AS TO THE ADMISSIBILITY OF
Application no. 11143/04
by Per Harald MJELDE
The European Court of Human Rights (First Section), sitting on 1 February 2007 as a Chamber composed of:
Mr C.L. Rozakis, President,
Mr L. Loucaides,
Mrs N. Vajić,
Mr K. Hajiyev,
Mr D. Spielmann,
Mr S.E. Jebens,
Mr G. Malinverni, judges,
and Mr S. Nielsen, Section Registrar,
Having regard to the above application lodged on 24 March 2004,
Having regard to the decision to apply Article 29 § 3 of the Convention and examine the admissibility and merits of the case together.
Having regard to the observations submitted by the respondent Government,
Having deliberated, decides as follows:
The applicant, Mr Per Harald Mjelde, is a Norwegian national who was born in 1965 and lives in Oslo. He was represented before the Court by Mr V. Strømme, a lawyer practising in Oslo. The Norwegian Government (“the Government”) were represented by their Agent, Mrs F. Platou Amble, Attorney at the Attorney General’s Office (Civil Affairs).
A. The circumstances of the case
The facts of the case, as submitted by the parties, may be summarised as follows.
1. Proceedings leading to a disqualification order
The applicant was the Chief Executive Officer and a member of the Governing Board of the company Næringslivets Innkjøpsorganisasjon Ltd, which was taken into bankruptcy in 1996. In this context, on 25 November 1997, the Oslo Probate and Bankruptcy Court (skifterett) inter alia found (i) that the applicant had failed to operate advance tax deduction through a separate bank account and had been grossly negligent in this respect, in breach of sections 4, 5, 5A and 51 of the Tax Payment Act 1952 (skattebetalingsloven); (ii) that there was reasonable ground for suspecting the applicant of having taken up a loan in the company in breach of sections 12-10 and 17-1 last sub-section of the Limited Liability Companies Act 1997 (aksjeselskapsloven) and (iii) embezzlement of the estate in breach of Articles 281 and 283A of the Penal Code. The Probate and Bankruptcy Court found reasonable ground for suspicion that such criminal acts as mentioned in section 142(1) of the Bankruptcy Act 1984 (konkursloven) had occurred. Moreover, under section 142(2) it found that his business conduct had been inappropriate to such a degree as to make him unsuited to establish a new limited liability company or to take part in such a company. Therefore, under section 142(1) and (2), the court ordered that he be disqualified (konkurskarantene) for a period of 2 years from establishing or taking on responsibilities for the governing board of such a company. In addition, under section 142(4) it extended the order to prohibiting the applicant from continuing existing responsibilities of this nature.
The Probate and Bankruptcy Court’s judgment contained the following reasoning:
“Pursuant to section 142(1) item 1, see sixth sub-section, item 2, of the Bankruptcy Act, a disqualification order may be imposed on [the applicant] as day-to-day manager of the company if there is ‘reasonable ground’ for suspecting him of a criminal act in connection with the bankruptcy or the activities that led to insolvency. Further, a disqualification order may be imposed pursuant to section 142 (1) item 2 ... if there is reason to presume that, on the ground because of unsound business conduct, the person is unfit to establish a new company, etc. There are sufficient grounds to impose a disqualification order if one of the conditions is fulfilled.
The taxation legislation contains provisions requiring separate tax deduction accounts in order to ensure that companies do not make use of funds that belong to the public authorities. Under sections 4, 5 and 5a of the Tax Payment Act, the amounts that are to be paid into tax deduction accounts are the part of taxable remuneration which is not to be retained by persons liable to pay tax (i.e. employees, etc), but which is to be paid as advance tax deductions. The employer has the responsibility for collecting advance tax deductions from employees. In principle, advance tax deductions should not go through a company’s operating accounts, but be paid directly into a tax deduction account, see section 11 of the Tax Payment Act. It is therefore insufficient to argue that there was adequate liquidity in the company both before and after the bankruptcy. The point is not whether the company was in a position to meet its obligations, but whether the amounts in question had in fact been set aside. In this connection, it is important to note that the company never had any formal right to make use of the advance tax deductions. Any exemption from criminal liability would have to be based on the grounds that the amounts that were not set aside were in fact paid at the correct time, see section 51, subsection 3 of the Tax Payment Act. This is not the case here.
The requirements for strict criminal liability under section 51 of the Tax Payment Act must be regarded as being fulfilled. With respect to whether [the applicant]’s actions fulfil the subjective requirements for liability, section 51 of the Tax Payment Act lays down intent or gross negligence. It is established that [the applicant], as general manager, was grossly negligent in not ensuring that the payments in question were actually made. The fact that he delegated the task of deducting tax payments in advance does not exempt him from criminal liability.
As regards the withdrawal of funds for personal use, the court finds that there is reasonable ground for suspecting that loans were raised in contravention of section 12-10 of the Limited Liability Companies Act. It has been claimed that the loans in question were within the framework of the company’s free equity, but the court cannot see that any security has been provided. This is an offence that is subject to penal sanctions, see section 17, last sub-section, of the Limited Liability Companies Act. The loans were advanced to [the applicant], and the requirements for both strict and subjective criminal liability must be considered to have been fulfilled.
Furthermore, the court finds that there is just cause for suspecting criminal withholding of assets from the estate pursuant to Article 281 of the Penal Code. Under Article 281, an attempt to withhold assets is sufficient to incur criminal liability. The court finds that there is reasonable ground for suspecting [the applicant] of attempting to withhold assets from the estate, since it is a fact that the computer equipment has not been transferred to the estate as required. Here too, the requirements for both strict and subjective liability are found to be fulfilled.
As regards the question of embezzlement of funds paid to the company by Stavanger Energi, the court notes that this has been reported to the police by their letter of 6 November 1997. This letter indicates that the police consider there to be reasonable ground for suspecting [the applicant] of criminal acts.
As regards whether the company operated at the creditors’ expense and how this relates to Article 283 A of the Penal Code, the court finds that in retrospect, it can be established that the company did operate at the creditors’ expense. However, the court does not have sufficient information to state with certainty whether there is reasonable ground for suspecting that the requirements for subjective criminal liability for violation of Article 283 A of the Penal Code are fulfilled. However, the court has found that there is reasonable ground for suspecting a number of other offences, and therefore does not consider it necessary to make a final decision on this question in order to determine whether or not a disqualification order should be imposed. Another question is whether this type of short trading in electricity can be considered to be sound business practice. In this connection, we cannot set such strict standards for documentation of [the applicant]’s subjective view of the matter. The court will return to this question below.
The court finds that there is reasonable ground for suspecting [the applicant] of offences such as are mentioned in section 142(1) item 1, of the Bankruptcy Act. It finds that the balance of probability is that [the applicant] is liable to punishment for one or more of the acts to which the Administrators has called attention. Thus, the conditions for imposing a disqualification order on [the applicant] pursuant to section 142(1) item 1, of the Bankruptcy Act are fulfilled.
The court finds that business conduct in this case has been so unsound that [the applicant] must be considered unfit to form or take part in the management of a new company, see section 142 (1) item 2, of the Bankruptcy Act. Particular importance is attached in this respect to the general disregard shown for companies legislation. This applies in particular to the provisions of the Limited Liability Companies Act relating to withdrawal of funds for personal use and borrowing from one’s own company. Furthermore, a number of the financial transactions made in the company’s name appear to have been carried out in [the applicant]’s personal interest. These include the purchase of a number of vehicles not conventionally used by a limited liability company of this type. For example, expensive motorcycles, sports cars and pleasure boats were purchased. In connection with an evaluation of business conduct, it is of little importance whether these were intended for use by [the applicant] himself or by his employees. In the court’s opinion, such transactions do not give a more favourable impression of the way the company was managed.
Despite the way the power market developed in 1996, [the applicant] allowed Næringslivets Innkjøpsorganisasjon to continue trading in electricity, even though the company did not have contracts for purchases of electricity to cover its sales. The company did not have sufficient funds for these transactions. The transactions thus became speculation at the purchaser’s risk, and in the final analysis at the purchaser’s expense. The company sold goods that it knew or should have known could not be delivered to the purchaser if electricity prices continued to rise. Short trading of this kind is acceptable if the company is in a strong enough financial position, which was not the case here. If the company does not have sufficient funds, its customers incur losses because they have to go out on the market and buy electricity at a higher price. In the court’s opinion, this cannot be in accordance with sound business practice.
[The applicant] has a history of several bankruptcies and is involved in several bankruptcy proceedings at present. He can therefore be described as a serial bankrupt, so that he belongs to the category which disqualification is specifically intended to deal with. The court has found no circumstances indicating that it would be unreasonable to impose a disqualification order. In the assessment of reasonableness it is important that the conditions of both item 1 and item 2 of section 142 (1) of the Bankruptcy Act are deemed to be fulfilled.
Nor can the court see that disqualification would be particularly unreasonable for [the applicant] on the grounds that he considers himself to be an entrepreneur and claims that disqualification would deprive him of the right to work. A disqualification order does not prohibit a person from working. [The applicant] could take up employment in a company or establish a company with unlimited liability to its creditors. The reason for issuing a disqualification order is that [the applicant] is considered unfit to establish a limited liability company.
Since the conditions of section 142(2) item 1, are fulfilled, the court further finds that, pursuant to section 142(4) of the Bankruptcy Act, [the applicant] should be removed from any existing offices in the management of companies, and he is therefore obliged to withdraw from any positions such as those mentioned in section 142 (3) and (5) of the Bankruptcy Act.”
This was the third time a disqualification order had been imposed on the applicant, who had been involved in several bankruptcies in the past.
On 4 March 1998 the Borgarting High Court (lagmannsrett) rejected an appeal by the applicant against the Probate and Bankruptcy Court’s judgment and upheld the latter’s findings under section 142(1) and (2) and, apparently also under (4), of the Bankruptcy Act. The High Court stated:
“The High Court does not find it established that the Probate and Bankruptcy Court has based its decision on erroneous facts or that the decision suffered from other errors that could lead to it being quashed.
Against the background of what emerges from the Administrators’ report, the High Court agrees with the Probate and Bankruptcy Court that there is reasonable ground for suspecting [the applicant] of breach of several penal provisions. It relates to breach of Articles 283A(2) item 2 and 281 of the Penal Code, section 51 of the Tax Payment Act and the taking up of loan in breach of section 12-10, see 17-1 last sub-section, the Limited Liability Companies Act. The conditions for disqualification under section 142(1) item 1 are therefore present, as the criminal offences refer to the bankruptcy and the activities that led to insolvency.
The High Court further agrees with the Probate and Bankruptcy Court that the management of the company at issue can be characterised as so indefensible that [the applicant] must be deemed unsuited to form a new liability company and take part in such a company, with the meaning of section 142 (1) item 2.
Having regard to the debtor’s conduct and the circumstances as a whole, the High Court finds that it seems reasonable, under section 142 (2), to subject him to a disqualification order. Reference is made to the Probate and Bankruptcy Court’s extensive reasoning, with which the High Court agrees in the main, and to the fact that [the applicant], according to the Administrators’ report, has been insolvent in also connection with a number of bankruptcies in the past and has also previously been subjected to disqualification.
Therefore the Probate and Bankruptcy Court’s decision is upheld.”
The applicant did not appeal against the above judgment by the High Court which became final.
2. Criminal conviction and sentence
Subsequently, on 8 September 1999, the applicant was charged on four counts of aggravated embezzlement inter alia in breach of Articles 255, 256, 281 and 288 of the Penal Code; section 2(2) of the Value Added Tax (VAT) Act 1969 (merverdiavgiftsloven); and section 51 of the Tax Payment Act. On 16 November 2000 he was in addition charged of aggravated breach of confidence (grovt utroskap) under Articles 275 and 276 of the Penal Code.
On 27 April 2001, the Oslo City Court (byrett) acquitted the applicant of all but one of the charges mentioned above, namely a charge of aggravated embezzlement, and sentenced him to 2 years’ imprisonment and to loss for 5 years of his right to run a business or to occupy a leading position in a company or be a member of a company board (Article 29(2) of the Penal Code).
On appeal by both the prosecution and the defence, the High Court, by a judgment of 11 October 2002, increased the sentence to 3 years, finding the applicant guilty also on the additional count of aggravated breach of confidence.
In his appeal to the Supreme Court the applicant requested, firstly, that the case be dismissed (avvist), arguing with reference to Article 4 of Protocol No. 7 to the Convention that the disqualification order barred the subsequent prosecution in relation to the same matters. Secondly, the applicant appealed against his conviction for aggravated embezzlement under Articles 255 and 256 of the Penal Code, challenging the High Court’s interpretation of the law and reasoning.
3. The Supreme Court’s judgment on the question of double jeopardy
On 23 September 2003 the Supreme Court rejected both of his appeal grounds. In so far as the submission under Article 4 of Protocol No. 7 was concerned the Supreme Court, referring to the reasoning in its judgment pronounced in a similar case on the same date, that the imposition of the disqualification order under sections 142(1), (2) and (4) did not bar subsequent prosecution and conviction.
The parallel judgment became the subject of an application (no. 12277/04) lodged under the Convention by Mr Yngvar Storbråten against Norway, which is being dealt with simultaneously with the present case. An English translation of the Supreme Court’s reasoning is reproduced in the Court’s decision in the case of Mr Storbråten, delivered on the same date as the present decision.
B. Relevant domestic law and practice
In so far as relevant, section 142 of the Debt Reorganisation and Bankruptcy Act of 8 June 1984 No. 58 (the Bankruptcy Act) read:
Section 142 -Conditions for imposing a disqualification order
“If a debtor’s estate is the subject of bankruptcy proceedings, the district court may impose a disqualification order on the debtor if
1) there is reasonable ground for suspecting the person concerned of a criminal act in connection with the bankruptcy or the activities that led to insolvency, or
2) if it must be presumed that for reasons of unsound business conduct, the person in question is unfit to establish a new company or to serve as a director or general manager (managing director) of such a company.
In taking a decision on this matter, importance shall be attached to whether, having regard to the debtor’s conduct and the circumstances as a whole, it appears reasonable to impose a disqualification order.
The imposition of a disqualification order means that, for a period of two years from the opening of bankruptcy proceedings, the debtor may not establish such a company as mentioned in the fifth sub-section, or undertake the office or de facto exercise the powers of a member or deputy member of a board of directors or managing director of such a company. The district court may decide that the two-year period shall start from the date when the court takes its decision.
In cases mentioned in the first sub-section, item 1, the district court may decide that disqualification shall also entail that the debtor shall be removed from any such offices as mentioned in the third sub-section held in such companies as mentioned in the fifth sub-section.
The term company in sub-sections 3 and 4 means a limited liability company, a public limited liability company, a branch office of a foreign company, a business foundation, a housing construction cooperative, a housing co-operative, a company aimed at promoting its members’ consumer interests (consumer co-operative), a mutual insurance company or a State company.”
For a summary of the legislative history of the provisions on disqualification under Norwegian law, reference is made to paragraphs 21 to 31 of the Supreme Court’s judgment quoted in the above-mentioned decision in the parallel Storbråten case.
The Government provided some additional information, inter alia what is summarised here below.
In the individual assessment of reasonableness to be carried out under section 142(2), account was to be had to such factors as the cause of the bankruptcy, the debtor’s conduct during the bankruptcy proceedings and the time element. In the event of a significant and unwarranted delay from the opening of the bankruptcy proceedings until the submission of a request for a disqualification order, the court might conclude that it would be unreasonable to impose a disqualification order.
In the preparatory works to the Bankruptcy Act 1984, the Ministry of Justice had stressed that the rules would make it possible to stop persons who repeatedly were involved in limited liability companies which went bankrupt, and where there was reason to suspect improper business conduct. It had also been emphasised that disqualification orders should function as a supplement to loss of entitlement (rettighetstap), a form of punishment pursuant to Article 29 of the Penal Code. In this context, the Ministry had pointed to the advantages of the fact that a disqualification order could be imposed shortly after the opening of the bankruptcy proceedings, whilst it normally would take longer to investigate and prosecute possible criminal offences. The possibility of swift action was necessary to achieve the preventive purpose of the measure.
The duration of disqualification period, ordinarily two years, could be extended if the public prosecutor in a criminal case had requested or was contemplating requesting the trial court to sentence the person in question to a loss of entitlement pursuant to the Article 29 of the Penal Code. The disqualification period could then be extended until the court had decided the criminal case.
The competent court could remit a disqualification order if any of the parties so requested and there was relevant new information. If a person subjected to a disqualification order was later acquitted in criminal proceedings for an offence which constituted the basis for a disqualification order, or further investigation showed that no such criminal offence had been committed, the public prosecutor was to request that the disqualification order be lifted (Norsk Retstidende 2002-789, Appeals Leave Committee of the Supreme Court).
A disqualification order could be imposed by a court of first instance (tingretten) or by the probate and bankruptcy courts (skifteretten). Such a measure was usually taken on the basis of written proceedings. However, the parties had the right to request an oral hearing. In his or her report to the probate and bankruptcy court, the liquidator was to provide information on whether, in his or her opinion, there were circumstances suggesting that a disqualification order should be imposed. Both the bankruptcy estate (represented by the liquidator) and the prosecuting authority had a right to intervene as parties in the proceedings concerning the disqualification order. The opposing party would be the debtor, board member etc. against whom the order would apply. It was rare that the prosecution or the bankruptcy estate intervened as a party to the proceedings. The court’s decision would, accordingly, normally be taken only on the basis of the information and recommendation in the liquidator’s report, and the information and objections provided by the defendant.
Under section 143A of the Bankruptcy Act, a failure to comply with a disqualification order was a criminal offence punishable by up to four months’ imprisonment and/or fines.
The applicant complained that the criminal proceedings against him and his conviction had concerned a matter which was the same as one in respect of which he had been imposed a disqualification order under section 142 of the Bankruptcy Act and thus amounted to double jeopardy in breach of Article 4 § 1 of Protocol No. 7 to the Convention.
The applicant alleged a violation of Article 4 § 1 of Protocol No. 7, which reads:
“No one shall be liable to be tried or punished again in criminal proceedings under the jurisdiction of the same State for an offence for which he has already been finally acquitted or convicted in accordance with the law and penal procedure of that State.”
A. Submissions of the parties
1. The applicant
The applicant was of the view that the notion of ”crime” in Article 4 § 1 of Protocol No. 7 to the Convention should be interpreted according to the same criteria and to have the same meaning and scope as that found in other provisions of the Convention, notably Articles 6 and 7 of the Convention. He invited the Court to reject the Government’s argument that only an acquittal or conviction that was the outcome of proceedings defined as “criminal” by the respondent State could bring the barring effect of Article 4 to Protocol No. 7 into play. Relying on the Explanatory Report and referring also to the corresponding provision in Article 14 § 4 of the United Nations 1966 Covenant on Civil and Political Rights as well its drafting history, the applicant maintained that the words “in accordance with the law and penal procedure of each country” did only intend to clarify that a decision was “final” when it could no longer be challenged by any remedies according to the procedural rules of the actual country.
While acknowledging that disqualification orders were formally classified as “civil” sanctions under the relevant national law, the applicant stressed that there was widespread perception that such orders in reality constituted punishment. Therefore, the formal classification could not be taken to militate in favour of considering disqualification orders as a “civil” sanction; weight should instead be attached to those perceptions.
As to the nature of the offences, the applicant stressed that the disqualification order imposed on him pursuant to section 142(1) item 1 of the Bankruptcy Act had been the direct result of the allegations of criminal offences that had been examined by the Probate and Bankruptcy Court. Although it would have been sufficient for the court to establish “reasonable ground for suspicion” [i.e. at least preponderance of probabilities] that the person in question had committed a criminal offence”, its reasoning had gone beyond that in the applicant’s case:
“The requirements for strict criminal liability under section 51 of the Tax Payment Act must be regarded as being fulfilled.”
“It is established that [the applicant], as general manager, was grossly negligent in not ensuring that the payments in question were actually made.”
“The loans were advanced to [the applicant], and the requirements for both strict and subjective criminal liability must be considered to have been fulfilled.”
“Here too, the requirements for both strict and subjective criminal liability are found to be fulfilled.”
On the two latest counts, the Probate and Bankruptcy Court did certainly also refer to the requisite “reasonable ground for suspicion”, but the point is that the court in its reasoning went further than required. At least in Norwegian legal language, a statement that “the requirements for both strict and subjective criminal liability are found to be fulfilled” can not be understood otherwise than establishing criminal guilt.
The applicant presumes that the same acts would be subject to serious criminal reactions in all Contracting States. The connection between the criminal offences and the reaction of imposing a disqualification order was even stronger in the applicant’s case as he had been imposed an extended disqualification order, which could only be imposed on the grounds of criminal acts.
The nature of the offence should also be considered in relation to the nature of the corresponding penalty (see Öztürk v. Germany judgment of 21 February 1984, series A no. 73, § 52), which in the present case was an extended disqualification order.
The applicant maintained that the general purpose of disqualification orders under the Norwegian legal system was twofold: an effective reaction towards criminal acts, with a purpose of both punishment and general deterrence as well as a means of removing unfit persons from future business positions. This duality was in fact illustrated by the shaping of the rule itself: section 142(1) item 1 was directed against criminal acts, while item 2 was directed against the removal of “unfit” persons from business. This should not be misinterpreted: Both items has a dual purpose, but the point was that the forward looking aspect of removing “unfit” persons from business was predominant under item 2, while the retrospective aspect of reaction against a criminal act was predominant under item 1. The dual purpose of the disqualification orders under the Norwegian legal system was well established on the basis of the official statements that appeared from the legislation process and according to the actual manner that disqualification orders were perceived. However, on reading the Governments observations, one could easily get the impression that there was little else to disqualification orders than a pure preventive measure.
In practice disqualification orders were not imposed as a preventive measure for the future at an early stage of the bankruptcy proceedings. Rather, according to the expert committee appointed by the Government in 1990 (“Falkangerutvalget”): “A disqualification order was most often imposed during the conclusion of the bankruptcy proceedings, something that may take several years.” Thus, they often had a retrospective perspective enhancing the strong aspect of a sanction against criminal acts that had been committed in the past rather than an immediate imposed preventive measure for the future. In the applicant’s case disqualification had not been raised until 1 ½ year after the bankruptcy – at the conclusion of the bankruptcy proceedings.
By imposing an extended disqualification order under section 142(4) – which was a seldom used alternative – the Probate and Bankruptcy Court had emphasised the seriousness of the criminal actions and had enhanced the defamatory effect of the measure, while at the same time declaring an undisputable connection between the imposition of the disqualification order and the criminal acts (since the criteria of unfitness in item 2 could not give reason to impose an extended disqualification order). Hence, the imposition of an extended disqualification order on the applicant gave significant weight to the view that the measure in fact was a punishment.
As to the degree of severity of the measure the applicant submitted that, according to the Minister of Justice’s statement during the parliamentary debate “a disqualification order [was] a sanction that might have considerable effects on the person inflicted.” A disqualification order was a loss of civil liberties. Unlike a withdrawal of a licence that had been previously granted, it was a restriction directed at liberties to which each person was entitled in the capacity of being a citizen. The disqualification order amounted to a considerable restriction on the applicant in the exercise of his profession as a business person.
In addition, the extended disqualification order, with its resemblance to a modern days pillory, also had significant defamatory effect, which was enhanced by its statutory publication in an official national registry open to the public. As the Courts had recognised in its case-law, the defamatory effect of a disqualification order was strong.
2. The Government
As to the general interpretation of Article 4 § 1 of Protocol No. 7, the Government were of the view that the classic Engel criteria - the domestic classification of the offence, the nature of the offence and the nature and degree of severity of the penalty – for establishing the existence of a “criminal charge” for the purposes of Article 6 of the Convention or a “criminal offence” or “penalty” within the meaning of Article 7, were applicable also to the issue whether a person had been acquitted/convicted for a (criminal) “offence” within the meaning of Article 4 § 1 of Protocol No. 7. However, it did not necessarily lead to identical conclusions as to the applicability of each of the aforementioned provisions, the scope of which may differ.
To the Government’s knowledge, there was no clear precedent in the Court’s case law to the effect that any sanction that release the legal protection guarantees under the criminal head of Article 6 would also be encompassed by the double jeopardy clause of Article 4 § 1 of Protocol No. 7. The Court did not explicitly rule on the question in the Gradinger judgment of 28 September 1995, and the Explanatory report to Article 4 § 1 of Protocol No. 7 offered no decisive support for either conclusion. The purpose of Article 6, and the considerations warranting the Court’s application of criminal legal protection guarantees in its case law for certain offences classified as civil in domestic law, did not – in the opinion of the Government – apply similarly in all cases where the competence was divided in domestic law to impose two different kinds of sanctions for the same “offence”. The purpose of Article 4 § 1 of Protocol No. 7, and the underlying considerations regarding the application of the ne bis in idem principle, were different.
The Government submitted that disqualification orders did not fall within the criminal head of Article 6 either. They relied on the Court’s decision in D.C., H.S. and A.D. v. the United Kingdom ((dec.) no. 39031/97, decided on 14 September 1999) that a disqualification order pursuant to UK legislation, which was very similar to item 2 of section 142(1) of the Norwegian Bankruptcy Act, did not constitute a criminal charge within the meaning of Article 6. Accordingly, regardless of any differences in scope as suggested above, no issue would in any event arise under Article 4 § 1 of Protocol No. 7 for orders imposed under item 2 of section 142(1).
The Government pointed out that Article 4 § 1 of Protocol No. 7 was only applicable where the first (blocking) decision had been taken pursuant to domestic penal procedure. In this connection they referred to the clear wording, purpose and Explanatory Report to Article 4 § 1 of Protocol No. 7 and the absence of any Strasbourg case law to the contrary.
In the event that the Court did not rule out the application of Article 4 § 1 of Protocol No. 7 on the basis outlined above, the question arose whether a disqualification order under section 142 of the Bankruptcy Act must be considered a “criminal matter” under the three Engel criteria, for the purposes of Article 4 § 1 of Protocol No. 7. Those criteria were applicable in exactly the same way to a disqualification order pursuant to section 142 item 1. The regulatory character of the measure was emphasized by the fact that it only covered a very narrow field of business activities. The nature of the measure was not significantly influenced by it being based on suspicion of criminal offences rather than on the somewhat wider concept of unfitness in general. That the purpose of section 142(1) item 1 was regulatory was strengthened by the fact that, pursuant to the second sub-section of section 142, an assessment of whether disqualification was reasonable in the circumstances had to be made before a decision could be taken.
The Government emphasized that there was no difference in purpose as regards disqualification orders under section 142 item 1 as compared to orders under item 2. That the disqualified person would normally perceive a disqualification order as a sanction or punishment did not alter the fact that the objective purpose was not to punish.
It could be argued that the regulatory character of the measure might give way to certain penal elements as time went by, because the need to prevent new actions might diminish. As outlined in paragraph 20 of the Davies v. the United Kingdom judgment (no. 42007/98, 16 July 2002) with respect to British law, proceedings under section 6 of the Company Directors Disqualification Act should not be commenced more than two years after the insolvency of the company. The significance of the time aspect was specifically addressed by the Supreme Court in the applicant’s case. The time lapse– 18 months – had been due to the complexity of the circumstances on which the disqualification order had been based, and could not, in the Government’s view, be said to impair the regulatory character of the measure.
To the applicant’s arguments that the Probate and Bankruptcy Court had based its decision on a “criminal” reasoning, the Government replied that this decision was of no relevance as it was appealed against. It was the High Court’s decision that constituted the factual and legal basis for the applicant’s disqualification order and which should be the subject of European review.
As regards the severity of the measure, the Government emphasised that the “penalty” was neither a fine nor a prison sentence, but rather a prohibition on holding certain business positions. Disqualification entailed a prohibition against forming or managing new limited liability companies for a period of two years. It did not entail a general prohibition against engaging in business activities. This as opposed to e.g. the revocation of a driver’s licence as was the case in Malige v France. Even the more severe form of disqualification order provided for under section 142 (4), removal from any existing offices, did not attain the level of severity implied by the term “penalty” under the Convention. That was neither the case in general nor, in particular, in the case of the applicant, who in fact had held no such offices at the time.
In the Government’s opinion, given the nature of the disqualification order, its purpose and the fact that it did not constitute a particularly severe encroachment on the applicant’s rights, the measure did not constitute a “criminal matter” for the purposes of Article 4 § 1 of Protocol No. 7.
Moreover, as found by the Supreme Court, the imposed disqualification order did not constitute a “final” conviction in the sense of Article 4 § 1 of Protocol No. 7.
Finally, the Government stressed, the criminal proceedings had not concerned the same offence as the disqualification order.
B. The Court’s assessment
The Court reiterates that the aim of Article 4 § 1 of Protocol No. 7 is to prohibit the repetition of criminal proceedings that have been concluded by a final decision.
In the case under consideration the applicant was, in two separate and consecutive sets of judicial proceedings, imposed two measures.
First he was imposed a 2 year disqualification order under section 142(1) items 1 and 2 and (4) of the Bankruptcy Act on account of its findings (i) that the applicant had failed to operate advance tax deduction through a separate bank account and had been grossly negligent in this respect, in breach of sections 4, 5, 5A and 51 of the Tax Payment Act 1952; (ii) that there was reasonable ground for suspecting the applicant of having taken up a loan in the company in breach of sections 12-10 and 17-1 last sub-section of the Limited Liability Companies Act 1997 and (iii) embezzlement of the estate in breach of Articles 281 and 283A of the Penal Code. Thereafter, he was prosecuted on four counts of aggravated embezzlement inter alia in breach of Articles 255, 256, 281 and 288 of the Penal Code; section 2(2) of the Value Added Tax (VAT) Act 1969; and section 51 of the Tax Payment Act, and one charge of aggravated breach of confidence under Articles 275 and 276 of the Penal Code.
It is undisputed that at least some of the acts constituted the basis not only for the disqualification order but also for the criminal prosecution. In the end he was acquitted of several of the charges but was convicted of aggravated embezzlement and aggravated breach of confidence and sentenced to 3 years’ imprisonment and to loss for 5 years of his right to run a business or to occupy a leading position in a company or be a member of a company board (under Article 29 of the Penal Code). The question is whether, as a result of the latter proceedings, the applicant could be said to have been “tried and punished again in criminal proceedings ... for an offence for which he had already been finally .... convicted in accordance with the law and penal procedure of that State”.
From the outset the Court observes that the disqualification order was imposed at the outcome of a procedure conducted under the Bankruptcy Act which had predominantly civil-law features and which was not regarded as a “penal procedure of [the respondent] State”. The Court is, however, unable to share the Government’s view that the applicability of Article 4 § 1 of Protocol No. 7 was excluded for this reason alone. As it appears from paragraph 29, referring to paragraph 22, of the Explanatory Report to Protocol No. 7, the intended meaning of the provision “finally .... convicted in accordance with the law and penal procedure of that State” (see also the French version of Article 4 § 1: “condamné par un jugement définitif conformément à la loi et à la procédure pénale de cet Etat.”) was to clarify when a “decision is final”. That is when, according to the traditional expression, it has acquired the force of res judicata (see Nikitin v. Russia, no. 50178/99, § 37, ECHR 2004-VIII), a question to be assessed with reference to national law.
Moreover, the legal characterisation of the procedure under national law cannot be the sole criterion of relevance for the applicability of the principle of ne bis in idem under Article 4 § 1 of Protocol No. 7. Otherwise, the application of this provision would be left to the discretion of the Contracting States to a degree that might lead to results incompatible with the object and purpose of the Convention (see, mutatis mutandis, the Őztürk v. Germany judgment of 21 February 1984, series A no. 73, pp. 17-18, § 49). It could, for example, make the protection of the ne bis in idem dependent on the order in which the respective proceedings are conducted, whereas it is the relationship between the two offences which is material (see Franz Fischer v. Austria, no. 37950/97, § 29, 29 May 2001).
Where, as is the case here, the Court is satisfied that the first decision is “final”, it must examine whether it concerned a “criminal” matter within the autonomous meaning of Article 4 § 1 of Protocol No. 7. This notion must be interpreted in the light of the general principles concerning the corresponding words “criminal charge” and “penalty” respectively in Articles 6 and 7 of the Convention (see Rosenquist v. Sweden (dec.), no. 60619/00, 14 September 2004; Manasson v. Sweden (dec.), no. 41265/98, 8 April 2003; Göktan v. France, no. 33402/96, § 48, ECHR 2002-V, and Malige v. France, judgment of 23 September 1998, Reports of Judgments and Decisions 1998-VII, p. 2935, § 35; Nilsson v. Sweden (dec.), no. 73661/01, ECHR 2005-). Hence, the Court will have regard to such factors as the legal classification of the offence under national law; the nature of the offence; the national legal characterisation of the measure; its purpose, nature and degree of severity; whether the measure was imposed following conviction for a criminal offence and the procedures involved in the making and implementation of the measure (see Malige and Nilsson, both cited above). This is a wider range of criteria than the so-called “Engel criteria” formulated with reference to Article 6 of the Convention.
In this regard the Court first reiterates its findings above as to the civil character of the procedure. It further notes that it is not disputed before it that the offence that could lead to a disqualification order and the measure itself were classified as civil under national law. The Court finds no reason to hold otherwise.
As to the nature of the offence the Court observes that the disqualification order in this case was imposed with reference both to item 1 and item 2 of section 142(1) of the Bankruptcy Act as well as the condition of reasonableness in section 142(2).
Under item 2, it was a condition that, due to unsound business conduct the person concerned must be presumed unfit for setting up or leading a company. In the view of the Court, this was not a matter of criminal- but of civil/administrative regulatory nature, as was undisputed before it (see, mutatis mutandis, Davies v. the United Kingdom, cited above, § 25; and D.C., H.S. and A.D. v. the United Kingdom (dec.) no. 39031/97, decided on 14 September 1999).
An issue arises only in relation to item 1. However, pursuant to this provision, it was sufficient that there existed a reasonable ground for suspecting the person concerned of a criminal act in connection with the bankruptcy or the activities leading to the insolvency; the establishment of guilt for the commission of a criminal offence being not a condition. On this point the Court disagrees with the applicant’s argument that regard must be had to the Probate and Bankruptcy Court’s reasoning having gone beyond merely establishing a reasonable suspicion of a criminal act. The Court will only review the decision of the High Court (see Zigarella v. Italy (dec.), no. 48154/99, ECHR 2002-IX (extracts) and Isaksen v. Norway (dec.), no. 13596/02). Moreover, as observed in paragraph 44 of the Supreme Court’s judgment in the parallel case of Mr Storbråten (quoted in the Court’s decision in Storbråten v. Norway (no. 12277/04) delivered on the same date as the present case), the application of item 1 depended on a broad assessment based on the Administrator’s report rather than on a specific assessment of the strength of the evidence in relation to each possible offence mentioned in the report.
Although the two items constituted alternative grounds for a section 142 measure, it is clear that, like in the present case, the existence of such grounds as described in item 1 was relevant for the issue of unfitness under item 2. In practice, the two grounds were often applied together. As observed by the Supreme Court in paragraph 50 of its judgment in the above-mentioned case of Mr Storbråten, the condition set out in item 1 could be regarded as a special case of the general criterion of fitness in item 2. In addition, under section 142(2), a condition for imposing a disqualification order was that it was reasonable having regard to the debtor’s conduct and the circumstances as a whole, including whether item 1 was applied in conjunction with item 2 in the case at hand. In view of these considerations, the Court does not find that the condition of reasonable ground for suspicion of a criminal act in item 1 deprived the measure of its essentially regulatory character and conferred on it a penal nature.
It should further be noted that the primary purpose of a disqualification order, whether imposed under item 1 or item 2, was, as emphasised by the Supreme Court (see paragraph 43 of its judgment in the Storbråten case), to protect shareholders and creditors and society as a whole against exposure to undue risks of losses and mismanagement of resources that were likely to arise if an irresponsible and dishonest person were to be allowed to continue to operate under the umbrella of a limited liability company. It was essentially a preventive measure that was meant to be taken as soon as possible in order to avert such excessive risks as mentioned above and for a defined period, usually two years. It was intended to offer an easy and rapid means of stopping damaging business misconduct, pending, as the case may be, criminal proceedings.
In this way, a disqualification order intervening at an early stage would play a supplementary role to criminal prosecution and conviction at a later stage with the possibility then of passing a sentence of loss of entitlements under Article 29 of the Penal Code, as opposed to continuing the disqualification order. Although it took some time in the present case before the disqualification order was made, which state of affairs was apparently due to the complexity of the case, the Court does not find that the sequence of events in this case varied significantly from the way it was intended to work. Whereas a disqualification order would be lifted in the event of an acquittal or discontinuation of the criminal proceedings, the institution of such proceedings was not a direct and inevitable consequence of disqualification. Nor would the latter be considered to be part of the sanctions under Norwegian law for the offences in respect of which the applicant was tried in the criminal case (cf. Nilsson v. Sweden (dec.), no. 73661/01, cited above).
As to the nature and degree of severity of the measure, it should be noted that a disqualification order entailed a prohibition against establishing or managing a new limited liability company for a period of two years, not a general prohibition against engaging in business activities. In the view of the Court, the character of the sanction was not such as to bring the matter within the “criminal” sphere. Although a disqualification order, which was to be entered on a special public register for such measures, was capable of having a considerable impact on a person’s reputation and ability to practise his or her profession (see Eastaway v. the United Kingdom, no. 74976/01, § 52, 20 July 2004), the Court does not find that what was at stake for the applicant was sufficiently important to warrant classifying it as “criminal”. This is not altered by the fact that a more severe measures was imposed under section 142(4) extending also to existing positions and honorary posts in other companies.
Against this background, the Court arrives at the same conclusion as the Norwegian Supreme Court, namely that the imposition of a disqualification order did not constitute a “criminal” matter for the purposes of Article 4 of Protocol No. 7 to the Convention.
It may in addition be noted that the two measures not only pursed different purposes - prevention and deterrence in the case of the first and also retribution in the case of the second, but also differed in their essential elements (see Rosenquist v. Sweden (dec.), no. 60619/00, 14 September 2004). For instance, while subjective guilt was not a prerequisite for the application of section 142(1) item 1 of the Bankruptcy Act in the first set of proceedings, it was a condition for establishing criminal liability in the second set; whereas reasonableness of the sanction was a condition in the former context, it was not in the latter.
In the light of the above, the Court finds that the criminal proceedings brought against the applicant subsequently, leading to his conviction and sentence for aggravated embezzlement and aggravated breach of confidence by the High Court on 11 October 2002, did not entail that he was “tried or punished again ... for an offence for which he ha[d] already been finally ... convicted”, in breach of Article 4 § 1 of Protocol No. 7.
It follows that the application must be rejected as manifestly ill-founded under Article 35 §§ 3 and 4 of the Convention.
For these reasons, the Court unanimously
Decides to discontinue the application of Article 29 § 3 of the Convention;
Declares the application inadmissible.
Søren Nielsen Christos Rozakis Registrar President
MJELDE v. NORWAY DECISION
MJELDE v. NORWAY DECISION