CASE OF A AND B v. NORWAY
No violation of Article 4 of Protocol No. 7 - Right not to be tried or punished twice-{general} (Article 4 of Protocol No. 7 - Right not to be tried or punished twice;Criminal offence)
András Sajó;Angelika Nußberger;Armen Harutyunyan;Dag Bugge Nordén;Erik Møse;Guido Raimondi;Julia Laffranque;Khanlar Hajiyev;Kristina Pardalos;Linos-Alexandre Sicilianos;Luis López Guerra;Mirjana Lazarova Trajkovska;Nona Tsotsoria;Paul Lemmens;Paul Mahoney;Paulo Pinto De Albuquerque;Yonko Grozev;Gabriele Kucsko-Stadlmayer;Ksenija Turković
11. The first applicant, Mr A, was born in 1960 and lives in Norway. The second applicant, Mr B, was born in 1965 and lives in Florida, United States of America. 12. The applicants and Mr E.K. owned a Gibraltar-registered company Estora Investment Ltd. (“Estora”). Mr T.F. and Mr G.A. owned the Samoa/Luxembourg-registered company Strategic Investment AS (“Strategic”). In June 2001 Estora acquired 24% of the shares in Wnet AS. Strategic acquired 46% of the shares in Wnet AS. In August 2001 all the shares in Wnet AS were sold to Software Innovation AS, at a substantially higher price. The first applicant’s share of the sale price was 3,259,341 Norwegian kroner (NOK) (approximately 360,000 euros (EUR)). He transferred this amount to the Gibraltar-registered company Banista Holding Ltd., in which he was the sole shareholder. The second applicant’s share of the sale price was NOK 4,651,881 (approximately EUR 500,000). He transferred this amount to Fardan Investment Ltd., in which he was the sole shareholder. Mr E.K., Mr G.A. and Mr T.F. made gains on similar transactions, while Mr B.L., Mr K.B. and Mr G.N. were involved in other undeclared taxable transactions with Software Innovation AS. The revenue from these transactions, amounting to approximately NOK 114.5 million (approximately EUR 12.6 million), was not declared to the Norwegian tax authorities, resulting in unpaid taxes totalling some NOK 32.5 million (approximately EUR 3.6 million). 13. In 2005 the tax authorities started a tax audit on Software Innovation AS and looked into the owners behind Wnet AS. On 25 October 2007 they filed a criminal complaint against T.F. with Økokrim (the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime) with regard to matters that later led to the indictment of the first applicant, along with the other persons mentioned above and the second applicant, for aggravated tax fraud. The persons referred to in paragraph 12 above were subsequently prosecuted, convicted and sentenced to terms of imprisonment for tax fraud in criminal proceedings. It may also be noted that: - the prison term to which Mr E.K. was sentenced at first instance was upheld at second instance, even though the second-instance court found it somewhat mild; in the meantime he had had a 30% tax penalty imposed on him; - the length of Mr B.L.’s term of imprisonment was fixed in the light of his having previously had a 30% tax penalty imposed on him; - Mr G.A. was neither sentenced to a fine nor had a tax penalty imposed on him; - Mr T.F. was in addition sentenced to a fine corresponding to the level of a 30% tax penalty; - Mr K.B. and Mr G.N. were each sentenced to a fine in accordance with the approach set out in the Supreme Court’s ruling in Rt. 2011 p. 1509, with reference to Rt. 2005 p. 129, summarised at paragraph 50 below. A summary of the particular circumstances pertaining to the first and second applicants is given below. 14. The first applicant was interviewed first as a witness on 6 December 2007; on 14 December 2007 he was arrested and gave evidence as a person charged (“siktet”). He admitted the factual circumstances but did not accept criminal liability. He was released after four days. 15. On 14 October 2008 the first applicant was indicted for violations of sections 12-1(1)(a), cf. 12-2, of the Tax Assessment Act 1980 (ligningsloven) (see paragraph 43 below for the text of these provisions). 16. On 24 November 2008 the Tax Administration (skattekontoret) amended his tax assessment for the years 2002 to 2007, after issuing a warning to that effect on 26 August 2008, with reference inter alia to the tax audit, to the criminal investigation, to the evidence given by him, as mentioned in paragraph 13 above, and to documents seized by Økokrim in the investigation. For the year 2002 the amendment was made on the ground that the first applicant had omitted to declare a general income of NOK 3,259,341 (approximately EUR 360,000), having instead declared a loss of NOK 65,655. Moreover, with reference to sections 10-2(1) and 104(1) of the Tax Assessment Act (see paragraph 42 below for the text of these provisions), the Tax Administration ordered him to pay a tax penalty of 30%, to be calculated on the basis of the tax that he owed in respect of the undeclared amount. The decision had regard inter alia to evidence given by the first and second applicants during their interviews in the criminal investigation. The first applicant did not lodge an appeal against that decision and paid the outstanding tax due, with the penalty, before the expiry of the three-week time-limit for lodging an appeal. 17. On 2 March 2009 the Follo District Court (tingrett) convicted the first applicant on charges of aggravated tax fraud and sentenced him to one year’s imprisonment on account of his having failed to declare, in his tax return for 2002, the sum of NOK 3,259,341 in earnings obtained abroad. In determining the sentence the District Court had regard to the fact that the first applicant had already been significantly sanctioned by the imposition of the tax penalty. 18. The first applicant appealed, complaining that, in breach of Article 4 of Protocol No. 7 to the European Convention on Human Rights, he had been both prosecuted and punished twice: in respect of the same offence under section 12-1 he had been charged and indicted by the public prosecutor, had then had a tax penalty imposed on him by the tax authorities, which he had paid, and had thereafter been convicted and sentenced. 19. In a judgment of 12 April 2010 the Borgarting High Court (lagmannsrett) unanimously rejected his appeal; similar reasoning was subsequently given by the Supreme Court (Høyesterett) in a judgment of 27 September 2010 (summarised below). 20. In its judgment of 27 September 2010 the Supreme Court first considered whether the two sets of proceedings in question had concerned the same factual circumstances (samme forhold). In this connection it noted the developments in the Convention case-law expounded in the Grand Chamber judgment of Sergey Zolotukhin v. Russia ([GC], no. 14939/03, §§ 52, 53, 8082, 84, ECHR 2009) and the attempt in that judgment to harmonise through the following conclusion: “... Article 4 of Protocol No. 7 must be understood as prohibiting the prosecution or trial of a second ‘offence’ in so far as it arises from identical facts or facts which are substantially the same. ... The Court’s inquiry should therefore focus on those facts which constitute a set of concrete factual circumstances involving the same defendant and [are] inextricably linked together in time and space ...”. 21. In the present instance, the Supreme Court observed, there was no doubt that the factual circumstances underlying the decision to impose tax penalties and the criminal prosecution had sufficient common features to meet these criteria. In both instances, the factual basis was the omission to declare income on the tax return. The requirement that the proceedings relate to the same matter had accordingly been met. 22. The Supreme Court next examined whether both sets of proceedings concerned an “offence” within the meaning of Article 4 of Protocol No. 7. In this regard the Supreme Court reiterated its ruling as reported in Norsk Retstidende (“Rt.”) 2002 p. 509 (see paragraph 45 below) that tax penalties at the ordinary level (30%) were consistent with the notion of “criminal charge” in Article 6 § 1. That earlier assessment had relied on the three socalled “Engel criteria” (the legal classification of the offence under national law; the nature of the offence; and the degree of severity of the penalty that the person concerned risked incurring) as spelled out in the Court’s judgment in Engel and Others v. the Netherlands (8 June 1976, § 82, Series A no. 22). Of importance for the Supreme Court’s assessment was the general preventive purpose of the tax penalty and the fact that, because 30% was a high rate, considerable sums could be involved. The Supreme Court further had regard to its judgment as reported in Rt. 2004 p. 645, where it had held in the light of the Strasbourg case-law (to the effect that the notion of “penalty” should not have different meanings under different provisions of the Convention) that a 30% tax penalty was also a criminal matter for the purposes of Article 4 of Protocol No. 7 – a stance adopted without further discussion in Rt. 2006 p. 1409. 23. The Supreme Court also noted that both the Directorate of Taxation (Skattedirektoratet) and the Director of Public Prosecutions (Riksadvokaten) were of the view that it was unlikely that a tax penalty at the ordinary level would not be deemed criminal punishment for the purposes of Article 4 of Protocol No. 7. 24. The Supreme Court further had regard to the Court’s more recent case-law (Mjelde v. Norway (dec.), no. 11143/04, 1 February 2007; Storbråten v. Norway (dec.), no. 12277/04, 1 February 2007; Haarvig v. Norway (dec.), no. 11187/05, 11 December 2007, with references to Malige v. France, 23 September 1998, § 35, Reports of Judgments and Decisions 1998VII; and Nilsson v. Sweden (dec.), no. 73661/01, ECHR 2005XIII) to the effect that a wider range of criteria than merely the Engel criteria applied to the assessment under Article 4 of Protocol No. 7. It found confirmation in Sergey Zolotukhin (cited above, §§ 52-57) – later followed in Ruotsalainen v. Finland (no. 13079/03, §§ 4147, 16 June 2009) – that the three Engel criteria for establishing the existence of a “criminal charge” for the purposes of Article 6 applied equally to the notion of criminal punishment in Article 4 of Protocol No. 7. 25. Against this background, the Supreme Court found no ground on which to depart from its above-mentioned rulings of 2004 and 2006, holding that tax penalties at the ordinary level were to be regarded as “criminal punishment” (straff) for the purposes of Article 4 of Protocol No. 7. 26. It went on to observe that a condition for protection under the abovementioned provision was that the decision which barred further prosecution – in this case the decision of 24 November 2008 to impose ordinary tax penalties – had to be final. That decision had not been appealed against to the highest administrative body within the three-week time-limit, which had expired on 15 December 2008, and was in this sense final. If, on the other hand, the expiry of the sixmonth time-limit for lodging a judicial appeal under section 11-1(4) of the Tax Assessment Act were to be material, the decision had not yet become final when the District Court delivered its judgment of 2 March 2009. 27. The words “finally acquitted or convicted” in Article 4 of Protocol No. 7 had been formulated with a view to situations where the barring decision was a judgment in a criminal case. The Court had established that a decision was final when it was res judicata, when no further ordinary remedies were available. In this regard, the time when a decision became res judicata according to the rules of national law would be decisive. Neither the wording of the provision, nor its drafting history, nor the case-law provided any guidance for situations where the barring decision was an administrative one. It was pointed out that, in Rt. 2002 p. 557, the Supreme Court had expressed an authoritative view to the effect that a tax assessment decision, including a decision on tax penalties, ought to be regarded as final when the taxpayer was precluded from challenging it (p. 570), without specifying, however, whether it was the time-limit for an administrative appeal, or rather for a judicial appeal, which was decisive. In the present case, the Supreme Court observed that the best solution would be to consider that the three-week time-limit for an administrative appeal was decisive in relation to Article 4 of Protocol No. 7. Otherwise, there would be clarity only after six months in cases where the taxpayer did not institute proceedings before the courts and, where he or she did so, only after a legally enforceable judgment – a period that would vary and could be lengthy. The decision of 24 November 2008 was therefore to be considered as final for the purposes of Article 4 of Protocol No. 7. 28. The Supreme Court noted that the first applicant had been charged on 14 December 2007 and that the warning about the amendment of his tax assessment had been sent on 26 August 2008. Thereafter the case concerning the tax penalties and the criminal case had been conducted in parallel until they had been decided respectively by a decision of 24 November 2008 and a judgment of 2 March 2009. A central question in this case was whether there had been successive prosecutions, which would be contrary to Article 4 of Protocol No. 7, or parallel treatment, which was permissible to some extent. In this connection the Supreme Court had regard to two inadmissibility decisions, R.T. v. Switzerland (dec.), no. 31982/96, 30 May 2000; and Nilsson v. Sweden, cited above, in particular the following passage from the latter: “However, the Court is unable to agree with the applicant that the decision to withdraw his driving licence amounted to new criminal proceedings being brought against him. While the different sanctions were imposed by two different authorities in different proceedings, there was nevertheless a sufficiently close connection between them, in substance and in time, to consider the withdrawal to be part of the sanctions under Swedish law for the offences of aggravated drunken driving and unlawful driving (see R.T. v. Switzerland, cited above, and, mutatis mutandis, Phillips v. the United Kingdom, no. 41087/98, § 34, ECHR 2001-VII). In other words, the withdrawal did not imply that the applicant was ‘tried or punished again ... for an offence for which he had already been finally ... convicted’, in breach of Article 4 § 1 of Protocol No. 7.” 29. In the present case, the Supreme Court held that there could be no doubt that there was a sufficient connection in substance and time. The two cases had their basis in the same factual circumstances – the lack of information on the tax return which had led to a deficient tax assessment. The criminal proceedings and the administrative proceedings had been conducted in parallel. After the first applicant had been charged on 14 December 2007, a warning had followed on 26 August 2008 about an amendment to his tax assessment, then an indictment on 14 October 2008, the tax authorities’ decision of 24 November 2008 to amend the assessment, and the District Court’s judgment of 2 March 2009. To a great extent the administrative-law and criminal-law processing had been interconnected. 30. The purpose behind Article 4 of Protocol No. 7, to provide protection against the burden of being subjected to a new procedure, had applied to a lesser degree here, in as much as the first applicant had had no legitimate expectation of being subjected to only one procedure. In such a situation the interest in ensuring effective prosecution was preponderant. 31. Following the tax audit in 2005 referred to in paragraph 13 above, during the autumn of 2007 the tax authorities reported to Økokrim that the second applicant had failed to declare on his tax return for the tax year 2002 income of NOK 4,561,881 (approximately EUR 500,000) earned from his sale of certain shares. 32. On 16 October 2008 the Tax Administration put the second applicant on notice that it was considering amending his tax assessment and imposing a tax penalty, referring inter alia to the tax audit, the criminal investigation and the evidence given by him, mentioned in paragraph 13 above, and to documents seized by Økokrim in the investigation. On 5 December 2008 the Tax Administration amended his tax assessment to the effect that he owed NOK 1,302,526 (approximately EUR 143,400) in tax in respect of the undeclared income. In addition, with reference to sections 10-2(1) and 104(1) of the Tax Assessment Act, it decided to impose a tax penalty of 30%. The decision had regard inter alia to evidence given by the first and second applicants during interviews in the criminal investigation. The second applicant paid the tax due, with the penalty, and did not appeal against the decision, which became final on 26 December 2008. 33. In the meantime, on 11 November 2008 the public prosecutor indicted the second applicant for a violation of section 12-1(1)(a), cf. section 12-2, of the Tax Assessment Act on the ground that for the tax year(s) 2001 and/or 2002 he had omitted to declare income of NOK 4,651,881 on his tax return, which represented a tax liability of NOK 1,302,526. The public prosecutor requested the Oslo City Court (tingrett) to pass a summary judgment based on his confession (tilståelsesdom). In addition, Mr E.K., Mr B.L. and Mr G.A. pleaded guilty and consented to summary trials on a guilty plea. 34. On 10 February 2009 the second applicant (unlike E.K., B.L. and G.A.) withdrew his confession, as a result of which the public prosecutor issued a revised indictment on 29 May 2009, including the same charges. 35. On 30 September 2009 the City Court, after holding an adversarial hearing, convicted the second applicant on the charges of aggravated tax fraud and sentenced him to one year’s imprisonment, account being taken of the fact that he had already had a tax penalty imposed on him. 36. The second applicant appealed against the City Court procedure to the Borgarting High Court, arguing in particular that by reason of the prohibition against double jeopardy in Article 4 of Protocol No. 7, the fact that he had had a tax penalty imposed on him constituted a bar against criminal conviction. Thus he requested that the City Court’s judgment be quashed (opphevet) and that the prosecution case be dismissed (avvist) from the courts. 37. In a judgment of 8 July 2010 the High Court rejected the second applicant’s appeal, relying essentially on its reasoning in the case of the first applicant, which was similar to that of the Supreme Court summarised above (see paragraphs 20 to 30 above). Thus, the High Court found that the tax authorities’ decision of 5 December 2008 ordering him to pay a tax penalty of 30% did constitute a criminal punishment (straff); that the decision had become “final” upon the expiry of the time-limit for lodging an appeal on 26 December 2008; and that the decision on the tax penalty and the subsequent criminal conviction concerned the same matter. 38. Moreover, as in the case of the first applicant, the High Court considered that parallel proceedings – both administrative and criminal – were to some extent permissible under Article 4 of Protocol No. 7, provided that the second proceedings had commenced before the first had become final. Where that minimum requirement had been fulfilled, an assessment had to be made of the state of progress of the second set and, not least, as to whether there was a sufficient connection in substance and in time between the first and second decisions. 39. As to the concrete assessment of the second applicant’s case, the High Court observed that the criminal proceedings and the tax proceedings had in fact been conducted in parallel since as far back as the tax authorities’ complaint to the police in the autumn of 2007 and until the decision to impose the tax penalty had been taken in December 2008. This state of affairs was similar to the case of the first applicant. The second applicant had been indicted and the case referred to the City Court with a request for a summary judgment on the basis of his confession on 11 November 2008, before the decision on the tax penalty. The criminal proceedings had thus reached a relatively advanced stage by the time the decision to impose the tax penalty had been taken. The nine-month period – from when the tax authorities’ decision of 5 December 2008 had become final until the second applicant’s conviction of 30 September 2009 by the City Court – had been somewhat longer than the two-and-a-half-month period in the case of the first applicant. However, this could be explained by the fact that the second applicant had withdrawn his confession in February 2009, with the consequence that he had had to be indicted anew on 29 May 2009 and an ordinary trial hearing had had to be scheduled. Against this background, the High Court (like the City Court) concluded that there was undoubtedly a sufficient connection in substance and time between the decision on the tax penalties and the subsequent criminal conviction. 40. On 29 October 2010 the Appeals Leave Committee of the Supreme Court refused the second applicant leave to appeal, finding that such leave was warranted neither by the general importance of the case nor by any other reason.