FIRST SECTION

CASE OF EKO-ELDA AVEE v. GREECE

( Application no. 10162/02 )

JUDGMENT

STRASBOURG

9 March 2006

FINAL

09/06/2006

.

In the case of Eko -Elda A VEE v. Greece ,

The European Court of Human Rights (First Section) , sitting as a Chamber composed of:

Loukis Loucaides , President , Christos Rozakis , Françoise Tulkens , Peer Lorenzen , Nina Vajić , Snejana Botoucharova , Anatoly Kovler , judges , and Søren Nielsen , Section Registrar ,

Having deliberated in private on 14 February 2006 ,

Delivers the following judgment, which was adopted on th at date:

PROCEDURE

1 . The case originated in an application (no. 10162/02) against the Hellenic Republic lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by a limited company , Eko - E lda AVEE (“the applicant company ”), on 28 February 2002 .

2 . The applicant company was represented by Mr P. Rizos , Mr S. Miratos and Ms E. Miha , of the Athe n s Bar . The Greek Government (“the Government”) were represented by the d elegates of their Agent, Mr S. Spyropoulos , Adviser at the State Legal Council, and M s S. Trekli , Legal Assistant at the State Legal Council .

3 . The applicant company complained , under Article 1 of Protocol No. 1 , of the refusal by the State to pay it default interest in respect of a n amount unduly paid in income tax .

4 . The application was allocated to the First Section of the Court (Rule 52 § 1 of the Rules of Court). Within that Section, the Chamber that would consider the case (Article 27 § 1 of the Convention) was constituted as provided in Rule 26 § 1 .

5 . By a decision of 27 May 2004 , the Chamber declared the application admissible.

6 . On 1 November 2004 the Court changed the composition of its Sections ( Rule 25 § 1). This case was assigned to the newly composed First Section (Rule 52 § 1) .

7 . The applicant company and the Government each filed observations on the merits (Rule 59 § 1).

THE FACTS

I. THE CIRCUMSTANCES OF THE CASE

8 . The applicant is a limited company specialising in petroleum products. Its predecessor was called G reek petroleum, oil and lubr i cants – Industrial and commercial limited company (EKO AVEE).

9 . On 8 May 1987 the applicant company paid the tax authorities 137 , 020 , 491 drachma s (GDR ) ( approximately 402, 338 euros (EUR)) as an advance payment on the income tax due for the tax year 1987. On 11 May 1987 the tax authorities granted the applicant company a 10 % reduction on the amount paid, as a bonus for paying the full advance payment due without requesting to pay by instalments . Accordingly , the advance tax payment ultimately paid by t he applicant company amounted to GDR 123,387, 306 ( approximately EUR 362 , 105).

10 . On 10 May 1988 the applicant company filed its tax return with the tax authorities for the year 1987. The return showed that the company had sustained a subs t antial loss of profit , which meant that the authorities ha d to refund the applicant company the amount paid as an advance payment since it had been unduly paid .

11 . On 24 June 1988 and 9 December 1991 the applicant company sought a refund of GDR 123 , 387 , 306 from the Athens tax authorities dealing with limited companies , which was the amount levied in income tax for the year 1987. On an unspecified date the State refused to c omply with its request.

12 . On 27 December 1991 the applicant company brought proceedings against the State in the Athens A dministrati v e Court . It requested a refund, under section 38 ( 2 ) of Law no. 1473/1984, of the sum of GDR 123 , 38 7, 306 that had been unduly paid in income tax . It also claimed default interest on that amount accruing from 10 May 1988, when the State had been inf ormed that the tax had been unduly paid , up until payment . The applicant company based its claims on A rticle 345 of the Civil C ode, which provides for the payment of default interest in the event of a pecuniary debt .

13 . Law no. 2120/1993 was published on 4 March 1993 . Section 3 of that Law provides that the State will pay interest in the event of a refund of tax unduly paid . With regard to cases pending at the time of publication of the Law, it provides that interest shall start to accrue on the first day of the month following a period of s ix months after its publication.

14 . On 12 November 1993, prior to the hearing in the case listed for 23 September 1994, the State refunded the applican t company GDR 123,387, 306, which correspond ed to the tax it had paid . In its submissions before the Adm inistrati ve Court , the applicant company limited its claims to statuto ry interest for the dela y in paying the refund .

15 . On 26 January 1995 the A dministrati ve Court declared the applicant company ’ s application inadmissible (d e cision no. 512/1995). On 3 November 1995 the applicant company appealed .

16 . On 6 June 1996 the Athens Ad ministrative Court of Appeal declared the applicant company ’ s appeal admissible , but held that it was ill-founded on the ground that at the material time the Code for the Collection of Public Reven ues did not provide that the State was liable to pay interest in the event of a delay in refunding tax unduly paid. Moreover , the court held that A rticle 345 of the Civil C ode did not apply to the present case , since the provision governed only civil-law relations (d ecision no. 4042/1996).

17 . On 27 June 1997 the applicant company lodged an appeal on points of law .

18 . On 8 November 2000, by judgment no. 3547/2000, the Supreme Administrative Court dismissed the appeal . I t found that the State was not bound to pay late-payment interest in the event of tax unduly paid . Such an obligation did not derive from the relevant provisions of the Civil Code relating to late-payment interest because the se did not apply to a debt arising from a public -law relation ship . Furthermore , the Supreme Administrative Court pointed out that no such obligation had been incumbent on the State prio r to Law no. 2120/1993, published on 4 March 1993 (see paragraph s 21 and 22 below ). Th at judgment was finalised and certified by the court on 26 October 2001.

II. RELE VANT DOMESTIC LAW AND PRACTICE

19 . The relevant Articles of the Civil Code provide:

Article 345

“ A c reditor of a pecuniary debt is entitled, when serving notice to pay , to claim default interest stipulated by law or by the legal document concerned without having to prove loss . Subject to any contrary statutory provision, a creditor who also establishes other loss is entitled to claim compensation for that as well . ”

Article 346

“ A debtor owing a pecuniary debt , even if not served with a notice to pay , shall be liable to pay statutory interest accruing from the date of service of legal proceedings relating to the debt due . ”

Article 904

“ Anyone who has been unjustly enriched by means of or to the detriment of another ’ s property shall make restitution of the gain . This obligation shall apply, inter alia , in the event of a payment made unduly o r a service rendered for a purpose that has not been realised or has c eased to exist or is illegal or immoral. ...”

Article 911

“ Anyone who benefits [ inter alia from unjust enrichment ] shall be subject to the same ob ligations as if a writ of action had been served on him : ( 1) in the event of a claim for an amount unduly received , if he was aware that the debt did not ex ist or from the time when h e became aware ; ( 2) in the event of a claim on grounds of an illegal or immoral purpose . ”

20 . A rticle 6 of Legislative D ecree no. 356/1974 provides :

“ D ebts due and owing from the State shall be subject to a late - payment surcharge that shall accrue from the first working day following the date on which the debt falls due. The surcharge shall accrue at a rate of 1% per month ’ s delay . ”

21 . Section 38 ( 2 ) of Law no. 1473/1984 provided that the State was bound to refund tax unduly paid without having to pay interest . Section 3 of Law no. 2120/1993 amended section 38 ( 2 ) of Law no. 1473/1984. That provision, as amended, now provides :

“Any direct or indirect, principal or additional, tax or duty , or any fine , recognised in a final decision of an administrative court as having been unduly paid ... shall be offset or refunded with interest at the rate applicable to State bonds for a three-month period . . . . With regard to cases pendi ng at the time of pu blication of this statute, interest shall start to accrue from t he first day of the month following a period of six months after publication of the said statute.”

22 . In two judgments (nos. 1274 and 1275/2002 ) the Supreme Administrative Court held that the State had an obligation to pay default interest even in respect of cases that were pending, that is, those in whi ch the tax unduly paid had not yet been refunded on the date of publication of Law no. 2120/1993 ( 4 March 1993). According to the Greek Supreme Administrative Court , that obligation was incumbent on the State fr om the date on which proceedings were brought in the relevant courts.

THE LAW

I . ALLEGED VIOLATION OF ARTICLE 1 OF PROTOCOL No . 1

23 . The applicant company complained of the tax authorities ’ refusal to pay it interest in compensation for the late payment of a tax credit in its favour. It relied on A rticle 1 of Protocol No. 1, which provides:

“ 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.”

24 . The Go vernment all eged that the applicant company had not had a “ possession ” within the meaning of Ar ticle 1 of Protocol No. 1. They submitted that its obligation to pay tax for the year 1 987 had been based on an administrative provision . That provision was presumed legal un til annulment by the administrative or judicial authorities . The State had refunded the applicant company t he entire sum paid in tax on 12 November 1993, that is, before the case was heard before the A dministrative C ourt . Consequently, the debt claimed by the applicant company had neve r been acknowledged by a judicial de cision as definite and immediately payabl e. Furthermore, the Govern ment ass erted that, in its judgment no. 3547/2000, the Supreme Administrative Court had held that the authorities were not under an ob ligation to pay late-payment interest on tax unduly paid . In their submission, the Court could not substitute its own point of view for the decision re ached by the domestic court s.

25 . The applicant company all eged that the State had owed it a debt from the time it had been proved that the tax had been unduly paid . Accor dingly, the State had to honour that obligation on the basi s of the provisions relating to unjust enrichment (Articles 345, 346 and 904 of the Civil Code ). Moreover, refunding the tax payment in 1993 without late-interest payment – despite the State having b e en informed in June 1988 that the tax was not ow ing – amounted to a practice contrary to Art icle 1 of Protocol No. 1. In the ap plicant company ’ s submission, the State, through the courts , had not complied with the principle of lawfulness. Articles 345, 346 and 911 of the Civil Code expressly provided for payment of default and statutory interest . Furthermore, in the present case the Supreme Administrative Court had not followed its own case-law, which obliged the State to pay interest even where the case in question was still pending, that is, in cases where the tax unduly paid had not yet been refunded on the da te of publication of Law no. 2120/1993.

26 . The Cour t reiterates that a debt can be a “ possession ” within the meaning of A rticle 1 of Protocol No. 1 if it is sufficiently established to be enforceabl e ( see, inter alia , Stran Greek Refineries and Stratis Andreadis v. Greece , 9 December 1994, § 59 , Series A no. 301 ‑ B ).

27 . In the present case the Court observe s that, in accordance with section 38 ( 2 ) of Law no. 1473/1984, the State must refund any tax or duty recognised by a final court decision as having been unduly paid . On 2 4 June 1988 the applicant company applied to the tax authorities for the first time for a refund of GDR 123, 387 , 306. After the applicant company had instituted legal proceedings, the authorities refunded the amount that had been unduly paid on 12 Novemb e r 1993. In doing so , the authorities acknowledged that they owed the applicant company the tax that had been unduly paid. There is no doubt that the applicant company had a pecuniary interest amounting to a “ possession ” within the meaning of Article 1 of Protocol No. 1 regarding the refund of the tax unduly paid ( see , mutatis mutandis , Buffalo S . r . l . i n liquidation v. Italy , no. 38746/97, §§ 28-29, 3 July 2003 ).

28 . It therefore remains to be determined whether the State ’ s refus al to pay the applicant company interest to compensate for the delay in refund ing the tax unduly paid is compatible with Ar ticle 1 of Protocol No. 1. In the Court ’ s view , t his question falls to be examined under the first sentence of the first paragraph of Ar ticle 1 of Protocol No. 1, which lays down the principle of the peaceful enjoyment of property in general terms ( see , among many other authorities, Almeida Garrett , Mascarenhas Falcão and Others v. Portugal , nos. 29813/96 and 30229/96, § 48, ECHR 2000 ‑ I ).

29 . In that connection the Court points out that in its case-law it ha s consistently linked the payment of default interest to d elay s by the authorities in refunding cre dit s . In particular, the Court has held on several occasions that the adequacy of compensation would be diminished if it were to be paid without reference to various circumstances liable to reduce its value, such as unreasonable delay ( s ee Angelov v. Bulgaria , no. 44076/98, § 39 , 22 April 2004 , and Almeida Garrett , Mascarenhas Falcão and Others , cited above, § 54). In such a case the Court will mainly have regard to whether the authorities have paid late-payment interest to offset the depreciation of the amount due on account of the time that has elapsed ( see , among other authoritie s, AkkuÅŸ v. Turkey , 9 July 1997, § 29 , Reports of Judgments and Decisions 1997 ‑ IV ). In short, under Ar ticle 1 of Protocol No. 1 the payment of interest is intrinsically linked to the State ’ s o bligation to make good the difference between the amount owed and the amount ultimately received by the creditor .

30 . With particular regard to the payment of taxes , the Court reiterates that the financial obligation arising out of the levying of taxes or contributions may infringe the rights guarantee d in Article 1 of Protocol No. 1 if the conditions for a refund impose an excessive burden on the per s on or entity concerned or fundamentally interfere with their financial security ( see , to that effect , Buffalo S . r . l . i n liquidation , cited above , § 32). In that case the Court, examining a question s imilar to the one under consideration here , held that there had been a breach of Arti cle 1 of Protocol No. 1 on the sole ground that the prolonged unavailability of the tax that had been unduly paid by the applicant company had had a definite and considerable impact on its financial situation ( ibid. , § 37).

31 . In the instant case the Cour t observes that the tax unduly paid was refunded on 12 N ovemb er 1993, that is, five years and approximately five months after 24 June 1988, when the ap plicant company sought a refund of the sum that it had unduly paid from the Athens tax au thorities dealing with limited companies . In the light of the foregoing, the Court considers that the authorities ’ refusal to pay late-payment interest for such a long period upset the fair balance that has to be struck between the general interest and the individual interest .

Accordingly , there has been a violation of A rticle 1 of Protocol No. 1.

II . APPLICATION OF ARTICLE 41 OF THE CONVENTION

32 . Article 41 of the Convention provides:

“If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party.”

A. Pecuniary and non-pecuniary d amage

33 . With regard to pecuniary damage , the applicant company submitted to the Cour t an expert report drawn up at its request by Hadji pavlou Sofianos & Campanis S.A. , repr esentatives in Greece of the law firm Deloitte & Touche . The experts established the pecuniary damage sustained by the applicant company for the period between 10 M ay 1988 and 12 November 1993 as follows :

( i ) either EUR 612 , 524 corresponding to the total simple default interest accrued on the sum of GDR 123 ,387,306 ( EUR 362 , 105) in respect of the aforementioned p e riod;

( ii ) or EUR 1,231, 831 for the total compound default interest accrued on the sum of GDR 123 ,387, 306 (EUR 362, 105) in respect of the aforementioned pe riod.

34 . The applicant company also sought EUR 6, 000 for non-pecuniary damage.

35 . The Govern ment submitted that a finding of a violation would in itself constitute sufficient just s atisfaction.

36 . The Court notes that in the instant case the interference in question relates to the S tate ’ s refusal to pay the applicant company default interest on the tax unduly paid . The failure to pay default interest together with the inability to use the money in question and the resulting uncertainty u ndoubtedly caused the applicant company to sustain both pecuniary and non-pecuniary damage that must be compensated .

37 . Having regard to the uncertainties inherent in any attempt to estimate the actual loss sustained by the applicant company, and ruling on the basis of equitable considerations as required by A rticle 41 of the Convention, the Court decides to award the applicant company , by way of a lump sum for the period from 24 June 1988 to 12 N ovemb er 1993, 6% per annum of the sum refunded ( EUR 362 ,105 ), namely, EUR 120 , 000, plus any tax that may be due on that amount ( see , mutatis mutandis , Malama v. Greece (just satisfaction), no. 43622/98, § 11 , 18 April 2002 ).

38 . With regard to non-pecuniary damage , the Cour t considers that t he finding of a v iolation constitu tes in itself sufficient just s atisfaction.

B. Costs and expenses

39 . In respect of the costs and expe ns es incurred before the domestic courts and the Court , the applicant company claimed EUR 33,386. 29, which it broke down as follows :

( i ) EUR 2 , 024 . 40 for the proceedings in the domestic c ourts ;

( ii ) EUR 20 ,564. 89 for the proceedings before the Cour t ;

( iii ) EUR 10 , 797 for the fees and expenses relating to the preparation of the expert report.

The applicant company provided vouchers in support of the expenses referred to under ( ii ) and ( iii ) , b ut not those referred to under ( i ) .

40 . The applicant company pointed out that, on account of the complexity of the case, it had had to retain three lawyers , whose expertise had been necessary to pursue the case both before the domestic courts and the Court .

41 . The Govern ment replied that retaining three lawyers from Deloitte & Touche had not been necessary for this type of case . They submitted that the amount claimed for costs and expen ses was excessive .

42 . According to the Court ’ s established case-law , costs and expenses will not be awarded under Article 41 unless it is established that they were actually incurred, were necessarily incurred and are also reasonable as to quantum ( see Iatridis v. Greece (just satisfaction) [GC], no. 31107/96, § 54 , ECHR 2000 ‑ XI ). In the present case the Cour t note s that the a pplicant company has not produced any invoice in respect of the costs incurred before the courts that dealt with the case . This part of its claims must therefore be dismissed . With regard to the costs incurred for the requirements of repre sent ing the applicant company before it , the Cour t observe s that the applicant company has provided a breakdown of its claims together with the necessary supporting vouchers . Moreover , the Cour t points out that it has already held that the use of more than one lawyer may sometimes be justified by the importance of the issues raised in a cas e ( ibid., § 56 ). However , it consi d ers that, even if the present case was of some complexit y , it was not necessary to employ three lawyers . Lastly , the question of the a pplication of A rticle 41 was not so complex as to require an e xpert opinion from a specialist firm ( contrast Malama (just satisfaction) , cited above , § 17). Having regard to the foregoing, the Court decides to award the ap plicant company EUR 4 , 000 in reimbursement of the cos ts incurred in the Strasbourg proceedings, plus any tax that may be chargea ble on that amount.

C. Default interest

43 . The Court considers it appropriate that the default interest should be based on the marginal lending rate of the European Central Bank, to which should be added three percentage points.

FOR THESE REASONS, THE COURT UNANIMOUSLY

1 . Holds that there has been a violation of Article 1 of Protocol No. 1 ;

2 . Holds

(a) that the respondent State is to pay the applicant company , within three months from the date on which the judgment becomes final in accordance with Article 44 § 2 of the Convention , the following amounts:

(i) EUR 120,000 ( one hundred and twenty thousand euros) in respect of pecuniary damage;

(ii) EUR 4,000 ( four thousand euros) in respect of costs and expenses;

(iii ) any tax that may be ch argeable on the above amounts;

(b) that from the expiry of the above-mentioned three months until settlement simple interest shall be payabl e on the above amounts at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points;

3 . Dismisses the remainder of the claim for just satisfaction.

Done in French , and notified in writing on 9 March 2006 , pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.

Søren N ielsen Loukis L oucaides Registrar President