Lech Garlicki;Nebojša Vučinić;Nicolas Bratza;Sverre Erik Jebens;Vincent A. De Gaetano;Zdravka Kalaydjieva

The applicant, Mr Thomas Judge, is a British national who was born in 1951. He is currently detained at HMP Glen Ochil.

On 17 September 2007, the applicant was convicted after trial in the High Court of Justiciary at Kilmarnock of seven offences of a sexual nature.

The victims (complainers) were three girls, N, C and J. The offences were alleged to been committed between 1996 and 2005 when the three girls had been in the foster care of the applicant and his wife. N and J were sisters who entered the applicant’s care in 1995. C and her brother and sisters came into the care of the applicant in 1998.

Section 274 of the Criminal Procedure (Scotland) Act 1995 (“the 1995 Act”) prohibits the admission of evidence or questioning as to the character or sexual history of a complainer in sexual offences unless the evidence or questioning falls within one of the exceptions provided for in section 275. Those exceptions require: (i) that the evidence or questioning relate only to a specific occurrence or occurrences of sexual or other behaviour (section 275(1)(a)); are relevant to whether the accused is guilty (section 275(1)(b)); and the probative value of the evidence is significant and likely to outweigh any risk of prejudice to the proper administration of justice (section 275(1)(c)) (see relevant domestic law and practice below).

On 30 August 2007, before the trial started, a preliminary hearing was held to consider inter alia an application by the defence under section 275 to admit evidence at trial that:

(i) in December 2005 (around the same time she made her own allegations to the police) the complainer C had a conversation with a defence witness, M, in which C indicated that she did not believe the allegations that had been made against the applicant by the other girls (issue 5(b) in the application); and

(ii) that the applicant had made two allegations of theft against C, which had been investigated by the police and led to reports to the Procurator Fiscal (the prosecution authority) (issue 6 in the application).

The preliminary hearing judge decided to exclude the evidence in issue 5(b) on the grounds that, as a general rule, evidence of facts affecting the credibility of a witness, apart from the evidence of the witness herself, was inadmissible unless the facts were also relevant to the questions at issue; a witness should not be asked to express an opinion as to the credibility of another witness. He excluded the evidence in issue 6 on the grounds that the test of relevance in section 275(1)(b) had not been met.

In their evidence at trial all three complainers gave evidence as to the offences which they alleged had been committed against them. J also gave evidence that she had observed one incident of abuse involving N. The jury also heard evidence that, in November 2005, following a discussion between N and J, the applicant’s conduct was reported to the authorities and all three complainers were removed from his household. All three complainers gave evidence that the reason they had delayed in reporting the abuse was that they feared that they would be separated from their respective siblings. Evidence was also led by the prosecution from a brother of N and J. The brother testified that he had seen a different instance of sexual activity between N and the applicant from that observed by J.

Each complainer was cross-examined to the effect that nothing of an inappropriate manner had ever occurred and that they had fabricated aspects of their evidence. N and J were examined as to differences between the statements they gave to the police and their testimony in court. C was examined as to why she had denied anything had happened to her at all, when first interviewed by the police in December 2005. A suggestion was put to J that she had colluded with N as to what she said she had seen the applicant doing to N. It was also put to N and C that the applicant’s alleged erectile dysfunction rendered him incapable of certain of the activities of which each of them had testified.

The applicant gave evidence denying any inappropriate conduct had ever occurred involving any of the complainers. He gave evidence as to his alleged erectile dysfunction, which, he said, meant the conduct described in particular by N and C could not have occurred. He gave evidence of a number of arguments between him and N just before they reported his conduct to the authorities in November 2005. He suggested J had misunderstood the incident she had observed between him and N. He also suggested that the three complainers had lied, possibly out of self-interest. Nine character witnesses gave evidence in his defence. The applicant’s general medical practitioner gave evidence that the applicant had sought help for erectile dysfunction. The applicant’s wife gave evidence as to the general circumstances in the house, the applicant’s character and her impression of the relationships he had with the complainers.

The applicant was convicted by a majority verdict of the jury as charged. As is the normal practice in Scots criminal law, when convicting the applicant, the jury did not give reasons for their verdict.

The applicant appealed against his conviction. He submitted that first, the preliminary hearing judge had erred in excluding the evidence set out in issues 5(b) and 6 of the defence application. Second, he submitted that the verdict of the jury was a miscarriage of justice because it had been taken in ignorance of evidence that C was motivated to tell lies about him because he had reported her to the police for theft. He argued that this evidence would have been of high probative value. It was particularly relevant because in his charge (summing up) to the jury the presiding judge had advised the jury that the evidence of C might be essential to the other charges.

The appeal was dismissed by the High Court of Justiciary sitting as a court of criminal appeal (“the Appeal Court”) on 18 December 2009. The Appeal Court accepted that the preliminary judge had erred in excluding the evidence regarding issue 5(b) since the proposed line of questioning would not have been prohibited by section 274 of the 1995 Act. He had been in error in thinking that the proposed line of questioning would have been to invite the defence witness M to comment on the credibility of C. Instead, it had been to question C’s credibility by proving that she had made two contradictory statements: one to M and another to the police. However, the Appeal Court concluded that the fact that this evidence was not before the jury did not amount to a miscarriage of justice. Whether evidence had been wrongly excluded was not the same question as whether the trial was fair; the issue of miscarriage of justice depended on the materiality of that evidence. The question was whether, had the evidence been before the jury, there would have been any real possibility that the verdict of the jury would have been different. The Appeal Court observed:

“In the present case, the jury had before them undisputed evidence that when C was interviewed by police officers in December 2005 she denied that she had been sexually abused. The jury had no basis for rejecting that evidence. Notwithstanding that evidence, the jury must have accepted C’s evidence that she had in fact been abused by the [applicant], in the manner outlined in the two charges relating to her. It is a well-known phenomenon for individuals who have been victims of abuse when they were children to be unwilling or reluctant to disclose such abuse, or to delay in doing so. Evidence that C had also, during December 2005, indicated to defence witness M that she did not believe allegations of abuse made by the other two complainers would, at its highest, merely have provided another instance of the same phenomenon. In our opinion it would not have added anything significant to the jury’s consideration of the case. On the contrary, the jury was liable to have regarded those two chapters of evidence as consistent manifestations of reluctance on the part of C to disclose abuse which she herself had suffered, a reluctance which common sense and experience of life indicated was understandable and one she subsequently overcame.

The jury’s verdicts were returned after they had heard evidence from all three complainers and the [applicant] himself. That involved their accepting that the other two complainers had been sexually abused by the [applicant] while they were in his care in similar circumstances to complainer C. It is also reasonable to assume that the jury must have accepted the evidence of the eye-witness to one instance of abuse against complainer N. When all these factors are taken into account, there appears to be no real possibility that the exclusion of evidence about what complainer C may have said to defence witness M would have affected the jury’s verdicts, whether in relation to the charges involving C or any of the other charges.”

The Appeal Court also considered that the evidence in regard to issue 6 (the alleged thefts) had been properly excluded. None of three requirements contained in section 277(1)(a)-(c) had been met. In particular, the two allegations of theft did not make it more or less likely that the applicant had been guilty of sexual abuse, nor did the making of those allegations by the applicant in 2002 or 2003 make it more or less probable that C had fabricated allegations of sexual abuse in January 2006. The probative value of that evidence was insignificant and would have been calculated to blacken by innuendo the character of C by evidence relating to matters unconnected with the charges faced by the applicant.

Scots criminal law distinguishes between summary and solemn procedure. In the former the trial takes place before a judge sitting alone. In the latter, which is reserved for more serious offences, the trial takes place before a judge and a jury of fifteen members on the basis of an indictment. Section 64 and Schedules 2 and 3 to the 1995 Act provide for the form and content of the indictment.

The admission of evidence is a matter either for the presiding judge or, as occurred in this case, if an application is made before the start of the trial, a preliminary hearing judge.

By section 97(1) of the Criminal Procedure (Scotland) Act 1995, immediately after the close of the evidence for the prosecution, the accused may intimate to the court his desire to make a submission that he has no case to answer both: (a) on an offence charged in the indictment; and (b) on any other offence of which he could be convicted under the indictment. Subsections 97(2)-(4) provide:

“(2) If, after hearing both parties, the judge is satisfied that the evidence led by the prosecution is insufficient in law to justify the accused being convicted of the offence charged in respect of which the submission has been made or of such other offence as is mentioned, in relation to that offence, in paragraph (b) of subsection (1) above, he shall acquit him of the offence charged in respect of which the submission has been made and the trial shall proceed only in respect of any other offence charged in the indictment.

(3) If, after hearing both parties, the judge is not satisfied as is mentioned in subsection (2) above, he shall reject the submission and the trial shall proceed, with the accused entitled to give evidence and call witnesses, as if such submission had not been made.

(4) A submission under subsection (1) above shall be heard by the judge in the absence of the jury.”

If the trial judge rejects a submission of no case to answer, the defence case is presented. The prosecution and defence then address the jury. By section 98 of the 1995 Act, the defence has the right to speak last. The presiding judge then charges the jury. The role of the presiding judge in charging the jury was restated by the Lord Justice General in Hamilton v. HM Advocate (1938) JC 134:

“The primary duty of the presiding judge is to direct the jury upon the law applicable to the case. In doing so it is usually necessary for him to refer to the facts on which questions of law depend. He may also have to refer to evidence in order to correct any mistakes that may have occurred in the addresses to the jury, and he may have occasion to refer to the evidence where controversy has arisen as to its bearing on a question of fact which the jury has to decide. But it is a matter very much in his discretion whether he can help the jury by resuming the evidence on any particular aspect of the case.”

The “utmost care” should be taken to avoid trespassing upon the jury’s province as masters of the facts (Simpson v. HM Advocate (1952) SLT 85) and a presiding judge should always be slow to express his own views on questions of fact in case he thereby influences the jury whose task it is to determine all questions of fact (Brady v. HM Advocate (1986) JC 68). A conviction will be quashed if the Appeal Court finds that the presiding judge unduly impressed his own views on the evidence upon the jury. This may be the case even if the presiding judge attempts to cure this defect by later emphasising that the evidence is entirely a matter for the jury (McArthur v. HM Advocate (1990) SLT 451).

The jury may return one of three verdicts: one of guilty and two alternative acquittal verdicts of not guilty or not proven. No reasons for any of the three verdicts are given by the jury. However, by section 106(3)(b) of the 1995 Act, there is a right of appeal in respect of any alleged miscarriage of justice, which includes a miscarriage based on the jury having returned a verdict which no reasonable jury, properly directed, could have returned. Thus a conviction may be quashed or varied when the jury’s verdict is logically inconsistent or lacking in rationality, for example, when they cannot logically acquit on certain counts in an indictment and convict on others (see, for example, Ainsworth v. HM Advocate (1997) SLT 56; Rooney v. HM Advocate [2007] HCJAC 1).

The compatibility of the jury system with Article 6 of the Convention was considered in Beggs v. HM Advocate [2010] HCJAC 27, judgment of 9 March 2010. The Appeal Court considered the Second Section’s judgment in Taxquet v. Belgium, no. 926/05, 13 January 2009 (in which the Grand Chamber has subsequently given judgment: Taxquet v. Belgium [GC], no. 926/05, 16 November 2010). It also considered a judgment of the Norwegian Supreme Court in A. v. the Public Prosecution Authority, 2009/397, 12 June 2009, in which Judge Indreberg, giving the lead judgment of the court, considered that the Second Section in Taxquet had not intended to establish a principle that a jury had to give reasons for its decisions. The Appeal Court concluded (at paragraphs 206 and 207):

“We find Judge Indreberg’s full and careful analysis of the Taxquet judgment and the earlier Strasbourg jurisprudence highly persuasive and we respectfully agree with her that the judgment is not to be read as imposing a requirement that a jury supply reasons for its verdict.

Just as in any other jury trial in Scotland, the verdict returned by the jury in the present case is not returned in isolation. It is given within a framework which includes, in particular, the speeches to the jury by those advocating the prosecution and the defence and the directions given to the jury by the trial judge. It is not suggested that the address by the trial Advocate depute in this case did not set out clearly the nature of the Crown case and the evidence which the Crown invited the jury to accept and acceptance of which was necessary if the jury were to return a guilty verdict. Nor is it suggested that the address by defence counsel did not clearly present to the jury the basis upon which it was contended that guilt was not established and that the appellant should be acquitted. It is also not suggested that the trial Judge’s charge to the jury did not adequately identify all the matters which the Crown had to establish, or fail to analyse or describe the necessary elements or ingredients in the offence. Accordingly, from that framework and also from the evidence in the case, the basis of the conviction is discernable. With a jury verdict thus placed in such a framework, we do not consider, having regard to the case law of the ECtHR to which we were referred, that the fact that a jury does not supply reasons involves an infraction of the fair trial requirements of Article 6 of the Convention.”

The current versions of sections 274 and 275 of the 1995 Act were introduced by the Scottish Parliament by the Sexual Offences (Procedure and Evidence) (Scotland) Act 2002. They provide as follows:

“274 Restrictions on evidence relating to sexual offences

(1) In the trial of a person charged with an offence to which section 288C of this Act applies, the court shall not admit, or allow questioning designed to elicit, evidence which shows or tends to show that the complainer—

(a) is not of good character (whether in relation to sexual matters or otherwise);

(b) has, at any time, engaged in sexual behaviour not forming part of the subject matter of the charge;

(c) has, at any time (other than shortly before, at the same time as or shortly after the acts which form part of the subject matter of the charge), engaged in such behaviour, not being sexual behaviour, as might found the inference that the complainer—

(i) is likely to have consented to those acts; or

(ii) is not a credible or reliable witness; or

(d) has, at any time, been subject to any such condition or predisposition as might found the inference referred to in sub-paragraph (c) above.

275 Exceptions to restrictions under section 274. S

(1) The court may, on application made to it, admit such evidence or allow such questioning as is referred to in subsection (1) of section 274 of this Act if satisfied that—

(a) the evidence or questioning will relate only to a specific occurrence or occurrences of sexual or other behaviour or to specific facts demonstrating—

(i) the complainer’s character; or

(ii) any condition or predisposition to which the complainer is or has been subject;

(b) that occurrence or those occurrences of behaviour or facts are relevant to establishing whether the accused is guilty of the offence with which he is charged; and

(c) the probative value of the evidence sought to be admitted or elicited is significant and is likely to outweigh any risk of prejudice to the proper administration of justice arising from its being admitted or elicited.

(2) In subsection (1) above—

(a) the reference to an occurrence or occurrences of sexual behaviour includes a reference to undergoing or being made subject to any experience of a sexual nature;

(b) ‘the proper administration of justice’ includes—

(i) appropriate protection of a complainer’s dignity and privacy; and

(ii) ensuring that the facts and circumstances of which a jury is made aware are, in cases of offences to which section 288C of this Act applies, relevant to an issue which is to be put before the jury and commensurate to the importance of that issue to the jury’s verdict...”

The 2002 Act was preceded by a public consultation and a Policy Memorandum, which was published by the Scottish Ministers. The Policy Memorandum stated that evidence as to the sexual history and character of a complainer in sexual offences was rarely relevant and, even where it was, its probative value was frequently weak when compared with its prejudicial effect. It involved invasion of the complainer’s privacy and dignity and diversion from the issues which required to be determined at trial.

Sections 274 and 275 were considered to be compatible with Article 6 of the Convention by the High Court of Justiciary in Moir (Mitchell John) v. HM Advocate (also known as MM v. HM Advocate) (2005) 1 JC 102, where the appellant faced trial on charges of rape and sexual assault. The Lord Justice Clerk, giving the opinion of the court, referred first to the “twin myths” that, in a rape case, a complainer’s previous sexual experience or adverse sexual reputation made it more likely that she consented to intercourse and made it less likely that she was a credible witness. His Lordship continued:

“The embarrassment and humiliation of a complainer in a rape trial is a genuine social problem. Counsel agree that the protection of the complainer from unfair and intrusive attacks on her sexual history or character and the exclusion of evidence tendered in pursuit of the twin myths to which I have referred are, in general, legitimate legislative aims that recognise the complainer’s rights to privacy under article 8 (cf R v A (No 2), [2002] 1 AC 45, L Hope of Craighead at paras. [1], [29]-[33]; SN v Sweden, No. 34209/96, 2 July 2002, unrepd, at para 47).

[30] But the protection of the complainer cannot be seen apart from the basic principles of fairness in Scottish criminal procedure which entitle everyone accused of a crime to defend himself, to confront his accusers and to have a fair opportunity to put his own case. These principles underpin a value that is fundamental to criminal jurisprudence in a free society, namely the protection of the citizen from being wrongly convicted.

[31] The difficult problem of reform in this emotive branch of the law is to reconcile the legislative aims to which I have referred with the basic principles of fairness (SN v Sweden, supra, at para [47]). Although article 6 expresses the right to a fair trial in unqualified terms, what is required for fairness may vary according to context (cf International Transport Roth GmbH v Home Secretary, [2002] 3 WLR 344, Laws LJ at para 84). Individual evidential or procedural rules may be devised to take account of rights and interests other than those of the accused. Such interests include respect for the complainer’s rights under article 8 (cf Doorson v the Netherlands, supra, at para 70), and the public interest in the detection and prosecution of crime. The protection of such interests is a clear and proper public objective that justifies a legislature in qualifying to a limited extent the constituent rights comprised within article 6 (Brown v Stott, supra, Lord Bingham of Cornhill at p 60A); but the legislature cannot qualify them to such an extent that the overall fairness of the trial is compromised (Brown v Stott, supra; Rowe and Davis v United Kingdom, supra, at para 61).

[32] In my opinion, the primary aim of the 2002 legislation and the subordinate and specific aim set out in paragraph 36 of the Policy Memorandum (supra), are both legitimate legislative aims. The balancing exercise by which those aims are to be achieved without prejudice to the overall fairness of the trial lies in the first instance within the province of the legislature. The underlying aim of section 274 involves a sensitive social issue that is more appropriate for the consideration of the legislature than that of the courts. In my opinion, the enactment of sections 274 and 275 was within the legitimate area of discretion of the Scottish Parliament. The Parliament had an evidential basis on which to exercise its judgment in the matter, namely the research evidence referred to in the Policy Memorandum, supported by the evidence of two of its authors to the Justice 2 Committee. The underlying policy was fully considered and tested during the legislative process. The policy justification was, in my view, coherent.

[33] But although the legislation is directed to legitimate aims, there remains the question whether the restrictions that it imposes on the defence are greater than are strictly necessary for the achievement of those aims (cf Rowe and Davis v United Kingdom, (2000) 30 EHRR 1, at para 61; Doorson v The Netherlands, (1996) 22 EHRR 330; Brown v Stott, supra).

[34] If section 274 had imposed an absolute prohibition on the questioning or evidence to which it refers, there would have been a violation of article 6 (cp R v Seaboyer, supra, McLachlin J at pp 264-267; Sporrong and Lonnroth v Swedeneg Cumming v HM Adv, 2003 SCCR 261, at paras [10], [16]).

[35] The decision of the court under section 275 will in every case depend on the nature of the prosecution case and of the proposed questioning or evidence. The probative value of evidence that the complainer had a sexual experience with another man may be much less than that of evidence that she had a sexual relationship with the accused; and there may be strong reasons for the court’s allowing reference to a matter affecting the complainer’s character that has no conceivable sexual connotations; for example, a previous conviction of the complainer for perjury or for perverting the course of justice, or some mental condition of the complainer that predisposes her to fantasise or to exaggerate.

[36] Section 275, in my view, is a reasonable and flexible response to the problem and a legitimate means of achieving the legislative objective (R v A (No 2), supra, Lord Hope of Craighead at paras 90-96, 99, 102-103). It lies within the discretionary area of the judgment that is confided to the Parliament (R v DPP, ex p Kebilene, [2002] 2 AC 326, at p 381; International Transport Roth GmbH v Home Secretary, supra, Laws LJ at paras 80-87) and in my view meets the requirements of proportionality (De Freitas v Minister of Agriculture, [1999] 1 AC 69, Lord Clyde at p 80).”

The accused in that case was subsequently convicted and appealed (Moir v. HM Advocate 2007 SLT 452). The conviction was quashed on different grounds. However, in respect of section 274, the Appeal Court confirmed that “behaviour” in that section should not be given a restrictive meaning; it would also include acts or omissions of the complainer and statements made by him or her, provided that they were relevant to whether the complainer was likely to have consented to the sexual acts alleged or reflect upon his or her credibility or reliability.


Violation of Art. 6-1;No violation of Art. 6-1;Remainder inadmissible;Non-pecuniary damage - award;Pecuniary damage - claim dismissed

Karel Jungwiert;Mark Villiger;Mirjana Lazarova Trajkovska;Mykhaylo Buromenskiy;Peer Lorenzen;Renate Jaeger;Zdravka Kalaydjieva

The applicant was born in 1941 and lives in Sevastopol.

She worked at the State-owned company “Sevastopolskyy Morskyy Zavod” (“the SMZ”). Following her retirement from the SMZ on 30 September 1996 the applicant worked for the SMZ's subsidiary company “Sovmorsudokorpus” (“the SMSK”) until July 1997.

She instituted several sets of court proceedings against her former employers, seeking initially recovery of salary arrears and subsequently compensation for late payment of salary pursuant to Article 117 of the Labour Code. Under that provision, retired employees were entitled to claim compensation if their salary or related payments due to them were not paid on the day of termination of employment, i.e. such compensation concerned delays in payment after termination of employment.

In July 1997 the applicant lodged a claim with the Nakhimovskyy District Court of Sevastopol (“the Nakhimovskyy Court”) against the SMZ. She sought recovery of salary arrears.

On 8 July 1997 the court awarded her 492.17 Ukrainian hryvnyas (UAH) in salary arrears. The period of the applicant's work concerning which she was awarded the above sum in salary arrears was not specified.

On 26 November 1997 the applicant instituted a new set of proceedings in the same court against the SMZ, seeking compensation for the latter's failure to pay her salary arrears in due time.

On 5 August 1998 the court, referring to paragraph 1 of Article 117 of the Labour Code, awarded her UAH 1,574.40 in compensation for non-payment of salary arrears for the period of 1 October 1996 – 5 August 1998, during which her salary arrears had remained unpaid. The court noted that the respondent company failed to appear before it without informing about the reasons for its absence. It further observed that in his written statement submitted to the court on 13 March 1998 the company's representative accepted the applicant's claim as regards the amount of compensation for the period of 1 October 1996 – 13 March 1998.

The judgments of 8 July 1997 (salary arrears) and 5 August 1998 (compensation for late payment) were not appealed against and became final. The enforcement proceedings in respect of these judgments were instituted on 15 October 1997 and 5 October 1998 respectively. On 18 March 1999 the applicant received the full amounts of the awards.

On 1 October 2001 the SMZ lodged a request with the Supreme Court for leave to appeal against the judgment of 5 August 1998 under the new cassation procedure. In its appeal the SMZ alleged that it had not been responsible for the delay in payment of salary arrears to the applicant, that its representative before the first instance court had not been given the right to accept the applicant's claim, that the SMZ had not been duly informed about the date and time of the hearing before that court, and that the latter's judgment did not contain calculations of the awarded amount. On 23 April 2003 the Supreme Court granted such leave and invited the applicant to participate in the hearing on the SMZ's appeal scheduled for 29 May 2003. On the latter date the Civil Chamber of the Supreme Court quashed the judgment of 5 August 1998 on the ground that the Nakhimovskyy Court had examined the case in the absence of the SMZ and remitted it for fresh consideration.

Meanwhile, on 15 March 1999 the applicant lodged a new claim with the Nakhimovskyy Court, seeking compensation for the period of 6 August 1998 – 15 March 1999, during which the SMZ had failed to pay her salary arrears awarded by the judgment of 8 July 1997.

On 31 July 2003 the applicant requested the Nakhimovskyy Court to examine her claims of 26 November 1997 and 15 March 1999 jointly. In the course of a hearing on 18 September 2003 the court allowed the applicant's request.

On 26 November 2003 the court adopted a judgment dismissing the applicant's claims. Its relevant provisions read as follows:

“... The court, having heard the plaintiff [and] having examined the materials of the civil case, considers that the claims are unsubstantiated and may not be allowed for the following reasons.

In particular, the court established that on 30 September 1996 the plaintiff had retired [from the SMZ]... By the judgment of the Nakhimovskyy Court ... of 8 July 1997, she was awarded 492.17 [Ukrainian hryvnyas] in salary arrears... Therefore, the dispute concerning the recovery of sums in the event of termination of employment was determined and [the matter] turned to the stage of enforcement. The said judgment was enforced on 18 March 1999...

In accordance with Article 117 of the Labour Code of Ukraine, if [the employer] fails to pay the employee [whose contract of employment was terminated] the sums due to him within the time-limits set by the law, [the former] shall pay the employee his average wages for the whole period of the delay until the day of the factual payment.

As it appears from the materials of the case, the plaintiff retired on 30 September 1996, the sum of her salary arrears on the day of the retirement was 492.17 [Ukrainian hryvnyas] which was recovered by the judgment of 8 July 1997.

Therefore, the dispute concerning the recovery of sums in the event of termination of employment was determined on 8 July 1997 and [the matter] turned to the stage of enforcement. The plaintiff lodged with the court her first claim for compensation under Article 117 of the Labour Code of Ukraine on 26 November 1997 ... having missed the three-month term envisaged by Article 233 of the Labour Code of Ukraine. The plaintiff and her representative did not furnish sufficient and objective evidence demonstrating that there had been a reasonable excuse for missing the procedural term, and she did not request an extension of [that] term; thus, the court [discerns] no grounds to renew it in accordance with the requirements of Article 234 of the Labour Code of Ukraine.

In the light of the foregoing... [the court]

Decided:

To dismiss the claim of Menshakova...”

The applicant appealed, contending that the time-limit at issue had started to run on 18 March 1999, the day when she had received her belated salary payment.

On 18 March 2004 the Sevastopol Town Court of Appeal (the former Sevastopol Court) upheld the judgment of 26 November 2003. It rejected the applicant's contention that the limitation period under Article 233 of the Labour Code had started to run on 18 March 1999, when she had actually obtained the amount awarded by the judgment of 8 July 1997. It held that the “factual payment” had been made on the latter date and that the limitation period had started to run from that day onwards.

On 28 July 2006 a panel of three judges of the Supreme Court rejected the applicant's request for leave to appeal in cassation as unsubstantiated.

In May 1998 the applicant instituted proceedings in the Nakhimovskyy Court against the SMSK, seeking recovery of salary arrears and compensation for their prolonged non-payment.

On 25 May 1998 the court awarded her UAH 1,767.38 in salary arrears and compensation for late payment of these arrears for the period of 7 July 1997 – 25 May 1998. This judgment was not appealed against and became final. On an unspecified date the Nakhimovskyy District Bailiffs' Service instituted enforcement proceedings in respect of the judgment. On 15 June 1999 the enforcement proceedings were discontinued upon the applicant's request. On 12 July 1999 the applicant received the full amount of the award of 25 May 1998.

In April 1999 the applicant again instituted proceedings in the Nakhimovskyy Court against the SMSK, seeking compensation for the latter's failure to pay her salary arrears from 26 May 1998 onwards.

On 19 April 1999 the court rejected the applicant's claims as unsubstantiated. The applicant appealed in cassation, contending that the proceedings instituted by her in May 1998 concerned salary arrears and compensation for their non-payment during the period of 7 July 1997 – 25 May 1998, while in her new claim lodged with the courts in April 1999 she requested compensation for the period after 25 May 1998.

On 15 June 1999 the Sevastopol Court quashed the decision of the first-instance court and adopted a new decision by which it discontinued the proceedings in the applicant's case. It held that the matter had already been determined by the Nakhimovskyy Court on 25 May 1998. The relevant parts of the decision of 15 June 1999 read as follows:

“... In accordance with Article 227 § 3 of the Code of Civil Procedure of Ukraine, the court shall discontinue the proceedings, if there is a judgment, which has entered into the force of the law, concerning a dispute between the same parties, on the same subject-matter and grounds.

It appears from the case materials that on 25 May 1998 the Nakhimovskyy District Court adopted a judgment, by which the plaintiff was awarded 1,767.38 [Ukrainian hryvnyas] in respect of salary arrears and average wages for the delay in payment in the event of termination of employment during the period of 8 July 1997 to 25 May 1998...

Therefore, [the court finds that] the dispute concerning the recovery of wages for the period of the delay in payment has been determined on 25 May 1998 and that the admission of a new claim concerning the same subject-matter and based on the same grounds would be contrary to Articles 136 § 3 and 227 § 3 of the Code of Civil Procedure...

Pursuant to Articles 310 and 315 of the Code of Civil Procedure of Ukraine, [the court]

Decided:

To quash the judgment ... of 19 April 1999 and to discontinue the proceedings concerning the claim of Menshakova ... against [the SMSK]...”

On 4 December 1995 the Sevastopol Arbitration Court (State court dealing with disputes between companies and other economic entities before June 2001) initiated bankruptcy proceedings against the SMZ. The applicant and Mr K. joined the proceedings as the SMZ's creditors. By a decision of 24 December 1998, the arbitration court ordered the inclusion of the Nakhimovskyy Court's awards of 8 July 1997 and 5 August 1998 in the applicant's favour into the list of creditor's claims.

By a decision of 24 March 1999, partially amended by a decision of 2 April 1999, the same court quashed the decision of 24 December 1998 and discontinued the bankruptcy proceedings on the ground that the SMZ had paid the amounts claimed by the applicant and Mr K. in full.

On 6 and 24 April 1999 respectively, Mr K. and the applicant lodged with the court requests for supervisory review of the decisions of 24 March and 2 April 1999.

On 13 July 1999 the Higher Arbitration Court rejected the request of Mr K. as unsubstantiated.

By a letter of 8 October 1999, the Sevastopol Arbitration Court informed the applicant that her request for supervisory review had not been submitted to the Higher Arbitration Court as it had been directed against the same decisions as the request of Mr K.

On 3 November 1999 the applicant instituted proceedings in the Leninskyy District Court of Sevastopol against the Sevastopol Arbitration Court, seeking compensation for the latter's failure to consider her request for supervisory review of its decisions of 24 March and 2 April 1999.

On 22 May 2000 the Leninskyy District Court discontinued the proceedings on the ground that the applicant's claim was not to be considered by the courts, as the Sevastopol Town Arbitration Court enjoyed immunity from civil proceedings in respect of its procedural activities. On 19 September 2000 the Sevastopol Court upheld the decision of the firstinstance court.

The relevant provisions of the Code read as follows:

“... A judge shall not [deal with] a claim:

3) if there is a judgment, which has entered into the force of the law, concerning a dispute between the same parties, concerning the same subject and based on the same grounds, or a court's ruling endorsing the plaintiff's withdrawal of the claim or a friendly-settlement agreement between the parties...”

“... A court shall discontinue the proceedings:

In the course of consideration of a case in cassation the court shall verify whether the first instance court's judgment is lawful and well-founded...

The court shall not be bound by the reasons of an appeal in cassation ... and must review the entire case.

The [first instance court's] judgment shall be quashed in cassation and the proceedings shall be discontinued or the claim shall be left without consideration on the grounds envisaged in Articles 227 and 229 of the Code.

The relevant provisions of the Code, as worded at the material, read as follows:

“An enterprise, entity, or organisation shall pay the sums due to a [dismissed or retired] employee on the day of termination of his employment. If the employee did not work on the day of his [dismissal or retirement], the abovementioned sums shall be paid to him not later than the day following the day of the submission of his payment request.

In the event of a dispute over the amount to be paid to a [dismissed or retired] employee, [the employer] ... shall pay the undisputed amount within the time-limit envisaged by this [provision].”

“In the absence of a dispute over the amount to be paid to a [dismissed or retired] employee, [the employer] ... shall pay him his average wages for the whole period of the delay in payment of the amounts envisaged by Article 116 of this Code until the day of their factual payment, if the delay was due to the fault of [the employer]...

In the event of a dispute over the amount to be paid to a [dismissed or retired] employee, [the employer] ... shall pay him compensation envisaged by this [provision], if the dispute was resolved in favour of the employee. If the dispute was resolved partly in favour of the employee, the amount of compensation for the delay shall be determined by the body deciding on the dispute...”

“An employee may submit an application concerning a labour dispute directly to a ... court within three months following the day on which he became or should have become aware of a violation of his right...”

The relevant extracts from the Resolution of the Plenary Supreme Court read as follows:

“20. Having established, in the course of consideration of a case concerning recovery of [average] salary in connection with a delay in payment in the event of termination of employment, that an employee was not paid the amounts due to him ... on the day of his [dismissal or retirement] ... a court shall award, under Article 117 of the Labour Code, the employee average salary for the whole period of the delay in payment; if no such payment has been made before the consideration of the case [the court shall award average salary] until the date of the adoption of the judgment, safe in case the employer proofs that it was not responsible [for the delay]. The mere absence of funds shall not exclude the employer's responsibility.

In case no payment [in the event of termination of employment] took place because of a dispute on the amount to be paid, the claims concerning the responsibility for the delay ... shall be allowed in full, if the dispute was determined in favour of the plaintiff or if a court dealing with the case reaches such a conclusion. In case the claim is partly allowed, the court determines the amount of compensation for the delay in payment, taking into account the disputed sum which [the plaintiff] was entitled to receive, the part of the claim it constituted, the value of the part [of the claimed amount] in comparison with average salary and other specific...

...A failure to pay sums due to an employee on the day of his dismissal or, if he was absent from work on that day, on the day following the submission of his request for payment constitutes a ground for responsibility under Article 117 of the Labour Code. In this case, the running of a three-month time-limit for lodging an application with a court commences on the day following the payment of the above mentioned sums, irrespective of the delay in payment.

A failure to meet the three-month time-limit for an application to a court as such constitutes a ground for dismissal of the claim, however, if the court finds that [the claim] is unsubstantiated, it shall dismiss [the claim] on [the latter] ground...”


Violation of Article 6 - Right to a fair trial

Anatoly Kovler;Christos Rozakis;Dean Spielmann;Elisabeth Steiner;George Nicolaou;Giorgio Malinverni;Sverre Erik Jebens

The applicant was born in 1949 and lives in Nicosia. The applicant was married on 2 June 1974 in Nicosia. His marriage was dissolved on 16 March 1998.

On 6 August 1999 his former wife lodged an application (no.143/99) with the Nicosia Family Court for adjudication of certain property disputes between her and the applicant. On the same date the court issued an interim injunction prohibiting the applicant from selling, transferring or otherwise disposing of certain of his properties consisting of an apartment, a plot of land and two bank accounts. On 7 January 2000 the applicant submitted his defence and counter-claims. He claimed that he and his former wife had entered into an agreement in 1997 for the settlement of any potential property dispute. On 3 April 2000 his former wife filed her response to the applicant’s defence, and her defence in respect of his counter-claim.

The case was adjourned on at least two occasions at the request of the applicant. The hearing of the interim order application began on 8 March 2002. On 19 November 2002 it was decided that the prohibitory injunction would remain in force pending the final determination of the proceedings. An amendment was made in respect of the applicant’s plot of land, which would only be bound in respect of two thirds of the undivided share of the property.

On 28 November 2002, the applicant lodged an appeal against the injunction. He maintained that the court had erred in law in issuing it solely on the basis of the affidavit of his former wife and without further evidence substantiating her allegations. In another ground of appeal he complained about the delay that had occurred in the proceedings, which had severely restricted his professional activities.

On 12 March 2004 the Supreme Court dismissed the appeal and upheld the injunction as the applicant’s former wife had entered into sufficient detail in her affidavit to justify non inclusion of further relevant documents. The court nevertheless expressed its concern about the delay in the proceedings.

The examination of the main application (no.143/99) by the Nicosia Family Court began on 26 September 2003. Of the 29 sittings held between 23 October 2003 and 18 November 2004 at least one was adjourned at the applicant’s request.

On 11 March 2005, the Nicosia Family Court ordered the applicant to pay 41,000 Cypriot pounds (CYP) plus interest to his former wife. The court dismissed the applicant’s submission that an agreement had been concluded between himself and his former wife. The counter-claim lodged by the applicant was dismissed in its entirety. Moreover, the court considered that the applicant’s evidence had been unreliable and given in bad faith. It noted that he had been unable to control himself during the proceedings and had become disrespectful towards the court and his former wife’s counsel.

On 11 April 2005, the applicant lodged an appeal with the Supreme Court.

On 13 April 2005, the applicant’s former wife lodged with the Nicosia Family Court an application by summons requesting a ‘garnishee order’ (third party debt order). The application was set for hearing on 22 April 2005. On 28 April 2005 the applicant filed an objection and maintained that the application had been filed in bad faith.

On 28 April 2005 the applicant applied for suspension of the execution of the court’s decision dated 11 March 2005, until the examination of his appeal. This was set for hearing on 19 May 2005. On 16 May 2005 the applicant’s wife objected to his application as the applicant had not complied with the aforementioned court order.

On 17 June 2005 the Nicosia Family Court, following a hearing, dismissed the application for suspension of the court’s decision dated 11 March 2005. The court declined to grant the requested order in light of the applicant’s unreliability and the evident danger that his former wife would remain without a remedy in the event that the order was granted. The court rejected the applicant’s allegations that the application was made in bad faith and found his claim that he would face considerable financial difficulties in the event of non suspension unsubstantiated. The application was accordingly dismissed with legal costs awarded to the applicant’s former wife.

On the same date the court granted the garnishee order. Accordingly the applicant’s bank was ordered to pay his former wife the amount of CYP 41,000 with 8% interest from 6 August 1999 until payment and expenses. The court ordered the applicant’s former wife to guarantee the return to the applicant of the whole amount payable upon the execution of the court’s decision dated 11 March 2005 in the event that his appeal was successful. The guarantee would be renewable until the completion of the appeal proceedings. On 27 June 2005, the applicant lodged an appeal with the Supreme Court against the decision of the Nicosia Family Court dated 17 June 2005.

On 23 March 2007 the Supreme Court granted the applicant’s appeal against the family court’s judgment of 11 March 2005 and against its order of 17 June 2005. It noted that the first-instance court had found the applicant an absolutely unreliable witness and his evidence was, as such, dismissed in its entirety. It further noted that the first-instance court had based its conclusion as to the applicant’s reliability as a witness on various factors including his behaviour in and outside the court room. It was held that the first-instance court ought not to have taken those factors into account in the assessment of the applicant’s evidence and therefore the case was remitted for a retrial, but only in respect of the former wife’s claim over the applicant’s plot of land.

On 29 February 2008 judgment was issued by the family court in favour of the applicant’s former wife. The court noted that the proceedings had been delayed by the applicant, who failed to appear before the court on two occasions. It was found that no agreement had been concluded between the applicant and his wife as to any potential property dispute. Given his former wife’s contribution to his enrichment during the period of their wedlock it was held that she was entitled to a third of the value of his plot of land.

On 14 March 2008 the applicant lodged an appeal against the decision of the family court before the Supreme Court. These proceedings are currently pending.


Violation of Article 1 of Protocol No. 1 - Protection of property (Article 1 para. 1 of Protocol No. 1 - Deprivation of property)

András Sajó;Guido Raimondi;Helen Keller;Nebojša Vučinić;Peer Lorenzen

The applicant was born in 1954 and lives in Szolnok.

The applicant, a civil servant for more than thirty years, had been in the service of the Hungarian Tax Authority. On 31 March 2011 she was dismissed, with effect from 1 June 2011. Her dismissal was part of a wave of similar measures throughout the entire civil service.

On dismissal, the applicant was statutorily entitled to two months’ salary for April and May 2011, during which time she was exempted from working. In addition, she was to receive severance pay amounting to twelve months’ salary in application of section 19(2) of Act no. XXIII of 1992 on the Status of Civil Servants (see paragraph 8 below).

These benefits were subsequently taxed at 98% in their part exceeding 3,500,000 Hungarian forints (HUF). The exceeding part was HUF 3,903,529, the tax amounting to HUF 3,825,458. This represented an overall tax burden of approximately 60% on the entirety of the severance, as opposed to the general personal income tax rate of 16% in the relevant period.

The tax amount in question was never disbursed to the applicant, but was withheld by the employer and directly transferred to the tax authority on 8 June 2011.

Section 19 of Act no. XXIII of 1992 on the Status of Civil Servants provides as follows:

“(1) A civil servant ... shall be entitled to severance if his service relationship is terminated by ordinary dismissal ... .

(2) The amount of severance shall be, if the civil servant’s service has been at least:

g) 20 years: eight months’ salary ...

The amount of severance shall be increased by four months’ salary if the service relationship is terminated within the five-year period prior to the civil servant’s qualification for old-age pension [section 19/A § 1(a)] or anticipated old-age pension.”

On 22 July 2010 Parliament adopted Act no. XC of 2010 on the Adoption and Modification of Certain Economic and Financial Laws (“the Act”). The Act, which was published in the Official Gazette on 13 August 2010, introduced inter alia a new tax on certain payments to employees in the public sector whose employment was terminated. Consequently, severance pay and other payments related to the termination of employment exceeding HUF 2 million became subject to a 98% tax. However, income tax and social security contributions already paid could be deducted from the tax. Notwithstanding the limit of HUF 2 million, the statutory provisions on the sum of severance pay – in some cases amounting to twelve months’ remuneration – were not modified. The bill preceding the Act justified the tax with reference to public morals and the unfavourable budgetary situation of the country.

The Act entered into force on 1 October 2010; however, the tax was to be applied to the relevant revenues as from 1 January 2010. Simultaneously, the Constitution was also amended, establishing retroactive tax liability in respect of the given tax year concerning “any remuneration against good morals” paid in the public sector.

The Act was challenged before the Constitutional Court within the framework of an abstract ex post facto control. This court found the relevant provisions unconstitutional in decision no. 184/2010. (X.28.)AB on 26 October 2010.

According to the Constitutional Court, revenues earned solely on the basis of relevant statutory provisions (that is, the overwhelming majority of the revenues concerned by the disputed legislation) could not be regarded as being against good morals, and therefore not even the constitutional amendment justified a retroactive 98% tax. The Constitutional Court pointed out that it reviewed the rate or amount of taxes only exceptionally; however, it held that a pecuniary burden was unconstitutional if it was of a confiscatory nature or its extent was clearly exaggerated, i.e. was disproportionate and unjustified. Considering also the “fifty-percent rule” (Halbteilungsgrundsatz) set out by the German Federal Constitutional Court – according to which the overall tax load on assets must be limited to 50-60% of the yield on those assets – the court found that the 98% tax was excessive and punitive, yet it equally applied to severance pay earned in a fully untainted manner. The tax was levied on or deducted from the revenues concerned even if their morally doubtful origin could not be established. The Constitutional Court annulled the relevant provisions retroactively, that is, from the day of the Act’s entry into force. It relied on the above arguments, rather than on considerations about the protection of property, to which its scrutiny did not extend in the case.

The Constitutional Court’s decision contained in particular the following considerations:

“5.2. ... [The Act] applies to ... payments originating in unconditional statutory entitlements and defined by objective criteria, that is, to those ... received from any source specified in the Act and exceeding the [relevant] amount .... The Act does not apply only to budgetary institutions but to other, State-owned employers as well. The use of private resources depends on the citizens’ relatively free choices and autonomous decisions. However, decisions concerning public funds are different. [The impugned legislation] relates to public funds, and determines – at least indirectly – the use of public resources.

5.3. ... Depending on the circumstances, [the] 98% tax may apply to payments which derive from the obligatory application of cogent legal provisions. ... In these cases, the special tax does not function as a regulatory instrument, given its inescapable factual basis. Nor does it aim to prevent abusive payments; its purpose is rather to levy almost the entire income [in question] for the central budget. ...

The volume of public duties is considered unconstitutional if they have a confiscatory nature or amount to an evidently excessive rate of the kind which can be regarded as disproportionate and unjustified. ...

The material case concerns a substantial punitive tax which also applies to payments which are received, by virtue of law and within the limits of the proper exercise of rights, upon the termination of employment in the public sector. The Act would be applied also in cases where no infringement of law can be established in connection with the payments concerning the termination of a legal relation. It would deprive the taxable persons of incomes originating in unconditional statutory entitlements. ...

To increase budgetary revenues and secure a general and proportionate distribution of public burden is only the secondary and eventual purpose of the legislator when introducing such a tax. The direct purpose of the legislator in this case is to set a certain barrier on incomes by using the means of tax law. However, imposing a tax or other similar duty is no constitutional means to achieve such purpose. Several constitutional instruments are at the disposal of the legislator to accomplish its objective. It may reduce or even abolish some State allowances falling under the scope of the Act for the future, or transform the allocation system so that in the future it should not be possible to acquire further entitlements to allowances above a certain limit. Nonetheless, the discretion of the legislator only prevails in the framework of international and European community law.”

Upon a new bill introduced on the same day as the date of the Constitutional Court’s decision, on 16 November 2010 Parliament re-enacted the 98 % tax with certain modifications, according to which this tax applied from 1 January 2005; however, for the majority of those affected (excluding some senior officials) it only applied to revenues above HUF 3.5 million. The new legislation was published in the Official Gazette of 16 November and entered into force on 30 December 2010.

At the same time, Parliament again amended the Constitution, allowing retroactive taxation going back five years. Furthermore, the Constitutional Court’s powers were limited: the amended articles of the Constitution contained a restriction on the Constitutional Court’s right to review legislation on budgetary and tax issues. This restriction – which has also been maintained in the new Basic Law in force from 1 January 2012 – allows for constitutional review only in respect of violations of the right to life and human dignity, the protection of personal data, freedom of thought, conscience and religion, and the rights related to Hungarian citizenship.

Upon a petition for an abstract ex post facto control, on 6 May 2011 the Constitutional Court annulled – notwithstanding its limited powers – the five-year retroactive application of the 98% tax in decision no. 37/2011(V.10.)AB, relying on the right to human dignity. However, the reasoning of the decision underlined that only the taxation of revenues gathered before the 2010 tax year constituted a violation of the right to human dignity. The Constitutional Court did not find unconstitutional as such the Act’s presumption that the relevant revenues infringed good morals; however, it ruled that this presumption should be susceptible to a legal challenge. In view of its limited jurisdiction, it did not consider the substantive aspects of the tax.

“1. ... The Constitutional Court has held that the retroactive effect of the Act does not only apply to incomes earned contra bonos mores, but also to incomes originating in unconditional statutory entitlements. Payments of statutory amounts [which have not been abolished] cannot be regarded as being contra bonos mores.

As regards the prospective provisions of the Act, the Constitutional Court has pointed out that the tax in issue is also applicable to payments received legally and within the limits of proper exercise of rights upon termination of employment in the public sector, and that it deprives the persons concerned of incomes originating in unconditional statutory entitlements. However, in this case the legislator interpreted the “special rate” as an entire withdrawal of the income, by which it overstepped its constitutional mandate and breached the amended constitutional rule of distributing public burden.

In pursuit of decision [no. 184/2010 (X.28.)AB], Parliament amended the rules on the Constitutional Court’s competence as well as the provision of the Basic Law determining the distribution of public burden, and re-enacted the special tax. ...

2.2. ... [The new legislation] contains no reference to the notion “contra bonos mores”, and allows for retroactive law-making with regard to the fifth tax year in arrears as well as for [any] imposition falling short of [the total] deprivation of income. ...

4.1.1. ... The legal relations falling under the scope of the special tax are typically regulated by the so-called “legal status” Acts [i.e. the Acts concerning the legal status of civil servants]. [In this context, the] salary is specified by the so-called “pay scale”, which is independent from the parties and obligatory for them.

[Moreover,] the personal scope of the special tax also includes employers and employees, mainly those who belong under the Labour Code, who can significantly influence the amount of the allowance received upon the termination of employment. ...

In this respect, the special tax is a tax whose purpose is not to generate [State] revenue. It is, in this connection, a regulatory instrument. ... Certain taxes may serve not only the purpose of increasing State revenue, but also function as regulatory instruments. Secondarily, but not insignificantly, [this] taxation can be also seen as part of the State’s economic policy. In this regard the legislature is afforded an exceptionally broad constitutional margin of discretion. ...

4.1.4. ... The special tax is not a general income tax applicable to all types of income, but rather a particular tax levied on non-repetitive, non-regular payments which relate to certain factual circumstances (i.e. the termination of a legal relation) and which exceed a certain limit. ...

Such a tax with ex nunc effect cannot be considered to violate the right to protection of human dignity or to constitute an improper interference by the State with individual autonomy. Taking into account its base, the incomes not belonging in that base and their amounts, the special tax cannot be considered as completely dispossessing the tax subjects. ...

The individual’s acquisition of the income subject to the special tax is restricted by a public-law limitation originating in that tax ...

4.2.4. ... In case of misuse of public resources, the limitation on payments might even have retroactive effect, [under] section 70/I (2) of the Constitution. The Constitutional Court has already emphasised in its decision [no. 184/2010 (X.28.)AB] that a retroactive special tax may be imposed on unfairly high payments, on certain types of severance pay or on compensation for significant periods of unused vacation time accumulated over years; the Act aiming at preventing abuses and endorsing the society’s sense of justice is not unconstitutional in itself, but must remain within the framework of the amended Constitution.

4.2.5. However, to impose tax on incomes [lawfully] acquired during the tax year ... cannot be considered as the implementation of the new paragraph (2) of section 70/I of the Constitution, but rather interference by a public authority with individual autonomy going to such lengths that cannot have constitutional justification, and therefore violates the taxpayers’ human dignity. ...

The special tax does not provide for a fair and just assessment of individual circumstances; its retroactive rules apply to everyone [with two exceptions mentioned above] without differentiation. Nor does it take into account objective circumstances concerning a wide range of taxpayers, such as the economic crisis or emergency situations, which may disadvantageously influence the individuals’ circumstances. ...”

On 9 May 2011 Parliament again re-enacted the retroactive application of the 98% tax. The amendment to Act no. XC of 2010 was published in the Official Gazette on 13 May and entered into force on 14 May 2011. It provided that only relevant revenues earned after 1 January 2010 should be subject to the tax. The amended legislation did not contain any remedy available to those affected.

The Act, as in force as of 14 May 2011, provides (in sections 8-12/B) that the special tax rules are applicable to incomes received on 1 January 2010 or after. Incomes shall be subject to a 98% special tax where the private individual has worked at an economic operator or an organisation operating from public money, the payment is effected on account of the termination of the private individual’s work relationship, and the amount of the income exceeds HUF 3.5 (in certain cases 2) million. Incomes received between 1 January 2010 and 29 December 2010 were declared by private individuals by means of self-assessment, in tax returns submitted by 25 February or 10 May 2011 (depending on the taxpayer group). The tax was payable by the same dates.

Members of Parliament, vice mayors and Members of the European Parliament declared their income earned in 2010 and subject to the special tax in a different manner, in a separate tax return submitted by 31 July 2011. They paid the special tax by the same date. Persons subjected to the payment of special tax declared their taxable incomes earned between 1 January 2011 and 13 May 2011 by way of tax returns submitted by 25 February or 20 May 2012 (depending on the taxpayer group), and paid the tax by the same dates. In all other cases, the special tax is deducted by the payment issuer as withholding tax, and the deduction is indicated in the private individual’s tax return for the given revenue year.

Any charges paid by or deducted from the private individual including, in particular, personal income tax or individual contributions shall be regarded as tax advances paid on the special tax.

The Charter of Fundamental Rights of the European Union provides as follows:

“1. The Union recognises and respects the entitlement to social security benefits and social services providing protection in cases such as maternity, illness, industrial accidents, dependency or old age, and in the case of loss of employment, in accordance with the rules laid down by Community law and national laws and practices.”

The European Court of Justice held in Case C-499/08 Andersen v Region Syddanmark, [2010] ECR I-09343 as follows:

“29. The aim pursued by the severance allowance of protecting workers with many years of service in an undertaking and helping them to find new employment falls within the category of legitimate employment policy and labour market objectives provided for in Article 6(1) of Directive 2000/78.”

European Commission Recommendation of 30 April 2009 on remuneration policies in the financial services sector (2009/384/EC) provides as follows:

“1. Excessive risk-taking in the financial services industry and in particular in banks and investment firms has contributed to the failure of financial undertakings and to systemic problems in the Member States and globally....

Creating appropriate incentives within the remuneration system itself should reduce the burden on risk management and increase the likelihood that these systems become effective. Therefore, there is a need to establish principles on sound remuneration policies.”

In the case Michel Bourgès-Maunoury, Marie-Louise Heintz v Direction des services fiscaux d’Eure-et-Loir concerning the compatibility with European Union primary law of a national provision on the procedure for calculating a wealth tax, Advocate General Cruz Villalón reiterated that the principle that rules governing tax law and the exercise of fiscal power must not have confiscatory effects is a “well-known and widely-recognised idea” (Case C558/10, Michel BourgèsMaunoury, Marie-Louise Heintz v. Direction des services fiscaux d’Eure-et-Loir 12 Dec 2011, OJ C-46, 12, Opinion of AG Villalón).

In a judgment of 22 June 1995, the Federal Constitutional Court held that, according to Article 14 of the Basic Law, the use of property served the purpose of private gain and the public good. In that sense, property tax, combined with other taxes, might take no more than 50% of the income from property (Halbteilungsgrundsatz). The overall tax burden should moreover not run counter to the principle of equality demanding the division of burden depending on the contributing capacity (BVerfG, 2 BvL 37/91, 22.6.1995).

In its subsequent decision of 18 January 2006 (BVerfG, 2 BvR 2194/99, 18.01.2006), the Federal Constitutional Court found that even though tax load fell within the ambit of Article 14 of the Basic Law, that is, the protection of property, the overall burden through business and personal income tax, in the particular circumstances, did not infringe the complainant’s right to property. In the instant case the overall tax burden in business and personal income tax combined amounted to 57.58%. The Federal Constitutional Court noted in this regard that it was permissible to charge high income with higher tax burden, as long as the taxable person, after deduction of the relevant tax, disposed of a remaining income representing his private performance.

In decision no. 2007-555 DC (16 August 2007; Act pertaining to work, employment and purchasing power), the Conseil constitutionnel held as follows:

“24o The requirement deriving from Article 13 of the declaration of 1789 would not be complied with if taxation were to be of a confiscatory nature or subjected a certain category of taxpayers to an excessive burden in comparison with their ability to pay taxes. The principle of the capping of the proportion of a tax household’s income allocated to paying direct taxes, far from infringing the principle of equality before public burden sharing, is intended to avoid a patent infringement of this same principle;”

The Federal Supreme Court held that a taxation scheme that is confiscatory in its effects and not limited in time would infringe the essence of the right to property (Decisions of the Federal Supreme Court, BGE 106 Ia 342, 349; BGE 128 II 112, 126). To date, the Federal Supreme Court has not found that any taxation scheme was confiscatory.

Decision no. BGE 128 II 112, 126 contains the following passage:

“10 bb) ... In taxation matters, however, it [the guarantee of property, as set out in Article 26 of the Federal Constitution] does not go beyond the prohibition of confiscatory taxation. Therefore, a tax to be levied may not damage the very essence of private property. It is the task of the legislative branch to preserve the substance of the taxpayer’s assets and to allow him the chance to create new ones. In fact, a tax rate expressed in percentages is not the only decisive criterion in order to determine whether a taxation scheme has a confiscatory effect. It is necessary to examine the burden of the imposition for a rather long period and by not taking into account extraordinary circumstances. In order to accomplish this, all specific facts must be taken into consideration: the length and the gravity of the interference as well as the accumulation with other taxes or charges and the possibility to shift the tax to another person ...”.

Decision of the Federal Supreme Court no. 2P.139/2004 contains the following passage:

“4.2 The Federal Supreme Court has held that it is not compatible with Article 26 of the Federal Constitution if an annuity for life, inherited by bequest, of initially CHF 2200 per month is – regardless of the ability to pay other taxes of the person in receipt of the pension –taxed at 55 % in total, in terms of inheritance and income taxes as well as other expenses, which (taking into account of the tax sum due for over CHF 200,000) were necessary for their financing (Decision P.1704/1984, published in: ASA 56 p. 439 et seq.). In that specific case the specific circumstances were relevant because the heir could not secure her own existence after paying the taxes for the annuity for life.”

In United States v. Lovett, 328 U.S. 303, 315 (1946) the Supreme Court dealt with the following problem: According to the provisions of the Urgent Deficiency Appropriation Act, after 15 November 1943 no salary or compensation was to be paid to certain individuals, who were then government employees, out of any moneys then or thereafter appropriated, except for services as jurors or members of armed forces unless they were prior to that date again appointed to jobs by the President with advice and consent of the Senate. In the background of the statute challenged lay the House of Representatives’ feeling that in the late 1930s many ‘subversives’ were occupying influential positions in the Government and elsewhere and that their influence must not remained unchallenged. In 1943 the respondents, Lovett, Watson and Dodd, were and had been for several years working for the Government. The Government agencies which had lawfully employed them were fully satisfied with the quality of their work and wished to keep them employed in their jobs. The Supreme Court held that the purpose of the provision challenged was not merely to cut off the petitioners’ compensation through regular disbursing channels, but permanently to bar them from government service and it was designed to force the employing agencies to discharge respondents and to bar their being hired by any other governmental agency. The Supreme Court reiterated that the Constitution barred such legislative acts by providing that “no Bill of Attainder or ex post facto Law shall be passed”. It found that the relevant provision was designed to apply to particular individuals and operated as a legislative decree of perpetual exclusion from a chosen vocation. It ruled that this permanent proscription from any opportunity to serve the Government was punishment of those individuals without a judicial trial and thus carried the usual characteristics of bills of attainder. The Supreme Court found that “legislative acts, no matter what their form, that apply either to named individuals or to easily ascertainable members of a group in such a way as to inflict punishment on them without a judicial trial, are ‘bills of attainder’ prohibited by the Constitution”.

The subject matter of the case Armstrong v. United States, 364 U.S. 40, 49 (1960) was as follows: The petitioners (Armstrong and al.) furnished various materials to Rice for use in construction of boats. Upon Rice’s default, the Government exercised its option as to ten of the boat hulls still under construction and removed these properties to out-of-state naval shipyards for use in the completion of the boats. When the transfer occurred, the petitioners had not been paid for their materials and they were not paid afterwards, either. The petitioners therefore contended that they had liens. The Supreme Court held “that there was a taking of these liens for which just compensation is due under the Fifth Amendment. It is true that not every destruction or injury to property by governmental action has been held to be a ‘taking’ in the constitutional sense. This case and many others reveal the difficulty of trying to draw the line between what destructions of property by lawful governmental actions are compensable ‘takings’ and what destructions are ‘consequential’ and therefore not compensable... The Fifth Amendment’s guarantee that private property shall not be taken for a public use without just compensation was designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole. A fair interpretation of this constitutional protection entitles these lienholders to just compensation here.”

In Eastern Enterprises v. Apfel, 524 U.S. 498 (1998) the Supreme Court held that the Coal Industry Retiree Health Benefit Act 1992 amounted to an unconstitutional regulatory taking of property. It held that the economic impact of the Act was substantial as to the petitioner, in that it required Eastern Enterprises to contribute large sums of money to a pension fund for employees employed in the 1950s and 1960s solely because those payments could not be allocated to other coal companies that were currently operating in the coal industry. The retroactive effect of the Act imposed a substantial economic injury on Eastern Enterprises that could not have been anticipated. Moreover, the challenged statute interfered with Eastern Enterprises’ expectations in that in 1987 the company sold off its remaining holdings in coal operations and completely quitted this industry. The statute’s requirement for Eastern Enterprises to undertake the obligation at issue clearly interfered with the expectations of Eastern when it sold off its interest in coal operations. Lastly, the nature of the government action was unusual because it retroactively applied a substantial economic burden on Eastern Enterprises. For the Supreme Court, the character of the government action was substantial and invasive. The balance of the factors resulted in the finding of an unconstitutional taking requiring just compensation.