Last Updated on June 17, 2019 by LawEuro
Information Note on the Court’s case-law 220
July 2018
Volokitin and Others v. Russia – 74087/10, 15410/11, 72789/12 et al.
Judgment 3.7.2018 [Section III]
Article 1 of Protocol No. 1
Article 1 para. 1 of Protocol No. 1
Peaceful enjoyment of possessions
Authorities’ failure to implement effective procedure to enable redemption of State issued bonds: violation
Facts – On 30 December 1980 the USSR Cabinet of Ministers decided to issue bonds of an internal premium loan to finance certain State programmes (“the 1982 premium bonds”). Soviet citizens could either buy the premium bonds with their own money or obtain them in exchange for bonds from an earlier 1966 State internal premium loan. Upon the dissolution of the USSR the Russian Government recognised its succession in respect of the obligations of the former USSR under the 1982 loan.
Between 1995 and 2000 a series of Russian laws and regulations were passed which provided for the conversion of Soviet securities, including the 1982 premium bonds, into special Russian promissory notes nominated in “promissory roubles”. From 2003 to the present day, the application and implementation of those laws and regulations have been continuously suspended, most recently for the period 1 January 2017 to 1 January 2020. The fifteen applicants as owners of the bonds applied to the Russian financial authorities and the courts, seeking their redemption. Their claims were rejected on procedural and substantive grounds.
Law
Article 1 of Protocol No. 1: The applicants’ “possessions” consisted of their entitlement to obtain some form of compensation for, or redemption of, the 1982 premium bonds which were currently in their possession. By enacting the Savings Protection Act in 1995, the Russian State had taken upon itself an obligation to settle the debt arising out of the 1982 premium bonds. The repeated suspensions of the implementing regulations had been decided through the legislative process, accordingly, a restriction on the exercise of applicants’ right to the peaceful enjoyment of their possessions was “provided for by law”. Given Russia’s tumultuous transition from a State-controlled to a market economy and the impact of the 1998 financial crisis on its economic well-being, defining budgetary priorities in terms of favouring expenditure on pressing social issues to the detriment of claims of a purely pecuniary nature was a legitimate aim in the public interest.
On the question of the striking of a fair balance between the general interest and the applicants’ rights, the Russian Parliament had promptly enacted the legislative acts required for the successful implementation of the 1995 Savings Protection Act. However, from 2003 the implementation of the existing legal framework had remained continuously suspended. As an inventory of the outstanding bonds and their total valuation had never been completed, there had been no assessment of the amount of budget appropriations necessary to settle the debt in view of other priority social expenses. The Russian Government had been unable to put forward a satisfactory justification for their continuous failure, over a period of more than fifteen years, to implement an entitlement conferred on the applicants by Russian legislation.
In addition, the applicants had not remained passive, but rather displayed an active attitude by making requests to the competent authorities and lodging claims with the domestic courts. There was no indication that the applicants were responsible for, or culpably contributed to, the state of affairs which they complained about. The Russian authorities had kept them in a state of uncertainty, which was incompatible in itself with the obligation to secure the peaceful enjoyment of possessions, notably with the duty to act in good time and in an appropriate and consistent manner where an issue of general interest is at stake.
Conclusion: violation (unanimously).
Article 41
(a) Pecuniary damage – The tumultuous development of the Russian economy and continuous suspension of the applicable legal framework must have affected the value of the bonds and the amount to be awarded to the applicants for the loss actually sustained (damnum emergens). The State’s failure to implement a redemption scheme could not be interpreted as calling for any particular method of calculation or a determination in abstracto of the current value of the bonds.
The situation of applicants who had acquired bonds in the Soviet times at full value accordingly had to be distinguished from those who had bought them in the later period on account of differences in their respective financial exposure. The Court had therefore asked the applicants to specify the time and manner of acquisition of the 1982 premium bonds in their possession, and the purchase price, if any, they had paid.
The amount of bonds held by three applicants was consistent with the explanation of their origin they provided. The Court awarded them the sums ranging from EUR 2,000 to 6,000. Claims of the remaining applicants were dismissed.
(b) Non-pecuniary damage – The Court awarded EUR 1,800 to each of the three aforementioned applicants under this head.
As regards the other applicants in respect of whom the time of acquisition of bonds and the length of period of their possession could not be ascertained, the finding of a violation constituted sufficient just satisfaction.
Article 46: There existed a structural problem stemming from the authorities’ continued failure to implement the entitlement of the bondholders to some form of compensation and to execute its earlier judgments concerning the same issue, which amounted to a practice incompatible with the Convention. Accordingly, the respondent State should, without further delay, initiate a genuine discussion with the Committee of Ministers of the Council of Europe on the issue of what may be required by way of compliance with the present and earlier judgments concerning the 1982 premium bonds.
(See also Yuriy Lobanov v. Russia, 15578/03, 2 December 2010; Malysh and Others v. Russia, 30280/03, 11 February 2010; Tronin v. Russia, 24461/02, 18 March 2010; SPK Dimskiy v. Russia, 27191/02, 18 March 2010; Andreyeva v. Russia, 73659/10, 10 April 2012; Fomin and Others v. Russia, 34703/04, 26 February 2013; Alekseyeva v. Russia, 36153/03, 11 December 2008; Milosavljev v. Serbia, 15112/07, 12 June 2012; and Vasilevski v. the former Yugoslav Republic of Macedonia, 22653/08, 28 April 2016)
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