VUKUSIC v. CROATIA - 69735/11 (Judgment (Merits and Just Satisfaction) : Court (Second Section)) [2016] ECHR 463 (31 May 2016)

In the case of Vukušić v. Croatia,

The European Court of Human Rights (Second Section), sitting as a Chamber composed of:

          Işıl Karakaş, President,
          Julia Laffranque,
          Paul Lemmens,
          Valeriu Griţco,
          Ksenija Turković,
          Stéphanie Mourou-Vikström,
          Georges Ravarani, judges,
and Stanley Naismith, Section Registrar,

Having deliberated in private on 10 May 2016,

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

PROCEDURE

1. The case originated in an application (no. 69735/11) against the Republic of Croatia lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by a Croatian national, Mr Filip Vukušić (“the applicant”), on 25 October 2011.

2. The applicant was represented by Mr D. Rupčić, a lawyer practising in Sisak. The Croatian Government (“the Government”) were represented by their Agent, Ms Š. Stažnik.

3. The applicant alleged, in particular, that his right to property had been violated by the annulment of his title to ownership of the flat he occupied.

4. On 4 March 2013 the application was communicated to the Government.

THE FACTS

I. THE CIRCUMSTANCES OF THE CASE

5. The applicant was born in 1946 and lives in Zagreb.

A. Background to the case

6. In 1965 the Sisak Ironworks (Željezara Sisak), a socially-owned company, granted a specially protected tenancy to its employee S.K. and his family of a flat in Sisak. During 1991 and 1992 Serbian paramilitary forces gained control of about one third of the territory of Croatia and proclaimed the so-called “Serbian Autonomous Region of Krajina” (Srpska autonomna oblast Krajina, hereinafter “Krajina”). The town of Sisak was close to the border of Krajina. There were targeted killings of Serbian civilians by members of the Croatian police and army in the Sisak area during a prolonged period in 1991 and 1992 (see Jelić v. Croatia, no. 57856/11, § 78, 12 June 2014). Owing to this situation, S.K. and his wife Z.K., both being of Serbian national origin, left the town of Sisak and went to live with their relatives in Rijeka. They left their belongings, such as furniture and household appliances, in the flat in Sisak.

7. In May 1991 the socially-owned company Sisak Ironworks was transformed into a joint-stock company and became Sisak Ironworks Holding (Željezara Sisak Holding). It remained State-owned and State-controlled. It owned several companies, one of them being Sisak Ironworks Flat company (Željezara Sisak “Stan”) which since May 1991 managed all the flats having been previously owned by the former Sisak Ironworks company. Another company was Sisak Ironworks Fortis, which was privatised in July 1995. From 1997 the State ceased to have any share in the ownership of Sisak Ironworks Holding.

8. On 3 June 1991 Parliament enacted the Specially Protected Tenancies (Sale to Occupier) Act (Zakon o prodaji stanova na kojima postoji stanarsko pravo, hereinafter “the Sale to Occupier Act”) with regulations on the sale of socially-owned flats previously let under a specially protected tenancy. In general, the Act entitled the holder of a specially protected tenancy of a socially-owned flat to purchase it under favourable conditions.

9. The applicant and his family lived in the town of Petrinja in their house. Petrinja was occupied by Serbian paramilitary forces in September 1991. The applicant and his family moved to Sisak as displaced persons. The applicant found employment with Sisak Ironworks Fortis.

10. In 1992 the applicant and his family moved into the flat where S.K. and Z.K. had a specially protected tenancy. According to the applicant the flat was allocated to him and his family by his employer. According to the Government, during the proceedings before the domestic courts the applicant did not produce any document which showed the flat as having been allocated to him. S.K. and the applicant communicated on several occasions by telephone and S.K. agreed that the applicant and his family, as displaced persons, could temporarily occupy the flat.

B. Proceedings concerning the specially protected tenancy of S.K. and Z.K.

11. On 13 July 1992 the Sisak Ironworks Flat company brought a civil action in the Sisak Municipal Court against S.K. and Z.K., seeking the termination of their specially protected tenancy of the flat at issue. The applicant gave oral evidence as a witness in those proceedings. He stated that he did not know where S.K. was. S.K. and Z.K., having been adjudged to be persons whose whereabouts were unknown, had a special guardian ad litem appointed to represent them in the proceedings. On 20 October 1992 the Sisak Municipal Court terminated S.K. and Z.K.’s specially protected tenancy on the grounds that they had abandoned the flat in question. That judgment was upheld by the Sisak County Court on 24 March 1992 and thus became final.

12. On 23 December 1993 S.K. and Z.K. lodged an application for the reopening of civil proceedings which had been completed with final effect. A copy of that application was served on the Sisak Ironworks Flat company. The application was granted on 12 April 1994 and the proceedings were reopened. The applicant participated in the reopened proceedings as an intervener on the side of the plaintiff.

13. On the same day, Sisak Ironworks Holding and the Fortis company concluded an agreement to sell the flat at issue to the applicant, under the Sale to Occupier Act. A copy of the contract was submitted to the State Attorney’s Office for approval, which was given on 12 April 1994.

14. On 22 May 1996 the Sisak County Court dismissed the action by the Sisak Ironworks Flat company to terminate the specially protected tenancy held by S.K. and Z.K. That judgment was upheld by the Sisak County Court on 30 June 1997 and thus became final.

C. Reconstruction of the applicant’s house in Petrinja

15. After the Croatian authorities had gained control over Petrinja in 1995, the applicant and his family sought reconstruction assistance for their house in Petrinja to be repaired, under the Reconstruction Act (see paragraph 28 below).

16. On 12 December 1996 the Office for Reconstruction and Development of Sisak-Moslavina County accepted the applicant’s request and granted him and his family the sum of 29,900 Croatian kunas (HRK) to repair their house in Petrinja.

17. The applicant and his family confirmed to the administrative authorities that they had returned to Petrinja on 16 January 1998. They had their registered residence in Petrinja between 5 February 1993 and 28 December 1999.

D. Annulment of the applicant’s title to the property

18. In 2003 S.K. and Z.K. brought a civil action in the Sisak Municipal Court (Općinski sud u Sisku) against the parties to the 1994 contract of sale, seeking the annulment of that contract. During the proceedings S.K. died. The claim was dismissed by the Sisak Municipal Court on the grounds that the contract of sale had been concluded in accordance with the law, since at that time the applicant had had a specially protected tenancy of the flat in question.

19. The Municipal Court’s judgment was reversed on 22 November 2007 by the Sisak County Court (Županijski sud u Sisku). It established that Z.K. had not lost her specially protected tenancy since it had been restored to her and therefore the contract of sale had been concluded in breach of the mandatory rules of the Sale to Occupier Act. It also held that the applicant had known the circumstances in which the former holders of the specially protected tenancy had left the flat at issue as well as that they had lodged a request for the re-opening of the proceedings in which their specially protected tenancy had been terminated. Therefore, the impugned contract of sale was contrary to morals and constitutional principles and therefore null and void under section 103(1) of the Obligations Act. The judgment was upheld by the Supreme Court (Vrhovni sud Republike Hrvatske) on 20 January 2010.

20. On 26 March 2008 the applicant lodged a constitutional complaint. He relied on Article 3 and Articles 14 § 1 and 29 § 1 of the Constitution (see paragraph 22 below). In essence he complained about the annulment of his title to the flat by the Sisak County Court. In particular, in his constitutional complaint he wrote, inter alia:

“The complainant’s right to inviolability of ownership guaranteed by Article 3 of the Croatian Constitution was violated by the decisions of the Sisak County Court and the Sisak Municipal Court because the unconstitutional decision of the Sisak County Court interferes with the complainant’s ownership ...”

21. The Constitutional Court declared the applicant’s constitutional complaint inadmissible on 9 June 2011 holding that the case did not raise any constitutional issues.

22. The applicant is still living in the flat at issue.

II. RELEVANT DOMESTIC LAW

A. The Constitution

23. The relevant Articles of the Constitution of the Republic of Croatia (Ustav Republike Hrvatske, Official Gazette no. 56/90 with further amendments) read as follows:

Article 3

“Freedom, equality, ethnic and gender equality, peace-making, social justice, respect for human rights, inviolability of ownership, preservation of nature and the environment, the rule of law and a democratic multi-party system are the highest values of the constitutional order of the Republic of Croatia and serve as a basis for interpreting the Constitution.”

Article 14

“...

All shall be equal before the law.”

Article 29

“In the determination of his rights and obligations or of any criminal charge against him, everyone is entitled to a fair hearing within a reasonable time by an independent and impartial court established by law.

...”

Article 34

“The home is inviolable.

...”

Article 48

“The right of ownership shall be guaranteed.

Ownership implies duties. Owners and users of property shall contribute to the general welfare.”

Article 141

“International agreements which have been concluded and ratified in accordance with the Constitution and made public shall be part of the Republic’s internal legal order and shall be [hierarchically] superior to [domestic] statutes ...”

B. Relevant legislation

1. The Constitutional Court Act

24. The relevant part of the 1999 Constitutional Act on the Constitutional Court of the Republic of Croatia (Ustavni zakon o Ustavnom sudu Republike Hrvatske, Official Gazette no. 99/99 - “the Constitutional Court Act”), as amended by the 2002 amendments (Ustavni zakon o izmjenama i dopunama Ustavnog zakona o Ustavnom sudu Republike Hrvatske, Official Gazette no. 29/02), which entered into force on 15 March 2002, reads as follows:

Section 62

“1. Anyone may lodge a constitutional complaint with the Constitutional Court if he or she deems that a decision of a State authority, local or regional government, or a legal person invested with public authority, on his or her rights or obligations, or as regards a suspicion or accusation of a criminal offence, has violated his or her human rights or fundamental freedoms, or the right to local or regional government, guaranteed by the Constitution (‘constitutional right’)...

2. If another legal remedy is available in respect of the violation of the constitutional rights [complained of], the constitutional complaint may be lodged only after use of this remedy has been made.

3. In matters in which an administrative action or, in civil and non-contentious proceedings, an appeal on points of law [revizija] is available, remedies shall only be considered exhausted after a decision on those legal remedies has been given.”

Section 65(1)

“A constitutional complaint shall contain ... an indication of the constitutional right alleged to have been violated [together] with an indication of the relevant provision of the Constitution guaranteeing that right...”

Section 71(1)

“... [t]he Constitutional Court shall only examine the violations of constitutional rights alleged in the constitutional complaint.”

2. Sale to Occupier Act

25. The Protected Tenancies (Sale to Occupier) Act (Zakon o prodaji stanova na kojima postoji stanarsko pravo, Official Gazette no. 27/91 with further amendments) regulated the conditions for the sale of flats let under protected tenancies.

26. Section 1 of the Act entitled holders of protected tenancies of socially-owned flats to purchase such flats under favourable conditions, provided that each holder bought only one flat.

27. Section 21 obliged a seller to submit the contract of sale within eight days to the competent State Attorney’s Office for approval.

3. The Reconstruction Act

28. The Reconstruction Act (Zakon o obnovi, Official Gazette no. 24/96, 54/96 with further amendments) provides, inter alia, that the State, subject to certain conditions, is to grant reconstruction assistance to owners of property (flats and family houses only) which was damaged during the war. The request is to be submitted to the competent ministry. A person claiming such assistance is obliged to give a binding statement that he or she will return to live in the property at issue.

4. The Obligations Act

29. The relevant part of the Obligations Act (Zakon o obveznim odnosima, Official Gazette of the Socialist Federal Republic of Yugoslavia no. 29/78 with further amendments, and Official Gazette of the Republic of Croatia no. 53/91 with further amendments - “the 1978 Obligations Act”) provided as follows:

Nullity

Section 103

“(1) A contract that is contrary to the Constitution, mandatory rules or morals shall be null and void unless the purpose of the breached rule indicates some other penalty, or the law in a particular case provides otherwise.

(2) If only one party is prohibited from concluding a contract, the contract shall remain valid, unless the law in a particular case provides otherwise, and the party that has breached the statutory prohibition shall bear the appropriate consequences.”

Effects of nullity

Section 104(1)

“Where a contract is null and void, each contracting party is obliged to return to the other everything it has received on the basis of such a contract. If that is not possible, or if the nature of the obligation performed renders restitution impracticable, an appropriate [amount of] monetary compensation shall be given, according to the prices at the time a court decision is made, unless the law provides otherwise.”

Subsequent disappearance of the cause of nullity

Section 107

“(1) A contract that is null and void shall not become valid if the cause of nullity subsequently disappears.

(2) However, if a prohibition was of minor importance, and the contract has been performed, the issue of nullity may not be raised.”

Liability of a person responsible for the nullity of a contract

Section 108

“A contracting party responsible for the conclusion of a contract that is null and void shall be liable in damages to the other contracting party for the damage sustained on account of the nullity of the contract, if the latter did not know or, according to the circumstances, could not have known of the existence of the cause of nullity.”

Examining nullity

Section 109

“(1) A court shall examine the issue of nullity of its own motion [ex officio] and any interested party may raise it.

(2) A State attorney shall also have the right to plead nullity.”

Unlimited period for pleading nullity

Section 110

“The right to plead nullity shall not lapse.”

30. On 1 January 2006 the new Obligations Act (Zakon o obveznim odnosima, Official Gazette, no. 35/05 with further amendments - “the 2006 Obligations Act”) entered into force. Sections 322, 323 and 326-328 contain the same provisions as sections 103, 104 and 107-110 of the 1978 Obligations Act.

THE LAW

I. ALLEGED VIOLATION OF ARTICLE 1 OF PROTOCOL No. 1 TO THE CONVENTION

31. The applicant complained that his right to the peaceful enjoyment of his possessions had been violated. He relied on Article 1 of Protocol No. 1 to the Convention, which reads as follows:

“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

A. Admissibility

1. The parties’ submissions

32. The Government argued that the applicant had not properly exhausted domestic remedies because he had not complained, even in substance, of a violation of his property rights in his constitutional complaint.

33. They argued further that Article 1 of Protocol No. 1 was not applicable to the circumstances of the present case because the case concerned a dispute between private parties, namely S.K. and Z.K. as the claimants, and the applicant and his employer, who had concluded the impugned sale contract, as the defendants in the civil proceedings at issue. The Sisak Ironworks Flat company, even though the majority of its capital had been State-owned at the time of the impugned sale contract, had acted as a private party to a civil-law dispute. The only involvement of the State had been through the courts, which had performed their regular duty of adjudicating disputes. In support of those arguments the Government relied on the cases of S.Ö., A.K. and Ar.K. v. Turkey ((dec.), no. 31138/96, 13 September 1999) and Gladysheva v. Russia (no. 7097/10, §§ 52 and 53, 6 December 2011).

34. The applicant argued that throughout the proceedings before the national courts he had raised his property complaint in substance.

2. The Court’s assessment

(a) Exhaustion of domestic remedies

35. The Court notes that even though the applicant in his constitutional complaint did not rely on Article 48 of the Constitution or Article 1 of Protocol No. 1 to the Convention he expressly stated that the judgment of the Sisak County Court of 22 November 2007 had been in violation of his constitutionally-guaranteed right of ownership (see paragraphs 19-20 above).

36. The Court is therefore satisfied that the applicant provided the national authorities with the opportunity which is in principle intended to be afforded to Contracting States by Article 35 § 1 of the Convention, namely of putting right the violations alleged against them (see Lelas v. Croatia, no. 55555/08, §§ 45 and 47-52, 20 May 2010).

37. It follows that the Government’s objection as to the exhaustion of domestic remedies must be rejected.

(b) Applicability of Article 1 of Protocol No. 1 to the Convention

38. According to the Convention institutions’ case-law, “possessions” within the meaning of Article 1 of Protocol No. 1 to the Convention may be either “existing possessions or assets”, including claims, under certain conditions. According to the decisions of the Croatian courts, it appears that the applicant’s title to his flat was considered void ab initio, which had the effect that he was considered never to have owned it. The Court considers that the applicant had a “possession” within the meaning of Article 1 of Protocol No. 1 to the Convention even if his title was declared null and void ab initio. The Court notes that he possessed the flat in question for about twenty years and was considered its owner for all legal purposes. Moreover, it would be unreasonable to accept that a State may enact legislation which allows annulment ab initio of contracts or other titles to property and thus escape responsibility for an interference with property rights under the Convention (see Panikian v. Bulgaria, no. 29583/96, Commission decision of 10 July 1997, and Gashi v. Croatia, no. 32457/05, § 22, 13 December 2007).

39. The Government submitted that Article 1 of Protocol No. 1 to the Convention was not applicable to the present case because the case concerned a civil-law dispute between private parties. In this connection the Court first reiterates that while such disputes do not themselves engage the responsibility of the State under Article 1 of Protocol No. 1 to the Convention (see Zagrebačka banka d.d. v. Croatia, no. 39544/05, § 250, 12 December 2013, and case-law cited therein), this does not mean that the Article in question is inapplicable to that type of dispute. If court decisions in such disputes are arbitrary or otherwise manifestly unreasonable they would constitute a violation of Article 1 of Protocol No. 1 (ibid.). If they are not, then those decisions do not amount to an interference with the right to peaceful enjoyment of possessions (ibid., § 252, and see also the case-law cited therein). In either case, Article 1 of Protocol No. 1 remains applicable. Consequently, the Government’s objection as to the applicability of Article 1 of Protocol No. 1 has to be dismissed.

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

B. Merits

1. The parties’ submissions

(a) The applicants’ submissions

41. The applicant maintained that his rights under Article 1 of Protocol No. 1 had been violated by the annulment of his title to the flat he occupied. He asserted that he had bought the flat in good faith and had been living in it for over twenty years. The situation in which he, on the one hand and Z.K. and S.K., on the other hand, had conflicting titles to the same flat had been created by the State authorities. The Sisak Municipal Court and the Sisak County Court had firstly terminated the special protected tenancy of S.K. and Z.K. by final judgments and then the same courts had annulled those judgments.

(b) The Government’s submissions

42. The Government argued that the agreement for the sale of the flat at issue between the applicant and his employer had been null and void and that the applicant could not have acquired title to the property on that basis since an agreement which was null and void could not have any legal effect.

43. Therefore, the Government argued that there had been no interference with the applicant’s property rights. Were the Court to hold otherwise, the interference had been based in law since the decision of the national courts to declare the impugned contract of sale null and void had been based on section 103 of the Obligations Act. It had also pursued the legitimate aim of protecting the legal order.

44. The Government further emphasised that the interference had also been proportionate and that the applicant had not borne any excessive individual burden. The applicant had known why S.K. and Z.K. had left Sisak and had maintained contact with them. The applicant’s employer had sold the flat at issue to the applicant, even though it had known that S.K. and Z.K. had sought the reopening of the proceedings in which they had lost their specially protected tenancy.

45. By allowing the reopening of those proceedings, the judgments of the Sisak Municipal Court and the Sisak County Court terminating the protected tenancy of S.K. and Z.K. had been set aside, with the consequence that their specially protected tenancy had prevailed. Therefore, the applicant had had no right to purchase the flat at issue and the contract of sale to that effect had been declared null and void.

46. The flat at issue had only been temporary accommodation for the applicant and his family as displaced persons during the occupation of the town of Petrinja, where they owned a house. After the liberation of Petrinja, the applicant and his family had been given reconstruction assistance for their house in Petrinja to be repaired. The very purpose of the legislation on such assistance was to enable displaced persons to return to their homes.

47. Lastly, after the impugned contract of sale had been declared null and void, the applicant could have sought reimbursement of the price he had paid for the flat at issue.

2. The Court’s assessment

(a) Whether there was an interference with the applicant’s possession

48. As to the Government’s argument that the present case concerns a civil-law dispute between private parties (see paragraphs 33 and 39 above), the Court reiterates that the mere fact that the State, through its judicial system, provided a forum for the determination of a private-law dispute does not give rise to an interference by the State with property rights under Article 1 of Protocol No. 1 (see Zagrebačka banka, cited above, § 250, and the case-law cited therein). However, in the Court’s view the present case is not a civil-law dispute in the traditional sense, nor was the State’s role limited to providing a judicial forum for the determination of such a dispute. In this connection the Court first notes that the contract of sale whereby the Sisak Ironworks Holding company sold the applicant the flat in question was declared null and void as being contrary to mandatory rules of the Sale to Occupier Act. The nature and rationale of that Act suggest that it is legislation which has a predominantly (if not entirely) public law character. This is best illustrated by the fact that under the legislation in question, former socially-owned companies (such as Sisak Ironworks Holding in the present case), even after they had been privatised and transformed into private companies, had to sell the flats in their ownership to those who held specially protected tenancies in respect of those flats under favourable conditions for the buyers (see paragraph 26 above). What is more, the competent State Attorney had to approve such contracts (see paragraph 27 above). It is precisely for that reason that the Court has not, in similar cases, confined itself to examining whether the judgments of domestic courts depriving applicants of the ownership of flats purchased under the Sale to Occupier Act were arbitrary or manifestly unreasonable (see Gashi, cited above, and Pavlinović v. Croatia (dec.), nos. 17124/05 and 17126/05, 3 September 2009). Rather, it has held that such judgments amounted to an interference with the applicants’ rights under Article 1 of Protocol No. 1 and examined whether the interference was provided for by law, was in the public interest and was proportionate. Moreover, at time when the flat in question was sold to the applicant, in 1994, the Sisak Ironworks Holding was still State-owned and State-controlled (compare to Ališić and Others v. Bosnia and Herzegovina, Croatia, Serbia, Slovenia and the former Yugoslav Republic of Macedonia [GC], no. 60642/08, §§ 115-117, ECHR 2014; R. Kačapor and Others v. Serbia, nos. 2269/06 et al., §§ 97 and 98, 15 January 2008; and Zastava It Turs v. Serbia (dec.), no. 24922/12, §§ 19-23, 9 April 2013).

49. The Court reiterates that Article 1 of Protocol No. 1 guarantees in substance the right of property and comprises three distinct rules. The first, which is expressed in the first sentence of the first paragraph and is of a general nature, lays down the principle of peaceful enjoyment of property. The second rule, in the second sentence of the same paragraph, covers deprivation of possessions and makes it subject to certain conditions. The third rule, contained in the second paragraph, recognises that the Contracting States are entitled, amongst other things, to control the use of property in accordance with the general interest. The second and third rules, which are concerned with particular instances of interference with the right to the peaceful enjoyment of property, are to be construed in the light of the general principle laid down in the first rule (see, among other authorities, Draon v. France [GC], no. 1513/03, § 69, 6 October 2005).

50. The Court notes in this connection that the applicant purchased the flat at issue under a contract of sale concluded in 1994 with the owner of the flat, a formerly socially-owned company which at that time had already been privatised. However, until 1997 the majority of the capital of Sisak Ironworks Holding was still State-owned. The Sisak County Court’s judgment of 22 November 2007 declaring null and void the contract of sale from which the applicant derived his ownership constituted an interference with his right to the peaceful enjoyment of his possessions, as guaranteed by Article 1 of Protocol No. 1 to the Convention. As to the question whether the interference was covered by the first or second paragraph of that Article, the Court has already found that declaring title to property null and void is to be examined under the first paragraph, second sentence, as it amounts to a deprivation of possessions (see Gashi, cited above, §§ 27-28, and Velikovi and Others v. Bulgaria, nos. 43278/98, 45437/99, 48014/99, 48380/99, 51362/99, 53367/99, 60036/00, 73465/01 and 194/02, §§ 159-160, 15 March 2007). It considers that the same approach must be followed in the present case.

51. The Court must further examine whether the interference was justified.

(b) Justification for the interference with the peaceful enjoyment of “possessions”

(i) Whether the interference was “provided for by law”

52. The Court reiterates that the first and most important requirement of Article 1 of Protocol No. 1 is that any interference by a public authority with the peaceful enjoyment of possessions should be lawful (see Iatridis v. Greece [GC], no. 31107/96, § 58, ECHR 1999-II).

53. In the Court’s view the decisions of the domestic courts in the present case had a legal basis in domestic law, in particular in section 103 of the Obligations Act. There is no indication that the courts applied those provisions arbitrarily or that their decisions and the resulting deprivation of property were unlawful under domestic law. The Court reiterates that its power to review compliance with domestic law is limited (see, among other authorities, Allan Jacobsson v. Sweden (no. 2), 19 February 1998, § 57, Reports 1998-I). It is in the first place for the national authorities, notably the courts, to interpret and apply domestic law, even in those fields where the Convention “incorporates” the rules of that law since the national authorities are, in the nature of things, particularly qualified to settle issues arising in such situations (see, mutatis mutandis, Winterwerp v. the Netherlands, 24 October 1979, § 46, Series A no. 33).

54. The Court is therefore satisfied that the interference in the present case was “provided for by law”, as required by Article 1 of Protocol No. 1 to the Convention.

(ii) Whether the interference pursued an aim in the public interest

55. Any interference with a property right, irrespective of the rule it falls under, can be justified only if it serves a public (or general) interest.

56. The Court reiterates that, because of their direct knowledge of their society and its needs, the national authorities are in principle better placed than an international judge to decide what is “in the public interest”. Under the system of protection established by the Convention, it is thus for the national authorities to make the initial assessment as to the existence of a problem of public concern warranting measures interfering with the peaceful enjoyment of possessions. Here, as in other fields to which the safeguards of the Convention extend, the national authorities accordingly enjoy a certain margin of appreciation (see, inter alia and mutatis mutandis, Draon, cited above, § 75).

57. Furthermore, the notion of “public interest” is necessarily extensive. The Court, finding it natural that the margin of appreciation available to the legislature in implementing social and economic policies should be wide, will respect the legislature’s judgment as to what is “in the public interest” unless that judgment is manifestly without reasonable foundation (see, inter alia, Draon, cited above, § 76). The same applies necessarily, if not a fortiori, to the kind of radical social changes which occurred in central and eastern Europe after 1989 (see Jahn and Others v. Germany [GC], nos. 46720/99, 72203/01 and 72552/01, § 91, ECHR 2005-VI).

58. In the present case the applicant’s title to the property in question was declared null and void as being contrary to the provisions of the Sale to Occupier Act, to morals and to constitutional principles since the judgment terminating the specially protected tenancy of the original holders had been set aside and therefore the applicant could not have acquired a specially protected tenancy in respect of the same flat. Consequently, he had no right to purchase the flat.

59. The Court accepts that the national courts, by declaring the contract of sale at issue null and void, were pursuing aims that were in the public interest, namely those of protecting the rule of law and of protecting the rights of others.

(iii) Proportionality of the interference

60. The Court must also examine whether an interference with the peaceful enjoyment of possessions strikes the requisite fair balance between the demands of the general interest of the public and the requirements of the protection of the individual’s fundamental rights, or whether it imposes a disproportionate and excessive burden on the applicant (see, among many other authorities, Jahn and Others, cited above, § 93). Thus, the balance to be maintained between the demands of the general interest of the community and the requirements of fundamental rights is upset if the person concerned has had to bear a “disproportionate burden” (see, among many other authorities, The Holy Monasteries v. Greece, 9 December 1994, §§ 70-71, Series A no. 301-A). Despite the margin of appreciation given to the State the Court must nevertheless, in the exercise of its power of review, determine whether the requisite balance was maintained in a manner consonant with the applicant’s right to property (see Rosinski v Poland, no. 17373/02, § 78, 17 July 2007). The concern to achieve this balance is reflected in the structure of Article 1 of Protocol No. 1 to the Convention as a whole, including therefore the first paragraph, second sentence, which is to be read in the light of the general principle enunciated in the first sentence. In particular, there must be a reasonable relationship of proportionality between the means employed and the aim sought to be achieved by any measure depriving a person of his possessions (see Pressos Compania Naviera S.A. and Others v. Belgium, 20 November 1995, § 38, Series A no. 332, and The Former King of Greece and Others v. Greece [GC], no. 25701/94, § 89, ECHR 2000-XII).

61. The Court notes at the outset that the national courts’ findings which led to the applicant’s title to the property at issue being declared null and void were mainly concentrated on the fact that other persons, S.K. and Z.K., had a specially protected tenancy in respect of the flat which the applicant occupied and that the judgments terminating their specially protected tenancy had been annulled. The consequence of such decisions was that S.K. and Z.K. never lost their specially protected tenancy. The national courts also placed emphasis on the fact that the applicant had been aware of the circumstances in which S.K. and Z.K. had left the flat at issue and of the fact that they had lodged a request for the re-opening of the proceedings in which their specially protected tenancy had been terminated, the applicant having even been an intervener in these proceedings.

62. However, in the meantime, the applicant had moved into the flat, allegedly with the acquiescence of the owner of the flat, the Sisak Ironworks Holding company, which subsequently sold the flat to the applicant under favourable conditions, as prescribed by the Sale to Occupier Act. The sale contract was approved by the State Attorney’s Office, a requirement under section 21 of that Act. Thus, the State authorities created a situation in which two persons had conflicting titles in respect of the same flat.

63. The Court emphasises that its task in the present case is not to call into question the right of a State to enact laws aimed at securing the rule of law by providing for the annulment of defective contracts contravening mandatory rules, but, in accordance with its supervisory powers, to review under the Convention the manner in which such laws were applied in the applicant’s case and whether the decisions taken by the relevant domestic authorities complied with the principles enshrined in Article 1 of Protocol No. 1 to the Convention.

64. In examining whether a fair balance was struck between the public interest and that of the applicant, the Court reiterates in particular the importance of the principle of “good governance”. The “good governance” principle should not, as a general rule, prevent the authorities from correcting occasional mistakes, even those resulting from their own negligence. Holding otherwise would, inter alia, amount to sanctioning an inappropriate allocation of scarce public resources, which in itself would be contrary to the public interest (see Moskal v. Poland, no. 10373/05, § 73, 15 September 2009). On the other hand, the need to correct an old “wrong” should not disproportionately interfere with a new right which has been acquired by an individual relying in good faith on the legitimacy of the actions of a public authority (see, mutatis mutandis, Pincová and Pinc v. the Czech Republic, no. 36548/97, § 58, ECHR 2002-VIII). In other words, State authorities which fail to put in place or adhere to their own procedures should not be allowed to profit from their wrongdoing or to escape their obligations (see Lelas, cited above, § 74). The risk of any mistake made by the State authority must be borne by the State itself and any errors must not be remedied at the expense of the individuals concerned (see, among other authorities, mutatis mutandis, Pincová and Pinc, cited above, § 58; Gashi, cited above, § 40; and Trgo v. Croatia, no. 35298/04, § 67, 11 June 2009). In the context of the revocation of a title to property which has been granted erroneously, the “good governance” principle may not only impose on the authorities an obligation to act promptly in correcting their mistake (see Moskal, cited above, § 69), but may also necessitate the payment of adequate compensation or another type of appropriate reparation to its former good-faith holder (see Pincová and Pinc, cited above, § 53; Toşcuţă and Others v. Romania, no. 36900/03, § 38, 25 November 2008; and Rysovskyy v. Ukraine, no. 29979/04, § 71, 20 October 2011).

65. The Court and the former Commission have already dealt with cases involving the annulment of contracts of sale under which applicants bought flats they occupied (see, inter alia, Panikian, cited above, pp. 109-119; Pincová and Pinc, cited above; and Velikovi and Others, cited above). In those cases, the Court and the Commission were called upon to assess particular situations which concerned legislation passed with the aim of making good injustices dating back decades and inherited from communist rule in the respective States. In particular, in the judgment of Velikovi and Others (cited above, § 190) the Court set out certain criteria for deciding whether the principle of proportionality had been complied with in such cases. It held:

“ ... [T]he proportionality issue must be decided with reference to the following factors: (i) whether or not the case falls clearly within the scope of the legitimate aims of the Restitution Law, having regard to the factual and legal basis of the applicants’ title and the findings of the national courts in their judgments declaring it null and void (abuse of power, substantive unlawfulness or minor omissions attributable to the administration) and (ii) the hardship suffered by the applicants and the adequacy of the compensation actually obtained or the compensation which could be obtained through a normal use of the procedures and possibilities available to the applicants at the relevant time, including ... the possibilities for the applicants to secure a new home for themselves.”

The Court considers that the above criteria apply, mutatis mutandis, in the present case.

66. In this connection, the Court notes that the domestic courts declared the contract of sale whereby the applicant had acquired ownership of the flat in question to be null and void because it had been concluded contrary to the mandatory rules of the Sale to Occupier Act. The applicant was aware of the circumstances in which S.K. and Z.K. had left the flat in Sisak since he had maintained contact with them. He was also aware, at the time when he bought the flat at issue, that Z.K. and S.K. had applied for the reopening of the civil proceedings in which their specially protected tenancy of that flat had been terminated. In these circumstances, the Court considers that it cannot be entirely ruled out that the applicant did not act in good faith or that the defect rendering the contract of sale null and void was partly attributable to him.

67. In the Court’s view, in such a situation the public interest pursued by the annulment of the applicant’s title, namely the rights of Z.K. and S.K. as former tenants whose specially protected tenancy had been restored, strongly prevails over any of the rights the applicant might claim in respect of the flat at issue. Thus, the first criterion under the Velikovi test has been satisfied (see paragraph 65 above).

68. As to the second criterion, in assessing whether adequate compensation was available to the applicant the Court must have regard to the particular circumstances of each case, including the availability of compensation and the practical realities in which the applicant found himself (see Velikovi and Others, cited above, § 231). A clear and foreseeable possibility of obtaining compensation was available to the applicant (see, by converse implication, Velikovi and Others, cited above, § 227). In particular, by relying on sections 104(1) and 108 of the 1978 Obligations Act (or, after 1 January 2006, section 323 of the 2006 Obligations Act), the applicant could not only have sought reimbursement of the purchase price, but also accrued statutory default interest and compensation for any further damage he might have sustained.

69. As to the situation in which the applicant found himself, the Court notes that he was granted reconstruction assistance for a house he owns in Petrinja, which had been damaged in the war, to be repaired. The purpose of the legislation concerning the allocation of resources for the reconstruction of houses damaged during the war was to enable owners to return to their homes and live there (see paragraph 28 above). The applicant, even though he had received resources from the State for that purpose, also bought a flat in Sisak under the favourable conditions prescribed by the Sale to Occupier Act. However, the actual purpose of that Act was to provide for the housing needs of those who owned no other suitable dwelling (see paragraph 25 above).

70. Against the above considerations, the Court concludes that the interference complained of did not place an excessive individual burden on the applicant. There has accordingly been no violation of Article 1 of Protocol No. 1 to the Convention.

II. ALLEGED VIOLATION OF ARTICLE 8 OF THE CONVENTION

71. The applicant complained that his right to respect for his home had been violated. He relied on Article 8 of the Convention, which reads as follows:

“1. Everyone has the right to respect for his private and family life, his home and his correspondence.

2. There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.”

Admissibility

1. The parties’ submissions

72. The Government argued that the applicant had not, either expressly or in substance, complained before the national courts of a violation of his right to respect for his home. In particular, he had not expressly relied on Article 34 of the Constitution in his constitutional complaint.

73. The applicant replied that he had raised this complaint in substance because throughout the proceedings before the national courts he had claimed that the flat in question constituted his home given that he had been living in it since 1991, that is, more than twenty years.

2. The Court’s assessment

74. The Court notes that the applicant in his constitutional complaint did not rely on Article 8 of the Convention or Article 34 of the Croatian Constitution, which is the provision which guarantees the right to respect for one’s home and therefore arguably corresponds to Article 8 of the Convention.

75. More importantly, the applicant did not complain of a violation of his right to respect for his home in his constitutional complaint, even in substance. In particular, his constitutional complaint does not contain a single reference to “home” or a single mention that he has been living in the flat in question for more than twenty years.

76. In this connection the Court reiterates that, in order to properly exhaust domestic remedies it is not sufficient that a violation of the Convention is “evident” from the facts of the case or applicants’ submissions. Rather, they must actually complain (expressly or in substance) about it in a manner which leaves no doubt that the same complaint that was subsequently submitted to the Court had indeed been raised at the domestic level (see Merot d.o.o. and Storitve Tir d.o.o. v. Croatia (dec.), nos. 29426/08 29737/08, § 36, 10 December 2013). Contrary to the applicant’s assertion, the Court notes that he neither expressly nor implicitly alleged a violation of his right to respect for his home in his constitutional complaint.

77. In these circumstances, the Court considers that the applicant did not properly exhaust domestic remedies and thus did not provide the national authorities with the opportunity - which is in principle intended to be afforded to Contracting States by Article 35 § 1 of the Convention - of addressing, and thereby preventing or putting right, the particular Convention violation alleged against them (see, for example, Merot d.o.o. and Storitve Tir d.o.o., cited above, § 38, and the cases cited therein).

78. It follows that this complaint is inadmissible under Article 35 § 1 of the Convention for non-exhaustion of domestic remedies and must therefore be rejected pursuant to Article 35 § 4 thereof.

FOR THESE REASONS, THE COURT, UNANIMOUSLY,

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

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

Done in English, and notified in writing on 31 May 2016, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.

Stanley Naismith Işıl Karakaş
Registrar President

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You are here: BAILII >> Databases >> European Court of Human Rights >> VUKUSIC v. CROATIA - 69735/11 (Judgment (Merits and Just Satisfaction) : Court (Second Section)) [2016] ECHR 463 (31 May 2016) URL: http://www.bailii.org/eu/cases/ECHR/2016/463.html Cite as: [2016] ECHR 463