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MALYSH AND OTHERS v. RUSSIA - 30280/03 [2010] ECHR 159 (11 February 2010)
URL: http://www.bailii.org/eu/cases/ECHR/2010/159.html
Cite as:
[2010] ECHR 159
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FIRST
SECTION
CASE OF
MALYSH AND OTHERS v. RUSSIA
(Application
no. 30280/03)
JUDGMENT
STRASBOURG
11
February 2010
This
judgment will become final in the circumstances set out in Article 44
§ 2 of the Convention. It may be subject to editorial
revision.
In the case of Malysh and Others v. Russia,
The
European Court of Human Rights (First Section), sitting as a Chamber
composed of:
Christos
Rozakis,
President,
Nina
Vajić,
Anatoly
Kovler,
Khanlar
Hajiyev,
Dean
Spielmann,
Giorgio
Malinverni,
George
Nicolaou,
judges,
and
Søren Nielsen, Section
Registrar,
Having
deliberated in private on 21 January 2010,
Delivers
the following judgment, which was adopted on the last mentioned
date:
PROCEDURE
The
case originated in an application (no. 30280/03) against the Russian
Federation lodged with the Court under Article 34 of the Convention
for the Protection of Human Rights and Fundamental Freedoms (“the
Convention”) by six Russian nationals listed in paragraph 6
below (“the applicants”) on 26 June 2003.
The
first applicant, Mr Nikolay Malysh, represented the other applicants
before the Court. The Russian Government (“the Government”)
were initially represented by Mr P. Laptev, Representative of
the Russian Federation at the European Court of Human Rights, and
subsequently by their new Representative, Mr G. Matyushkin.
The
applicants alleged, in particular, that the failure on the part of
the Russian Government to implement the procedure for redemption of
Urozhay-90 bonds had been in breach of Article 1 of Protocol
No. 1.
By
a decision of 19 June 2008 the Court declared the application
admissible.
The
Government, but not the applicants, filed further written
observations (Rule 59 § 1 of the Rules of Court).
THE FACTS
I. THE CIRCUMSTANCES OF THE CASE
The applicants are:
(1) Mr
Nikolay Ivanovich Malysh, born in 1949,
(2) Mr Vasiliy Aleksandrovich Bogomolov, born in 1944,
(3) Mr Sergey Stepanovich Iglin, born in 1949,
(4) Ms Zinaïda Aleksandrovna Sannikova, born in 1954,
(5) Ms Lyubov Vasilyevna Nazarenko, born in 1953, and
(6) Mr Sergey Nikolaevich Malysh, born in 1979.
All
the applicants are Russian nationals living in the Amur Region. They
are all holders of Urozhay-90 bonds.
A. Background information on Urozhay-90 bonds
In
1987 the General Secretary of the USSR Communist Party Mikhail
Gorbachev presented his “basic theses”, which laid the
political foundation for economic reform heralding the transition to
a market economy. Several laws were enacted which opened up the
State-dominated planned economy to private enterprise. However, the
Government preferred to keep control over consumer prices rather than
leaving them to be determined by the free market.
By
1990 Government spending increased sharply as a growing number of
unprofitable enterprises required State support, whereas more
resources were diverted to subsidise consumer prices. At the same
time, the elimination of central control over production decisions,
especially in the consumer-goods sector, led to a breakdown in
traditional supply-demand relationships. This resulted in pervasive
shortages of food and basic consumer goods. The Government reacted by
introducing ration stamps for food and certain hygiene articles.
In
addition to ration stamps, the Government of the Russian Socialist
Federative Soviet Republic (RSFSR)
put into circulation several types of so-called “commodity
bonds” (товарные
чеки)
which gave their bearers the right to purchase consumer goods, such
as refrigerators, washing machines, tape recorders and passenger
cars. The Urozhay-90 (“Harvest-90”) bonds were one
of many types of bonds; they were distributed among agricultural
workers and companies which had sold grain and other agricultural
produce to the State in 1990 and 1991. Those bonds were designed to
encourage agricultural workers to sell produce to the State in
exchange for the right to priority purchasing of goods in high demand
(see paragraph 43 below). The State paid workers for the produce at
fixed prices and also gave them bonds in amounts proportionate to the
value of the produce sold.
The
Urozhay-90 bonds were not legal tender, but they had a certain
nominal value indicated on their face. That value determined the
maximum purchase price of consumer goods which could be sold on
production of the bonds. The bonds were not intended for payment but
merely for certification of the right to purchase specific goods; the
sale of goods was conditional on payment of the full purchase price
by the bond-holder and production of the bonds for the same amount.
The bonds were not registered in the person’s name or otherwise
personalised and the Government Resolution did not prevent them from
being transferred among individuals and legal entities.
On
2 January 1992 the Russian Government decided to put an end to the
regulation of retail prices. Shops began to fill up with merchandise
but prices increased at a staggering speed (the inflation rate in
1992 was 2,600%). In March 1992, the Government established that
goods available under the bonds would be sold at the prices fixed
before 2 January 1992 (see paragraph 44 below).
In
August 1992 the Government introduced the possibility of buying out
the bonds with a coefficient of 10. In 1994, the coefficient was
raised to 70 (see paragraphs 45 and 46 below). It appears that a
significant number of bonds were bought out by the State before the
buyout operations were stopped in 1996 (see paragraph 48 below).
In
1995 the status of the commodity bonds was codified in the Commodity
Bonds Act passed by Parliament (see paragraph 47 below). Its text was
very laconic, shorter than one page, but it purported to cover every
type of commodities bonds issued in previous years. Section 1
recognised the commodity bonds as part of the internal debt of the
Russian Federation; section 2 fixed at ten years the limitation
period for the obligations arising out of commodity bonds (the
starting date was not specified); section 3 required the Government
to adopt a programme for settlement of the internal debt.
In
2000 the Government presented the programme for settlement of the
internal debt (see paragraph 50 below). It covered every type of
commodity bond, save for the Urozhay-90 bonds. A few months
before the Commodity Bonds Act was amended so as to provide that the
settlement of the debt under the Urozhay-90 bonds would be
regulated by a special federal law (see paragraph 49 below).
Between
2003 and 2009 the application of section 1 of the Commodity Bonds Act
was suspended in the part concerning the Urozhay-90 bonds, in
accordance with the laws on the federal budget for each successive
year (see paragraph 51 below).
In
2009 Parliament passed a law on the buyout of the Urozhay-90
bonds and the Government issued implementing regulations which set
out a detailed procedure for buyout of the bonds (see paragraphs 52
and 53 below).
B. Mr Nikolay Malysh (first set of proceedings) and Mr
Bogomolov
The
applicants Mr Nikolay Malysh and Mr Vasiliy Bogomolov are holders of
Urozhay-90 bonds with a total nominal value of 30,110 and
30,000 non-denominated Russian roubles (RUR) respectively.
In
2001 Mr Nikolay Malysh and Mr Bogomolov brought an action against the
Russian Government and the Ministry of Finance, seeking compensation
for the damage incurred through the State’s continued failure
to effect payment under the bonds.
After
several rounds of judicial proceedings, on 13 January 2003 the
Tambovskiy District Court of the Amur Region refused their claim for
the following reasons:
“At present the State programme for settlement of
the internal debt in the period 2001 to 2004 has been developed and
is being implemented. The Commodity Bonds Act described the debt
arising out the Urozhay-90 bonds as a medium-term debt.
Accordingly, pursuant to Article 98 § 2 of the Budget Code of
the Russian Federation, the maturity date has not yet occurred. It
follows that the executive bodies of the Russian Federation are now
taking measures for the settlement of the debt to the plaintiffs. In
these circumstances, the court cannot find that any acts or failures
to act on the part of the defendant have caused any damage to the
plaintiffs.”
On
19 February 2003 the Amur Regional Court upheld that judgment on
appeal.
C. Mr Nikolay Malysh (second set of proceedings)
The
applicant Mr Nikolay Malysh also holds Urozhay-90 bonds with a
total nominal value of RUR 582,665.
On
5 December 2002 he sued the Russian Government and the Ministry of
Finance for the damage incurred through the State’s continued
failure to effect payment under these bonds.
On
4 March 2003 the Tambovskiy District Court of the Amur Region refused
his claim for the same reasons as those given in the above-quoted
judgment of 13 January 2003.
On
23 April 2003 the Amur Regional Court upheld the judgment on appeal.
D. Mr Iglin
The
applicant Mr Sergey Iglin is the holder of Urozhay-90 bonds
with a total nominal value of RUR 152,200.
On
5 December 2002 he sued the Russian Government and the Ministry of
Finance for the damage incurred through the State’s continued
failure to effect payment under these bonds.
On
20 February 2003 the Tambovskiy District Court of the Amur Region
refused his claim for the same reasons as those given in the
above-quoted judgment of 13 January 2003.
On
28 March 2003 the Amur Regional Court upheld the judgment on appeal.
E. Ms Sannikova
The
applicant Ms Zinaïda Sannikova is the holder of Urozhay-90
bonds with a total nominal value of RUR 223,170.
On
5 December 2002 she sued the Russian Government and the Ministry of
Finance for the damage incurred through the State’s continued
failure to effect payment under these bonds.
After
several rounds of judicial proceedings, on 1 July 2003 the
Blagoveshchensk Town Court of the Amur Region refused her claim
because a federal law governing the procedure for the settlement of
the debt arising out of the Urozhay-90 bonds had not yet been
adopted and because the law on the 2003 federal budget had suspended
the application of the Commodity Bonds Act in the part concerning
Urozhay-90 bonds.
On
6 August 2003 the Amur Regional Court upheld the judgment on appeal.
F. Ms Nazarenko
The
applicant Ms Lyubov Nazarenko is the holder of Urozhay-90
bonds with a total nominal value of RUR 271,855.
On
5 December 2002 she sued the Russian Government and the Ministry of
Finance for the damage incurred through the State’s continued
failure to effect payment under these bonds.
On
19 March 2003 the Blagoveshchensk Town Court of the Amur Region
refused her claim because a federal law governing the procedure for
the settlement of the debt arising out of the Urozhay-90 bonds
had not yet been passed and because the law on the 2003 federal
budget had suspended the application of the Commodity Bonds Act in
the part concerning Urozhay-90 bonds.
On
18 April 2003 the Amur Regional Court upheld the judgment on appeal.
G. Mr Sergey Malysh
The
applicant Mr Sergey Malysh is the holder of Urozhay-90 bonds
with a total nominal value of RUR 222,820.
On
5 December 2002 he sued the Russian Government and the Ministry of
Finance for the damage incurred through the State’s continued
failure to effect payment under these bonds.
After
several rounds of judicial proceedings, on 27 March 2003 the
Blagoveshchensk Town Court of the Amur Region refused his claim. It
referred to the case-law of the Constitutional Court to the effect
that:
“...the balance between the rights and lawful
interests of persons who are creditors of the State, on the one hand,
and all other persons, on the other hand, may only be fixed in the
form of an act of the federal legislature.” (decision of 21
December 2000)
As
no such act had yet been passed, the court dismissed Mr Sergey
Malysh’s action.
On
7 May 2003 the Amur Regional Court upheld the judgment on appeal.
II. RELEVANT DOMESTIC LAW AND PRACTICE
On 26 July 1990 the RSFSR Council of Ministers adopted
Resolution no. 259 on urgent measures for increasing the
purchase of agricultural products harvested in 1990 and for ensuring
their safe keeping. Its relevant parts resolved as follows:
I. Measures to increase the independence
of decision-making by collective and Soviet farms concerning the sale
of the harvest
“1. To authorise all manufacturers of
agricultural produce to sell the surplus of such produce that remains
after delivery under existing agreements ... to procurers or other
consumers at negotiated prices...
2. To declare inadmissible any restrictions
on the sale or shipment of agricultural produce to consumers in
autonomous districts or regions of the RSFSR under paragraph 1 of the
present resolution... Should local councils introduce such
restrictions in their territories, the RSFSR Council of Ministers may
stop issuing Urozhay-90 bonds or delivering goods on the basis
of them in those territories...”
II. Measures to encourage the sale of
agricultural produce to the State through the reciprocal sale of
goods in high demand
“7. To begin issuing, in 1990,
Urozhay-90 bonds to employees of collective and Soviet farms,
other agro-industrial enterprises and organisations, peasants’
farms and owners of personal subsidiary land plots in respect of
agricultural produce sold to the State.
To determine that the bonds certify the right to
purchase goods in high demand at retail prices in trade outlets. The
said bonds are not legal tender.
8. The RSFSR Ministry of Finance and the
RSFSR Ministry of Agriculture and Food will, until 1 September 1990,
print and put into circulation through the branches of the RSFSR
State Bank Urozhay-90 bonds for a total amount of 10 billion
roubles. The bonds are to be used before 1 October 1991.
9. To establish that Urozhay-90 bonds are
issued by the branches of the RSFSR State Bank:
- to all producers who sold standard products to the
State between 1 July 1990 and 30 June 1991 ... in an amount
equivalent to 10% of the value of the products sold...
...
13. The Russian Consumers’ Association
is to submit to the RSFSR Ministry for Foreign Economic Relations
requests for those goods in high demand which are to be sold on
production of the Urozhay-90 bonds, and organise their sale,
on advance orders by citizens and organisations, at regional fairs
and exhibitions and in specialised trade outlets. The Consumers’
Associations is to deliver goods to the consumers on the basis of the
Urozhay-90 bonds no later than 1 January 1990 [sic]. In
1991 orders under the said bonds will be executed within two months.”
On 15 March 1992 the Russian Government issued
Resolution no. 161, intended to compensate the owners of
Urozhay-90 bonds for an increase in retail prices. It
resolved, in particular:
“1. To establish that passenger cars
and other consumer goods which are made available to citizens as a
reward for the grain and other agricultural produce that was sold to
the State in 1990 and 1991 are to be sold at the retail prices that
prevailed before 2 January 1992...
2. To extend the period of validity of the
Urozhay-90 bonds until the end of 1992...”
On 10 August 1992 the Government adopted Resolution
no. 1442-r. It required the Russian ministries to allocate
substantial amounts for the purchase of goods that were to be sold on
production of the Urozhay-90 bonds. It further provided:
“4. The Ministry for Trade and Material
Resources, in cooperation with the Central Consumers’ Union,
shall define, within two weeks, the list of goods intended for the
implementation of the Urozhay-90 bonds...
5. The Prices Committee of the Ministry of
the Economy shall determine the increase in prices of domestic and
imported goods since 1990... The price difference shall be reimbursed
from the republican budget.
6. The Ministry of Agriculture shall carry
out an inventory of bonds held by agricultural enterprises and
organisations and private individuals as on 1 September.
7. The Ministry of Finance and the Ministry
of Agriculture shall, within two weeks, lay down the procedure for
the buyout of the Urozhay-90 bonds through the branches of the
Savings Bank. It is to be taken into account that these bonds may be
either used for purchasing goods or bought out by the State with a
coefficient of 10.”
On 16 April 1994 the Government approved Regulation
no. 344 on State commodity bonds, which provided as follows:
“With a view to redeeming the State commodity
bonds and preventing accrual of the State’s liability to
compensate for price differences, the Government of the Russian
Federation resolves:
1. The Ministry of Finance of the Russian
Federation –
– will buy out ... the Urozhay-90 bonds at
a price equivalent to their nominal value multiplied by 70 and credit
that amount into a bank account...”
47. On 1 June
1995 the Commodity
Bonds Act (no.
86-FZ, ФЗ
«О государственных
долговых товарных
обязательствах»)
was enacted. It
provided that State commodity bonds, including Urozhay-90
bonds, would be recognised as part of the internal State debt of the
Russian Federation (section 1). The obligations arising out of
the commodity bonds would be settled in accordance with the general
principles of the Russian Civil Code, the limitation period being set
at ten years (section 2). The original wording of section 3 provided:
“The Government of the Russian Federation shall
draft, in 1995-1997, the State Programme for settlement of the
internal debt of the Russian Federation described in section 1, based
on the principle of full compensation. The Programme shall provide
for redemption terms ... convenient for citizens, including,
according to their choice: provision of goods designated in ... the
State bonds issued to agricultural suppliers ...; redemption of State
commodity bonds at consumer prices prevailing at the time of the
redemption ...; conversion of the debt into State securities...”
On 16 January 1996 the Government adopted Resolution
no. 33, by which it annulled Regulation no. 344 and instructed the
Ministry of Finance to redeem the State commodity bonds within the
amounts allocated for that purpose in the federal budget.
On 2 June 2000, section 3 of the Commodity Bonds Act
was amended to provide that the procedure for implementation of the
State’s obligations to holders of the Urozhay-90 bonds
would be determined in a special federal law.
On 27 December 2000 the Government adopted the State
Programme for settlement of the internal debt of the Russian
Federation. Paragraph 14 of the Programme provided that the procedure
for payments in respect of the Urozhay-90 bonds would be
determined in a special federal law.
In 2003 the application of section 1 of the Commodity
Bonds Act was for the first time suspended in the part concerning the
Urozhay-90 bonds. The suspension clause was maintained in the
following years (Federal Law no. 176-FZ of 24 December
2002; no. 186-FZ of 23 December 2003; no. 173-FZ of 23 December
2004; no. 189-FZ of 26 December 2005; no. 238-FZ of 19 December
2006; and no. 198-FZ of 24 July 2007).
On 19 July 2009 a federal law governing the procedure
for the buyout of the Urozhay-90 bonds was adopted (no. 200-FZ
– “the Buyout Act”). It established that holders of
the bonds would be paid, in the period between 15 December 2009 and
31 December 2010, an amount equivalent to the nominal value of the
bonds divided by 1,000 (section 2). The law also amended the
Commodity Bonds Act by removing the reference to the Urozhay-90
bonds from section 1 of that Act.
On 15 September 2009 the Government issued Resolution
no. 749, setting out the detailed procedure for payments in exchange
for the production of Urozhay-90 bonds.
On 15 December 2000 the Constitutional Court gave a
decision on an application lodged by the Parliament of the Sakha
(Yakutiya) Republic, which had claimed that the amendments of 2 June
2000 (see above) had indefinitely delayed the implementation of the
State’s obligations towards the bearers of the Urozhay-90
bonds. The Constitutional Court declared the application inadmissible
for the following reasons:
“In its [previous decisions] the Constitutional
Court has already determined that a unilateral change in the scope of
the State’s obligations towards individuals, including the
obligation to sell goods in exchange for commodity bonds, is
impermissible. This does not exclude, however, the possibility of
imposing restrictions on the property rights of individuals –
in an established form and within the constitutional limits –
in the matter of State obligations, which is compatible with Article
55 § 3 of the Constitution.
In particular, it follows from the case-law of the
Constitutional Court ... that implementation of the rights and lawful
interests of individual citizens or groups of citizens should not
excessively and adversely affect the budgetary resources allocated
for satisfying the rights and interests of society as a whole. This
principle becomes particularly relevant in a situation where
budgetary resources are insufficient to resolve many social problems
relating to the exercise of the rights to life and personal dignity.
It follows that the balance between the rights and lawful interests
of the individuals who act as creditors for the State in property
relationships, on the one hand, and everyone else, on the other hand,
may, in principle, be struck only in the form of an act of
Parliament.
Hence, given that the legislature may restrict
individual rights and freedoms (including property rights) for the
purpose of the protection of the rights and lawful interests of
others, a review of the federal law amending section 3 of the
Commodity Bonds Act by the Constitutional Court would imply an
assessment of the financial and economic justification for the
legislative decision on the procedure for settlement of State
commodity bonds, which ... falls outside the jurisdiction of the
Constitutional Court.
When examining claims relating to settlement of the
State commodity bonds, courts of general jurisdiction have the right
and duty to interpret the legislative provisions in the light of the
interests of the individual (Articles 2 and 18 of the Constitution)
and be guided, in particular, by section 2 of the Commodity Bonds
Act, which establishes that State commodity bonds are to be settled
in an appropriate form and in accordance with the Civil Code of the
Russian Federation.”
THE LAW
I. ALLEGED VIOLATION OF ARTICLE 1 OF PROTOCOL No. 1
The
applicants complained under Article 1 of Protocol No. 1 about the
continued failure of the domestic authorities to discharge their
obligations arising out of the Urozhay-90 bonds, which had
been recognised as part of Russia’s internal debt. Article 1 of
Protocol No. 1 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. Submissions by the parties
1. The applicants
The
applicants submitted that the Urozhay-90 bonds had an economic
value and could be considered “possessions” within the
meaning of Article 1 of Protocol No. 1. A substantial part of the
bonds had been exchanged for goods in high demand before 1994 or
bought out by the Ministry of Finance before 1995 at their nominal
value multiplied by 70. The remaining part of the bonds had been
recognised as part of the internal debt of the Russian Federation
under the Commodity Bonds Act. Since that recognition, the applicants
claimed that they had had a legitimate expectation that the State
would repay the nominal value of the bonds.
The
applicants claimed that the State’s failure to effect payments
under the Urozhay-90 bonds amounted to an interference with
their property rights. The laws enacted by the State had not
furnished legal and practical possibilities for enforcing the
obligations arising out of the bonds. Moreover, by enacting
successive laws which had suspended the application of the relevant
provision of the Commodity Bonds Act, the State had elevated itself
to a privileged position and thereby breached the constitutional
principle of equality before the law.
The
applicants accepted that the radical reform of the country’s
political and economic system, as well as the state of the country’s
finances, might have justified stringent limitations on compensation
for Urozhay-90 bond-holders. However, there were no
satisfactory grounds justifying the extent to which the State had
continuously failed over many years to give effect to the entitlement
conferred on Urozhay-90 holders. Since 2001 the revenues of
the Russian federal budget had constantly exceeded expenditure and
multi-billion amounts had been transferred into the Stabilisation
Fund. Thus, the Government’s claim of insufficient budgetary
funds was obviously unfounded. In these circumstances, it was
incumbent on the domestic courts to strike a fair balance between the
public and individual interests and to determine whether the
country’s financial situation had been so dire as to require
postponement of the obligations arising out of the Urozhay-90
bonds.
The
applicants finally submitted that, by imposing successive limitations
on the exercise of their right to recover the debts and by applying
practices that made their right unusable in practice, the authorities
had destroyed its very essence. They had to bear a disproportionate
and excessive individual burden which could not be justified in terms
of the legitimate general community interest pursued by the
authorities.
2. The Government
The
Government claimed that the Urozhay-90 bonds did not
constitute “property rights” or “possessions”
within the meaning of Article 1 of Protocol No. 1. They
distinguished the present case from the Broniowski v. Poland case
([GC], no. 31443/96, ECHR 2004 V), in which the obligation of
the Polish authorities to compensate repatriated persons for
abandoned property had not been disputed. In the Government’s
view, the present case had similarities with the situation obtaining
in the Grishchenko v. Russia case ((dec.), no. 75907/01, 8
July 2004), in which the Court had found that the applicant’s
claim under a commodity bond for the purchase of a Russian-made car
had not been sufficiently established to be enforceable.
The
Government emphasised the specific legal nature of the Urozhay-90
bonds. The bonds were not legal tender; they could not be exchanged
for goods or money. They merely certified the holder’s right to
purchase goods in high demand, but he or she could only do so at his
or her own expense. The bonds were distributed in addition to payment
for agricultural produce as an incentive for farmers to sell produce
to the State. Thus, the face value of a bond did not represent the
amount the State owed to the holder but rather the scope of the
holder’s entitlement to purchase goods which had not been
otherwise available for purchase in the early 1990s.
The
Government pointed out that the bonds had been issued as an
individual incentive and that the applicable regulations did not
provide for a possibility of their sale or purchase. There is no
evidence that all of the applicants had been farmers themselves: for
example, the applicant Mr Sergey Malysh, born in 1979, had been
eleven years old at the time the bonds had been issued. In the
Government’s view, the applicants could not be said to have
suffered an “individual and excessive burden”, because
they had not submitted any information on the price at which they had
purchased the bonds from third parties.
According
to the Government’s position, the obligations arising out of
the Urozhay-90 bonds could not described as a “debt”
because the holders had not given their money to the State and
because the State had paid for the agricultural produce. Their
recognition in the Commodity Bonds Act as internal debt was
“mistaken”. The application of the Act had been suspended
by successive laws on the federal budget. The interference therefore
had a lawful basis and the domestic courts had taken reasoned and
justified decisions to dismiss the applicants’ claims. It was
also in the public interest since, in a situation where the budgetary
resources were insufficient to satisfy pressing social needs, the
State had a duty to protect the budget from excessive spending.
Finally,
the Government indicated that at the time of submission of their
memorandum a draft law governing the procedure for buyout of the
Urozhay-90 bonds had been prepared and submitted to Parliament
for a vote. The law would regulate all aspects of redemption of the
bonds.
B. The Court’s assessment
1. Applicability of Article 1 of Protocol No. 1
The
concept of “possessions” in the first part of Article 1
of Protocol No. 1 has an autonomous meaning which is not limited to
the ownership of material goods and is independent from the formal
classification in domestic law. In the same way as material goods,
certain other rights and interests constituting assets can also be
regarded as “property rights”, and thus as “possessions”
for the purposes of this provision. In each case the issue that needs
to be examined is whether the circumstances of the case, considered
as a whole, conferred on the applicant title to a substantive
interest protected by Article 1 of Protocol No. 1 (see Broniowski,
cited above, § 129; Iatridis v. Greece [GC], no.
31107/96, § 54, ECHR 1999-II; and Beyeler v. Italy
[GC], no. 33202/96, § 100, ECHR 2000-I).
When
declaring the application admissible, the Court examined the issue of
applicability of Article 1 of Protocol No. 1. It found that the scope
of the entitlement conferred by the Urozhay-90 bonds on their
holders had not been identical throughout their lifetime. In the
initial period following their introduction and until early 1992, the
bonds had had no independent value, being merely an administrative
instrument for the distribution of consumer goods in high demand. In
the subsequent period the right the bonds had originally certified –
the right to purchase goods in high demand – lost its value and
relevance on transition to the market economy. However, the legal
regulations governing the bonds evolved in line with the changing
economic conditions in Russia, with the result that the bonds were
firstly treated as equivalent to discount coupons, later gave access
to monetary compensation and, eventually, were recognised as part of
the internal debt by the Commodity Bonds Act.
The
Court further noted that by enacting the Commodity Bonds Act in 1995,
the Russian State had taken upon itself an obligation to settle the
debt arising out of the Urozhay-90 bonds. Since that time the
applicants had continuously held against the Russian State a claim
which had existed both on the date of the ratification of Protocol
No. 1 by Russia (5 May 1998) and on the date of the submission of the
present application to the Court. Although the application of the
relevant provision of the Commodity Bonds Act had been suspended for
many years, it had not been revoked or annulled. Moreover, despite
the discrepancy in the grounds invoked by the domestic courts which
had rejected the applicants’ claims, all the decisions had
acknowledged the existence of a debt arising out of the Urozhay-90
bonds under the Commodity Bonds Act and chargeable to the State.
In
sum, the Court found that the applicants had a proprietary interest
which was both recognised under Russian law and acknowledged by
Russian courts and which qualified for protection under Article 1 of
Protocol No. 1. It finds nothing in the Government’s present
arguments to change the conclusion that, as has already been
established in the decision on admissibility, the applicants’
right to obtain redemption of the debt arising out of the Urozhay-90
bonds constitutes a “possession” within the
meaning of that Convention provision.
Following
the decision on the admissibility of the application, the Russian
Parliament amended the Commodity Bonds Act by removing the reference
to the Urozhay-90 bonds, and also passed a law governing the
buyout of those bonds. This welcome development has put an end to the
situation of legal uncertainty which was the main subject of the
applicants’ complaint. However, the Court reiterates that the
issue must be seen from the perspective of what “possessions”
the applicants had on the date of the Protocol’s entry into
force and, critically, on the date on which they submitted the
complaint to the Court (see Broniowski, cited above, §
132). As noted above, on both those dates the debt arising out of the
bonds had been recognised but the implementing regulations had not
been adopted, making redemption of the bonds impossible.
The
fact that the applicants complained about the lack of legal
regulation of their entitlement distinguishes the present case from
the situation obtaining in the Grishchenko case, to which the
Government referred above. Ms Grishchenko possessed a different type
of a commodity bond, one that originally certified her right to
purchase a passenger car. She lodged a complaint with the Court after
the Government had defined the procedure for redemption of bonds of
that type, because she was dissatisfied with the Government’s
decision to grant an allegedly insufficient sum of money instead of a
real car. The thrust of her complaint under Article 1 of Protocol No.
1 was therefore not the lack of regulation of her entitlement but
rather the adequacy of compensation, a matter which is not in issue
in the instant case.
Having
regard to the above, the Court finds that for the purposes of Article
1 of Protocol No. 1, the applicants’ “possessions”
comprised the entitlement to obtain some form of compensation for, or
redemption of, the Urozhay-90 bonds. While that right was
created in a kind of inchoate form, as its materialisation was
conditional on the enactment of implementing legislation, at the
material time section 1 of the Commodity Bonds Act clearly
constituted a legal basis for the State’s obligation to
implement it (compare Broniowski, cited above, § 133).
2. The applicable rule and the nature of the alleged
violation
Article
1 of Protocol No. 1 comprises three distinct rules: the first rule,
set out in the first sentence of the first paragraph, is of a general
nature and enunciates the principle of the peaceful enjoyment of
property; the second rule, contained in the second sentence of the
first paragraph, covers deprivation of possessions and subjects it to
certain conditions; the third rule, stated in the second paragraph,
recognises that the Contracting States are entitled, inter alia,
to control the use of property in accordance with the general
interest. The three rules are not, however, distinct in the sense of
being unconnected. The second and third rules are concerned with
particular instances of interference with the right to peaceful
enjoyment of property and should therefore be construed in the light
of the general principle enunciated in the first rule (see
Broniowski, § 134; Iatridis, § 55; and
Beyeler, § 98, all cited above).
The
parties did not take a clear position on the question under which
rule of Article 1 of Protocol No. 1 the case should be examined.
Having regard to the complexity of the legal and factual issues
involved, the Court considers that the alleged violation of the
applicants’ property rights cannot be classified in a precise
category. In any event, the situation mentioned in the second
sentence of the first paragraph is only a particular instance of
interference with the right to peaceful enjoyment of property as
guaranteed by the general rule laid down in the first sentence (see
Beyeler, cited above, § 106). The case should
therefore more appropriately be examined in the light of that general
rule (compare Broniowski, cited above, §§ 135-136).
The
Court further reiterates that the boundaries between the State’s
positive and negative obligations under Article 1 of Protocol No. 1
do not lend themselves to precise definition. The applicable
principles are nonetheless similar. Whether the case is analysed in
terms of a positive duty of the State or in terms of an interference
by a public authority which needs to be justified, the criteria to be
applied do not differ in substance. In both contexts regard must be
had to the fair balance to be struck between the competing interests
of the individual and of the community as a whole. It also holds true
that the aims mentioned in that provision may be of some relevance in
assessing whether a balance between the demands of the public
interest involved and the applicant’s fundamental right of
property has been struck. In both contexts the State enjoys a certain
margin of appreciation in determining the steps to be taken to ensure
compliance with the Convention (see Broniowski, cited
above, § 144, and Hatton and Others v. the United Kingdom
[GC], no. 36022/97, §§ 98 et seq., ECHR
2003-VIII).
In
the present case the applicants’ submission under Article 1 of
Protocol No. 1 is that the Russian State, having conferred on them an
entitlement to seek redemption of the Urozhay-90 bonds, made
it impossible to benefit from that entitlement by failing for years
to adopt the implementing regulations. That situation may well be
examined in terms of a hindrance to the effective exercise of the
right protected by Article 1 of Protocol No. 1 or in terms of a
failure to secure the implementation of that right (compare
Broniowski, cited above, § 146).
The
Court will determine whether the conduct of the Russian State was
justifiable in the light of the principles of lawfulness, pursuance
of a legitimate aim in the public interest and striking of a fair
balance between the general interest of the community and the
applicant’s right to the peaceful enjoyment of his possessions
(see, for a detailed description of those principles, Broniowski,
cited above, §§ 147-151).
3. Compliance with Article 1 of Protocol No. 1
(a) Respect for the principle of
lawfulness
The
Court notes that the application of section 1 of the Commodity Bonds
Act in the part concerning the Urozhay-90 bonds was repeatedly
suspended through the laws on the federal budget for each successive
year (see paragraph 51 above).
It
is therefore satisfied that an interference with, or a restriction
on, the exercise of the applicants’ right to the peaceful
enjoyment of their possessions was “provided for by law”
within the meaning of Article 1 of Protocol No. 1.
(b) Existence of a legitimate aim in the
public interest
The
Government indicated that the restriction on the implementation of
the bond-holders’ entitlement sought to prevent excessive
expenditure from the federal budget. This position was reflected in
the decision of the Russian Constitutional Court, which held that the
necessity to restrict property rights could arise “in a
situation where budgetary resources [were] insufficient to resolve
many social problems relating to the exercise of the rights to life
and personal dignity” (see paragraph 54 above).
The
Court observes that in the 1990s the Russian State went through a
tumultuous transition from a State-controlled to a market economy.
Its economic well-being was further jeopardised by the financial
crisis of 1998 and the sharp devaluation of the national currency.
Even though it has achieved relative prosperity and wealth in recent
years, the Court agrees that defining budgetary priorities in terms
of favouring expenditure on pressing social issues to the detriment
of claims with a purely pecuniary nature was a legitimate aim in the
public interest.
(c) Striking of a fair balance between the
general interest and the applicants’ rights
The
Court notes at the outset that, by contrast with the situation
obtaining in the above-mentioned Broniowski case and other
similar cases, for instance, Ramadhi and Others v. Albania (no.
38222/02, 13 November 2007) and Deneş and Others v. Romania
(no. 25862/03, 3 March 2009), the
applicants had not suffered an initial taking or loss of property
which the State had undertaken to compensate for. The bonds of which
the applicants were the holders were given to agricultural workers as
an additional incentive to encourage them to sell their produce to
the State, which had paid for it at fixed prices. Nor could these
bonds be used as legal tender or a money substitute: they certified
the bearer’s right to purchase goods in high demand but the
buyer still had to pay the full purchase price in cash or otherwise.
These particular features of the bonds may be relevant for an
assessment of the level of compensation which was eventually offered
to the bond-holders, since the Court has already considered that a
substantially reduced amount of compensation may be acceptable in a
situation in which the compensatory entitlement does not arise from
any previous taking of individual property by the respondent State
but is designed to mitigate the effects of a taking or loss of
property not attributable to the State (see Broniowski, cited
above, §§ 182 and 186). However, the Court reiterates
that the applicants’ complaints in the instant case do not
concern the amount of compensation recoverable under the Buyout Act
passed in 2009; their grievances stemmed from the fact that, in
passing the Commodity Bonds Act, the Russian State had voluntarily
taken upon itself an obligation towards bearers of the bonds that had
not been discharged for many years owing to the absence of a
legislative framework for its implementation.
The
rule of law underlying the Convention and the principle of lawfulness
in Article 1 of Protocol No. 1 require States not only to respect and
apply, in a foreseeable and consistent manner, the laws they have
enacted, but also, as a corollary of this duty, to ensure the legal
and practical conditions for their implementation (see Broniowski,
cited above, §§ 147 and 184). In the context of the present
case, those principles required the Russian State to fulfil in good
time, in an appropriate and consistent manner, the legislative
promises it had made in respect of claims arising out of the
Urozhay-90 bonds. In particular, it was incumbent on the
authorities to legislate on the conditions for implementation of the
bond-bearers’ entitlement with a view to satisfying the
undertaking that had been created through the enactment of the
Commodity Bonds Act. The Court is not persuaded by the Government’s
submission that the recognition of the bonds as part of the State’s
internal debt had been “mistaken”. Even if this were so,
no explanation was offered as to why that alleged mistake had not
been promptly identified and corrected through an appropriate
amendment of the Commodity Bonds Act. It could not have been due to a
mere oversight or oblivion because the application of section 1 of
the Commodity Bonds Act in the part concerning the Urozhay-90
bonds had been explicitly and repeatedly suspended for many years in
the successive laws on the federal budget.
During
the entire period between the enactment of the Commodity Bonds Act in
1995 and the approval of the Buyout Act in 2009, the conduct of the
Russian authorities appears to have been passive vis-à-vis
the implementation of the entitlement of the bond-bearers which had
been continuously recognised as part of the State’s internal
debt. The information available to the Court does not allow it to
find that the Russian Government took any measures in that period
with a view to satisfying the claims arising out of the bonds. No
draft legislation governing the State’s obligations under the
bonds had been proposed or discussed in Parliament. The preparatory
work which was essential for drafting such legislation had not been
carried out. The inventory of the bonds, which had already been
decided upon in the Government’s Resolution of 10 August
1992 (see paragraph 45 above), had never been completed and,
accordingly, the exact number and amount of the outstanding bonds
could not have been known. The Court therefore finds that the
Government’s argument that the restrictions on redemption of
the bonds had been necessary to prevent excessive expenditure from
the federal budget is hardly persuasive. An appropriate balancing
exercise determining the exact amount that would be required to
settle the debt under the bonds in relation to other priority
expenses could not have been possible in the absence of crucial
figures, such as the quantity and total valuation of the remaining
bonds. While the Court agrees that the radical reform of Russia’s
political and economic system, as well as the state of the country’s
finances, may have justified stringent financial limitations on
rights of a purely pecuniary nature, it finds that the Russian
Government were not able to adduce satisfactory grounds justifying,
in terms of Article 1 of Protocol No. 1, the continuous failure over
many years to implement an entitlement conferred on the applicants by
Russian legislation.
As
regards the conduct of the applicants, the Court reiterates that
following the enactment of the Commodity Bonds Act they had a
legitimate expectation of obtaining some form of compensation for, or
redemption of, the Urozhay-90 bonds. They did not remain
passive but rather displayed an active attitude by filing individual
and collective actions with the domestic courts and, following the
rejection of their claims at first instance, making use of the
appeals procedure. The Government did not suggest that any other
effective domestic remedies were available to them. In these
circumstances, it cannot be said that the applicants were responsible
for, or culpably contributed to, the state of affairs which they
complained about (compare Broniowski, cited above, §
181). Rather, as the Court has found on the strength of the evidence
before it, the hindrance to the peaceful enjoyment of their
possessions was solely attributable to the respondent State.
On
balance, the Court considers that the Russian authorities, by
imposing successive limitations on the application of the legislative
provision establishing the basis for the applicants’ right to
redemption of the Urozhay-90 bonds and by failing for years to
legislate on the procedure for implementation of that entitlement,
kept the applicants in a state of uncertainty, which was incompatible
in itself with the obligation arising under Article 1 of Protocol No.
1 to secure the peaceful enjoyment of possessions, notably with the
duty to act in good time, in an appropriate and consistent manner
where an issue of general interest is at stake (see Broniowski,
cited above, §§ 151 and 185).
There
has therefore been a violation of Article 1 of Protocol No. 1.
II. APPLICATION OF ARTICLE 41 OF THE CONVENTION
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.”
A. Damage
The applicants claimed compensation in respect of
pecuniary damage in an amount equal to the nominal value of the
bonds, divided by 1,000 to take account of the redenomination of the
Russian rouble and multiplied by a coefficient of 48,222,
representing the increase in consumer prices in the period from March
1991 to March 2006. They further claimed compensation in respect of
non-pecuniary damage, ranging from 5,000 to 10,000 euros (EUR) for
each applicant.
The Government objected to an award of just
satisfaction, claiming that the applicants had not suffered any
damage because they had bought the bonds in question from third
parties. The purchased bonds had no real value because they had
originally certified the bearer’s right to buy goods in high
demand, whereas at the time of their purchase those same goods had
already been available in all shops.
As
regards pecuniary damage, the Court notes that, following the
enactment of the Buyout Act in 2009 and the Government’s
Resolution governing the buyout procedure (see paragraphs 52 and 53
above), it is now open to the applicants to apply to the competent
domestic authorities for redemption of their bonds.
The
Court further considers that the applicants must have suffered
anxiety and frustration on account of the authorities’
prolonged failure to devise the procedure for settlement of their
entitlement. However, it considers the amounts claimed in respect of
non-pecuniary damage excessive. Making its assessment on an equitable
basis, the Court awards each applicant EUR 1,800 in respect of
non-pecuniary damage, plus any tax that may be chargeable on it.
B. Costs and expenses
The
applicants also claimed 88,599.58 Russian roubles (RUB) in respect of
legal costs and postal and travel expenses. The Government did not
make specific comments on this claim.
Having
regard to the material in its possession, the Court considers it
reasonable to award EUR 2,000 to all the applicants jointly, plus any
tax that may be chargeable to the applicants on that amount.
C. Default interest
The
Court considers it appropriate that the default interest should be
based on the marginal lending rate of the European Central Bank, to
which should be added three percentage points.
FOR THESE REASONS, THE COURT UNANIMOUSLY
Holds that there has been a violation of
Article 1 of Protocol No. 1;
Holds
(a) that
the respondent State is to pay the applicants, within three months
from the date on which the judgment becomes final in accordance with
Article 44 § 2 of the Convention, the following
amounts, to be converted into Russian roubles at the rate applicable
at the date of settlement:
(i) EUR
1,800 (one thousand eight hundred euros) to each applicant, plus any
tax that may be chargeable, in respect of non-pecuniary damage;
(ii) EUR
2,000 (two thousand euros) to all the applicants jointly, plus any
tax that may be chargeable to the applicants, in respect of costs and
expenses;
(b) that
from the expiry of the above-mentioned three months until settlement
simple interest shall be payable on the above amount at a rate equal
to the marginal lending rate of the European Central Bank during the
default period plus three percentage points;
Dismisses the remainder of the applicants’
claim for just satisfaction.
Done in English, and notified in writing on 11 February 2010,
pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.
Søren Nielsen Christos Rozakis
Registrar President
