FIFTH SECTION      CASE OF SVIT ROZVAG, TOV AND OTHERS v. UKRAINE (Applications nos. 13290/11 and 2 others)       JUDGMENT This version was rectified on 26 August 2019under Rule 81 of the Rules of Court. STRASBOURG 27 June 2019   FINAL 27/09/2019 This judgment has become final under Article 44 § 2 of the Convention. It may be subject to editorial revision.In the case of Svit Rozvag, TOV and Others v. Ukraine,The European Court of Human Rights (Fifth Section), sitting as a Chamber composed of: Angelika Nußberger, President, Yonko Grozev, Ganna Yudkivska, Síofra O’Leary, Mārtiņš Mits, Lәtif Hüseynov, Lado Chanturia, judges,and Claudia Westerdiek, Section Registrar,Having deliberated in private on 4 June 2019,Delivers the following judgment, which was adopted on that date:PROCEDURE1. The case originated in applications against Ukraine lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) on the various dates listed in the Appendix by two Ukrainian companies and one Ukrainian national whose details are listed in the Appendix.2. The applicants were represented by lawyers specified in the Appendix. The Ukrainian Government (“the Government”) were represented by Ms O. Davydchuk, Head of the Office of the Government Agent before the European Court of Human Rights.3. The applicants alleged, in particular, that the prohibition of gambling operations by the Law of 15 May 2009, in particular the revocation of their previously acquired multi-year gambling licences, amounted to an interference with their right to the peaceful enjoyment of their possessions, contrary to Article 1 of Protocol No. 1; the second applicant also alleged that Article 1 of Protocol No. 1 had been breached on account of the suspension of her licence by order of the Ministry of Finance on 8 May 2009, shortly prior to the total prohibition of gambling operations; the first and second applicants further alleged, under Article 6 § 1 of the Convention, that the domestic courts had failed to give sufficient reasons for their decisions, and in particular had failed to comment on the applicants’ references, in support of their claims, to Article 1 of Protocol No. 1 and to the Court’s case-law; the first and third applicants also alleged, under Article 13, that they did not have an effective remedy with respect to the possible infringement of their rights under Article 1 of Protocol No. 1.4. On 3 November 2017 notice of the above complaints was given to the Government and the remainder of the second and third applicants’ complaints were declared inadmissible pursuant to Rule 54 § 3 of the Rules of Court.THE FACTSI. THE CIRCUMSTANCES OF THE CASEA. Concerning all applicants5. 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.B. The applicants’ particular circumstances1. The first applicant17. 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.2. The second applicant24. 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 fees25. 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 licences31. 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.

Outcome for Article P1-1: violation