European Court of Human Rights

 

 

GRAND CHAMBER

 

 

 

 

 

 

 

CASE OF VISTIŅŠ AND PEREPJOLKINS v. LATVIA

 

(Application no. 71243/01)

 

 

 

 

 

 

 

 

 

JUDGMENT

(Just satisfaction)

 

 

 

STRASBOURG

 

25 March 2014

 

 

 

 

 

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

 




In the case of Vistiņš and Perepjolkins v. Latvia,

The European Court of Human Rights, sitting as a Grand Chamber composed of:

          Dean Spielmann, President,
          Nicolas Bratza,
          Françoise Tulkens,
          Nina Vajić,
          Lech Garlicki,
          Peer Lorenzen,
          Karel Jungwiert,
          Elisabeth Steiner,
          Ján Šikuta,
          András Sajó,
          Nona Tsotsoria,
          Işıl Karakaş,
          Kristina Pardalos,
          Angelika Nußberger,
          Julia Laffranque,
          Linos-Alexandre Sicilianos,
          André Potocki, judges,
and Michael O’Boyle, Deputy Registrar,

Having deliberated in private on 5 March 2014,

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

PROCEDURE

1.  The case originated in an application (no. 71243/01) against the Republic of Latvia lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by two Latvian nationals, Mr Jānis Vistiņš and Mr Genādijs Perepjolkins (“the applicants”), on 5 June 2001.

2.  In a judgment delivered on 25 October 2012 (“the principal judgment”), the Court (Grand Chamber) held that, by expropriating the land belonging to the applicants, and as the compensation was disproportionately low, the respondent State had overstepped the margin of appreciation afforded to it, thus upsetting the fair balance to be struck between the protection of property and the requirements of the general interest. Accordingly, there had been a violation of Article 1 of Protocol No. 1 (see Vistiņš and Perepjolkins v. Latvia [GC], no. 71243/01, §§ 130-131, and point 2 of the operative provisions, 25 October 2012).

3.  Under Article 41 of the Convention the applicants claimed the full cadastral value of the land in question at the time of its expropriation and the reimbursement of their loss of income corresponding to lost rent in respect of the land. They also sought the reimbursement of their expenses in connection with the proceedings before the Court.

4.  Since the question of the application of Article 41 of the Convention was not ready for decision, the Court reserved it and invited the Government and the applicants to submit, within three months from the date of notification of the principal judgment, their written observations on that issue and, in particular, to notify the Court of any agreement they might reach (ibid., § 140, and point 4 of the operative provisions).

5.  Having failed to reach an agreement, the applicants and the Government each filed observations. The Government subsequently filed additional observations on the applicants’ just satisfaction claim.

FACTS

A.  Determination of the cadastral value of the real estate in 1997

6.  At the time of the expropriation of the applicants’ land, the cadastral value of real estate within the perimeter of a town or city was determined in accordance with regulation no. 94 of 12 April 1994 concerning the valuation of urban land (Noteikumi “Par pilsētu zemes vērtēšanu”), which was in force until 12 June 1998. To the extent that it is pertinent in the present case, the preamble to the text contained the following definitions:

“... Cadastral value of a plot of land - the urban-planning and economic value of a plot of land, formulated in pecuniary terms.

...

Model value of a plot of land [zemes paraugvērtība] - maximum value of a square metre of urban land situated in a value zone [vērtību zona] for the purposes of its exploitation for a specific aim.

De facto model value of a plot of land [zemes faktiskā paraugvērtība] - maximum value of a square metre of urban land situated in a specific territory of a value zone [vērtību zona] for the purposes of its exploitation for a specific aim.

...

Value zone - a portion of urban territory corresponding to a constant set of data characterising the value of real estate.

...”

7.  Article 5 stipulated that the regulation was inapplicable to the determination of the market value of urban land. For the purposes of valuation, urban territory was to be divided into value zones based on the general land-use plan. The capital, Riga, was to be divided into seven or more zones (Article 7). Under Article 8, the main zoning criteria were as follows:

“...

(1) position [of land] in relation to the city centre;

(2) level of development of public-works infrastructure and social services;

(3) attractiveness of territory;

(4) ecological conditions and consequences of negative factors;

(5) local geological conditions”

8.  Article 24 of the regulation laid down the methodology for the calculation of the model value (paraugvērtība) of a plot of land. For cities such as Riga, the model value did not have to be calculated specially because it corresponded to a scale in annex no. 2 to the regulation. In order to establish the de facto model value (faktiskā paraugvērtība), it was necessary to calculate the difference between the model value of the zone in question and the adjacent zone, multiply it by the distance from the next zone, then divide the result by the width of the zone in question, and, lastly, add the corresponding model value from the fixed scale (Article 25). The de facto model value then had to be adjusted to take account of any buildings erected on the land (Article 26).

9.  The de facto model value had to be multiplied by the surface area of the plot of land for its cadastral value to be obtained. It was then subject to adjustment within a limit of 20% to take account of certain positive or negative factors (Articles 30 to 34). The calculation of the cadastral value of land was the responsibility of the State Land Authority (Valsts Zemes dienests).

B.  Statutory interest

10.  The relevant provisions of the Civil Code (Civillikums) read as follows:

Article 1757

“Where the contract provides for the payment of interest, its percentage shall be fixed, failing which it shall be presumed that the statutory rate (see Article 1765) has been tacitly agreed.”

Article 1765

(version in force prior to 1 March 2006)

“The interest rate shall be clearly established in the deed or contract. Failing that, as in cases where the payment of statutory interest is required by law, the rate shall be six per cent per annum. Interest may be calculated only on the capital itself. However, should the interest not be paid within the allotted time in respect of one year or more, from that time onwards, at the creditor’s request, statutory interest shall be calculated on the interest then accruing”.

Article 1765

(version in force after 1 March 2006, amended by the law of 23 May 2013)

“The interest rate shall be clearly established in the deed or contract. Failing that, as in cases where statutory interest is required by law, the rate shall be six per cent per annum.

The interest rate for late payment of a pecuniary debt provided for under a contract as consideration for the delivery or purchase of a good or service, shall be eight per cent [“seven per cent” before 26 June 2013] above the base rate (Article 1765, third paragraph) per annum; as to contractual relations to which a consumer is party, [the base rate shall be] six per cent per annum.

The interest base rate shall be four per cent. The said rate shall be modified on 1 January and 1 July every year by the percentage corresponding to the increase or decrease in the most recent rate fixed for refinancing operations by the Bank of Latvia before the first day of the half-year in question. After 1 January and 1 July every year, the Bank of Latvia shall immediately publish in the [Official Gazette] information on the applicable interest rate for the coming half-year.

Interest may be calculated only on the capital itself. However, should the interest not be paid within the allotted time in respect of one year or more, from that time onwards, at the creditor’s request, statutory interest shall be calculated on the interest then accruing.”

Article 1763

“The interest shall cease to increase:

(1) when the amount of the interest still unpaid reaches the amount of the capital; ...”

C.  Inflation rate

11.  According to the calculator of inflation rates of the Latvian Central Bureau for Statistics (Centrālā Statistikas pārvalde), the rate of inflation between 25 November 1997 (date of the entry into force of the relevant law on expropriation; see the principal judgment, §§ 23 and 54) and 25 October 2012 (date of the principal judgment) was 94.3%.

THE LAW

12.  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.  Pecuniary damage

1.  The parties’ submissions

(a)  The applicants

13.  The applicants began by pointing out that, in the Court’s principal judgment, the conformity of the acquisition of the relevant land with the requirements of Latvian law and the validity of their title to that land had not been called into question. On the contrary, the Court had expressly observed that the applicants’ good faith as to the acquisition of the property had never been challenged and that the Latvian authorities had formally recognised their right of ownership by registering the land in their names and paying them rent (see the principal judgment, § 120). Moreover, they had never been found to have exercised their property rights against the law or to have caused harm to public interests. The applicants did not therefore bear any responsibility for the damage they had sustained on account of the expropriation of their plots of land.

14.  Relying on the judgments in Guiso-Gallisay v. Italy ((just satisfaction) [GC], no. 58858/00, § 105, 22 December 2009) and Medici and Others v. Italy (just satisfaction), no. 70508/01, § 13, 4 December 2012), the applicants observed that the compensation should correspond to the full value of the land at the time of the loss of the property, reduced by any sums awarded at domestic level, then updated to compensate for the effects of inflation, plus interest. In this connection, they emphasised that the cadastral value of a plot of land, as determined by the State Land Service and influenced, among other things, by political considerations, did not correspond to its actual market value, which would be determined mainly by free-trade mechanisms. By way of example, the applicants produced an expert’s report drawn up by the firm SIA I., a certified real-estate evaluator, showing that on 20 December 2012 the total cadastral value of all the land at issue in the present case was 723,118 Latvian lati (LVL), whereas its full market value amounted to LVL 7,609,000. The cadastral value was thus approximately 10% of the market value of the property. As to the experts’ reports produced by the Government (see paragraphs 23-28 below), the applicants commented that they were not very reliable and did not clearly state the methodology adopted.

15.  In addition, the applicants asserted that neither of the above-mentioned values had been affected by the so-called infrastructure built on the land. The only infrastructure to be found there at the time of the expropriation consisted in “plates of concrete” for the stacking of containers, the value of which was LVL 5.28 per square metre.

16.  In reality, the only value in respect of the land that had been available at the time of the expropriation was the cadastral value determined by the State Land Authority (Valsts Zemes dienests). That value had been used for the calculation of the real-estate tax, to fix rents and to determine the compensation for use of the land on the basis of servitudes. In the present case, the Latvian courts had also used the cadastral value as the reference value for calculating the rent arrears owed to the applicants (see the principal judgment, §§ 25-27) and it was this value that the Court should use as the basis for its award under Article 41 of the Convention.

17.  The applicants were of the view that in determining the compensation to which they were entitled it was necessary to take into account the sums received by others persons in a comparable situation to their own. They adduced a copy of a sale agreement and extracts from the land register to show that on 31 July 2002 the city of Riga had purchased from Mrs D. a plot of land of 10,590 square metres in Kundziņsala, close to one of the plots of land which belonged to the second applicant. The cadastral value of that land at the time of its purchase was LVL 515,981; the price agreed by the parties in the agreement was LVL 309,588.60, i.e. LVL 29.23 per square metre, representing 60% of the cadastral value at the time.

18.  The applicants stated that the cadastral value of the land which belonged to them amounted, at the time of expropriation, to LVL 564,140 (802,698.90 euros (EUR)) for that of the first applicant, and LVL 3,126,480 (EUR 4,448,580.26) for that of the second applicant. These were therefore the sums that the applicants were mainly claiming before the Court.

19. The applicants further observed that, according to the Court’s case-law, statutory interest had to be added to any compensation awarded (at 6% per annum according to the Latvian Civil Code), together with an adjustment to offset the effects of inflation. However, the applicants preferred instead to claim reimbursement of the loss of income resulting from their inability to collect rents for fifteen years (between 1997 and 2012). As the rent represented 3% per annum of the cadastral value of the land, they claimed on that basis, respectively, LVL 253,863 or EUR 361,214.51 (first applicant) and LVL 1,406,916 or EUR 2,001,861.12 (second applicant).

20.  In total, the applicants thus sought the payment of EUR 1,163,913.41 (first applicant) and EUR 6,450,441.38 (second applicant).

(b)  The Government

21.  The Government acknowledged that the amount of the compensation should correspond to the value of the property at the date on which ownership had been lost. However, they argued that, even though the cadastral value of the land at issue had been used as a basis for the calculation of rent arrears, it was not appropriate and should not be used for the purposes of Article 41 of the Convention. In this connection, the Government explained that in 1997 the cadastral value was totally unrelated to the actual market value of the land. During the first few years following independence, the real-estate market (which had been inexistent during the Soviet era, when any land belonged to the State) had just begun to develop. Consequently, in that period of transition, the division of urban areas into zones, the model value of land and the resulting cadastral value had been based on theoretical assumptions and depended on the size of the population in the relevant town and on the land’s proximity to the town centre (see paragraphs 6-9 above). Since the Autonomous Port of Riga was relatively close to the centre of the capital, its territory was included in the “AB” zone, which was the zone with the second highest value. In that zone the model values of land ranged from LVL 24.24 to LVL 87.60 per square metre.

22.  On 1 January 1998, after the expropriation at issue, the new law on “real property tax” entered into force. Unlike the previous system, this law provided that in future the cadastral value had to be established on the basis of property-market information. The new zones and new cadastral values based on that information did not become effective until 2003. The new cadastral value of the land that had belonged to the applicants was then LVL 3.90 per square metre, and it remained at that level until 2007.

23.  For the above-mentioned reason, the Government argued that the cadastral value of the land in 1997 was not pertinent for the calculation of the pecuniary damage sustained by the applicants and that its market value at the date of expropriation should instead be used. However, at the time of the expropriation that value of the land was not known; its calculation at the time would have been pointless as the property was not subject to market transactions. In order to remedy that omission, the Government produced four expert’s reports drawn up in January 2013 by three real-estate valuation firms containing a retroactive calculation of the market value of the land in question at 25 November 1997 (date of the entry into force of the relevant expropriation law; see the principal judgment, §§ 23 and 54).

24.  The first report, drawn up on 22 January 2013 by the firm SIA B.K.G., presented the following valuation:

“We were asked to determine the market value of a property, namely a plot of land located in Riga, at Kundziņsala, registered under the number 0100 096 0236 [expropriated from Jānis Vistiņš] as of ... 25 November 1997. The valuation was carried out according to the Latvian property valuation standard (Latvijas Īpašuma vērtēšanas standarti, LVS-401) and the requirements of the law ... concerning the expropriation of real estate in the public interest, as in force at the date of expropriation.

Following our calculations and analyses, we reached the conclusion that as of 25 November 1997, the market value of the land [in question] could be estimated at 338,484 lati ...

The ‘market value’ is a sum of money, calculated at the time of the valuation, in return for which a property should pass from one owner to another on the basis of a commercial transaction between a willing purchaser and a willing vendor after appropriate marketing; moreover, it is presumed that each party acts knowingly ... and without duress. ...”

25.  The second report, which was drawn up on the same date by the same firm, concerned the plots of land expropriated from the second applicant (Mr Genādijs Perepjolkins). Its reasoning was identical to that of the first report. According to this document, the total market value of the plots of land belonging to the second applicant had amounted, on 25 November 1997, to LVL 1,250,593.

26.  The third report was drawn up on 22 January 2013 by another valuation firm, SIA V. Also referring to the LVS-401 standard and using the same definition of “market value”, that report gave the following figures: LVL 338,500 for the first applicant’s plot of land, and LVL 1,250,500 for all of the second applicant’s four plots of land. However, that report did not stop there and also established the market value of all the above-mentioned properties “without taking into account particular circumstances, namely court judgments fixing rents”. Thus calculated, the value of the land expropriated from the first applicant amounted to LVL 100,700 and the total value of the second applicant’s four plots of land amounted to LVL 281,300.

27.  The fourth report, issued by a third firm, SIA E., bore the date of 23 January 2013. Like all the above-mentioned reports, it also referred to the LVS-401 standard and to the same definition of “market value”. This report gave the following figures: LVL 338,000 for the first applicant’s plot of land, and LVL 1,250,000 for all of the second applicant’s four plots of land.

28.   The Government also supplied a fifth expert’s report drawn up by the same firm SIA E. in 1999. Unlike the previous four reports, it did not determine the market value at 25 November 1997, but the “economically-based average cadastral value” for all the land within the perimeter of the Autonomous Commercial Port of Riga at 12 September 1999. The Government explained that this valuation failed to take account of the distance of the land from the city centre (and was thus erroneous), but was based on a comparison with other similar harbours in the area and their turnover. According to that report, the “economically-based average cadastral value” for this locality was LVL 6.62  per square metre, while the “economically-based effective average cadastral value” was LVL 18,79 per square metre.

29.  The Government referred to the Court’s finding in its principal judgment to the effect that “the Latvian authorities were justified in deciding not to compensate the applicants for the full market value of the expropriated property and that much lower amounts could suffice to fulfil the requirements of Article 1 of Protocol No. 1” (see the principal judgment, § 118). They further observed that the applicants had acquired their land by means of donation, that they had not invested anything in its development, that they had not paid any land tax, and that after the expropriation they had been able to obtain the payment of very high amounts in rent arrears (ibid., §§ 25-27). Moreover, the applicants had received some compensation, even though the Court had found it to be insufficient (ibid., §§ 22 and 24). In the Government’s submission, the direct and indirect profit generated by the applicants from the land in question to the detriment of taxpayers (that is, the sums corresponding to the rent arrears, the unpaid taxes and the compensation already paid) amounted to LVL 72,475.26 for the first applicant and LVL 455,320.71 for the second. In view of the general economic situation of the respondent State at the time of the expropriation (for example, between 1993 and 1996, the average gross monthly wage in Latvia was only EUR 142), those figures were enormous. The Government asked the Court to take that into account and considerably reduce the amounts owed to the applicants.

30.  In the light of the foregoing considerations, the Government were of the view that the Court should award LVL 27,607 (EUR 39,281) to the first applicant and LVL 80,522 (EUR 114,572) to the second, in respect of the damage they had sustained on account of the expropriation of their land. They did not explain how they had arrived at these figures or what calculation formula had been used; however, they emphasised that the market price on which the estimates were based took account of the 5% income capitalisation rate.

31.  Lastly, the Government argued that in the light of the Court’s current case-law, there was no legal basis on which the applicants could additionally claim a loss of income. In that connection they considered that the solution adopted by the Court in the above-cited Guiso-Gallisay judgment was not applicable in the present case, because a lawful expropriation was at issue and not a constructive expropriation incompatible with the principle of legality.

2.  The Court’s assessment

32.  The Court observes at the outset that in paragraph 118 of the principal judgment it is stated as follows:

“The Court takes the view that the Latvian authorities were justified in deciding not to compensate the applicants for the full market value of the expropriated property and that much lower amounts could suffice to fulfil the requirements of Article 1 of Protocol No. 1 for three reasons: firstly, because the actual market value of the land could not objectively be determined, in particular because of the exclusive right of purchase introduced for the benefit of the State and local authorities by the Ports Act ...; secondly, because the land at issue was subject to a statutory servitude for the benefit of the port ...; and lastly, because the applicants had not invested in the development of their land and had not paid any land tax, the tax reassessment procedure subsequently initiated against them by Riga City Council having been unsuccessful.”

33.  The Court further notes that the applicants claimed the loss of income they had allegedly sustained on account of no longer being able to collect rent in respect of the land in question after its expropriation. It reiterates that a judgment in which it finds a breach imposes on the respondent State a legal obligation to put an end to the breach and make reparation for its consequences in such a way as to restore as far as possible the situation existing before the breach (see Iatridis v. Greece (just satisfaction) [GC], no. 31107/96, § 32, ECHR 2000-XI). In other words, reparation for pecuniary damage must result in the closest possible situation to that which would have existed if the breach in question had not occurred. As the Court has previously held in that connection, it is impossible to equate lawful expropriation with constructive expropriation incompatible with the principle of legality (see Guiso-Gallisay, cited above, § 95). In the present case the Court left open the question of the formal legality of the impugned expropriation, finding as follows (see the principal judgment, § 105):

“The Court nevertheless remains doubtful as to whether the impugned expropriation may be regarded as having been carried out ‘subject to the conditions provided for by law’, having regard in particular to the derogation applied to the applicants and to the procedural safeguards that were - or were not - attached to it ... The Court does not, however, find it necessary to settle that question, as the impugned expropriation breaches Article 1 of Protocol No. 1 for other reasons ...”

34.  In any event, in the principal judgment the Court never declared this expropriation incompatible with the principle of legality, as the finding of a violation was based solely on an unjustified disproportion between the official cadastral value of the land and the compensation awarded to the applicants (ibid., §§ 119 and 130). In those circumstances, “the closest possible situation to that which would have existed if the breach in question had not occurred” is limited to the payment of appropriate compensation which should have been awarded at the time of the expropriation. By contrast, there is no basis on which the applicants can claim any loss of income (lucrum cessans) in respect of the period subsequent to the expropriation. That part of their claims should thus be rejected.

35.  The Court must now determine the amount to be awarded to the applicants on the basis of the pecuniary damage sustained (damnum emergens). In this connection, it takes the view that the criteria laid down in Guiso-Gallisay (cited above, §§ 104-105), cannot be transposed to the present case since they apply to expropriations that are unlawful per se. In the present case, the Court reiterates that it was the extreme disproportion between the official cadastral value of the land and the compensation awarded to the applicants, and not the inherent unlawfulness of the taking of the land, that was at the origin of the violation found.

36.  In those circumstances, the Court finds that the compensation to be determined in the present case will not have to reflect the idea of a total elimination of the consequences of the impugned interference, nor the full value of the property at issue. In determining the amount of appropriate compensation, the Court must have regard to the criteria laid down in its case-law concerning Article 1 of Protocol No. 1 and according to which, without payment of an amount reasonably related to its value, the taking of property would normally constitute a disproportionate interference which could not be considered justifiable under that Article. The Court therefore deems it appropriate to fix sums that are, as far as possible, “reasonably related” to the market value of the plots of land, that is to say sums that it would itself have found acceptable under Article 1 of Protocol No. 1 if the respondent State had duly compensated the applicants. To that end, it must make a general assessment of the consequences of the impugned expropriation, calculating the amount of the compensation according to the value of the land at the time the applicants lost their ownership thereof (see the principal judgment, § 111). Lastly, having regard to the particular circumstances of the present case, the Court must have recourse to equitable considerations in calculating the relevant sums (see, mutatis mutandis, Former King of Greece and Others v. Greece [GC] (just satisfaction), no. 25701/94, §§ 78-79, 28 November 2002), whilst taking into account the findings in paragraph 118 of the principal judgment.

37.  The Court observes that, prior to their expropriation, the plots of land had undergone three successive valuations: in 1994, in 1996 and in 1997. The first valuation, carried out when the land was acquired by donation, was never relied upon during the proceedings concerning expropriation and compensation. As to the third, it produced values that the Court found insufficient for the purposes of Article 1 of Protocol No. 1 (see the principal judgment, §§ 115-117 and 130-131). That leaves the second estimation, made in 1996 by the Real-Estate Valuation Centre of the State Land Authority on the basis of the cadastral value of the plots of land in question (ibid., § 116). According to the Government’s explanations, which have not been disputed by the applicants, the cadastral value of the real estate at the time was calculated according to purely urban-planning criteria and did not reflect its actual market value (see also the relevant domestic law in paragraphs 6-9 above). Consequently, the Court does not find it appropriate to use it as the basis for calculating the pecuniary damage.

38.  The Court notes that the parties have submitted a number of experts’ reports drawn up after the expropriation of the plots of land at issue. Having recourse to equitable considerations, as required by Article 41 of the Convention, it takes the view that the “economically-based effective average cadastral value” of land within the perimeter of the Autonomous Commercial Port of Riga, as established by the firm of experts SIA E. in 1999, would be the most appropriate basis on which to calculate the sums to be awarded to the applicants (see paragraph 28 above). Firstly, that value has the advantage of having been calculated only about two years after the impugned expropriation. Secondly, even though “the actual market value of the land could not objectively be determined, in particular because of the exclusive right of purchase introduced for the benefit of the State and local authorities by the Ports Act” (see the principal judgment, § 118), the above-mentioned value does in fact take account of economic factors such as the turnover of harbours in a given region. The economically-based effective average cadastral value thus used by the Court is LVL 18.79 per square metre.

39.  Having regard to all the relevant circumstances of the case and, in particular, those stated in paragraph 118 of the principal judgment, the Court deems it equitable to reduce the above-mentioned sum by 75%. The figure to be taken as the basis of calculation for the award in respect of pecuniary damage is thus LVL 4.69 per square metre. The land formerly belonging to the first applicant, having an area of 17,998 square metres, should thus be valued at LVL 84,410.62. As to the four plots of land expropriated from the second applicant and of which the total surface area amounts to 47,740 square metres, they should be valued at LVL 223,900.60 (see the principal judgment, § 11).

40.  It is now appropriate to deduct from the above-mentioned figures the amounts already paid to the applicants by way of compensation at domestic level, namely, LVL 548.26 and LVL 8,616.87 respectively (ibid., § 24). This leaves the sum of LVL 83,862.36 (EUR 119,378.18) for the first applicant and LVL 215,283.73 (EUR 306,461.90) for the second applicant.

41.  The Court considers that it must now adjust those sums to offset the effects of inflation (see Scordino v. Italy (no. 1) [GC], no. 36813/97, § 258, ECHR 2006-V). It observes that the inflation rate was 94.3% in the period from 25 November 1997 to 25 October 2012 (see paragraph 11 above). Applying that percentage, the above-mentioned sums are increased to EUR 231,951.63 (for the first applicant) and EUR 595,455.47 (for the second applicant).

42.  The statutory interest in respect of the same period remains to be calculated (ibid.). The Court notes that, in accordance with Articles 1763 and 1765 of the Latvian Civil Code, statutory interest is generally 6% per annum, but it ceases to increase once the amount of the capital has been reached (see paragraph 10 above). The period between the two above-mentioned dates is fourteen years and eleven months, a figure which should be rounded up. Thus, in respect of the fifteen-year period between the two above-mentioned dates, interest of EUR 107,440.35 is to be paid to the first applicant and EUR 275,815.65 to the second. The final sums to be awarded to the applicants are thus EUR 339,391.98 for the first applicant and EUR 871,271.12 for the second.

43.  Lastly, the Court does not see any reason to deduct from those sums the rent arrears paid to the applicants at national level or any unpaid land tax, as suggested by the Government. As the Court noted in its principal judgment, the rent arrears claim derived from a separate legal basis from that of the compensation for expropriation. As to the land tax, the Latvian courts themselves found that the applicants were personally exempted from paying it as the tax had already been paid by the public corporation responsible for the port’s management (see the principal judgment, §§ 37-38 and 128).

44.  Having regard to the foregoing, the Court finds it reasonable to award the first applicant EUR 339,391.98 and the second applicant EUR 871,271.12 in respect of pecuniary damage.

B.  Non-pecuniary damage

45.  Each of the applicants claimed EUR 10,000 in respect of non-pecuniary damage caused by their anxiety and frustration following the expropriation of their properties. In this connection, they pointed out that much time and effort had been required of them for their participation in the proceedings concerning not only the expropriation itself but also the collection of rent arrears.

46.  The Government denied that the applicants had sustained any non-pecuniary damage. Firstly, they argued that the present case, involving lawful expropriation, was not comparable to the above-cited Guiso-Gallisay and Medici cases. Secondly, they disputed the existence of a causal link between the violation of Article 1 of Protocol No. 1 that had been found by the Court and the domestic proceedings initiated by the applicants - proceedings which, moreover, had not always been unfavourable to the applicants themselves. Thirdly, the Government were of the view that legal efforts normally made by a party to judicial proceedings did not entail, per se, any “moral suffering” capable of giving rise to reparation under Article 41 of the Convention.

47.  The Court agrees with the Government in taking the view that the powerlessness and frustration felt by an owner who has been unlawfully dispossessed of his property (see Guiso-Gallisay, cited above, § 110) is not comparable to the feelings of a former owner who is simply not satisfied with the amount of compensation awarded by the State. It acknowledges, however, that the applicants did sustain a degree of non-pecuniary damage on account of the violation found, such that an award on that basis can be regarded as justified. Ruling on an equitable basis, as required by Article 41 of the Convention, it decides to award EUR 3,000 to each of the applicants under this head.

C.  Costs and expenses

48.  In the proceedings on the merits before the Grand Chamber, the applicants sought the reimbursement of costs and expenses that they evaluated at EUR 4,980 each. They did not indicate for which proceedings the sums had been incurred, nor did they adduce any supporting documents.

49.  The Government took the view that this claim was not sufficiently substantiated and did not meet the basic requirements laid down by Rule 60 § 2 of the Rules of Court. They admitted, however, that the applicants must have incurred certain expenses and did not object to the award of a sum under that head, but not exceeding EUR 1,500 for each applicant.

50.  The Court reiterates that to be entitled to an award for costs and expenses under Article 41 of the Convention, the injured party must have actually and necessarily incurred them. In particular, Rule 60 § 2 states that itemised particulars of any claim made under Article 41 of the Convention must be submitted, together with the relevant supporting documents, failing which the Court may reject the claim in whole or in part. Furthermore, costs and expenses are only recoverable in so far as they relate to the violation found (see, among many other authorities, Andrejeva v. Latvia [GC], no. 55707/00, § 115, ECHR 2009).

51.  In the present case, the Court finds that the applicants’ claim in the proceedings before the Grand Chamber for the reimbursement of costs and expenses clearly failed to satisfy those requirements, since the sums claimed were not substantiated by any supporting documents and it was not possible to ascertain the precise nature of the services rendered or whether they had been objectively necessary in the proceedings before the Court. Nevertheless, the Court accepts that, in view of the complexity of the case, the applicants must have incurred costs, especially in the proceedings before the Grand Chamber. In those circumstances, ruling on an equitable basis as required by Article 41, it decides to award them EUR 1,500 each in respect of all costs and expenses, together with any taxes that may be chargeable (ibid., § 116).

D.  Default interest

52.  The Court considers it appropriate that the default interest rate 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

1.  Holds, by twelve votes to five,

(a)  that the respondent State is to pay, within three months, the following amounts:

(i)  EUR 339,391.98 (three hundred and thirty-nine thousand, three hundred and ninety-one euros and ninety-eight cents) to the first applicant, plus any tax that may be chargeable, in respect of pecuniary damage;

(ii)  EUR 871,271.12 (eight hundred and seventy-one thousand, two hundred and seventy one euros and twelve cents) to the second applicant, plus any tax that may be chargeable, in respect of pecuniary damage;

(iii)  EUR 3,000 (three thousand euros) to each of the applicants, plus any tax that may be chargeable, in respect of non-pecuniary damage;

(iv)  EUR 1,500 (one thousand five hundred euros) to each of the applicants, plus any tax that may be chargeable to them, 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 amounts at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points;

 

2.  Dismisses, unanimously, the remainder of the applicants’ claim for just satisfaction.

Done in English and in French, and notified in writing on 25 March 2014, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.

Michael O’Boyle                                                                  Dean Spielmann
Deputy Registrar                                                                       President

 

In accordance with Article 45 § 2 of the Convention and Rule 74 § 2 of the Rules of Court, the following separate opinions are annexed to this judgment:

- dissenting opinion of Judge Garlicki;

- dissenting opinion of Judge Lorenzen, joined by Judges Bratza, Tsotsoria and Pardalos.

 

D.S.

M.O’B.




DISSENTING OPINION OF JUDGE GARLICKI

I dissented from the principal judgment since, in my opinion, no Convention rights had been violated in the present case. The logical consequence is that I am against granting any award under Article 41 of the Convention.

Normally, there is no need to write a separate dissent on Article 41. What prompted me to depart from this practice is that today’s judgment does not correspond with the position that the Grand Chamber had expressed in paragraph 118 of the principal judgment. It was stated therein that “much lower amounts [of compensation] could suffice to fulfil the requirements of Article 1 of Protocol No. 1” (see Vistiņš and Perepjolkins v. Latvia [GC], no. 71243/01, § 118, 25 October 2012).

I am not convinced that the award granted in the present judgment does justice to that suggestion of the Grand Chamber. The calculation of the award is based on a 75% reduction (a percentage which, already in itself, should have been greater), but the resulting amount has been almost doubled due to the inflation rate. While this is the usual method of calculation, its application in the present case has led to over-generous effects. It should not be forgotten that the applicants received the property for free and that, initially, in their own assessment (as reflected in tax returns) the value of this property was set at a very low level. This assessment skyrocketed only when it came to the expropriation and compensation controversies.

In my opinion, the calculation adopted in the present judgment circumvents the tenor of the discussion on the principal judgment and contradicts the directive expressed in the above-cited paragraph 118.




 

DISSENTING OPINION OF JUDGE LORENZEN, JOINED BY JUDGES BRATZA, TSOTSORIA AND PARDALOS

In the judgment on the merits of the present case I voted together with four other judges for finding no violation of Article 1 of Protocol No. 1 and it is accordingly my opinion that no compensation should be granted to the applicants under Article 41 of the Convention. In these circumstances I do not want to express any opinion on what amounts the Court should grant them for pecuniary or non-pecuniary damage or for costs and expenses following the judgment of the majority. This is the reason why I could not agree with the present judgment.