CASE OF GYRLYAN v. RUSSIA
(Application no. 35943/15)
9 October 2018
This judgment will become final in the circumstances set out in Article 44 § 2 of the Convention. It may be subject to editorial revision.
In the case of Gyrlyan v. Russia,
The European Court of Human Rights (Third Section), sitting as a Chamber composed of:
Vincent A. De Gaetano,
Pere Pastor Vilanova,
María Elósegui, judges,
and Stephen Phillips, Section Registrar,
Having deliberated in private on 18 September 2018,
Delivers the following judgment, which was adopted on that date:
1. The case originated in an application (no. 35943/15) against the Russian Federation lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms ("the Convention") by a Russian national, Mr Sergey Konstantinovich Gyrlyan ("the applicant"), on 14 July 2015.
2. The applicant was represented by Mr A. Koyfman, a lawyer practising in Moscow, who died in the course of the proceedings. The Russian Government ("the Government") were represented initially by Mr G. Matyushkin, the Representative of the Russian Federation to the European Court of Human Rights, and then by his successor in that office, Mr M. Galperin.
3. The applicant complained that the confiscation of his lawfully acquired money had been an excessive and disproportionate measure.
4. On 9 February 2017 the Government were given notice of the application.
I. THE CIRCUMSTANCES OF THE CASE
5. The applicant was born in 1972 and now lives in Odessa, Ukraine.
6. On 31 January 2014 the applicant sold a plot of land and a summer cottage in the Moscow Region for 4,600,000 Russian roubles (RUB). On 20 February 2014 he exchanged RUB 3,605,000 for 100,000 United States dollars (USD).
7 . On 19 March 2014 the applicant travelled to Odessa from Domodedovo Airport in Moscow. He was carrying the entire USD 100,000 in his handbag. At the security check, his hand luggage was X-rayed. An officer asked him whether he was carrying any cash. The applicant acknowledged that he had money in his handbag and showed it to the officer.
8. The applicant was subsequently interviewed by a police officer and an investigator on suspicion of smuggling foreign currency. He insisted on the lawful origin of the money and claimed that he had erroneously believed that the customs control would take place after the security check.
9 . On 18 April 2014 the investigator refused to initiate criminal proceedings because it could not be established that the applicant had deliberately sought to circumvent customs regulations.
10. On 6 June 2014 the Federal Customs Service prepared a report on a regulatory customs offence under Article 16.4 of the Code of Administrative Offences. The applicant was charged for his failure to make a written declaration in respect of the USD 100,000 he had been carrying on him.
11. A hearing was held on 18 December 2014 before a justice of the peace in the Domodedovo District of the Moscow Region. The court held that the customs report and statements the applicant had given to the police were sufficient evidence of the offence. It was legally irrelevant whether he had deliberately sought to circumvent customs regulations or negligently failed to abide by the applicable declaration requirements. The court issued a confiscation order for USD 90,000, reasoning as follows:
"When deciding on the punishment, the court takes into account the nature and gravity of the offence which is connected to the operation of a hazardous device, the information on the character of Mr Gyrlyan, who has no previous record of similar offences, and considers it appropriate to order confiscation of the object of the administrative offence."
12. In his grounds of appeal, the applicant relied in particular on the case-law of the Constitutional Court, which emphasised that any punishment had to be fair and proportionate to the nature of the offence, the gravity of the consequences, the extent of the damage and other relevant factors. He pointed out that the money had been lawfully obtained and that his actions had not caused any damage to the State.
13. On 14 January 2015 the Domodedovo Town Court dismissed the appeal in a summary fashion, noting that the punishment had been determined "within the range of penalties [provided for in Article 16.4 of the Code of Administrative Offences] and with regard to the character of the offender".
14. An appeal on points of law was dismissed by the deputy president of the Moscow Regional Court on 30 April 2015. He wrote that "the defence's allegation of a formalistic approach on the part of the [lower] courts [was their] subjective opinion that [did not] shield Mr Gyrlyan from liability."
II. RELEVANT DOMESTIC LAW
15 . The Code of Administrative Offences (as worded at the material time) provided as follows:
Article 16.4 - Non-declaration or inaccurate declaration by individuals
of cash and/or monetary instruments
"The non-declaration or inaccurate declaration by individuals of cash and/or monetary instruments being carried across the customs border of the Customs Union which are subject to a written declaration, provided that these acts are not constitutive of a criminal offence:
shall be punishable by an administrative fine of between once and twice the amount of the undeclared cash and/or monetary instruments or confiscation of the object of the administrative offence.
Note 1. For the purposes of the present article, the undeclared amount shall be deemed equivalent to the portion of cash and/or monetary instruments exceeding the amount which the customs regulations of the Customs Union allow to be taken in or out without a written declaration."
16 . On 5 July 2010 the Inter-State Council of the Eurasian Economic Community, a regional organisation comprising Belarus, Kazakhstan and Russia, approved a treaty on the procedure for the movement by individuals of cash and/or monetary instruments across the customs border of the Customs Union. Article 4 (as in force at the material time) provided as follows:
"1. An individual may take cash and/or travellers' cheques out of the customs territory of the Customs Union without restrictions in the following manner:
if carrying cash and/or travellers' cheques in a total amount exceeding the equivalent of 10,000 [United States] dollars at one time, the cash and/or cheques must be reported on a written customs declaration by means of filing a passenger customs declaration stating the entire amount of cash or cheques being carried."
I. ALLEGED VIOLATION OF ARTICLE 1 OF PROTOCOL No. 1 TO THE CONVENTION
17. The applicant complained that that the decision of the domestic authorities in the administrative-offence proceedings to confiscate USD 90,000 of his money for having failed to declare the sum of USD 100,000 at customs had been excessive and disproportionate to the legitimate aim pursued. He relied on Article 1 of Protocol No. 1 to the Convention, which 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."
18. The Government recapitulated the applicable legal provisions and distinguished the present case from the case of Ismayilov v. Russia (no. 30352/03, 6 November 2008), in that the applicant had been held accountable for an administrative, rather than criminal, offence and given the minimum penalty. In the Government's view, the domestic courts had assessed the proportionality of the interference and rejected the applicant's arguments in that respect, finding that he could have abided by the applicable customs regulations but had not.
19. The Court considers that the application is not manifestly ill-founded within the meaning of Article 35 § 3 (a) of the Convention. It further notes that it is not inadmissible on any other grounds. It must therefore be declared admissible.
20. It is not in dispute between the parties that the applicant was the lawful owner of USD 90,000, which constituted his "possessions" for the purposes of Article 1 of Protocol No. 1 (contrast Eliseev and Ruski Elitni Klub v. Serbia (dec.), no. 8144/07, §§ 32-36, 10 July 2018). The decision to confiscate that amount therefore constituted an interference with his right to the peaceful enjoyment of his possessions (see Ismayilov , cited above, § 29; Paulet v. the United Kingdom , no. 6219/08, § 64, 13 May 2014; and Boljević v. Croatia , no. 43492/11, § 37, 31 January 2017).
21. The Court reiterates its consistent approach that a confiscation measure, even though it involves a deprivation of possessions, falls within the scope of the second paragraph of Article 1 of Protocol No. 1, which allows the Contracting States to control the use of property to secure the payment of penalties. However, this provision must be construed in the light of the general principle set out in the first sentence of the first paragraph and there must, therefore, exist a reasonable relationship of proportionality between the means employed and the aim sought to be realised (see Ismayilov , § 30, and Paulet , § 64, both cited above, and Grifhorst v. France , no. 28336/02, §§ 85-86, 26 February 2009).
22. By contrast with previous cases against Russia in which the Court identified defects in the legal framework governing the confiscation of foreign currency (see Baklanov v. Russia , no. 68443/01, § 46, 9 June 2005; Sun v. Russia , no. 31004/02, §§ 29-33, 5 February 2009; and Adzhigovich v. Russia , no. 23202/05, §§ 30-34, 8 October 2009), the sanction for non-compliance with the obligation to declare any amount of foreign currency exceeding USD 10,000 was established in Article 16.4 of the Code of Administrative Offences, which provided for either a fine or a confiscation order (see paragraph 15 above). The Court is therefore satisfied that the interference with the applicant's property rights was provided for by law, as required by Article 1 of Protocol No. 1.
23. The Court further notes that States have a legitimate interest and also a duty by virtue of various international treaties to implement measures to detect and monitor the movement of cash across their borders, since large amounts of cash may be used for money laundering, drug trafficking, financing terrorism or organised crime, tax evasion or the commission of other serious financial offences. The general declaration requirement applicable to any individual crossing the State border prevents cash from entering or leaving the country undetected and the confiscation measure which the failure to declare cash to the customs authorities results in is part of the general regulatory scheme designed to combat those offences. The Court therefore considers that the confiscation measure conformed to the general interest of the community (see Ismayilov , § 34, and Grifhorst , § 93, both cited above).
24. The remaining question for the Court to determine is whether the interference struck the requisite fair balance between the protection of the right of property and the requirements of the general interest, taking into account the margin of appreciation left to the respondent State in that area. The requisite balance will not be achieved if the property owner concerned has had to bear "an individual and excessive burden". Moreover, although the second paragraph of Article 1 of Protocol No. 1 contains no explicit procedural requirements, the Court must consider whether the proceedings as a whole afforded the applicant a reasonable opportunity to put his case to the competent authorities with a view to enabling them to establish a fair balance between the conflicting interests at stake (see Grifhorst , § 94; Paulet , § 65; and Boljević , § 41, all cited above; Denisova and Moiseyeva v. Russia , no. 16903/03, §§ 58-59, 1 April 2010; and Rummi v. Estonia , no. 63362/09, § 104, 15 January 2015).
25. The administrative offence of which the applicant was found guilty was his failure to declare the full amount of cash which he was carrying to the customs authorities. It is worth noting that the act of taking foreign currency out of Russia was not illegal under Russian law or the law of the Customs Union of which Russia is a member State. Not only was it permissible to export foreign currency, but the sum which could be legally transferred or, as in the present case, physically carried across the customs border, was not in principle restricted (see paragraph 16 above). Those elements distinguish this case from certain others, in which the confiscation measure applied either to goods whose import was prohibited or to vehicles used for transporting prohibited substances or trafficking human beings (for examples of such cases, see Ismayilov , § 35, and Grifhorst , § 99, both cited above).
26. Furthermore, the lawful origin of the confiscated cash was not disputed. The applicant presented to the domestic authorities and the Court documentary evidence, including a contract for the sale of a house and land and receipts from Russian banks where he had exchanged his money, showing that the money had originated from the sale of his property in the Moscow Region. On that basis the Court distinguishes the present case from cases in which the confiscation measure covered assets which were the proceeds of a criminal offence, were deemed to have been unlawfully acquired or were intended for use in illegal activities (for examples of such cases, see Ismayilov , cited above, § 36).
27. Turning next to the applicant's conduct, the Court notes that there is no indication that he was deliberately seeking to circumvent customs regulations. When asked at the security check whether he had any cash, he replied in the affirmative (see paragraph 7 above and compare with Moon v. France , no. 39973/03, § 8, 9 July 2009, and Grifhorst , cited above, § 8, in which the applicants denied that they had any money on them). The lack of intent to deceive was conceded by the Russian authorities, which decided not to pursue criminal proceedings on that basis (see paragraph 9 above). There is nothing in the case file to suggest that the applicant was suspected of or charged with any criminal offences in connection with the incident at issue or that by imposing the confiscation measure on him the authorities were seeking to prevent any other illegal activities, such as money laundering, drug trafficking, financing terrorism or tax evasion. The money he was carrying had been lawfully acquired and he was allowed to take it out of Russia and the Customs Union so long as he declared it to the customs authorities. It follows that the only prosecutable conduct which could be attributed to him was failure to make a written declaration to that effect to the customs authorities (compare Ismayilov , § 37, and Boljević , § 43, both cited above).
28. The Court reiterates that in order to be proportionate, the interference should correspond to the severity of the infringement, and the sanction to the gravity of the offence it is designed to punish - in the instant case, failure to comply with the declaration requirement - rather than to the gravity of any presumed infringement which has not actually been established, such as an offence of money laundering or tax evasion (see Ismayilov , § 38; Grifhorst , § 102; and Boljević , § 44, all cited above).
29. The amount confiscated was undoubtedly substantial for the applicant, for it represented almost the entire proceeds of sale of his property in Russia. On the other hand, the harm that the applicant might have caused to the authorities was minor: he had not avoided customs duties or any other levies or caused any other pecuniary damage to the State. Had the amount gone undetected, the Russian authorities would have only been deprived of the information that the money had left Russia. Thus, the confiscation measure was not intended as pecuniary compensation for damage - as the State had not suffered any loss as a result of the applicant's failure to declare the money - but was deterrent and punitive in its purpose (see Ismayilov , cited above, § 38).
30. The Court is not convinced by the Government's argument that an assessment of proportionality was incorporated in the domestic decisions. It does not appear that the above considerations relating to the lawful origin of the money, the unintentional nature of the applicant's conduct or the absence of indications of any other customs offences, played any role in their decision-making. The sentencing court merely referred to the "nature and dangerousness of the offence" and "information on the [applicant's] character" but did not ask whether or not the confiscation order was in the public interest or whether the requisite balance was maintained in a manner consonant with the applicant's right to the peaceful enjoyment of his possessions. Accordingly, the Court finds that the scope of the review carried out by the domestic courts was too narrow to satisfy the requirement of seeking the "fair balance" inherent in the second paragraph of Article 1 of Protocol No. 1 (see Paulet , cited above, § 68).
31. Moreover, contrary to the Government's claim that the court had opted for the most lenient penalty, Article 16.4 does not appear to leave the sentencing court any discretion in the matter by imposing a choice between a fine equivalent to at least the undeclared amount or confiscation of the undeclared cash. In either case, it was the entire undeclared amount that was forfeited to the State. In the Court's view, such a rigid system is incapable of ensuring the requisite fair balance between the requirements of the general interest and the protection of an individual's right to property (see Grifhorst , cited above, § 103 in fine , and also Vasilevski v. the former Republic of Macedonia , no. 22653/08, § 57, 28 April 2016, and Andonoski v. the former Yugoslav Republic of Macedonia , no. 16225/08, § 38, 17 September 2015, in which the domestic legislation prevented the courts from considering the relationship between the applicant's conduct and the offence). The confiscation measure imposed an individual and excessive burden on the applicant and was disproportionate to the offence committed (see Ismayilov , § 38, and Boljević , § 45, both cited above; and Tanasov v. Romania , no. 65910/09, § 28, 31 October 2017).
32. There has therefore been a violation of Article 1 of Protocol No. 1.
II. APPLICATION OF ARTICLE 41 OF THE CONVENTION
33. Article 41 of the Convention provides:
"If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party."
34. The applicant claimed 90,000 United States dollars (USD) in respect of pecuniary damage and asked the Court to determine the amount of compensation in respect of non-pecuniary damage.
35. The Government submitted that the claim in respect of non-pecuniary damage should be rejected because the applicant had not specified the amount he claimed.
36. The Court reiterates that it has agreed to examine claims in respect of non-pecuniary damage for which applicants did not quantify the amount, "leaving it to the Court's discretion" (see Nagmetov v. Russia [GC], no. 35589/08, § 72, 30 March 2017, with further references). In the present case, it awards the applicant 73,000 euros (EUR) in respect of pecuniary damage - the equivalent of USD 90,000 on the date of submission of the claim - and EUR 1,500 in respect of non-pecuniary damage, plus any tax that may be chargeable.
37. The Court considers it appropriate that the default interest rate should be based on the marginal lending rate of the European Central Bank, to which should be added three percentage points.
FOR THESE REASONS, THE COURT, UNANIMOUSLY,
1. Declares the application admissible;
2. Holds that there has been a violation of Article 1 of Protocol No. 1 to the Convention;
(a) that the respondent State is to pay the applicant, within three months from the date on which the judgment becomes final in accordance with Article 44 § 2 of the Convention, the following amounts:
(i) EUR 73,000 (seventy-three thousand euros), plus any tax that may be chargeable, in respect of pecuniary damage;
(ii) EUR 1,500 (one thousand five hundred euros), plus any tax that may be chargeable, in respect of non-pecuniary damage;
(b) that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amounts at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points.
Done in English, and notified in writing on 9 October 2018, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.
Vincent A. De Gaetano