CASE OF S.C. CONTINENTAL HOTELS S.A. v. ROMANIA (European Court of Human Rights)

Last Updated on November 20, 2019 by LawEuro

FOURTH SECTION
CASE OF S.C. CONTINENTAL HOTELS S.A. v. ROMANIA
(Application no. 36407/12)

JUDGMENT
(Merits)
STRASBOURG
8 October 2019

This judgment is final but it may be subject to editorial revision.

In the case of S.C. Continental Hotels S.A. v. Romania,

The European Court of Human Rights (Fourth Section), sitting as a Committee composed of:

Faris Vehabović, President,
Iulia Antoanella Motoc,
Péter Paczolay, judges,
and Andrea Tamietti, Deputy Section Registrar,

Having deliberated in private on 3 September 2019,

Delivers the following judgment, which was adopted on that date:

PROCEDURE

1. The case originated in an application (no. 36407/12) against Romania lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by a Romanian company, S.C. Continental Hotels S.A. (“the applicant company”), on 5 June 2012.

2. The applicant company was represented by S.C.A. Popovici Nițu Stoica & Asociații, a law office located in Bucharest. The Romanian Government (“the Government”) were represented by their Agent, Mrs C. Brumar, from the Ministry of Foreign Affairs.

3. On 9 March 2016 the application was communicated to the Government.

THE FACTS

I. THE CIRCUMSTANCES OF THE CASE

A. Background information concerning the applicant company

4. The applicant, SC Continental Hotels SA, is a company set up in 1990 under Law no. 15/1990 as a State company. The applicant company’s property comprised a hotel and the plot of land on which the hotel was situated. The Ministry of Tourism issued a title of property in this regard.

5. In 1995 the State Property Fund (the “FPS”) sold the company’s shares. The company was transformed from a State company into a private company.

6. On 16 May 1996 the State Construction Inspectorate noted that the hotel was at an advanced degree of degradation because the works needed to render it safe for use as a hotel had not been carried out for some time. The report drafted on that occasion stated that “the building did not satisfy the security standards in respect of its commercial exploitation and structural stability” and therefore “its owner should immediately stop using it.”

7. On 17 September 1996 the authorities granted the applicant company a permit for the demolition of the building. On an unspecified date in the same year the building was demolished.

8. According to the Government the demolition permit was revoked after the demolition had been carried out on account of the pending restitution proceedings between the applicant company and the successors of the former owner. However, none of the parties submitted a copy of the cancellation order or any other documents relating to it.

B. Civil proceedings against the applicant company for the restitution of property

9. In 1994 the legal successors of the former owner of the land and of the hotel, who had been deprived by the State of his property during the communist regime, brought an action against the applicant company for the restitution of the land and of the hotel.

10. By a judgment delivered on 16 November 1995 the Bucharest District Court granted their civil action and ordered the restitution of the hotel and of the appurtenant land to the plaintiffs.

11. The applicant company lodged an appeal on points of law. On 18 December 1996 the Bucharest Court of Appeal allowed the applicant company’s appeal. The case was remitted to the Buzău County Court.

12. The applicant company asked the court to introduce as a party to the proceedings the FPS which had sold the company’s shares in the privatisation process and which, in its opinion, should guarantee payment of compensation for the hotel and the appurtenant land in the event that the plaintiffs’ claims was allowed. The applicant company based its request on (i) the relevant provisions of the Civil Code concerning the liability of the seller for the quiet possession of the sold assets and the seller’s obligation to compensate the buyer in event of the buyer’s eviction and (ii) the liability clauses in the privatisation contract.

13. On 15 June 1998 the Buzău County Court dismissed the plaintiffs’ action on the grounds that the hotel and the land had been legally included in the applicant company’s assets.

14. The plaintiffs lodged an appeal with the Ploieşti Court of Appeal.

15. The appeal court suspended the trial between 10 May 1999 and 22 December 2006 as there were civil proceedings pending between the legal successors of the former owner.

16. On 20 March 2009 the Ploieşti Court of Appeal allowed the plaintiffs’ action. By the same decision, the Authority for the Recovery of State Assets (Autoritatea pentru Valorificarea Activelor Statului – AVAS), the successor to the FPS, was identified as the State authority responsible for compensating the applicant company for the damage caused to it.

17. The applicant company lodged an appeal on points of law claiming that it had not received any compensation for the lost land. AVAS and the plaintiffs also lodged appeals on points of law.

18. By a decision of 2 December 2009 the High Court of Cassation and Justice allowed all the appeals on points of law, quashed the decision and remitted the case to the Ploieşti Court of Appeal.

19. During the fresh appeal proceedings, the applicant company lodged a request for the Ministry of Finance to be introduced as party to the proceedings.

20. By a decision of 16 December 2010 the Ploieşti Court of Appeal allowed the civil action lodged by the plaintiffs and dismissed the request lodged by the applicant company for the Ministry of Finance to be named as guarantor. The applicant company was obliged to restore the title to the land and to pay the plaintiffs compensation of 11,138,275 Romanian lei (RON – approximately 2,600,000 euros (EUR)) for the demolished hotel. The Court of Appeal also ordered AVAS to pay to the applicant company the amount it had to pay for the demolished hotel and RON 2,209,200 (approximately EUR 515,000) for the land it had lost, as well as all court expenses that it had incurred.

21. All the parties lodged appeals on points of law.

22. By a decision of 6 December 2011 the High Court of Cassation and Justice dismissed the applicant company’s appeal. It allowed the appeal lodged by AVAS and rejected the applicant company’s request to be compensated by AVAS as having been lodged by a person not having locus standi. In this respect, the court held that the applicant company hadn’t been party to the transaction concerning the sale of its shares.

C. Civil proceedings for compensation

23. After lodging its application with the Court, the applicant company brought new civil proceedings for compensation against (i) the Authority for the Administration of the State’s Assets (Autoritatea pentru Administrarea Activelor Statului – AAAS) (the successor to AVAS) and (ii) the Romanian State (through the Ministry of Public Finance). Relying on Article 324 of Emergency Government Ordinance no. 88/1997 (see paragraph 34 below) the applicant company claimed RON 16,141,398 (approximately EUR 3,766,000 EUR) as compensation for the damage caused as a result of (i) the restitution of the land, whose book value amounted to RON 5,003,123 (approximately EUR 1,166,000 EUR), and (ii) the payment to the former owners the sum of RON 11,138,275 (approximately EUR 2,600,000), representing the monetary equivalent of the demolished hotel building.

24. By a judgment of 7 June 2013 the Bucharest District Court allowed the applicant company’s claim in part. It ordered AAAS to pay the applicant company RON 5,003,123 as compensation for the restitution of the land, but declined to order AAAS to pay it compensation for its payment of the monetary equivalent of the demolished hotel to the former owners.

25. The applicant company appealed against that judgment. On 16 April 2014 the Bucharest Court of Appeal allowed the appeal. It quashed the judgment of the first-instance court and allowed the applicant company’s claims.

26. On 27 January 2015 the High Court of Cassation and Justice allowed the appeal on points of law lodged by AAAS. It quashed the decision given on appeal and upheld the judgment of the first-instance court.

27. The High Court of Cassation ruled that under Article 324 §§ 1 and 2 of Emergency Government Ordinance no. 88/1997 (see paragraph 34 below), on which the applicant relied by way of legal grounds, a privatised company was entitled to compensation only in the event that the damage incurred was the result of the restitution of its real estate to the former owners. In this respect, the court held that compelling the applicant company to pay the monetary equivalent of the building (instead of restoring title to the actual building) was the result of the fact that the building had been demolished, which had placed the applicant company “through its own fault, outside the legal framework stipulated by Article 324 §§ 1 and 2 of Emergency Government Ordinance no. 88/1997”.

28. Secondly, the High Court held that Article 324 § 5 of Emergency Government Ordinance no. 88/1997, on which the applicant relied by way of subsidiary legal grounds, was also not applicable because it did “not provide an obligation on the part of the public institution involved to pay compensation for the demolished building”.

29. Thirdly, the High Court held that the applicant company was not entitled to lodge a claim for compensation relying on unjust enrichment on the part of the State (actio de in rem verso) either, since by demolishing the building it “had distanced itself from the benefit of the legal provisions”.

30. Lastly, the High Court dismissed the applicant company’s claim to compel the Romanian State, through the Ministry of Finance to pay the compensation. It held that the obligation to compensate privatised companies for losses caused by the restitution to their former owners of assets taken over by the State applied only to public institutions involved in the privatisation process and not to the State.

D. Enforcement proceedings

31. The applicant company initiated enforcement proceedings against AAAS for the recovery of the amount awarded to it by the judgment of 7 June 2013 (see paragraph 24 below), upheld on appeal by the High Court of Cassation.

32. On 27 May 2014 the Bucharest District Court agreed that enforcement proceedings could be initiated. The applicant company informed the Court that the enforcement agent had managed to recover only RON 69,747 (approximately EUR 15,661), representing just 1.39% of RON 5,003,123, the amount granted by the final judgment of the High Court.

33. By a letter of 19 August 2014 the Bucharest Municipality Treasury informed the applicant company that AAAS was insolvent. It also informed the applicant company that it was registered as occupying position 3,462 in the list of AAAS’s creditors.

II. RELEVANT DOMESTIC LAW AND PRACTICE

A. Emergency Government Ordinance no. 88/1997 concerning the privatisation of commercial companies, approved by Law no. 44/1998 and amended by Law no. 99/1999

34. In so far as relevant, Article 324 of the ordinance reads as follows:

“(1) The designated public institutions shall ensure that compensation [is paid] for damage caused to privatised companies or companies undergoing privatisation by the restitution to former owners of property taken over by the State;

(2) The designated public institutions shall pay to the companies referred to in paragraph (1) compensation representing the monetary equivalent of the damage caused by the restitution to former owners, under a final and irrevocable court judgment, of the real estate owned by the company.

(3) The compensation provided under paragraph (2) shall be mutually agreed upon with the companies, and in case of disagreement, it shall be decided by the courts.

…

(5) In case that the companies are ordered, by final and irrevocable court judgment to pay the monetary equivalent of the property, the designated public institutions shall directly pay the amount established by the judgment to the former owner.

(6) The State shall guarantee the fulfilment by the public institutions of the obligations set forth herein.”

35. Article 324 of the ordinance was repealed by Article 56 of Law no. 137/2002 on Measures for the Acceleration of the Privatisation Process. Article 30 § 3 of the law expressly stipulated that Article 324 of the ordinance remained applicable to all sale-purchase agreements of shares already concluded when the law entered into force in 2002.

B. The Civil Code

36. The relevant provisions of the Civil Code read as follows:

Article 1345

“A person, who, through no fault of his own, has unjustly enriched himself/herself to the detriment of a third party, is obliged to make restitution for the loss of assets incurred by that third party, but without being held liable beyond the limits of his/her own enrichment.”

Article 1346

“Enrichment is justified when it derives from:

a) the performance of a valid obligation;

b) the injured party’s failure to exercise a right against the enriched party;

c) a deed undertaken by the injured party in his/her personal interest and at its own exclusive risk or, as the case may be, with the intention to gratify.”

C. Decision no. 18/2011 of the High Court of Cassation and Justice

37. In a decision delivered on 17 October 2011 and published in the Official Gazette on 16 December 2011, the High Court of Cassation and Justice confirmed that Article 324 of the Emergency Government Ordinance continued to apply (even after the repeal of the Emergency Government Ordinance) to sale-purchase agreements concluded before the entry into force of Law no. 137/2002 (see paragraph 35 above).

THE LAW

I. ALLEGED VIOLATION OF ARTICLE 6 § 1 OF THE CONVENTION

38. The applicant company complained that the decision delivered by the High Court of Cassation and Justice on 6 December 2011 rejecting its request to be compensated by the competent State authority on the grounds that it lacked locus standi (see paragraph 22 above) had been in breach of Article 6 § 1 of the Convention, which reads as follows:

“In the determination of his civil rights and obligations …, everyone is entitled to a fair … hearing … by [a] … tribunal …”

A. The parties’ submissions

39. The Government raised two preliminary objections: one concerned the allegedly abusive character of the complaint, and the other concerned the loss by the applicant company of its “victim status”.

40. As to the first objection, the Government pointed out that after lodging its application in Strasbourg, the applicant company had brought new civil proceedings seeking compensation for the damage sustained. The applicant company had not informed the Court that by a judgment of 7 June 2013 (see paragraph 24 above), upheld on appeal by a judgment of 27 January 2015 (see paragraph 26 above), the domestic courts had partly allowed its claims for compensation. Accordingly, relying on a decision rendered by the Court in the case of Ibriş v. Romania ((dec.), no. 15193/12, 21 June 2016), the Government asked the Court to declare the complaint abusive as the applicant company had failed provide information about aspects of the case that in their opinion were essential for its assessment.

41. Moreover, for the same reasons – namely, because the domestic courts had assessed and allowed the applicant company’s claims in part – the Government submitted that the applicant company was no longer a “victim” and asked the Court to declare the complaint inadmissible ratione personae.

42. The applicant company submitted that the civil proceedings lodged after the dismissal of its first claim by the High Court of Cassation and Justice on 6 December 2011 had concerned two different claims: one relating to the damage caused by the restitution of the land in question and the other one to the payment of the monetary equivalent of the demolished building. By the decision of 27 January 2015 the High Court of Cassation and Justice had allowed only the claim concerning the land-related damage and had dismissed the other one.

43. Moreover, its prospects of recovering compensation for the land were quite reduced owing to the difficulties it had encountered in the enforcement of the judgement of 7 June 2013. It therefore considered that it could still claim to be a “victim” under Article 6 of the Convention, as the final domestic judgment had only provided partial redress.

44. The applicant company also argued that there had been, on its part, no attempt to mislead the Court.

B. The Court’s assessment

1. Whether there has been an abuse of the right of individual application

45. The Court reiterates that an application may be rejected as an abuse of the right of application if it was knowingly based on untrue facts with the intention of misleading the Court (see Centro Europa 7 S.r.l. and Di Stefano v. Italy [GC], no. 38433/09, § 97, ECHR 2012). The submission of incomplete (and thus misleading) information may also amount to an abuse of the right of application, especially if the information in question concerns the very core of the case and no sufficient explanation has been provided for the failure to disclose that information. The same applies where new, significant developments arise during proceedings before the Court and where – despite being expressly required to do so by Rule 47 § 6 of the Rules of Court – the applicant fails to disclose that information to the Court, thereby preventing it from ruling on the case in full knowledge of the facts. However, even in such cases, the applicant’s intention to mislead the Court must always be established with sufficient certainty (see Gross v. Switzerland [GC], no. 67810/10, § 28, ECHR 2014).

46. The Court notes that the applicant company acknowledged that it had pursued its case for compensation before the civil courts and had not informed the Court of that fact after it had lodged its application with the Strasbourg Court. Having regard to the explanation provided by the applicant – namely, that only a part of its claim had been allowed and that in so far as the allowed part of the claim was concerned it had had difficulties in obtaining the enforcement thereof (see paragraphs 42 and 43 above) – the Court considers that the omission in question cannot be seen as an attempt to conceal from the Court any essential information.

47. In addition, in its written observations the applicant provided all relevant information and documents relating to the new set of proceedings that it instituted after lodging its application with the Court.

48. In conclusion, not having found any fraudulent intent on the part of the applicant company, the Court dismisses the objection that there has been an abuse of the right of application.

2. Whether the applicant company lost its victim status

49. The Court reiterates that a decision or measure favourable to an applicant is not in principle sufficient to deprive him of his status as a “victim” unless the national authorities have acknowledged, either expressly or in substance, and then afforded redress for, the breach of the Convention (see, among other authorities, Dalban v. Romania [GC], no. 28114/95, § 44, ECHR 1999‑VI).

50. In the present case the applicant company complained that in its decision of 6 December 2011, the High Court of Cassation and Justice had not examined its claims to be compensated for the damage it had incurred; it had simply rejected them on the grounds that the applicant company lacked locus standi (see paragraph 38 above).

51. The Court notes that in a new set of civil proceedings brought by the applicant company, the domestic courts examined its claims on the merits and allowed them in part (see paragraph 24 above).

52. In the Court’s view, this deprived the applicant company of its victim status in respect of its complaint of lack of access to court. The fact that its claims for reimbursement were allowed only in part by the domestic courts cannot change this conclusion.

53. It follows that the applicant company can no longer claim to be the victim of a violation of Article 6 § 1 of the Convention. Accordingly, its complaint is incompatible rationae personae with the provisions of the Convention within the meaning of Article 35 § 3 (a) and must be rejected in accordance with Article 35 § 4.

II. ALLEGED VIOLATION OF ARTICLE 1 OF PROTOCOL NO. 1 TO THE CONVENTION

54. The applicant company submitted that being deprived of its property followed by the failure of the State to provide it with compensation had been in breach of its right to the peaceful enjoyment of its possessions under Article 1 of Protocol No. 1, which provides:

“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.”

A. Admissibility

55. The Court notes that this complaint is not manifestly ill-founded within the meaning of Article 35 § 3 (a) of the Convention. It furthermore notes that it is not inadmissible on any other grounds. It must therefore be declared admissible.

B. Merits

1. The parties’ submissions

(a) The applicant company

56. The applicant company alleged that the deprivation of its property in the absence of any actions on the part of the State aimed at granting just and effective compensation amounted to expropriation.

57. In the applicant company’s view, there had been a violation of Article 1 of Protocol No. 1. on account of the fact that in the first set of civil proceedings, the High Court of Cassation and Justice had rejected its claims for compensation (see paragraph 22 above). The applicant company pointed out that the reasoning of the decision of the High Court of Cassation had been inappropriate and had been excessively formalistic in its interpretation of the law.

58. The applicant company also contended that the second set of civil proceedings of which it had made use in seeking to obtain compensation proved to be ineffective.

59. As regards the dismissal by the domestic courts of the applicant company’s compensation claim pertaining to the payment it had made to the legal successors of the former owner of the hotel building, the applicant company maintained that it had taken the demolition measure because of the building’s advanced state of deterioration, as acknowledged by the State Inspectorate for Construction (see paragraphs 6 et 7 above). By demolishing the building it had only acted in accordance with its rights as an owner.

60. Moreover, the applicant company maintained that the decision setting the amount of compensation for the returned land had been only partially enforced to date (see paragraphs 32 et 33 above).

(b) The Government

61. The Government submitted that the domestic courts had allowed the applicant company’s claim for compensation in relation to the land it had returned to the legal successors of the former owner but had rightfully dismissed its claim for compensation in respect of the hotel building that it had demolished in 1996.

62. The Government argued that the only partly responsible for the dismissal of the latter claim was the applicant company, which had demolished the hotel building on the basis of a permit that had subsequently been cancelled (see paragraph 8 above).

63. In addition, by demolishing the building the applicant company had placed itself outside the legal framework set out by Article 324 of Emergency Government Ordinance no. 88/1997, under which it had been entitled to be compensated only for the restitution of the actual building (see paragraph 27 above).

64. According to the Government, Article 324 of Emergency Government Ordinance no. 88/1997 (see paragraph 34 above) satisfied the requirements of accessibility, accuracy and foreseeability under the Convention. The decisions rendered by the domestic courts had therefore had a legal basis as required under Article 1 of Protocol No. 1 to the Convention.

65. In so far as the proportionality of the domestic courts’ decisions is concerned, the Government noted that the State enjoyed a wide margin of appreciation when regulating matters such as compensation for abuses committed by the State authorities under the communist regime.

2. The Court’s assessment

(a) General principles

66. The Court refers to its established case-law on the structure of Article 1 of Protocol No. 1 and the manner in which the three rules contained in that provision are to be applied (see, among many other authorities, J.A. Pye (Oxford) Ltd and J.A. Pye (Oxford) Land Ltd v. the United Kingdom [GC], no. 44302/02, § 52, ECHR 2007-III, and Broniowski v. Poland [GC], no. 31443/96, § 134, ECHR 2004-V).

67. The Court reiterates that any interference by a public authority with the peaceful enjoyment of possessions should be lawful, must be in the public interest, and must pursue a legitimate aim by means reasonably proportionate to the aim sought to be realised (see Moskal v. Poland, no. 10373/05, §§ 49-50, 15 September 2009).

(b) Application of the above principles in the present case

i. Whether there has been an interference with the applicant’s possessions

68. The Court notes that the applicant company was the legal owner of the hotel and the appurtenant land which were transferred to private ownership during the privatisation process that took place after the fall of the communist regime (see paragraphs 4 and 5 above). The Government did not contest that the obligation to return the property amounts to interference with the applicant company’s right to the peaceful enjoyment of possessions within the meaning of the second sentence of the first paragraph of Article 1 of Protocol No. 1 to the Convention. The Courts sees no reason to find otherwise.

ii. Lawfulness of the interference

69. The Court recalls that the first and most important requirement of Article 1 of Protocol No. 1 is that any interference by a public authority with the peaceful enjoyment of possessions should be lawful: the second sentence of the first paragraph authorises a deprivation of possessions only “subject to the conditions provided for by law”. The principle of lawfulness also presupposes that the applicable provisions of domestic law are sufficiently accessible, precise and foreseeable in their application (see Broniowski, cited above, § 147).

70. Turning to the present case the Court notes that Romania enacted legislation on the restoration of property confiscated from owners under the communist regime (see Maria Atanasiu and Others v. Romania, nos. 30767/05 and 33800/06, § 44, 12 October 2010). The Court notes that the parties do not dispute that that legislation allowed the legal successors of the former owner of the land and of the hotel to recover their property rights. The deprivation of possessions was thus provided for by law.

iii. Legitimate aim

71. The Court must determine whether this deprivation of property pursued a legitimate aim – that is to say whether it was “in the public interest”. To this end it notes that the domestic courts invalidated the applicant company’s title to the property in question in order to satisfy the restitution claims of persons from whom that property had been expropriated by the State under the communist regime.

72. The Court accepts that the general objective of restitution laws – namely, to mitigate the consequences of certain infringements of property rights committed by the communist regime – is a legitimate aim and a means of securing the rights of former owners. In such circumstances, the Court accepts that the deprivation of property experienced by the applicant served not only the interests of the original owners of the land in question, but also the general interests of society as a whole (see, mutatis mutandis, Bečvář and Bečvářová v. the Czech Republic, no. 58358/00, § 67, 14 December 2004).

iv. Proportionality

73. The Court reiterates that any interference with property must, in addition to being lawful and having a legitimate aim, also satisfy the requirement of proportionality. A fair balance must be struck between the demands of the general interest of the community and the requirements of the protection of the individual’s fundamental rights, the search for such a fair balance being inherent in the whole of the Convention. The requisite balance will not be struck where the person concerned bears an individual and excessive burden (see Sporrong and Lönnroth v. Sweden, 23 September 1982, §§ 69-74, Series A no. 52; Brumărescu v. Romania [GC], no. 28342/95, § 78, ECHR 1999‑VII; and see Doğrusöz and Aslan v. Turkey, no. 1262/02, § 27, 30 May 2006).

74. On several occasions in respect of similar cases – which, as in the present case, concerned the correction of mistakes made by the State authorities in the process of restitution – the Court has emphasised the necessity of ensuring that the remedying of old injuries does not create disproportionate new wrongs. To that end, the legislation should make it possible to take into account the particular circumstances of each case, so that individuals who have acquired their possessions in good faith are not made to bear the burden of responsibility, which is rightfully that of the State that has confiscated those possessions (see Velikovi and Others v. Bulgaria, nos. 43278/98 and 8 others, § 178, 15 March 2007).

75. In order to assess the burden borne by the applicant, the Court must assess the particular circumstances of each case – namely the conditions under which the disputed property was acquired and the compensation that was received by the applicant in exchange for the property (see, mutatis mutandis, Mohylová v. the Czech Republic (dec.), no. 75115/01, 6 September 2005).

76. In this regard, the Court reiterates that the taking of property without payment of an amount reasonably related to its value will normally constitute a disproportionate interference and a total lack of compensation can be considered justifiable under Article 1 of Protocol No. 1 only in exceptional circumstances. This provision does not, however, guarantee a right to full compensation in all circumstances, since legitimate objectives of “public interest” may call for less than reimbursement of the full market value (see The Holy Monasteries v. Greece, 9 December 1994, § 71, Series A no. 301‑A; Former King of Greece and Others v. Greece [GC], no. 25701/94, § 89, ECHR 2000‑XII; and Zvolský and Zvolská v. the Czech Republic, no. 46129/99, § 70, ECHR 2002‑IX).

77. Turning to the present case, the Court notes that at the relevant time, Article 324 of Emergency Government Ordinance no. 88/1997 provided the legal framework for the compensation of privatised companies that had incurred damage as a result of the restitution to the former owners of real estate property taken over by the State under the communist regime. Thus, Article 324 §§ 1 and 2 stipulated that public authorities involved in the privatisation process were obliged to give compensation for losses incurred by the restitution of real estate. Under Article 324 §§ 5 and 6 the same public authorities had to guarantee that compensation would be afforded for any damage caused by the payment of the monetary equivalent of the real estate in question (see paragraph 34 above).

78. The Court notes that in spite of those legal provisions, in the civil proceedings initiated by the legal successors of the former owner of the property in question the applicant company’s compensation claims against the State authority (AVAS) were unsuccessful (see paragraph 22 above) and the applicant company was ordered by the domestic courts to return the land and to pay compensation of RON 11,138,275 (approximately EUR 2,600,000) for the hotel building, which the applicant company could not return because it had demolished it (see paragraph 20 above).

79. The fact that the decision rendered by the High Court of Cassation and Justice on 6 December 2011 contradicted both the applicable legal provisions and its own decision of 17 October 2011 on how the applicable law should be interpreted (see paragraph 37 above) was confirmed by the subsequent examination on the merits of the same claims in a new set of civil proceedings initiated by the applicant company. In those proceedings, the domestic courts not only examined the applicant company’s claims but also allowed its claim to be compensated for the land it had returned to the legal successors of the former owners (see paragraph 24 above).

80. The Court also notes that that the applicant company complied with the decision of 16 December 2010 (see paragraph 20 above) and paid the compensation to the legal successors of the former owner, even though under Article 324 § 5 of the Emergency Government Ordinance no. 88/1997 it was the State authority involved in the privatisation of companies that had to directly pay compensation to former owners – not privatised companies.

81. In the present case, what appears crucial in the Court’s view is that after the applicant company’s title to the real estate in question was invalidated, the authorities were under an obligation to compensate it for the loss of its property rights in one of the forms provided by law. However, only the applicant’s claim for compensation for the restitution of the land was allowed (see paragraph 24 above), while the claim for compensation for the amount that it had paid for the hotel building was eventually rejected by the High Court of Cassation and Justice (see paragraph 26 above).

82. As regards the grounds cited in rejecting the applicant company’s claims, the Court notes that the High Court of Cassation and Justice held that by demolishing the building the applicant company placed itself “through its own fault, outside the legal framework stipulated under Article 324 §§ 1 and 2 of Emergency Government Ordinance no. 88/1997” (see paragraph 27 above).

83. The Court is not persuaded by that argument. As pointed out by the applicant company (see paragraph 59 above), the hotel building had to be demolished because of its advanced state of deterioration, which had rendered it dangerous. On 16 May 1996 the State Inspectorate for Construction had requested the applicant company to cease using the building, which “did not satisfy security standards in respect of its commercial exploitation and structural stability” (see paragraph 6 above). Accordingly, the applicant company had obtained a demolition permit in September 1996 and had demolished the building in the same year (see paragraph 7 above).

84. The Court points out that until the delivery of the final decision by the High Court of Cassation and Justice on 6 December 2011, the applicant company would have been the owner of the building for more than fifteen years and thus the only party bearing responsibility for any damage caused by the building’s advanced state of degradation.

85. Therefore, the Court considers that no fault or negligence can be imputed to the applicant company for demolishing the building. However, the consequence of the applicant’s legitimate action was the loss of the sum of RON 11,138,275 (approximately EUR 2,600,000), which it had to pay to the former owners and which it could not recover from the State.

86. In addition, the Court notes that all the enforcement proceedings which the applicant company had made use of in order to compensate the loss of the land proved to be ineffective and the applicant company recovered only a small fraction of what the judgement of 7 June 2013 awarded to it (see paragraph 32 above).

87. In this connection the Court reiterates that it has already found a violation of the right to the peaceful enjoyment of possessions in view of the ineffectiveness of the State’s restitution system and, in particular, of delays in the procedure for payment of compensation to the applicants (see Maria Atanasiu and Others v. Romania, nos. 30767/05 and 33800/06, § 183, 12 October 2010).

88. After examining all the evidence in its possession in the light of the principles articulated in its case-law, the Court considers that the Government have not put forward any fact or argument capable of justifying the failure to secure the applicant company’s right to compensation for the monetary equivalent of the demolished hotel building that it had to pay and the difficulties in enforcing the judgment by which the applicant company had been awarded compensation for the land returned.

89. Having regard to the particular circumstances of the present case, the Court takes the view that the State has imposed on the applicant company a disproportionate and excessive burden, which is incompatible with the right to the peaceful enjoyment of possessions guaranteed by Article 1 of Protocol No. 1.

90. Accordingly, there has been a violation of that provision in the present case.

III. APPLICATION OF ARTICLE 41 OF THE CONVENTION

91. Article 41 of the Convention provides:

“If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party.”

92. The applicant company requested just satisfaction in respect of pecuniary damage amounting to 3,776,514 euros (EUR). It claimed a further EUR 5,000 in respect of non-pecuniary damage.

93. The Government contested the claims.

94. Given the particular circumstances of the present case, the Court considers that the question of the application of Article 41 is not ready for decision. It is therefore necessary to reserve that matter, due regard being had to the possibility of an agreement being reached between the respondent State and the applicant (Rule 75 §§ 1 and 4 of the Rules of Court).

FOR THESE REASONS, THE COURT, UNANIMOUSLY,

1. Declares the complaint under Article 1 of Protocol No. 1 admissible, and the remainder of the application inadmissible;

2. Holds that there has been a violation of Article 1 of Protocol No. 1 to the Convention;

3. Holds that the question of just satisfaction under Article 41 of the Convention is not ready for decision, and accordingly:

(a) reserves the said question in whole;

(b) invites the Government and the applicant to submit, within three months, their written observations on the matter and, in particular, to notify the Court of any agreement that they may reach;

Done in English, and notified in writing on 8 October 2019, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.

Andrea Tamietti Faris Vehabović
Deputy Registrar President

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