CASE OF VÉKONY v. HUNGARY
Preliminary objection joined to merits and dismissed (Article 35-3 - Ratione materiae);Violation of Article 1 of Protocol No. 1 - Protection of property (Article 1 para. 1 of Protocol No. 1 - Peaceful enjoyment of possessions;Article 1 para. 2 of Protocol No. 1 - Control of the use of property);Pecuniary and non-pecuniary damage - award (Article 41 - Non-pecuniary damage;Pecuniary damage;Just satisfaction)
András Sajó;Egidijus Kūris;Guido Raimondi;Jon Fridrik Kjølbro;Nebojša Vučinić;Robert Spano
5. The applicant was born in 1950 and lives in Sopron. 6. From 1994 the applicant’s family operated a grocery with the personal involvement of the applicant. They sold, initially under the excise licence of the applicant’s mother, merchandise subject to excise tax, that is, alcohol and tobacco products. On average, the turnover of tobacco retail represented about one-third of the family’s business. The applicant himself obtained a shop-keeping licence in 1999 (see also paragraph 15 below). In 2001 he qualified as a trader and shop manager. In 2005, he was registered in his own right as a trader of excise goods. 7. On 11 September 2012 Parliament enacted Act no. CXXXIV of 2012 on the Repression of Smoking of the Youth and on Tobacco Retail. The Act was published on 24 September 2012. The Act was subsequently amended on several occasions, and the final version was enacted on 6 June 2013. It entered into force on 1 July 2013. 8. According to the Act, tobacco retail – previously exercised at about 42,000 retail points nationwide – was to become a State monopoly (exercised through a State-owned company, ND Nemzeti Dohány-kereskedelmi Nonprofit Zrt, “ND Zrt”), and tobacco retailers would become licensed through a concession tender, advertised on 15 December 2012, for up to five retail points per tenderer. In applying for the new concessions, tenderers were required to produce business plans reflecting, inter alia, the new governmental policy to limit to the utmost the access of minors to tobacco products, notably by prohibiting the entry of those less than 18 years of age into shops selling tobacco. Under the new licences, tobacco retail could take place only in shops with separate entrances, with dark shades in the shop windows preventing seeing through, and with only a limited selection of other goods on sale. The final time-limit for applying was 22 February 2013. Entities previously engaged in tobacco retail had no privileges in the tender. The decision about the tenders was to be taken by ND Zrt. In the tender, altogether some 6,800 licences were granted nationwide. 9. The applicant applied for a concession on 4 February 2013, for the would-be licence to be used in the family enterprise. The application was signed by the applicant, and witnessed by his wife and their son. The applicant then amended the application according to the upcoming new rules, on 20 February 2013. According to the Government, the application was very succinct and in no way developed; in particular, it contained no appropriate business plan, which was part of the criteria for the tenders. The applicant submitted that no information was ever made available about the assessment of the tender. 10. On 23 April 2013 the applicant was informed that he had not obtained a tobacco retail concession. The decision contained no reasons or any indication of the applicant’s score on the 120-point tender adjudication score-sheet, and it was not subject to any legal remedy. The enterprise run by the applicant’s family was obliged to terminate the sale of tobacco products by the statutory deadline, that is, 14 July 2013. Tobacco wholesalers were under a legal obligation to re-buy any outstanding stocks from terminated retailers. The remaining sales activities of the applicant’s family enterprise were no longer profitable, entailing the winding-up of the business. 11. Under the law, no compensation is available for former holders of tobacco retail licences who, by not having been awarded a concession, lost part of their livelihood. The applicant submitted that this was the case of his family; and that he had, after losing the retail licence, considerable difficulties in supporting his family including a minor son. 12. The applicant further submitted that others in comparable situations – and in the case of those who had never been doing tobacco retail beforehand, in non-comparable situations – had been granted concessions, which difference in treatment could not be explained by any circumstance other than political adherence. In his view, this was corroborated by the fact that some successful tenderers had obtained more than one concession for multiple selling points. 13. On 14 January 2014 the Constitutional Court declared admissible a number of complaints relating to the same matter. In decision no. 3194/2014 (VII.14.) it dismissed these motions on the merits (see below in paragraph 16), noting in particular that the legislature had aimed to eliminate underage smoking and therefore restricted the accessibility of tobacco retail, measures reflecting Hungary’s obligations under the WHO Framework Convention on Tobacco Control as well as the findings of the Global Youth Tobacco Survey. 14. Act no. CXXXIV of 2012 on the Repression of Smoking of the Youth and on Tobacco Retail provides as follows: “(1) Tobacco retail in Hungary is an activity falling under State monopoly, the exercise of which may be licensed through fix-term concession contracts concluded according to the provisions of this Act, as well as of Act no. XVI of 1991 on Concessions.” “(1) If this Act does not provide otherwise, tobacco retail may only be pursued in tobacco shops.” 15. According to Act no. CIII of 1997 on Excise Tax and the Special Rules of Trading in Merchandise Subject to Excise Tax (“the Excise Tax Act”), as in force until 1 May 2004, trading in excise goods was possible in two manners: (a) subject to an excise licence, in which case the holder of such a licence could sell the products to non-end-consumers; (b) the sale of excise goods to end-consumers was also possible without a specific excise licence, if the owner of the business had an appropriate shop-keeping licence, covering also the sale of the excise goods in question. The relevant provisions of the Act provided as follows: “(1) Non-excise-licensed free trade of excise goods ... is only allowed in possession of a shop-keeping licence, specified by the law on the operation of shops ... if a) the shop-keeping licence is issued for a scope of retail, catering or accommodation activities in the framework of which the law allows the sale of excise goods, and b) the non-excise-licensed dealer pursues his or her commercial activity ... in a shop.” 16. In its relevant part, Act no. CLI of 2011 on the Constitutional Court (“the Constitutional Court Act”) provides as follows: “(1) In accordance with Article 24 § 2 (c) of the Fundamental Law, any person or organisation affected by a concrete case may submit a constitutional complaint to the Constitutional Court if due to the application of a legal regulation contrary to the Fundamental Law in the judicial proceedings: a) their rights enshrined in the Fundamental Law were [allegedly] violated, and b) the possibilities for legal remedy have already been exhausted or no possibility for legal remedy is available. (2) By way of derogation from paragraph (1), Constitutional Court proceedings may also be initiated – by exception – relying on Article 24 § 2 (c) of the Fundamental Law, if: a) due to the entry into force or the application of a legal provision contrary to the Fundamental Law, the complainant’s rights were [allegedly] violated directly, without a judicial decision, and b) there is no legal remedy capable of redressing the violation of rights, or the complainant has already exhausted the remedy.” “The Constitutional Court admits constitutional complaints if a conflict with the Fundamental Law significantly affects the judicial decision [in question] or the case raises constitutional law issues of fundamental importance.” “(1) The Constitutional Court decides on the admission of a constitutional complaint sitting as a panel ... (2) The panel examines in its discretionary power the content-related requirements of the admissibility of a constitutional complaint ....” The Constitutional Court analysed the motions mentioned in paragraph 13 above from two aspects: whether the impugned legislation infringed the complainants’ right to protection of their property and whether it breached their right to pursue an entrepreneurial activity. As regards the property right, the Constitutional Court held in essence that the complainants’ business activities in tobacco retail – however long-standing it may have been – did not constitute per se acquired possessions or constitutionally protected legitimate expectations. Prior to 1 July 2013, they had not possessed specific licences for tobacco retail, this kind of licence having been instituted only by the impugned legislation as of that date. Therefore, the legislation did not deprive them of pre-existing, acquired possessions, nor did it annul their shop-keeping licences in general. Moreover, their licences to sell merchandise subject to excise tax (a licence different from the one instituted by the impugned legislation, issued by the Tax Authority as a pre-condition for engaging in tobacco retail) were non-transferable and revocable permits, which did not constitute possessions. The Constitutional Court emphasised that the legislation did not prevent the complainants from applying for tobacco retail concession under the new system and, if successfully licensed, from continuing their activities. As regards the complaint concerning the right to pursue an entrepreneurial activity, the Constitutional Court agreed that the complainants’ activity fell within the scope of constitutional protection. Nevertheless, it underlined that this right did not give an unrestricted or inalienable entitlement to pursue an activity of one’s choice. In the Constitutional Court’s view, the impugned legislation did not prejudice the essence of the right to pursue an entrepreneurial activity, namely it did not permanently deprive the complainants of the possibility to continue their tobacco retail business, let alone to pursue entrepreneurial activities in general. It only subjected that activity to conditions, which they were not unable to meet. The Constitutional Court found that limitation to be in the public interest and to be sufficiently proportionate to the underlying public health considerations, all the more so since the goods merchandised by the complainants represented well-known health risks and the treatment of smoking-related diseases put a considerable burden on the State – which, in the Constitutional Court’s view, enjoyed a wide margin of appreciation in the regulation of the matter in question. 17. The standing case-law of the Supreme Court/Kúria concerning the lawmaker’s tort liability was recapitulated by the Budapest Court of Appeal in leading case no. EBD2014.P.1 as follows: “[T]he Supreme Court held in leading case no. EBH1999.14 that rules of tort liability cannot be applied to legislation, that is, to the activity aimed at adopting general and abstract legal rules of behaviour. In leading case no. BH1993.312 it also considered that the damage potentially resulting from the entry into force of a law laying down a general rule of normative force does not create a relationship of civil law liability between the lawmaker and the alleged victim of the legislation. ... Furthermore, leading case no. BH1994.31 also reflects the jurisprudence according to which the lawmaker cannot be held liable for the adoption of normative rules, unless there are additional findings of fact (többlettényállás).” In the leading case, such additional findings of fact were constituted by the underlying decision of the Constitutional Court holding that the law-making process in question had been dysfunctional in that the resultant legal provision was nothing less than an individual decision to the detriment of the complainant, couched in terms of a legislative act.