5.  The applicants purchased licences for gambling operations for the periods indicated in the Appendix. They (except the third applicant; see paragraphs 43-47 below) operated gambling businesses. The licences were prepaid for the entire period for which they were issued. The applicants each paid the amount in Ukrainian hryvnias (UAH) equivalent to 150,000 euros (EUR) for the licences (see paragraph 63 below). The licences were revoked by operation of law on 25 June 2009 (see paragraph 15 below).
6.  On 23 December 2008 the Cabinet of Ministers introduced a bill in Parliament on regulation of gambling operations. The bill proposed detailed rules for comprehensive regulation of commercial gambling operations, such as a new licensing system and a number of regulatory requirements (see paragraph 78 below). The bill envisaged that the resulting law would come into force thirty days after enactment and that the entities holding gambling licences under the old system would have a year from that day to comply with the new set of requirements; their licences would remain in effect for the periods for which they were issued. On 26 December 2008 Parliament adopted the bill at its first reading.
7.  On 18 March 2009 the relevant parliamentary committee approved its amended text for the second reading.
8.  On 26 March 2009 two members of parliament introduced a bill which proposed a total prohibition on gambling, to come into force on 1 January 2010. In an explanatory note the authors stated that gambling was developing rapidly, leading to a rise in crime, and that an increasing number of children and young people were being drawn into it (see paragraph 147 below).
9.  On 7 May 2009 a fire occurred at a gambling establishment in the city of Dnipro, leaving nine people dead and eleven injured. The incident attracted considerable public attention.
10.  On the same day the Cabinet of Ministers issued an instruction (розпорядження) entitled “Measures to Increase the Safety of Citizens”, which envisaged a number of measures in response to the disaster, including:
(i) directing the Ministry of Finance and local executive authorities to take action to revoke the licences of the entities which had operated the establishment where the fire had taken place; and
(ii) directing the Ministry of Finance to suspend (зупитини) all gambling licences for one month.
11.  On 8 May 2009 the Ministry of Finance issued an order by which it suspended all gambling licences until 7 June 2009 with immediate effect.
12.  On 15 May 2009 Parliament passed into law the bill introduced on 26 March 2009 (see paragraph 8 above) prohibiting all gambling operations in Ukraine (hereinafter “the Prohibition Law”), with some limited exceptions – notably in respect of lotteries. The law did not contain any provisions regarding compensation for licence holders (see paragraphs 66 and 67 below).
13.  The President vetoed the Prohibition Law. He pointed out, in particular, that:
(i) the Licensing Law did not provide for such grounds for the revocation of licences as the banning of a particular activity;
(ii) the proposed law was contrary to the constitutional provisions protecting property (see paragraph 58 below);
(iii) the proposed law was silent regarding the matter of expenses already committed by businesses for the acquisition of licences and for rent; and
(iv) businesses would sue the State for the funds they had paid for licences and permits and for any other damage they would incur if the bill became law.
14.  On 11 June 2009 Parliament overrode the veto.
15.  On 25 June 2009 the law entered into force and as of that date the applicants’ licences were deemed to have been revoked by operation of law.
16.  The applicants lodged claims for compensation with the domestic courts, but those claims were dismissed.
17.  Prior to the prohibition, the applicant company operated at least fifteen gambling establishments and points in Kharkiv.
18.  On 26 September 2009 the applicant company lodged a claim for damages against the Ministry of Finance and the State Treasury Administration.
It claimed 11,461,690 Ukrainian hryvnias ((UAH – about 905,426 euros (EUR) at the time) in damages, representing: part of the licence fees corresponding to the period from the Prohibition Law’s entry into force to the date on which the applicant company’s licence was supposed to expire (25 April 2011); and various losses it had suffered in respect of the purchase of gambling-related equipment and special tax-control software, the refurbishment of gambling premises and lost profit. Subsequently, it increased those claims to the equivalent of EUR 3,219,900.
It relied on various provisions of domestic law. Its first argument was that, by selling a licence for five years priced “per year”, the State had given it a guarantee that it would be able to engage in the licensed activity for the duration of the licence, provided that it complied with the licence terms. The Licensing Law, which was a lex specialis, did not provide for the collective revocation of licences, which was only possible on a case-by-case basis on the grounds provided in that law.
The applicant company also relied on the following provisions of the Civil Code (see paragraphs 68-71 below):
(i)  Article 1166 concerning the general obligation to compensate for tort damage;
(ii)  Article 1170 concerning the obligation of the State to compensate for damage caused by the enactment of laws terminating property rights (hereinafter also referred to as “the Legislative Takings Clause”); and
(iii)  Article 1173 concerning the obligation of public authorities to compensate for damage caused by their unlawful decisions and actions.
19.  On 10 December 2009 the Kyiv City Commercial Court dismissed the claim. The court cited the part of Article 1166 of the Civil Code requiring intent or negligence for tort liability. Article 1173 required a finding that the acts of the authorities were unlawful. Parliament had the constitutional power to enact laws, which it had done in enacting the Prohibition Law. That law had not been declared unconstitutional by the Constitutional Court. Therefore, there was no indication of unlawful action on the part of the State. For the same reason, Article 1175 of the Civil Code, providing for liability in the event of damage caused by legislative documents that had been declared unlawful (see paragraph 72 below), was equally inapplicable. Neither the Prohibition Law nor the budget provided for any compensation. There was thus no basis for the claim for damages.
20.  The applicant company appealed. It raised essentially the same arguments. It also argued that the first-instance court had failed to apply the Legislative Takings Clause, which was the applicable provision in the case since the Prohibition Law had terminated the applicant company’s property rights in respect of the licence, cash registers and gambling equipment. That provision of the Civil Code required compensation specifically for lawful action, in this case the enactment of the Prohibition Law. This also followed from the provision of the Constitution requiring full compensation for the taking of private property (see paragraph 58 below).
In addition, the applicant company cited Article 1 of Protocol No. 1 to the Convention and stated that the notions of “possessions” and “property” used in that provision were autonomous and broad. In that context the applicant company stated that in Tre Traktörer AB v. Sweden (7 July 1989, § 53, Series A no. 159) the Court had recognised that a licence to sell alcoholic beverages constituted a “possession” for those purposes. The applicant company referred to the domestic provisions incorporating the Convention and the Court’s case-law (see paragraphs 74-76 below) and submitted that the first-instance court had failed to comply with its obligation to apply Article 1 of Protocol No. 1 and the Court’s case-law.
In the concluding part of its appeal the applicant company stated that Article 41 of the Convention provided for payment of just satisfaction.
21.  On 6 April 2010 the Kyiv Commercial Court of Appeal upheld the first-instance court’s judgment. It cited the Civil Code provisions concerning tort liability in general and tort liability for unlawful action by public authorities (see paragraphs 37 below and 68-71 below) and endorsed the first-instance court’s reasoning. It did not comment on the applicant company’s arguments concerning the Legislative Takings Clause, Article 1 of Protocol No. 1 or the Court’s case-law.
22.  The applicant company lodged an appeal on points of law. It argued that the lower courts’ finding that there was only an obligation to compensate for unlawful acts was wrong and that the Legislative Takings Clause provided for compensation in the event of the lawful termination of property rights. It repeated the other arguments it had raised in the first appeal.
23.  On 22 September 2010 the High Commercial Court rejected the applicant company’s appeal and upheld the lower courts’ decisions. It stated that the Prohibition Law did not provide for the termination of property rights within the meaning of the Legislative Takings Clause, or for payment of any compensation to licence holders. The law in question had not been declared unconstitutional by the Constitutional Court. Therefore, the lower courts had correctly found that the applicant company had failed to show that there had been either any unlawful conduct on the part of the defendants or a causal connection between the defendants’ actions and its losses, both of which were required elements in a claim for damages.
24.  The applicant lodged several claims with the domestic courts. They are set out below in the order in which they were completed domestically and the applicant submitted her corresponding application forms with the Court.
(a)  First set of proceedings: reimbursement of licence fees
25.  In the first set of proceedings (application form submitted on 25 September 2012) the applicant claimed UAH 360,349.59 (about EUR 30,160 at the time) from the State Treasury Administration and the Ministry of Finance, corresponding to the licence fees for the unused part of her licence, in respect of the period from the Prohibition Law’s entry into force to the date on which her licence was supposed to expire (16 May 2011).
She relied on various provisions of domestic law, most notably the Legislative Takings Clause (see paragraph 70 below). In that context she pointed out that, in accordance with the Court’s judgment in Tre Traktörer AB (cited above), licences constituted “possessions” for the purposes of Article 1 of Protocol No. 1. She relied on the provisions of domestic law incorporating the Convention and the Court’s case-law and the primacy of the former (see paragraphs 74 and 76 below) and argued that the Prohibition Law, by revoking her licence, had terminated her property rights within the meaning of the Legislative Takings Clause.
26.  On 15 December 2011 the Kyiv Commercial Court rejected her claim on the grounds that the Prohibition Law did not provide for the reimbursement of the licence fees paid for licences revoked by operation of that law.
27.  The applicant appealed, relying in particular on the same provisions of the Civil Code, the Convention, the Court’s case-law and the incorporating provisions of domestic law. She also pointed to the provisions of the Code of Commercial Procedure prohibiting the courts from refusing to give judgment in the absence of legislation governing an issue (see paragraph 76 below).
28.  On 1 February 2012 the Kyiv Commercial Court of Appeal upheld the first-instance court’s judgment. It cited domestic provisions concerning the obligations of the public authorities to compensate for damage caused by their unlawful conduct (see, in particular, paragraph 71 below), and stated that Parliament’s constitutional role was to enact laws, that it had acted within those powers in adopting the Prohibition Law and that that law did not provide for the payment of any compensation to former licence holders.
29.  The applicant, reiterating essentially the same arguments, lodged an appeal on points of law with the High Commercial Court.
30.  On 21 May 2012 the High Commercial Court upheld the lower courts’ decisions, holding that there was no indication of an error of law in them.
(b)  Second set of proceedings: challenge against the Cabinet of Ministers’ instruction to suspend all gambling licences
31.  In the second set of proceedings (application form submitted on 4 November 2013), the applicant sought to have the acts of the Cabinet of Ministers and of the Ministry of Finance regarding the one-month suspension of her licence declared unlawful and quashed (see paragraph 11 above). She argued that no law conferred power on the Cabinet of Ministers and the Ministry of Finance to suspend a licence. The Licensing Law itself only provided for the revocation of licences in certain cases but not for the “suspension” of licences (see paragraph 64 above).
32.  The Kyiv Circuit Administrative Court returned the applicant’s claim in so far as it was directed against the Ministry, holding that the administrative courts at the place of her registration as a businessperson were competent. This resulted in the third set of proceedings instituted by her (see paragraph 37 below). It proceeded to examine the remainder of the claim against the Cabinet of Ministers. Similar claims lodged by three other companies were joined to the proceedings.
33.  On 27 September 2011 the first-instance court agreed with the applicant’s arguments, allowed the claim and declared unlawful the relevant part of the Cabinet of Ministers’ instruction (see paragraph 10 above).
34.  On 31 May 2012 the Kyiv Administrative Court of Appeal allowed appeals by the Cabinet of Ministers and the Ministry of Finance and quashed the first-instance court’s judgment. It referred to the constitutional rules defining the Cabinet of Ministers as the highest executive authority having the power to issue instructions to ministries (see paragraphs 60 and 62 below). The Ministry of Finance was required to follow the Cabinet’s instructions. Accordingly, the Cabinet of Ministers had had the power to issue the instruction in question.
35.  One of the other claimant companies lodged an appeal on points of law, which the applicant joined. The appeal presented essentially the same arguments as in the applicant’s claim (see paragraph 31 above).
36.  On 28 May 2013 the High Administrative Court upheld the Court of Appeal’s decision, having largely repeated its reasoning.
(c)  Third set of proceedings: challenge against the Ministry of Finance order suspending all gambling licences
37.  In the third set of proceedings (application form submitted on 19 July 2016) the applicant submitted a separate claim seeking to have the order of the Ministry of Finance which had suspended her licence declared unlawful and quashed. Her main argument was that the Ministry had acted ultra vires (see paragraph 31 above). The applicant also stated that, in addition to breaching domestic law, the order had also breached Article 1 of Protocol No. 1 which she quoted. She referred to the the Court’s judgment in Tre Traktörer to the effect that a licence constituted a “possession”. The applicant also invoked Article 17 of the Convention.
38.  On 2 July 2013 the Zakarpattya Circuit Administrative Court rejected her claim, holding that, because the Cabinet of Ministers had powers to give instructions to ministries (see paragraph 62 below) and the ministries had the power to issue their own orders, the Ministry, in issuing the impugned order which complied with the Cabinet of Ministers’ instructions, had acted within its powers.
39.  The applicant appealed. She reiterated the same arguments, insisting that the order was contrary to higher-level norms than the Cabinet of Ministers’ instruction, namely the Licensing Law and Article 1 of Protocol No. 1.
40.  On 2 December 2015 the Lviv Administrative Court of Appeal upheld the first-instance court’s judgment, essentially repeating its reasoning.
41.  On 20 January 2016 a judge of the High Administrative Court denied the applicant’s company leave to appeal on points of law, stating that there was no appearance of any error of law in the lower courts’ decisions.
42.  The third applicant, a single-shareholder company, was established in September 2008.
43.  On 10 November 2008 the applicant company paid the full price for a five-year licence to the State Treasury and on 14 November 2008 it obtained its licence, valid from 28 October 2008 to 27 October 2013.
44.  According to the applicant company, it invested in preparation for the opening of a gambling business, acquired permits, cash registers and gambling equipment, rented premises and recruited staff, but never launched the business because of the prohibition of gambling.
45.  In July 2009 the applicant company asked the Ministry of Finance for a refund of the licence fees but was told that no refund was forthcoming.
46.  In November 2010 the applicant company asked an authority responsible for licensing for a certificate, which it intended to submit to the State Treasury Department to obtain reimbursement of the funds paid for the licence, under the procedure established for the reimbursement of erroneous and excess payments to the Treasury (see paragraph 77 below).
47.  Having received no response, the applicant company lodged a claim against the licensing authority, the State Treasury Administration and the Ministry of Finance, seeking reimbursement of the amount it had paid for the licence. It relied on the provisions concerning reimbursement of erroneous or excess payments to the Treasury and the provisions of the Code of Administrative Justice that required the courts to give judgment even in the absence of relevant legislation (see paragraphs 76 and 77 below).
48.  On 4 May 2011 the Lviv Circuit Administrative Court allowed the applicant company’s claim in part and ordered the State Treasury to return UAH 963,030.15 (about EUR 80,600 at the time), corresponding to the part of the licence fees for the period from the Prohibition Law’s entry into force to the date on which the applicant company’s licence was supposed to expire (27 October 2013).
The court stated, in particular, that the defendants’ main argument was that there was no established mechanism for the reimbursement of funds paid for revoked gambling licences. However, the court rejected that argument, relying on the provision of the Code of Administrative Justice that required the courts to give judgment even in the absence of relevant legislation (see paragraphs 76 below). The key consideration for the court was that, under the Licensing Law, a licence was a document which granted the right to operate a particular business for a certain period of time. The applicant company had paid and obtained the licence for the totality of that period. Given that it was prevented from actually using the licence, a portion of the fees had to be reimbursed.
49.  The defendants appealed. Copies of their appeals have not been provided to the Court.
50.  The applicant company responded. In addition to its other arguments, it relied on Article 1 of Protocol No. 1, the Court’s judgment in Tre Traktörer AB (cited above) and the provision of the Code of Administrative Justice requiring administrative courts to apply the Court’s case-law (see paragraph 76 below). It argued that, because the Prohibition Law had revoked its licence in the absence of any grounds for doing so under the Licensing Law and, indeed, in the absence of any wrongdoing on its part, the domestic law did not meet the requirement of “foreseeability” under the Convention. It also pointed out that the transitional provisions of the Prohibition Law required the Cabinet of Ministers to enact new regulations as required for the implementation of the Prohibition Law (see paragraph 67 below). The applicant company argued that those regulations had to include the mechanism for compensation but that the Cabinet’s failure to enact them could not disadvantage the former licence holders.
51.  On 21 July 2014 the Lviv Administrative Court of Appeal quashed the first-instance court’s decision, holding that the Prohibition Law did not provide for any mechanism for reimbursement and that the procedures established for erroneous or excess payments to the Treasury were inapplicable.
52.  The applicant company appealed, arguing that the first-instance court’s judgment had been correct. It reiterated its arguments. Developing its argument in respect of the alleged lack of foreseeability of the domestic law, it also quoted certain passages from Sierpiński v. Poland (no. 38016/07, §§ 72, 79 and 80, 3 November 2009) concerning uncertainty in respect of compensation as applicable to its own case.
53.  On 15 March 2016 the High Administrative Court upheld the appeal court’s decision. It stated that the lower courts’ conclusion that the procedures established for erroneous or excess payments were inapplicable had been correct.
54.  Article 8 of the Constitution provides that the provisions of the Constitution have direct effect and guarantees the right to apply to the courts relying directly on the Constitution.
55.  Article 9 provides that international treaties ratified by Parliament are part of domestic law.
56.  Article 13 § 4 requires the State to ensure the protection of property.
57.  Article 19 establishes the principle of legality and the principle that any action by the public authorities must be based on powers granted by the Constitution or laws passed by Parliament.
58.  Article 41 guarantees the right to property. It provides, in particular:
“...
No one shall be unlawfully deprived of the right of property. The right of private property is inviolable.
The expropriation of objects covered by the right of private property may be carried out only in exceptional cases for reasons of social necessity, on the grounds of and by the procedure established by law, and on condition of full compensation for their value in advance. The expropriation of such objects with full compensation for their value at a subsequent stage is permitted only under conditions of martial law or a state of emergency.
Confiscation of property may take place only pursuant to a court decision, in the cases, to the extent and by the procedure established by law.
...”
59.  Article 42 provides that everyone has the right to engage in entrepreneurial activity that is not prohibited by law.
60.  Article 133 defines the Cabinet of Ministers as the highest body in the executive branch of government.
61.  Article 150 authorises the Constitutional Court to review the constitutionality of laws enacted by Parliament on applications from the President, forty-five members of parliament, the Supreme Court, the Parliamentary Commissioner for Human Rights and the legislature of the Autonomous Republic of Crimea. At the relevant time, no right to apply for individual constitutional review was recognised.
62.  Section 1 of the Law provided that the Cabinet of Ministers exercised executive power directly, as well as through ministries and other executive agencies which it had the power to direct, coordinate and control.
63.  Section 15 of the Law, as worded at the material time, provided that payment for a licence had to be made at the time that the licence was issued. The fee for the issuance of a licence for gambling operations was EUR 30,000 per year, and licences were issued for a five-year term.
64.  Section 21 of the Law contained an exhaustive list of situations in which a licence could be revoked (анулювання), such as in the event of a repeated breach of the terms of the licence or misrepresentation in the licence application. The Law did not contain any provisions on the revocation of licences in the event of the prohibition of a previously lawful licensed activity. Neither did it provide for any temporary “suspension” (зупинення) of licences.
65.  The Laws regulating fire and workplace safety and public-health supervision provide for the right of the relevant inspectors to conduct checks of various establishments and suspend their operations if they present a risk of fire, workplace accidents or health hazards.
66.  Section 2 of the Law on the Prohibition of Gambling in Ukraine of 15 May 2009 contains a general prohibition on gambling in Ukraine with some limited exceptions – notably in respect of lotteries.
67.  Section 4 of the Law contains transitional provisions.
Pursuant to section 4(1), the Law came into effect on the date of its official publication, which occurred on 25 June 2009; it was to remain in effect until a law was passed authorising gambling in specially designated areas (no such law has been passed to date).
Section 4(2) provides that gambling licences issued prior to the date of the Law’s entry into force are deemed to have been revoked and that no new licences will be issued.
Section 4(4) directed the Cabinet of Ministers to take the following action, within three months:
(i)  submit to Parliament a bill providing for gambling in specially designated areas;
(ii)  submit to Parliament draft amendments to other laws flowing from the Prohibition Law;
(iii)  amend its own regulations in line with the Prohibition Law and ensure that executive agencies did the same at their level; and
(iv)  adopt new regulations as required for the implementation of the Law.
68.  Article 1166 of the Code, which sets out general grounds for tort liability, provides that a person who causes damage can be released from liability where the damage did not result from intent or negligence on his or her part. It also provides that a person can be held liable for lawful acts where the Code and other laws so provide.
69.  Subsequent Articles of the Code set out alternative grounds for possible claims for damages in tort.
70.  Article 1170 of the Code provides that, in the event of the enactment of a law which terminates property rights in respect of certain assets (у разі прийняття закону, що припиняє право власності на певне майно), the State is to compensate the owner for the loss in its entirety. This provision is also referred to as the “Legislative Takings Clause” (see paragraph 18 above).
71.  Article 1173 of the Code requires the public authorities to compensate for damage caused by unlawful decisions, actions or inaction of such authorities. There is no need to show that the authority acted with intent or negligence.
72.  Article 1175 of the Code provides for compensation for the adoption of a legislative document (нормативно-правового акта) if that document is subsequently declared unlawful and rescinded. There is no need to show intent or negligence.
73.  As a general rule, the statute of limitations for tort claims is three years (Article 257 of the Code).
74.  Section 17 of the Law on the Execution of Judgments of the European Court of Human Rights of 2006 provides that the courts, when deciding cases, are to apply the Convention and Protocols and the Court’s case-law of as a source of law.
75.  Section 19 of the International Treaties Law of 2004 provides that international treaties are deemed part of domestic law and prevail over conflicting provisions of domestic legislation.
76.  Article 8 §§ 1 and 2 of the 2005 Code of Administrative Justice, as worded at the relevant time, provided that the courts were guided (керується) by the principle of the rule of law and that they had to apply this principle taking into account the case-law of the European Court of Human Rights. Paragraph 3 provided that claimants could invoke the Constitution directly.
Under paragraph 4 of the same Article, the courts could not refuse to give judgment if there was no legislation governing matters before them or if the relevant legislation was incomplete, unclear or contradictory. A similar provision could be found in Article 4 of the 1991 Code of Commercial Procedure.
Article 9 § 4 of the Code of Administrative Justice provided that in the event of a contradiction between a legislative act and the Constitution, an international treaty or a legislative instrument which was higher in the hierarchy of norms and one which was lower, the court was to apply the former. Paragraph 6 provided that in the event of a conflict between a binding international treaty and a law enacted by Parliament, the court had to apply the treaty. A similar provision could be found in Article 4 of the Code of Commercial Procedure.
77.  The State Committee for Entrepreneurship, the State agency responsible for certain licensing matters at the time, established (order no. 88 of 7 May 2009) a procedure for reimbursement of funds paid erroneously or excess payments for licences and permits. Under the procedure, on a licensee’s application a regional department of the Committee had to issue a reimbursement certificate, to be submitted to the State Treasury Administration. The State Treasury Administration also approved a procedure for reimbursement of taxes and payments made to the Treasury in error or in excess of what was due (помилково або надмірно зарахованих).
78.  The system of gambling regulation proposed by the Cabinet of Ministers in its bill no. 3535 of 23 December 2008 contained the following elements: (i) a licensing system with five-year licences, provisions for revocation and temporary suspension of licences; (ii) a requirement for gambling operators to own rather than rent all gambling equipment and to comply with certain minimum capital levels, from EUR 200,000 to EUR 1,000,000 depending on the type of operations; (iii) restriction of the locations where gambling establishments could operate, barring them from such places as schools and public transport, and minimum requirements for the size of gambling establishments (500 sq. m for casinos and 250 sq. m for others); (iv) special certification for gambling equipment and software.
The text proposed for the second reading tightened certain regulatory requirements, such as raising the minimum age for entry to gambling establishments from eighteen to twenty-one years and adding certain additional places, such a cultural heritage sites, to the list of places where gambling would be prohibited.