European Court of Human Rights

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You are here: BAILII >> Databases >> European Court of Human Rights >> MA & Ors v Finland [2003] ECHR 712 (10 June 2003)
URL: http://www.bailii.org/eu/cases/ECHR/2003/712.html
Cite as: (2003) 37 EHRR CD 210, [2003] ECHR 712, 37 EHRR CD 210

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FOURTH SECTION

DECISION

AS TO THE ADMISSIBILITY OF

Application no. 27793/95
by M.A. and 34 Others
against Finland

The European Court of Human Rights, sitting on 10 June 2003 as a Chamber composed of

Sir Nicolas Bratza, President,
Mr M. Pellonpää,
Mrs E. Palm,
Mr M. Fischbach,
Mr J. Casadevall,
Mr S. Pavlovschi,
Mr J. Borrego Borrego, judges,

and Mr M. O’Boyle, Section Registrar,

Having regard to the above application introduced with the European Commission of Human Rights on 29 June 1995 and registered on 5 July 1995,

Having regard to Article 5 § 2 of Protocol No. 11 to the Convention, by which the competence to examine the application was transferred to the Court,

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

Having deliberated, decides as follows:

THE FACTS

The applicants are 35 Directors of a limited liability company (hereinafter “the Company”). All applicants are Finnish citizens, except applicant N.L. who is a citizen of the United Kingdom. Before the Court they are represented by Mr Markku Fredman, a lawyer practising in Helsinki. The respondent Government were represented by their Agent, Mr Arto Kosonen, Director in the Ministry for Foreign Affairs.

A.  The circumstances of the case

The facts of the case, as submitted by the parties, may be summarised as follows.

In 1994 all the applicants were employed by the same employer, the Company. On 7 April 1994 the Annual General Meeting of the Company decided that a bond loan with warrants be issued. The Terms and Conditions for the Bond Loan with Warrants for share subscription (hereinafter “the Terms”) were determined, inter alia, as follows:

“I  Loan Terms

1.  The maximum amount of the bond loan with warrants shall be 200,000 Finnish Marks (FIM).

2.  The Loan shall be offered for subscription to the management of [the Company]. It is proposed that shareholders’ pre-emptive right to subscription be disapplied since the loan is intended as part of the incentive programme for the management of [the Company] and its various units.

3.  The bonds shall be dated 15.4.1994. The term of bonds shall be five years. The loan shall be repaid in one instalment on 15.4.1999 against presentation of the bonds at the Company’s head office.

...

5.  The annual interest rate on the loan shall be (2)%. ...

6.  Subscription may take place on 15.4.1994 at the Company’s head office.

...

7.  [The Company] shall issue not more than 200 bonds made out to a named person each with a nominal value of FIM 1,000 and carrying 1,000 warrants. The bonds and warrants shall be kept by an agent designated by [the Company] for the account of the subscriber until 1.12.1998.

...

II  Terms and Conditions of Share Subscription

1.  Each warrant shall entitle the holder to subscribe for one [Company] preferred share with a nominal value of FIM 20. ...

2.  Shares may be subscribed during the period 1.12.1998   31.1.2000. Share subscription shall take place at [the Company’s] head office or at a place later indicated by [the Company]. When subscribing for a share a warrant shall be surrendered. payment of shares subscribed shall be effected on subscription.

3.  The share subscription price shall be FIM 374.

...

5.  Warrants pertaining to bonds may not be transferred to a third party prior to 1.12.1998 without the written permission of the Board of Directors. After this date warrants may be freely transferred.”

The Annual General Meeting noted that the loan formed a part of an incentive programme directed to the management of the Company. The purpose of the programme was to strengthen the management’s commitment to continuous and long-standing service for the Company.

In April 1994, about 45 employees, including all the applicants, subscribed for bonds under the incentive programme. The applicants’ loan-share varied between FIM 2,000 (EUR 336.38) and 12,000 (EUR 2,018.26), carrying the same amount of warrants. At the time, the mid-rate of the Company’s stock was FIM 374 (EUR 62.90).

Under Section 66 (1) of the Income Tax Act (tuloverolaki, inkomstskattelag 1535/1992, hereinafter “the 1992 Act”), an employee receives ordinary income under employee stock purchase programmes when subscribing for the company’s shares for a price that is under the fair market value of the stock. However, under programmes that are designed for the whole personnel, or for the majority of it, no taxable income arises if the price reduction is 10% or less compared with the fair market value of the stock.

Under Section 66 (3) of the 1992 Act, as it stood, the benefit of subscribing for shares based on debenture loan or stock option was taxable income if the subscription price was lower than the fair market value at the moment when the loan was issued. However, applying the 1992 Act, the potential profits in the future, based on appreciation of stock, were regarded as capital gains.

Applying the 1992 Act, as it stood in April 1994, the applicants did not receive any ordinary income at the option grant. The potential gains would in due course be taxed as capital gains.

In 1994 the capital gains tax rate was 25%. The rateable value for capital gains was determined by deducting the acquisition price from the sales price. There was a legal presumption that the acquisition price was 30% of the sales price unless the taxpayer showed that some other acquisition price be applied.

On 16 September 1994 the Government introduced a Bill (hereinafter “the Bill”), proposing amendments to the 1992 Act. The amendments concerned, inter alia, Section 66 (3), of the 1992 Act. According to the Bill, profits based on appreciation of stock were to be regarded as a benefit related to employment. The incentive stock options programme for directors of a company was a new way of paying salary; the employer gave a promise regarding a right to a certain subscription for shares, and the value of that right would most likely, at the exercise of the right, be significantly higher than at the option grant. From the angle of income tax, it represented a postponed salary, which should be taxed as ordinary income. Due to practical problems relating to the assessment of the benefit at the option grant, the Government proposed that the benefit would be taxed at the exercise of the stock option (i.e. purchase of shares) or when the stock option was transferred. The Government stated that the amendments were intended to enter into force as from the beginning of 1995. The amended Act would be applied to existing stock option arrangements where the option was exercisable in 1995 or later.

On 19 October 1994 the Board of Directors of the Company decided, relying on Chapter II, Section 5, of the Terms, to grant to subscribers of the bond loan a permission to transfer the warrants pertaining to bonds (stock option certificates) before 1 December 1998 when the subscribtion for shares would otherwise have started. As a result, a subscriber of the bond loan could transfer his or her stock options already in 1994, during which the 1992 Act in its original form was still assumed to be applicable.

On 3 November 1994 the Parliament discussed during its question time the news according to which certain companies were planning to bring forward the opportunity to exercise their stock options. In his answer to the Parliament, the Minister of Finance took up the possibility of retrospective legislation. According to his answer, an earlier implementation of the proposed amendment would be justified at least in cases where the original subscription time was brought forward.

On 7 November 1994 the applicants exercised their stock options by selling them. The selling price was FIM 366 (EUR 61.56) per option, i.e. the net value of the stock options after the income taxes paid by the applicants was FIM 19,266,448 (EUR 3,240,383.94) altogether.

On 9 December 1994 the Parliament’s Finance Committee (valtiovarainvaliokunta, finansutskottet) gave its report on the Bill. The Finance Committee found that the proposed amendment was based on good reasons relating to fiscal policy. However, it found that the proposed entry into force was problematic. It reported that after the Bill had been introduced, companies had started to make strenuous efforts to modify their incentive programmes so as to make possible an earlier exercise of the stock options than laid down in the terms of the subscription. The Finance Committee found that, when considering the general equality aspects in levying taxes and the need to protect the incentive programmes from such artificial modifications that were made only by reason of taxation, the proposed amendment should enter into force earlier in order to make the described plans unprofitable.

Taking into account expert opinions, the Finance Committee found that the goal could not be achieved by applying Section 56 of the Income Tax Act (concerning tax evasion). Therefore the Finance Committee found that the implementing provision should include an explicit clause as regards arrangements which permitted an earlier exercise of stock options. On the other hand, the so-called pure cases (i.e. cases in which the company had not initiated any artificial arrangements with the aim of making possible an earlier exercise of the options) should be left outside the scope of an earlier implementation. The Finance Committee stated that the provision regarding the earlier implementation should be applied, inter alia, in cases where the Board of Directors of a company had, after 16 September 1994, exercised its right to give a permission to exercise the stock option. It found that the proposed implementation would not be contrary to the right of property, at least if the “pure” cases were left outside the earlier implementation, which would apply only to irregular arrangements that aimed at producing an undeserved tax benefit.

The proposed amendment to the 1992 Act was adopted on 21 December 1994, ratified on 29 December 1994 and published on 31 December 1994. The implementing provision included a clause to the effect described above. The decisive date as regards permission, given by Boards of Directors, to an earlier exercise of stock options was set at 16 September 1994, i.e. the date of introducing the Bill.

Under the new provision of the Income Tax Act (hereinafter “the 1994 Provision”) and according to its implementation provision, the relevant tax authorities found that the applicants had received taxable income by selling their stock options in November 1994. A corresponding income tax was levied on them.

Unlike capital gains tax, the income tax was progressive. The applicants’ incomes in 1994 were such as to put them in the highest tax band, resulting in marginal tax rates of 60% or more. In practice, the application of the amended tax legislation imposed on the applicants, respectively, a tax burden varying from FIM 333,060 (EUR 56,016.67 euros) to FIM 1,998,360 (EUR 336,100.02), and amounting in total FIM 21,000,000 (EUR 3,531,946.46) more than would have applied under the previous legislation.

The applicants lodged claims for rectification with their respective Tax Rectification Boards (verotuksen oikaisulautakunta, skatterättelsenämnd). They referred, inter alia, to Article 1 of Protocol No. 1 to the Convention. The first decision was made on 18 December 1995 and the last on 11 February 1997. The Tax Rectification Boards rejected their claims. The tax authorities found that the relevant profits were to be taxed as ordinary income. In assessing the taxable gains, they did not accept that a 30% deduction, based on the presumption of the acquisition price, be made from the sales price. Instead, they found that the assessment of the taxable gains was to be made by deducting the purchase price and sales cost from the sales price. Since in the relevant cases there were no purchase prices, only the sales costs were deducted.

The applicants appealed to the County Administrative Courts (lääninoikeus, länsrätt). They requested that the profit on sale be taxed by applying the 1992 Act, i.e. as capital gains and not as ordinary income. They also requested that the legal presumption as regards the acquisition price be taken into account and a corresponding amount be deducted when assessing the taxable gains. They maintained, inter alia, that the interpretation, based on retrospective legislation, according to which the profits on sale of the stock options were taxed as ordinary income, infringed the principle of equality as well as the right of property and, furthermore, was contrary to Article 1 of Protocol No. 1 to the Convention.

On 13 February 1997 the first decision was given by the County Administrative Court of Turku and Pori. It rejected the appeals lodged by the applicants living in the relevant county.

The above-mentioned applicants, living in the County of Turku and Pori, applied to the Supreme Administrative Court (korkein hallinto-oikeus, högsta förvaltningsdomstolen) for leave to appeal.

On 6 October 1998 the Supreme Administrative Court granted leave to appeal to one of the applicants, but rejected the appeal on merits. The court decided to publish the judgment in its yearbook of precedents (1998:53). The key words in the summary of the precedent are, inter alia, “right of property” and “equality”. After adopting the first judgment, the Supreme Administrative Court refused the other four applicants, who had already received a judgment from the County Administrative Court, leave to appeal.

The Supreme Administrative Court stated in its reasoning, inter alia, that the relevant tax on income was not a confiscatory measure which could be regarded as infringing the right of property. It noted that the applicant’s taxable income, based on the sale of the stock options, corresponded to the actual gains from that sale. The Supreme Administrative Court found that it had not been contrary to Article 1 of Protocol No. 1 to the Convention to tax an income, made by selling stock options, as any other ordinary earnings.

Had the applicants sold their stock options on 1 December 1998, which was the originally planned first possible day to transfer the warrants pertaining to bonds, the total net value of the stock options after income tax would have been FIM 189,349,569 (EUR 31,846,311.39). Had the stock options been sold on 30 December 1999, the total net value after income tax would have been FIM 882,739,513 (EUR 148,466,128.30).

B.  Other relevant domestic practice

On 21 October 1998 the Supreme Administrative Court gave a decision in another case in which it found that the profits from a sale of a stock option in December 1994 were to be taxed as capital gains since the original loan conditions had not been altered and since the relevant company had agreed to the transfer prior to 16 September 1994.

COMPLAINTS

1.  The applicants complain, under Article 1 of Protocol No. 1 to the Convention, that the applying of a retrospective tax law, leading to a considerably higher tax liability than the previous law, has violated their right to the peaceful enjoyment of their possessions. They argue that the retrospective legislation does not fulfill the requirements of lawfulness in respect of foreseeability, and that it rendered the actions taken by the applicants unprofitable since they lost the opportunity to enjoy the later increase in the value of stock.

2.  The applicants also complain, under Article 6 § 1 of the Convention, that they did not have a fair trial as they had not been able to challenge before a court whether the 1994 Provision should be applied to their particular circumstances as it had not been possible to make any exceptions in applying the tax legislation.

3.  They finally complain, under Article 13 of the Convention about the lack of an effective remedy. As the Tax Rectification Boards had not discussed the questions arising under the property rights, the applicants could not in their tax appeals criticise those decisions in a proper manner.

THE LAW

1.  The applicants complain, under Article 1 of Protocol No. 1 to the Convention, that the applying of a retrospective law, leading to a considerably higher tax liability than the previous law, violated their right to the peaceful enjoyment of their possessions. Article 1 of Protocol No. 1 reads as follows:

“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

The Government disagree with the applicants’ contention. They note that neither the Convention nor any of its Protocols protect a right to obtain possessions as Article 1 of Protocol No. 1 is limited to enshrining the right of everyone to the peaceful enjoyment of already existing possessions. The essential characteristic needed for the fulfilment of the notion of “possession” within the meaning of Article 1 of Protocol No. 1 is the acquired economic value of the individual interest. Expectations such as those at issue in this case do not have the degree of concreteness to bring them within the idea of “possessions”.

The Government observe that the purpose of the impugned measures was to secure the payment of taxes within the meaning of the rule in the second paragraph of Article 1 of Protocol No. 1.

The Government consider it clear that the domestic lawfulness of the amended Section 66, subsection 3, of the Income Tax Act cannot be doubted. Secondly, as regards the retroactivity of the Act, the Government recall that retroactivity in legislation on non-criminal matters is, in principle, prohibited neither by the Constitution of Finland nor by Article 1 of Protocol No. 1.

The Income Tax Act was amended with some retrospective effect, inter alia, to rectify a flaw in the Act which was never intended by the legislature. In the public debate in Finland the very favourable terms of option arrangements were considered unjust by those who paid taxes on their salaries at a progressive rate of taxation. The aim of the amendment was to make the favourable option arrangements taxable income in their entirety, by applying a progressive rate of taxation. The debate on the necessity of a retroactive provision of application was initiated in October 1994, when the intention of certain quoted companies to use their options already in 1994 became public knowledge. Finally, due to the extensive practice of using options based on an employment relationship earlier, and due to public opinion, it was necessary to legislate retroactively. There was, thus, an obvious and compelling general interest, related to the credibility of the system of taxation, that the said incomes based on an employment relationship were treated equally. The Government also note that the applicants’ tax liabilities for the relevant year had not been settled before the amendment of the Income Tax Act was to be applied to them. Furthermore, they emphasise that the applicants did not follow their earlier agreements but changed them in response to the discussion which took place concerning the tax liabilities for stock options, in order to allow an earlier use of the stock options. One of the aims of the interference was, thus, to enhance equality amongst tax payers. An urgent intervention by means of legislation was necessary at the time.

The Government also emphasise that, in order to implement the impugned measures, the legislator must have a wide margin of appreciation. In the Government’s view, the aforesaid aim of the interference undoubtedly fulfils the criteria set by Article 1 of Protocol No. 1. In no case can the reasoning given be characterised as being manifestly unreasonable. Accordingly, the 1995 Act had a legitimate aim in the general interest.

The applicants recall that the tax which they believed to be applicable in the present case, in accordance with the law applicable at the time they sold their option certificates at issue here, would originally have been 25 per cent of the sales price of the certificates. However, the applicants could have reduced the assumed purchase price, equivalent to 30 per cent of the sales price. Thus, the net taxes would have been only 17,5 per cent of the sales price. Having changed the applicable tax law retroactively so that the tax to be paid was over 60 per cent of the sales price, the Finnish State had deprived the applicants of their possessions in violation of Article 1 of Protocol No. 1 to the Convention.

The applicants rely on the case of Pressos Compania Naviera S.A. v. Belgium (judgment of 20 November 1995, Series A no. 332), arguing that their expectation “constituted an asset” and a possession within the meaning of the first sentence of Article 1 of Protocol No. 1.

The applicants question whether any sort of taking can be disguised as “a tax”. In the present case the central issue is that Finland’s State budget had made no reservation whatsoever for this sort of unexpected collection of taxes. The situation, in other words, is not one in which the State collects taxes fairly to cover expenditures for which it has budgeted.

The applicants contest the lawfulness of the means used in the present case. The requirement concerning the lawfulness encompasses the foreseeability of a proposed law and the publication of its content. The Government’s allegations as to the foreseeability of the amendment to the law in question refers at most to the known fact that the law was to become stricter - not to any knowledge that the tax increase was also to be retroactive. The idea of the foreseeability of a law is that people know what sort of changes lie ahead and can thus take those changes into account in advance and act accordingly.

The applicants note that, even taking into account the wide margin of appreciation given to the States in respect of the taxes to be collected, there must be an objective and reasonable justification for any intereference with the applicants’ property rights. Overly systematic application of the doctrine of the margin of appreciation entails the risk that the object of the Court’s examination will remain insubstantial, thus reducing the scope of the protection that Article 1 of Protocol No. 1 guarantees.

Furthermore, the applicants emphasise that the total sum received from the sale of option certificates, after taxes, was FIM 19,266,448 (EUR 3,240,383.94). Their expectation at the time was significantly greater, inasmuch as the intention was to take the forthcoming change in the law into account and sell the options before the tax was increased. The implementation of that tax increase was to be considered a matter of course at the time, since the Government had submitted the Bill. If the Government’s Bill had contained a provision for retroactivity when it was submitted, the applicants would have abandoned their intentions to sell; or, more precisely, those intentions would never have developed. If the latter alternative had occurred, i.e. had the legislation been foreseeable, the applicants would have waited for an appropriate time to sell. On the original date of subscription, 1 December 1998, converting the options would have yielded a total of FIM 189,349,569 (EUR 31,846,311.39) after taxes. If the sale had taken place on 30 December 1999, the applicants would together have received FIM 882,739,513 (EUR 148,466,128.30) after taxes. The options remained exercisable until 31 January 2000. These calculations demonstrate clearly how radically the owners’ rights have been interfered with as a result of unforeseeable changes affecting the right of ownership. As a consequence of those changes, the applicants, even after consulting the best experts, had to dispose of their property in a manner that generated the greatest possible loss.

The applicants consider that the retrospective actions by virtue of which legal transactions leading to a huge loss must be considered a violation of the right of ownership. According to them, it is questionable whether unnoticed interference with ownership, in the State budget, can in reality be considered a tax at all. A major disproportion exists between the actions of the State and the loss suffered by the applicants.

The Court recalls that Article 1 of Protocol No. 1 guarantees in substance the right to property. It comprises three distinct rules. The first, which is expressed in the first sentence of the first paragraph and is of a general nature, lays down the principle of the peaceful enjoyment of possessions. The second, in the second sentence of the same paragraph, covers deprivation of possessions and makes it subject to certain conditions. The third, contained in the second paragraph, recognises that the Contracting States are entitled to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.

However, the three rules are not “distinct” in the sense of being unconnected: the second and the third rules are concerned with particular interferences with the right to peaceful enjoyment of property and should therefore be construed in the light of the general principle enunciated in the first rule.

Having regard to the fact that the background to the alleged deprivation of the applicants’ rights concerns the steps taken by Parliament to ensure that the option certificates’ sales price was subject to tax, the Court finds it natural to examine their complaints from the angle of a control of the use of property in the general interest “to secure the payment of taxes”, which falls within the rule in the second paragraph of Article 1 of Protocol No. 1.

It is to be recalled in this respect that irrespective of the retroactive legislation at issue, the profit earned by the applicants from the option certificates’ sales price would always have been liable to be brought into account for tax purposes since the benefits resulting from the lower purchase price under employee stock purchase programmes were, under the 1992 Act, taxed as ordinary income. Also sales profits were taxed, but as capital gains. The 1994 Provision changed the tax treatment of these profits to the effect that the tax rate was based on the progressive income tax rate.

According to the Court’s well-established case-law, an interference, including one resulting from a measure to secure payment of taxes, must strike a “fair balance” between the demands of the general interest of the community and the requirements of the protection of the individual’s fundamental rights. The concern to achieve this balance is reflected in the structure of Article 1 as a whole, including the second paragraph: there must be a reasonable relationship of proportionality between the means employed and the aims pursued.

Furthermore, in determining whether this requirement has been met, it is recognised that a Contracting State, not least when framing and implementing policies in the area of taxation, enjoys a wide margin of appreciation and the Court will respect the legislature’s assessment in such matters unless it is devoid of reasonable foundation (see the National & Provincial Building Society, the Leeds Permanent Building Society and the Yorkshire Building Society v. the United Kingdom, judgment of 23 October 1997, Reports of Judgments and Decisions 1997-VII, §§ 80-82).

In the Court’s view the changes in the tax legislation which took effect on 1 January 1995 as such certainly fall within this margin despite the fact that they applied, as from the above-mentioned date, even to existing stock option arrangements. Nor does the fact that the legislation applied retroactively in the applicants’ case constitute per se a violation of Article 1 of Protocol No. 1, as retrospective tax legislation is not as such prohibited by that provision. The question to be answered is whether, in the applicants’ specific circumstances, the retrospective application of the law imposed an unreasonable burden on them and thereby failed to strike a fair balance between the various interests involved.

In this respect the Court considers that the applicants did not have an expectation protected by Article 1 of Protocol No. 1 that the tax rate would, at the time when they would have been able to draw benefits from the stock option programme according to the original terms of the programme, i.e. between 1 December 1998 and 31 January 2000, be the same as it was in 1994 when the applicants subscribed the bonds. The Court does not exclude that the situation might have to be assessed differently, had the law applied (which it did not) even to cases in which the exercise of the stock options was possible before 1 January 1995 according to the relevant terms and conditions of the stock option programmes in question. In such a situation, in which the applicants did not find themselves, taxation at a considerably higher tax rate than that in force on the date of the exercise of the stock options could arguably be regarded as an unreasonable interference with expectations protected by Article 1 of Protocol No. 1.

The retroactive application of the law in the applicants’ case would not appear to have such drastic consequences as in respect of the so-called “pure cases”. Whether it is compatible with Article 1 of Protocol No. 1 depends, first, on the reasons for the retroactivity and, secondly, on the impact of the retroactive law on the position of the applicants.

The Court notes that the alteration to the tax treatment of profits, made from appreciation of stock acquired under employer’s stock options incentive programmes, was considered necessary from the angle of fiscal policy in the Bill issued in September 1994. The amendment was planned to be applied to existing stock option arrangements as from the beginning of 1995. This would have meant that only such existing stock options that could be exercised already in 1994 would have been left outside the application of the amendment. However, it appeared that some companies were planning to make arrangements to the effect that the stock options would be exercisable earlier than laid down in the original terms. Boards of Directors could also change the time of exercise by giving a collective permission to an earlier transfer without altering the original terms. The implementing provision of the 1994 Provision aimed at bringing these types of arrangements within the scope of the altered tax treatment. The retrospective effect was the Parliament’s answer to the pre-emptive steps that had been taken is order to avoid the higher tax rate.

The Court finds that the main aim of the retrospective implementing provision was to prevent stock option arrangements, which were originally planned to fall under the amended provision, from escaping it. It accepts that this aim was part of the aim of ensuring equal treatment of taxpayers, i.e. in this case equal treatment in comparison with those who did not bring forward the exercise date of the stock options. The Court considers that the assessment made by the legislature in this respect cannot be regarded as unreasonable.

As to the impact of the measure, the Court considers that the legislation was not such as to amount to confiscatory taxation or of such a nature as could deprive the legislation of its character as a tax law. Despite its important financial consequences for the applicants, the measure cannot be said to have imposed an excessive burden on them, taking into account the maximum percentage of the tax levy and the fact that the levy, which in part was a reflection of the very high general income level of the applicants, was based on real profits made from the sale of the stock options. The Court notes that the impact of the taxation measures should be assessed, from the point of view of Article 1 of Protocol No. 1, above all with reference to the situation existing at the time of the exercise of the stock options by the applicants, without regard to the subsequent developments in the stock market.

Taking into account the margin of appreciation which the States have in taxation matters, the Court considers therefore that the actions taken by the respondent State did not upset the balance which must be struck between the protection of the applicants’ rights and the public interest in securing the payment of taxes.

It follows that this complaint is manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 and 4 of the Convention.

2.  The applicants complain that they did not have access to court as they were not able to challenge before a court the lawfulness of the retroactive amendment to the 1994 Act as it is not possible for the domestic courts to make any exceptions in applying the tax legislation. They invoke Article 6 § 1 of the Convention which reads, insofar as relevant, as follows:

“In the determination of his civil rights and obligations ..., everyone is entitled to a fair ... hearing ... by [a] ... tribunal...”

In this respect the Court recalls, in accordance with its established case-law, that this provision does not guarantee a right of access to a court with competence to invalidate or override a law (see, inter alia, James and Others v. the United Kingdom, judgment of 21 February 1986, Series A no. 98, § 81). Moreover, the Court recalls its case-law according to which tax disputes fall outside the scope of civil rights and obligations, despite the pecuniary effects which they necessarily produce for the taxpayer (see, inter alia, Ferrazzini v. Italy [GC], no. 44759/98, §§ 29 31, 12 July 2001). Accordingly, Article 6 § 1 does not apply in the instant case.

It follows that this complaint is incompatible ratione materiae with the provisions of the Convention within the meaning of Article 35 § 3 and must be rejected in accordance with Article 35 § 4.

3.  The applicants finally complain about the lack of an effective remedy as the Tax Rectification Boards did not discuss the questions arising in respect of property rights, leading to the fact that the applicants could not in their tax appeals criticise those decision in a proper manner. They invoke Article 13 which reads as follows:

“Everyone whose rights and freedoms as set forth in [the] Convention are violated shall have an effective remedy before a national authority notwithstanding that the violation has been committed by persons acting in an official capacity.”

In this connection the Court recalls, in conformity with its established case-law, that Article 13 does not guarantee a remedy whereby a law as such can be challenged before a domestic organ (see, inter alia, James and Others v. the United Kingdom, cited above, § 85). It follows from the terms of the applicants’ submissions that it is basically the legislation as such which they attack. However, as stated above, Article 13 does not guarantee a remedy for such complaints.

It follows that also this complaint is incompatible ratione materiae with the provisions of the Convention within the meaning of Article 35 § 3 and must be rejected in accordance with Article 35 § 4.

For these reasons, the Court unanimously

Declares the application inadmissible.

Michael O’Boyle Nicolas Bratza
Registrar President

ANNEX

The applicants are:

1. Mr M.A., born in 1952 and resident in Kauniainen;

2. Mr T.A., born in 1952 and resident in Lohja;

3. Mr P. A.-P., born in 1957 and resident in Helsinki;

4. Ms S.B., born in 1955 and resident in Helsinki;

5. Mr K.B., born in 1954 and resident in Espoo;

6. Mr M.H., born in 1949 and resident in Espoo;

7. Mr T.H., born in 1942 and resident in Espoo;

8. Mr J.H., born in 1941 and resident in Espoo;

9. Mr J.H., born in 1957 and resident in Salo;

10. Mr O.-P.K., born in 1953 and resident in Espoo;

11. Mr P.K., born in 1961 and resident in Salo;

12. Mr H.K., born in 1950 and resident in Helsinki;

13. Ms P.K., born in 1960 and resident in Espoo;

14. Ms K.-M.K., born in 1950 and resident in Helsinki;

15. Mr L.K., born in 1948 and resident in Tampere;

16. Mr V.L., born in 1951 and resident in Salo;

17. Mr E.T.L., born in 1949 and resident in Espoo;

18. Mr R.L., born in 1949 and resident in Salo;

19. Mr K.L., born in 1945 and resident in Helsinki;

20. Mr T.L., born in 1938 and resident in Espoo;

21. Mr N.L., born in 1956 and resident in Helsinki;

22. Mr Y.N., born in 1943 and resident in Espoo;

23. Mr K.O., born in 1939 and resident in Tervalampi;

24. Mr J.O., born in 1950 and resident in Espoo;

25. Mr K.P., born in 1956 and resident in Espoo;

26. Ms U.R., born in 1953 and resident in Espoo;

27. Ms K.I.S., born in 1957 and resident in Espoo;

28. Mr K.S., born in 1950 and resident in Espoo;

29. Mr H.S., born in 1950 and resident in Salo;

30. Ms M.T., born in 1946 and resident in Helsinki;

31. Mr P.V., born in 1952 and resident in Salo;

32. Mr P.W., born in 1948 and resident in Helsinki;

33. Mr E.V., born in 1955 and resident in Oulu;

34. Mr A.V., born in 1956 and resident in Espoo; and

35. Mr S.W., born in 1943 and resident in Helsinki.

All applicants are Finnish citizens except applicant N.L., who is a citizen of the United Kingdom.