JOSEF MÜLLER AG v. SWITZERLAND

THE FACTS

The facts of the case, as submitted by the parties, may be

summarised as follows:

The applicant company is a stock corporation (Aktien-

gesellschaft) with its seat in Zürich. Before the Commission

it is represented by Mr. J. Müller, the President of the board

(Verwaltungsrat) of the applicant company.

The applicant company was, and has again become, the wholesale

marketing company (Vertriebsfirma) for the "Less Rheuma ointment

(Heilsalbe)". Problems arose in respect of defects in the material of

the tubes. The applicant company was subsequently involved in civil

and criminal proceedings in the Federal Republic of Germany and in

Switzerland. The present application concerns mainly the authorisation

(Bewilligung) of the Zürich authorities concerning this ointment.

I.

On 25 May 1976 the Direction of Health (Gesundheitsdirektion)

of Canton Zürich granted the applicant company the authorisation to

"produce as a salaried commission, and to undertake wholesale commerce

(agency) in respect of the product 'Less Rheuma ointment'" ("das

Präparat 'Less Rheuma-Heilsalbe' im Lohnauftrag herstellen zu lassen

und Grosshandel [Vermittlung] damit zu betreiben"; see below Relevant

domestic law and practice). This authorisation which was granted

under various conditions expired on 31 December 1980. The ointment

was supervised by and registered with, the Intercantonal Control

Office for medicaments (Interkantonale Kontrollstelle für

Heilmittel) for a period lasting until 31 December 1979.

On 3 February 1981 an inspector of the Cantonal Pharmacy

(Kantonsapotheke) inspected a storage room of the applicant company

where he found defect tubes of the "Less Rheuma ointment".

On 13 February 1981 the Zürich Cantonal Pharmacist informed

the applicant company that the authorisation granted on 25 May 1976

had expired. The company was requested to provide information inter

alia as to certain defects in the package material of the ointment.

On 20 February 1981 the applicant company filed a request for

a prolongation of the expired authorisation. It thereby stated that

it undertook the marketing (Vertrieb) of the product and was neither

the producer nor the manufacturer of the product which was prepared

and packed elsewhere.

On 11 March 1981 the Cantonal Pharmacist again requested

information until 27 March 1981 from the applicant company as to the

production, control, packing, storing and delivery of the ointment and

the measures undertaken to protect its quality.

On 28 and 30 March 1981 the applicant company replied that it

was registered in Canton Zürich as a wholesale pharmaceutical commerce

(Pharma-Grossist). It neither produced the ointment nor did it

maintain a production plant, and it was not in a position to give

details about production. The Cantonal Pharmacist was also not

competent to request information as to the registration of medicaments

as this fell solely to the Intercantonal Control Office.

On 24 April 1981 the Zürich Direction of Health issued an

order (Verfügung) in which it refused the applicant company's request

for a prolongation of the authorisation for wholesale commerce

(agency) of the ointment. The Direction considered in particular that

details would have to be supplied as to the exact circumstances of

production and marketing of the ointment. In the present case the

conditions for granting a marketing authorisation (Vertriebs-

bewilligung) had not been met. The Direction of Health also imposed

costs of 100 SFr. on the applicant company.

On 19 June 1981 the applicant company filed an appeal (Rekurs)

against this decision with the Zürich Council of State (Regierungsrat)

in which it requested inter alia the prolongation of the authorisation

for the wholesale commerce (Grosshandel) of the ointment. Therein it

referred to its position as a marketing company.

On 26 August 1981 the Council of State dismissed the appeal.

It noted that since 1 January 1980 the ointment was not longer validly

registered with the Intercantonal Control Office and that a renewed

registration now seemed improbable as the circumstances of production

were unknown. An authorisation for the marketing (Vertrieb) of the

ointment through a wholesale distributor (Verteiler-Grossist) was

therefore inadmissible. The Council of State concluded that for this

reason even during the appeal proceedings the marketing of the

ointment was prohibited. The Council of State also imposed costs of

500 SFr. on the applicant company.

Against this decision the applicant company filed on 4 October

1981 an appeal (Beschwerde) with the Zürich Administrative Court

(Verwaltungsgericht).

On 22 June 1982 the Administrative Court partly upheld the

applicant company's appeal. It referred the case-file for further

investigation and for renewed decision along the lines of its decision

back to the Council of State.

In its decision the Court observed that the Council of State

had mainly considered that the applicant company had applied for an

authorisation as a wholesale distributor (Verteiler-Grossist) within

the meaning of No. 3 para. 4 of the 1976 Guidelines (see below

Relevant domestic law and practice). In this case the Council of

State could have justifiably refused the authorisation.

However, it was not clear whether the applicant company had

only applied for an authorisation as a wholesale distributor. The

authorisation of 25 May 1976 had entitled the applicant company until

31 December 1980 to produce as a salaried commission, and to undertake

wholesale commerce in respect of the ointment concerned. The applicant

company thus had the authorisation of a marketing firm according to

No. 3 para. 5 of the 1976 Guidelines which entitled it to register the

ointment with the Intercantonal Control Office. In its reply of 28 and

30 March 1981 the applicant company had told the Cantonal Pharmacist

that it was a marketing rather than a production company (eine

Vertriebs- und nicht eine Herstellerfirma). The Zürich Direction of

Health had also concluded on 24 April 1981 that the conditions for a

marketing authorisation had not been met. In his appeal of 19 June

1981 the applicant company had again referred to itself as a marketing

company (Vertriebsfirma).

The Court concluded that the Council of State should have

granted the applicant company the opportunity to clarify its request.

It therefore partly upheld the appeal of the applicant company. In

referring the case-file back to the Council of State, the Court

considered that if the applicant company no longer wanted a renewal of

the authorisation as a wholesale marketing company, the proceedings

would become irrelevant. On the other hand, if the applicant company

insisted on such an authorisation, the Council of State would have to

examine whether the conditions were met. The Court could not prejudice

such a decision.

The applicant company filed a request for review (Revision) of

this decision of the Administrative Court which the latter dismissed

on 7 June 1983.

On 10 November 1982, the applicant company filed a public law

appeal (staatsrechtliche Beschwerde) which was declared inadmissible

by the Federal Court (Bundesgericht) on 10 January 1984. In its

public law appeal the applicant company stated that it had not applied

for the authorisation as a marketing firm within the meaning of No. 3

paras. 4 and 5 of the 1972 guidelines.

II.

Meanwhile, as a result of the decision of the Zürich

Administrative Court, the Zürich Council of State requested the

applicant company on 26 October 1982 to file within ten days the

necessary further information for its appeal. The request was served

on the applicant company on 19 November 1982. The Council of State

informed the applicant company in particular as follows:

<German>

"Sollte sie nicht innert Frist einen unmissverständlichen

Antrag auf Erteilung einer Bewilligung für den Grosshandel

als Vertriebsfirma stellen, wäre bei der weiteren

Rekursbehandlung davon auszugehen, es sei ein Gesuch um

Erteilung der Bewilligung zum Grosshandel als Verteiler-

Grossist gestellt worden."

<Translation>

"If (the applicant company) does not file within the

time-limit an unambiguous request to be granted an

authorisation for the wholesale commerce as a marketing

firm, it would have to be assumed when further dealing with

the appeal that a request had been filed to be granted an

authorisation as a wholesale distributor."

On 24 November 1982 the applicant company replied that it

requested "the authorisation for the wholesale commerce as a marketing

firm to be prolonged" ("die Grosshandelsbewilligung als Vertriebsfirma

zu verlängern").

III.

In a letter of 17 March 1988 to the Intercantonal Control

Office, the applicant company complained that for five and a half

years it had been waiting to be granted the authorisation for a

marketing firm; if the authorisation was not granted very soon, the

applicant company would complain to the Federal Court about the delay.

On 20 June 1988 the Cantonal Pharmacist wrote to the

Intercantonal Control Office explaining, inter alia, that it appeared

from the letter of 17 March 1988 that the applicant company was

awaiting the renewal of the authorisation and that the Cantonal

Pharmacist was willing to grant this authorisation if the applicant

company complied with the necessary conditions. The Intercantonal

Control Office was requested to undertake the necessary inspections.

On 9 September 1988 the applicant company filed a public law

appeal with the Federal Court in which it complained of the delay in

the proceedings. The applicant company referred therein to the letter

of the Cantonal Pharmacy of 20 June 1988 as showing the Zürich

authorities knew that the applicant company was waiting for the

authorisation. The applicant company complained inter alia that the

delay of six years breached the right to a fair and public hearing

within a reasonable time within the meaning of Article 6 of the

Convention.

On 28 October 1988 the Zürich Direction of Health informed the

Federal Court that while on 24 November 1982 the applicant company had

indeed asked the Council of State for the authorisation as a marketing

company, two weeks earlier in its public law appeal to the Federal

Court of 10 November 1982 it had stated that it had never asked for an

authorisation as a marketing company within the meaning of No. 3

paras. 4 and 5 of the 1972 Guidelines. The Direction of Health

observed that in view of this about-change (Kehrtwendung) the Council

of State did not for the time being pursue the proceedings. Meanwhile,

the matter had been taken over by the Intercantonal Control Office

which had arranged an inspection with the applicant company on

8 November 1988.

On 19 December 1988 the Federal Court declared the applicant

company's public law appeal inadmissible. The Court, which noted that

the applicant company had continued to act as a marketing firm for the

ointment, regarded in principle the public law appeal against the

inactivity of the Council of State as admissible. However, according

to its case-law the applicant company could no longer claim a

practical interest in its public law appeal since the Cantonal

Pharmacy with its letter of 20 June 1988 had again taken up the

procedure for the Council of State (see below Relevant domestic law

and practice).

According to a letter of 30 May 1990 of the Federal Court to

the applicant company, the decision of 19 December 1989 was served on

the applicant on 19 January 1988. The Federal Court further confirmed

"that before this date no operative part of the decision had

separately been served (on the applicant company)" ("dass Ihnen vor

diesem Datum kein Urteilsdispositiv separat eröffnet worden ist").

On 16 May 1989 the Direction of Health issued an order according

to which the applicant company was granted, until 31 December 1993,

the authorisation to "produce as a salaried commission, and to undertake

wholesale commerce (agency) in respect of ... the 'Less Rheuma

ointment'" ("im Lohnauftrag herstellen zu lassen und Grosshandel

<Vermittlung> damit zu betreiben").

IV.

On 11 April 1990 the Zürich Council of State decided to strike

the appeal of the applicant company of 19 June 1981 off its list of

cases (gegenstandlos geworden), as the applicant company had been

granted the authorisation for a marketing firm. The Council of State

further cancelled the imposition of costs of its decision of 26 August

1981 and of the order of the Zürich Direction of Health on 24 April

1981.

On 21 May 1990 the applicant company appealed against this

decision to the Zürich Administrative Court, claiming inter alia that

it should be granted compensation for the expenses of the proceedings.

On 13 July 1990 the Zürich Administrative Court dismissed the

appeal stating that it could only grant compensation if the authority

concerned had acted arbitrarily or negligently. This could not be

said of the order of the Zürich Direction of Health of 24 April 1981.

The preparation and sale of medicaments falls under the

constitutional right to freedom of commerce (Handels- und

Gewerbefreiheit) as enshrined in Article 31 of the Swiss Federal

Constitution (Bundesverfassung). The cantons may restrict this right

on police grounds (polizeiliche Gründe), namely for the protection of

public health and security (see e.g. ATF <Arrêts du Tribunal fédéral>

106 Ia 267). These police restrictions must also respect the

principle of proportionality and the equality of the persons engaged

in the commerce.

If a commercial activity requires for police reasons a police

authorisation (Polizeibewilligung), the police authority will state,

upon application, whether there are obstacles to the activity.

In the Canton of Zürich the Direction of Health authorises the

preparation and sale of the medicaments. As regards the health police

restrictions, the applicant must offer guarantees as to the

preparation, storing, control and sale of the medicament.

According to Article 8bis of the 1972 Regulative Order on the

Execution of the Intercantonal Agreement on the Control of Medicaments

(Regulativ über die Ausführung der interkantonalen Vereinbarung über

die Kontrolle der Heilmittel) and No. 3 para. 1 of the 1976 Guidelines

of the Intercantonal Control Office for the Wholesale Commerce of

Medicaments (Richtlinien betreffend den Grosshandel mit Arzneimitteln),

wholesale commerce is to be understood as the agency (Vermittlung) of

medicaments towards firms and persons who are entitled to store the

medicaments, further to sell them or professionaly to apply them.

According to No. 3 para. 4 of the Guidelines, wholesale dealers

(Grosshändler) whose activities are confined to distributional functions

are considered as wholesale distributors (Verteiler-Grossisten),

whereas according to No. 3 para. 5 wholesale dealers, who have

registered medicaments with the International Control Office, are

considered as marketing companies (Vertriebsfirmen).

Article 4 of the Swiss Federal Constitution, which enshrines

the principle of equality, has been interpreted by the Federal Court

as prohibiting the denial of justice as well as delays in proceedings

(Verbot der Rechtsverweigerung und Rechtsverzögerung, see ATF 103 V

190). However, the Federal Court will not deal with such a complaint

if, during its proceedings, the authority concerned has given its

decision or resumed the proceedings; the Federal Court then considers

that the applicant no longer has a practical interest in his case (see

ATF 110 Ia 141).

COMPLAINTS

The applicant company complains of the length of the

proceedings following the decision of the Administrative Court on

22 June 1982. Six years were required until a decision was taken in

respect of the authorisation concerned.

The applicant company disputes that it undertook activities in

respect of the ointment without the required authorisation. The

applicant company also complains inter alia that it did not have a

fair hearing before the Council of State and the Federal Court, and

that the latter did not examine its public law appeal.

The applicant company relies on Article 6 paras. 1, 2 and 3(d)

and Articles 7, 8 and 13 of the Convention.

PROCEEDINGS BEFORE THE COMMISSION

The application was introduced on 14 July 1989 and registered

on 20 July 1989.

On 5 March 1990 the Commission decided to communicate the

application to the respondent Government and invite them to submit

written observations on the admissibility and merits of the

application limited to the issue under Article 6 para. 1 of the

Convention concerning the length of the proceedings.

The Government's observations were received by letter dated

8 May 1990 and the applicant's observations were dated 11 June 1990.

On 7 November 1990 the Commission, having consulted the

parties, decided to refer the application to the Second Chamber.