SECOND SECTION

DECISION

Application no . 73696/13 HÁLÓZATI GYÓGYSZERTÁRAK SZÖVETSÉGE AND OTHERS against Hungary

The European Court of Human Rights (Second Section), sitting on 11 March 2014 as a Chamber composed of:

Guido Raimondi, President, Işıl Karakaş , András Sajó , Nebojša Vučinić , Paul Lemmens, Egidijus Kūris , Robert Spano , judges and Stanley Naismith , Section Registrar ,

Having regard to the above application lodged on 25 November 2013,

Having deliberated, decides as follows:

THE FACTS

1. The first applicant, Hálózati Gyógyszertárak Szövetsége (“ HGYSZ ”) (“Association of Pharmacy Networks”), is an association registered under Hungarian law, with its seat in Budapest. The other applicants (listed in the Annex) are members of the first applicant. They are companies registered under Hungarian law. The applicants were represented before the Court by Mr J-F. Bellis , a lawyer practising in Brussels.

2. The facts of the case, as submitted by the applicant s , may be summarised as follows.

3. The applicants listed in the Annex are companies which operate pharmacy networks in Hungary and are as such members of the first applicant, HGYSZ. Each member of HGYSZ holds shares (usually majority shares) in a number of different pharmacies or directly operates (usually more than four) pharmacies. As a result of their respective shareholdings, HGYSZ members own part of the equity, take part in the management and share the profits of a number of pharmacies in Hungary.

4. Between 1990 and 1994, the operation of pharmacies in Hungary was governed by Ministerial Decree No. 9/1990. (III.28.) SZEM, under which the opening of new pharmacies was allowed without any geographic or demographic limitation. During this period, the number of pharmacies in Hungary increased by about 30% to approximately 2,000 pharmacies.

5. From the adoption of Act no. LIV of 1994 onwards, and until 2006, the operation of pharmacies was governed by different rules, according to which the opening of new pharmacies was still without obstacles and the takeover/operation of existing pharmacies by companies was possible. However, geographic and demographic barriers to the opening of new pharmacies were introduced, requirements concerning inter alia the qualification of pharmacists and their influence on the management of the pharmacies were applied, and the legal form of companies that may operate pharmacies was prescribed. At the same time, there was no limitation on the number of pharmacies that could be operated by one entity, provided the relevant sector-specific conditions were met.

6. In 2006, new rules contained in Act no. XCVIII of 2006 (“the Gyftv .”) abolished most limitations on the establishment of pharmacies and the legal form of companies that could operate pharmacies.

7. Between 1994 and 2010, a number of foreign investors entered the Hungarian pharmaceutical retail market by acquiring shares in pharmacies. The majority of HGYSZ members ’ shareholdings date back to the period between 1994 and 2006. Despite the limitations in place between 1994 and 2006, there was no indication that shareholdings in pharmacies would be limited or that any future limitation on shareholdings would affect already existing shareholdings in pharmacies.

8. At the end of 2010, Hungarian legislation introduced limitations on the shareholdings in pharmacies. These limitations, which Act no. CLXXIII of 2010 (“the Act”) incorporated into the Gyftv . – as of 1 January 2011 – require that the shareholdings of pharmacists in the pharmacies where they work must exceed 25% by 1 January 2014 and 50% by 1 January 2017 and moreover that no one may have shares in more than four pharmacies. The restrictions do not only apply to pharmacies which are established after the amendments entered into force, but ownership in already existing pharmacies must also be brought into line with the limitations by the respective deadlines of 1 January 2014 and 1 January 2017. Moreover, any change in the ownership of the non-pharmacist shareholders entails an immediate obligation to meet the above thresholds, even before the deadlines of 1 January 2014 and 1 January 2017. The amendments do not contain any guarantee for an appropriate compensation for those shareholders who are obliged to give up part of their shareholdings.

9. The 2010 amendments introduced by the Act entail in particular the limitations outlined below.

Previously, in cases where pharmacies were operated by enterprises, it was sufficient for the pharmacist exercising the professional leadership of the pharmacy concerned to have a 1% share in the enterprise operating that pharmacy. Pursuant to the amendment to section 74 (1) of the Gyftv ., introduced by section 84 (1) of the Act, enterprises are now only allowed to operate pharmacies if the combined shares of the pharmacist exercising the professional leadership of the pharmacy concerned and the pharmacist(s) employed in the pharmacy exceed 50%.

According to section 83/A (1) of the Gyftv ., introduced by section 87 of the Act, these ownership rules enter into force between 1 January 2011 and 1 January 2017 according to the following schedule.

10. Between 1 January 2011 and 31 December 2013, with some exceptions (such as the death of the pharmacist), changes in the ownership structure of the enterprise operating a pharmacy entail an immediate obligation under which the combined shares of the pharmacist exercising the professional leadership of the pharmacy and the pharmacist(s) employed in the pharmacy must exceed 25%.

11. Between 1 January 2014 and 31 December 2016, the combined shares of the pharmacist exercising the professional leadership of the pharmacy and the pharmacist(s) employed in the pharmacy must exceed 25% and, again with some exceptions, changes in the ownership structure of the enterprise operating a pharmacy entail an immediate obligation under which the combined shares of the pharmacist exercising the professional leadership of the pharmacy and the pharmacist(s) employed in the pharmacy must exceed 50%.

12. As of 1 January 2017, the combined shares of the pharmacist exercising the professional leadership of the pharmacy and the pharmacist(s) employed in the pharmacy must exceed 50%.

13. According to section 83/A (4) of the Gyftv ., introduced by section 87 of the Act, once the combined shares of the pharmacist exercising the professional leadership of the pharmacy and the pharmacist(s) employed in the pharmacy have exceeded 50%, it is prohibited, even before the time-limit of 1 January 2017, to reduce those combined shares to 50% or below.

14. The applicants submitted that it was difficult to estimate the exact value that they would obtain in exchange for the shares they were required to transfer to pharmacists by 1 January 2017. However, they argued that, in the absence of any provision concerning compensation for the required transfer of shares and in light of the limited financial means of pharmacists in Hungary, the price offered for the shareholdings in question would inevitably be substantially below pharmacies ’ normal market value. Indeed, the limited number of cases where HGYSZ members had sold shares since the beginning of 2011 showed that, subsequent to the amendments made to the Gyftv . in 2010, purchase prices were far below the market value.

15. Moreover, before the amendments introduced by the Act, there was no restriction on how many pharmacies a single shareholder could have shares in. Pursuant to the amendment to section 74 (3) of the Gyftv ., introduced by section 84 (2) of the Act, companies that have shares in enterprises operating four or more pharmacies cannot acquire or hold shares in an(other) enterprise operating pharmacies.

16. Furthermore, section 73 (1) of the Gyftv ., as amended by section 83 of the Act, as well as section 74 (5) of the Gyftv ., as amended by section 84 (4) of the Act, give pharmacists increased powers in the decision-making of the enterprise that operates the pharmacy, regardless of their shareholding and their position in the enterprise, in derogation from Hungarian company law.

17. Given the shareholdings of HGYSZ members, the applicants would need to give up substantial shareholdings in order to bring their shares below the 75% threshold by 1 January 2014 and below the 50% threshold by 1 January 2017. Additionally, with the exception of one applicant that holds shares in only three pharmacies, all others would need to give up completely their shareholdings in a number of pharmacies in order to reduce the number of pharmacies in their respective networks to four. For instance, Pharmanova Zrt ., the largest member of HGYSZ, which holds shares in 140 pharmacies, would need to surrender its shares in 136 pharmacies and reduce its shares in the remaining four pharmacies below 75% by 1 January 2014 and below 50% by 1 January 2017.

18. The value of the shareholdings that the applicants would need to give away – because of the restriction on the size of shareholdings – by 1 January 2014 is estimated at 5.8 billion Hungarian forints (HUF) [1] , and the value of the shareholdings that they would need to surrender by 1 January 2017 is estimated at an additional HUF 9.9 billion [2] . These figures exclude the further shareholdings to be alienated on account of the restriction on the number of pharmacies owned by one shareholder, whose value will be dependent on the choice of pharmacies to be surrendered.

19. In the face of the forced sales of these shares representing a very substantial amount of money, the legislation does not guarantee any particular form of compensation.

20. On 5 June 2012 the Constitutional Court rejected, without an examination on the merits, HGYSZ ’ s complaint alleging that the amendments brought about by the Act amounted to a breach of constitutional rights. According to the decision, the complaint was inadmissible, partly because HGYSZ was not directly affected by the impugned provisions in that it could not possibly sustain a direct violation of any constitutional right in this context, and partly because the subject matter of the complaint was essentially the same as that of cases previously adjudicated by the Constitutional Court.

21. Subsequently, a number of new laws were enacted, which amended several health- and health-insurance-related Acts, amongst others, the Gyftv . The latter was amended in particular as of 1 January, 6 July 2013 and 1 January 2014.

22. Due to these amendments, pharmacists were given privileged rights to purchase those pharmacy shares which the current legal person owners, such as the applicants, would have to sell.

23. From 1 January 2013 on, the operation of a pharmacy by a company is only allowed if the pharmacist exercising the pharmaceutical management of the pharmacy concerned holds more than 50% of the business shares of the owner company, or if the combined volume of shares of the principal pharmacist and of the ones employed in the pharmacy exceed 50% of the shares. The shares and the combined shares can be taken into consideration in respect of a maximum of four pharmacies.

24. The requirements for a pharmacist to be entitled to run a pharmacy are regulated by the Gyftv . As of 6 July 2013, a new element was included in the Act, namely that such principal pharmacists must figure in a dedicated register and that, once registered, he or she exercises his or her operational rights independently.

25. The latest amendment of the Gyftv . which entered into force on 1 January 2014 prohibits companies running pharmacies from instructing the principal pharmacist (and other employed professionals) on commercial-pharmaceutical practices. Moreover, in the management of companies running pharmacies, the exercise of pharmacists ’ shareholder rights must be guaranteed in a manner which reflects the volume of their shares and which is outlined in the articles of associations. This is a strict rule, from which any departure is null and void.

26. As of 1 July 2013, Government Decree no. 212/2013. (VI.19.) on Facilitating the Increase of Pharmacists ’ Share Holding in Pharmacies stipulated the possibility of a preferential loan for those pharmacists who are intended to purchase shares in companies running pharmacies.

COMPLAINTS

27. The applicants complained under Article 1 of Protocol No. 1, read alone and in conjunction with Article 14 of the Convention, that the impugned legislation amounts to a discriminatory breach of their right to protection of property.

THE LAW

28. The applicants submitted an application to the Court on 16 October 2012 concerning in essence the same issues (application no. 66925/12), which was rejected on 14 May 2013 on the ground that it had been lodged outside the six-month time-limit laid down in Article 35 § 1 of the Convention.

29. In the present case, the applicants reiterated their previous arguments, completing them with the complaint that the intervening amendments to the Gyftv ., notably as of 1 January and 6 July 2013, placed in a concrete and actual context the discriminatory violation of their right to the peaceful enjoyment of their possessions, in breach of Article 1 of Protocol No. 1, read alone and in conjunction with Article 14 of the Convention. In that sense, they were of the opinion that the recent legislative amendments represent new relevant information for the purposes of Article 35 § 2 (b) of the Convention.

30. In so far as the present complaint is directed against the legislative amendments that were the object of application no. 66925/12, which resulted in the Court ’ s decision of 14 May 2013, it must be rejected on the basis of Article 35 § 2 (b) of the Convention.

31. The Court notes that, subsequently to the introduction of application no. 66925/12, legislative amendments entered into force on 1 January, 1 and 6 July 2013 and 1 January 2014.

32. As regards the amendment of 1 January 2013, the Court notes that the application was introduced only on 25 November 2013, that is, more than six months later. It follows that this part of the application must be declared inadmissible pursuant to Article 35 §§ 1 and 4 of the Convention.

33. As regards the amendments that entered into force on 1 and 6 July 2013 and 1 January 2014, the Court observes that these amendments provide in particular that principal pharmacists must figure on a dedicated list, that they exercise their operational rights independently, that corporate owners, such as the applicants, are precluded from interfering with the commercial-pharmaceutical practices defined by the principal pharmacist, and that pharmacists may obtain preferential loans for purchasing shares in companies running pharmacies. The Court finds that the impact of these provisions – taken alone, independently from the already rejected complaint about the compulsory transfer of shares – on the applicants ’ rights under Article 1 of Protocol No. 1 read alone or in conjunction with Article 14 of the Convention has not been substantiated in any manner. It follows that this part of the application is manifestly ill-founded within the meaning of Article 35 § (a) and must be rejected, pursuant to Article 35 § 4 of the Convention.

For these reasons, the Court unanimously

Declares the application inadmissible.

Stanley Naismith Guido Raimondi Registrar President

ANNEX

List of other applicants

[1] Approximately 19 million euros (EUR)

[2] EUR 32.4 million