EHRM, 04-07-2024, nr. 24460/16

The Court reiterates that, according to its well-established case-law, search and seizure carried out on the premises of a company constitute an interference with the rights protected by Article 8 of the Convention — more specifically, the right to respect for home and correspondence (see Bernh Larsen Holding AS and Others v. Norway, no. 24117/08, § 106, 14 March 2013; Naumenko and SIA Rix Shipping v. Latvia, no. 50805/14, § 46, 23 June 2022; and UAB Kesko Senukai Lithuania v. Lithuania, no. 19162/19, § 109, 4 April 2023).

In the present case, the Government acknowledged that the audit at the company's premises and the seizure of various documents and items had constituted an interference with the applicant's right to respect for his home and correspondence (see paragraph 34 above) and the Court has no reason to find otherwise.

As to the question whether there was also an interference with the applicant's right to respect for his private life, the Court observes that as it has not been provided with a copy of record no. 1300777013701082 dated 1 November 2013 on the seizure of documents and items drawn up by the tax authority (see paragraph 8 above), it cannot clearly establish the nature of the documents and items seized during the on-site audit. In these circumstances, the Court does not consider it necessary to determine for the purposes of the present case whether there has also been an interference with the applicant's right to respect for his private life (compare Bernh Larsen Holding AS and Others, cited above, § 107).

An interference will be in breach of Article 8 of the Convention unless it can be justified under paragraph 2 of Article 8 as being in accordance with the law, pursuing one or more of the legitimate aims listed therein, and being necessary in a democratic society in order to achieve the aim or aims concerned.

The Court reiterates that the expressions ‘prescribed by law’ and ‘in accordance with the law’ in Articles 8 to 11 of the Convention require that the impugned measure must have some basis in domestic law and also be compatible with the rule of law, which is expressly mentioned in the Preamble to the Convention and is inherent in all its Articles (see Selahattin Demirtaş v. Turkey (no. 2) [GC], no. 14305/17, § 249, 22 December 2020, with further references).

The expression ‘in accordance with the law’ not only requires that the impugned measure should have some basis in domestic law, but also refers to the quality of the law. This implies that where a national law authorises intervention, it must be sufficiently accessible, precise and foreseeable in its application, in order to avoid all risk of arbitrariness. A law is ‘foreseeable’ if it is formulated with sufficient precision to enable the individual — if need be with appropriate advice — to regulate his conduct (see Bernh Larsen Holding AS and Others, cited above, § 123). In addition, compatibility with the rule of law requires that the domestic law provide adequate protection against arbitrary interference with Article 8 rights (see Erduran and Em Export Dış Tic A.Ş. v. Turkey, nos. 25707/05 and 28614/06, § 80, 20 November 2018).

In assessing the lawfulness of an interference, and in particular the foreseeability of the domestic law in question, the Court has regard both to the text of the law and to the manner in which it was applied and interpreted by the domestic authorities. The practical interpretation and application of the law by the domestic courts must give individuals protection against arbitrary interference (see Guliyev v. Azerbaijan, no. 54588/13, § 51, 6 July 2023).

Turning to the circumstances of the present case, the Court notes that while the Government submitted that the search and seizure had been carried out in accordance with Articles 40 and 43 of the Tax Code, the applicant argued that the interference had been unlawful. The Court observes that Articles 40 and 43 of the Tax Code provide for the conditions in which tax authority officials may have access to the premises of a taxpayer and may seize documents and items relevant to an audit (see paragraphs 22 and 23 above).

In that connection, the Court notes that the domestic law authorised the tax authority to conduct the search and seizure during an unannounced on-site tax audit after a decision by the head (or deputy head) of the tax authority without a court order (see paragraphs 22 and 23 above), which could have restricted or controlled the search and seizure in question (compare DELTA PEKÁRNY a.s. v. the Czech Republic, no. 97/11, § 86, 2 October 2014). The Court reiterates that while States may consider it necessary to have recourse to such measures in order to obtain relevant evidence, nevertheless the relevant legislation and practice must provide adequate and effective safeguards against abuse (see, mutatis mutandis, Société Colas Est and Others v. France, no. 37971/97, § 48, ECHR 2002-III; Société Canal Plus and Others v. France, no. 29408/08, § 54, 21 December 2010; and Naumenko and SIA Rix Shipping, cited above, § 50). Moreover, considerations of efficiency of the tax audit which may justify a relatively wide power in the initial phases of tax proceedings cannot be construed as conferring on the tax authorities an unfettered discretion (see Bernh Larsen Holding AS and Others, cited above, § 130).

However, in the present case the Court is not satisfied that there were adequate and effective safeguards against unfettered discretion in practice. As regards the provisions of the domestic law, the Court notes that while it did limit the seizure of documents and items to those necessary for the calculation of taxes, providing that it is forbidden to seize documents and items which are not necessary for the calculation of taxes during an on-site tax audit (see paragraph 24 above), the tax authority failed to comply with those provisions. In particular the Court notes that although it was not provided with a copy of the relevant decisions of the tax authority concerning the search and seizure (see paragraphs 6 and 8 above), it is clear from the facts of the case and the parties' submissions (see paragraphs 10, 33 and 35 above) that the tax authority disregarded those provisions in that they seized numerous documents and items during the search without making any distinction between the documents and items as to whether they were necessary for the calculation of taxes.

The Court also does not lose sight of the fact that, while examining the company's complaints, the domestic courts did not address the failure of the tax authority to comply with the relevant provisions of the domestic law during the search and seizure. In particular, they did not carry out any meaningful assessment of the legality and scope of the seizure conducted by the tax authority.

The foregoing considerations are sufficient to enable the Court to conclude that the interference in question was not ‘in accordance with the law’ within the meaning of Article 8 § 2 of the Convention. In view of this conclusion, the Court is dispensed from having to examine whether the interference pursued any of the legitimate aims referred to in Article 8 § 2 and was necessary in a democratic society.

There has accordingly been a violation of Article 8 of the Convention.

The applicant maintained that the freezing of the company's bank accounts had been an unlawful and disproportionate measure.

The Government submitted that the interference with the applicant's rights had been lawful and justified. The interference related to the control of the use of property which fell within the ambit of the second paragraph of Article 1 of Protocol No. 1 to the Convention. The interference was based on Article 65.7 of the Tax Code and those provisions of the domestic law were sufficiently accessible, precise and foreseeable in their application. They further maintained that the freezing of the applicant's assets constituted a restriction made in the public interest, with a view to ensuring the proper administration of justice.

The Court observes at the outset that it was not provided with a copy of any decision of the tax authority concerning the freezing of the company's bank accounts. However, it appears from the decisions of the domestic courts that there was a freezing order made in respect of the company's bank accounts (see paragraphs 16–19 above). Moreover, the Government accepted that there had been an interference with the applicant's property rights on account of the freezing of the company's bank accounts and submitted that the interference in question related to the control of the use of property, which fell within the ambit of the second paragraph of Article 1 of Protocol No. 1 to the Convention (see paragraph 52 above).

In these circumstances, having regard to the documents in the case file and the parties' submissions, the Court considers that there had been an interference with the applicant's property rights as a result of the freezing of the company's bank accounts by the tax authority. In that regard, the Court reiterates that the freezing of bank accounts has to be regarded as a measure of control of the use of property (see Uzan and Others v. Turkey, nos. 19620/05 and 3 others, § 194, 5 March 2019, and Yunusova and Yunusov v. Azerbaijan (no. 2), no. 68817/14, § 167, 16 July 2020).

The Court reiterates that the first and most important requirement of Article 1 of Protocol No. 1 to the Convention is that any interference by a public authority with the peaceful enjoyment of possessions should be lawful (see, among other authorities, Iatridis v. Greece [GC], no. 31107/96, § 58, ECHR 1999-II, and Béláné Nagy v. Hungary [GC], no. 53080/13, § 112, 13 December 2016). This concept requires firstly that the impugned measures should have a basis in domestic law. It also refers to the quality of the law in question, requiring that it be accessible to the persons concerned, precise, and foreseeable. Although it is primarily for the national authorities to interpret and apply domestic law, the Court is required to verify whether the way in which the domestic law is interpreted and applied produces consequences consistent with the principles of the Convention, as interpreted in the light of the Court's case-law (see Beyeler v. Italy [GC], no. 33202/96, §§ 109 and 110, ECHR 2000-I; Batkivska Turbota Foundation v. Ukraine, no. 5876/15, § 56, 9 October 2018; and Democracy and Human Rights Resource Centre and Mustafayev v. Azerbaijan, nos. 74288/14 and 64568/16, § 67, 14 October 2021).

Turning to the circumstances of the present case, the Court notes that while the Government submitted that the interference was lawful under Article 65.7 of the Tax Code, the applicant argued in a general way that it had been unlawful.

The Court observes at the outset that Article 65.7 of the Tax Code provides for the imposition of an obligation on credit institutions or persons carrying out banking operations to freeze a taxpayer's bank account under an order issued by the tax authorities. Moreover, Article 65.2 of the Tax Code allowing the tax authority to issue orders for the purposes of collection of tax debts empowers the tax authority to issue an order concerning the freezing of the bank accounts in the absence of a court order (see paragraph 25 above). The Court thus accepts that those provisions of the domestic law were clear, accessible and sufficiently precise.

Furthermore, the Court observes that the freezing of the company's bank accounts served to secure the payment of a tax debt and, accordingly, accepts that the interference at issue pursued a legitimate aim within the meaning of the second paragraph of Article 1 of Protocol No. 1.

As to the proportionality of the measure, Article 1 of Protocol No. 1 requires of any interference that there should be a reasonable relationship of proportionality between the means employed and the aim pursued. This fair balance will be upset if the person concerned has to bear an individual and excessive burden (see G.I.E.M. S.r.l. and Others v. Italy [GC], nos. 1828/06 and 2 others, § 300, 28 June 2018, and Uzan and Others, cited above, § 203).

In addition, the importance of the procedural obligations under Article 1 of Protocol No. 1 must not be overlooked. Thus the Court has, on many occasions, noted that, although Article 1 of Protocol No. 1 contains no explicit procedural requirements, judicial proceedings concerning the right to the peaceful enjoyment of one's possessions must also afford the individual a reasonable opportunity of putting his or her case to the competent authorities for the purpose of effectively challenging the measures interfering with the rights guaranteed by this provision. An interference with the rights provided for by Article 1 of Protocol No. 1 cannot therefore have any legitimacy in the absence of adversarial proceedings that comply with the principle of equality of arms, allowing discussion of aspects that are important for the outcome of the case. In order to ensure that this condition is satisfied, the applicable procedures should be considered from a general standpoint (see G.I.E.M. S.r.l. and Others, cited above, § 302, and Shorazova v. Malta, no. 51853/19, § 105, 3 March 2022).

Turning to the circumstances of the present case, the Court observes that although it was not provided with a copy of the relevant decision of the domestic authorities concerning the freezing of the company's bank accounts, it is clear from the documents in the case file that the freezing of the company's bank accounts was ordered by the tax authority in the absence of a court order.

The Court reiterates that while the fact that freezing orders are made without notice being served on the person affected by them does not in itself raise an issue in terms of safeguards, given the one-sidedness of the proceedings, the freezing order's potentially far-reaching consequences, and the fact that it takes effect immediately, careful consideration of the requests for such orders is called for in each individual case (see, mutatis mutandis, Apostolovi v. Bulgaria, no. 32644/09, § 98, 7 November 2019, and Shorazova, cited above, § 115).

In that connection, the Court also considers it necessary to draw attention to the Constitutional Court's decision of 17 March 2016 in which the Constitutional Court clearly underlined the importance of the existence of the subsequent judicial review as an important safeguard in this context (see paragraph 26 above).

However, in the instant case, when examining the company's complaint against the tax authority's decision to freeze its bank accounts, the domestic courts conducted no assessment of the proportionality of the measure taken by the tax authority and merely confined themselves to considering the disputed measure lawful, without giving any further explanation in support of their findings (see paragraphs 16–19 above). In particular, the domestic courts' decisions do not contain any assessment as regards possible adverse effects of the freezing of the company's bank accounts on its activities in spite of the company's argument in that connection (see paragraph 15 above).

Moreover, it appears from the documents in the case file that the domestic authorities subjected the company to that measure for an indefinite period of time and in the absence of any possibility of its review at regular intervals. In particular, the Court draws attention to the fact that at the time of the latest communication with the Government in September 2021, it had not been informed by the Government of the lifting of the measure taken in respect of the company's bank accounts. The Government also did not argue that the domestic law provided for any possibility of a regular review of the continuation of the freezing of the company's bank accounts, which could address the proportionality of the measure taking into account its duration and other particular circumstances of the case (compare International Bank for Commerce and Development AD and Others v. Bulgaria, no. 7031/05, § 124, 2 June 2016).

Accordingly, the Court cannot but conclude that the freezing of the company's bank accounts was imposed and kept without a relevant assessment of the proportionality of that measure by the domestic authorities.

The foregoing considerations are sufficient to enable the Court to conclude that there has accordingly been a violation of Article 1 of Protocol No. 1 to the Convention.