Op-Ed: “How to deal with massive compensation claims for expropriation under extreme circumstances: the never-ending Albanian case and the ECtHR” by Dolores Utrilla
As is well known, the protection of property rights under Article 1 of Protocol no. 1 (‘Article P1-1’) to the European Convention of Human Rights (ECHR) is highly dependent on procedural safeguards concerning, inter alia, the amount and the timely payment of compensation in case of expropriation. This explains why Article P1-1 is frequently invoked before the European Court of Human Rights (ECtHR) in conjunction with Article 6(1) ECHR (right to a fair trial) and Article 13 ECHR (right to an effective remedy). It also explains why the ECtHR has used the doctrine of positive obligations to incorporate some due process requirements in P1-1 (for example in Zehentner v. Austria).
A recurring question raised by these provisions is how to make them compatible with situations where State resources are seriously scarce, be it due to situations of State illiquidity, the carrying out of massive expropriations, or a combination of both. Certainly, the ECtHR has stated that the lack of resources of a public entity cannot be invoked as a justification for lack or delay in payment of compensation in case of expropriation (De Luca v. Italy and Pennino v. Italy). However, it has taken a flexible approach regarding compensation in cases appertaining to contexts of political transition or economic reform (for example in Kopecký v. Slovakia and Jahn and Others v. Germany), and has given particular weight to the State’s budgetary constraints in exceptionally difficult situations (Wolkenberg and Others v. Poland).
The Strasbourg-based court has been particularly mindful of the reality in eastern-European States regarding properties expropriated, nationalised or confiscated under the former communist regimes. It has been mostly in this context where the pilot-judgment procedure has been used as a means of dealing with systemic dysfunctions under national law, since Broniowski v. Poland (2004). Compliance with pilot judgments has been used by the ECtHR to allow an additional degree of flexibility for States when dealing with massive complaints in the affected area of law.
A few days ago, the ECtHR showed how all these principles apply jointly in its remarkable inadmissibility decision in Beshiri v. Albania, a case concerning the prolonged lack of enforcement by Albanian authorities of final decisions awarding compensation for property expropriated during the communist era. This decision raises particularly interesting questions concerning the proportionality of extremely delayed and low compensation for massive expropriations, as well as regarding the retroactive application of substantive and procedural requirements adopted by States in compliance with pilot judgments. To give due account of the case it is necessary, however, to briefly refer to its context and background.
The Albanian systemic problem concerning property rights
Albania faced extensive confiscations of property between 1945 and 1992. From that moment onwards, the restitution process has been steadily boosted by international organisations and by the EU, which is a major stakeholder in the development of the property rights policy in the country (see for example the 2008 Report of the European Parliament on the property restitution process in Albania, or the 2009 Albania – EU Stabilisation and Association Agreement).
Between 2006 and 2011, the ECtHR delivered a considerable number of judgments in respect of Albania finding joint violations of Article P1-1 and of Articles 6(1) and 13 ECHR on account of the non-enforcement of final decisions recognising compensation in lieu of the restitution of property which had been confiscated or otherwise taken by the former communist regime (for all, see Ramadhi and Others v. Albania). These judgments do not concern the fact of the nationalisation or confiscation by the authoritarian power, but the actual failure of the State to comply with its compensation obligations.
The 2012 pilot judgment in Manushaqe Puto and Others v. Albania
In view of the increasing number of applications concerning similar cases, in 2012 the ECtHR decided to have recourse to the pilot judgment procedure and selected, to that end, the case Manushaqe Puto and Others v. Albania, giving general recommendations to Albania on the steps needed to deal with the long-standing issue in question.
Under Article 46 ECHR, the Court proposed, on a purely indicative basis, a list of general measures that Albania should adopt, including inter alia: (i) the creation of a clear compensation scheme which should make use of alternative forms of compensation as provided for by law, as well as consider how the payment of financial compensation should be made; (ii) transparent decision-making in, and publication of, the type and award of compensation, as well as transparent revision and update of valuation maps; and (iii) the setting of realistic, statutory and binding time-limits in respect of every step of the process.
According to a report issued by the Government of Albania in 2015, between 1993 and 2014 only 2.5% of the process of restitution and compensation had been completed. More than 26,000 decisions recognising the compensation rights remained unforced, and 10,131 property claims were still pending for examination. According to the Government, in view of the statistical data and the rate of paying compensation as of 2015, the compensation process would be completed after 2,713 years.
The 2015 Albanian Property Act
In response to the 2012 pilot judgment, on 5 December 2015, the Albanian Parliament adopted the Treatment of Property and Finalisation of the Property Compensation Process Act, which entered into force on 24 February 2016. The Property Act aimed at creating a feasible and workable scheme to ensure equal treatment of property owners and solve the long-standing issue. Specifically, it purported to finalise the examination of claims and the process of compensation within the period of 10 years.
In its decision no. 1 of 16 January 2017, the Albanian Constitutional Court upheld the constitutionality of the provisions of the 2015 Property Act dealing with the compensation scheme. It recognised that, even though these provisions would result in the award of lower compensation amounts in comparison with the prior property legislation, this restriction was justified and proportionate. The Constitutional Court stressed the importance of the measure’s goal, namely solving property issues within a reasonable time-frame under sensible financial costs, as well as the establishment of social peace amongst various societal strata affected by property issues, which continued to remain unresolved for 25 years. Further requests for constitutional review regarding certain provisions of the Property Act, as well as regarding the property valuation maps subsequently approved by the Albanian government on the basis thereof, are currently pending.
The case Beshiri and Others v. Albania
In Beshiri and Others v. Albania, the applicants were 12 former owners (or their heirs) whose possessions were confiscated or nationalised by the former communist regime. Between 1994 and 2009, they all received final administrative decisions recognising their right to compensation in lieu, but those decisions were never enforced in full.
The ECtHR’s decision of 7 May 2020, which is final and was adopted unanimously, declared the applications inadmissible on the basis of two key findings. Firstly, that the new domestic scheme for compensation amounts to an effective remedy. Secondly, that the applicants were obliged to exhaust this mechanism before seeking redress from the ECtHR, even if their applications had been lodged between 2006 and 2014, long before approval and the entering into force of the Property Act. Because of this, the ECtHR concluded that the applications were inadmissible for non-exhaustion of domestic remedies, or because the applicants were no longer victims of a violation of their rights.
(i) Effectiveness of the remedy
According to the ECtHR, the compensation scheme introduced by the 2015 Property Act amounts to an ‘effective remedy’, despite it resulting in considerably lower amounts of compensation than under previous national rules. Whilst recognising that such decrease amounts to an ‘interference’ with the applicant’s rights, the ECtHR noted that it pursued a legitimate purpose, namely the goals identified by the Constitutional Court’s ruling in 2016 and, additionally, the objective to comply with the 2012 pilot judgment. The ECtHR further upheld the proportionality of the scheme, taking into account the exceptionally difficult and complex situation in the country. According to the ECtHR, given the magnitude of the problem, the approach taken by the Albanian authorities does not appear to be unreasonable and disproportionate.
The ECtHR noted in particular that the reference to the original cadastral category of the expropriated property as a basis for fixing the compensation amount is not per se arbitrary. However, the ECtHR declared that the remedy can only be considered ‘effective’ to the extent that the aggregate amount of compensation amounts to at least 10% of the value to which the applicants would have been entitled if the financial evaluation had been carried out by reference to the current cadastral category of the expropriated property. As regards the 10-year time-frame for the full payment of compensation, the ECtHR found that this additional delay is proportionate in the exceptional circumstances of the case and does not hamper the effectiveness of the remedy.
The ECtHR also confirmed that retroactive application of the 2015 Property Act to pending cases was in line with ECHR law, insofar as it was not aimed specifically at any individual application and, after the 2012 pilot judgment, the applicants could have foreseen a reaction by the national legislature.
(ii) Non-exhaustion of domestic remedies
The ECtHR recalled that, in certain exceptional circumstances, it can be justified to assess whether domestic remedies have been exhausted (Article 35(1) ECHR) with reference to the date in which the applications are examined, and not to the date in which they were lodged (Balan v. the Republic of Moldova, application no. 44746/08).
The Court considers that this exception applies in the case at hand for three reasons. Firstly, because the compensation scheme was introduced by the 2015 Property Act in response to the 2012 pilot judgment. Secondly, because that compensation scheme was applicable and available to all applicants before the ECtHR and ‘it would not be fair and reasonable to dispense the applicants from having recourse to it’. Thirdly, because, according to the ECtHR, its task would not be best achieved by taking the case to judgment in the place of domestic authorities, let alone considering them in parallel with the pending domestic proceedings.
The ECtHR assessment regarding the effectiveness of the new Albanian compensation scheme largely corresponds to its well-established case law and seems proportionate to the circumstances of the case. However, the way in which it deals with the requirement to exhaust domestic remedies seems highly problematic. In particular, the inadmissibility decision omits any reference to the proportionality of the retroactive application of the requirement to exhaust a remedy made available in 2016 to applications submitted in 2004, and referring to rights’ violations that occurred in the 1990s. Although this approach already existed in the ECtHR’s case law concerning remedies created in response to pilot judgments (see for example Grzinčič v. Slovenia), this is not conceived of as an automatic rule, but as one which involves assessment of whether there were ‘exceptional circumstances compelling applicants to avail themselves of the new remedy’ (Fakhretdinov and Others v. Russia). One could argue that the delay by the ECtHR in dealing with applications lodged many years before its pilot judgment should be taken into account. Last but not least, it must be noted that a similar result, but much more in line with the basic standards of legal certainty, could have been achieved through admission of the applications and their subsequent dismissal on substantive grounds.
Dolores Utrilla is Assistant Editor at EU Law Live and Associate Professor at the University of Castilla-La Mancha. She is author of ‘Las garantías del Derecho de propiedad privada en Europa’ (Thomson Reuters, 2012) and a co-author of ‘Good Administration and the Council of Europe: Law, Principles and Effectiveness’ (Stelkens ed., OUP, on press).