AS TO THE ADMISSIBILITY OF
by LESNÍ SPOLEČNOST PŘIMDA, A.S.
against the Czech Republic
The European Court of Human Rights (Fifth Section), sitting on 21 September 2010 as a Chamber composed of:
Mirjana Lazarova Trajkovska,
Ganna Yudkivska, judges,
and Claudia Westerdiek, Section Registrar,
Having regard to the above application lodged on 25 March 2005,
Having regard to the partial decision of 8 July 2008,
Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicant,
Having deliberated, decides as follows:
The applicant, Lesní společnost Přimda, a.s., is a joint-stock company with its seat in Přimda. It was represented before the Court by Mrs R. Tunklová, practising in Plzeň. The Czech Government (“the Government”) were represented by their Agent, Mr. V.A. Schorm, from the Ministry of Justice.
A. The circumstances of the case
The facts of the case, as submitted by the parties, may be summarised as follows.
1. Privatisation proceedings
By Resolution no. 323 of 29 April 1992 of the Government of the Czech Republic and the decision of the Ministry of Administration of National Property and Privatisation (ministerstvo pro správu národního majetku a jeho privatizaci) of 30 April 1992, privatisation project no. 3132 of the State enterprise Západočeské státní lesy Plzeň was approved. On the basis of that project, the applicant company was founded on 1 September 1992. In accordance with the privatisation project approved by the Government, the property transferred to it included the building in issue.
On 3 June 1996, further to the applicant company's notification (oznámení), its title to the building was recorded in the Land Register.
2. Proceedings for a determination of ownership
On 8 December 1995 the Přimda Municipality (Město Přimda) brought a civil action against the applicant company, seeking to determine that it was the owner of the building. It referred to the Act on Transfer of Certain Property of the Czech Republic to Municipalities (Act no. 172/1991) which provided that certain property was to be ipso jure transferred to municipalities with effect from the date on which the law came into force, that was, on 24 May 1991.
Judgments of the Tachov District Court (okresní soud) of 14 June 1996 and of 18 November 1997 in favour of the Municipality were quashed by the Plzeň Regional Court (krajský soud) on 19 May 1997 and on 19 January 1999 respectively. The Regional Court held that the first-instance court had failed to establish the facts of the case properly, and instructed it to supplement the evidence.
On 19 December 2000 the District Court again allowed the Municipality's action, holding that the conditions set forth in section 2(1)(c) of Act no. 172/1991 were met, specifically that the plaintiff had been the owner of the property in issue as of 31 December 1949 and that the property was in State ownership on the date on which the Act entered into force. Responding to one of the applicant company's objections and with reference to the conclusions of an expert opinion drawn up on the court's request of 1 November 1999, it concluded that the building owned by the Municipality as of 31 December 1949 was the one in issue. Notwithstanding the reconstruction works carried out by the applicant company's legal predecessor, the building had not lost its character, that is, it had not ceased to exist and a new building had not been created.
In an appeal of 19 February 2001 the applicant company argued that the reasoning of the District Court did not comply with the statutory requirements. It further challenged the court's interpretation of section 2(1)(c) of Act no. 172/1991 and its finding that a new building had not been created.
In a judgment of 21 August 2002 the Regional Court upheld the first-instance judgment finding that its reasoning had been in compliance with the Code of Civil Procedure since it referred, inter alia, to the expert opinion and it had therefore been possible to ascertain the evidence on which the court had based its decision. It further rejected the applicant company's interpretation of the provision cited above and accepted the interpretation given by the District Court. Lastly, it upheld the conclusion that the original building had never ceased to exist. The Regional Court's judgment became final on 30 September 2002.
On 21 March 2003 the Supreme Court (Nejvyšší soud), holding that the courts had decided in compliance with the established case-law and that therefore no issue of crucial legal importance arose, rejected an appeal on points of law (dovolání) by the applicant company as inadmissible.
On 15 September 2004 a constitutional appeal (ústavní stíZnost) by the applicant company alleging a violation of the right to a fair hearing and its property rights was dismissed as manifestly ill-founded. The Constitutional Court (Ústavní soud) found that the applicant company had merely disputed the ordinary courts' findings of fact and law and had presented the same legal opinion again. However, its status as a party to the proceedings had been respected and the courts had examined enough evidence and reasoned their decisions. As to the alleged violation of property rights, the court held that ownership that was merely the subject of legal proceedings did not enjoy constitutional protection. The decision was served on the applicant's legal representative on 27 September 2004.
3. Proceedings for damages
On 22 August 2005, pursuant to Act no. 58/1969 on State Liability Act, the applicant company brought an action in the Prague 1 District Court (obvodní soud) against the Ministry of Finance (ministerstvo financí). The damages sought consisted of (i) the price of the building in issue which had been transferred to it under the privatisation project and in respect of which it had later been established that it had been the property of the Přimda Municipality, (ii) legal costs incurred in the proceedings for a determination of ownership, and (iii) costs incurred for the upkeep of the property.
On 31 January 2007 the District Court excluded the first two claims for a separate hearing and transferred the case to the Prague High Court (Vrchní soud) for a decision which level of courts had jurisdiction to hear the case. In a judgment of the same day, the District Court dismissed the applicant company's third claim.
On 11 June 2007 the High Court remitted the case to the District Court. It appears that the proceedings are still pending before that court.
On 17 October 2007 the District Court's judgment concerning the third claim was upheld by the Prague Municipal Court (městský soud). On 21 January 2008 the applicant company lodged an appeal on points of law (dovolání) in which it submitted, inter alia, that should it not have been possible to infer the State's liability under Act no. 58/1969 or Act no. 82/1998, its liability should have been given under general provisions of civil law. The proceedings appear to be pending before the Supreme Court.
B. Relevant domestic law and practice
At the material time, the relevant provisions of Act no. 172/1991 as amended read as follows:
“(1) As of the date when this law comes into force, the following property shall be transferred to municipalities: ...
(c) Buildings with land constituting a single functional unit with the building, ...
which were owned by municipalities as of 31 December 1949 and provided that they are owned by the Czech Republic ...”
“Within one year after acquiring the ownership of real estate in accordance with this law, municipalities shall be obliged to lodge an application with the Geodetic Centre to record [the title to] such real estate in the Register of Real Property.”
At the material time, the relevant provision of Act no. 92/1991, on the conditions of transfer of State property to other persons (the Privatisation Act) read as follows:
“(3) Privatisation proceedings are not subject to general rules on administrative proceedings and a privatisation decision is not subject to judicial review.”
Act no. 58/1969 on State liability for damage caused by a State body's decision or its incorrect administrative procedure. As of 5 May 1998 it has been replaced by Act no. 82/1998.
Resolution of the Constitutional Court no. III. ÚS 380/97
“ ... a decision (of the State) on privatisation, under the Act on the conditions of transfer of State property to other persons (Law no. 92/1991, as amended) is a decision of the State, however not in its capacity as the holder of public power, but in its capacity as the owner of the privatised property; it follows ... that any disposition of (decision on) the property in the framework of the above-mentioned law is an expression and a consequence of the owner's will and that the liability of any authority empowered to carry out privatisation falls outside the scope of general liability under domestic legislation.”
Resolution of the Constitutional Court no. III. ÚS 93/99
“The activity of privatisation commissions ... has the character of decision-making by the owner of property on the manner in which the property will be treated, and the State does not act as a superior subject. ... A prerequisite for application of Law no. 58/1969 is that the State, through its bodies, must act as the holder of public power and exercise that power. If [in the context of the activity of privatisation commissions] the State acts as the owner of the property and disposes of its property in the framework of civil-law relation, it is clear that the State's liability cannot be based on Law no. 58/1969.”
Resolution of the Constitutional Court no. III. ÚS 1734/07
“In the instant case the ordinary courts ... referred to the established case-law of the Constitutional Court and the Supreme Court and held that a decision of the State in the context of privatisation is one of the owner, not the holder of public power. ... On the other hand they did not rule out a State's mistake from the point of view of statutory provisions in making a decision. They merely ruled out that such mistakes would be covered by special laws on the State's liability.”
The applicant company complained that it had been deprived of its possessions, in violation of Article 1 of Protocol No. 1, which had acquired bona fide in 1992, when the State had founded it and assigned the building to its corporate assets. The title to the property had been recorded in the Register of Real Property accordingly. The applicant company could not have been aware that the State had transferred to it property that had earlier been ipso jure transferred to a municipality. Moreover, the Přimda Municipality had failed to comply with section 8 of Act no. 172/1991 by not lodging an application to record its newly established title to the building in issue to the Register of Real Property.
The applicant company submitted in conclusion that it had been deprived of its property without a fair balance between the public interest and the protection of fundamental rights having been struck.
The applicant company alleged that it had been deprived of its possessions contrary to Article 1 of Protocol No. 1 which reads as follows:
“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.”
The Government submitted that the applicant company had never become the owner of the building in issue, but accepted, taking into account the fact that “possessions” is an autonomous Convention concept, that the applicant company had a “legitimate expectation” for the purpose of Article 1 of Protocol No. 1. The instant case consisted of two sets of civil proceedings. In the first one, between the applicant company and the Přimda Municipality concerning the determination of ownership, the courts had merely decided a private dispute. Therefore, from the point of view of the Convention, it should only be scrutinised whether the State, through its court system, had complied with its positive obligations under Article 1 of Protocol No. 1. The Government considered that it had been the case and that this part of the application was therefore manifestly ill-founded.
Regarding the proceedings for damages, the Government submitted that according to the national case-law, a privatisation decision was not a decision adopted in administrative proceedings or any other decision of the State as a superior authority. While special laws on the State's liability were therefore not applicable to the instant case, general provisions on civil-law liability, which existed in the domestic legal order, were applicable. It was up to the domestic court to decide whether the case fell within the scope of civil law or commercial law and to draw conclusions accordingly. As the proceedings were still pending, the Government considered that the complaint was inadmissible for non-exhaustion of domestic remedies. They also emphasised that in its appeal on points of law of 17 October 2007 the applicant company based its claim for damages on a violation of the Commercial Code, sharing therefore the Government's point of view.
In its reply to the Government's observations, the applicant company contended that it had been the owner of the property in issue from the date it was registered in the Companies Register and that the domestic courts had ignored the expert opinion to this effect. While the applicant company had acquired the property under the privatisation project, the municipality had not met the prerequisites for the transfer of the property under Act no. 172/1991. The court's decisions on the determination of ownership had therefore lacked legal basis and the courts had failed to comply with the requirements of a fair hearing and of a fair decision in the case.
While admitting that the proceedings for damages were pending, the applicant company pointed out that, given their length, their remedial effect was weakened.
The Court notes that the building in question was registered at the Land Registry in June 1996 as being owned by the applicant company. The Court finds that the building constituted as “possession” within the meaning of Article 1 of Protocol No. 1.
It recalls that under the terms of Article 35 § 1 of the Convention it can only deal with the matter after all domestic remedies have been exhausted, according to the generally recognised rules of international law. The rule of exhaustion of domestic remedies obliges applicants to use first the remedies that are available and sufficient in the domestic legal system to afford redress for the violation complained of (see Iatridis v. Greece [GC], no. 31107/96, § 47, ECHR 1999-II; and İlhan v. Turkey [GC], no. 22277/93, § 58, ECHR 2000-VII). It is incumbent on the Government claiming non-exhaustion to convince the Court that the remedy was an effective one available in theory and in practice at the relevant time, that is to say that it was accessible, was capable of providing redress directly in respect of the applicant's complaints and offered reasonable prospects of success. However, once this burden of proof has been discharged, it falls to the applicant to establish that the remedy advanced by the Government was in fact exhausted or was for some reason inadequate and ineffective in the particular circumstances of the case or that there existed special circumstances absolving him or her from the requirement (see Akdivar and Others v. Turkey, 16 September 1996, § 68, Reports 1996-IV, and Kleyn and Others v. the Netherlands [GC], nos. 39343/98, 39651/98, 43147/98 and 46664/99, § 156, ECHR 2003-VI).
In the present case, the Government submitted, and supported with references to the established case-law of the national courts, including the Constitutional Court, that special provisions of the domestic law on State liability were not applicable and that the case fell within the scope of general civil-law liability.
The Court notes that it is not its role to substitute its own assessment for that of the State in order to determine which provisions of the domestic law on liability should be applicable to a certain case. It is therefore up to the domestic courts to make this assessment and draw conclusions accordingly. It also notes that the applicant company, in the course of the proceedings, amended its claims in its points of law of 21 January 2008 to cover the possibility that the State could be liable under the civil law. Both alternatives are therefore pending before the domestic courts, and will be considered in due course. Moreover, although the courts in the proceedings for determining ownership were not able to award compensation, the applicant company's action against the Ministry of Finance covers its claims about the value of the building, and also a claim for costs. It is only at the end of those proceedings, in the light of any decision as to compensation and the reasons given for it, that the Court will be able to determine the extent of the applicant company's loss, if any.
The Court further notes that the applicant company did not submit any relevant argument which, taking into consideration the stage of the proceedings for damages at domestic level, would cast doubt on the availability of an effective remedy. Regarding the length of the proceedings, the Court observes that the proceedings have been pending before the domestic courts since 22 August 2005, which is approximately four and a half years at three levels of jurisdiction. In the Court's view, this fact as such cannot lead to the conclusion that the remedy used by the applicant company was not effective. Moreover, the Czech legal order offers a remedy in respect of delays in the proceedings which the Court has found to be effective for the Convention's purposes (see Vokurka v. the Czech Republic (dec.) no. 40552/02, 16 October 2007).
Given that proceedings for compensation are still pending, the Court cannot take a stand on the question whether the applicant company will be sufficiently compensated in order to satisfy the requirements of Article 1 of Protocol No. 1. It considers, therefore, that the complaint is premature and that the applicant company has not exhausted domestic remedies within the meaning of Article 35 § 1 of the Convention. It follows that the complaint must be declared inadmissible in accordance with Article 35 § 4 of the Convention.
For these reasons, the Court unanimously
Declares the application inadmissible.
Claudia Westerdiek Peer Lorenzen