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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Mellat v HM Treasury [2015] EWHC 1258 (Comm) (06 May 2015) URL: https://www.bailii.org/ew/cases/EWHC/Comm/2015/1258.html Cite as: [2015] EWHC 1258 (Comm) |
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QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Fetter Lane, London, EC4A 1NL |
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B e f o r e :
____________________
Bank ![]() ![]() |
Claimant |
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- and - |
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Her Majesty's Treasury |
Defendant |
____________________
Mr Steven Kovats QC, Mr Patrick Goodall QC & Mr Julian Blake (instructed by Government Legal Department) for the Defendant
Hearing dates: 24 and 25 March 2015
____________________
Crown Copyright ©
The Honourable Mr Justice Flaux:
Introduction and background
"The object of the direction, as the Treasury acknowledges, was to shut the Bank out of the UK financial sector, and that has been its effect. Before the direction, the Bank had a substantial international business, much of it international trade finance transacted through London. In the year to March 2009, it issued letters of credit with an aggregate value of about US$11 billion, of which about a quarter represents letters of credit in respect of business transacted through the United Kingdom. The Bank's own estimate of its revenue losses is about US$25 million a year. In addition, the Bank has been prevented from drawing on 183 million euros of call and time deposits with its part-owned subsidiary in London. Important banking relationships have been lost to other banks. The judge found that since the direction, the bank has been unable to make profitable use of the goodwill which it had established in the United Kingdom, which was a "possession" for the purpose of article 1 of the First Protocol to the European Convention on Human Rights. He held that "on any view the effect has been substantial, and suffices to require all of the Bank's challenges to the Order to be addressed and determined." This much is not in dispute."
"…the essential question raised by the Bank's substantive objections to the direction is whether the interruption of commercial dealings with BankMellat
in the United Kingdom's financial markets bore some rational and proportionate relationship to the statutory purpose of hindering the pursuit by Iran of its weapons programmes."
20. The requirements of rationality and proportionality, as applied to decisions engaging the human rights of applicants, inevitably overlap. The classic formulation of the test is to be found in the advice of the Privy Council, delivered by Lord Clyde, in De Freitas v Permanent Secretary of Ministry of Agriculture, Fisheries, Lands and Housing [1999] 1 AC 69 at 80. But this decision, although it was a milestone in the development of the law, is now more important for the way in which it has been adapted and applied in the subsequent case-law, notably R (Daly) v Secretary of State for the Home Department [2001] 2 AC 532 (in particular the speech of Lord Steyn), R v Shayler [2003] 1 AC 247 at paras 57-59 (Lord Hope of Craighead), Huang v Secretary of State for the Home Department [2007] 2 AC 167 at para 19 (Lord Bingham of Cornhill) and R (Quila) v Secretary of State for the Home Department [2012] 1 AC 621 at para 45. Their effect can be sufficiently summarised for present purposes by saying that the question depends on an exacting analysis of the factual case advanced in defence of the measure, in order to determine (i) whether its objective is sufficiently important to justify the limitation of a fundamental right; (ii) whether it is rationally connected to the objective; (iii) whether a less intrusive measure could have been used; and (iv) whether, having regard to these matters and to the severity of the consequences, a fair balance has been struck between the rights of the individual and the interests of the community. These four requirements are logically separate, but in practice they inevitably overlap because the same facts are likely to be relevant to more than one of them. Before us, the only issue about them concerned (iii), since it was suggested that a measure would be disproportionate if any more limited measure was capable of achieving the objective…
21. None of this means that the court is to take over the function of the decision-maker, least of all in a case like this one. As Maurice Kay LJ observed in the Court of Appeal, this case lies in the area of foreign policy and national security which would once have been regarded as unsuitable for judicial scrutiny. The measures have been opened up to judicial scrutiny by the express terms of the Act because they may engage the rights of designated persons or others under the European Human Rights Convention. Even so, any assessment of the rationality and proportionality of a Schedule 7 direction must recognise that the nature of the issue requires the Treasury to be allowed a large margin of judgment. It is difficult to think of a public interest as important as nuclear non-proliferation. The potential consequences of nuclear proliferation are quite serious enough to justify a precautionary approach."
"25. A measure may respond to a real problem but nevertheless be irrational or disproportionate by reason of its being discriminatory in some respect that is incapable of objective justification. The classic illustration is A v Secretary of State for the Home Department [2005] 2 AC 68, another case in which the executive was entitled to a wide margin of judgment for reasons very similar to those which I have acknowledged apply in the present case. The House of Lords was concerned with a derogation from the Convention permitting the detention of non-nationals whose presence in the United Kingdom was considered by the Home Secretary to be a risk to national security and who could not be deported. The House held that this was not a proportionate response to the terrorist threat which provoked it: see in particular paras 31, 43-44 (Lord Bingham of Cornhill), 132 (Lord Hope of Craighead), and 228 (Baroness Hale of Richmond)…
26. Every case turns on its own facts, and analogies with other decided cases can be misleading. The suppression of terrorism and the prevention of nuclear proliferation are comparable public interests, but the individual right to liberty engaged in A v Secretary of State for the Home Department can fairly be regarded as the most fundamental of all human rights other than the right to life and limb. The right to the peaceful enjoyment of business assets protected by article 1 of the First Protocol, is not in the same category of human values. But the principle is not fundamentally different.
27. I would not go so far as to say that the Schedule 7 direction in this case had no rational connection with the objective of frustrating as far as possible Iran's weapons programmes. On the footing that a precautionary approach is justified, the elimination of any Iranian bank from the United Kingdom's financial markets may well have added something to Iran's practical problem in financing transactions associated with those programmes, just as the incarceration of some potential terrorists under Part IV of the Crime and Security Act 2001 may have made some difference to the reduction of terrorism. But I think that the distinction between BankMellat
and other Iranian banks which was at the heart of the case put to Parliament by ministers was an arbitrary and irrational distinction and that the measure as a whole was disproportionate. This is because once it is found that the problem is not specific to Bank
Mellat
but an inherent risk of banking, the risk posed by Bank
Mellat
's access to those markets is no different from that posed by the access which comparable banks continued to enjoy. Moreover, the discriminatory character of the direction must drastically reduce its effectiveness as a means of impeding the Iranian weapons programmes. As the Exchequer Secretary herself pointed out, "as long as all financial sanctions and relevant risk warnings are complied with, alternative banks may be used." Nothing in the Treasury's case explains why we should accept that it is necessary to eliminate Bank
Mellat
's business in London in order to achieve the objective of the statute, if the same objective can be sufficiently achieved in the case of comparable banks by requiring them to observe financial sanctions and relevant risk warnings. It may well be that other Iranian banks have not been found to number among their clients entities involved in Iran's nuclear and ballistic missile programmes. But it follows from the fact that this is a problem inherent in the conduct of international banking business that they are as likely to do so as Bank
Mellat
. The direction was irrational in its incidence and disproportionate to any contribution which it could rationally be expected to make to its objective. I conclude that that it was unlawful."
"Prior to the Order, the Bank had a thriving and profitable international finance business. It had successfully implemented an aggressive growth strategy both in Iran and internationally, and was committed to building and expanding its operations in Europe. It held c.33 million accounts for c.19 million customers internationally, across c.2000 branches in Iran, Turkey and South Korea. It had subsidiaries in London, Malaysia and Armenia, and a substantial shareholding in a commercial bank in Germany. The Order destroyed the Bank's business in the UK and (in consequence, and as the Treasury intended) caused serious and irreparable damage to its business internationally. Suppliers such as Swift and Reuters withdrew their services. Customers and counterparties left the Bank en masse for its international competitors. To compound the position, the Treasury encouraged its international partners to pass 'copycat' restrictions, in many cases in materially identical form to the 2009 Order, to ensure that the Bank would be unable to mitigate its losses elsewhere. The overall result has been catastrophic. "
The preliminary issues
(1) Whether, in light of the judgment of the Supreme Court, it is open to the Defendant to contend that it did not act in a way which was incompatible with a Convention right and/or unlawful contrary to section 6(1) of the HRA.
(2) Whether, as a matter of law, it is open to the Defendant to contend that loss caused to the Claimant by a diminution in the EBT generated by its subsidiaries (as pleaded in paragraphs 109 to 113 of the Particulars of Claim) is irrecoverable.
(3) (a) Whether the only "possessions" of the Claimant within the meaning of A1P1 with which the 2009 Order could have interfered are (i) any "unperformed concluded transactions" as defined in paragraph 40.4.2 of the Amended Defence and (ii) marketable goodwill to the extent (if any) that it was represented by or referable to any such "unperformed concluded transactions".
(b) If not, whether the 2009 Order could in law have interfered with each of the categories of "possessions" identified in the Claimant's schedule served on 5 December 2014 pursuant to paragraph 4 of the Order of Eder J made on 31 October 2014.
The legal and statutory framework
"63Application to set aside financial restrictions decisionE+W+S+N.I.
This sectionnoteType=Explanatory Notes has no associated
(1)This section applies to any decision of the Treasury in connection with the exercise of any of their functions under—
…
(c)Schedule 7 to this Act (terrorist financing, money laundering and certain other activities: financial restrictions).
(2)Any person affected by the decision may apply to the High Court or, in Scotland, the Court of Session to set aside the decision.
(3)In determining whether the decision should be set aside the court shall apply the principles applicable on an application for judicial review.
(4)If the court decides that a decision should be set aside it may make any such order, or give any such relief, as may be made or given in proceedings for judicial review."
"…. Our law does not recognise a right to claim damages for losses caused by unlawful administrative action (although compensation may sometimes be available to the victims of maladministration). There has to be a distinct cause of action in tort or under the Human Rights Act 1998. …."
"6 Acts of public authorities.E+W+S+N.I.
(1)It is unlawful for a public authority to act in a way which is incompatible with a Convention right.
…
7 Proceedings.E+W+S+N.I.
(1)A person who claims that a public authority has acted (or proposes to act) in a way which is made unlawful by section 6(1) may—
(a) bring proceedings against the authority under this Act in the appropriate court or tribunal, or
(b) rely on the Convention right or rights concerned in any legal proceedings,
but only if he is (or would be) a victim of the unlawful act.
8 Judicial remedies.E+W+S+N.I.
(1) In relation to any act (or proposed act) of a public authority which the court finds is (or would be) unlawful, it may grant such relief or remedy, or make such order, within its powers as it considers just and appropriate.
(2) But damages may be awarded only by a court which has power to award damages, or to order the payment of compensation, in civil proceedings.
(3) No award of damages is to be made unless, taking account of all the circumstances of the case, including—
(a) any other relief or remedy granted, or order made, in relation to the act in question (by that or any other court), and
(b) the consequences of any decision (of that or any other court) in respect of that act,
the court is satisfied that the award is necessary to afford just satisfaction to the person in whose favour it is made.
(4) In determining—
(a) whether to award damages, or
(b) the amount of an award,
the court must take into account the principles applied by the European Court of Human Rights in relation to the award of compensation under Article 41 of the Convention.
(5) A public authority against which damages are awarded is to be treated—
…
(b) for the purposes of the Civil Liability (Contribution) Act 1978 as liable in respect of damage suffered by the person to whom the award is made.
(6)In this section—
"court" includes a tribunal;
"damages" means damages for an unlawful act of a public authority; and
"unlawful" means unlawful under section 6(1)."
"Protection of property
Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties."
"It is evident that under article 41 there are three pre-conditions to an award of just satisfaction: (1) that the Court should have found a violation; (2) that the domestic law of the member state should allow only partial reparation to be made; and (3) that it should be necessary to afford just satisfaction to the injured party. There are also pre-conditions to an award of damages by a domestic court under section 8: (1) that a finding of unlawfulness or prospective unlawfulness should be made based on breach or prospective breach by a public authority of a Convention right; (2) that the court should have power to award damages, or order the payment of compensation, in civil proceedings; (3) that the court should be satisfied, taking account of all the circumstances of the particular case, that an award of damages is necessary to afford just satisfaction to the person in whose favour it is made; and (4) that the court should consider an award of damages to be just and appropriate. It would seem to be clear that a domestic court may not award damages unless satisfied that it is necessary to do so, but if satisfied that it is necessary to do so it is hard to see how the court could consider it other than just and appropriate to do so. In deciding whether to award damages, and if so how much, the court is not strictly bound by the principles applied by the European Court in awarding compensation under article 41 of the Convention, but it must take those principles into account. It is, therefore, to Strasbourg that British courts must look for guidance on the award of damages."
"if the 2009 Order caused the Claimant to suffer loss for which the Defendant is otherwise liable, it will not be open to the Defendant to contend that an award of damages is not necessary to afford just satisfaction to the Claimant within the meaning of section 8(3) of the Human Rights Act 1998."
As Lord Bingham said, once an award of damages is regarded as "necessary", it is difficult to see how the court could consider that it was not just and reasonable to award damages, thereby satisfying the fourth precondition.
"57. Section 8(4) of the HRA requires the Court to take into account the principles applied by the ECtHR when deciding whether to award damages and the amount of an award. Both the decisions of that Court and the HRA make it plain that when damages are required to vindicate human rights and to achieve just satisfaction, damages should be awarded. Our approach to awarding damages in this jurisdiction should be no less liberal than those applied at Strasbourg or one of the purposes of the HRA will be defeated and claimants will still be put to the expense of having to go to Strasbourg to obtain just satisfaction. The difficulty lies in identifying from the Strasbourg jurisprudence clear and coherent principles governing the award of damages.
58. The Law Commission Report states: "Perhaps the most striking feature of the Strasbourg case-law… is the lack of clear principles as to when damages should be awarded and how they should be measured."(para. 3.4) The Law Commission correctly suggests that part of the explanation for this is the absence of a common approach to damages in the different jurisdictions. It also refers to the views of different commentators, including the statement of Karen Reid (A Practitioner's Guide to the ECHR p.398) "The emphasis is not on providing a mechanism for enriching successful applicants but on its role in making public and binding findings of applicable human rights standards." Lester and Pannick, Human Rights Law and Practice (1999) p 41 note 3 comment: "The case-law of the European Court of Human Rights lacks coherence, and advocates and judges are in danger of spending time attempting to identify principles that do not exist."
59. Despite these warnings it is possible to identify some basic principles the Court of Human Rights applies. The fundamental principle underlying the award of compensation is that the Court should achieve what it describes as restitutio in integrum. The applicant should, insofar as this is possible, be placed in the same position as if his Convention rights had not been infringed. Where the breach of a Convention right has clearly caused significant pecuniary loss, this will usually be assessed and awarded. The awards of compensation to homosexuals, discharged from the armed forces, in breach of Article 8, for loss of earnings and pension rights in Lustig-Prean and Beckett v United Kingdom (2001) 31 EHRR 601 and Smith and Grady v United Kingdom (2001) 31 EHRR 620 are good examples of this approach." (my emphasis in [57] and [59]).
"Three conclusions can be drawn from this discussion. First, at the present stage of the development of the remedy of damages under section 8 of the 1998 Act, courts should be guided, following the Greenfield case [2005] 1 WLR 673, primarily by any clear and consistent practice of the European court. Secondly, it should be borne in mind that awards by the European court reflect the real value of money in the country in question. The most reliable guidance as to the quantum of awards under section 8 will therefore be awards made by the European court in comparable cases brought by applicants from the UK or other countries with a similar cost of living. Thirdly, courts should resolve disputed issues of fact in the usual way even if the European court, in similar circumstances, would not do so."
The first preliminary issue
"40.2 It is denied that the Supreme Court found that HM Treasury's decision to make the 2009 Order was unlawful contrary to section 6(1) of the Human Rights Act 1998 or that, in making the 2009 Order, HM Treasury had acted in any way which was incompatible with a Convention right. It is, however, admitted that the effect of the Supreme Court's judgment is that the 2009 Order did not satisfy the conditions provided for by law and was therefore an unjustified interference with BankMellat
's rights under Article 1 of Protocol 1 to the Convention insofar as Bank
Mellat held relevant possessions in accordance with paragraph 40.4 below, and HM Treasury's decision to make the 2009 Order was unlawful contrary to section 6(1) of the Human Rights Act 1998 to that extent." (the underlining being the amendment)
"The effect of the Order has been that which was intended: to shut the bank out of the UK financial sector. There has been some debate about the extent of the impact on the bank's business. Mr Swift QC for the Treasury has submitted that much of the impact of the Order could have been mitigated by conducting replacement business in other markets. Mr Hormozi states that there has been significant reputational damage to the bank and that others, not directly affected by the Order, such as Reuters Dealing Services have withdrawn vital services from the bank outside the UK. Mr Swift has also submitted that the impact upon the bank's "possessions", for the purposes of Article 1 of the First Protocol to the ECHR (A1P1), has not been as great as the total impact upon its business. That may, in principle be right, but the effect has none the less been significant: since 12 October 2009, the bank has been unable to make profitable use of the goodwill which it has established in the United Kingdom – undoubtedly a possession for the purposes of A1P1. Accordingly, it has not been entitled to the peaceful enjoyment of that possession. It is unnecessary for me to determine the precise extent to which the bank's enjoyment of its possessions and its business have been affected by the Order. On any view, the effect has been substantial and suffices to require all of the bank's challenges to the Order to be addressed and determined."
The second preliminary issue
"The[se] authorities support the following propositions. (1) Where a company suffers loss caused by a breach of duty owed to it, only the company may sue in respect of that loss. No action lies at the suit of a shareholder suing in that capacity and no other to make good a diminution in the value of the shareholder's shareholding where that merely reflects the loss suffered by the company. A claim will not lie by a shareholder to make good a loss which would be made good if the company's assets were replenished through action against the party responsible for the loss, even if the company, acting through its constitutional organs, has declined or failed to make good that loss. So much is clear from Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204 particularly at pp 222-223, Heron International, particularly at pp 261-262, George Fischer, particularly at pp 266 and 270-271, Gerber and Stein v Blake, particularly at pp 726-729. (2) Where a company suffers loss but has no cause of action to sue to recover that loss, the shareholder in the company may sue in respect of it (if the shareholder has a cause of action to do so), even though the loss is a diminution in the value of the shareholding. This is supported by Lee v Sheard [1956] QB 192, 195-196, George Fischer and Gerber. (3) Where a company suffers loss caused by a breach of duty to it, and a shareholder suffers a loss separate and distinct from that suffered by the company caused by breach of a duty independently owed to the shareholder, each may sue to recover the loss caused to it by breach of the duty owed to it but neither may recover loss caused to the other by breach of the duty owed to that other. I take this to be the effect of Lee v Sheard, at pp 195-196, Heron International, particularly at p 262, R P Howard, particularly at p 123, Gerber and Stein v Blake , particularly at p 726. I do not think the observations of Leggatt LJ in Barings at p 435b and of the Court of Appeal of New Zealand in Christensen v Scott at p 280, lines 25-35, can be reconciled with this statement of principle."
"However, the Court observes, firstly, that the present case can be distinguished from Agrotexim in one important way: the nature of the measures taken in the latter case, i.e. the prohibition to build and the institution of expropriation proceedings were such that it was the company itself which was the direct victim. In the present case, the measures complained of consisted of the cancellation of certain shares, including those belonging to the applicant; they were thus directly aimed at the applicant's rights as a shareholder. Accordingly, it was the applicant's rights protected by Article 1 of Protocol No. 1 which were directly affected. Moreover, in the Agrotexim case the measures complained of were to the detriment of the company, whereas in the present case their purpose was, on the contrary, to prevent the bank from becoming insolvent. Consequently, the bank was to benefit from them, whereas the applicant's interests suffered. "
"61. The Court observes that in the present case, the shares held initially by the applicant represented approximately 45 per cent of the bank's equity capital. Following measures of the Board of Receivers appointed by the National Bank of Poland, the applicant's shareholding decreased to 0,4 per cent. As a result, the value of the shares in real terms was very seriously reduced. The applicant undeniably lost his property as a result of these measures. Moreover, the applicant's powers resulting from his ownership of shares and his powers to influence the company and to vote have decreased seriously. It must be recalled in this connection that the term "victim" used in Article 25 of the Convention denotes the person directly affected by the act or omission which is at issue (Eckle v. Germany judgment of 15 July 1982, Series A no. 51, p. 30, § 66), in specie the applicant.
62. The Court accordingly concludes that in the present case the applicant, as a shareholder in a public company, may claim victim status regarding his complaint under Article 1 of Protocol No. 1."
"The Court notes at the outset that the applicant companies did not complain of a violation of the rights vested in them as shareholders of Fix Brewery, such as the right to attend the general meeting and to vote. Their complaint was based exclusively on the proposition that the alleged violation of the Brewery's right to the peaceful enjoyment of its possessions had adversely affected their own financial interests because of the resulting fall in the value of their shares. They considered that the financial losses sustained by the company and the latter's rights were to be regarded as their own, and that they were therefore victims, albeit indirectly, of the alleged violation. In sum, they sought to have the company's corporate veil pierced in their favour."
"The Commission's view would also engender considerable problems concerning the requirement of exhaustion of domestic remedies. It may be assumed that in the majority of national legal systems shareholders do not normally have the right to bring an action for damages in respect of an act or an omission that is prejudicial to "their" company. It would accordingly be unreasonable to require them to do so before complaining of such an act or omission before the Convention institutions. Nor could, conversely, a company be required to exhaust domestic remedies itself, because the shareholders are of course not empowered to take such proceedings on behalf of "their" company.
66. Concerned to reduce such risks and difficulties the Court considers that the piercing of the "corporate veil" or the disregarding of a company's legal personality will be justified only in exceptional circumstances, in particular where it is clearly established that it is impossible for the company to apply to the Convention institutions through the organs set up under its articles of incorporation or – in the event of liquidation - through its liquidators. The Supreme Courts of certain member States of the Council of Europe have taken the same line. This principle has also been confirmed with regard to the diplomatic protection of companies by the International Court of Justice (Barcelona Traction, Light and Power Company Limited, judgment of 5 February 1970, Reports of judgments, advisory opinions and orders 1970, pp. 39 and 41, paras. 56-58 and 66)."
"In that judgment the Court concluded that "the piercing of the "corporate veil" or the disregarding of a company's legal personality will be justified only in exceptional circumstances, in particular where it is clearly established that it is impossible for the company to apply to the Convention institutions through the organs set up under its articles of incorporation or, in the event of liquidation, through its liquidators"".
"59. Secondly, as regards the distinction between the shareholder's interests and those of the company, it should be recalled that the concept of the public company is founded on a firm distinction between the rights of the company and those of its shareholders. Only the company, endowed with legal personality, can take action in respect of corporate matters. A wrong done to the company can indirectly cause prejudice to its shareholders, but this does not imply that both are entitled to claim compensation. Whenever a shareholder's interests are harmed by a measure directed at the company, it is up to the latter to take appropriate action. An act infringing only the company's rights does not involve responsibility towards the shareholders, even if their interests are affected. Such responsibility arises only if the act complained of is aimed at the rights of the shareholder as such (International Court of Justice, Barcelona Traction, Light and Power Company Limited, judgment of 5 February 1970, Reports of judgments, advisory opinions and orders 1970, pp. 39 and 41, paras. 56-58 and 66), or if the company has been wound up."
"The Court reiterates that where the acts or omissions complained of affect a company, the application should be brought by that company. Disregarding a company's legal personality as regards the question of being a "victim" will be justified only in exceptional circumstances (see Capital Bank AD v. Bulgaria (dec.), no. 49429/99, 9 September 2004; Camberrow MM5 AD v. Bulgaria (dec.), no. 50357/99, 1 April 2004; G.J. v. Luxembourg, no. 21156/93, § 23, 26 October 2000; and Agrotexim and Others v. Greece, judgment of 24 October 1995, Series A no. 330, p. 25, § 66). On the other hand, the sole owner of a company can claim to be a "victim" within the meaning of Article 34 of the Convention in so far as the impugned measures taken in respect of his company are concerned, because in the case of a sole owner there is no risk of differences of opinion among shareholders or between shareholders and a board of directors as to the reality of infringement of Convention rights or to the most appropriate way of reacting to such infringement (see Ankarcrona v. Sweden (dec.), no. 35178/97, 27 June 2000; Dyrwold v. Sweden, no. 12259/86, Commission decision of 7 September 1990; or, more recently, Nosov v. Russia (dec.), no. 30877/02, 20 October 2005)."
"The Court refers at the outset to its above finding that the property owned exclusively by the applicant's brother, and namely the latter's house, cannot constitute the applicant's possessions (see paragraph 121 above). The applicant's brother not being a party to the Strasbourg proceedings, the Court will not grant any claims made with regard to his property. The Court further notes that it has accepted above that the land and the industrial premises assigned to the Nedra company may be regarded as part of the applicant's possessions, since the applicant was one of only two founders and owners of the said company, and the other co-owner did not object to the applicant's bringing proceedings before the Court. On the other hand, the fact that there are two co-owners of the property in question makes it clear that the applicant, on his own, cannot claim the whole amount of compensation as regards the occupation of, and the damage caused to, the land and the industrial premises. In the absence of any indication to the contrary, the Court finds that the brothers own the company in equal shares, and will award the applicant 50% of the amount which, following the Court's assessment, is found to constitute full compensation in this respect."
"It is clear from the judgment in Agrotexim 21 ECHR 250 at paragraph 64, that the Human Rights Court took the same general view as the House of Lords in Johnson, in that it held that the fact that an alleged violation of the company's rights leads to diminution in the value of a shareholder's shares does not infringe the shareholder's rights in respect of those shares. Accordingly, Mr Cogley accepts that, even on his case, the jurisprudence of the Human Rights Court as developed in Agrotexim 21 ECHR 250 and in SJ [2000] BPRI 1020, only gives Mr Hicks cause for complaint if there is "a factual or legal impossibility preventing the Company from suing for the loss". In my judgment, it is at that point that his argument based on the Convention falls down. It is true that, in one sense, it is factually impossible for the Company to sue for any loss it may have suffered as a result of the defendants' alleged activities, but that would be true in any case where the company had already successfully or unsuccessfully brought proceedings or settled proceedings. For instance, in Johnson; it would have been impossible for the company to sue, because it had compromised its claim; in another case, it might be impossible for the company to sue because its claim had been dismissed or struck out. It cannot be right that, in such a case, the shareholder would be entitled to sue for his reflective loss pursuant to the Convention."
The third preliminary issue
"177 The Court … notes that, as it has previously held, the withdrawal of a licence to carry on business activities amounts to interference with the right to peaceful enjoyment of possessions as enshrined in Article 1 of Protocol No. 1 to the Convention (see Tre Traktörer AB v. Sweden, 7 July 1989, § 53, Series A no. 159; Capital Bank AD v. Bulgaria, no. 49429/99, § 130, ECHR 2005-XII; Rosenzweig and Bonded Warehouses Ltd v. Poland, no. 51728/99, § 49, 28 July 2005; and Bimer S.A. v. Moldova, no. 15084/03, § 49, 10 July 2007). Although the licence was not in fact withdrawn in the instant case, the Court considers that, without the allocation of broadcasting frequencies, it was deprived of its substance.
178 The Court thus considers that the interests associated with exploiting the licence constituted property interests attracting the protection of Article 1 of Protocol No. 1 (see, mutatis mutandis, Tre Traktörer AB, cited above, § 53).
179 It therefore finds that the applicant company's legitimate expectation, which was linked to property interests such as the operation of an analogue television network by virtue of the licence, had a sufficient basis to constitute a substantive interest and hence a "possession" within the meaning of the rule laid down in the first sentence of Article 1 of Protocol No. 1, which is therefore applicable in the present case (see, mutatis mutandis, Stretch v. the United Kingdom, no. 44277/98, §§ 32-35, 24 June 2003, and Bozcaada Kimisis Teodoku Rum Ortodoks Kilisesi Vakfi v. Turkey (no. 2), nos. 7646/03, 37665/03, 37992/03, 37993/03, 37996/03, 37998/03, 37999/03 and 38000/03, § 50, 6 October 2009)."
"As to the alleged loss of earnings, the Court finds that the applicant company did indeed suffer a loss of this nature as a result of its inability to derive any profit whatsoever from the licence over a period of many years. It considers, however, that the circumstances of the case do not lend themselves to a precise assessment of pecuniary damage, since this type of damage involves many uncertain factors, making it impossible to calculate the exact amounts capable of affording fair compensation.
219 Without speculating on the profits which the applicant company would have achieved if the violations of the Convention had not occurred and if it had been able to broadcast from 2001, the Court observes that the company suffered a real loss of opportunities (see, mutatis mutandis, Gaweda, cited above, § 54). It should also be noted that the applicant company intended to embark on an entirely new commercial venture, the potential success of which was dependent on a variety of factors whose assessment falls outside the Court's jurisdiction. It notes in this connection that where a loss of earnings (lucrum cessans) is alleged, it must be conclusively established and must not be based on mere conjecture or probability.
220 In those circumstances, the Court considers it appropriate to award a lump sum in compensation for the losses sustained and the loss of earnings resulting from the impossibility of making use of the licence. It must also take into account the fact that the applicant company was awarded compensation at domestic level in respect of part of the period concerned (see paragraph 48 above)."
"41. Without speculating on the profits which the applicant would have achieved if the violation of the Convention had not occurred, the Court observes that he suffered a real loss of business. It therefore considers it appropriate to award a lump sum in compensation for the loss of future earnings. In addition, the Court considers that the violation it has found of Article 1 of Protocol No. 1 in the instant case must have caused the applicant prolonged uncertainty in the conduct of its business and feelings of helplessness and frustration, entailing some non-pecuniary damage.
Thus, the Court considers it reasonable, making its assessment on the basis of equity, to award the applicant an aggregate sum of EUR 15,000, covering all heads of damage (see, mutatis mutandis, Centro Europa 7, cited above, §§ 219 to 222)."
"11. Finally, as regards compensation for pecuniary damage, we emphasise that the sum granted to the applicant is intended to compensate for the loss of profit from selling tobacco products during a transition period that may be regarded as reasonable, allowing the applicant sufficient time to adjust to the new situation arising as a consequence of the new legislation."
"The following principles can be extracted from the case law: (i) loss of future income is not a possession protected by A1P1; (ii) loss of marketable goodwill may be a possession protected by A1P1; (iii) a number of factors may point towards the loss being goodwill rather than the capacity to earn future profits: these include marketability and whether the accounts and arrangements of the claimant are organised in such a way as to allow for future cash flows to be capitalised; (iv) goodwill may be a possession if it has been built up in the past and has a present day value (as distinct from something which is only referable to events which may or may not happen in the future): and thus (v) if there is interference which causes a loss of marketable goodwill at the time of the interference, and if that can be capitalised, then it is prima facie protected by A1P1."
"90 Mr Coppel submits that the November decision violates A1P1 because it interferes with the goodwill of the practices of criminal legal aid firms. Their goodwill is in their own client work. It is said that the decision to limit the number of DPW contracts to 527 threatens to destroy the goodwill of many firms. The firms which do not obtain such contracts will fall into financial difficulty because they will be deprived of the opportunity to act as duty solicitor and many will close. Even firms which do obtain DPW contracts will be expected, on the Lord Chancellor's modelling, to give up (on average) 50% of their own client work, and that is a further interference with their possessions.
91 I consider that this argument is misconceived. Legal aid contracts are time-limited. The current contracts, which began in 2010, were of three years duration but have been extended until June 2015. There is no right to be awarded a legal aid contract in any fresh round. Though it is clear that in principle business goodwill may constitute a possession for the purpose of A1P1, the interest of a business in future trade cannot be dressed up as goodwill if it is in substance an interest in future income: Malik v United Kingdom (Application No.23780/08).
92 The distinction between goodwill and future income was discussed by Lord Bingham in R (on the application of Countryside Alliance and others) v Her Majesty's Attorney General [2007] UKHL 52, [2008] 1 AC 719 at paragraph 21:
'Strasbourg jurisprudence has drawn a distinction between goodwill which may be a possession for purposes of article 1 of the First Protocol and future income, not yet earned and to which no enforceable claim exists, which may not: see, for instance, Ian Edgar (Liverpool) Ltd v United Kingdom Reports of Judgments and Decisions 2000-I, p 465; Wendenburg v Germany (2003) 36 EHRR CD 154, 169…'
Lady Hale said this in the same case at paragraph 128:
'There is no Convention right to continue to enjoy a particular level of trade. There is no Convention right to retain one's job beyond the 'right to a job' which is recognised by domestic law … All sorts of laws may reduce demand for particular services and thus affect the profits of the self-employed or the job security of employed people. They do not in my view usually have to be justified under [A1P1], although that should not be difficult."
See also Breyer Group plc v Department of Energy and Climate Change [2014] EWHC 2257 (QB), per Coulson J at paragraphs 63-75.
93 Moreover as matters presently stand it cannot be said which firms will be successful in bidding for a duty provider contract, and which, if any, will go out of business if unsuccessful. Thus on the claimants' own argument it is not shown that any particular firm has a case to make under A1P1. But as I have said, the argument is in my judgment misconceived."
"In my view, the following principles are beyond argument:
(a) Damages for wrongful interference under A1P1 may only be awarded if a court is satisfied that they are necessary to give just satisfaction to the claimant having regard to, inter alia any other relief granted (see HRA, Section 8(3)).
(b) Damages in such a case are assessed on the basis of restitutio in integrum (Anufrijeva v Southwark London Borough Council [2004] QB 1124, approved in R (Greenfield) v Secretary of State for the Home Department [2005] UKHL 14).
(c) Damages will generally not be awarded unless the court is satisfied that the loss was demonstrably and directly caused by the violation of A1P1: see Kingsley v United Kingdom [2002] 35 EHRR 10.
(d) The usual approach will be to put the applicant in the position it would have been had the violation not occurred, even if precisely calculating the sums necessary to make full reparation might be impossible: see Basarbaood v Bulgaria (Application No. 77660/01, 20 January 2011)."
"Whilst a particular claimant's entitlement to damages will ultimately turn on the facts, I consider that, as a matter of general principle, these claimants will be able to recover damages for the wrongful interference with their possessions. Those possessions are, of course, those limited by my analysis in Section 6 above."
In other words, damages would only be recoverable for wrongful interference with what the judge had concluded constituted "possessions" within the meaning of A1P1, the particular signed contracts and elements of goodwill which he had concluded constituted "possessions". However, he did not go further and decide whether, for example, loss of profits caused by interference with the possessions in question would or would not be recoverable.
"As the judge recognised, the question of whether DECC's conduct did indeed render the claimants' businesses unviable is a question of fact which will need to be determined on the evidence at trial. I doubt the utility of determining that the claimants are in principle entitled to an award of damages assessed by reference to this loss of profits when, as is common ground, the entitlement to damages will ultimately depend on the facts of each case. It seems to me that the judge's decision on this issue is unexceptionable, but of little value. The judge was right to reject DECC's argument that every claim must fail because the losses were caused by the claimants' commercial decisions. It will all depend on the facts."