Information Note on the Court’s case-law 189

October 2015

Laurus Invest Hungary Kft and Others v. Hungary (dec.) - 23265/13, 23853/13, 24262/13 et al.

Decision 8.9.2015 [Section II]

Article 35

Article 35-1

Exhaustion of domestic remedies

Effective domestic remedy

Domestic remedy made possible by EU law not yet exhausted: inadmissible

Facts – The applicant companies operated slot machine and other gaming arcades. In 2012 the Hungarian Parliament adopted a law which restricted the activities of arcades and put an end, generally, to the operation of slot machine terminals. Some of the applicant companies sued the State for compensation for the loss of busine ss they had sustained, relying on the law of the European Union. The domestic court hearing the claim requested a preliminary ruling from the Court of Justice of the European Union (CJEU) regarding the compatibility of the Hungarian law and the manner of its implementation with the freedom to provide services guaranteed by Article 56 of the Treaty on the Functioning of the European Uni on (TFEU) and whether EU law conferred on individuals a right to claim compensation for damage suffered as a result of the infringement of the relevant EU law.

The CJEU stated that an infringement of Article 56, including by legislation, gave rise to a rig ht for individuals to obtain from the member State concerned compensation for the damage suffered as a result, provided the infringement was sufficiently serious and there was a direct causal link between the infringement and the damage sustained, a matter to be determined by the national court. It also noted that a national law which is restrictive from the point of view of Article 56 is also capable of limiting the right to property enshrined in Article 17 of the EU Charter of Fundamental Rights . At the date of the Court’s judgment, the case was still pending before the Hungarian courts.

In their application to the European Court the applicants complained that the invalidat ion of their licences to operate the arcades and slot machines had amounted to an unjustified deprivation of property, in breach of Article 1 of Protocol No. 1, alone and in conjunction with Article 14 of the Convention.

Law – Article 35 § 1: According to Article 267 of the TFEU and the well-established case-law of the CJEU, a preliminary ruling by the CJEU on the interpretation of an EU law is binding on the referring national court. Furthermore, pursuant to the principle of “sincere co-operation”, the authorities of the EU member States have the task of ensuring, within the sphere of their competence, observance of the rules of EU law, as interpreted by the CJEU, and the judicial protection of an individual’s rights under EU law. Consequently, the Court was satisfied that guidance provided by a preliminary ruling had to be observed not only in the specific dispute which had given rise to the referral but indirectly also in other cases, even those concerning legal relationship s which had arisen before the CJEU gave its ruling.

The CJEU’s ruling therefore provided the Hungarian courts with guidance as to the criteria to be applied in the pending case. According to that guidance, justification for the restriction complained of had also to be interpreted in the light of the general principles of EU law, in particular the fundamental rights guaranteed by the EU Charter.

It followed that the litigation before the Hungarian authorities ought to be capable of encompassing the issue of justification for the alleged breach of the rights g uaranteed by Article 1 of Protocol No. 1. The method of scrutiny laid down by the CJEU bore close resemblance to that applied by the Court for the purposes of Article 1 of Protocol No. 1. Indeed, the assessment required by the CJEU explicitly relied, at le ast in part, on the Strasbourg case-law. In these circumstances, substituting the Court’s own assessment for that of the Hungarian courts as oriented by the CJEU, without awaiting the outcome of those proceedings, would be tantamount to ignoring the Court’ s subsidiary role.

The Court was therefore satisfied that the case pending before the Hungarian courts offered a reasonable prospect of success for the applicants to have their claims adjudicated on the merits and, potentially, to obtain damages. It thus c onstituted an effective remedy requiring exhaustion.

Conclusion : inadmissible (failure to exhaust domestic remedies).

© Council of Europe/European Court of Human Rights This summary by the Registry does not bind the Court.

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