CEDH · CASELAW;DECISIONS;DECCOMMISSION;ENG — 14 octobre 1996

.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. 26449/95                       by SPACEK Ltd.                       against the Czech Republic          The European Commission of Human Rights sitting in private on 14 October 1996, the following members being present:                Mr.    S. TRECHSEL, President            Mrs.   G.H. THUNE            Mrs.   J. LIDDY            MM.    E. BUSUTTIL                  G. JÖRUNDSSON                  A.S. GÖZÜBÜYÜK                  A. WEITZEL                  H. DANELIUS                  F. MARTINEZ                  L. LOUCAIDES                  J.-C. GEUS                  M.P. PELLONPÄÄ                  G.B. REFFI                  M.A. NOWICKI                  I. CABRAL BARRETO                  B. CONFORTI                  N. BRATZA                  I. BÉKÉS                  J. MUCHA                  D. SVÁBY                  G. RESS                  A. PERENIC                  C. BÎRSAN                  P. LORENZEN                  K. HERNDL                  E. BIELIUNAS                  E.A. ALKEMA                  M. VILA AMIGÓ              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 22 November 1994 by SPACEK Ltd. against the Czech republic and registered on 6 February 1995 under file No. 26449/95;          Having regard to :   -     the reports provided for in Rule 47 of the Rules of Procedure of      the Commission;   -     the observations submitted by the respondent Government on      5 October 1995 and the observations in reply submitted by the      applicant on 3 January 1996;        Having deliberated;        Decides as follows:   THE FACTS        The applicant is a limited liability company incorporated under Czech law with its head office in Prague.   It is represented before the Commission by Mr. B. Mazourek, a lawyer practising in Prague.     A.    Particular circumstances of the case         The facts of the case, as submitted by the parties, may be summarised as follows.        On 22 April 1993, the Prague 5 Finance Office (Financní úrad) decided that the applicant company was required to pay additional income tax of 385,600 Czech crowns for 1991 and penalty of 37,200 Czech crowns because on incorporation the company had not increased the income tax base for the tax year 1991 although it was obliged to do so as it had changed its status.   The tax base was to be increased by the equivalent of 713,971 crowns.   According to the opinion of the Finance Office, Section 25 of the Private Business Activities Act No. 105/1990 (Act) (Zákon o soukromém podnikání obcanu) and the Regulation on the procedure for passing from single to double entry book-keeping (Regulation) (Postup prechodu z jednoduchého úcetnictví na podvojné úcetnictví) of the Ministry of Finance had been breached.        On 17 August 1993, the Prague Finance Department (Financní reditelství pro hl. m. Prahu) dismissed the applicant's appeal.   It stated that the Prague 5 Finance Office had correctly decided the case in accordance with the Private Business Accounting Rules (Rules) (Zásady vedení úcetnictví pri soukromém podnikání obcanu) and the Regulation.   The Rules and the Regulation were issued by the Ministry of Finance in Financial Bulletins Nos. 5 and 6-7 respectively and were issued in order to clarify obligations arising from Section 25 of the Private Business Activities Act.   The Finance Department also found that the Regulation was to be considered as a generally binding regulation since the Ministry of Finance was required to issue more detailed regulations on this matter.        On 22 December 1993, the Prague Municipal Court (Mestsky soud v Praze) rejected the applicant's appeal against the Prague Finance Department's decision.   The Court considered that the Ministry of Finance was entitled to regulate the way in which accounting books were to be kept in 1991 and there was no law or other legal act obliging the Ministry to publish the Rules in the Official Gazette.   Under Section 8 para. 1 b) of the Official Gazette Act No. 131/1989 (Zákon o sbírce zákonu), regulations of central administrative authorities and other central authorities were to be published only where the law so required.   So long as the applicant did not increase the income tax base for 1991, and the Regulation was not being complied with, Section 25 para. 2 of the Private Business Activities Act was being violated.        On 1 March 1994 the applicant company lodged a constitutional appeal and alleged a violation of its right under Section 2 para. 4 of the Constitution, according to which "everyone shall be allowed to do anything which is not forbidden by law, and no one shall be forced to do anything which is not required by law", and under Section 4 para. 1 of the Charter of Fundamental Rights and Freedoms according to which "obligations shall be imposed only by law and within its limits and by observing fundamental rights and freedoms".   The applicant submitted that the Prague Municipal Court had not settled the question of the conformity of the Regulation with the requirements of the Official Gazette Act and had not taken into consideration the principle that any secondary legal act must be published in the Official Gazette, have an appropriate title and form, made to become valid and enforceable in order to be binding on individuals and legal entities not subordinate to the issuing body.        The applicant company also criticised the opinion of the Prague Municipal Court that it was "obliged to observe internal regulations" which, in the applicant's view, were not applicable to individuals and legal entities.   It submitted that it was not possible for the   company to learn the contents of such internal regulations from the Official Gazette.   Obligations imposed by the Rules were incompatible with the Official Gazette Act No. 131/1989.   Moreover, the later Act No. 545/1992 did not adopt measures similar to the Regulation, either.        On 2 June 1994, the Constitutional Court (Ústavní soud) rejected the applicant's appeal as ill-founded.   The Court found that:        "Section 25 of the Private Business Activities Act ...      established the obligation to perform single or double      entry book-keeping in compliance with accounting principles      as prescribed by law.   In 1991 the ... Ministry of Finance      was entitled to prescribe conditions and requirements for      accounting ...   To specify obligations set out in      Section 25 ..., the ... Ministry of Finance issued the      Private Business Accounting Rules, ... published in      Financial Bulletin No. 5. This measure ... further defined      obligations on businesses in respect of book-keeping.      Moreover, Section 29 paras. 1 and 3 define the      responsibility of businesses for the state of accounting      records and sets out the sanctions arising from violation      of the obligations under [the above-mentioned] Section 25      ... or failure to observe the principles.   This measure,      which sets up standards of book-keeping for private      businesses, was followed by the Ministry of Finance      Regulation ... of 17 April 1991, ... published in Financial      Bulletin No. 6-7 ...   The date of the entry into force of      this Regulation is not specifically given; nevertheless, it      states that the transfer from single to double entry book-      keeping shall always take place on 1 January of an      accounting year ...        ... as regards any insufficiency in the publication of that      Regulation ..., the Court can, in general, agree with the      applicant that ordinary legal acts become valid only when      published in the Official Gazette.   In cases where there is      no reason to publish generally binding legal acts of      central administrative authorities, such legal acts must be      announced in the Official Gazette.   In this case it was a      regulation of a ... central administrative authority which,      in view of Section 8 para. 1 b) of the Official Gazette      Act, had to be published in the Official Gazette only if so      provided by law.   This was not the case for Section 25 of      the Private Business Activities Act."     B.    Relevant domestic law        The obligation for businesses to keep single or double entry book-keeping in compliance with accounting principles was governed by Section 25 para. 2 of the Private Business Activities Act No. 105/1990.        This Act specified neither the legal form under which accounting principles should be adopted nor the authority entitled to issue them. The Ministry of Finance has jurisdiction over accounting matters by virtue of Section 60 of the Competence of the Federal Central Authorities Act No. 194/1988 (Pusobnost federálních ústredních orgánu). However, ministries were able to issue legal acts only on the basis and within the scope of the Federal Parliament Acts and after they had been authorised to do so by law.   According to Sections 8 and 9 of the Official Gazette Act, acts of the central organs of state administration must be published in full in the Official Gazette or announced by a notification therein in order to acquire the status of legal regulations.        The Private Business Accounting Rules, issued by the Ministry of Finance and published on 15 June 1990 in Financial Bulletin No. 5, entered into force on 1 June 1990.   On 17 April 1991, the Ministry of Finance issued the Regulation on the procedure for passing from single to double entry book-keeping and on 30 May 1991 it was published in Financial Bulletin Nos. 6-7.   The Regulation, in contrast to the Rules, lacked any reference to the Private Business Activities Act, and did not specify the date of its entry into force, its subject-matter or the sanctions arising from non-respect of its provisions.   Neither the Rules nor the Regulation were published and/or notified in the Official Gazette.     COMPLAINTS        The applicant company alleges that the decisions of the Czech authorities to impose additional tax on it have violated its right under Article 1 of Protocol No 1.   Under these decisions, the applicant was allegedly obliged to comply with the Private Business Accounting Rules and the Regulation on the procedure for passing from single to double entry book-keeping which were never published or announced in the Official Gazette, and which, it claims, never acquired the quality of a generally binding "law" within the meaning of Article 1 of Protocol No 1.     PROCEEDINGS BEFORE THE COMMISSION        The application was introduced on 22 November 1994 and registered on 6 February 1995.        On 17 May 1995 the Commission decided to give notice of the application to the Czech Government and to invite them to present their observations on the admissibility and merits of the application.        The Government's written observations were submitted on 5 October 1995.   The applicant's observations in reply were submitted on 3 January 1996.     THE LAW        The applicant company alleges that the decisions of the Czech authorities to impose additional tax on it have violated its right under Article 1 of Protocol No 1 (P1-1).   Under these decisions, the applicant was allegedly obliged to comply with the Private Business Accounting Rules and the Regulation on the procedure for passing from single to double entry book-keeping which were never published or announced in the Official Gazette, and which, it claims, never acquired the quality of a generally binding "law" within the meaning of Article 1 of Protocol No. 1 (P1-1).        Article 1 of Protocol No. 1 (P1-1) provides:        "Every natural or legal person is entitled to the peaceful      enjoyment of his possessions.   No one shall be deprived of his      possessions except in the public interest and subject to the      conditions provided for by law and by the general principles of      international law.        The preceding provisions shall not, however, in any way impair      the right of a State to enforce such laws as it deems necessary      to control the use of property in accordance with the general      interest or to secure the payment of taxes or other contributions      or penalties."        The Government first submit that the application is incompatible ratione materiae with the provisions of the Convention.   They point out that the issue in the present case concerns the determination by the State of duties of its citizens, the promulgation of laws and regulations and their binding effect, which are matters not covered by the Convention.        The Government further submit that the applicant has not exhausted the domestic remedies which were at its disposal, and that the application should be declared inadmissible on this ground. Despite the fact that the right to the peaceful enjoyment of possessions is safeguarded in domestic legislation by Section 11 of the Charter of Fundamental Rights and Freedoms, the applicant's constitutional appeal alleged exclusively the violation of the right determined by Section 2 para. 4 of the Constitution and Section 4 para. 1 of the Charter.   The Government submit that in order to exhaust all domestic remedies, the applicant should also have alleged the violation of the right to the peaceful enjoyment of possessions.        As regards the substance of the applicant's complaint, the Government claim that the application is manifestly ill-founded.        The Government underline that according to Section 25 of the Private Business Activities Act, the applicant was obliged to keep single or double entry book-keeping, in compliance with established accounting principles.   However, the Private Business Accounting Rules published in the Financial Bulletin merely determined accounting methods to be used by businesses on the basis of Section 25.   They cannot, therefore, be regarded as a legal act.        The Government point out that the Financial Bulletin, which is intended for the public, contains provisions, communications, instructions, positions and regulations regarding the application of binding laws, and also regulations already published in the Official Gazette which are required to be published therein or which the Ministry of Finance has been authorised to issue.   The Financial Bulletin, as well as the Official Gazette, are distributed to subscribers or sold by SEVT a.s. (Printed Forms State Editorial Publisher, p.l.c., Státní Editorní Vydavatelství Tiskopisu, A.S.).        The Government also submit that the Ministry of Finance was authorised to regulate accounting.   The publication of the Rules based on Section 25 of the Private Business Activities Act was fully within the Ministry's competence.   There was no legal provision which required the administrative authority to promulgate the conditions and provisions relating to accounting in the Official Gazette.   According to the Official Gazette Act, measures adopted by administrative authorities are promulgated by the publication of their entire text or by announcement of their introduction, if so required by law.   If the publication of the Rules in the Official Gazette or by the announcement of their introduction had been required under Section 25 of the Private Business Activities Act, there is no doubt that the Rules would have been published in this manner.   However, the Rules were published in the Financial Bulletin of which the applicant was - or should have been - aware.        The applicant disagrees with the Government's reasoning concerning the Commission's competence ratione materiae to examine its case.   It also considers that all domestic remedies have been exhausted.   In its view, reaching a decision on the breach of rights under Section 2 para. 4 of the Constitution and Section 4 para. 1 of the Charter of Fundamental Rights and Freedoms amounts to reaching a decision on the violation of the right to the peaceful use of property under Section 11 of the Charter and Article 1 of Protocol No. 1   (P1-1) to the Convention.        The applicant submits that the company kept, in accordance with Section 25 of the Private Business Activities Act, single entry book- keeping in 1991 and double entry book-keeping in 1992.   Therefore, there was no obligation to increase the income tax base, as the Constitution and the Charter do not allow obligations of this kind to be imposed except by law.   In the present case, the obligation was imposed by the above-mentioned Rules which did not have the status of a legal act.        The applicant disputes the Government's characterisation of the Rules and Regulation as measures of the administrative authorities passed under a generally binding legal regulation.   However, even if the Rules and Regulation had been published in the Official Gazette according to Section 8 para. 1b) of the Official Gazette Act - which was not the case - they would not have become generally binding legal regulations.   According to Article 8 para. 2 (Art. 8-2), the measures referred to in Article 8 para. 1 (Art. 8-1) as well as any internal by- laws, may not be called "public notices" or "rulings", or "decrees". It follows that the obligation to increase the tax base was not imposed by law or any other generally binding regulation.        The applicant company states that Section 25 of the Private Business Activities Act did not contain any authorisation for the Ministry of Finance to pass any generally binding secondary legal regulation, although such authorisation is required by the Constitution.        The applicant considers that tax laws, by which the State provides for payment of taxes must comply with formal, as well as substantive, requirements for laws.   In the present case, the State authorities provided for payment of taxes in a manner which was not allowed by the Act determining the formal status of all legal acts.     The publication in the Financial Bulletin - even if it was delivered to each company - is irrelevant so long as publication in the Bulletin is no substitute for notification in the Official Gazette stipulated by law.        Finally, the applicant submits that increase of the income tax base cannot be considered as an accounting transaction.   It should not have been governed by the Ministry of Finance's regulations.   The obligation to increase the income tax base concerns taxes, and may, therefore, be governed only by law.   It is true that the obligation to pay income tax was imposed by law.   However, the key issue of the definition of the tax base appeared merely in the form of a regulation which was never published or announced in the Official Gazette.        The Commission recalls that Article 26 (Art. 26) of the Convention requires the exercise of only those domestic remedies which relate to the breaches alleged and can at the same time provide effective and sufficient redress.   An applicant does not need to exhaust remedies which would be a pure repetition of remedies already exercised by him (cf. No. 9248/81, Dec. 10.10.83, D.R. 34 p. 78).        The Commission refers to its established case-law to the effect that a person has exhausted domestic remedies when he has raised in substance before the highest competent national authority the complaint he makes before the Commission.   Even where the Convention is directly applicable in the State's domestic law (as is the case in the Czech Republic), the person concerned may also rely before the domestic courts on "other arguments to the same effect" (cf. No. 10.3.77, D.R. 8 p. 185; No. 11425/85, Dec. 5.3.85, D.R. 53 p. 76).        The Commission observes that in the present case the final decision regarding the applicant's claim is the decision of the Constitutional Court of 2 June 1994.        The Commission notes that the applicant alleged before the Constitutional Court that the requirement to pay additional income tax of 385,600 Czech crowns for 1991 was based on the Federal Ministry of Finance's regulations which were not published in the Official Gazette. The Commission therefore considers that the applicant raised in substance in the domestic proceedings the complaint he now makes before the Commission.        Consequently, the Commission finds that the requirement as to the exhaustion of domestic remedies has been satisfied and that the application cannot be rejected on the basis of Articles 26 and 27 para. 3 (Art. 26, 27-3) of the Convention.        Finally, as to the substance of the case, the Commission has conducted a preliminary examination of the parties' arguments.   It considers that the application raises complex factual and legal issues which cannot be resolved at this stage of its examination, but require an examination of the merits.   The Commission concludes, therefore, that the application is not manifestly ill-founded within the meaning of Article 27 para. 2 (Art. 27-2) of the Convention.   No other grounds for declaring it inadmissible have been established.        For these reasons, the Commission, by a majority,        DECLARES THE APPLICATION ADMISSIBLE, without prejudging the      merits of the case.         H.C. KRÜGER                                  S. TRECHSEL        Secretary                                    President    to the Commission                            of the Commission