CONCURRING OPINION OF JUDGE PINTO DE ALBUQUERQUE

1 . Könyv-Tár Kft and Others v. Hungary is a remarkable case for various reasons. It deals for the first time with the creation of a de facto State monopoly in a delicate, profitable economic area, that of schoolbook distribution, in the context of successive State interventions in a particularly sensitive social and political area, that of public school management. Ultimately, what is at stake in this case, and remained unnoticed in the majority judgment, is also the freedom of choice for schools and teachers in Hungary to decide what is taught and how it should be taught. This alone would have prompted me to write separately. But there are additional reasons for me to do so, which relate to the nature of the State ’ s intervention in this case and the width of its margin of appreciation.

2 . I agree with the majority that the Government ’ s New Regulations [1] amounted to a violation of Article 1 of Protocol No. 1 to the Convention. However, I write separately to argue that this legislation amounted to a calculated measure of deprivation of a possession (the applicant companies ’ clientele) and not a mere measure of control of the use of their possession. From this perspective, I am of the view that the margin of appreciation afforded to the first of these two forms of State intervention in the economy is narrower than the one accorded to the second, and that the case-law on compensation was directly applicable to the case at hand.

Deprivation or regulation of the use of a possession?

3 . Article 1 of Protocol No. 1 provides for two forms of interference with possessions: control and deprivation. Deprivation is the transfer de jure or de facto of the possession away from its owner to the State or a third party, or its destruction. Control involves no transfer: the owner retains his possession, but is restricted in his use of it.

4 . Yet in Sporrong and Lönnroth the Court identified a new type of interference: “interference with the substance of ownership” [2] , based on the first sentence of Article 1 of the Protocol. This form of interference, said to be of a general nature, allows the Court to review all situations not falling under the other two forms (deprivation or control of use). What qualifies a measure as incompatible with the substance of the right to the peaceful enjoyment of property remains fairly unclear. In any event, the Court has not yet considered that the loss of clientele falls into this category.

5 . According to the case-law of the Court, the concept of deprivation of property implies a transfer of ownership, like expropriation or nationalisation. This does not mean, however, that the applicants have been formally deprived of their property. There are some cases where the Court has characterised de facto expropriation [3] as deprivation of a possession. However, in all those cases the good was something tangible. Since a clientele is not something tangible of which the applicant has physical possession, the Court has been reluctant to consider the loss of clientele as a form of deprivation of possessions.

6 . The case-law of the Court has not yet precisely defined what constitutes regulation of the use of a possession. But it refers to cases where there was no transfer of ownership and in which the national authorities sought to limit or control the use of the possession, such as restrictions on freedom of contract in respect of tenancies [4] . However, the Court has also considered that confiscation falls under the regulation of the use of property, if it is provided for by law and pursues an aim in the general interest [5] .

Loss of clientele as deprivation of a possession

7 . The loss of clientele has also been included among the forms of regulation of the use of a possession, for example when it resulted from a prohibition on the possession of handguns [6] or a prohibition on the online intermediation of games of chance [7] , from a refusal to register someone as a registered accountant [8] , removal from the Bar [9] , annulment of registration with the Bar [10] or annulment of exclusive rights of audience in courts of appeal [11] .

8 . Basically, these cases refer to dangerous business activities which warrant State licensing (like selling guns or providing games of chance) or professions which require some form of public regulation, like those of lawyer or accountant. Restrictions placed on the registration, licences or permits connected to such businesses or professions are to be considered as forms of State regulation of the economy. This is particularly the case when such measures are designed to promote the “general interest” by structuring a profession that is important to the entire economic sector and by providing the public with guarantees as to the competence of those who carry on that profession [12] .

9 . The case at hand is different from the above cases. In Hungary, prior to the New Regulations, schools were able to select the publisher and schoolbook distributor in a highly competitive, open market [13] . The schoolbook distributors needed no specific registration, licence or permit to enter and operate in the market of schoolbook distribution, since they were established and operated in accordance with general civil law [14] . The distributors ’ activity included not only the provision of logistical services but also the execution of the orders, the management of customised billing and the handling of returns of products resulting from over-ordering. Moreover, they also financed the distribution of the schoolbooks as they either purchased the books or obtained them on a consignment basis. In addition, their activity also required them to either own or lease warehouses and delivery vehicles for the purposes of distributing the schoolbooks, and they maintained office premises in order to keep in contact with their upstream and downstream business partners (the schools and the publishers). The applicant companies had, by dint of their continuous work in this unregulated market, gained a clientele. They enjoyed “goodwill” in their professional practice, namely the advantage which had arisen over many years of practice from their own reputation and connections.

10 . The case of Oklešen and Pokopališko Pogrebne Storitve Leopold Oklešen S.P . [15] is the closest to the present case. There, the Court found that the applicant company had an existing possession (a clientele) for the provision of funeral services during a period of legal vacuum, but did not have a reasonable expectation of continuing to provide those services after they were entrusted to the municipal enterprise under the 2000 Decree and the 2002 Amendment. Significantly enough, the Court did not qualify the width of the State ’ s margin of appreciation, despite acknowledging that the full nationalisation or municipalisation of funeral services appeared to be a rare occurrence in the member States.

11 . There is however a crucial difference between the Slovenian and Hungarian cases. When the Slovenian company obtained its craft licence, the provision of funeral services had already been designated as a public utility, by law. That is why the Court attached decisive importance to the fact, undisputed by the applicant Mr OkleÅ¡en, that throughout the entire period during which he provided funeral services, he had been aware that this was only a temporary solution pending the implementation of the national legislation requiring the municipality to regulate the provision of funeral services as a public utility. Nothing of the sort happened in the schoolbook distribution market in Hungary, since the applicant companies started to operate, and continued to operate for over twenty years [16] , in an unregulated market which the legislature had not classified as a public ‑ utility sector of the economy. In the Slovenian case the applicant ’ s de facto possibility to provide funeral services over the period of seven years, which ceased de jure following the implementation of the 2002 Amendment, was from the beginning of an obviously transitional nature. Not so in the Hungarian case, where the applicant companies worked, invested and grew with a legitimate expectation of being able to continue their business activity.

12 . In Hungary, the State intervened by way of legislative acts in the schoolbook distribution market, reserving this profitable business for itself. It did so by means of a two-step procedure. First, by way of the 2012 Act [17] , the State excluded de facto the applicant companies from schoolbook distribution contracts, allowing companies to apply in order to enter into an agreement with the State-run company within the framework of the public procurement procedures, but limiting the tenders to certain partial activities such as logistics and packaging, to certain parts of Hungary and only to invited participants, which did not include the applicant companies [18] . Afterwards, by way of the 2013 Act [19] , it excluded them de jure from that market altogether.

13 . In the case of Sporrong and Lönnroth , cited above, the Court considered that the national authorities had not actually expropriated the applicants ’ buildings and that there had been no transfer of ownership, but decided to look beyond appearances and analysed the reality of the contentious situation complained of. The Court held that the expropriation permits were not intended to limit or control the use of the property, but since they were an initial step in a procedure that ultimately led to a deprivation of possessions, they would be assessed under the first paragraph of Article 1 of Protocol No. 1. In that case, the Court ultimately found that the interference had not been proportionate.

14 . Likewise, in the present case, the Court had a duty to go beyond appearances and evaluate the applicant companies ’ situation as whole, considering the different steps in a procedure that ultimately led to the loss of their business activity and of their clientele in the schoolbook distribution market. There is no doubt that in the present case the State pursued a deliberate policy to monopolise the schoolbook distribution market from the outset. As of the 2013/14 school year the applicant companies were suffocated by the omnipresent State-run company in the schoolbook distribution market. What this policy did, in effect, was to centralise the profits from the schoolbook distribution market in the hands of the State-run company (with a margin of 20% guaranteed to the State-owned schoolbook distributor [20] ).

15. The Court cannot turn a blind eye to the market reality; otherwise, the Convention protection of the right to property would be virtual and ineffective. Given the above considerations, this case amounts to “deprivation of a possession”, because the applicants effectively lost their clientele as of the 2013/14 school year, an asset that they had garnered over twenty years of work in an open and unregulated market.

The legitimacy of the purpose of the deprivation measure

16 . The Government argue that the purpose of the impugned legislation was “to strengthen the schoolbook procurer ’ s position by the uniform and centralised procurement of schoolbooks ... and ... to make schoolbook distribution more transparent by generating competition in a stronger position, that of the procurer”, because “the centralised procurement of schoolbooks is more appropriate to ensure both efficiency of budgetary spending and prevalence of educational aspects in the selection of schoolbooks” [21] . In their submissions, the Government add that the centralisation measure “served the purpose of ensuring a more efficient spending of public funds (including the purchase price paid by parents)” [22] .

17 . I share the majority ’ s doubts that the real purpose of the new legislation was to protect the interests of the end-users [23] . I can accept that the New Regulations were aimed at more efficient budgetary spending on schoolbooks in the case of purchases subsidised by the State, which corresponded at the relevant time to a 40% share of end-users according to the Government [24] . But I doubt that the centralised procurement of schoolbooks was aimed at benefiting the non-subsidised end-users. I will return to this point later.

18 . I also doubt that the New Regulations could contribute to the “prevalence of educational aspects in the selection of schoolbooks”. I fail to see how the monopolisation of schoolbook distribution can pursue educational aims or improve the quality of the public education system. It is no t a valid argument to assert that “market distortions were exacerbated by discounts and bonuses provided by publishers and distributors to schools whose decision on the selection of textbooks was therefore, unethically, often influenced by considerations other than professional educational standards (or price sensitivity of end-users)” [25] . Firstly, the Government assume unethical conduct on the part of schools and teachers that is not proven in the file. In fact, such unethical behaviour could even constitute criminal conduct [26] . No evidence was provided that the applicant companies or their representatives or any other schoolbook distributors or their representatives were ever charged, let alone found guilty, of any unlawful or improper conduct with respect to their professional activities in the schoolbook distribution market. More generally, no statistical or other evidence was produced to demonstrate that such a practice existed and, if so, its real impact on the schoolbook distribution market in Hungary. Secondly, the Government ’ s line of reasoning does not exclude the possibility that the same unethical conduct might occur with the State-run company, which might take decisions, or influence the taking of decisions by others, strictly on the basis of a cost-effectiveness analysis and not on the basis of professional educational standards. In other words, the Government ’ s argument is nothing but a scaremongering fallacy, an appeal to fear, without any factual substantiation whatsoever.

19 . The applicant companies argue, and the Government do not dispute, that any schoolbook distributed by them had been approved by the Government decision-making body responsible for the quality inspection, approval and registration of all schoolbooks. Obtaining approval from the respondent State ’ s relevant decision-making body is a precondition for the classification of a book as an “official schoolbook” which can then be ordered by the schools. Accordingly, any schoolbook distributed by the applicants was previously inspected and approved by the Government [27] . Since from the Government ’ s perspective all “official schoolbooks” available on the market satisfy educational standards, the argument cannot be made that the schools ’ and teachers ’ freedom to select schoolbooks could harm educational standards.

20 . More importantly, the monopolisation of the distribution of schoolbooks must be seen against the general background of the Government ’ s wider plan to centralise the management of the national educational system, which includes the monopolisation of the market in both the publishing and distribution of schoolbooks [28] . As the applicant companies argue and the Government do not contest, the New Regulations were part of a policy which included “the designation of one or a very limited number of official schoolbooks which and [ sic ] shall be used by the public schools (as opposed to the several dozens from which teachers and parents may currently choose)” [29] .

21 . I see a danger here, and it is my duty to name it. The one ‑ line ‑ of ‑ thought school, which to me closely resembles a feature of an authoritarian regime, is dangerous for Hungarian society, particularly when the Government themselves assert that their centralisation policy is “a means for the State to monitor and control what textbooks are ordered by the schools” [30] . The Government is walking a fine line here. There is a fine line between such a “centralised”, “uniform” school management system and entrapping pupils in a governmental Weltanschauung . There is an even finer line between such a system of controlling schoolbooks supply (publishing and distribution) and State thought control. I have pleaded in another case for the four university freedoms [31] . Today I am pleading for the freedom of school teachers to choose what they want to teach and how they want to teach it. I am not insensitive to the Government ’ s concern about possible shortcomings in the public education management system that may eventually reinforce social inequalities between pupils coming from well-off and poor families, create regional inequalities between urban and rural areas and hinder mobility in the public education system [32] . The public education system has an important role in levelling the playing field between pupils coming from well-off and poor families and between pupils coming from urban and rural areas. But I do not accept that a management system that affords autonomy to teachers in the determination of the curriculum and the selection and distribution of schoolbooks will necessarily contribute to the reinforcement of social and regional inequalities, as the Government assume [33] . At least in the file of this case, the Government did not put forward any hard evidence of such a correlation, either in general terms or in the specific case of Hungary. I am thus led to conclude that such a correlation is more a political assumption than a scientifically proven fact.

The proportionality of the deprivation measure

22 . Even assuming, for the sake of exhaustiveness, that there was a “public interest” in the State intervention and the purpose of the State ’ s intervention was therefore legitimate, it was not proportionate. I agree with the majority ’ s assessment of the proportionality factors [34] , but I would like to elaborate further on some particularly important points in this regard.

23 . In this context, the test of proportionality has two prongs: the test of necessity and the test of proportionality strictu sensu . The test of necessity assesses whether the State interference with the right to property adequately advances the “public interest” pursued and whether it extends no further than necessary in order to meet the said “interest”. This means that the Court must ascertain whether there is a “rational connection” between the State interference and the “public interest”, by establishing a plausible instrumental relationship between them, and whether there is an equally effective but less restrictive means available by which to further the same “public interest”. The test of proportionality strictu sensu assesses whether a fair balancing of the right to property and the competing “public interest” has been achieved, whilst ensuring that the essence (or minimum core) of the former is respected [35] .

24 . In this regard, I would argue that the margin of appreciation afforded to the most intensive form of State intervention in the economy (deprivation of a possession) is narrower than the one accorded to lesser forms of State intervention, encompassed in the regulation of the use of the possession. This idea coalesces with the principle that the scope of the margin of appreciation depends on the extent of the intrusion into the applicant ’ s sphere of interests [36] . This is also in line with the fact that deprivation of a possession is, in the literal terms of Protocol No. 1, prohibited “except in the public interest”, while regulation (control of use) measures are not per se prohibited, but are a “right of the State to enforce such laws”. The strict language of the second sentence of paragraph 1 of Article 1 of Protocol No. 1 indicates clearly that the State does not have per se a “right” to deprive people of their possessions. Hence, such highly intrusive State action must be submitted to an enhanced standard of judicial review by this Court. A fortiori , the State ’ s margin is even narrower when it intervenes in an unregulated business area, where freedom of enterprise and the right to peaceful enjoyment of one ’ s possessions prevail.

25 . In the case at hand, it is questionable that the State interference with the applicant companies ’ respective clientele adequately advanced the “public interests” pursued, namely less public spending, cheaper books paid for by the parents, more transparency in the schoolbook distribution market, and selection of schoolbooks strictly on the basis of professional educational standards. In fact, it caused the opposite result, since it practically closed down the schoolbook distribution market [37] and promoted less transparency, less efficiency and more public spending, to the point where the government even contemplated the possibility of involving the police in the chaotic process that ensued from the radical legal change [38] .

26 . Furthermore, there is no evidence in the file that the new State monopoly-based distribution policy impacted positively on the selection of schoolbooks, let alone that it benefited the non-subsidised end-users, and in particular that the higher margin guaranteed to the State-run company was used to decrease the purchase price charged to the non-subsidised end-users. In fact, it appears that the net average price of schoolbooks has increased and that the new system even resulted in the first year of operation in an additional cost to the State budget [39] .

27 . To answer the question whether the State intervention extended no further than necessary in order to meet the said “public interests”, it must be taken into consideration that at the time the New Regulations were introduced the Government already had a significant degree of control over the schoolbook market and could deter any price abuse by the publishers and distributors, even in the areas where only one or a limited number of distributors undertook to provide services, because the maximum prices of schoolbooks were set by the Government themselves. Hence, the amount of public spending on subsidised schoolbooks and private spending on non-subsidised schoolbooks was already, to a certain extent, dependent on a decision of the Government themselves.

28 . Worse still, no less restrictive means were sought in order to attenuate the negative impact of the interference on the distributors already in the market and no balancing of the right to property and the competing “public interest” was achieved. The applicant companies were not compensated, in any shape or form, for the deprivation of their possessions, in spite of the fact, known to the Government, that it was impossible for them to reconstitute their business outside the sphere of schoolbook distribution, which was their exclusive or major field of activity [40] . The provision of an eighteen-month transitional period is in this regard manifestly insufficient to enable the applicant companies to change their field of activity entirely and to prevent an individual and excessive burden from being imposed on them. Finally, this is not a case in which special considerations would justify nationalisation of a certain asset without any compensation [41] .

29 . At this juncture, it is important to note that the proportionality assessment must include the entrepreneurial risk associated with the applicants ’ business. The Court has considered such risks in the context of businesses dependent on discretionary permits issued by the administrative authorities, in cases concerning matters such as the loss of a construction permit [42] or the revocation of a permit to extract gravel [43] . It has also taken into account the risk inherent in the conclusion of transnational contracts [44] and the risk in transnational activities of penalties being imposed by other jurisdictions [45] . This is not the case here. Since the applicant companies ’ business activity was limited to the confines of the national market and this was an open, unregulated market, it did not involve any special risk which should be taken into account in the proportionality test.

30 . To my mind, a full-blown restriction of entrepreneurial freedom carries with it a strong presumption against its Convention validity. That presumption is even stronger in the field of education. In the instant case, the respondent Government did not satisfy the burden of showing that the imposition of such a drastic change in the schoolbook distribution market, without any remedies and any compensation, was justified.