AS TO THE ADMISSIBILITY OF
Application no. 307/02
by NBTK and SWIG GROUP INC.
The European Court of Human Rights (First Section),
23 March 2006 as a Chamber composed of:
Mr C.L. Rozakis, President,
Mr P. Lorenzen,
Mrs N. Vajić,
Mrs S. Botoucharova,
Mr A. Kovler,
Mrs E. Steiner,
Mr K. Hajiyev, judges,
and Mr S. Nielsen, Registrar,
Having regard to the above application lodged on 6 August 2001,
Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicants,
Having deliberated, decides as follows:
A. The circumstances of the case
The first applicant, Nevsko-Baltiyskaya Transportnaya Kompaniya (NBTK), is a limited liability company based in Russia. The second applicant, Swig Group Inc., is a company incorporated in the USA. The applicants are represented before the Court by Boris Karhu, a lawyer practising in St. Petersburg. The respondent Government are represented by Mr P. Laptev, Representative of the Russian Federation at the European Court of Human Rights.
The facts of the case, as submitted by the parties, may be summarised as follows.
In February 1999 the first applicant, a transport company, carried a commercial cargo for its client, a commercial company Smarska Holding Ltd., from Kotka, Finland, to Moscow. The cargo was carried by lorry leased by the first applicant from another company.
On 11 February 1999 the lorry crossed the Finnish-Russian border and arrived at the checkpoint of the Vyborg customs office. The customs officers examined the shipping documents, sealed the lorry and permitted it to continue the journey with a mandatory check-in at the Moscow customs on 15 February 1999 at the latest.
On 12 February 1999 the lorry was stopped at a traffic police checkpoint outside St. Petersburg, apparently to conduct a customs check. The officers of the North-Western Customs Office examined the lorry, stated that it contained undeclared goods and seized the cargo and the lorry.
On 17 February 1999 the North-Western Customs Office issued a notice charging the first applicant with an administrative offence of a breach of the customs regulations. It opened administrative case file no. 10400-40/99 and seized the lorry and part of the goods. The seizure of the remaining goods was ordered on 24 March 1999.
On 12 April 1999 the Leningrad-Finlyandskaya Prosecutor’s Office, on the basis of the custom’s notice no. 10400-40/99, opened criminal case file no. 44437 concerning the alleged smuggling. No suspect was identified in the case file.
On 17 May 1999 the lorry and the cargo were deposited with a specialised auction company, the State Untary Enterprise for the Sales of Forfeited Property “Rubezh” (the State Enterprise Rubezh).
On 11 June 1999 the Leningrad-Finlyandskaya Prosecutor’s Office ordered that the seized goods should be attached as evidence in the smuggling case no. 44437 in accordance with procedures in criminal cases.
On 14 June 1999 the Leningrad-Finlyandskaya Prosecutor’s Office suspended the smuggling case no. 44437, as it could not identify a suspect. It ordered that the attached goods be sold, with the proceeds to be charged to the benefit of the State and held as deposit until the case concerning the customs breach was decided.
On 16 June 1999 the Leningrad-Finlyandskaya Prosecutor’s Office ordered an expert examination to determine the market value of the goods attached to the criminal file no. 44437.
On 18 June 1999 the experts established that the market value of the goods was RUR 2,205,863 (the equivalent of about EUR 88,000).
On 21 June 1999 the State Enterprise Rubezh sold the goods to a private commercial company, OOO Avangard, at the above price. The sale was approved by the Leningrad-Finlyandskaya Prosecutor’s Office.
On 3 August 1999 the company Smarska Holding Ltd transferred its title to the seized goods to the second applicant, under a sales contract which indicated that the goods were “free from third party claims or pledge”, and that they were “at the customs’ warehouse”. The second applicant paid USD 577,000 to the seller and succeeded to all the rights and obligations relating to the goods.
On 27 October 1999 the Federal Commercial Court of the North-Western Circuit upheld, in the final instance, a challenge to the injunction against the lorry brought by its owner. The lorry was returned to the owner.
On an unspecified date the first applicant challenged the custom’s administrative notice no. 10400-40/99 and in particular the seizure of goods. On 20 December 1999 the Federal Commercial Court of the North-Western Circuit, in the final instance, dismissed the claim and held that the customs authorities had acted lawfully.
On an unspecified date both applicants filed
a claim to declare the sale of goods by the State Enterprise Rubezh
to OOO Avangard null and void. On 21 December 1999 the Commercial Court
of St. Petersburg and the Leningrad Region granted the claim, declared
the sale null and void and ordered restitution between the State Enterprise
OOO Avangard. It held that the goods were to be stored by the State Enterprise Rubezh until the end of the administrative proceedings. If the return of the goods was impossible their real cost had to be repaid by the buyer.
On 5 January 2000 the North-Western Prosecutors’ Office informed the first applicant that the suspension of the criminal case no. 44437 and the “sale of the evidence in the criminal case” had been unlawful, that the decision of 14 June 1999 had been quashed and the investigation was to be resumed.
On 4 May 2000 the Federal Commercial Court of the North-Western Circuit upheld the judgment of 21 December 1999 in the final instance, having confirmed that the sale of goods by the State Enterprise Rubezh to OOO Avangard had had no legal basis. Unlike in the first instance, the final judgment referred to the first applicant as the only plaintiff, while the second applicant was referred to as an interested third party.
On 28 June 2000 the bailiff in charge of the enforcement of the judgment of 21 December 1999 reported that the buyer, OOO Avangard, could not be found at the address indicated in the sales contract. On 23 August 2000 she concluded that it could not be tracked down; i.e. it was impossible to reclaim the goods or otherwise enforce the judgment.
On an unspecified date the second applicant requested the North-Western Prosecutors’ Office permission to join the criminal proceedings (case file no. 44437) as a civil claimant, i.e. a third party whose interests had been affected by the alleged crime. The prosecutor’s office replied with refusal, which the second applicant challenged before a court.
On 26 December 2000 the Kalininskiy District Court of St. Petersburg disallowed the second applicant’s complaint concerning the refusal to join the criminal proceedings. The court held that the request was outside the courts’ competence. The second applicant filed an application with the Constitutional Court to declare the provision preventing its access to court unconstitutional.
On 21 June 2001 the Constitutional Court examined the appeal and found that there had been no legal provision preventing the second applicant from challenging a refusal to join in criminal proceedings before a court. It held that it did not need to be a party to criminal proceedings in order to challenge the authorities’ acts or omissions if its pecuniary or non-pecuniary interests were affected by criminal proceedings. It pointed out that the law provided for a direct access to court to invalidate the authorities’ acts and claim damages.
On 5 February 2002 the Vyborg Town Court of the Leningrad Region examined the administrative charges against the first applicant (case no. 10400-40/99) and held that it had breached customs rules. It ordered forfeiture of the seized goods. On 20 February 2002 the president of the same court quashed the judgment and remitted the case for fresh examination.
On 27 June 2002 the Kalininskiy District Court of St. Petersburg examined the second applicant’s complaint against the refusal of the prosecutor’s office to allow it joining the criminal proceedings as a civil claimant. The court found that such claim should have been brought under criminal and not civil procedure and discontinued the proceedings. This decision was subsequently upheld on appeal.
On 18 February 2003 the Vyborg Town Court of the Leningrad Region re-examined the administrative charges against the first applicant (case no. 10400-40/99) and held that there had been no breach of customs rules on the part of the applicant. The court also found that the cargo had been seized unlawfully. It discontinued the administrative proceedings against the first applicant and ordered the seized goods to be returned to their lawful owner, the second applicant. No ordinary appeal was lodged against this decision and it became final ten days later.
The applicants informed the customs and the prosecutor’s office about the judgment of 18 February 2003, requested the resumption of the suspended criminal proceedings (case file no. 44437) and claimed the seized goods to be returned to the second applicant.
On 25 March 2003 the Leningrad Regional Prosecutor’s Office informed the applicants that there were no grounds to lift the suspension order. According to the prosecutor’s office, the judgment of 18 February 2003 was irrelevant to the criminal proceedings, because the latter did not concern the applicants, but some unidentified suspect. It rejected the claim for the goods to be returned on the grounds that they were attached as evidence in the criminal proceedings, and that file contained no information about their owner.
On 19 August 2003 the Leningrad Regional Prosecutor’s Office lodged a request with the Leningrad Regional Court to conduct supervisory review of the judgment of 18 February 2003. He requested to reverse the order to return the goods.
On 10 November 2003 the President of the Leningrad Regional Court by his own decision varied the judgment of 18 February 2003. He established that the goods had been attached to the criminal and not to the administrative file. Therefore he found that their release could not have been ordered in the administrative proceedings. He also noted that the court had no competence to rule on damages but such award could be made in civil proceedings. He quashed the order to return the goods to the second applicant. The remainder of the judgment concerning the administrative charges was left unchanged.
Thereafter there has been no change in the state of the criminal proceedings or the injunction related thereto.
B. Relevant domestic law
1. Administrative offence of breach of customs regulations
Section 278 of the Customs code in force at the material time provided that a failure to present, in accordance with the customs regulations, valid documents in respect of goods and transport crossing the customs border shall be punishable with a fine of 100%-300% of the value of the goods or the vehicle, accompanied with their forfeiture or additional charge equal to their value.
2. Criminal offence of smuggling
Smuggling, that is movement of goods or other objects in a large amount across the customs border of the Russian Federation, committed by concealing such goods from the customs or combined with non-declaration or inaccurate declaration of such goods, carries a penalty of up to five years’ imprisonment (Article 188 § 1 of the Criminal Code).
3. Material exhibits in criminal proceedings
The Code of Criminal Procedure of the Russian Federation in force from 1 July 2002 provides as follows.
Article 81. Material exhibits
“1. As a material exhibit may be recognised any object -
(1) that served as the instrument of the offence or retained traces of the offence;
(2) that was the target of the criminal acts;
(3) any other object or document which may be instrumental for detecting a crime or establishing the circumstances of the criminal case.
3. On delivery of a conviction... the destiny of material exhibits must be decided upon. In such a case –
(1) instruments of the crime belonging to the accused are liable to confiscation, transfer to competent authorities or destruction;
(2) objects prohibited from circulation must be transferred to competent authorities or destroyed;
(3) non-reclaimed objects of no value must be destroyed...;
(4) criminally acquired money and other valuables must be reverted to the profit of the State, on the basis of a judicial decision;
(5) documents are kept with the case file...;
(6) other objects must be returned to their lawful owners or, if the owner cannot be established, transferred into the State’s property...”
The 1960 Code of Criminal Procedure contained similar provisions concerning material exhibits in criminal proceedings.
4. Right to challenge in criminal proceedings
Section 123 of the 2002 Code of Criminal Procedure
Russian Federation provides that an act or failure to act on the part of investigation authorities, prosecutors or courts may be challenged by parties to the criminal proceedings or other persons in so far as their interests are affected by the official procedural acts or decisions.
5. Action for damages
Under Section 1069 of the Civil Code a State agency or a State official shall be liable to a citizen or a legal person for damage caused by their unlawful actions or failure to act. Such damage is to be compensated at the expense of the federal or regional treasury
The applicants complained under Article 1 of Protocol No. 1 to the Convention that there has been a violation of their right to the peaceful enjoyment of their possessions which were seized by the customs and have not been returned or compensated for. They restate the same complaint under Articles 6 § 1, 7, 13 and 17 of the Convention.
The applicants complained about the seizure of the cargo by the customs in 1999 and the authorities’ subsequent refusal of its release without any compensation thereof. This complaint falls to be examined under Article 1 of Protocol No. 1 of the Convention which provides 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 contested the applicants’ claims. In respect of the first applicant they submitted that there had been no interference with its possessions. The goods seized at the customs belonged to the second applicant, while the lorry had been leased from a third party and in any event had been returned to the owner.
As for the second applicant, the Government claimed that it had not exhausted remedies available to it under domestic law. They claimed, in particular, that it had not brought a claim for damages against the seller, the company Smarska Holding Ltd., from whom it purchased the goods under the injunction. Moreover, the Government submitted that the second applicant had not been a party to any domestic proceedings relating to the seized goods. In particular, it was the first applicant who challenged the sales contract between the State Enterprise Rubezh and OOO Avangard, and the second applicant was only an interested party in this dispute. The Government also maintained that the above proceedings concerned only the parties to the sale and had no bearing on the applicants’ rights; therefore they could not rely on any findings made thereby.
The Government further submitted that the goods were seized in accordance with domestic law, that the seizure pursued a legitimate aim of regulating economic activities and cross-border trade and that it was necessary to enforce import duties. They also claimed that the measures imposed on the applicants were strictly proportionate to the aim pursued. However, if the second applicant believed that there had been a breach of its property right it could apply to a competent court for redress. They claimed, in particular, that the commercial courts were competent to award compensation for any damage caused by State authorities, but such a claim had never been lodged.
The applicants disagreed with the Government. They considered that the attachment of goods as evidence in the criminal case constituted a de facto expropriation of property without any court order. They maintained that the retention of the proceeds was not based on any court order and was unjustified after the closure of administrative proceedings. In any event, it served no useful purpose, because the proceeds had no value as evidence, unlike the goods themselves.
They further contested the Government’s argument that they were to pursue proceedings for damages either against the seller of the goods, or against the authorities.
They recalled that on 27 June 2002 the court refused to entertain proceedings in which the second applicant challenged the refusal to join the criminal case as a civil claimant and contended that it was prevented from laying any legal claim to the goods or the proceeds thereof. In any event, they claimed that any action would have been vain because the courts had already pronounced themselves on the attribution of goods, first by ordering on 18 February 2003 the return of the seized goods, and then by revoking this order on supervisory review. They claimed that any subsequent claim for repossession or compensation would have had no chances of success in view of the courts’ decision to link proceeds from the sale of the goods to the criminal case. Such a link meant that their pecuniary rights could be determined no earlier than the smuggling case is resolved. However, there had been no progress in that respect, because the case remained suspended since June 1999 for lack of a suspect.
The Court, first, takes note of the Government’s objection concerning the first applicant’s victim status. It recalls that under Article 34 of the Convention it may receive applications from individuals and others “claiming to be the victim of a violation by one of the High Contracting Parties of the rights set forth in the Convention or the protocols thereto”. In order to claim to be a victim of a violation, a person must be directly affected by the impugned measure (see, for example, Buckley v. the United Kingdom, judgment of 25 September 1996, Reports of Judgments and Decisions 1996-IV, p. 1288, §§ 56-59). It observes that in the present case the possessions at stake, notably the seized goods, belonged to the second applicant. The first applicant has not demonstrated that the impugned measures interfered with any of its own pecuniary interest representing “possessions” within the meaning of Article 1 of Protocol No. 1. Accordingly, the first applicant is not a victim of the alleged violation within the meaning of Article 34 of the Convention.
It follows that the Government’s objection in this respect is well-founded and the first applicant’s complaint must be rejected as incompatible ratione personae pursuant to Article 35 §§ 3 and 4 of the Convention.
As for the Government’s objection concerning the second applicant’s alleged failure to exhaust domestic remedies, the Court observes that two avenues have been suggested for the recovery of its financial losses. Firstly, the Government argued that the second applicant should be able to obtain redress by suing the seller of the goods. However, there is no sound ground for this hypothesis because the latter does not appear to have been in breach of the sales contract or to have otherwise incurred liability to the second applicant.
Secondly, the Government argued that it was open to the second applicant to bring a claim against the public authorities in respect of any damage they had allegedly caused. However, the Court observes that a precondition for an award to be made by courts would be an established fact of the authorities’ unlawful conduct. In the instant case, no such finding has yet taken place in either administrative or criminal proceedings, and the Government did not specify whether the applicant prior to claiming damages was expected to take another action in order to have established the authorities’ unlawful conduct.
The Court observes that, according to the second applicant, most damage had been done to it through the unlawful sale of the seized goods to a third party. Accordingly, the best way for it to make a case for damages would be to pursue this point which it did in the proceedings that ended with a judgment of 4 May 2000 declaring the sale of the seized goods unlawful. However, the Government argue that the applicants cannot rely on that judgment, because they were not party to the annulled sale contract. It has not been suggested that a wrong procedure for having the sale declared unlawful has been chosen, and it is not for the Court to speculate on whether the same finding, had it been made under the criminal procedure, would have opened a direct access to the award of damages.
Thus, in the given circumstances the Court does not accept that the second applicant neglected an effective domestic remedy clearly capable of providing redress for its complaint.
In view of the above the Court dismisses the Government’s objection to the admissibility of the second applicant’s complaint. It furthermore considers, in the light of the parties’ submissions, that the second applicant’s complaint raises serious issues of fact and law under the Convention, the determination of which requires an examination of the merits. The Court concludes therefore that this complaint is not manifestly ill-founded within the meaning of Article 35 § 3 of the Convention. No other ground for declaring it inadmissible has been established.
For these reasons, the Court unanimously
Declares admissible, without prejudging the merits, the second applicant’s complaint concerning the seizure of its possessions by the customs and the subsequent refusal of its release or compensation thereof;
Declares inadmissible the remainder of the application.
Søren Nielsen Christos Rozakis
NBTK AND SWIG v. RUSSIA DECISION
NBTK AND SWIG v. RUSSIA DECISION