Published on 12 April 2021

FOURTH SECTION

Application no. 31435/16 OTIAK CJSC against Armenia lodged on 18 May 2016 communicated on 23 March 2021

STATEMENT OF FACTS

The applicant, Otiak , is a closed joint-stock company which was established in 1995 and has its registered office in Yerevan (hereafter “the applicant company”). It is represented before the Court by its founder and director, Mr M. Serobyan .

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

On 1 November 2007 the Government adopted Decree no. 1607-A declaring land and the buildings on it, owned by the applicant company, subject to expropriation for public needs. A special body, the Yerevan Construction and Investment Project Implementation Agency (hereafter “the Agency”) was assigned to manage the implementation of the expropriation project.

On 5 May 2008 the applicant company and the Agency concluded an agreement on the expropriation of the applicant company ’ s property for compensation of 200,113,800 Armenian drams (AMD) [1] .

On 20 May 2008, following an oral demand by officials from the State Revenue Committee (SRC), the applicant company transferred AMD 29,002,000 and AMD 4,350,000 [2] to the SRC as value-added tax (VAT) in respect of the amount of compensation received.

On 27 June 2008 the applicant company transferred AMD 10,000,000 and AMD 500,000 [3] to the SRC as partial payments for profit tax on the amount of compensation received. Nevertheless, it refused to pay the remaining amount of profit tax on the grounds that, under the Law on the Expropriation of Property for the Needs of the State and Society, the owner of expropriated property was not liable to pay taxes on the amount of compensation received.

The SRC subsequently initiated administrative proceedings against the applicant company, seeking to oblige it to pay AMD 22,354,300 [4] in profit tax.

On 11 December 2009 the Administrative Court rejected the SRC ’ s claim, stating that the applicant company was not liable to pay the claimed profit tax.

The SRC appealed against that judgment.

On 27 May 2010 the Court of Cassation, acting as a final-instance appeal court, upheld the judgment of the Administrative Court dated 11 December 2009.

Relying on the final judgment of 11 December 2009, on 30 September 2010 the applicant company lodged a civil claim with the Kentron and Nork‑ Marash District Court of Yerevan (“the District Court”) against the Government, the Ministry of Finance and the Agency, seeking to recover the AMD 33,352,200 that it had paid in VAT and the AMD 10,500,000 [5] that it had paid in profit tax. In addition, the applicant company sought to obtain interest from the SRC and the Government for the unlawful levy of taxes and unjust enrichment, on the basis of Article 411 of the Civil Code.

By a judgment of 17 March 2011 the District Court granted the applicant company ’ s claims, ordering the Government to pay the applicant company AMD 43,852,300 [6] , that is the total amount of taxes paid (unjust enrichment). Furthermore, the District Court obliged the Government to pay the applicant company the statutory interest accrued on that amount in accordance with Article 411 of the Civil Code calculated from 5 May 2008 until the date when the main award was paid in full.

The Government appealed against that judgment.

On 30 June 2011 the Civil Court of Appeal rejected the appeal.

The Government lodged an appeal on points of law.

On 23 March 2012 the Court of Cassation upheld the applicant company ’ s position that it was not liable to pay VAT and profit tax on the amount of compensation it had received for its expropriated property. At the same time, it decided to quash the decision of the Civil Court of Appeal and discontinue the case for lack of jurisdiction, finding that the subject matter of the case fell within the competence of the Administrative Court.

On 2 May 2012 the applicant company requested from the SRC to reimburse the unlawfully levied tax, together with payment of statutory interest on the basis of Article 411 of the Civil Code.

It appears that this request was refused by the SRC.

Relying on the decision of the Court of Cassation of 23 March 2012, on 4 June 2012 the applicant company applied to the Administrative Court seeking the recovery of the unlawfully levied taxes, together with the statutory interest on the basis of Article 411 of the Civil Code.

On 20 June 2013 the Administrative Court granted the applicant company ’ s claim with respect to the recovery of the unlawfully levied taxes. As regards the claim for the payment of statutory interest under Article 411 of the Civil Code, it discontinued its examination for lack of jurisdiction, reasoning, inter alia , that that claim was of a civil-law nature and was therefore not subject of adjudication in the Administrative Court.

The applicant company lodged an appeal against the judgment in relation to the part concerning the refusal to examine its civil claim for the payment of statutory interest.

On 19 December 2013 the Administrative Court of Appeal upheld the judgment of 20 June 2013. As regards the applicant company ’ s civil claim, it stated that the issues related to the unjust enrichment could have been discussed in the light of the provisions of Article 411 of the Civil Code and that they were subject to a separate adjudication.

The applicant company lodged an appeal on points of law.

On 18 June 2014 the Court of Cassation declared its appeal on points of law inadmissible for lack of merit.

On 18 August 2014 the applicant company lodged a claim against the Ministry of Finance with the District Court seeking the payment of the statutory interest pursuant to Article 411 of the Civil Code for unjust enrichment as a result of the unlawful levy of taxes calculated from 5 May 2008, that is the date when the applicant company had partially paid the tax on profit and the VAT, until the date the main award was paid.

On 31 March 2015 the District Court partially granted the applicant company ’ s claims. In doing so, it stated that the amount of the statutory interest for unjust enrichment on the basis of Article 411 of the Civil Code should be calculated starting from 1 June 2012, that is in a thirty-day statutory time-limit calculated from the date when the applicant company had made a formal request to the Ministry of Finance whereby it had sought to obtain the reimbursement of unlawfully levied taxes together with the statutory interest accrued on that amount (the request at issue was made on 2 May 2012).

The applicant company and the Ministry of Finance appealed against the judgment of the District Court of 31 March 2015.

By its decision of 24 July 2015 the Civil Court of Appeal quashed and amended the judgment of 31 March 2015. It found that the provisions of Article 411 of the Civil Code were not applicable to tax disputes, which were regulated by tax legislation. In particular, the Civil Court of Appeal reasoned that regulations concerning overpayments were defined under Article 33 § 2 of the Law on Taxes.

The applicant company appealed against that decision.

On 21 October 2015 the Court of Cassation declared the applicant company ’ s appeal on points of law inadmissible for lack of merit.

Article 411 provides that interest at a rate determined by the Central Bank may be calculated on the sum of assets in cases of unlawful retention; where there has been a refusal to return monetary assets belonging to another person; where such assets have been used after a delay in payment obligations; or in cases of unjustified acquisition or saving at the expense of assets belonging to another person.

In accordance with Article 11, when a case contains several interconnected claims, one of which is within the jurisdiction of the Administrative Court, while the other claims are within the jurisdiction of the courts of general jurisdiction, the case should be examined by the court that has jurisdiction over the main claim. The “main claim” is the one whose resolution predetermines the outcome of the subsidiary claims.

In accordance with that decision, pursuant to the constitutional rights to an effective remedy and a fair trial, if the Administrative Court has jurisdiction over a main claim, then it should also examine the subsidiary claims of a civil-law nature which emanate from the main claim. The Constitutional Court reasoned that the practice of the Administrative Court in refusing to examine subsidiary claims of a civil nature emanating from a main claim within its jurisdiction amounted to imposing a disproportionate burden on individuals, as they were deprived of the possibility to resolve their interconnected claims within one judicial case, and therefore had to initiate separate proceedings for each claim.

In accordance with that decision, when a judicial case contains several interconnected claims, the whole case should be examined by the court that has jurisdiction over the main claim. The “main claim” is the one whose resolution predetermines the outcome of the subsidiary claims.

COMPLAINTS

Relying on Article 6 § 1 of the Convention, the applicant company complains that its right of access to a court was breached, as it was deprived of the opportunity to obtain judicial determination of its civil claims.

QUESTION TO THE PARTIES

Was the applicant company ’ s right of access to a court, guaranteed by Article 6 § 1 of the Convention, breached as a result of the domestic courts ’ refusal to examine its claim seeking the payment of statutory interest pursuant to Article 411 of the Civil Code (see Geouffre de la Pradelle v. France , 16 December 1992, § 34, Series A no. 253 ‑ B; Lesjak v. Croatia , no. 25904/06, §§ 35-42, 18 February 2010; and Popovic and Others v. Serbia ( dec. ), no. 75915/12, 23 September 2014)?

[1] Approximately EUR 420,875 at the material time.

[2] Approximately EUR 60,281 and EUR 9,041, respectively at the material time.

[3] Approximately EUR 20,999 and EUR 1,049, respectively, at the material time.

[4] Approximately  EUR 46,282 at the material time.

[5] Approximately EUR 67,730 and EUR 21,324, respectively, at the material time.

[6] Approximately EUR 84,396 at the material time.