CASE OF PAYKAR YEV HAGHTANAK LTD v. ARMENIA
Violation of Art. 6-1;Remainder inadmissible;Pecuniary damage - claim dismissed;Non-pecuniary damage - financial award;Costs and expenses partial award - Convention proceedings;Costs and expenses (domestic proceedings) - claim dismissed
David Thór Björgvinsson
4. The applicant is a private small-scale trading company which has its registered office in Yerevan. 5. On 29 January 2001 the Tax Inspectorate conducted an inspection of the applicant company's accounts. As a result of this inspection, on 2 April 2001 the Ministry of State Revenue (ՀՀ պետական եկամուտների նախարարություն) made an assessment, according to which the applicant company's tax arrears amounted to 3,797,281 Armenian drams (AMD) (approx. 5,400 euros (EUR)), including surcharges and fines prescribed by the relevant tax laws. 6. On an unspecified date, the Yerevan City Prosecutor's Office (Երևան քաղաքի դատախազություն) and the Tax Inspectorate of the Myasnikyan District of Yerevan (Երևանի Մյասնիկյանի տարածքային հարկային տեսչություն) instituted proceedings against the applicant company, claiming that it had failed to meet its tax obligations in an appropriate and timely manner and seeking to recover the above tax arrears. 7. On 13 July 2001 the Kentron and Nork-Marash District Court of Yerevan (Երևան քաղաքի Կենտրոն և Նորք-Մարաշ համայնքների առաջին ատյանի դատարան) decided against the applicant company. 8. On an unspecified date, the applicant company lodged an appeal with the then Commercial Court of Appeal (ՀՀ տնտեսական գործերով վերաքննիչ դատարան). The applicant company also requested that payment of the court fee (known as State fee) be deferred. In his request, the manager of the applicant company submitted, inter alia, that the company was experiencing financial problems and that he was the company's sole employee. 9. On 31 August 2001 the Commercial Court of Appeal granted the applicant company's request for deferral and admitted the appeal. 10. Following the reform of the court system introduced in Armenia on 11 September 2001 which brought about the establishment of the Commercial Court (ՀՀ տնտեսական դատարան), the applicant company's case was transferred to be examined by that court. 11. On 5 November 2001 the Commercial Court decided to leave the authorities' claim unexamined on the ground that the plaintiffs had failed to appear. In its decision, the Commercial Court levied a court fee on the Tax Inspectorate in the amount of AMD 189,864.05 (approx. EUR 370). 12. It appears that the proceedings were resumed on an unspecified date. 13. On 24 December 2001 the Commercial Court decided, at the prosecutor's request, to take measures aimed at securing the claim, freezing the applicant company's property and monetary assets in the amount of AMD 3,797,281. 14. On an unspecified date, the applicant company lodged a counterclaim with the Commercial Court, seeking to have the 2 April 2001 assessment ruled unlawful. The applicant company requested that the payment of the court fee be deferred on the same grounds as before. 15. On 18 January 2002 the Commercial Court granted the applicant company's request for deferral of payment of the court fee and allowed the applicant company's counterclaim, referring to Articles 21 (d) and 31 (c) of the Law on State Fees («Պետական տուրքի մասին» ՀՀ օրենք). 16. On 3 December 2002 the Commercial Court decided to join both claims and to examine them together. 17. On 20 January 2003 the Commercial Court granted the authorities' claim and dismissed that of the applicant company. The court decided to levy on the applicant company a total of AMD 3,797,281 of tax arrears, including profit tax arrears of AMD 193,400 plus a surcharge of AMD 11,352.9 (approx. EUR 310 and EUR 18 respectively), Value Added Tax (VAT) arrears of AMD 132,610 plus a surcharge of AMD 57,839.44 and a fine of AMD 73,080 (approx. EUR 213, EUR 93 and EUR 117 respectively), and simplified tax arrears of AMD 1,919,820 plus a surcharge of AMD 304,428.66 and a fine of AMD 1,104,750 (approx. EUR 3,096, EUR 491 and EUR 1,781 respectively). In imposing the surcharges and fines, the Commercial Court referred to Article 43 of the Law on Value Added Tax («Ավելացված արժեքի հարկի մասին» ՀՀ օրենք), Articles 25 and 28 of the Law on Taxes («Հարկերի մասին» ՀՀ օրենք) and the provisions relating to the delayed payment of taxes. The amount of the unpaid court fee to be paid by the applicant company was calculated at AMD 79,946 (approx. EUR 129). 18. On 3 February 2003 the applicant company lodged a cassation appeal. Together with the appeal, the applicant company submitted a request for deferral of payment of the court fee, claiming that the company was experiencing financial problems: the company had only AMD 770 (approx. EUR 1.2) on its books and in its bank account, both of which had been frozen. 19. By a letter of 14 February 2003 the Court of Cassation informed the applicant company that its cassation appeal would be examined on 28 February 2003. The letter also stated that the appeal would be returned unexamined should the applicant fail to pay the court fee by 24 February 2003. 20. By a letter of 27 February 2003 the Court of Cassation (ՀՀ վճռաբեկ դատարան) returned the applicant company's cassation appeal on the ground that it had not paid the required court fee. The judgment of the Commercial Court came into force. 21. On 28 February 2003 the applicant company applied to the Chairman of the Court of Cassation (ՀՀ վճռաբեկ դատարանի նախագահ), requesting that its appeal be examined out of time and claiming that it was incapable of paying the court fee since the company had almost no assets and the existing ones were frozen. 22. By a letter of 13 March 2003 the Senior Advisor to the Civil and Commercial Chamber of the Court of Cassation (ՀՀ վճռաբեկ դատարանի քաղաքացիական և տնտեսական գործերի պալատի ավագ խորհրդատու) informed the applicant company that its cassation appeal had been returned since “according to Article 70 of the Code of Civil Procedure [(CCP) (ՀՀ քաղաքացիական դատավարության օրենսգիրք)] commercial entities could not be exempted from payment of the State fee”. 23. On 25 March 2003 enforcement proceedings were instituted and an injunction was placed on the applicant company's assets in the amount equal to the judgment debt. 24. On 22 April 2004 the Commercial Court instituted bankruptcy proceedings in respect of the applicant company on the basis of an application lodged by the Tax Inspectorate. 25. On 20 May 2004 the Commercial Court decided to stay those proceedings until a decision had been taken on the applicant company's application lodged with the European Court. It appears that the bankruptcy proceedings are currently still stayed. 26. The relevant provisions of the CCP read as follows: “1. A State fee shall be paid for: (1) lodging a claim; ... (7) lodging appeals and cassation appeals against court judgments and decisions... 3. The determination of the amount of a State fee, the exemption from its payment, the deferral or postponement of payment of a State fee, and the reduction of its amount are regulated by the “Law on State Fees” of Armenia. Private businessmen and commercial entities cannot be exempted from payment of a State fee.” “1. The court, upon the request of a party or of its own motion, shall take measures to secure a claim, if the failure to take such measures may make impossible or hinder the enforcement of a judicial act or lead to the deterioration of the disputed property's condition. It is allowed to secure a claim at any stage of the proceedings.” “1. Measures securing a claim are: (1) placing an injunction on [(freezing)] the defendant's property or monetary assets in the amount of the claim value...” “1. An appeal shall be returned if: ... (5) documents substantiating the payment of a State fee according to an established procedure and in a prescribed amount are not attached to the appeal, and, in cases where a deferral or postponement of payment of a State fee or a reduction of its amount are possible under the law, no relevant request has been made or such request has been refused.” “A cassation appeal can be lodged on: (1) points of law or a procedural violation of the parties' rights; [and] (2) the ground of newly discovered circumstances. “3. A document substantiating the payment of a State fee shall be attached to the [cassation] appeal.” “1. Judgments and decisions can be reviewed on the basis of new circumstances [if] ... a violation of a right (rights) guaranteed by an international convention to which Armenia is a party has been found by a final judgment or decision of an international court...” 27. The relevant provisions of the Law on State Fees read as follows: “Rates of State fees shall be established in respect of the value of the property subject to assessment or the base fee established by this law. The amount of the base fee shall be AMD 1,000.” “9. for cassation appeals lodged against court judgments and decisions: (a) if a pecuniary claim – at the rate of three per cent of the claim value, but not less than ten times and not more than one thousand times the base fee; (b) if a non-pecuniary claim – twenty times the base fee...” “The following concessions can be fixed in respect of State fees: (a) exemption from payment of a State fee; (b) reduction of the amount of a State fee: (c) reduction of the rate of a State fee; (d) deferral of payment of a State fee; and (e) exemption, reduction or deferral of payment of a surcharge imposed for the failure to pay a State fee to the budget in due time.” “...Private businessmen and commercial entities cannot be exempted from payment of State fees prescribed by Article 9 of this law...” “Concessions in respect of payment of a State fee by specific payers or groups of payers can be set by: ... (c) the courts or judges in specific cases referred to in Article 9 of this law taking into account the financial situation of the parties...” 28. The relevant provisions of the Law on Taxes read as follows: “Tax liability shall include payment of taxes (including taxes for a concealed or understated taxable object), and surcharges and fines prescribed by the tax legislation for violation of the tax legislation and other legal acts regulating tax relations in Armenia.” “Taxpayers (enterprises, institutions and organisations) and their officials as determined by the legislation of Armenia shall be responsible for accurate calculation and timely payment of taxes, and for compliance with other requirements of the tax legislation...” “In case of delayed payment of tax, taxpayers ... shall pay a surcharge equal to 0.15 per cent of the overdue amount for each day of delay.” “In case of failure to keep accounts (and also other calculations and (or) records envisaged by the tax legislation and the decrees of the Government of Armenia) or in case of keeping accounts in violation of the established procedure or inaccurately preparing accounting reports, calculations, tax returns and other documents and information required under the tax legislation, a fine shall be levied on the taxpayer equal to ten per cent of the amount of the tax not paid or paid incompletely to the budget as a result of these violations.” “In case of non-registration of objects of business activity, such as supplied, furnished, transported or sold goods and products, and non-registration of work carried out and services rendered in conformity with the procedure prescribed by the Government of Armenia, a fine shall be levied on the taxpayer equal to 25 per cent of the overall value expressed in (calculated at) the sales prices of the unregistered objects of business activity, including the sold (realised) ones... If repeated non-registration of objects of business activity is recorded within one year of the date when the violation was recorded by the tax inspectorate, a fine shall be imposed equal to 50 per cent of the overall value expressed in (calculated at) the sales prices of the unregistered objects of business activity, including the sold (realised) ones.” 29. The relevant provisions of the Law on Value Added Tax read as follows: “The amount of the concealed or understated VAT and a fine equal to 50 per cent of that amount shall be levied from taxpayers who conceal or understate the turnover subject to VAT and who conceal or understate the amount of VAT payable to the budget by understating ... the amount of VAT paid for goods and services in violation of the procedure prescribed by this law.”