CEDH · CASELAW;DECISIONS;DECCOMMISSION;ENG — 14 décembre 1988

.sDD6737AE { font-size:11pt } .s211D6B00 { margin-top:0pt; margin-bottom:0pt; line-height:normal; widows:0; orphans:0; font-size:8.5pt } .sBB9EE52A { font-family:Arial }        AS TO THE ADMISSIBILITY OF     Application No. 13013/87 by Wasa Liv Ömsesidigt, Försäkringsbolaget Valands Pensionsstiftelse and a group of approximately 15,000 individuals against Sweden             The European Commission of Human Rights sitting in private on 14 December 1988, the following members being present:                   MM.   C.A. NØRGAARD, President                      J.A. FROWEIN                      S. TRECHSEL                      G. SPERDUTI                      E. BUSUTTIL                      G. JÖRUNDSSON                      A.S. GÖZÜBÜYÜK                      A. WEITZEL                      J.C. SOYER                      H.G. SCHERMERS                      H. VANDENBERGHE                 Mrs.   G.H. THUNE                 Sir   Basil HALL                 MM.   F. MARTINEZ                      C.L. ROZAKIS                 Mrs.   J. LIDDY                   Mr.   H.C. KRÜGER, Secretary to the Commission             Having regard to Article 25 of the Convention for the Protection of Human Rights and Fundamental Freedoms;           Having regard to the application introduced on 15 June 1987 by Wasa Liv Ömsesidigt, Försäkringsbolaget Valands Pensionsstiftelse and a group of approximately 15,000 individuals against Sweden and registered on 15 June 1987 under file No. 13013/87;           Having regard to the report provided for in Rule 40 of the Rules of Procedure of the Commission;           Having deliberated;           Decides as follows:   THE FACTS           The facts of the case, as submitted by the applicants, may be summarised as follows:           The first applicant, Wasa Liv Ömsesidigt, is a Swedish mutual life insurance company with its headquarters in Stockholm.   The second applicant, Försäkringsbolaget Valands Pensionsstiftelse, is a Swedish pension foundation also with its headquarters in Stockholm.   The third applicant is a group of approximately 15.000 Swedish and non-Swedish nationals holding pension and endowment insurance policies in the first and second applicant companies.   Before the Commission the applicants are represented by Mr.   Dag Wersén of the law firm Lagerlöf in Stockholm.           The application concerns the introduction in Sweden of a new legislation in December 1986 imposing a once and for all property tax on life insurance companies, certain friendly societies and pension foundations (Lag om tillfällig förmögenhetsskatt för livsförsäkringsbolag, understödsföreningar och pensionsstiftelser).   The relationship between on the one hand the first and second applicant and on the other hand the third applicant           One of the various pension systems available in Sweden is the buying of a private pension policy from a private life insurance company.   Such policies do not follow any social insurance index but the future value of the policies depends exclusively upon successful administration of the premium income received.   The greater part of such insurance is contracted by private individuals wishing to improve their pension status.   This category includes private employees requiring a better pension than they can expect from the national social insurance scheme as well as businessmen and farmers who have to arrange their service pensions themselves.   In addition to the above groups there are people who are not in need of any additional pension themselves but want to make provision for their survivors in case of their death.   Furthermore, life insurance is generally also a long-range kind of saving.           In Sweden, licensing and forms of life insurance business are governed by the Insurance Companies Act of 1982 (försäkringsrörelselag (1982:713)).           Licensing (in the form of a concession) by the Government is mandatory for carrying on life insurance business.   A concession includes official confirmation of the company's charter and the general rules for the life insurance business.           The general rules of a life insurance company can be regarded as a legal supplement to the company's charter.   They are also essential for the contractual relationship between the company and its policyholders.   In most cases the general insurance conditions of life insurance policies contain an explicit provision which makes the general rules, applying at any time, an integral part of the insurance agreement.           As a general principle of Swedish insurance law, all life insurance business must be operated solely in the interest of the policyholders.   As a consequence all profits have to be allotted to the policyholders in the form of a bonus.   Dividends to shareholders and similar payments are not allowed.           As a consequence of the said general principle most life insurance companies in Sweden are operated in mutual form - i.e. the companies are owned by the policyholders.   There is, however, no rule against carrying on life insurance business in the form of a joint stock company.   However, no dividends may in this case be paid to shareholders.   Consequently, there is in practice virtually no difference between the company forms for life insurance business.   The business is always operated in accordance with mutual principles and solely in the interests of the policyholders.           The fact that all insurance companies are effectively operated on a mutual basis does not mean that the policyholders have any legal claim to direct ownership of the companies' assets as such.   All property - shares, bonds, real estate etc. - in which the companies invest their funds is the company's own property as in the case of any other legal entity.   The fact that there are no interested parties in life insurance companies other than the policyholders does not alter this fact.           An individual life insurance policy is a long-term agreement often running for a period of 30 years or more.           The amount insured and the premium are fixed on the basis of an assumed income on invested premiums received.   The surplus that arises when the actual income is higher, is returned as a bonus on the policies in accordance with the general mutual principle.           Depending on the success or otherwise of the insurance business the aggregate value of the bonus reserve may increase or decrease.           Consequently, an insurance policy constitutes a vested right to the insurance amount contracted in the policy and a right to a bonus which amounts to a fair share of the surplus, if any.           As already mentioned, all surplus on life insurance business is to be returned as a bonus on the policies.   Each individual policy is entitled to a certain share of the surplus in proportion to its relative contribution to the creation of the surplus.   This principle is universal for all life insurance companies.   The manner in which the allotment of the surplus is effected may nevertheless vary slightly from one company to another, depending on which way the individual life insurance company allocates receipts and expenditure on the policies.   In all cases, the principle of equitable treatment of policies must be adhered to.   Details on the allotment principles can be found in each company's general rules.   The actual allocation of the bonus is not formally effected until the amount insured for becomes payable.           It is common for life insurance companies to describe the importance of the bonus to the future value of insurance policies by preparing what are referred to as "bonus illustrations".   Such illustrations often accompany the general information given to potential buyers of life insurance policies.   The bonus illustrations do not represent any guarantee of a future bonus to be received on the policy in question, the intention being simply to show how various levels of bonus interest are influenced by the factual return on invested premiums.   It is, nevertheless, the experience that the bonus illustrations are understood by policyholders as a prognosis of future bonus, which makes it necessary to prepare all such illustrations on a very conservative basis and to make a number of reservations.   The particulars of the one-off property tax           The essential stipulations of the legislation on the property tax may be summarised as follows.           The legislation on the property tax was passed by the Swedish Parliament on 16 December 1986 and published the same day as No. 1986:1225 of the Swedish Law Gazette.   The Act entered into force on 23 December 1986.           The one-off property tax was calculated as 7% of the taxable assets of the below mentioned companies.   For pension insurance the taxable assets equalled the aggregate assets of the contributor whereas the taxable assets for the purpose of endowment insurance were 72% of the aggregate assets referable to this type of insurances.   No tax should be paid on that part of a company's assets which were referable to sickness or accident insurances.   The basic principle was that the assets were assessed, with certain exceptions, at their book value.           The one-off property tax was to be paid to the State by Swedish life insurance companies, certain friendly societies and pension funds.   The tax liability was imposed on the subjects concerned which had started business activities before the end of 1984.   No others were subjected to the property tax.   The tax was based on the entities' aggregate assets in excess of 10 million Swedish crowns by 31 December 1986.   As a result the levy concerned approximately 200 companies, societies and funds directly, including the first and second applicant.   The method of distributing the tax burden chosen by the first and second applicants, as well as by other insurance companies affected by the Act, was, in the absence of any criteria provided for by law, to reduce the bonus payments which would otherwise have been credited the policyholders for the years 1987 and 1988.           Those entities which were liable to the tax had to file a special tax return relating to the levy no later than 1 June 1987.   At the same time one half of the amount to be paid had to be remitted. One half of the remainder of the amount had to be paid no later than 31 August 1987 and the remaining part on 30 November 1987.           The property tax was not deductible for the entities concerned when calculating their income tax to the State.   The one-off tax totalled approximatelly 16 billion Swedish crowns, and the first and second applicants paid 916,091,000 and 356,000 Swedish crowns respectively.           When the Government presented the new legislation to Parliament the responsible minister stated inter alia the following:   "Since the autumn of 1982, economic policy has aimed at eliminating the various balance problems in the Swedish economy.   Among other things, this has involved a strict budgetary policy aimed at reducing the large budget deficit. During this period, the margin for improvements, both in the form of increases in real household income and through public expenditures, has been extremely narrow.   During these years large groups of our society have contributed to a pronounced decrease of the Swedish economy's problems by various types of sacrifices.   The deficits on the national budget and in the balance of current payments have thus been reduced or eliminated.   This has proved possible parallel to a reduction in unemployment.   The policy pursued - in combination with international development - has thus made a radical reduction in the rate of inflation possible.   A necessary condition for continued low inflation, which is essential for any favourable economic development in real terms, is that the deficit on the national budget be further limited in coming years.   It has also proved possible to reduce the level of interest rates, in that the balance problems in the Swedish economy have been softened.   However, the fall in interest rates has not been as rapid as the decrease in the rate of inflation. While inflation has fallen from 10% in 1982 to around 3% this year, nominal interest rates have decreased over the same period from 13% to 9%.   It is not surprising therefore that the rates of real interest have risen sharply.   Experience shows that changes in the inflation rate - upwards or downwards - are only reflected in the nominal rate after a considerable period of time.   On the other hand, the level of real interest is almost unique.   Real interest has not been anywhere near today's level in modern times.   It is impossible to foresee how long the level of real interest will remain high.   It may be noted, however, that institutions with a high proportion of their wealth invested in assets at a tied rate will be in a position to enjoy a continued high yield for several years after any decision in the general level of interest rates.   Given continued low inflation, such investors can even now reckon, with a high degree of certainty, on a very good real yield, at least for the remainder of the 1980s, even if the interest on new investments were to fall.   Through the rise in real interest rates, the yield on insurance saving has gone up markedly.   One may note, among other things, a trend increase in the so-called 'refund rates'.   These show what a yield individual pension and endowment insurances give for individual years.   In real terms, the refund rates have thus risen from around 1% in 1981 to approximately 11% this year.   Refund rates can be expected to remain at this level for a further few years.   Another factor contributing to the rise in refund rates has been the rapidly rising rates noted for listed shares, an increase in value which is the result of the high level of profit in business and industry.   The increased attractiveness of insurance saving has led to a strong increase in the demand for policies.   During the period 1980-85, the number of newly subscribed P-insurances rose by no less than 23% per year, while the number of E-insurances rose by 16% per year.   At the same time as insurance saving has expanded strongly so far during the 1980s, total savings by households have continued to remain low, or actually to fall.   There is thus reason to believe that the increase in insurance saving has to a large extent replaced other savings by households.   It also seems probable that part of this saving, particularly in the case of E-insurance, has been achieved with borrowed money.   The rapid real growth in the insurance companies' refund rates - i.e. the yield on insurance saving - is in contrast with the restricted development of real wages in recent years.   The high yield entails, in the case of individual insurance saving, increased benefits.   There is a direct link between the yield in an insurance company and the scale of, for example, the pension paid on the grounds of a pension insurance policy.   In the case of collective insurance saving, the scale of pensions and other insured benefits is dependent only in part on the yield on insurance capital.   These benefits are set out in collective agreements.   If the yield on capital is very high, as is the case at present, the effect is to render the costs to the employer lower than otherwise.   It is thus the employers who, primarily, benefit from the high yield.   That this is the case is confirmed by the fact that the level of premiums for service pension insurance has fallen during the past two years.   General considerations   Life insurance saving enjoys a favoured position in the context of taxation.   Saving in a pension insurance (P-insurance) takes place with untaxed money.   The yield on its capital is not subject to taxation within the insurance sector.   Only when pension sums are actually paid does a tax obligation arise.   In the case of endowment policies (E-insurance), the arrangement if different.   Saving is effected with taxed money.   The yield is subject to a low rate of taxation within the insurance company.   The sums that fall due are exempt from income tax.   The life insurance capital is entirely exempt from wealth tax and is favourably treated, by comparison with other assets, in inheritance taxation.   Also, it should be noted that the costs to an employer of service pensions and other 'security' insurances for the employees are not included in the basis for the employers' social charges.   It will be clear from what I have now said that the entire life insurance sector is consistently afforded a favourable treatment as regards taxation.   This is the case both regarding individual insurance savings, and the savings based on collective agreements between labour and management.   Even if the rules are differently structured in respect of P- and E-insurance, both types are favoured, compared with other types of savings.   It is not without reason, however, that benefits have been accorded to savings in the form of insurance.   The long-term character ascribable to most insurance savings is generally desirable.   Savings in the form of insurance mean that the saver often ties up funds over long periods of time.   Even if the financial security ensured in sickness and old age has been radically improved by the development of the national insurance, there is reason also to provide conditions favouring a complementary financial protection, whether this is based on collective agreements, or created by individual insurance solutions.   The benefits accorded, in taxation, to insurance savings are for the reasons I have just quoted, among others, essentially well considered during periods when the growth of insurance capital is normal.   As I have indicated, however, in the preceding section, we are currently experiencing a growth of wealth in the insurance sector that one is bound to characterise as unique.   The yield on insurance capital now lies at a level in excess of 10%.   No such situation has prevailed at all in modern times.   I would observe, in this context, that fluctuations in the yield are per se a regular feature in insurance company operations.   Periods when the real yield is low, or actually negative, alternate with periods when the yield is at a higher level.   What we are now experiencing, however, is a growth in whealth far beyond what can be contained by such normal fluctuations.     .....................   In the light of what I have just said, I have reached the conclusion that the disadvantages connected with a tax on real interest are so considerable as to prevent me from recommending the introduction of such a tax.   My position entails that a solution to the problems of income distribution consequent upon the growth of wealth in the insurance sector must be sought along different lines.   As already stated, it is my opinion that the general order of things prevailing as regards the taxation of insurance savings affords an acceptable result both when profitability is good, and when it is bad.   In the situation currently prevailing, however, with a growth of wealth that is unique in modern times, the favoured position of insurance savings from the standpoint of taxation entails that such savings are enjoying benefits on a scale that must be called into question.   In my opinion, special measures are thus called for.   When considering the thrust of such measures, one should in my opinion take into account precisely the circumstance that the present level of yield will not persist.   In a few years' time, we can foresee a return to a more normal level of profitability.   What has just been said leads also to the conclusion that no other new, permanent forms of taxation should be introduced.   On the contrary, it would be sufficient to exact, now, a (one-off) wealth tax from the insurance sector.   Such a tax would not entail drawbacks of the kind associated with a tax on real interest.   An occasional tax can be simply structured.   It will not create uncertainty regarding the future as to the scale of the tax to be exacted on insurance savings.   Also, its budgetary effects can be entirely estimated.   By way of summary, I would make the following judgment.   The growth of wealth noted within the life insurance sector is at present at such a level that the favourable tax rules applying produce results that are unreasonable from the point of view of distribution-of-income policy.   The present situation is in the historical perspective almost unique, and cannot be expected to persist over any long period of time.   To alter the fundamental tax provisions or introduce an entirely new, permanent system of taxation to meet the present situation can produce undesirable long-term effects.   By a (one-off) wealth tax, one avoids such effects, at the same time as the sector which is being favoured with particular force by successful efforts to combat inflation is required to contribute to a clean-up of the state's finances.   My conclusion is therefore that the rules of the taxation of life insurance should be retained, in their essentials, but that an occasional tax should be exacted.   I would also add, at this point, that this tax will create the possibility for improvements for those pensioners who are worst off."   The Swedish Law Council (Lagrådet)           The proposal the Swedish Government presented to Parliament was under the Constitution submitted for scrutiny from a legal point of view by an institution called the Law Council.   This Council is composed of three members from the country's supreme legal institutions, the Supreme Court (Högsta Domstolen) and the Supreme Administrative Court (Regeringsrätten).   In the present case, two Supreme Court judges and a Supreme Administrative Court judge scrutinised the bill and gave their opinion on 31 October 1986.           Concerning the compatibility of the Government bill with the Swedish Constitution and the European Convention on Human Rights, the Law Council made the following statement:   "The Council has in particular studied the bill from its constitutional aspects.   In this respect, the Council has started from the statement in the remittted proposal that the bill, if a decision is made by Parliament before its Christmas recess, will not be in conflict with the prohibition against retroactive tax legislation contained in Chapter 2 Section 10 of the Instrument of Government, nor with any Swedish commitments under international treaties.   By the latter are envisaged, presumably, the European Convention of 4 November 1950 on the Protection of Human Rights and Fundamental Freedoms together with the supplementary protocol of 20 March 1952 relating to the protection of, among other things, property rights.   The Council has also considered the compatibility of the bill with these documents, which for the sake of simplicity are referred to below as the European Convention.     ...................   A circumstance considered inter alia in many statements by the bodies to whom the bill was circulated is that it is intended to tax insurance companies etc. for a wealth that they only manage in accordance with agreements with the policyholders. This view is developed, among others, by the Court of Appeal for Western Sweden (hovrätten för västra Sverige), which found the construction objectionable on legal grounds and recommended that the liability to tax rest with the owner of the wealth asset.   Applying a strict judgment by the terms of the Instrument of Government, the Law Council finds, to begin with, that there is no obstacle to exacting tax on the actual wealth assets in question.   Whether a tax is exacted in one way or another, from the insurance institutions or the policyholders, is a question to which inter alia practical administrative considerations can obviously be applied.   The Council cannot find any legal obstacle to the construction which has been chosen.   It is of major importance, however, that the tax should ultimately burden the individuals involved in accordance with fair and objective principles.   Satisfactory guarantees of this should be available within the framework of the control system that would be in operation under the Act, and in view of the tax subjects in question.   On the other hand, the wealth tax's character of a once-for-all tax presents a major problem.   It should be noted per se that alterations to taxes, and above all, charges that limit their period of application in various ways have been made on numerous occasions.   In this context, an example close to hand can be recalled in the Act (1983:968) concerning an Occasional Increase in the State Wealth Tax, which applied to the assessment of 1984 and was introduced as one among many aspects of a larger proposal on economic policy.   The background, according to the Government's bill (1983/84:40 p. 32) was that the wealth values of certain assets had risen dramatically.   It was not considered acceptable that this increase in value should benefit only a limited group of citizens.   The objections raised by those entering reservations in the Standing Committee on the Constitution lack relevance in the present context.   In the present case, however, it is a question not of any temporary change in a previously payable tax, but of the introduction of an entirely new wealth tax of a once-for-all character.   This has given rise to certain special constitutional questions, which have not previously been brought forward.   The Law Council recalls that the idea of a once-for-all tax on wealth was raised during the Second World War.   A memorandum regarding the conditions for and consequences of such a tax was compiled by Professor Erik Lindahl (SOU 1942:52).   The question was raised several times in Parliament, most recently by the Standing Committee of Ways and Means in 1945 (No. 55), shortly after the end of the war in Europe.   The majority of the Standing Committee then recommended an enquiry into the forms in which private wealth should contribute to the covering of the expenditures arising during the period of the emergency.   The minority did not quote any constitutional grounds against the proposal.   The general opinion appears to have been that extraordinary measures were permitted in conditions of crisis.   The national defence tax, for example, had been introduced with retroactive effects.   The same came to apply - but here with political differences of opinion - to the excess profit tax exacted on income from business and agricultural operations during 1951, against the background of the Korean War.   This latter tax became in fact an example of a once-for-all tax.   A once-for-all tax on wealth is obviously of a more sensitive nature than a once-for-all tax on income.   It is one thing to exact a tax that is in principle of the customary general nature - as was the case during the war - another to abandon this general nature, and instead limit, with a greater or lesser degree of narrowness, the circle of tax-liable entities.   In the present case, the number of entities liable to tax is said to be around 2,000, but the majority will escape taxation owing to the deduction of 10 million Swedish crowns which it is proposed to allow.   The Council finds that a basis is lacking on which to calculate the number of entities liable in practice.   Still less can the Council arrive at any general picture as to how the deduction will influence the effects of the tax on different policyholders and persons entitled to pensions.   In the field of tax legislation it is accepted - obviously - that a relatively far-reaching differentiation be made between different taxable entities, and between different kinds of receipts, property and other sources of tax.   However, the limit for what can be regarded as acceptable is by no means unproblematic.   In the case of a wealth tax, special problems arise in view of the provision contained in Chapter 2 Section 18 of the Instrument of Government regarding expropriation and similar procedures.   The Instrument of Government recognises no other procedures - we are here disregarding penalties for legal offences, and the like - for the transfer of property from the individual to the society than those envisaged in this provision and those effected through taxes etc.   The more detailed import of the term 'tax' is not apparent from any provision in the Instrument of Government, nor is it further treated in the preliminaries to the Instrument.   Nonetheless, it is still worth recalling that the Instrument of Government entailed a final break with the earlier constitutional fiction that in principle all taxes were decided for one year at a time.   Even if it is clear that Parliament still has the authority to decide upon a limitation in time, the circumstance quoted contains a factor that urges a generally cautious approach to once-for-all taxes.   It must, at least, be said to lie in the structure and spirit of the Instrument of Government that the taxing power should not circumvent the provision laid down in Chapter 2 Section 18 by specially directed interventions of a once-for-all character against property.   The discussion concerning disputed proposals for new or increased taxes often raises the question of limits of the taxing power, and more specifically the boundary between tax and confiscation.   The question has also been discussed in the legal literature both prior to the advent of the Instrument of Government and thereafter.   As developed (in this literature), the confiscation argument is frequently used in tax discussions in a manner unacceptable from the legal point of view.   What is stated in the literature clearly indicates that the bill now under consideration cannot be said to entail an illegal confiscation.   Similar points of view to those presented above are also relevant when one considers the compatibility of the proposal with the European Convention (....).   According to (Article 1 of Protocol No. 1), the right to property shall be respected.   No one shall be deprived of his property other than in the public interest and on the conditions indicated in the law of the country and by the general principles of international law.   It is also, however, stated that this shall not impair the right of a State to enforce laws to secure the payment of taxes and charges.   Only in isolated cases have questions relating to taxes been criticised under the provisions of the Convention.   One case related to a once-for-all tax of 25% on wealth above a certain limit, decided upon in a Nordic country in critical economic circumstances.   By a decision of 20 December 1960, the case, as being "manifestly ill-founded", was not taken up by the Commission for consideration (No. 511/59, Dec. 20.12.60, Collection 4 p. 1 at p. 33) A similar decision was made on 2 December 1985 by reason of a complaint against the Swedish profit sharing tax (No. 11036/84, Dec. 2.12.85, to be published in D.R.).   It should be observed that a development in the direction of stronger protection for ownership rights has been reflected in the findings of the European Court in recent years.   Greater importance has also been accorded to (Article 14 of the Convention) which prescribes that enjoyment of the freedoms and rights set forth in the Convention shall be secured without discrimination on any ground, such as sex, race, language, or other status.   In the Council's view, however, there is no basis for claiming that the bill here in question is in breach of the European Convention.   The Law Council returns here to the statements in the remitted proposal, quoted in the introduction to the effect that the bill is not in breach of any provision in the Instrument of Government etc.   As will have become apparent from the reasoning of the Council, these statements in no way exhaust the constitutional problems.   The provisions of the Instrument of Government, like its preliminaries, are far from exhaustive, and are in several areas, including that of the financial power, couched in markedly brief and general terms.   It is illustrative, for example, that the import of the concept of law is discussed in detail in the preliminaries, while the concept of 'tax' is hardly touched upon.   In this situation, it becomes of great importance how the content of the Instrument of Government is implemented through the actions of the executive powers.   The Council recalls that our constitutional law, prior to the constitutional reform, was based essentially on constitutional practice, which on many points had acquired substance only after prolonged dispute.   It is obvious that the implementation of the new Instrument of Government by a suitable and workable practice is a matter of great urgency.   Essentially, it is, of course, for Parliament and Government to shoulder this responsibility.   Against this background, it is a serious shortcoming of the remitted proposal that it fails to provide either any material basis for judgment or any statements for guidance.   In scrutinising any proposed legislation that raises the question of how the Instrument of Government is to be given substance in legal practice, it is an important task for the Council to report its view from the perspective this Council is set to represent.   In the present case, it is thus required to do this without any support in the remitted proposal.   The Law Council cannot ignore the possibility of this bill providing the starting-point of a development that could give rise to very serious doubts, in view of the grounds on which the Instrument of Government rests.   Reference can be made, apart from Chapter 2 Section 18, to inter alia the fact that Chapter 1 Section 2 establishes the economic welfare of the individual as a fundamental objective of public activities.   This is the first occasion on which a bill is submitted for a once-for-all tax on wealth that lacks a general nature.   Such a tax fits somewhat badly per se into our constitutional system.   It could also constitute grounds for various once-for-all property taxes to be exacted from a narrowly limited circle of taxable entities, and with higher rates of taxation than that which we are now considering.   It is true that nothing of this kind is evident from the remitted proposal.   Nor, however, does it contain any statement expressing rejection of such a development.   The bill as circulated, would, in the opinion of the Law Council, create an unfortunate precedent in a sensitive area, in which the regulation provided by the constitutional laws is incomplete and unclear, and the formation of practice therefore acquires special importance.   One should also in particular note that the country is not in any such critical situation as is mentioned in, for example, Chapter 2 Section 10 of the Instrument of Government.   Decisions taken in extraordinary circumstances of that kind have limited, if any, force as precedents in normal times.   If this bill is enacted, however, one is acquiring a precedent that cannot be dismissed on such grounds.   The same argument also leads the Council to adopt a critical attitute to the manner in which the bill has been prepared and presented in the remitted proposal.   The further constitutional aspects have not been taken into account.   It would have been highly desirable to have a discussion of these, together with a normal procedure of circulation for comment.   Shortcomings in the preparation of the bill are evident also in other respects than the constitutional.   It is admittedly true that it has been possible, in the treatment of various details, to build on the report of the Committee on Taxation of Real Interest and the statements of the bodies circulated, but the construction in principle of the bill is entirely different, and the effects of it have not been illustrated in any satisfactory manner.   The Law Council has, for example, drawn critical attention to the lack of clarity as to who will actually be burdened by the tax.   The bill emerges almost as an improvisation, produced when a bill for a new and permanent tax was rejected.   It is difficult to avoid the reflection that closer consideration could have led to essentially the same purpose having been gained by another construction, which would not have given rise to the doubts expressed by the Law Council in the foregoing.   In the light of these deliberations, the Council finds itself obliged to recommend against implementation of the proposed legislation remitted to it."     COMPLAINTS   Article 1 of Protocol No. 1 to the Convention           In the applicants' view the primary issue to be determined under this Article and which is inherent in the Convention as a whole, is whether a fair balance has been struck between the public or general interest and the protection of the proprietary rights and interests of the applicants.   The purpose and effects of the Act in question are clearly concerned with the deprivation of property, with the result that the second sentence of the first paragraph of Article 1 of Protocol No. 1 is applicable.    Moreover, since the present case involves the payment of taxes, it falls to be considered not only under the terms of the second sentence of the first paragraph, but also under the second paragraph of Article 1.           The applicants recognise, as is made clear by the second paragraph itself, that the margin of appreciation given to national authorities under Article 1 of Protocol No. 1 in the field of economic and fiscal regulation, is necessarily a wide one.   However, it is well-established in the Commission's case-law that the powers of taxation are not immune from review under the Convention (cf. for example No. 8531/79, Dec. 10.3.81, D.R. 23 p. 203).           It follows that although the Act involves the payment of a tax, this fact does not exclude the circumstances of the present case from the effective protection afforded by Article 1 of Protocol No. 1 and the other relevant provisions of the Convention.   The relevant principles are as follows:     (i)    Although the margin of appreciation available to the national         legislature under Article 1 is a wide one, the measure imposed         must have a legitimate aim, in the sense of not being         "manifestly without reasonable foundation" (cf. for example,         Eur.   Court H.R., James and others judgment of 21 February 1986,         Series A No. 98).     (ii)    Where the measure has a legitimate aim, there must be a         reasonable relationship of proportionality between the means         employed and the aim sought to be realised. (iii)    A fair balance must be struck between the demands of the         general interest of the community and the requirements of the         protection of the individual's fundamental rights, and this         balance will not be struck if the measure results in a person         or a section of the public having an individual and excessive         burden (cf.   Eur.   Court H.R., Sporrong and Lönnroth judgment of         23 September 1982, Series A No. 52).           For the reasons given below the Act, which is both grossly unfair in its operation and lacking in any objective and reasonable justification, falls well short of satisfying these principles, and exceeds the Swedish State's margin of appreciation.           Under the second sentence of the first paragraph of Article 1 of Protocol No. 1 a deprivation of possessions must not only be in the public interest, but must also be "subject to the conditions provided for by law".   The applicants submit that this principle, which is inherent in the Convention as a whole, applies to every case in which the right to property guaranteed by Article 1 falls to be considered. It is evident from the jurisprudence of the European Court of Human Rights that State action does not necessarily comply with the principle of legal certainty, guaranteed by these requirements, merely by reason of the fact that it is in conformity with domestic law.   The requirement that a measure must be prescribed by law can thus be seen to include the requirements that it must satisfy the principle of legal certainty and not be arbitrary.           The Act fails to satisfy these requirements for the following reasons.           The Act itself is arbitrary, in that its scope and application are restricted, in a discriminatory manner and without any objective and reasonable justification, to certain mutual life insurance companies, friendly societies and pension foundations and hence their beneficiaries, leaving other entities and individuals unaffected.           Further, the operation of the Act is arbitrary, in that it provides no means for the relevant companies to determine the way in which the burden of the tax should be distributed, and thus fails to provide the individual policyholder or other beneficiary with any guarantee that he or she will not be unjustly burdened as compared to other policyholders or beneficiaries.   It is not expedient for the insurance companies and other institutions, nor is it their function, to redress the arbitrary nature of the tax by the manner in which they transfer the burden upon the policyholders and other beneficiaries. The institutions are not, for example, required to apply a means test, nor to have regard to the family and other individual circumstances of the policyholders and other beneficiaries.   From the point of view, therefore, of those who are the real taxpayers under the Act, the operation of the legislation is inherently arbitrary, as well as being neither adequately accessible nor sufficiently precise.   For these reasons there has been a breach not only of Article 1 of Protocol No. 1, but also, as will be shown below, of Article 6 and Article 13 of the Convention.           The Act involves the legislative taking by the Swedish Government of a large part of the savings and pension benefits of several million men and women (both Swedish and non-Swedish nationals), which have accumulated in the hands of life insurance companies, friendly societies and pension foundations.   The levying of the 7% one-off wealth tax involves a deprivation of the applicants' proprietary rights and interests.   It is therefore necessary to consider whether the taking of property provided for by, or as a consequence of, the Act was in accordance with the principles of fairness, proportionality, legal certainty and non-discrimination which are inherent in Article 1 of Protocol No. 1, and in the Convention as a whole.           The stated aim of the Swedish Government in introducing the unprecedented measure was to reduce the national debt by redistributing wealth from the private sector to the public sector.   Whilst the applicants accept that the redistribution of wealth from more favoured to less favoured groups in society is a legitimate aim the arbitrary and discriminatory taking of wealth from particular sections of the public, in circumstances in which there is no "fair balance", constitutes an aim which is "manifestly without reasonable foundation". The effect of the occasional wealth tax will be to appropriate to the Swedish State 16-18 billion Swedish crowns, in the context of total revenues from State income tax amounting to approximately 60 billion Swedish crowns.   In other words, the Government seek by the levying of this tax to increase the revenue of the State by about one third of the revenue normally obtained through State income tax.   Furthermore, it does so at the expense of the individual policyholders and their dependants, irrespective of their individual means and particular circumstances.   In a formal sense the tax is levied under the Act upon the life insurance companies, friendly societies and pension foundations.   But in reality the effective burden of this tax is necessarily borne by individual policyholders and other beneficiaries.           These policyholders and beneficiaries are ordinary men and women, the majority of whom could not be said to be particularly wealthy.   The Act provides no guidance as to how the burden of the tax should be distributed between those individuals.   The mutual life insurance companies to which the Act applies have decided to distribute the burden by reducing, on a pro rata basis, the bonus payments that would otherwise have been made to policyholders in 1987 and 1988.   There can be no doubt that under this method of distribution, the appropriation by the State of 7% of the assets of the institutions in whose hands the savings and pension benefits of policyholders have been placed, will have had the effect of diminishing the proprietary rights and interests of many peo