FOURTH SECTION

Application no. 22007/11 Jón Asgeir JÓHANNESSON and others against Iceland lodged on 21 March 2011

STATEMENT OF FACTS

The first applicant, Mr Jón Ásgeir Jóhannesson is an Icelandic national who was born in 1968 and lives in London, the United Kingdom. He was represented before the Court by Mr Gestur Jónsson , a lawyer practising in Reykjavík.

The second applicant, Mr Tryggvi Jónsson is an Icelandic national who was born in 1955 and lives in Reykjavík. He was represented before the Court by Mr Jakob R. Möller , a lawyer practising in Reykjavík.

The third applicant, Fjárfestingafélagið Gaumur , is a private limited liability company registered in Iceland. It was represented before the Court by Ms Kristín Edwald , a lawyer practising in Reykjavík.

The circumstances of the case

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

A. Tax proceedings

The Icelandic tax authorities conducted an investigation into the first applicant ’ s tax reports and book keepings which was concluded by the issuing of a report on 27 October 2004. On the basis of that report, the Directorate of Internal Revenue, in its ruling of 30 December 2004, found that he had failed to report a significant payment he had received in August 1998. Therefore it revised upwards the figure given in the tax return in 1999 for his capital income and, consequently, re-assessed his taxes and imposed on him a 25 % tax surcharge. By its ruling of 30 December 2005, it further found, among other things, that he had failed to report significant payments received in 1999, 2000, 2001 and 2002, car allowances for the years 2000 to 2002, further allowances (payments of life insurances) and profits from the selling of shares in the company Baugur Group. It re-assessed his taxes for the years 1999 to 2002 and imposed on him a 25 % surcharge.

The tax authorities also conducted an investigation into the second applicant ’ s tax reports and book keepings which was concluded by the issuing of a report on 24 November 2005. On the basis of that report, the Directorate of Internal Revenue, by its ruling of 29 December 2005, re ‑ assessed the second applicant ’ s taxes for the income years 1999 to 2002. It found, in particular, that he had failed to report significant payments he had received in this period. It also found that the company Baugur Group had paid his life insurance in the years 1999 to 2002 and that he had failed to report that as taxable allowances.

The tax authorities also conducted an investigation into the third applicants ’ tax reports and book keepings which was concluded by the issuing of a report on 29 July 2004. On the basis of that report, the Directorate of Internal Revenue, by its ruling of 30 December 2004, re ‑ assessed the third applicant ’ s taxes for the years 1999 to 2003. In particular, it found that the third applicant company had failed to account for and report allowances (such as cars and housing) enjoyed by the first applicant and others, and failed to withhold public levies on these allowances and pay them to the State Treasury. It further found that profits and loss from selling shares in Baugur Group had not been reported correctly and that expenditures in 2000 to 2002 had been over-reported. Consequently, it re-assessed the third applicant company ’ s taxes for the years 1999 to 2003, imposed on it a 25 % surcharge and a further 10 % surcharge because of its failure to withhold levies at source and paying to the State Treasury.

Following the applicants ’ appeal, the State Internal Revenue Board, in its decisions of 29 August (in respect of the second applicant) and 26 September 2007 (in respect of the first and third applicants), upheld the abovementioned decisions concerning the first and second applicants. It confirmed in part the decisions concerning the third applicant company .

The applicants did not seek judicial review of these decisions which thus became final.

B. Criminal proceedings

Subsequently, on 18 December 2008 the National Commissioner of Police indicted the first applicant for aggravated tax offences for, among other things, having under-reported his income on the tax reports in 1999 to 2003 (including by failing to report significant payments received in 1998 to 2002, car allowances for the years 2000 to 2002, further allowances (payments of life insurances) and profits from the selling of shares in the company Baugur Group). The second applicant was indicted for under ‑ reporting his income in 1999 to 2003 (including by failing to report significant payments he had received during that period and Baugur Group ’ s paying of his life insurance). The third applicant company and its representative, KJ, were indicted for aggravated tax offences by having, among other things, in 2001 and 2003, failed to report salaries and allowances (such as car and housing allowances) enjoyed by the first applicant, KJ, JJ and VE and failed to withhold public levies on these allowances and pay them to the State Treasury. It was also indicted for failing to report correctly profits and losses of the selling of shares in Baugur Group and for over-reporting expenditures and losses.

In a ruling of 1 June 2010, the Reykjavik District Court found that the offences, for which the applicants were personally indicted, were based on the same facts as the abovementioned decisions of the tax authorities. It further found that the proceedings concerning the tax surcharges imposed on the applicants involved a determination of a “criminal charge” within the meaning of Article 4 of Protocol No. 7 to the Convention. Relying mainly on that provision and the Court ’ s judgment in Sergey Zolotukhin v. Russia [GC], no. 14939/03, ECHR 2009, the District therefore dismissed those parts of the indictment on the ground that they referred to offences for which the applicants had already been tried and punished by the decisions of the Directorate of Internal Revenue of 30 December 2004 and 29 December 2005, as upheld by the State Internal Revenue Board, in its decisions of 29 August and 26 September 2007.

The Acting National Commissioner of Police lodged an appeal with the Supreme Court, which, in its judgment of 22 September 2010, overturned the District Court ’ s ruling and ordered it to try the merits of the case. It referred to section 2 of Act No. 62/1994 on the European Convention on Human Rights in which the legislature had reiterated the validity of the principle of dualism of national law and international law in respect of the decisions of the institutions established under the Convention. It stated that the courts would look to the judgments of the European Court when interpreting the Convention but the consequences of the principle of dualism was that it was up to the legislature to make the necessary amendments to national law to honour the State ’ s obligations under the Convention. The domestic law provided for the current system where tax offences could be dealt with in two separate proceedings, one deciding on surcharges and the other on punishment, even in circumstances where the proceedings were based on the same or substantially the same facts. The Supreme Court further stated that the case-law of this Court had not been clear on this issue and, consequently, there was uncertainty as to the scope and the content of Article 4 of Protocol No. 7. In the light of this, it found that it was not possible for the domestic courts to decide that the current system of tax surcharges and subsequent criminal proceedings was in violation of the Convention and consequently referred the case back to the District Court.

The Reykjavik District Court, in its judgment of 9 December 2011, found the first and second applicants to have acted with gross negligence, which was sufficient for criminal liability under the relevant provisions of the tax law and all three applicants were convicted in respect of some of the charges against them. However, the District Court, referring to the excessive length of the proceedings and to the fact that the tax authorities had imposed a 25 % tax surcharges on the defendants, decided to suspend the determination of penalty for one year.

The first and second applicant, as well as KJ, lodged an appeal against the District Court ’ s judgment. No appeal was lodged on behalf of the third applicant company .

In a judgment given on 7 February 2013, the Supreme Court upheld the first and second applicants ’ conviction for the most part. Moreover, the Supreme Court convicted the first applicant for two further charges for which he had been acquitted by the District Court. It revoked earlier suspended sentences (three months ’ imprisonment in respect of the first applicant and twelve months ’ imprisonment in respect of the second applicant, both suspended for two years by a Supreme Court judgment of 5 June 2008) and included them in their sentencing in the present case. The first applicant was sentenced to twelve months ’ imprisonment, suspended for two years, and the payment of a fine of 62,000,000 Icelandic krónur ( ISK ) (approximately 380,000 Euros). The second applicant was sentenced to eighteen months ’ imprisonment, suspended for two years, and the payment of a fine of ISK 32,000,000 (approximately 196,000 Euros). The Supreme Court, in the determination of punishment, did take into consideration the tax surcharges imposed on the applicants and the excessive length of the proceedings.

COMPLAINT

The applicants complain under Article 4 of Protocol No. 7 to the Convention that, through the imposition of tax surcharges and the subsequent criminal trial for aggravated tax offences, they have been tried twice for the same offence. They argue that the two proceedings have been based on identical facts.

QUESTIONS TO THE PARTIES

1. Did the proceedings that resulted in the imposition of tax surcharges on the applicants constitute “criminal proceedings” for the purpose of Article 4 § 1 of Protocol No. 7 to the Convention?

2. Having regard to the fact that tax surcharges were imposed on the applicants and that they were tried and convicted for aggravated tax offences, have they been tried or punished twice for the same offence as prohibited by Article 4 § 1 of Protocol No. 7?