FOURTH SECTION
DECISION
AS TO THE ADMISSIBILITY OF
Application no. 38864/08
by Seppo SORMUNEN
against Finland
The European Court of Human Rights (Fourth Section), sitting on 4 January 2011 as a Chamber composed of:
	Nicolas Bratza, President,
	David Thór Björgvinsson,
	Ján Šikuta,
	Päivi Hirvelä,
	Ledi Bianku,
	Nebojša Vučinić,
	Vincent A. de Gaetano, judges,
and Fatoş Aracı, Deputy Section Registrar,
Having regard to the above application lodged on 11 August 2008,
Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicant,
Having deliberated, decides as follows:
THE FACTS
The applicant, Mr Seppo Sormunen, is a Finnish national who was born in 1944 and lives in Nummela. He was represented before the Court by Mr Markku Fredman, a lawyer practising in Helsinki. The Finnish Government (“the Government”) were represented by their Agent, Mr Arto Kosonen of the Ministry for Foreign Affairs.
A.  The circumstances of the case
The facts of the case, as submitted by the parties, may be summarised as follows.
In 2000 and 2001 the local tax authorities carried out a tax inspection concerning the tax years 1997, 1998 and 1999 in two limited liability companies. According to the trade registry, the applicant was the managing director of one of the companies between 19 December 1996 and 1 December 1998 but had no formal position in the other company. Nor did he own any shares in either of the companies.
On the basis of the tax inspection, the tax authorities found on 6 September 2001 and 6 September 2002 that the applicant had evaded taxes for the tax years 1997, 1998 and 1999 as he had been the real actor and authority in both of the companies and had received benefits from them which had not been declared. These benefits were to be considered as disguised dividends given to the applicant by the companies. An additional tax and a tax surcharge (veronkorotus, skatteförhöjning), amounting in total to 41,451 euros, were imposed on the applicant.
The applicant sought rectification from the Uusimaa Tax Rectification Committee (verotuksen oikaisulautakunta, prövningsnämnden i beskattningsärenden). On 29 January 2004 the Committee rejected the applicant’s applications.
The applicant appealed to the Helsinki Administrative Court (hallinto-oikeus, förvaltningsdomstolen), claiming that the taxation decisions should be quashed as he could not be held responsible for tax evasion.
On 29 September 2006 the Administrative Court quashed the previous taxation decisions. It found that no additional tax or tax surcharge could be imposed on the applicant as he had not owned any shares in either of the companies. No tax could be levied on the disguised dividends solely on the ground that a person had been a real actor and authority in a company. This decision became final and the taxation for the years 1997, 1998 and 1999 was rectified accordingly on 20 November 2006.
On 16 January 2004, while the taxation proceedings were still pending, the public prosecutor brought charges against the applicant for, inter alia, aggravated tax fraud. The applicant was accused of having failed to supply complete information in his tax returns for the tax years 1997, 1998 and 1999 with the intent of evading the tax due, amounting in total to 41,451 euros. The public prosecutor considered that the applicant had sought considerable financial benefit, that the offence was committed in a particularly methodical manner and that the tax fraud was also aggravated when assessed as a whole. The tax authorities concurred with the charges brought by the public prosecutor and pursued also a compensation claim, which was joined to the criminal charges.
On 25 August 2005 the Helsinki District Court (käräjäoikeus, tingsrätten) found the applicant guilty of aggravated tax fraud and sentenced him to a six-month prison sentence. He was also banned from business operations for five years and was ordered to pay compensation to the tax authorities in the amount of the evaded taxes, that is, 41,451 euros plus interest, together with costs and expenses. The court found that the applicant had not contested his failure to supply complete information in his tax returns. As the applicant had sought considerable financial benefit, the offence had been committed in a methodical manner over three years and the tax fraud had also been aggravated when assessed as a whole, the applicant was found guilty of aggravated tax fraud.
The applicant appealed to the Helsinki Appeal Court (hovioikeus, hovrätten), requesting that his conviction be quashed. He referred to the decision of 29 September 2006 by the Helsinki Administrative Court, in which the court had quashed the previous taxation decisions. He claimed that there had been no obligation to declare the benefits allegedly received, as such benefits had not existed. In any event, the element of intent was missing.
On 15 May 2007 the Helsinki Appeal Court upheld, after having held an oral hearing and having voted (2-1), the District Court’s judgment in this respect. It found that, according to the Constitution, the general courts, when judging criminal cases, were not bound by the interpretation given by the administrative bodies. Criminal and taxation proceedings were different in nature. In the present case, the decision of the Administrative Court, which had been solely based on tax inspection reports, was not binding on the Appeal Court but the case was to be judged only on the basis of the evidence gathered during the oral hearing. On the basis of this evidence the court found that the applicant had evaded taxes in the amount of 41,451 euros when failing to declare the received benefits. By this tax evasion the applicant had sought considerable financial benefit, the offence had been committed in a particularly methodical manner and the tax fraud had also been aggravated when assessed as a whole. No reduction of the sentence was made on the basis of the Administrative Court’s decision of 29 September 2006.
The dissenting judge considered that the evidence presented in the Appeal Court was based in most parts on the tax inspection reports which had been confirmed by a witness. The evidence was therefore mainly the same as that relied on by the Administrative Court. Moreover, the Supreme Administrative Court (korkein hallinto-oikeus, högsta förvaltnings-domstolen) had confirmed in its case-law (KHO 1994-B-547) that no tax could be levied on a person for disguised dividends if the person had not owned any shares in the company in question. According to the practice of the Supreme Court (korkein oikeus, högsta domstolen), a conviction for tax fraud would require that a tax be levied in the administrative procedure (see KKO 2004:58). In these circumstances the dissenting judge considered that the applicant should have been acquitted on the basis of the principle of in dubio pro reo.
By a letter dated 2 July 2007 the applicant appealed to the Supreme Court. He claimed that he could not be convicted for tax fraud as he had not been ordered to pay any taxes for the same acts of which he had been accused. There was no duty to pay compensation to the tax authorities as, according to the Administrative Court, there was not even any taxable income.
On 14 February 2008 the Supreme Court refused leave to appeal.
B.  Relevant domestic law and practice
Section 57 of the Tax Assessment Procedure Act (laki verotusmenettelystä, lagen om beskattningsförfarande, Act no. 1558/95) provides that if a person has failed to make the required tax returns or has given false information to taxation authorities and tax has therefore been incompletely or partially levied, the tax payer shall be ordered to pay unpaid taxes together with an additional tax and a tax surcharge.
According to Chapter 29, sections 1 and 2, of the Penal Code (rikoslaki, strafflagen; as amended by Act no. 1228/1997), a person who (1) gives a taxation authority false information on a fact that influences the assessment of tax, (2) files a tax return concealing a fact that influences the assessment of tax, (3) for the purpose of avoiding tax, fails to observe a duty pertaining to taxation, influencing the assessment of tax, or (4) acts otherwise fraudulently and thereby causes or attempts to cause a tax not to be assessed, or too low a tax to be assessed or a tax to be unduly refunded, shall be sentenced for tax fraud to a fine or to imprisonment for a period of up to two years. If by the tax fraud (1) considerable financial benefit is sought or (2) the offence is committed in a particularly methodical manner and the tax fraud is aggravated when assessed as a whole, the offender shall be sentenced for aggravated tax fraud to imprisonment for a period between four months and four years.
In the case KHO 1994-B-547 the Supreme Administrative Court found that no tax could be levied on a person for disguised dividends if the person did not own any shares in the company in question.
In the case KKO 2004:58 the Supreme Court found that a conviction for tax fraud would require that, in any event, a tax be levied. It stated the following:
“According to [Chapter 29, Section 1, subparagraph 3 of the Penal Code], a conviction for tax fraud requires that the offender has caused or attempted to cause that, in general, a tax shall not be levied. It does not require that the amount of the said tax would have to be confirmed finally by a tax decision or otherwise. In its decision, a general court is also not bound by decisions rendered in taxation or administrative law proceedings although it is natural that the said kind of decision has cogent significance in the discretion. Ultimately, a court shall consider itself the amount of tax at issue. Therefore, the fact that a dispute exists regarding the fiscal sanction does not mean that the essential elements of tax fraud could not be considered to have been fulfilled. The requirement is, however, that a tax shall be ordered in the matter. In such a situation, a taxpayer cannot, either, hinder or try to hinder a tax to be levied without the threat of a sanction by not filing an appropriate notification only on the grounds that the question of determination of tax is in his or her opinion not clear.”
The Supreme Court has taken a stand on the ne bis in idem principle in its recent precedent case KKO 2010:46 which concerned tax surcharges and aggravated tax fraud. In that case it found, inter alia, that, in addition to res judicata force, traditionally pending criminal charges already prevent in Finland the bringing of another set of criminal proceedings brought in the same matter (lis pendens). Both principles apply only within the limits of criminal proceedings, not in cases crossing from administrative proceedings to criminal proceedings or vice versa. It is the duty of the public prosecutor to make sure ex officio before pressing charges that there are no other pending criminal cases on the same matter against the accused. Such a duty does not exist in relation to cases which cross over the limits of criminal proceedings.
COMPLAINT
The applicant complained under Article 4 of Protocol No. 7 to the Convention that he had been tried twice for essentially the same offence.
THE LAW
The applicant complained that he had been tried twice for essentially the same offence in breach of Article 4 of Protocol No. 7 to the Convention, which reads as follows:
“1.  No one shall be liable to be tried or punished again in criminal proceedings under the jurisdiction of the same State for an offence for which he has already been finally acquitted or convicted in accordance with the law and penal procedure of that State.
2.  The provisions of the preceding paragraph shall not prevent the reopening of the case in accordance with the law and penal procedure of the State concerned, if there is evidence of new or newly discovered facts, or if there has been a fundamental defect in the previous proceedings, which could affect the outcome of the case.
3.  No derogation from this Article shall be made under Article 15 of the Convention.”
The Government noted that it did not appear from the documents that the applicant had invoked Article 4 of Protocol No. 7 to the Convention before the domestic courts, not even in substance. The allegation that the courts should apply the ne bis in idem principle ex officio had no relevance in the matter as this issue was not at stake in the present case.
The applicant disagreed with this: he had raised the substance of the ne bis in idem principle in the domestic proceedings. The relevance of the Administrative Court decision had been thoroughly discussed in the Appeal Court judgment. Moreover, the applicant had raised the issue in substance in his appeal to the Supreme Court. Ne bis in idem was a principle that should be applied ex officio by the courts and for this reason the general courts had been made aware of the final judgment of the Administrative Court.
The Court reiterates that the purpose of the requirement of exhaustion of domestic remedies under Article 35 § 1 of the Convention is to afford the Contracting States the opportunity to prevent or put right the violations alleged against them before those allegations are submitted to the Court. Consequently, States are dispensed from answering for their acts before an international body before they have had an opportunity to put matters right through their own legal system. That rule is based on the assumption, reflected in Article 13 of the Convention – with which it has close affinity – that there is an effective remedy available in respect of the alleged breach in the domestic system. In this way, it is an important aspect of the principle that the machinery of protection established by the Convention is subsidiary to the national systems safeguarding human rights. Thus the complaint intended to be made subsequently to the Court must first have been made – at least in substance – to the appropriate domestic body, and in compliance with the formal requirements and time-limits laid down in domestic law (see Selmouni v. France [GC], no. 25803/94, § 74, ECHR 1999-V, with further references).
The Court notes that the applicant did not raise the ne bis in idem principle in his appeals to the Helsinki Appeal Court or to the Supreme Court, not even in substance. In his appeals the applicant only concentrated on showing that, according to him, he could not be convicted for a tax fraud if no tax had been imposed at all. He has made no reference to Article 4 of Protocol No. 7 to the Convention nor can his submissions be interpreted as making reference to this principle even in substance.
As to the applicant’s allegation that the national courts should have applied the ne bis in idem principle ex officio in the present case, the Court notes that, according to national law, the national courts and authorities are under no such obligation. In any event, even if the Finnish courts were able, or even obliged, to examine the ne bis in idem principle of their own motion under the Convention, this cannot have dispensed the applicant from relying on the Convention in those courts or from advancing arguments to the same or like effect before them, thus drawing their attention to the problem he intended to submit subsequently, if need be, to the institutions responsible for European supervision (see Ahmet Sadık v. Greece, 15 November 1996, § 33, Reports of Judgments and Decisions 1996‑V).
It follows that the Government’s objection is upheld and the applicant’s complaint must be rejected under Article 35 §§ 1 and 4 of the Convention for non-exhaustion of domestic remedies.

For these reasons, the Court unanimously
Declares the application inadmissible.
	Fatoş Aracı	Nicolas Bratza	Deputy Registrar	President