David Thór Björgvinsson;George Nicolaou;Lech Garlicki;Ledi Bianku;Nebojša Vučinić;Päivi Hirvelä;Vincent A. De Gaetano

The application was lodged by five applicants – Henryk Pikielny (“the first applicant”), Simon Pikielny (“the second applicant”), Yael Star (“the third applicant”), Irit Fenton (“the fourth applicant”) and Ruth Leshem (“the fifth applicant”). The first applicant is a Brazilian national, the second, third and fifth applicant are Israeli nationals. The fourth applicant has dual Israeli and British nationality. They were born in 1928, 1923, 1932, 1937 and 1936 respectively. The first applicant lived in Paris, the second in Hertzila, the third in Ashdod, the fourth in Haifa, and the fifth in Tel Aviv.

The first applicant died on 12 June 2010. On 20 October 2010 the applicant’s wife, Ms Helena Pikielny, expressed the wish to pursue the application in his stead.

The applicants were represented before the Court by Ms A. SucheckaTarnacka and Mr B. Kordasewicz, lawyers practising in Warszawa, Poland. The Polish Government (“the Government”) were represented by their Agent, Mr J. Wołąsiewicz, succeeded by Ms J. Chrzanowska, of the Ministry of Foreign Affairs.

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

The applicants’ ancestors owned a textile manufacturing factory in Łódź, Poland, consisting of some 15 various buildings, including wool weaving mills, a plot of land of 6,437 sq. m. and a garden. The factory, which was originally intended for the manufacture of silk scarves, was founded by the first, the second and the fourth applicants’ grandfather, Mojżesz Pikielny, in 1889.

Shortly before the Second World War the factory operated under the name “Factory of Wool and Cotton Manufactures M. i. T. Pikielni Joint Stock Company” (“Fabryka Wyrobów Wełnianych i Bawełnianych M. I T. Pikielni Spółka Akcyjna”) and, following various acquisitions and transactions, was eventually co-owned by Mojżesz Pikielny and his sons – Maks Pikielny (the first and second applicants’ father) and William Pikielny (the fourth applicant’s father).

Following the outbreak of the Second World War, the factory owners and the applicants’ other relatives were taken by the Nazis to concentration camps or ghettos. The factory was taken over by Germans and throughout the war operated under the Nazi-appointed trustee (“Treuhender”).

William Pikielny was killed during a bombing of Łódź in 1939. Mojżesz Pikielny perished in the Warsaw ghetto in 1943. Maks Pikielny and the first and second applicants survived the concentration camps and returned to Łódź at the end of the war. They found the factory functioning largely as it had been during the Nazi occupation. It was then taken over and managed by the communist authorities. In recognition of his former role as owner and chief executive of the factory Maks Pikielny was designated by the Workers’ Committee as manager of operations. In fact, he actively managed the business until he and the first and second applicants left Poland for Brazil in June 1946.

On 12 February 1948 the factory was nationalised by virtue of the Minister of Light Industry’s (Minister Przemysłu Lekkiego) decision no. 22 (“the 1948 decision”), issued pursuant to section 3(16) of the Law of 3 January 1946 on the nationalisation of basic branches of the State economy (Ustawa o przejęciu na własność Państwa podstawowych gałęzi gospodarki narodowej) (“the 1946 Act”). The decision was published in the Cabinet’s Official Gazette (Monitor Polski) no. 44 of 30 April 1948.

The former owners were neither notified about the take-over of their property nor were they compensated for it. Throughout the years of the communist regime the factory remained operating, having been transferred by the State Treasury from one State-owned enterprise to another. Finally, in 1963 it was assigned to “Lodex”, a State-owned Wool Trade Plant (Zakłady Przemysłu Wełnianego “Lodex”). However, the relevant entry recording the owner in the Łódź District Court Land and Mortgage Register had not been amended and the company “M. i T. Pikielny Joint Stock Co.” remained listed as the factory’s owner until the beginning of the 1990s.

At around the same time the applicants started to make first attempts to have the land and factory restored to them or, alternatively, to obtain compensation for its nationalisation.

On 31 May 1991 winding-up proceedings were instituted in respect of the “Lodex” Wool Trade Plant. In the course of the proceedings, “Lodex” lodged an application with the Łódź District Court for acquisition of the property in question by prescription. The claim was dismissed on 3 March 1992.

Subsequently, the plant’s representatives asked the Łódź District Court to open a new book (księga wieczysta) for the property and to make an entry recording the State Treasury as its owner.

On 17 April 1992 the Łódź District Court ordered that the old books and records kept for the property and listing the applicants’ family as the owners be closed, that a new book no. 87708 be opened and that the State Treasury be entered in the Land and Mortgage Register as the owner of the property. The applicants appealed against that order.

On 10 December 1993 the Łódź Regional Court dismissed their appeal (rewizja). Subsequently, on 30 April 1994, the applicants asked the Minister of Justice to lodge an extraordinary appeal (rewizja nadzwyczajna) against the contested order but their request was to no avail.

In the meantime, on 17 December 1992, the Governor of Łódź (Wojewoda) had given a decision declaring that the “Lodex” Wool Trade Plant had acquired perpetual use (użytkowanie wieczyste) of the land in question “with ownership of the buildings and machines having been acquired by ‘Lodex’ through payment”. The applicants sought to have the administrative proceedings reopened. On 23 March 1993 the Governor of Łódź refused their application.

On 14 December 2004, following the applicants’ inquiry into the possibility of obtaining pecuniary compensation for the nationalised property, the Minister for Economy and Labour (Minister Gospodarki i Pracy) informed them by letter that until that time no laws regulating this matter had been enacted. Admittedly, the 1946 Act in sections 3 and 7 stated that an appropriate body would be set up to deal with such compensation claims and that the relevant rules governing the principles for payment of compensation would be established. However, the Cabinet had not yet fulfilled that statutory obligation. Accordingly, there was no body that could be authorised to act in respect of compensation or related matters. The Minister added that it should be assumed that this lacuna would be removed once Parliament had adopted a law on restitution and compensation. Currently, the Minister for the State Treasury was working on the relevant bill and it was likely that that bill would soon become a formal proposal by the Government.

Since then, the applicants have not made any further attempts to claim compensation for the nationalised factory before the domestic authorities.

Following the establishment of the communist regime in Poland nearly all branches of industry, as well as banking, insurance, transport and commercial companies were taken over by the State under the 1946 Act which, in its section 1, stated the purposes of nationalisation as follows:

“ In order to ensure the planned rebuilding of the state economy, the economic sovereignty of the State and to foster the general well-being, the State shall take over ownership of enterprises on the conditions laid down in this law.”

Pursuant to section 2(1), only those industrial, mining, transport, banking, insurance and commercial enterprises that belonged to the Third Reich and the former Free City of Gdańsk, their citizens (except for those of Polish or other nationality who had been persecuted by the Germans), German and Gdańsk legal persons (except for those set up under public law), companies controlled by German or Gdańsk citizens or administration or those owned by persons who had defected to the enemy were to be taken over by the State without payment of compensation.

Section 3(1) of the 1946 Act (as amended) states that the owners of the remaining enterprises were to be compensated for their nationalised property. That provision reads, in so far as relevant, as follows:

“1. The State shall compensate [the owners] for taking over ownership of the following:

A. Mining and industrial enterprises in the following sectors of State economy:

1) mines and mining leases subject to mining law;

2) oil and gas industry, including mines, refineries, gasoline production and other processing plants, gas pipes and synthetic fuel industry;

3) companies that generate, process, transmit or distribute electricity ...;

4) companies that generate, process, transmit or distribute gas ...;

5) water supply companies serving more than one municipality ...;

6) steelworks and non-ferrous metals smelting plants;

7) armaments, aviation and explosives industry;

8) coking plants;

9) sugar factories and refineries;

10) industrial distilleries, spirit refineries and vodka production plants;

11) breweries with an annual output exceeding 15,000 hectolitres;

12) yeast production plants;

13) grain plants with a daily output exceeding 15 tons of grain ...;

14) oil plants with an annual output exceeding 500 tons and all refineries of edible fats;

15) cold stores;

16) large and medium textile industry;

17) printing industry and printing houses;

B. Industrial enterprises not listed in subsection “A” if they are capable of employing in the production more than 50 persons on one shift.

C.

1) Transport enterprises (standard gauge and narrow-gauge railways, electric railways and aviation transport enterprises);

2) communication enterprises (telephone, telegraph and radio enterprises).

Section 7 lays down general principles for compensation to be paid for nationalised property. It states, in so far as relevant, as follows:

“1. The owner of an enterprise whose ownership has been taken over by the State (section 3) shall receive compensation from the State Treasury within one year from the date on which a notice of final determination of the amount of compensation due has been served on him.

Such compensation shall in principle be paid in securities; however, in exceptional and economically justified cases it may also be paid in cash or other values.

The amount of compensation due shall be determined by special commissions. The persons concerned shall have the right to participate in proceedings before those commissions. If need be and in any case if so requested by the persons concerned, the commission shall appoint appropriate experts.

The composition of the commissions, the rules for the appointment of their members, the quorum, the rules of procedure before the commissions and rules for appeals against their decisions shall be determined by an ordinance issued by the Cabinet.

The following factors shall be taken into account in determining compensation:

a) general deterioration of the value of State property;

b) net value of the corporate property on the date of nationalisation;

c) deterioration of the value of the enterprise cause by war losses or losses incurred by the enterprise in connection with the war, occupation in the period from 1 September 1939 to the date of nationalisation;

d) value of expenditures made after 1 September 1939;

e) special circumstances affecting the value of the enterprise (concession terms, licenses etc.).

A Cabinet’s ordinance shall determine detailed rules governing the calculation of compensation, assessment of the circumstances listed in subsection 5 and means of payment of compensation (subsection 2) and depreciation of securities.”

Pursuant to section 10, the Cabinet and the relevant Ministers shall be entrusted with the implementation of the 1946 Act. However, since 5 February 1946, the date of entry into force of the 1946 Act, until the present day the Cabinet has not yet issued an ordinance on the organisation of the compensation commissions and determination of compensation referred to in section 7(4) and (6).

Articles 417 et seq. of the Civil Code (Kodeks cywilny) provide for the State’s liability in tort.

In the version applicable until 1 September 2004, Article 417 § 1, which lays down a general rule, read as follows:

“1. The State Treasury shall be liable for damage caused by a State official in the performance of the duties entrusted to him.”

On 1 September 2004 the Law of 17 June 2004 on amendments to the Civil Code and other statutes (Ustawa o zmianie ustawy – Kodeks cywilny oraz niektórych innych ustaw) (“the 2004 Amendment”) entered into force. The relevant amendments were in essence aimed at enlarging the scope of the State Treasury’s liability in tort under Article 417 of the Civil Code – including the addition of a new Article 4171 and provision being made for the State’s tortious liability for failure to enact legislation, a concept known as “legislative omission” (zaniechanie legislacyjne).

Following the 2004 Amendment, Article 4171, in so far as relevant, reads as follows:

“4. If damage has been caused by failure to enact a law [akt normatywny] where there is a statutory duty to do so, the incompatibility of the failure to enact that law shall be established by the court dealing with the claim for damages.”

However, under the transitional provisions of section 5 of the 2004 Amendment, Article 417 as applicable before 1 September 2004 applies to all events and legal situations that subsisted before that date.

The concept of the State’s civil liability for a constitutional tort was introduced into the Polish legal order on 17 October 1997, the date of entry into force of the 1997 Polish Constitution.

Article 77 § 1 of the Constitution states, in so far as relevant, as follows:

“Everyone shall have the right to compensation for any harm done to him by any act of a public authority in breach of the law.”

In its resolution of 24 November 2005 (“the 2005 Resolution”), the Supreme Court (Sąd Najwyższy), sitting as a bench of three judges, dealt with the following legal questions submitted to it by the Warsaw Court of Appeal (Sąd Apelacyjny):

“ Is the State Treasury liable for damage caused by failure to enact a law [akt normatywny] if the duty to enact that law, laid down in section 7(4) and (6) of [the 1946 Act] was not fulfilled until the date of entry into force of [the 2004 Amendment],

and, if so,

When this duty should have been performed and whether damages for failure to enact the above law corresponds to unreceived compensation for the enterprise nationalised by the State, determined in accordance with the principles laid down in section 7(2) and (5) of [the 1946 Act]?”.

The question arose in the context of a case brought by a certain E.K., who sought damages for the nationalisation of her family’s printing house and, as one of the basis for her claim, invoked Article 4171 of the Civil Code, relying on the State’s legislative omission consisting in its failure to issue the relevant ordinance.

The Supreme Court’s answer in the operative part of the resolution reads:

“Until the date of entry into force of [the 2004 Amendment] the Cabinet’s failure to issue an ordinance foreseen in section 7(4) and (6) of [the 1946 Act] did not constitute a basis for a claim by an owner of the nationalised enterprise for damages arising from [nationalisation].”

The resolution contains extensive reasoning, the main thrust of which reads as follows:

“[As regards the time-frame for the issue of the ordinance]. The determination of the beginning of that situation carries with it a certain element of arbitrariness since [the 1946 Act] does not lay down any term within which the ordinance referred to in section [7] (4) and (6) should be issued. Assuming that in general the absence of a term is tantamount to a duty to enact a law without undue delay, it can be considered that the discharge of the statutory authorisation, assuming the existence of willingness of the authorised body (the Cabinet) should have taken place in 1946 or in 1947 at the latest. This is supported by the fact that the Cabinet issued ordinances implementing other provisions (including section 2(7) of the Act, a fundamental provision for the interest of the State).

[As regards the State’s civil liability for legislative omission], ... it should be concluded that before the entry into force of the 1997 Constitution the State had not been liable under civil law for the consequences of its legislative inactivity. ...

17 October 1997, marking the entry into force of the Constitution is the relevant date as its constitutes the beginning of the existence in the legal order of, inter alia, Article 77 § 1 of the Constitution, proclaiming the right of “everyone” to compensation for any harm done to him by any act of a public authority in breach of the law ....

Assuming that Article 77 § 1 does not contain a provision making it possible to draw from it a direct basis for a claim for damages for the legislature’s inactivity, it must be said that the rules for the State’s liability in the sphere of law-making should be established by means of an ordinary statute, determining in a more detailed manner than Article 77 §1 premises for an effective claim. ...

Article 4171 § 4 of the Civil Code, as introduced by [the 2004 Amendment] satisfies the requirement of detailed premises. The relevant temporal consequences have been clearly set out in its section 5, evidently indicating the prospective operation of Article 4171 § 4 of the Civil Code. A formulation laying down a non-retroactive character of the provision is telling in that it refers to “events and legal situation that subsisted before its entry into force” ... In consequence, the assessment of the effects of legislative omission subsisting before 1 September 2004 was governed by [earlier provisions]. The relevant Article 417, in its version before the amendment, did not include legislative omission as it was based on a completely different premise, namely, the absence of the State’s civil liability for the legislature’s acts. ... “

On 5 December 2007 the Supreme Court, sitting as a bench of three judges, dealt with a cassation appeal (kasacja) lodged by Lubelska Fabryka Maszyn i Narzędzi Rolniczych “Plon”, a limited liability company which was at that time subject to a winding-up procedure. The appellant contested the judgment of the Warsaw Court of Appeal of 2 February 2007, rejecting its appeal (apelacja) against the judgment of the Warsaw Regional Court of 30 May 2006 whereby its claim for damages arising from the State’s failure to issue the relevant ordinance, pursuant to section 7(2) and (5) of the 1946 Act, had been dismissed. The claim was based on Article 77 of the Constitution and Articles 417 and 4171 § 4 of the Civil Code.

In dismissing the cassation appeal, the Supreme Court essentially reiterated the grounds stated in the 2005 Resolution (see paragraph 25 above), stressing that the impugned legislative omission occurred in 1946 or, at the latest in 1947 and since then had continued. However, Article 77 § 1 of the Constitution could not be considered a legal basis for a claim deriving from an “omission” by public authorities since that provision clearly covered only their “acts”. The provision of Article 4171, enabling a plaintiff to seek damages for legislative omission, had been introduced only on 1 September 2004 by virtue of the 2004 Amendment. The terms of section 5 of the Amendment 2004 were unambiguous: Article 4171 of the Civil Code did not apply to events and situations that had subsisted before its entry into force. Consequently, its operation was excluded in respect of legislative omissions that originated in facts that had occurred earlier, even if this state of affairs continually existed until the present day.

On 13 June 2011 the Constitutional Court (Trybunał Konstytucyjny) heard a constitutional complaint lodged by a company Elektrownia w Kielcach spółka akcyjna, challenging the constitutionality of section 5 of the 2004 Amendment in so far as it excluded the application of Article 4171 of the Civil Code to situations that had subsisted before the entry into force of that Amendment, i.e. 1 September 2004 (see also paragraphs 20-26 above). The claimant invoked, in particular, Article 77 § 1 of (right to compensation for unlawful action of public authority) read in conjunction with Article 2 (rule of law), Article 64 §§ 1 and 2 (right of ownership) read in conjunction with Article 21 §§ 1 and 2 (protection of ownership) and Article 32 § 1 (equality before the law) and Article 45 § 1 (right of fair trial) of the Constitution.

Before lodging the complaint, the company, which had been nationalised under the 1946 Act, unsuccessfully sought compensation for the Prime Minister’s legislative inactivity in that he had failed to enact an ordinance on rules for compensation as required by the 1946 Act. On 4 April 2008 the claim was finally rejected by the Warsaw Court of Appeal on the grounds stated in the 2005 Resolution (see paragraphs 23-25 above).

The Constitutional Court’s decision (no. SK 26/09), in its relevant part, reads as follows:

“4.7. ... Consequently, in the light of the provisions of the Constitution it is difficult to assume that non-fulfilment of the duty to enact an ordinance on compensation for nationalised property derived from [the 1946 Act] amounted to “[an] act of a public authority in breach of the law” linked with the State’s liability for [constitutional] tort under the Constitution. Even assuming that the state of legislative omission still persists, it should at the same time be concluded that the duty is non-enforceable. Thus, it is evident that on the basis of the applicable laws only a statute could regulate compensation for the claimant’s nationalised property. ... Accordingly, the Constitutional Court considers that the assumption that a legislative omission “in breach of the law” still continues is unwarranted, in particular after the entry into force of the Constitution, in the light of its standards. ... In the light of the constitutional standards as applicable at present it is difficult to accept that there is any legal force attached to the duty imposed on the Cabinet by section 7 of the 1946 Act.”

Article 156 § 1 of the Code of Administrative Procedure (“the CAP”) (Kodeks postępowania administracyjnego), which sets out grounds on which a final administrative decision is subject to annulment, states:

“1. A public administration authority shall declare a decision null and void if:

1) it has been issued in breach of the rules governing competence;

2) it has been issued without a legal basis or in flagrant breach of the law;

3) concerns a case already decided by means of another final decision;

4) it has been addressed to a person who is not a party to the case;

5) it was unenforceable on the date of its issuance and its unenforceability is of a permanent nature;

6) it would give rise to a punishable offence in the event that it has been enforced;

7) it has a flaw making it null and void by the force of law.

There is no time-limit for a party’s request to have an administrative decision declared null and void under Article 156 § 1.

However, there are situations where, even if certain grounds listed in Article 156 § 1 exist, the lapse of time or irreversible effects of the contested decision have consequences for the formula used in a decision given in the annulment procedure. Article 156 § 2 provides for the following exceptions:

“ A decision shall not be declared null and void on the grounds listed in paragraph 1 (1), (3), (4) and (7) if 10 years have expired from the date of its service or promulgation, as well as if the decision has produced irreversible legal effects.”

Article 158 reads as follows:

“1. A ruling on annulment of a decision shall be given by means of a decision.

If it is impossible to declare a decision null and void because of the circumstances referred to in Article 156 § 2, a public administration authority shall only declare that the contested decision has been issued contrary to the law and indicate circumstances because of which it has not declared the decision null and void.”

For the purposes of compensation, the effects of declaring the original administrative decision “null and void” or “issued contrary to the law” are the same.

Article 160 set out principles for compensation for loss caused by the issuance of an administrative decision subsequently annulled on the grounds listed in Article 156 § 1.

This provision was repealed by the 2004 Amendment with effect from 1 September 2004 (see also paragraphs 20-21 above) and replaced by new Article 4171 § 2 of the Civil Code. However, under section 5 of the 2004 Amendment, which sets out transitional rules, Article 160, in the version applicable on the repeal date, still applies to “events and legal situations” that subsisted before the entry into force of the 2004 Amendment.

Article 160, in the version applicable on the relevant date, read as follows:

“1. A party who has suffered a loss on account of the issuance of a decision in breach of Article 156 § 1 or on account of annulment of such a decision shall have a claim for compensation for actual damage, unless he has culpably caused the circumstances mentioned in this provision.

The provisions of the Civil Code, except for Article 418 [provision repealed], shall apply to [such] compensation.

Compensation is due from an authority that issued a decision in breach of Article 156 § 1, unless the other party to the proceedings concerning the decision culpably caused the circumstances mentioned in this provision; in the latter case a claim for compensation shall be directed against the culpable party.

A public administration authority that has declared a decision null and void or declared, pursuant to Article 158 § 2, that it has been issued contrary to the law shall rule on compensation due from the authority referred to in § 1. The vindication of compensation from a person who has culpably caused the circumstances mentioned in Article 156 §1, shall be effected before a court of law.

A party who is not satisfied with compensation granted by a public administration authority referred to in § 4, may lodge a claim with a court of law within 30 days from the date of service of a decision given on that matter.

A claim for compensation shall be time-barred after 3 years from the date on which has become final the decision declaring null and void the decision issued in breach of Article 156 § 1 or decision whereby an authority has declared, pursuant to Article 158 § 2, that the contested decision has been issued in breach of Article 156 § 1.”

On 30 March 2011 the Civil Chamber of the Supreme Court, sitting in plenary, gave a resolution (no. III CZP 112/10) on the application of Article 160 of the CAP and rules regarding compensation. The resolution was given in response to legal questions submitted by the First President of the Supreme Court in connection with certain problems and divergences arising in judicial practice, in particular in respect of the temporal effects of Article 160 as determined in section 5 of the 2004 Amendment, the application of Article 4171 § 2 of the Civil Code which replaced Article 160 (see paragraphs 20-21 and 29 above) and rules for adjudicating compensation.

The resolution contains an extensive reasoning which, in so far as relevant, may be summarised as follows:

1) Article 160 §§ 1,2,3 and 6 of the CAP applies to all claims for damages arising from an issuance of a final administrative decision given before 1 September 2004, which has been declared null and void or has been declared as being issued in breach of Article 156 § 1 of the CAP. In contrast, paragraphs 4 and 5 of Article 160, setting out the procedure for vindicating such claims, should be considered as no longer applicable. Consequently, a party seeking compensation under this provision should file an action directly with a civil court.

2) Where an annulled administrative decision has been given before the entry into force of the Constitution (17 October 1997), compensation defined in Article 160 of the CAP shall not include loss of profits sustained in consequence of its issuance, even if such loss has occurred after this date.

The Government, in their observations, supplied data concerning the annulment procedure and claims for compensation for nationalisation asserted by former owners or their heirs under the provisions of the CAP. Their submissions may be summarised as follows. From 1989 to 30 September 2006 the Ministry for Economy registered 3,167 cases where applicants asked for the annulment of nationalisation decisions issued under the 1946 Act and other nationalisation laws adopted under the communist regime. Many other cases were registered in other Ministries. The Government assumed that one half of those cases concerned the 1946 Act. By 30 September 2006 the relevant Minister annulled 1,394 nationalisation decisions, declaring them either null and void or being issued in breach of the law. A further 1,100 similar cases were at that time pending. In 625 cases the applicants initiated the compensatory procedure under Article 160 of the CAP. In 374 cases compensation was granted, 151 cases were dismissed as time-barred since the applicants had not complied with the statutory time-limit of 3 years for lodging a compensation claim. _

Between 1995 and 2006 the Minister for Economy paid to claimants 227,000,000 Polish zlotys (PLN) by way of compensation for nationalised property.

In the years 1990-2005 Parliament dealt with 11 bills on reprivatisation, restitution and compensation for property taken over by the communist authorities under nationalisation laws passed in 19441962. None of them was successfully enacted mostly because fresh elections were called and the work on them had to be discontinued. In the case of the 1999 bill on the restitution of immovable property and certain kinds of movable property taken from natural persons by the State or by the Warsaw Municipality, and on compensation (Projekt ustawy o reprywatyzacji nieruchomości i niektórych ruchomości osób fizycznych przejętych przez Państwo lub gminę miasta stołecznego Warszawy oraz o rekompensatach – “the Restitution Bill 1999”) the relevant Act of Parliament never entered into force because it had been vetoed by the President of Poland.

Each of those bills, although they differed in specific modalities, contained provisions for compensation for nationalisation of property under the 1946 Act.

In 2007 the Polish Parliament started the first reading of the Government’s bill on compensation for property or other assets taken over by the State (projekt ustawy o rekompensatach za przejęte przez państwo nieruchomosci oraz inne składniki mienia) (“the 2006 Compensation Bill”). In general, compensation claims were to be subject to a statutory ceiling of 15% of the value of the original property taken over by the State. The claims of the owners of property nationalised under the provisions of the 1946 Act were included in the list of claimants entitled to compensation. The work on the 2006 Compensation Bill was discontinued in September 2007 since snap parliamentary elections were called following the collapse of the government coalition.

In 2008 the new Government started preparatory work on fresh restitution legislation, i.e. the “Bill on pecuniary benefits to be granted to some persons who were subject to nationalisation procedures” (projekt ustawy o świadczeniach pieniężnych przyznawanych niektórym osobom, których dotyczyły procesy nacjonalizacji) (“the 2008 Compensation Bill”).

The 2008 Compensation Bill provided for no restitution of nationalised properties and was based on the principle of limited compensation, corresponding to a certain – not stipulated in the bill but to be determined in the Minister for Treasury’s future ordinance – percentage of the value of the property in question on the date of its nationalisation.

In the Minster for Finance’s report on the assessment of the budgetary impact of the implementation of the 2008 Compensation Bill (drawn up in 2008) the total value of the claims to be covered by the 2008 Compensation Bill was estimated at PLN 100,000,000,000.

It was expected that some 80,000 applications for compensation will be submitted under the provisions of the new legislation. The process of the realisation of cash payments was to be spread over the period of 15 years and instalments were to be indexed each year in accordance with the consumer price index.

The entry into force of the bill was tentatively foreseen for 2012.

In February 2010 the Minister for Finance was asked to make an analysis of the consequences of the implementation of the 2008 Compensation Bill.

On 5 March 2010 the Minister for Finance submitted a report stating that if the bill entered into force in 2012, there would be an abrupt increase in the public debt by PLN 18,000,000,000 which would correspond to 1.001.10% of the Gross National Product (GNP). In the circumstances, the allocation of PLN 20,000,000,000 for securing nationalisation claims might result in Poland’s exceeding the permissible limits of the national debt in relation to GNP as set by the European Union.

In March 2011 the Minister for Treasury issued a press release on the Ministry’s website, informing the public that the Government had decided not to submit the 2008 Compensation Bill to Parliament. That statement gives the following explanation:

“In view of the considerable savings that have been made in recent years, connected with the global financial crisis in many sectors of our social and economic life and the large financial burden resulting from the planned legislation, in the present economic situation, [the 2008 Compensation Bill] cannot be enacted.”


Remainder inadmissible;No violation of Art. 6-1

Giovanni Bonello;Lech Garlicki;Ledi Bianku;Nebojša Vučinić;Nicolas Bratza;Päivi Hirvelä

The applicant was born in 1949 and lives in Słupsk.

On 5 November 2000 the applicant filed a claim for payment against a housing cooperative of which she was a member. By a judgment of 27 February 2001 the Słupsk Regional Court dismissed the claim. The judgment was upheld on 7 September 2001 by the Gdańsk Court of Appeal. On 21 November 2001 the applicant was served with that judgment together with its written grounds.

On 10 December 2001 she filed a request with the Słupsk Regional Court to be granted a legal-aid lawyer for the purpose of lodging a cassation appeal. Her request was subsequently forwarded to the Gdańsk Court of Appeal as the Słupsk court lacked jurisdiction to deal with it. The request was allowed by a decision of 17 December 2001.

On 18 December 2001 the decision of 17 December 2001 was served on the local Bar Association. At the same time the Gdańsk Court of Appeal informed the Bar about the date on which the applicant had been served with the second-instance judgment.

On 3 January 2002 the Bar Association informed the applicant that a legal-aid lawyer had been assigned to her case. By a letter of 19 January 2002 to the court the lawyer refused to lodge a cassation appeal, finding no grounds to do so. The letter read:

“Having examined the file in detail, I have not found grounds for lodging a cassation appeal. The judgment given on 7 September 2001 by the Court of Appeal did not breach any provisions of substantive law. Nor were any provisions of procedural laws violated during the proceedings.

The findings of fact made by the courts show without any ambiguity that the applicant had never had the right to a co-operative apartment which could be assimilated to ownership. She had admitted, both before the first-instance and the appellate court, that at the time of the exchange of apartments she had been aware that her right was only assimilable to the rights arising out of a rental contract. (...) It had been open to her to take steps in order to have her right transformed into an ownership-like right, but she had not done so. Hence, the first instance court was right in finding that the defendant housing co-operative was not obliged to pay compensation to the applicant. The appellate court accepted these findings. In these circumstances, a cassation appeal would not offer any prospects of success.”

On 23 January 2002 the applicant requested the Gdańsk Court of Appeal to assign a new legal-aid lawyer to her case.

On 29 January 2002 the court informed the applicant that she should file a request with the Bar Association for a new lawyer to be appointed. On 4 February 2002 the applicant accordingly submitted her request to the local Bar Association.

By a letter of 19 February 2002 the Bar Association dismissed the request, having found that the applicant's previous legalaid lawyer had been entitled to refuse to draft a cassation complaint.

On 4 March 2002 the applicant again requested the court to assign a legalaid lawyer to the case. On 15 March 2002 the Gdańsk Court of Appeal informed the applicant that the refusal to lodge a cassation appeal could not justify assigning a new lawyer for the same purpose.

Pursuant to Article 5 of the Code of Civil Procedure, a court should give all necessary procedural instructions to a party acting without a lawyer and, in particular, should indicate the consequences of that party's acts or failures to act.

Article 113 § 1 of the Code of Civil Procedure provides that a party to the proceedings may ask the court competent to deal with the case to grant him or her an exemption from court fees provided that he submits a declaration to the effect that the fees required would entail a substantial reduction in his and his family's standard of living.

Pursuant to Article 117 of the Code, persons exempted from court fees may request that legal aid be granted to them. The court will then request the relevant District Bar Association or the District Chamber of Legal Advisers to assign an advocate or a legal adviser to the claimant's case.

At the material time a party to civil proceedings could lodge a cassation appeal with the Supreme Court against a final judicial decision of a secondinstance court which terminated the proceedings.

Under Article 393 4 § 1 of the Code of Civil Procedure a cassation appeal had to be lodged with the court that had given the relevant decision within one month from the date on which the decision with its written grounds was served on the party concerned. Cassation appeals which were not lodged by an advocate or a legal adviser would be rejected.

Article 1 of the Bar Act of 1982, as amended, reads, insofar as relevant:

“1. The Bar is established to provide legal assistance, co-operate in protecting a person's rights and freedoms as well as to formulate and apply the law.

The Bar is organized as a self-governing association.

An advocate whilst executing his/her professional duties is accountable only to the law.”

Article 3 of the Act provides as follows:

“The general tasks of the professional Bar Council are as follows:

1) creation of conditions for the statutory performance of the Bar's tasks,

2) representation of the Bar and protection of its rights,

3) supervision over the observance of the rules regulating the practice of the profession,

4) development of professional skills and training of advocates,

5) determination and promotion of professional ethics and ensuring their observance,

6) management (...) of the Bar's assets.”

Article 28 of the Act reads:

“1. An advocate may only refuse to provide legal assistance for important reasons of which he must notify the interested party. Any doubts as to whether to provide legal assistance or refuse to do so shall be resolved by the local Bar Council, and in situations where time is of the essence, by the Dean of that Council.

In cases where legal assistance is granted on the basis legal regulations concerning legal aid, only the entity appointing the advocate to represent the client may decide to relieve him or her from providing legal assistance.”

Under Article 21 § 3 of the Act, an advocate shall provide legal aid services in the jurisdiction of a court where he or she has their office.

Lawyers are bound to act in accordance with rules of professional and ethical conduct enacted by the Bar Association. They may be held accountable for professional misconduct or a breach of ethical principles in the proceedings before the bar disciplinary court.

Under Article 57 of the Body of Ethical Rules adopted by the National Bar Council on 10 October 1998, when an advocate, either privately hired by the client or appointed under the legalaid scheme, considers that submission of an appeal in a case offers no reasonable prospect of success and the client disagrees with his or her view, the lawyer shall give notice of termination of the power of attorney, terminate the representation, or notify the refusal to the body which appointed him or her.

In 2000 the Supreme Court issued a resolution in reply to a legal question whether a legalaid lawyer could refuse to lodge a cassation appeal. It replied to the question in the positive.

The court observed that issues involved in the grant of legal aid concerned not only the proper administration of justice, but also touched on human rights, and the right of access to a court in particular. Nevertheless, there was no comprehensive and coherent regulation of legal aid available under Polish law.

The mere fact that it was necessary for a cassation appeal to be lodged by a qualified representative was not open to criticism. However, a certain conceptual confusion was to be noted in the provisions governing legal aid as a whole, mostly because the legislator had failed to harmonise the relevant provisions of civil and criminal procedure. In particular, the scope of legalaid lawyers' obligations when legal representation was mandatory was not directly addressed by provisions of civil procedure.

As a result, the scope of legalaid lawyers' obligations to provide a party to the proceedings with “legal aid” in civil proceedings was unclear. In particular, the provisions on lawyers' legalaid obligations in connection with cassation proceedings before the Supreme Court lacked clarity. The application of the relevant provisions had given rise to serious difficulties of interpretation and discrepancies in the case-law of the Polish courts.

The court observed that the issue of the possible conflict between the opinion of a party granted legal aid and a lawyer assigned to represent him or her for the purpose of cassation proceedings had not been directly addressed by the applicable law. The notion of legal assistance could not be identified with a simple obligation of a lawyer to act in accordance with the client's wishes. The role of a legalaid lawyer had rather to be understood as obliging him or her to provide legal advice to the party, including as to the prospects of success offered by a cassation appeal against a given judgment.

The constitutional role of the Supreme Court, the highest judicial authority, was also an argument in favour of the conclusion that a legalaid lawyer was not compelled by the will of the party to have a cassation appeal lodged if such an appeal was bound to fail. In case of a disagreement between the party and the lawyer, it was open to the party to complain to the local Bar under Article 28 of the Bar Act. The Bar could then appoint a new lawyer who could lodge a cassation appeal, requesting at the same time to be granted leave to appeal out of time under Article 169 of the Code of Civil Procedure. It was true that the practice of the Supreme Court was not coherent in that in some cases it had rejected such requests and in others it had accepted them. However, it did not prevent the parties from having recourse to this course of action.

Pursuant to Article 169 of the Code of Civil Procedure, a party to the proceedings may ask for retrospective leave to perform a procedural measure outside the prescribed time-limit; this measure shall be performed simultaneously with the lodging of the request.

Article 133 § 3 of the Code of Civil Procedure reads, in so far as relevant:

“If a legal representative ... has been appointed in a case, the court correspondence shall be served on [him or her].

However, in a number of decisions the civil courts have held that the running of the time-limit for lodging a cassation appeal is not affected in any way by a request for legal aid submitted by a hitherto non-represented party and its subsequent grant or refusal. That time-limit starts to run on the date when the party was served with the judgment of the appellate court together with its written grounds, also where the request for legal aid has subsequently been granted (the Supreme Court's decisions of 15 April 1997, II CZ 35/97; 18 April 1997, I PKN 120/97; 10 September 1998, II UZ 101/98; 6 July 1999, II UKN 332/99; 9 August 2000, I CKN 747/00; 23 March 2001; II UZ 17/01; 19 June 2001, I PZ 33/01; 27 September 2001, II UZ 51/01; 28 November 2001, II UZ 85/01, 15 December 2005, I UZ 33/05).

The Supreme Court has repeatedly held that a request for leave to appeal out of time was the only method by which a cassation appeal submitted after the expiry of the timelimit could be admitted for examination (21 April 1997, II CZ 38/97; 27 September 2001, II UZ 51/01). In a further series of decisions the Supreme Court considered that it would be unfair for the legally-aided party to be penalised for the fact that legalaid applications could not be processed quickly enough to make it possible for a cassation appeal to be lodged within thirty days counted from the day of service of the judgment on the party. A request to appeal out of time should therefore be submitted within seven days from the date on which the lawyer could obtain effective access to the case file or had an effective possibility of drafting an appeal (4 March 2005, II UZ 72/04; 27 June 2000, I CZ 62/00), or from the date when the lawyer was informed that he had been assigned to the case by the local bar association (11 October 2001, IV CZ 163/01; 17 November 1998, II UZ 122/98; 11 October 2001, IV CZ 163/01).


PLAT ROR OCH SVETS SERVICE I NORDEN AB v. SWEDEN

Alvina Gyulumyan;Corneliu Bîrsan;Egbert Myjer;Elisabet Fura;Josep Casadevall

The first applicant (the applicant company) is a Swedish limited liability company, Plåt Rör och Svets Service i Norden AB. The other applicants, Mr P. Ernmark (the second applicant), Mr C. Hedberg (the third applicant), Mrs L. Brandtler (the fourth applicant) and Mrs A. Bergqvist (the fifth applicant), all of whom are Swedish nationals and live in the south of Sweden, are the owners of the applicant company. The applicants are represented before the Court by the second applicant.

The second applicant has also made some separate complaints. He is, regarding these complaints, represented before the Court by Mr. P. Friis, a lawyer practising in Malmö.

In January 2003 the Tax Authority decided to perform a tax audit of the applicant company. On 12 March 2003 a preliminary audit report (förhandspromemoria) was drawn up.

In March 2003, on the basis of the findings of the preliminary audit report, the Tax Authority requested the County Administrative Court (länsrätten) of the County of Skåne to sequestrate (belägga med betalningssäkring) the applicant company’s assets to the amount of 3,341,097 Swedish kronor (SEK) which corresponded to the company’s tax debt, including tax surcharges, as estimated at that time. The Tax Authority further requested that the decision be taken without the applicant company having been heard or informed of the request.

The Tax Authority submitted that it had discovered invoices that appeared false (osanna), in that they gave the incorrect impression that the applicant company had hired labour from subcontractors (under-entreprenörer) in order to make deductions for costs and ingoing value-added tax (VAT), thereby avoiding paying employer’s contributions (arbetsgivaravgifter) for its own employees. Furthermore, the Tax Authority pointed out several defects in the invoices, for example, that they lacked information proving the amount of hours worked and who the customer was. The Tax Authority further claimed, inter alia, that most of the subcontractors had not, during the time they were supposedly supplying the applicant company with labour, accounted for any salaries paid to employees.

On 28 March 2003 the County Administrative Court rejected the request for sequestration as it found that the Tax Authority had not, to a sufficient degree, proven that the applicant company had the alleged tax debt.

The Tax Authority appealed against the judgment to the Administrative Court of Appeal (kammarrätten) in Göteborg, maintaining its claim but no longer requesting that the decision be taken without the applicant company having been heard or informed of it. In particular, the Tax Authority stressed that a representative of one of the subcontractors who had been heard during the preliminary criminal investigation (see § 15 below) initiated by the National Economic Crimes Bureau (Ekobrottsmyndigheten – hereafter “the Bureau”) had denied any knowledge of the applicant company and had denied that he had issued any invoices to it.

On 9 May 2003, on the applicant company’s request, an oral hearing was held before the Administrative Court of Appeal. At the hearing the Tax Authority referred to some interrogation reports (förhörsprotokoll) held with four persons during the Bureau’s preliminary criminal investigation. These reports had, prior to the oral hearing, not been referred to by the Tax Authority. The Administrative Court of Appeal adjourned the hearing for 25 minutes to give the applicant company’s representative time to consider the new material. When the hearing resumed, the applicant company objected to the fact that the Tax Authority had been allowed to refer to selected parts of the very extensive body of information to which only the Tax Authority had access.

At the conclusion of the hearing the applicant company was afforded one week to supplement the grounds for its plea.

The applicant company demanded that the Administrative Court of Appeal reject the Tax Authority’s appeal and that the court grant it access to all the information in the Bureau’s criminal investigation. It submitted that the invoices corresponded to services ordered and paid for and that it had verified that all subcontractors had certificates proving that they were responsible for paying taxes and contributions for their businesses (Fskattebevis) and who their legal representatives were.

On 17 September 2003 the Administrative Court of Appeal rendered its judgment in the case. It found that the merits of the case were such as to make it probable that the applicant company would not be allowed to deduct the ingoing VAT. It further considered there to be an obvious risk that the applicant company would try to shirk responsibility for the debt. Therefore, and since the court did not find it disproportionate, it granted the Tax Authority’s request as regards the VAT. However, the court found that it would be in breach of Article 6 of the Convention to sequester the applicant company’s assets corresponding to the estimated tax surcharges. The court, therefore, rejected the Tax Authority’s appeal in that part. The court also found that it could not, within the instant case, try the applicant company’s request to grant it access to all the information in the Bureau’s criminal investigation. Therefore, it dismissed that request.

Both parties appealed against the judgment. The Tax Authority requested the Supreme Administrative Court (Regeringsrätten) to sequester an additional part of the applicant company’s assets, corresponding to the debt regarding tax surcharges, whereas the applicant company requested the court to quash the Administrative Court of Appeal’s judgment. In its appeal, the applicant company complained, inter alia, that the Tax Authority had been allowed to use selected information from the criminal investigation and that the applicant company had not been allowed access to the entire investigation.

On 19 December 2003 the Supreme Administrative Court granted the Tax Authority leave to appeal and, on 22 September 2004, it found that the sequestration of assets to cover tax debts concerning tax surcharges would not be in violation of the Convention, as long as the principle of proportionality and the limitations set out in the Law on sequestration for taxes, tolls and fees (lagen om betalningssäkring för skatter, tullar och avgifter) were respected. The court then noted that the tax debt, including the tax surcharges, had at the time of its judgment been confirmed by the Tax Authority. After having observed that the tax debt concerned a substantial amount, the court found that there was a considerable risk that the applicant company would try to shirk responsibility for the debt. Therefore, and since the court did not find it disproportionate, it granted the Tax Authority’s appeal and sequestrated additional property corresponding to the tax surcharges. In the same judgment, the Supreme Administrative Court refused leave to appeal in all other parts of the case.

At some point the Bureau had initiated a criminal investigation regarding aggravated tax crimes and aggravated book-keeping crimes against several people involved with the applicant company, including the second applicant. In April 2003 the Bureau conducted a search of the applicant company’s premises, questioned several people and seized part of the applicant company’s books. However, on 30 December 2004 the Bureau dropped the criminal investigation against the second applicant, since it considered that it would not be able to prove that he had committed any criminal acts. In January 2006 the criminal investigation was dropped against the other suspects.

On 15 December 2003, the applicant company was declared bankrupt, as it was unable to pay its tax debts (other than the ones concerned in this case) and therefore found to be insolvent.

On 14 January 2004 the Tax Authority decided that the applicant company was not entitled to certain deductions claimed by it in its VAT declarations for the period July-December 2002. Therefore, it refused the applicant company VAT deductions amounting to SEK 2,812,174 and, in addition, found the applicant company liable to pay SEK 562,432 in tax surcharges (skattetillägg), as it was considered to have supplied incorrect information in its VAT declarations. This decision was based on the results of the tax audit of the applicant company that had been carried out by the Tax Authority between January and December 2003 and which had resulted in an audit report (revisionspromemoria) of 2 December 2003.

The Tax Authority’s decision was not appealed against by the applicant company or any of its representatives.

Some time during 2004 the Tax Authority requested the County Administrative Court of the County of Skåne, in accordance with the rules on personal responsibility for representatives of corporations (företrädar-ansvar), to oblige the second applicant to pay SEK 517,711 with interest to the State. The Tax Authority claimed that the applicant company, according to the audit report, had issued false invoices to cover up payment of salaries to the applicant company’s own employees. By making deductions for the ingoing VAT in the invoices, the applicant company had, inter alia, wrongfully been awarded repayment of a surplus of ingoing VAT to the amount of SEK 517,711. The Tax Authority further submitted that the second applicant, who owned shares in the applicant company and who had been its only board member and sole representative, had with intent or through gross negligence supplied the authorities with false information which had led to the applicant company being wrongfully awarded repayment of a surplus of ingoing VAT. Moreover, the Tax Authority noted that it had decided in accordance with the information in the tax audit and that neither the applicant company nor the second applicant had appealed against its decision, despite the fact that such a possibility existed before as well as after the Tax Authority had petitioned the County Administrative Court in the present case. Therefore, the Tax Authority argued, no examination of the validity of the underlying tax decision should be made in the present case.

The second applicant contested the claim. He submitted, inter alia, that the applicant company had not been wrongfully awarded repayment of ingoing VAT and that the Tax Authority had not been able to prove that the invoices were false. The applicant company had not appealed against the Tax Authority’s decision of 14 January 2004 because it had by then been declared bankrupt. Furthermore, he submitted that he had not acted with intent or gross negligence. He had come into an already on-going business and the actual administration of the company had been handled by two other persons who had been responsible for all invoices. The invoices had also been inspected by the applicant company’s accounting consultant, who had made no criticism of the invoices or how the company was run. The second applicant himself had made sure that all the subcontractors had certificates proving that they were responsible for paying taxes and contributions for their businesses and that the companies had complete boards of directors. Therefore, he had had no reason to believe that the invoices were false and no criticism could be made of his management of the company’s administration. Moreover, the second applicant claimed that there were special reasons to remit liability, in full or at least partly, because his influence and involvement in the company’s business had been limited and very brief.

On 30 May 2006, after having held an oral hearing, the County Administrative Court rendered its judgment. It first noted that the second applicant had been a shareholder and the sole member of the board in the applicant company during the time when the incorrect information had been given and that he had signed the tax declarations which had contained the incorrect information. The court further considered that the second applicant had had an obligation to ensure that the applicant company promptly and correctly paid its taxes and fees. In its view, none of his objections were such as to call into question the validity of the underlying tax decision. In any event, the court observed that the second applicant had had the overall responsibility for the management of the company and that he could not relinquish this responsibility to his colleagues. Lastly, it stressed that he had been responsible for ensuring that the information given in the tax declarations was correct. Thus, the court found that the second applicant’s insufficient control over the management of the applicant company amounted to gross negligence. Therefore, and since there were no reasons to remit liability, the court granted the Tax Authority’s request.

The second applicant appealed against the judgment to the Administrative Court of Appeal in Göteborg, requesting, in the first place, that the court reject the Tax Authority’s petition. In the alternative, he requested that the liability be remitted in full or lowered. He maintained his claims and stressed, inter alia, that, despite a lengthy investigation into the applicant company by the Bureau, no one had been charged with any criminal acts.

The Tax Authority disputed the appeal and submitted that the Bureau had dropped the criminal investigation because it had not deemed it possible to prove whether the acts had been committed by the second applicant or another person involved with the company.

On 27 December 2006, after having held an oral hearing, the Administrative Court of Appeal rendered its judgment. It first noted that the case before it had come to concern mainly the question of the significance of the underlying tax decision of 14 January 2004. In this respect, it noted that there had been no appeal against the tax decision and that the second applicant had not requested that the decision be tried in accordance with Chapter 22, section 15 of the Tax Payment Act (skattebetalningslagen). Hence, the court found that, because of the existing possibilities for the second applicant to have the underlying tax decision tried, before as well as after the Tax Authority had petitioned the County Administrative Court in the present case, the validity of the underlying tax decision could not be tried within the instant proceedings. The court then considered that the second applicant’s management of the applicant company had been lacking to such an extent he had to be considered grossly negligent. Therefore, and since there were no special reasons to remit liability, the second applicant’s appeal was rejected.

The second applicant appealed against the judgment to the Supreme Administrative Court where he maintained his claims. He also complained about the fact that the Administrative Court of Appeal had refused to try the validity of the underlying tax decision within the instant proceedings. Furthermore, he stressed that the criminal investigation against all persons involved in the applicant company had been dropped, for which reason the Tax Authority should not have been allowed to refer to the allegedly false invoices. He further claimed that the courts had violated the presumption of innocence when they based their judgments on criminal acts which had not been proven.

On 10 May 2007 the Supreme Administrative Court refused leave to appeal.

The Law on sequestration for taxes, tolls and fees (lagen om betalningssäkring för skatter, tullar och avgifter, SFS 1978:880 – hereafter “the 1978 Act”) contains provisions that give the State a possibility to sequester property to ensure payment for a claim for taxes, tolls, or fees in situations where it is feared that the debtor might otherwise try to shirk payment. The provisions roughly correspond to the provisions on provisional attachment (kvarstad) possible in civil or criminal cases and their purpose is to secure temporarily payment of the State’s claims until voluntary payment of the debt is made or it can be secured through attachment (indrivning).

Section 1 of the 1978 Act states that a debtor’s property may be sequestered to cover the State’s claim for taxes, tolls or fees. If the claim has not yet been confirmed (fastställd), sequestration may be utilised only if there is probable cause (sannolika skäl) to believe that the claim will be confirmed and only to the expected amount of the confirmed claim.

From section 2 of the 1978 Act it follows that sequestration may be used also as regards claims for VAT and tax surcharges.

According to section 4 of the 1978 Act, sequestration may be used only if there is a considerable risk that the debtor will try to shirk payment of the debt and the debt concerns considerable amounts. Furthermore, sequestration may only be used if the reasons for sequestration outweigh the encroachment or harm suffered by the debtor or any other opposing interest.

The Tax Payment Act (skattebetalningslagen, SFS 1997:483 – hereafter “the 1997 Act”) contains, inter alia, provisions regulating how to account for and how to pay one’s preliminary and final tax and VAT. It also prescribes responsibility regarding payment of taxes that can be levied on representatives of corporations.

Chapter 12, section 6 (a) of the 1997 Act states that if a representative of a corporation, with intent or by gross negligence, has supplied incorrect information which has led to the corporation being wrongfully awarded a surplus of ingoing VAT, the representative is responsible for the repayment of the amount with interest, together with the corporation.

If there are special reasons (särskilda skäl) the liability for the representative may, according to Chapter 12, section 6 (b) of the 1997 Act be remitted, fully or in part.

Chapter 22, section 15 of the 1997 Act states that a representative of a corporation, against whom proceedings in accordance with Chapter 6, section 6 (a) have been instituted, may institute proceedings before a court to have the validity of the underlying tax decision tried.


Violation of Art. 8 with regard to interception of telephone call;Violation of Art. 8 with regard to creation and storing of information card;Preliminary objection dismissed;Non-pecuniary damage - finding of violation sufficient;Costs and expenses award - Convention proceedings

The applicant, who was born in 1940, is a businessman living in Switzerland. In the early 1980s he imported depilatory appliances into Switzerland which he advertised in magazines.

On 12 October 1981 a woman telephoned the applicant from the former Soviet embassy in Berne to order a “Perma Tweez” depilatory appliance.

That telephone call was intercepted by the Federal Public Prosecutor’s Office (Bundesanwaltschaft – “the Public Prosecutor’s Office”), which then requested the Intelligence Service of the police of the Canton of Zürich to carry out an investigation into the applicant and the goods he sold.

The report drawn up by the police of the Canton of Zürich in December 1981 stated that the applicant, who had been registered in the Commercial Registry since 1973, was in the aerosols business. It stated that “Perma Tweez” was a battery-operated depilatory appliance; a leaflet describing the appliance was appended to the report.

On 24 December 1981 the Public Prosecutor’s Office drew up a card on the applicant for its national security card index on the basis of the particulars provided by the police of the Canton of Zürich.

In 1990 the public learned of the existence of the card index being kept by the Public Prosecutor’s Office and many people, including the applicant, asked to consult their card.

Various laws on accessing and processing the Confederation’s documents were then enacted.

On 12 September 1990 the special officer in charge of the Confederation’s national security documents (“the special officer”) sent the applicant, at his request, a photocopy of his card.

The applicant’s card, which was numbered (1153 : 0) 614 and on which two passages had been blue-pencilled ..., contained the following information:

“from the Zürich Intelligence Service: A. identified as a contact with the Russian embassy according to ... . A. does business of various kinds with the [A.] company. Appendices: extract from the Commercial Registry and leaflet. ...”

As soon as he received his card, the applicant asked the Ombudsman at the Public Prosecutor’s Office to disclose the blue-pencilled passages.

On 9 October 1990 the Ombudsman replied that the censored passage at the end of the card rightly concealed the initials of the federal police officers who had obtained the information on the card. The other censored passage related to a technical surveillance measure ordered against a third party; the Ombudsman stated that he would be recommending that the special officer disclose that information, since – in his view – the applicant’s interest prevailed over the public interest in keeping it secret.

On 19 April 1991 the special officer decided, on the basis of Article 5 § 1 of the Order of 5 March 1990 on the Processing of Federal National Security Documents, that the initials at the end of the card could not be disclosed. He also considered that the other censored passage contained counter-intelligence which, pursuant to Article 5 § 3 (a) of the Order, should not be disclosed. On the basis of those considerations, the disclosure of the applicant’s card was extended to one word (“report”):

“from the Zürich Intelligence Service: A. identified as a contact with the Russian embassy according to report ... A. does business of various kinds with the [A.] company. Appendices: extract from the Commercial Registry and leaflet. ...”

On 26 October 1991 the applicant filed a request for compensation with the Federal Department of Finance. His request was refused on 28 January 1992.

On 9 March 1992 the applicant filed an administrative-law action with the Federal Court claiming compensation from the Confederation of 5,000 Swiss francs for the unlawful entry of his particulars in the card index kept by the Public Prosecutor’s Office. He also requested that his file and card be sent immediately to the Federal Archives with a prohibition on making any copies and that they be ordered to store the information under lock and key and not disclose any of it without his agreement.

On being invited to submit its written observations, the Confederation stated, in its memorial of 26 May 1992, that according to the information provided by the Public Prosecutor’s Office and the special officer the record of the surveillance was no longer in the federal police’s files. It pointed out in that connection that, pursuant to section 66(1 ter) of the Federal Criminal Procedure Act (“FCPA”), documents which were no longer necessary had to be destroyed (“Das Protokoll der technischen Ueberwachung ist gemäss Auskunft der Bundesanwaltschaft und des Sonderbeauftragten ... in den Akten der Bundespolizei nicht mehr vorhanden. In diesem Zusammenhang ist anzumerken, dass nicht mehr benötigte Akten gemäss Art. 66 Abs. 1ter BStP ... vernichtet werden müssen”).

The Federal Court held hearings on 27 October 1993 and 14 September 1994.

The applicant’s lawyer pointed out that the case number of the card, namely (1153 : 0) 614, was a code meaning “communist country” (1), “Soviet Union” (153), “espionage established” (0) and “various contacts with the Eastern bloc” (614).

The Confederation’s representative stated that where someone (jemand) at the former Soviet embassy was under surveillance, on every telephone call both parties to the conversation were identified, a card drawn up on them and a telephone monitoring report (Telefon-Abhör-Bericht) made. In that connection she stated that most of the reports had been destroyed and that those which had not been were now stored in bags; the intention had been to destroy them as well, but when the post of special officer had been instituted everything had had to be maintained “in its present state”. She went on to state that she did not know whether the telephone monitoring report in respect of the applicant had or had not been destroyed. According to information she had received from the special officer, the reports had not been sorted and it would require about five people and one year’s work to examine the contents of all the bags still in existence.

In a judgment of 14 September 1994, which was served on 25 January 1995, the Federal Court dismissed all the applicant’s claims.

Regarding the issue whether there was a legal basis for the measures complained of, the Federal Court referred first to section 17(3) FCPA and Article 1 of the Federal Council’s Decree of 29 April 1958 on the Police Service of the Federal Public Prosecutor’s Office. However, it considered it unnecessary to examine whether those provisions could have provided a lawful basis for the alleged infringement of the applicant’s personality rights, since one of the conditions for awarding compensation had not been met.

The court then referred to sections 66 et seq., and particularly section 72 FCPA on the monitoring of telephone communications and postal correspondence, and to Articles 265 et seq. of the Criminal Code, which govern “crimes or major offences against the State,” and reiterated that information could lawfully be gathered – even before a prosecution was brought – in order to prevent an offence being committed against the State or national security if there was evidence that such an offence was being prepared.

In that connection the Federal Court found:

“... a card was drawn up on the plaintiff in connection with the then monitoring of telephone communications with the Soviet embassy for counter-intelligence reasons. As he had contacts with a male or female employee of the Soviet embassy and it was not immediately clear that the ‘Perma Tweez’ appliance which he sold was a harmless depilatory instrument, the authorities acted correctly in investigating his identity, his circumstances and the ‘Perma Tweez’ appliance in question and recording the result.”

The Federal Court held, however, that it did not have to rule on whether those provisions, particularly section 66(1 ter) FCPA, allowed the information thus obtained to be kept after it had become apparent that no criminal offence was being prepared (“Fraglich ist, ob die Aufzeichnungen weiter aufbewahrt werden durften, nachdem sich offenbar herausgestellt hatte, dass keine strafbare Handlung vorbereitet wurde”), since the applicant had not suffered a serious infringement of his personality rights.

Lastly, the Federal Court held that the applicant’s administrative-law action, which he had filed with it on 9 March 1992, was an “effective remedy” within the meaning of Article 13 of the Convention. It also pointed out that the applicant could have instituted proceedings challenging certain data in the Public Prosecutor’s card index and requesting that they be amended. In that connection the Federal Court referred to, inter alia, the Federal Council’s Directives of 16 March 1981 applicable to the Processing of Personal Data in the Federal Administration (section 44), to the Federal Decree of 9 October 1992 on the Consultation of Documents of the Federal Public Prosecutor’s Office (Article 7 § 1) and to the Federal Council’s Order of 20 January 1993 on the Consultation of Documents of the Federal Public Prosecutor’s Office (Article 11 § 1).

In 1996 the applicant’s card was removed from the card index and transferred to the Federal Archives where it cannot be consulted for fifty years.

The relevant provisions of the Federal Constitution in force at the material time were worded as follows:

“The powers and duties of the Federal Council, as referred to in the present Constitution, are the following, among others:

It shall ensure that Switzerland’s external security is protected and its independence and neutrality maintained;

It shall ensure that the Confederation’s internal security is protected and that peace and order are maintained;

The relevant provisions of the Federal Council’s Decree of 29 April 1958 on the Police Service of the Federal Public Prosecutor’s Office are worded as follows:

“The Police Service of the Federal Public Prosecutor’s Office (Federal Police) shall provide an investigation and information service in the interests of the Confederation’s internal and external security. That service shall comprise:

The surveillance and prevention of acts liable to endanger the Confederation’s internal or external security (police politique);

Police investigations in the prosecution of offences against the internal or external security of the Confederation (police judiciaire).”

The relevant provisions of the Federal Criminal Procedure Act in force at the material time were worded as follows:

The Federal Public Prosecutor’s Office shall be provided with the personnel necessary to enable it to run a uniform investigation and information service in the interests of the Confederation’s internal and external security. The Public Prosecutor’s Office shall, as a general rule, act in concert with the relevant police authorities of the cantons. It shall in each case inform those police authorities of the results of its investigations as soon as the aim of and stage reached in the proceedings make it possible to do so.”

“1. The investigating judge may order monitoring of the accused’s or suspect’s postal correspondence and telephone and telegraphic telecommunications if

(a) the criminal proceedings concern a crime or major offence whose seriousness or particular nature justifies intervention or a punishable offence committed by means of the telephone; and if

(b) specific facts cause the person who is to be monitored to be suspected of being a principal or accessory in the commission of the offence; and if

(c) without interception, the necessary investigations would be significantly more difficult to conduct or if other investigative measures have produced no results.

1 bis. Where the conditions justifying the monitoring of the accused or suspect are satisfied, third parties may also be monitored if specific facts give rise to the presumption that they are receiving or imparting information intended for the accused or suspect or sent by him ... The telephone connection of third parties may be monitored at any time if there are reasons to suspect that it is being used by the accused.

1 ter. Recordings which are not needed for the conduct of an investigation shall be kept in a separate place, under lock and key, and shall be destroyed at the end of the proceedings.”

“1. Within twenty-four hours of his decision, the investigating judge shall submit a copy of it, accompanied by the file and a brief statement of his reasons, for approval by the President of the Indictment Division.

The decision shall remain in force for not more than six months; the investigating judge may extend its validity for one or more further periods of six months. The order extending its validity, accompanied by the file and the statement of reasons, must be submitted, not later than ten days before expiry of the time-limit, for approval by the President of the Indictment Division.

The investigating judge shall discontinue the monitoring as soon as it becomes unnecessary, or immediately if his decision is rescinded.”

“1. The President of the Indictment Division shall scrutinise the decision in the light of the statement of reasons and the file. Where he finds that there has been a breach of federal law, including any abuse of a discretionary power, he shall rescind the decision.

He may authorise monitoring provisionally; in that case, he shall lay down a time-limit within which the investigating judge must justify the measure, either by adding any relevant material to the file or orally.”

“1. The procedure shall be kept secret even from the person concerned. The President of the Indictment Division shall give brief reasons for his decision and notify the investigating judge thereof within five days of the date when the monitoring began or, where the period of validity has been extended, before the further period begins.

The President of the Indictment Division shall ensure that the interception measures are discontinued on expiry of the time-limit.”

“1. Before the opening of a preliminary investigation the Principal Public Prosecutor may order interception of postal correspondence and telephone and telegraphic communications and prescribe the use of technical appliances...

He may also order those measures in order to prevent the commission of a punishable offence justifying such intervention where particular circumstances give rise to the presumption that such an offence is being prepared.

Sections 66 to 66 quater shall be applicable by analogy.”

The relevant provisions of the Federal Council’s Directives of 16 March 1981 applicable to the Processing of Personal Data in the Federal Administration are worded as follows:

“411. There must be a legal basis for the processing of personal data.

Personal data may be processed only for very specific purposes. The data and technique used to process them must be appropriate and necessary to the performance of the task to be carried out.

Inaccurate or incomplete data must be rectified having regard to the purpose of the processing.

Data which are of no foreseeable further use or which have evidently been processed illegally must be destroyed.

The obligation to store them in the Federal Archives is reserved.

“431. As regards personal data files the federal offices and other administrative units having the same status must take the necessary measures to ensure that they can supply information on the legal basis and aim of the files, the nature of the processed data and the lawful recipients thereof to anyone requesting the same.

On request, they must indicate in a comprehensible manner to anyone who has disclosed his identity whether – and which – data on him from a particular file have been processed.

“If it emerges, on a request, that the data on the person making the request are inaccurate or incomplete, or inappropriate to the purpose for which they have been recorded, or that processing is illegal for another reason, the organ in question must rectify or destroy such data immediately, and at the latest when the file is next accessed.”

The relevant provisions of the Federal Council’s Order of 5 March 1990 on the Processing of Federal National Security Documents are worded as follows:

“1. The present Order shall guarantee that persons in respect of whom the federal police possess documents compiled on grounds of national security can defend their personality rights without hindering the performance of national security tasks.

Federal documents compiled on grounds of national security shall be placed in the custody of a special officer...”

“1. The special officer shall have custody of all documents belonging to the Police Service of the Federal Public Prosecutor’s Office.

He shall then sort the documents and withdraw those which serve no further purpose...”

“1. The special officer shall allow applicants to consult their cards by sending them a photocopy thereof.

He shall conceal data relating to persons who have processed the cards and to foreign intelligence and security services.

Furthermore, he may refuse or restrict the consultation if it

(a) reveals details of investigative procedures in progress or of knowledge relating to the fight against terrorism, counter-intelligence or the fight against organised crime;

“1. The ombudsman appointed by the Federal Council shall examine, at the request of the person concerned, whether the present Order has been complied with.

“1. Anyone claiming that his request to consult his card has not been dealt with in accordance with the present Order may contact the ombudsman within thirty days.

If the ombudsman considers that the Order has been complied with, he shall inform the applicant accordingly. The applicant may lodge an appeal with the Federal Council within thirty days of receiving the ombudsman’s decision.

If the ombudsman considers that the Order has not been complied with, he shall inform the special officer and the applicant accordingly. The special officer shall then give a fresh decision, which is subject to appeal.”

The relevant provisions of the Federal Decree of 9 October 1992 on the Consultation of Documents of the Federal Public Prosecutor’s Office provide:

“1. Authorisation to consult documents shall be granted to persons who submit a prima facie case that they have sustained pecuniary or non-pecuniary damage in connection with information transpiring from documents held by the Police Service or with acts by officers of the Federal Public Prosecutor’s Office.

“1. The special officer shall sort the documents placed in his custody and eliminate those which are no longer necessary for national security and are no longer the subject of a consultation process.

Documents relating to criminal proceedings shall be eliminated if

(a) the time-limit for prosecuting the offence has expired following a stay of the proceedings;

(b) the proceedings have been closed by an enforceable judgment.

The eliminated documents shall be stored in the Federal Archives. They can no longer be consulted by the authorities and access to them shall be prohibited for fifty years.”

The relevant provisions of the Federal Council’s Order of 20 January 1993 on the Consultation of Documents of the Federal Public Prosecutor’s Office are worded as follows:

“1. A person who contests the accuracy of certain data may request that an appropriate annotation be marked on the documents or appended thereto.

Documents which are manifestly erroneous shall be rectified at the request of the person concerned.

A Parliamentary Commission of Inquiry (“PCI”) was set up to investigate the so-called “card index” affair. In its report published in the Federal Gazette (Feuille fédérale (FF) 1990, I, pp. 593 et seq.) it noted, among other things, in connection with the monitoring of telephone conversations (pp. 759 and 760):

“According to various sources, a number of people feared that their telephone conversations were being monitored for political reasons. The PCI has conducted a thorough examination of the technical surveillance measures ordered by the Federal Public Prosecutor’s Office. In the course of that examination it requested from the Federal Public Prosecutor’s Office a full and detailed list of the persons whose telephones were tapped and the telephone connections which were monitored; that list was then compared with the list requested independently from the Post, Telecommunications and Telegraph Office. The PCI was then able to satisfy itself, partly with the help of certain documents and also following an interview with the President of the Indictment Division of the Federal Court, that there were no differences between the lists drawn up by the authorities ordering the telephone tapping and the authorities implementing those orders.

The federal investigating judge and, before the preliminary investigation begins, the Federal Public Prosecutor have power to order a surveillance measure. A decision taken to this effect is valid for no more than six months but may be extended if necessary. It requires in all cases the approval of the President of the Indictment Division of the Federal Court. That approval procedure has been considerably formalised over recent years and is now applied by means of a pre-printed form. The PCI noted that all decisions had been submitted to the President of the Indictment Division and that he had approved all of them without exception...”