EHRM, 06-12-2022, nr. 39859/14

The Court notes at the outset that the applicant companies' business is within a specific segment of the out-of-home advertising sector, namely roadside advertising which requires assets, in this case roadside advertising hoardings, specifically designed for roadside use (see paragraph 7 above). Consequently, they are to be considered an inflexible and non-variable type of asset as they are unsuitable for any other type of business activity.

The Court further notes that as a consequence of the impugned legislative measure, which interfered with the applicant companies' economic freedom, they lost the ability to use and rent out a significant number of their previously installed hoardings. They consequently had to terminate or amend contracts with existing clients who had publicised their products on the applicant companies' affected assets. In addition, the applicant companies had to cover the costs of removing the roadside hoardings which — given their above-mentioned specific features — could not be used for other revenue-generating purposes. This, in turn, has substantially diminished the applicant companies' income and resulted in a loss of their investments' value (see paragraph 15 above), a fact which was not disputed by the Government.

The Court observes that resulting from the legislative interference, the applicant companies lost opportunities on the market. This inevitably entailed a loss of chances for them to make profit, which may translate into a decrease in the equity value of their shares (see Könyv-Tár Kft and Others v. Hungary (just satisfaction), no. 21623/13, § 23, 5 October 2021). A decrease in equity value affects not only the interests of the shareholders but also the enterprise value of a company; consequently, the alleged interference may infringe on the company's rights. The Court recalls that shares in a public company have an economic value and, therefore, are to be regarded as ‘possessions’ within the meaning of Article 1 of Protocol No. 1 to the Convention (see Marini v. Albania, no. 3738/02, § 164, 18 December 2007). Moreover, there is no doubt that the applicant companies were the owners of the roadside advertising hoardings — physical goods eligible for protection under Article 1 of Protocol No. 1, which lost most of their economic value as a result of the impugned measure. Given the serious economic consequences flowing from the measure, the Court agrees with the applicant companies that it was a severe measure amounting to an interference with their property rights.

The Court also notes that there has been no formal expropriation of the applicant companies' assets, either in favour of the Government or a third party. Whilst it is possible that in certain circumstances there may be a de facto expropriation of possessions even without any formal alienation, on the grounds that property has become wholly unusable (see, for example, Papamichalopoulos and Others v. Greece, 24 June 1993, §§ 43-45, Series A no. 260-B), the present application does not disclose any such circumstances since the assets in question, while losing their economic value in terms of their primary purpose, could still be sold for parts.

It thus finds that there has been an interference with the applicant companies' rights under that provision consisting of a measure entailing control of the use of their property. Such an interference falls to be considered under the second paragraph of Article 1 of Protocol No. 1 (see Könyv-Tár Kft and Others, cited above, § 43).

The Court notes the parties' partly diverging positions as to the lawfulness and purpose of the interference. It reiterates that any interference by a public authority with the peaceful enjoyment of possessions can only be justified if it serves a legitimate public (or general) interest. Because of their direct knowledge of their society and its needs, the national authorities are in principle better placed than the international judge to decide what is ‘in the public interest’. Under the system of protection established by the Convention, it is thus for the national authorities to make the initial assessment as to the existence of a problem of public concern warranting measures interfering with the peaceful enjoyment of possessions. The Court finds it natural that the margin of appreciation available to the legislature in implementing social and economic policies should be a wide one and will respect the legislature's judgment as to what is ‘in the public interest’ unless that judgment is manifestly without reasonable foundation (see Béláné Nagy v. Hungary [GC], no. 53080/13, § 113, 13 December 2016).

The Court — mindful of the importance of road traffic safety and the respondent State's obligations enshrined in the Vienna Convention on Road Traffic of 8 November 1968 (see paragraph 20 above) — does not call into question the Government's position that the measure served the purpose of reducing traffic accidents by removing advertising hoardings from the vicinity of public roads so as to ensure that the attention of drivers is not distracted and that road signs are clearly visible. Furthermore, for want of any material evidence, it cannot subscribe to the allegations raised by the applicants to the effect that the impugned measure served the interest of another advertising company closely linked to the Government at the material time.

The Court therefore considers that the goals of the impugned measure, as cited by the Government, cannot be said to be ‘manifestly without reasonable foundation’. It therefore finds the measure to be lawful and pursuing a legitimate aim.

As was pointed out in James and Others v. the United Kingdom (21 February 1986, § 37, Series A no. 98), the second paragraph of Article 1 of Protocol No. 1 has to be construed in the light of the general principle set out in the first sentence of that provision. That sentence has been interpreted by the Court as including the requirement that a measure of interference should strike a ‘fair balance’ between the demands of the general interest of the community and the requirements of the protection of the individual's fundamental rights. The search for this balance is reflected in the structure of Article 1 of Protocol No. 1 as a whole (ibid.) and hence also in the second paragraph. There must be a reasonable relationship of proportionality between the means employed and the aim sought to be realised. A proper balance between the general interest and the individual's rights will not be found if the person concerned has had to bear an individual and excessive burden (see Vékony v. Hungary, no. 65681/13, § 32, 13 January 2015).

The Court accepts that, in the present case, the competent authorities enjoy a wide margin of appreciation for the purposes of Article 1 of Protocol No. 1. Their assessment as to the need for legislation, its aims and its effects should be accepted by the Court unless it was manifestly unreasonable and imposed an ‘excessive burden’ on the person concerned (ibid., § 33).

The applicant companies submitted — and this argument was not refuted by the Government — that the impugned measure had significantly reduced their income and resulted in a loss of clientele and goodwill (see paragraph 37 above). Given the serious economic consequences, the Court agrees with the applicant companies that it was a severe measure in the circumstances.

The Court further observes that only two days had passed between the promulgation of the first amendment on 30 December 2010 and its coming into effect on 1 January 2011, the date from which the installation of new roadside hoardings was prohibited. This measure undisputedly had a direct effect on the applicant companies' businesses by impelling them to terminate or amend their already existing contractual relationships with their clients and the limitations on signing new contracts. The burden that this short transitory period placed on the applicant companies was only to a limited extent alleviated by the fact that, by virtue of further statutory amendments, a fine for non-compliance with the impugned measure could only be imposed six months after the coming into effect of the amendments to the Road Traffic Act (see paragraph 11 above). This is because the competent authority could already, from 1 January 2011, forcibly remove the applicant companies' property, that is, the roadside advertising hoardings, at the applicant companies' expense, thereby placing an immediate financial burden on them. Moreover, from 24 October 2011, not only was the ‘installation’ of roadside hoardings prohibited outside built-up areas, but also their ‘presence’. The later statutory amendment also stipulated that hoardings violating the regulations had to be removed by 30 September 2012, that is, less than two months from the entry into force of the statutory amendment (7 August 2012) requiring the removal of already installed roadside hoardings. These measures — contrary to the argument put forward by the Government — in reality had retroactive effect (see paragraphs 13 and 39 above).

In the context of businesses operating under a legal framework that was essentially stable for more than ten years (see paragraph 9 above), such short transitory periods can hardly be regarded as sufficient (compare and contrast Ian Edgar (Liverpool) Ltd v. the United Kingdom (dec.), no. 37683/97, ECHR 2000, and C.A. Zrt. and T.R. v. Hungary [Committee], nos. 11599/14 and 11602/14, § 36, 1 September 2020, where progressively more restrictive legislation over a long period foreshadowed the possibility of a ban). Also considering the fact that the Road Traffic Act prior to the adoption of the impugned measure, between 15 March 1996 and 31 December 2010, already prohibited the placement of roadside hoardings in so far as they presented a risk to traffic safety (see paragraph 9 above), the applicant companies had a legitimate expectation of continuing their business activity. Therefore, while the impugned measure was sufficiently foreseeable from a qualitative perspective, that is to say, its formulation was made with sufficient precision, it was unexpected in the context of the present case (contrast C.A. Zrt. and T.R. v. Hungary [Committee], cited above, § 36).

Furthermore, the burden placed on the applicant companies as a result of the statutory ban on part of their business activity, although heavy, must be weighed against the general interest of the community, that is, public safety considerations in the instant case. In this context, the States enjoy a wide margin of appreciation. As considered earlier, the goals of the impugned measure cited by the Government cannot be said to be ‘manifestly without reasonable foundation’ (see paragraph 49 above) but quite on the contrary were in line with the respondent State's international obligations (see paragraph 20 above) and, as already stressed above, pursued the legitimate aim of ensuring an important public interest, namely, road traffic safety (see paragraph 48 above).

Although it is true that the interference with the applicant companies' possessions was a control of use rather than a deprivation of possessions, such that the case-law on compensation for deprivation is not directly applicable (see Vékony, cited above, § 35), a disproportionate and arbitrary control measure cannot satisfy the requirements of Article 1 of Protocol No. 1. It is noteworthy that the very short period provided to the applicant companies to make adequate arrangements to respond to the impending change to their major source of revenue was not alleviated by any positive measures on the part of the State, for example, the adoption of a scheme of reasonable compensation (contrast Pinnacle Meat Processors Company and 8 Others v. the United Kingdom (dec.), no. 33298/96, 21 October 1998, and Ian Edgar (Liverpool) Ltd, cited above).

Moreover, the Government failed to advance any argument concerning the relative brevity of the transitory period, making no reference to any pressing economic or social need which could have prevented a longer period being afforded. In particular, for the Court, while the aim of reducing traffic accidents by removing advertising hoardings from the vicinity of public roads so as to ensure that the attention of drivers is not distracted is undoubtedly relevant, it cannot be considered to correspond to an exceptional circumstance which would allow the transitory period to be shortened (compare and contrast with Jahn and Others v. Germany [GC], nos. 46720/99 and 2 others, §§ 116-17, ECHR 2005-VI).

In sum, having regard to the partly retroactive nature of the impugned measure, its unexpected nature, the short transitory period, the lack of any compensatory scheme and the importance that the extinguished business activity had for the applicant companies, the Court concludes — even bearing in mind the wide margin of appreciation afforded to the State in this type of policies and the importance of road traffic safety — that the interference with the applicant companies' rights was disproportionate to the aim pursued and that they had to bear an individual and excessive burden. A disproportionate measure, especially without any scheme of compensation, does not satisfy the requirements of the protection of possessions under Article 1 of Protocol No. 1 (see, mutatis mutandis, Vékony, cited above, § 35, and Valle Pierimpiè Società Agricola S.P.A. v. Italy, no. 46154/11, §§ 74–77, 23 September 2014).

There has accordingly been a violation of Article 1 of Protocol No. 1 to the Convention.