Strasbourg court rules against Hungary in tobacco retailing case

January 13, 2015


The European Court of Human Rights has ruled against Hungary in a case brought by László Vékony, a former tobacco shop owner who lost his livelihood under a new law establishing a state monopoly on the sale of tobacco products.  Individuals wishing to obtain a franchise to sell tobacco products had to apply. Virtually without exception, national tobacco franchises were awarded to individuals connected one way or another to governing Fidesz-KDNP politicians or their supporters.

In its verdict the court established that Vékony’s right to private property was violated by the Hungarian state and obliged Hungary to pay EUR 15,000 (USD 17,715) in reparation.

In his original appeal filed with the Strasbourg tribunal in October 2013, Vékony alleged that the loss of his tobacco retail licence amounted to an unjustified deprivation of possessions in discriminatory circumstances,” asking the judiciary body to establish that with its motion the Hungarian state violated Article 34 of the European Convention to Protect Human Rights and Fundamental Freedoms. The Hungarian government objected to the request, claiming that “the applicant’s application for a new concession had been very succinct and not at all elaborated.” They further argued that the applicant “could legitimately expect nothing more than an appropriate transitory period to adjust to the new situation, which was available.”

The court dismissed the government’s defense, establishing the violation of the right to private property on their behalf. The verdict offers the following reasons for deciding in favor of the former tobacconist (emphasis added):

“The Court finds that the measure did not offer a realistic prospect to continue the possession because the process of granting of new concessions was verging on arbitrariness, given that

(i) the existence of the previous licence was disregarded;

(ii) the possibility of a former licence-holder to continue tobacco retailing under the changed conditions accommodating the policy of protection of minors was not considered in the new scheme;

(iii) the concession system enabled the granting of five concessions to one tenderer which objectively diminished the chances of an incumbent licence holder, in particular of those individuals, such as the applicant’s family, whose livelihood had depended for many years on the possibility of tobacco sale, now lost and, finally,

(iv) the lack of transparent rules in the awarding of the concessions, which took place

(v) without giving any privilege to a previous licence-holder, such as limiting the scope of the first round of tendering to such persons.”

With the decision the Strasbourg court also opened the way for the filing of future complaints from former Hungarian concession owners.

The controversial tobacco franchise law of 2011 introduced by the second Orbán government continues to be a much-debated issue in Hungary. As a result, thousands of small-scale enterprises were deprived of the right to sell tobacco products, resulting in a significant loss in revenues.  The government justified the decision on public health grounds, claiming it was necessary to “combat juvenile smoking”.  The European Commission did not raise objections to the original act before its implementation in early 2012.

Recently the Hungarian parliament passed a law requiring all tobacco wholesalers to sell to, and tobacco retailers to buy from, a new state-owned distributor inserted into the supply chain by legislative fiat.

Referenced in this article:

JUDGMENT – In the case of Vékony v. Hungary 13. January 2015. / European Court of Human Rights