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FIFTH
SECTION
CASE OF BASARBA OOD v. BULGARIA
(Application
no. 77660/01)
JUDGMENT
(Just
satisfaction)
STRASBOURG
20 January
2011
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 Basarba OOD v. Bulgaria,
The
European Court of Human Rights (Fifth Section), sitting as a Chamber
composed of:
Peer Lorenzen, President,
Renate
Jaeger,
Karel Jungwiert,
Rait
Maruste,
Isabelle Berro-Lefèvre,
Mirjana
Lazarova Trajkovska, judges,
Pavlina Panova, ad hoc
judge,
and Claudia
Westerdiek, Section
Registrar,
Having
deliberated in private on 14 December 2010,
Delivers
the following judgment, which was adopted on that date:
PROCEDURE
- The case originated in an application (no. 77660/01)
against the Republic of Bulgaria lodged with the Court under Article
34 of the Convention for the Protection of Human Rights and
Fundamental Freedoms (“the Convention”) by a Bulgarian
limited liability company, Basarba OOD (“the applicant
company”), on 13 November 2001.
- Judge
Kalaydjieva, the judge elected in respect of Bulgaria, withdrew from
sitting in the case. On 30 January 2009 the Government appointed in
her stead Ms Pavlina Panova as an ad hoc judge (Article 27 §
2 of the Convention and Rule 29 § 1 of the Rules of Court).
- In
a judgment delivered on 7 January 2010 (“the principal
judgment”), the Court held that there had been violations of
Article 6 § 1 of the Convention and Article 1 of Protocol No. 1.
In particular, it found that in refusing to offer for sale to the
applicant company a municipally-owned supermarket in Sofia (“the
shop”), as ordered by a domestic court, the authorities had
failed to comply with a final court judgment and had deprived the
applicant company of its legitimate expectation to be offered to
acquire the property at issue (see Basarba OOD v. Bulgaria,
no. 77660/01, 7 January 2010).
- Since
the question of the application of Article 41 of the Convention was
not ready for decision as regards the claims for damages, the Court
reserved it and invited the Government and the applicant company to
submit, within two months, their written observations on that issue
and, in particular, to notify the Court of any agreement they might
reach (see paragraph 54 of the principal judgment and point 4 of the
operative provisions).
- The
applicant company lodged just satisfaction claims. The Government
submitted their comments.
- The
applicant company was represented by Ms N. Sedefova, a lawyer
practising in Sofia. The Bulgarian Government (“the
Government”) were represented by their Agent, Ms M. Kotzeva, of
the Ministry of Justice.
THE LAW
- 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
1. The applicant company’s claims
- The
applicant company argued that had the authorities complied with their
statutory obligation to offer it to buy the shop in 1996, today it
would have owned that property and would have, for more than fourteen
years, profited from its use. Therefore, referring to the case of
Papamichalopoulos and Others v. Greece ((Article 50), 31 October
1995, Series A no. 330 B), the applicant company urged the Court
to award to it: (a) the current market value of the shop, reduced by
the preferential price it would have had to pay had it been offered
to buy it in 1996, and (b) compensation for its inability to use the
shop between 1996 and 2010, equalling the market rent it would have
received had it been letting it out after acquiring title to it. In
support of these claims the applicant company presented a report
prepared in May 2010 by an expert appointed by it.
- In
order to prepare her report, the expert visited and inspected the
premises. She also consulted various documents. She described the
property as a one-storey building constructed in 1969, located in a
residential area of Sofia, with a surface totalling 210 square
metres, 80 square metres of which was a commercial area and the
remainder a storage area.
- On
the basis of a document issued by the municipal company which had
managed the property in 1995, the expert estimated that had it been
offered to buy it in 1996, the applicant company would have been
required to pay a price of 9,962 Bulgarian levs (BGN), the equivalent
of approximately 5,082 euros (EUR). This was a preferential price, as
provided for in section 35(1) of the Privatisation Act of 1992 (see
paragraph 20 of the principal judgment).
- In
order to evaluate the current market value of the shop the expert
used three different methods and then, on that basis, calculated a
final amount. The first method referred to the costs that would be
incurred if a similar building was constructed today, taking also
into account the actual building’s amortisation. The second
method was based on the possible future revenues from the shop,
calculated on the basis of the rent that could possibly be received
if the property was to be let out. The third method relied on
information on similar properties offered for sale recently. Thus,
the expert calculated that the cost of constructing the shop amounted
to EUR 36,344.31, the possible revenue was EUR 103,256.46 and the
shop’s value under the third method amounted to EUR 160,289.36.
Taking into account the respective weight of these three methods, the
expert calculated the final market value of the shop at EUR 118,390.
- Thus,
the amount the applicant company claimed in respect of the value of
the shop (the market value, EUR 118,390, reduced by the preferential
price, EUR 5,082) was EUR 113,308.
- As
to the market rent to be received by letting out the shop, the expert
relied on information about rents received for other similar shops in
Sofia. She found that the monthly rent would have varied between BGN
592 and BGN 1,100. On this basis she calculated that the total rent
between the beginning of 1996 and May 2010 would have amounted to BGN
138,306, the equivalent of EUR 70,926.
- Thus,
the total amount claimed by the applicant company in damages (the
value of the shop, as indicated in paragraph 12 above, plus the
market rent indicated in the preceding paragraph) was EUR 184,234.
2. The Government’s position
- The
Government contested the expert report submitted by the applicant
company. They presented a report prepared by another expert appointed
by them.
- The
Government’s expert agreed with the applicant company’s
expert that the preferential price the applicant company would have
had to pay for the shop in 1996 was BGN 9,962 (see paragraph 10
above). However, his calculations led to a different amount in
respect of the property’s market value in March 2010. On the
basis of a comparative method, taking into account the prices of
similar properties offered for sale recently and the individual
characteristics of the building at issue (its age, the fact that it
had not been subject to major improvements), he assessed the shop’s
market value at EUR 34,800.
- As
to the market rent for the shop for the period from the beginning of
1996 to May 2010, the Government’s expert used a comparative
method and then diminished the amount reached by 20% to account for
“commercial risk”. He thus calculated the market rent for
the shop at BGN 60,945, the equivalent of EUR 31,100.
- In
any event, the Government contested the approach proposed by the
applicant company, namely that it had based its claims on the current
market price of the shop and the market rent after 1996. The
Government noted that those claims as formulated did not account for
the taxes that would have had to be paid. Furthermore, the applicant
company could have invested the sum it had been prepared to pay for
the shop in 1996 in another activity and still received profit. In
addition, it was speculative to assert that the applicant company
would have received rent for the shop and would not have, for
instance, immediately sold it to a third party. In the latter case it
would have received the shop’s market value in 1996, which was
considerably lower than its current value.
3. The Court’s assessment
- The
Court considers that in the circumstances of the present case the
reparation should aim at putting the applicant company in the
position in which it would have been had the violation not occurred
(see Zlínsat, spol. s. r.o. v. Bulgaria (just
satisfaction), no. 57785/00, § 39, 10 January 2008).
- The
Court’s case-law establishes that there must be a clear causal
connection between the damage claimed by the applicant and the
violation of the Convention and that this may, in the appropriate
case, include compensation in respect of loss of earnings (see,
amongst others, Stretch v. the United Kingdom, no.
44277/98, § 47, 24 June 2003). A precise calculation of the sums
necessary to make complete reparation in respect of the pecuniary
losses suffered by applicants may be prevented by the inherently
uncertain character of the damage flowing from the violation. An
award may still be made notwithstanding the large number of
imponderables involved in the assessment of future losses, though the
greater the lapse of time involved the more uncertain the link
becomes between the breach and the damage. The question to be decided
in such cases is the level of just satisfaction, in respect of both
past and future pecuniary loss, which it is necessary to award, the
matter to be determined by the Court at its discretion, having regard
to what is equitable (see ibid., § 48, and Lustig-Prean
and Beckett v. the United Kingdom (Article 41), judgment of 25
July 2000, §§ 22-23).
- In
the case at hand the Court found a violation of Article 6 § 1 of
the Convention because the municipal authorities in Sofia had failed
to comply with a final judgment ordering them to initiate a
privatisation procedure and offer for sale to the applicant company
under preferential conditions a shop that it had previously been
renting (see paragraphs 32-33 of the principal judgment). Under
Article 1 of Protocol No. 1, the Court found that the applicant
company had had a legitimate expectation of being offered the shop
for sale and had unlawfully been deprived of that expectation (see
paragraphs 44 and 48 of the principal judgment).
- Thus,
the present case does not concern deprivation of existing property or
an unconditional obligation on the part of the authorities to
transfer property (see Stretch, cited above, § 50, and
contrast Kirilova and Others v. Bulgaria (just satisfaction),
nos. 42908/98, 44038/98, 44816/98 and 7319/02, §§ 26-27, 14
June 2007). What the applicant company was deprived of was an
opportunity to buy the shop under preferential conditions and
eventually develop a commercial activity in it; the respondent State
must therefore make good that loss of opportunity.
- The
Court is unable to accept the approach to assessing that loss
proposed by the applicant company, which claimed the current market
value of the shop reduced by the preferential price it would have had
to pay in 1996, and the market rent it would have received had it
been letting out the shop between 1996 and 2010 (see paragraph 8
above). The Court notes firstly that even though there is a strong
likelihood that this would have happened, it cannot be accepted as a
definite fact that the applicant company would have accepted the
offer to buy the shop, had it been made, would have been able to pay
the asking price, and would have thus acquired title to the shop.
Moreover, the Court is unable to speculate as to whether the
applicant company would have kept the shop or, for example, as the
Government suggested (see paragraph 18 above), would have preferred
to sell it. Neither does the Court consider that the market rent
which the applicant company could have received had it been letting
out the shop between 1996 and 2010, is an appropriate basis for
assessing the damage suffered by it as a result of the breaches
found. In this respect the Court agrees with the Government that it
is mere speculation to assume that the applicant company would have
let out the property instead of using it for its own commercial
activities or selling it, and would have received rent for it during
the whole period between 1996 and 2010. Furthermore, the Court notes
that even if this had been the case, the applicant company would have
inevitably incurred expenses for maintaining the shop, given in
particular the fact that the building was rather old (see paragraph 9
above). In addition, any revenue from rent would have been subject to
taxation (see Popov v. Moldova (no. 1) (just
satisfaction), no. 74153/01, § 13, 17 January 2006, and
Kirilova and Others, cited above, § 31).
- To
sum up, the Court considers that it has not been established with
certainty that the applicant company would have acquired title to the
shop and would have been letting it out up to today. Thus, in
assessing the loss of opportunity suffered by the applicant company
the Court will not rely on the calculations of the property’s
value and the rent to be received contained in the expert reports
presented by the parties.
- As
to the Government, although they criticised the applicant company’s
approach to assessing the loss suffered by it (see paragraph 18
above), they did not indicate how, in their view, the quantum of
award was to be calculated.
- Thus,
having regard to the lapse of time, the large number of imponderables
involved and the impossibility of quantifying the applicant company’s
loss in exact terms, given in particular that the present case
concerns the commercial activities of a company, which implies the
taking of risks and a degree of uncertainty as to the use and the
profitability of the properties acquired, the Court considers that it
must rule in equity (see paragraph 20 above). It takes into account
all the circumstances which have become known to it concerning the
applicant company and the economic situation in Bulgaria. It
therefore awards the applicant company EUR 40,000 under this
head, plus any tax that may be chargeable on that amount.
B. Costs and expenses
- The
applicant company did not claim costs and expenses for the
proceedings under Article 41 of the Convention.
- The
Court sees no reason to make an award under this head in the absence
of a claim by the applicant company.
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
(a) that
the respondent State is to pay the applicant company, within three
months of the date on which the judgment becomes final in accordance
with Article 44 § 2 of the Convention, EUR 40,000 (forty
thousand euros) in respect of pecuniary damage, plus any tax that may
be chargeable, to be converted into Bulgarian levs at the rate
applicable on the date of settlement;
(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 applicant
company’s claims for just satisfaction.
Done in English, and notified in writing on 20 January 2011, pursuant
to Rule 77 §§ 2 and 3 of the Rules of Court.
Claudia Westerdiek Peer Lorenzen
Registrar President
