issued by the Registrar of the Court
ECHR 294 (2015)
01.10.2015
Case concerning the removal of licences to operate arcades and slot machines
in Hungary declared inadmissible
In its decision in the case of Laurus Invest Hungary KFT and Continental Holding Corporation v.
Hungary and other applications (application no. 23265/13) the European Court of Human Rights has
unanimously declared the application inadmissible. The decision is final.
The case concerned the removal of licences from companies involved in developing and operating
entertainment arcades and other gaming arcades in Hungary following legislative changes.
The companies complained, relying in particular on Article 1 of Protocol No. 1 to the European
Convention on Human Rights (protection of property), that the removal of their licences amounted
to an unjustified interference with their rights and that the absence of any legal avenues to
challenge this measure gave rise to a further violation of the Convention.
The Court found that the applicants had not exhausted the legal remedies at national level. In
particular, some of the applicant companies had brought an action in damages against the State –
claiming compensation for the loss of business sustained on account of the legislation in question,
allegedly in breach of EU law – which was pending. The Court considered that the pending case
before the national courts offered a reasonable prospect of success for the applicants to have their
claims considered on the merits and to potentially receive damages. As regards the remaining
applicants, the Court considered that they also had the possibility to file a similar claim.
Principal facts
The applicants in this case are 26 limited liability companies based in Hungary and one company
established under the laws of California, USA and based in Beverly Hills.
The case concerned the removal of these companies’ licences to operate arcades and slot machines
following legislation enacted in Hungary.
The applicant companies were involved in developing and operating entertainment centres, slot
machine arcades and other gaming arcades in Hungary. In 2011 existing gambling legislation was
amended requiring slot machine operators to switch to server-based slot machines (at significant
costs to the arcade operators) and increased the tax payable. Having complied with the legislation,
the applicants submitted that they were confident that their licences would not be terminated.
However, on 1 October 2012 a bill was introduced restricting the activities of arcades and
suppressing the operation of slot machine terminals, with limited exceptions. The bill was voted into
law the following day and entered into force on 10 October 2012. The applicants’ licences were
removed. There was no legal avenue available to the applicants to be heard, to appeal against or
otherwise challenge the revocation of their licences.
On 16 May 2013 five of the applicants brought an action of damages against the Hungarian
authorities alleging that a breach of European Union law effectively deprived them of their business.
On 13 February 2014 the Budapest High Court stayed its proceedings and requested a preliminary
ruling from the Court of Justice of the European Union (CJEU).
On 11 June 2015, the CJEU gave its judgment and set out the criteria to be applied by the Hungarian
court in the case pending before it. The CJEU ruled, among other things, that national legislation
such as that at issue in the main proceedings constituted a restriction on the freedom to provide
services guaranteed by Article 56 of the Treaty on the Functioning of the European Union (TFEU),
and that an infringement of that provision by a Member State would give rise to a right of individuals
to obtain compensation from that Member State. The CJEU enumerated the criteria for the
assessment of whether a restriction similar to that in the present case amounted to an infringement
of Article 56 TFEU. According to those criteria, national courts are required to assess whether the
restrictions satisfy the conditions laid down in the case-law of the CJEU as regards their
proportionality and whether they are compatible with the fundamental rights and general principles,
the observance of which is ensured by the CJEU – in particular, with the principles of legal certainty
and the protection of legitimate expectations and the right to property. In the eventuality of an
infringement of Article 56 TFEU, the national courts are further required to examine whether that
infringement is sufficiently serious and whether there is a direct causal link between that
infringement and the damage sustained.
The case is currently pending before the Budapest High Court.
Complaints, procedure and composition of the Court
The applications were lodged with the European Court of Human Rights on 4, 5 and 8 April 2013,
respectively and were later joined.
Relying on Article 1 of Protocol No. 1 (protection of property), Article 6 § 1 (right to a fair hearing /
access to court), Article 13 (right to an effective remedy) and Article 14 (prohibition of
discrimination), the applicant companies alleged that the removal of their licences to operate
arcades and slot machines in Hungary had been unjustified.
The applicant companies argued that Hungarian jurisprudence did not allow the lawmaker to be
successfully sued for damages resulting from legislation. They further argued that, since the
accession of Hungary to the European Union, Hungarian courts had never established the
lawmaker’s liability for a breach of EU law. As such, any application for compensation before the
Hungarian Courts would most likely be futile.
The decision was given by a Chamber of seven, composed as follows:
Guido Raimondi (Italy), President,
Işıl Karakaş (Turkey),
András Sajó (Hungary),
Nebojša Vučinić (Montenegro),
Helen Keller (Switzerland),
Egidijus Kūris (Lithuania),
Robert Spano (Iceland), Judges,
and also Abel Campos, Deputy Section Registrar.
Decision of the Court
The Court observed that shortly after the introduction of the present applications, some of the
applicants had brought an action in damages against the State, claiming compensation for the loss of
business sustained on account of the legislation in question, the latter allegedly being in breach of
EU law. The Budapest High Court had perceived a potential issue under the relevant law of the EU
and had requested a preliminary ruling from the CJEU. The Court noted that the relevant domestic
jurisprudence did not normally create a duty of civil liability between the lawmaker and those
alleging damages following from that legislation. However, rather than deciding the case on this
basis, the domestic court had requested an opinion from the CJEU, which demonstrated a
reasonable prospect that the issue might be decided by the national courts with regard to EU law.
The Court observed that the CJEU reiterated in their decision that Member States of the European
2
Union bear liability towards individuals for infringements and entitle those injured to claim
compensation.
The Court was satisfied that the guidance provided by the CJEU had to be observed not only in the
specific dispute in which it had been asked to advise but also in other cases. The ruling in the
applicants’ case therefore provided the Hungarian courts with guidance as to the criteria to be
applied in the case pending before them. According to that guidance, justifications for the
restrictions complained of also had to be interpreted in light of the general principles of EU law and
in particular the fundamental rights guaranteed by the Charter, including Article 17 (right to
property). It followed that the litigation in progress before the national court ought to be capable of
encompassing the applicants’ complaints under Article 1 of Protocol 1.
The Court considered that the pending case before the national courts offered a reasonable
prospect of success for the applicants to have their claims considered on the merits and to
potentially receive damages. That case thus constituted an effective remedy to be exhausted for the
purposes of Article 35 of the Convention (admissibility criteria). It followed that the applications had
to be rejected as premature in respect of those applicants whose case was currently pending before
the Budapest High Court, in so far as the complaints under Article 1 of Protocol No. 1 and Article 14
were concerned.
As regards the remaining applicants, the Court considered that they also had the possibility to file a
similar claim. Their applications therefore had to be rejected for non-exhaustion of domestic
remedies, as regards the complaints under Article 1 of Protocol No. 1 and Article 14.
For essentially the same reasons, namely the availability of a legal avenue capable to providing
adequate redress, the complaints under Articles 6 and 13 were manifestly ill-founded.
The Court therefore declared the applications inadmissible.
The decision is available only in English.
This press release is a document produced by the Registry. It does not bind the Court. Decisions,
judgments and further information about the Court can be found on www.echr.coe.int. To receive
the Court’s press releases, please subscribe here: www.echr.coe.int/RSS/en or follow us on Twitter
@ECHRpress.
Press contacts
[email protected] | tel: +33 3 90 21 42 08
Tracey Turner-Tretz (tel: + 33 3 88 41 35 30)
Nina Salomon (tel: + 33 3 90 21 49 79)
Denis Lambert (tel: + 33 3 90 21 41 09)
The European Court of Human Rights was set up in Strasbourg by the Council of Europe Member
States in 1959 to deal with alleged violations of the 1950 European Convention on Human Rights.
3