to seven years and nearly three months.
59. The reasonableness of the length of proceedings is to be
determined with reference to the criteria laid down in the Court's
case-law and in the light of the circumstances of the case, which in
this instance call for an overall assessment.
60. In the Government's submission, the case was not a complex one,
except in the Court of Cassation; Mrs Hentrich contributed to slowing
down the proceedings; and the judicial authorities could not be held
responsible for the proceedings having taken an abnormal length of
time, in view of the backlog of business in the Colmar Court of Appeal.
61. Like the Commission, the Court notes that while the proceedings
at first instance progressed at an acceptable pace, there were delays
especially on appeal (the proceedings took four years), and to a lesser
extent in the Court of Cassation (where the proceedings lasted two
years). For the most part, the length of the appeal proceedings was
due to the backlog of business in the Colmar Court of Appeal, a factor
which, as the Court has consistently held in the past, cannot excuse
it. On the other hand, the length of the proceedings in the Court of
Cassation was attributable primarily to that court's wish to hear
together four cases that raised similar issues - an approach which is
understandable but which, under Article 6 (art. 6) of the Convention,
cannot justify substantial delay.
That being so, and having regard to what was at stake for the
applicant, the Court cannot regard the lapse of time in the instant
case as having been "reasonable".
There has therefore been a breach of Article 6 para. 1
(art. 6-1) in this respect.
C. Presumption of innocence
62. The applicant maintained lastly that, contrary to the
presumption of innocence, the pre-emption in issue was tantamount to
an accusation of tax evasion. She referred to the opinion of French
legal writers that pre-emption was a penalty designed to punish
possible tax evaders without the Revenue having the burden of proving
the offence.
63. The Government's primary submission was that Article 6
para. 2 (art. 6-2) was inapplicable in the instant case. The
pre-emption procedure had no criminal characteristics, either in
domestic law or from the point of view of the Convention; it was
concerned only with a physical fact, namely that the price paid for a
property transfer was too low, and it did not necessarily imply a fraud
amounting to a criminal offence. In the alternative, they considered
that the complaint was ill-founded, as a dispossessed purchaser had the
possibility of challenging a pre-emption decision in the ordinary
courts.
64. Like the Commission, the Court considers that the
implementation of the pre-emption measure was not tantamount to a
declaration of guilt.
V. ALLEGED VIOLATION OF ARTICLE 13 (art. 13) OF THE CONVENTION
65. In view of its decision in respect of Article 6 para. 1
(art. 6-1), the Court considers it unnecessary to look at the case
under Article 13 (art. 13) of the Convention; this is because the
requirements of that provision are less strict than, and are here
absorbed by, those of Article 6 para. 1 (art. 6-1) (see, among other
authorities, the Pudas v. Sweden judgment of 27 October 1987,
Series A no. 125-A, p. 17, para. 43).
VI. ALLEGED VIOLATION OF ARTICLE 14 OF THE CONVENTION TAKEN
TOGETHER WITH ARTICLE 1 OF PROTOCOL No. 1 AND ARTICLES 6 AND
13 (art. 14+P1-1, art. 14+6, art. 13) OF THE CONVENTION
66. The findings in paragraphs 50, 56, 61, 64 and 65 above make it
unnecessary for the Court to consider also the complaint that the
applicant had suffered discrimination contrary to Article 14 (art. 14)
of the Convention in the enjoyment of the rights secured to her in
Article 1 of Protocol No. 1 and Articles 6 and 13 (P1-1, art. 6,
art. 13) of the Convention.
VII. APPLICATION OF ARTICLE 50 (art. 50) OF THE CONVENTION
67. Article 50 (art. 50) of the Convention provides:
"If the Court finds that a decision or a measure taken by a
legal authority or any other authority of a High Contracting
Party is completely or partially in conflict with the
obligations arising from the ... Convention, and if the
internal law of the said Party allows only partial reparation
to be made for the consequences of this decision or measure,
the decision of the Court shall, if necessary, afford just
satisfaction to the injured party."
Under this provision, Mrs Hentrich sought compensation for
damage and reimbursement of costs.
A. Damage
68. The applicant said that the seized land could now be built on
and that its value was in the region of FRF 1 million. She concluded
that the exercise of the right of pre-emption had enabled the State to
enrich itself at her expense without cause to the extent of at least
FRF 800,000 and claimed this amount in compensation for pecuniary
damage.
She also alleged non-pecuniary damage but left it to the
Court's discretion to assess its extent.
69. The Government disputed that the alleged financial damage had
actually been sustained and considered that at all events the
calculation had to be based on the situation at the time of the
pre-emption, unless the purely speculative nature of the purchase was
to be recognised.
70. The Delegate of the Commission left the matter to the Court's
discretion.
71. The Court considers that the applicant may have suffered
non-pecuniary damage, but the present judgment affords her sufficient
compensation in this respect.
On the other hand, the question of pecuniary damage is not
ready for decision. Given the violation found of Article 1 of
Protocol No. 1 (P1-1), the best form of redress would in principle be
for the State to return the land. Failing that, the calculation of
pecuniary damage must be based on the current market value of the land.
Those appearing before the Court did not supply any very precise
particulars on this matter. Accordingly, the question must be reserved
and the further procedure must be fixed, due regard being had to the
possibility of an agreement between the respondent State and the
applicant (Rule 54 paras. 1 and 4 of the Rules of Court).
B. Costs and expenses
72. Mrs Hentrich sought reimbursement of the costs of
representation in the French courts (FRF 29,075) and before the
Convention institutions (FRF 27,000).
73. The Government expressed no view as to the amount of lawyer's
fees but pointed out that only expenses actually incurred could be
reimbursed.
74. The Delegate of the Commission did not find the sums sought
exorbitant.
75. The Court allows the applicant's claim in full.
FOR THESE REASONS, THE COURT
1. Dismisses unanimously the Government's preliminary objections;
2. Holds by five votes to four that there has been a breach of
Article 1 of Protocol No. 1 (P1-1);
3. Holds unanimously that for lack of a fair trial there has been
a breach of Article 6 para. 1 (art. 6-1) of the Convention;
4. Holds unanimously that there has been a breach of
Article 6 para. 1 (art. 6-1) on account of the length of the
proceedings;
5. Holds unanimously that there has been no breach of
Article 6 para. 2 (art. 6-2) of the Convention;
6. Holds unanimously that it is unnecessary to consider
separately the complaints based on Articles 13 and 14
(art. 13, art. 14) of the Convention;
7. Holds unanimously that this judgment in itself constitutes
sufficient just satisfaction in respect of the alleged
non-pecuniary damage;
8. Holds unanimously that the respondent State is to pay the
applicant, within three months, 56,075 (fifty-six thousand and
seventy-five) French francs in respect of costs and expenses;
9. Holds unanimously that the question of Article 50 (art. 50) is
not ready for decision as regards pecuniary damage;
Accordingly,
(a) reserves the said question in that respect;
(b) invites the Government and the applicant to submit in
writing, within three months, their observations on the matter
and, in particular, to notify the Court of any agreement they
may reach;
(c) reserves the further procedure and delegates to the
President of the Chamber power to fix the same if need be.
Done in English and in French, and delivered at a public
hearing in the Human Rights Building, Strasbourg, on 22 September 1994.
Signed: Rolv RYSSDAL
President
Signed: Herbert PETZOLD
Acting Registrar
In accordance with Article 51 para. 2 (art. 51-2) of the
Convention and Rule 53 para. 2 of the Rules of Court, the following
separate opinions are annexed to this judgment:
(a) partly dissenting opinion of Mr Ryssdal and Mr Baka;
(b) partly dissenting opinion of Mr Pettiti and Mr Valticos.
Initialled: R.R.
Initialled: H.P.
PARTLY DISSENTING OPINION OF JUDGES RYSSDAL AND BAKA
We share the Court's opinion that there have been violations
of Article 6 para. 1 (art. 6-1) of the Convention in the present case
both because of the lack of a fair trial and because of the length of
proceedings.
However, we have voted against the finding of a breach of
Article 1 of Protocol No. 1 (P1-1).
We consider that there was a deprivation of the applicant's
possessions within the meaning of the second sentence of Article 1 of
Protocol No. 1 (P1-1). It has therefore to be decided whether the
deprivation was in the public interest and subject to the conditions
provided for by law as required by this provision.
The pre-emption of the applicant's property was based on
Article 668 of the General Tax Code which gives the tax authorities the
right to purchase by pre-emption any property whose sale price they
consider to be too low. In such a case the authorities may exercise
this right for the benefit of the Treasury by "offering to pay the
rightful claimants the price in question and a premium of ten per
cent". This right of pre-emption is designed to prevent tax evasion
and, like the majority of the Court (paragraph 39), we consider the
prevention of tax evasion to be a legitimate objective which is in the
public interest.
In our opinion the pre-emption was also exercised subject to
the conditions provided for by law. In particular, Article 668 of the
General Tax Code was adequately accessible and formulated with
sufficient precision.
According to the case-law of the Court, "there must also be a
reasonable relationship of proportionality between the means employed
and the aim sought to be realised" (see the Lithgow and Others v. the
United Kingdom judgment of 8 July 1986, Series A no. 102, p. 50,
para. 120). An important factor in the assessment of such
proportionality is the compensation to be paid. As already mentioned,
the amount of such compensation in pre-emption cases is fixed by law
as the purchase price plus a premium of ten per cent. In addition the
tax authorities were obliged to pay the costs and fair expenses.
Having regard to the compensation paid and to the margin of
appreciation left by Article 1 of Protocol No. 1 (P1-1) to the national
authorities, we have come to the conclusion that this Article was not
violated in the present case.
PARTLY DISSENTING OPINION OF JUDGES PETTITI AND VALTICOS
(Translation)
We voted in favour of finding that there had been a breach of
Article 6 para. 1 (art. 6-1) of the European Convention on Human Rights
on the ground that the proceedings had not been fair and that their
length had been excessive. We did not vote in favour of finding a
breach of Protocol No. 1 (P1).
It appeared to us that in the consideration of the system
adopted in France for the right of pre-emption in respect of
real-property sales regard should be had above all to the relevant
national law and its special features, which are different from those
of other member States of the Council of Europe.
Vendors and purchasers are duly informed of the obligation to
be honest in declarations of price. As regards false statements, for
instance, several provisions of the General Tax Code (GTC) require the
parties to a contract for the sale of real property or of a business
or to a right to a lease or a promise of a lease and parties to
contracts for the partition or exchange of real property or of a
business to certify at the bottom of the contract that it "represents,
on pain of the penalties provided for in the Act of 18 April 1918
(Art. 1837 GTC), the full agreed price or balance in cash"
(Art. 850 GTC).
Article 863 of the GTC imposes a similar obligation on a notary
who draws up a contract of sale, exchange or partition, requiring him
to notify the parties of the penalties provided for in Articles 850 and
1837 of the GTC and in Article 366 of the Criminal Code. In the same
way, Article 864 requires notaries who draw up contracts transferring
real property, a business or a professional office (office ministériel)
to inform the parties of the penalties attaching to concealment, to
mention in the contract that this has been done and to state in it
that, to his knowledge, the contract is not altered or contradicted by
any secret document containing an increase in the price (see Bruron,
Droit pénal fiscal, Paris, Librairie générale de droit et de
jurisprudence).
This is distinct from the right of pre-emption but certainly
has the same aim of foreseeability and deterrence. The right of
pre-emption is exercised in order to ensure a distribution of
registration fees by regulating the property market. In order to avoid
underestimations which ultimately penalise those who are completely
honest in their price declarations by altering the total tax revenue,
each State adopts a particular arrangement which is part of its general
fiscal policy.
These fiscal policies, as such, are not covered by the European
Convention and Protocol No. 1. In our view, only if tax provisions
that might amount to an interference with possessions or with the use
of property did not provide opportunities for appeal in accordance with
Article 6 (art. 6) of the Convention might there hypothetically be a
breach of Protocol No. 1 and Article 6 (P1, art. 6) taken together,
without any separate breach of Protocol No. 1 (P1) taken on its own.
We would cite various arrangements adopted by other States to
prevent concealment or underestimation of prices.
GERMANY
Tax offences (Steuerordnungswidrigkeiten) include, for example,
underestimation of tax payable without fraudulent intent, the making
of inaccurate tax returns, actions designed to jeopardise the
collection of taxes without fraudulent intent or to secure or retain
unjustified tax concessions and breaches of the obligation to retain
and transfer tax deducted at source. They are punished by
administrative fines.
The offence of tax evasion is defined as follows in section 370
of the General Tax Act:
"A person shall be liable to imprisonment not exceeding five
years or a criminal fine if he
1. supplies financial or other authorities with inaccurate
or incomplete information about facts of importance for tax
purposes;
2. contrary to his obligations, fails to inform the
financial authorities of facts of importance for tax purposes;
3. ..."
Attempted evasion is punishable in the same way as the offence
of tax evasion.
A particularly serious offence is committed by anyone who makes
serious underestimations of his income or claims unjustified tax
concessions through his own actions.
NETHERLANDS
Section 68 of the General National Taxation Act (Algemene Wet
inzake Rijksbelastingen) provides for the criminal prosecution and
punishment of tax evasion. This offence may be committed by failure
to make a tax return, making an inaccurate and incomplete return,
failing to submit documents, failing to keep accounts, submitting
falsified documents or failing to keep account documents or books.
Such offences are punishable by imprisonment for a period not exceeding
six months and/or a third-category fine (section 68(1)). The
definition is an extremely wide one since fraudulent intent does not
have to be proved and the rigour of the principle means that negligence
or mistake may give rise to criminal proceedings.
ITALY
Tax evasion is made a punishable offence by Law no. 4 of
7 January 1929 laying down general rules for the prosecution and
punishment of offences against finance Acts and by special tax laws,
in particular on VAT and direct taxes (Legislative Decree no. 429 of
10 July 1982, Law no. 516 of 7 August 1982 and Law no. 154 of
15 May 1991); in the absence of any specific enactment, prosecutions
can be brought under the Code of Criminal Procedure. All these
provisions exhaustively list the various offences and the penalties
attaching to them. The same penalties apply to underestimations in
returns.
Admittedly, these measures do not provide for a right of
pre-emption, but the fiscal-policy objective is of the same kind.
Several States also have arrangements for pre-emption in respect of
agricultural property or property belonging to the artistic heritage.
The Court has rightly held that the interference was lawful as
regards the aim pursued under Protocol No. 1.
But we consider that the majority were wrong to find a breach
in respect of the lawfulness of the interference on the grounds of lack
of precision and foreseeability (paragraphs 40 to 42 of the judgment),
thus indirectly criticising the quality of the law derived from
enactments and case-law (see the Kruslin and Huvig v. France judgments
of 24 April 1990, Series A no. 176-A and B). Foreseeability was
ensured both by the applicable provisions and by the established
notarial practice of informing vendors and purchasers before sales are
concluded.
Equally wrongly, in our view, the majority found a breach in
respect of proportionality (paragraphs 45 to 48 of the judgment). It
looked at the possibility of arbitrariness in the proceedings and the
risk run by any purchaser that he will be subject to pre-emption.
These considerations were more relevant to foreseeability or the
fairness of the trial than to proportionality.
The right of pre-emption is exercised through a selection of
cases in which there have been the greatest underestimations of price
on the property market. It is the lack of any judicial review of the
selection criteria after a comparative survey which may amount to a
breach.
The majority appears to have been influenced by considerations
of good faith, fraud and formal exactness of the declaration of price.
But in the French system there may be not an underestimation through
fraud or through concealment of the price really paid but one which
hides a benefit granted to the purchaser and which may, for example,
be equated with a partially disguised gift, and this results in a
failure to pay due registration fees. The right of pre-emption is
therefore not exercised "for the sole purpose of warning others against
any temptation to evade taxes".
It is obvious that the French procedure for exercising the
right of pre-emption, before the change in the Court of Cassation's
case-law, was defective from the point of view of Article 6 (art. 6)
of the Convention; in that respect it could be contrary to
Protocol No. 1 taken together with Article 6 (P1, art. 6).
The right had virtually ceased to be exercised but the
provision retained its effect of deterrence and of raising moral
standards in the market.
The majority's legitimate concern (paragraph 49 of the
judgment) that a "fair balance ... should be struck between the
protection of the right of property and the requirements of the general
interest" was sufficiently met by the finding of a breach of
Article 6 para. 1 (art. 6-1).