LANTTO v. FINLAND
Inadmissible
Georg Ress
The applicants are Finnish citizens, born in 1945 and 1952 and resident in Pello (Sweden) and Pello (Finland), respectively. The first applicant is a building engineer and the second applicant is a managing director.  They are represented before the Court by Mr Markku Fredman, a lawyer practising in Helsinki. The facts of the case, as submitted by the parties, may be summarised as follows. A. The first applicant was the managing director of the limited liability company K (hereinafter “K”), and the second applicant the managing director of the limited liability company P (hereinafter “P”). They are brothers. On 22, 23 and 30 May 1991, requests for a winding-up order were filed against P. On 27 May 1991, the second applicant, as the company’s managing director, was notified of the winding-up proceedings. On 30 May 1991, the applicants signed a contract between the companies K and P. According to the contract, K was to repair a roof of a building owned by P. The contract was priced at 600,000 Finnish marks (FIM). On the same day, P paid the said sum to K in advance. The works were to be completed by 15 July 1991. On 12 June 1991, the District Court (kihlakunnanoikeus, häradsrätten) of Ylitornio ordered the winding-up of P for insolvency. On 27 June 1991, the liquidators of P’s assets decided to maintain the contract between K and P. On 27 September 1991, the liquidators lodged a petition with the police. They suspected that the applicants had acted dishonestly as debtors by signing the contract despite being aware of the winding-up requests against P. They found that the correct contract price was FIM 200,000, at the most. Moreover, the work had not been completed and it had been impossible to recuperate the money that P had paid to K.  On 26 May 1992, the Chief of Rural Police and Public Prosecutor of Ylitornio, S, (hereinafter “prosecutor S”) charged the second applicant with, inter alia, the offence of debtor’s dishonesty. Furthermore, he charged the first applicant with aiding and abetting that crime. According to the indictment, the second applicant had known, on the basis of his existing or expected financial difficulties, that his act could be detrimental to the financial interests of his creditors. In these circumstances he had, without good cause, increased his financial obligations by entering into the contract of FIM 600,000 when the real value of the contract was FIM 200,000, at the most, and the whole contract price had been paid immediately after signing the contract. The prosecution relied on chapter 39, section 1 (4), of the Penal Code. Chapter 39, section 1, of the Penal Code (rikoslaki, strafflagen, 769/1990) stipulates as follows: “The Offence of Debtor’s Dishonesty. A debtor, who, on the basis of his existing or expected financial difficulties, is aware that that his act can be detrimental to the financial interests of his creditors, 1) destroys his property, ... (points 2 and 3 concern donations and transfers abroad), or 4) increases, without good cause, his financial obligations, thereby causing his insolvency or substantially aggravating it, shall be sentenced for the offence of debtor’s dishonesty ...” (Unofficial translation from Finnish. NB. that the Finnish word in point 1) (hävittää) has also a less concrete meaning than “destroy”, namely “dispose of” or “dissipate”. Hereinafter the word “dispose of” is being used.)  The case was heard by the District Court of Ylitornio, which held six hearings. Prosecutor S acted as prosecutor at the three first court hearings, namely on 26 May, 8 September and 1 December 1992. As he was to take up a post in a different rural police district, he was replaced by another prosecutor, R (hereinafter “prosecutor R”). The fourth court hearing was held on 9 February 1993. On 6 April 1993, at the fifth court hearing, both applicants were present and counsel represented them. During this hearing, prosecutor R stated that the second applicant had, by entering into the contract in issue, not only increased P’s financial obligations but also disposed of its property. In this regard, he referred to the advance payment whereby P’s possessions had been transferred out of its creditors’ reach. He stated that in this respect he extended the charges. He referred to chapter 39, section 1, of the Penal Code without further specification as to the point in that section. Furthermore, he requested that a prohibition of engaging in business be imposed on the second applicant. The second applicant, represented by counsel, replied that he had not disposed of P’s possessions. The parties declared that they were ready for the case to be decided. The District Court, however, adjourned the case to prepare its judgment and fixed the pronouncement thereof for 26 May 1993. On 26 May 1993, the District Court held the last hearing. Both applicants were present and represented by counsel. During this hearing, the District Court heard a further witness called by the second applicant (previously, ten witnesses had been heard). Moreover, the District Court accepted further oral submissions from the parties. The defence submitted that the charges had been extended but that the extension had not been substantiated. The parties informed the court that they were ready for the case to be decided.  On 26 May 1993, the District Court pronounced its judgment. The District Court, when citing the prosecutor, noted that according to the indictment, which referred to the contract and the payment thereof, the company’s financial obligations had not only been increased but its possessions had also been disposed of. In this connection, the District Court referred to chapter 39, section 1(1), of the Penal Code. The District Court found that the second applicant had, without good cause, increased P's financial obligations by entering into the contract with K and by paying the full contract price immediately on signature, although K had not intended to fulfil its part of the contract. Thereby, the second applicant had disposed of P’s property and substantially aggravated its insolvency. The District Court found that the first applicant had aided and abetted the crime, having accepted P's payment to K although aware of P’s financial difficulties. The District Court found the second applicant guilty of, inter alia, the offence of debtor’s dishonesty in violation of chapter 39, sections 1(1) and 1(4), of the Penal Code. He was sentenced to one year and four months’ suspended imprisonment and was prohibited from exercising any business activity for a three-year period. The first applicant was found guilty of aiding and abetting that crime and sentenced to ten months' suspended imprisonment. Furthermore, the applicants were ordered to pay damages to P.  After the District Court’s judgment, the applicants instituted three sets of proceedings: (i) appeal proceedings, i.e. appeal to the Court of Appeal (hovioikeus, hovrätten) and request for leave to appeal to the Supreme Court (korkein oikeus, högsta domstolen); (ii) petition with the Chancellor of Justice (valtioneuvoston oikeuskansleri, justitiekanslern i statsrådet) concerning the bias of prosecutor S; (iii) report of an offence against a lay judge, Y, on the basis of bias, with the Prosecuting Counsel (kanneviskaali, advokatfiskalen) at the Court of Appeal. In the course of these proceedings, the Prosecuting Counsel also initiated an investigation concerning an allegation that prosecutor R had addressed the District Court outside the court proceedings during its deliberations. In the following, the above-mentioned proceedings are described separately, following chronological order within each set of proceedings. (i) The appeal proceedings  Both applicants appealed, separately, to the Court of Appeal of Rovaniemi. They requested that the charges against them be dismissed. They objected to the alleged extension of the charges. Furthermore, the second applicant requested that the Court of Appeal hold a hearing with a view to re-examining the witnesses heard by the District Court. Also the first applicant submitted that the Court of Appeal should hold a hearing. The applicants based their appeals, inter alia, on the bias of the above-mentioned lay judge Y, who had participated in the decision-making. They stated that Y had been a member of the Board of Directors of a company that had been P’s creditor at the time of the District Court’s proceedings. Furthermore, they found that a second lay judge, V, who had participated in the proceedings only at an early stage, had been biased on the ground that he had also been a member of the Board of Directors of one of P’s creditor companies at the time of the court proceedings.  On 24 November 1993, the Court of Appeal held a hearing. The applicants, assisted by counsel, were present at the hearing. The Court of Appeal examined, in addition to the parties, two of the eleven witnesses heard by the District Court, two further witnesses as well as F, who had been the second applicant's counsel in certain matters. According to the Court of Appeal's minutes, all five were heard at the second applicant's request. There is no indication that the Court of Appeal would have refused to examine the other witnesses previously heard by the District Court or any other witnesses. The prohibition of engaging in business was withdrawn until the Court of Appeal gave its final judgment. On 17 March 1993, the second applicant sent the Court of Appeal further written submissions. He noted, inter alia, that the Court of Appeal was the first impartial tribunal examining the case. Furthermore, he commented on certain evidence that had come to light during the oral hearing.  On 2 June 1994, the Court of Appeal delivered its judgment. Under the subheading “Procedure in the Court of Appeal”, it found that the lay judges Y and V had lacked impartiality. The Court of Appeal noted that the defence had not even contented that those judges had influenced the proceedings before the District Court or the contents of the minutes. For this reason, and in view of the fact that the applicants had lodged an appeal concerning all aspects of the case and requested an oral hearing, the Court of Appeal had itself held such a hearing without referring the case back to the District Court. The Court of Appeal dismissed the applicants' objection regarding the alleged extension of the charges. The Court of Appeal summed up F’s oral statements as follows. F had been instructed by the second applicant to investigate the possibilities of obtaining compensation for the damaged roof. After K’s insolvency had been discovered, the second applicant had informed F that the first applicant had also become personally insolvent. From this testimony, the Court of Appeal inferred that, at the time of signing the contract between P and K, the second applicant had been aware both of K’s insolvency and the first applicant’s personal insolvency. As regards the merits, the Court of Appeal found that the second applicant had had a good reason for taking action to have the roof of P’s building repaired. Moreover, the contracted price had not been excessive and K’s failure to complete the works had partly been due to P’s liquidators’ failure to supervise them. It noted that the roof had originally been built by the first applicant and that, most obviously, the second applicant would have had the right to compensation from the former. The Court of Appeal found that the second applicant, when entering into the contract, had been aware that P was insolvent and that the contract and the payment could be detrimental to the creditors’ financial interests. Furthermore, the second applicant had, by entering into the contract, without good cause increased P’s financial obligations and by paying the contract price, disposed of its property, thereby substantially aggravating its insolvency. It found the second applicant guilty of, inter alia, the offence of debtor’s dishonesty, relying on chapter 39, section 1, points 1 and 4, of the Penal Code. It sentenced the second applicant to six months’ suspended imprisonment and the first applicant to four months’ suspended imprisonment. It also reduced the damages to be paid and quashed the prohibition of engaging in business imposed on the second applicant. On 26 and 27 July 1997, the applicants, respectively, sought leave to appeal to the Supreme Court. They requested that the Supreme Court, either without or after an oral hearing, dismiss the charges against them or, alternatively, quash the Court of Appeal’s judgment and refer the case back to a court of a lower instance for renewed proceedings (alemman oikeuden uudelleen käsiteltäväksi). Their requests for leave to appeal concerned, inter alia, the bias of the lay judges, the bias of prosecutor S, the extension of the charges, as well as the evaluation of evidence before the Court of Appeal. According to the applicants, F had never said that the first applicant was insolvent. He had only said that the first applicant was unable to pay some FIM 700,000 in damages. Moreover, F had made no statement regarding K. The applicants did not complain that prosecutor R had addressed the District Court outside the hearings during its deliberations.  On 14 December 1994, the Supreme Court refused the applicants leave to appeal. (ii) The petition with the Chancellor of Justice concerning the bias of the prosecutor On 25 March 1994, the applicants lodged a petition concerning the bias of prosecutor S.  On 15 February 1995, the Deputy Chancellor of Justice (valtioneuvoston apulaisoikeuskansleri, justitiekanslersadjointen i statsrådet) found that prosecutor S had been a member of the Board of Directors of a bank called T when the bank had granted loans to P. That bank had been an important creditor of P at the time when P went into liquidation. It merged with two other banks, and, subsequently, a bank L was founded. Prosecutor S had been a member of the Board of Governors of the latter bank at the time when the petition concerning offences around the liquidation of P had been lodged with the police. The offences had violated the interests of P’s creditors. Due to the merger, bank L had succeeded bank T as P's creditor. The Deputy Chancellor of Justice found that in these circumstances prosecutor S’s impartiality had been open to doubt and that, therefore, he should neither have considered whether to press charges against the applicants nor have acted as prosecutor in the case. The Deputy Chancellor reprimanded S but found no grounds for considering that he had committed an offence in office, given the lack of explicit provisions in domestic law governing the impartiality of public prosecutors. (iii) The petition with the Prosecuting Counsel concerning the bias of a lay judge  On 4 March 1994, the applicants lodged a report of an offence with the Prosecuting Counsel of the Court of Appeal concerning an offence in office by lay judge Y, who had participated in the decision-making of the District Court’s judgment (see also “ (i) The appeal proceedings”). The lay judge had been a member of the Board of Directors of a company that had been P’s creditor at the time of the District Court’s proceedings. The applicants considered that Y had committed an offence in office by not stepping down from the bench. The lay judge stated in his written submission, inter alia, that prosecutor R had during the last hearing in the District Court requested “more severe sentences and a lengthy prohibition of the second applicant’s business activities”. On the last point, prosecutor R had referred to the winding-up of another company in Pello in which the second applicant had been involved. According to Y, the prosecutor’s request had resulted in an amendment to the draft judgment, which the presiding judge had distributed to the lay judges. On 20 April 1994, the Prosecuting Counsel of the Court of Appeal requested that a pre-trial investigation be opened regarding Y's suspected partiality and prosecutor R’s above-mentioned request to the District Court. The Prosecuting Counsel requested that the police investigate the circumstances in which prosecutor R had made this request. In the pre-trial investigation Y, on 15 June 1994, acknowledged that he should not have taken part in the applicants’ case. His participation had been due to his lack of knowledge but had not affected the outcome of the case. According to the recollection of the Presiding Judge of the District Court, also heard in the pre-trial investigation, prosecutor R had requested the prohibition of engaging in business “at the last or last but one hearing”. The Presiding Judge, furthermore, stated that the parties’ oral submissions at the hearings had been transcribed verbatim. The pre-trial investigation record was completed on 20 June 1994. A copy thereof, which the applicants submitted to the European Commission of the Human Rights as an annex to their application, was certified on 23 December 1994. B. Relevant domestic law and practice For chapter 39, section 1, of the Penal Code, see A. above. According to the Code of Procedure (oikeudenkäymiskaari, rättegångsbalken), as it stood, the District Court was composed of a presiding professional judge and three or four lay judges. Courts of appeal are competent to examine both factual and legal issues. The Supreme Court’s precedent of 12 June 1984 (KKO 1984-II-110) concerned a case in which the Court of Appeal had found that a lay judge in the District Court had been biased. Therefore, the Court of Appeal had referred the case back to the District Court. In the Supreme Court’s view, since there was no indication that the biased lay judge would have influenced the proceedings and since all the defendants had by appeal brought the case in its entirety before the Court of Appeal, the latter should not have refrained from examining the case itself. The Supreme Court found in another precedent of 6 November 1995 (KKO 1995:185) that the District Court had not met the requirements of impartiality as guaranteed by Article 6 of the Convention. Therefore, and in order to fulfil the requirements of a fair trial, the case was to be referred back for a retrial to the relevant court of first instance.