EHRM, 25-10-2012, nr. 71243/01

At the material time, and up to 1 January 2011, expropriation was governed by the Expropriation (Public Interest) Act (Likums ‘Par nekustamā īpašuma piespiedu atsavināšanu valsts vai sabiedriskajām vajadzībām’ — the ‘General Expropriation Act’), which was first enacted in 1923 and which re-entered into force on 15 September 1992. The relevant sections of that Act read as follows:

Section 1

Section 3(1)

Section 5

Section 6

Section 9(1) and (2)

Section 10

Section 13

Section 16

Section 17(1)

Section 18

A Law of 19 December 1996 inserted certain provisions into Article 2 of the Supreme Council's decision of 15 September 1992 on the conditions of the entry into force1. of the 1923 General Expropriation Act (Lēmums‘Par Latvijas Republikas likuma ‘Par nekustamā īpašuma piespiedu atsavināšanu valsts vai sabiedriskajām vajadzībām’ spēkā stāšanās kārtību’); the relevant parts of those provisions read as follows:

On 1 January 2011 the 1923 Act was superseded by a new Expropriation (Public Interest) Act (Sabiedrības vajadzībām nepieciešamā nekustamā īpašuma atsavināšanas likums), enacted on 14 October 2010. Under section 4 of that new Act, expropriation of real estate can take the form of a friendly settlement between the State and the owner of the property in question, or of ‘forced’ expropriation ordered on the basis of a special law.

The use of the term ‘special law’ in Article 105 of the Constitution and in section 1 of the 1923 Act indicates that each individual expropriation measure falls within the exclusive remit of the legislature, that is to say, Parliament. As the Constitutional Court observed in its judgment of 16 December 2005, this is a specific feature of the Latvian legal system in comparison with that of other countries (see paragraph 62 below). In this system any expropriation is always based on two legislative instruments: the general law, determining the rules of expropriation in general, and a special targeted law by which Parliament orders the expropriation of designated property in a specific case. As to the sum to be paid in compensation, it is fixed by friendly settlement or, failing that, by the courts (section 9 of the 1923 General Expropriation Act).

Regulation no. 273 of 5 August 1997 on the expropriation of land for the needs of the State within the Free Commercial Port of Riga was promptly submitted to Parliament, as required by Article 81 of the Constitution (as then in force). On 30 October 1997 Parliament enacted a law on expropriation for the needs of the State of land within the Free Commercial Port of Riga (Likums‘Par zemes īpašuma atsavināšanu valsts vajadzībām Rīgas tirdzniecības brīvostas teritorijā’), which used almost the exact same wording as the Regulation. The relevant parts of that law read as follows:

Section 1

Section 2

Section 3

Section 4

The Law of 5 February 1997 on the expropriation of land for the needs of the State within the territory of the Riga State Airport Corporation (Likums‘Par zemes īpašumu atsavināšanu valsts vajadzībām valsts lidostu uzņēmuma ‘Rīga’ teritorijā’) is almost identical in structure to that of the law mentioned previously. Sections 1 and 2 order the expropriation of the specific plots of land enumerated in the annexes to the law. Section 3 requires the Transport Ministry to have the State's title entered in the land register, while the last two sections concern the conditions of payment of the compensation and the effective transfer of title.

The Court reiterates that Article 1 of Protocol No. 1 requires that any interference by a public authority with the peaceful enjoyment of possessions should be lawful: the second sentence of the first paragraph of that Article authorises the deprivation of possessions ‘subject to the conditions provided for by law’. Moreover, the rule of law, one of the fundamental principles of a democratic society, is a notion inherent in all the Articles of the Convention (see Former King of Greece and Others v. Greece [GC] (merits), no. 25701/94, § 79, ECHR 2000-XII, and Broniowski v. Poland [GC], no. 31443/96, § 147, ECHR 2004-V).

However, the existence of a legal basis in domestic law does not suffice, in itself, to satisfy the principle of lawfulness. In addition, the legal basis must have a certain quality, namely it must be compatible with the rule of law and must provide guarantees against arbitrariness. In this connection it should be pointed out that when speaking of ‘law’, Article 1 of Protocol No. 1 alludes to the very same concept as that to which the Convention refers elsewhere when using that term (see, for example, Špaček, s.r.o., v. the Czech Republic, no. 26449/95, § 54, 9 November 1999).

It follows that, in addition to being in accordance with the domestic law of the Contracting State, including its Constitution (see Former King of Greece and Others (merits), cited above, §§ 79 and 82, and Jahn and Others, cited above, § 81), the legal norms upon which the deprivation of property is based should be sufficiently accessible, precise and foreseeable in their application (see Guiso-Gallisay v. Italy, no. 58858/00, §§ 82–83, 8 December 2005). As to the notion of ‘foreseeability’, its scope depends to a considerable degree on the content of the instrument in issue, the field it is designed to cover and the number and status of those to whom it is addressed (see, mutatis mutandis, Sud Fondi S.r.l. and Others v. Italy, no. 75909/01, § 109, 20 January 2009). In particular, a rule is ‘foreseeable’ when it affords a measure of protection against arbitrary interferences by the public authorities (see Centro Europa 7 S.r.1. and Di Stefano v. Italy [GC], no. 38433/09, § 143, 7 June 2012). Similarly, the applicable law must provide minimum procedural safeguards commensurate with the importance of the principle at stake (see, mutatis mutandis, Sanoma Uitgevers B.V. v. the Netherlands [GC], no. 38224/03, § 88, 14 September 2010).

The Court would, moreover, reiterate the finding in its settled case-law that the national authorities are in principle better placed than an international court to evaluate local needs and conditions. In matters of general social and economic policy, on which opinions within a democratic society may reasonably differ widely, the domestic policy-maker should be afforded a particularly broad margin of appreciation (see, for example, Stec and Others v. the United Kingdom [GC], no. 65731/01, § 52, ECHR 2006-VI). This also holds true in respect of urban and regional planning policies (see, under Article 6 § 1, Gorraiz Lizarraga and Others v. Spain, no. 62543/00, § 70, ECHR 2004-III).

Generally speaking, the principle of the rule of law requires that any interference be based on an instrument of general application. However, in certain exceptional situations the Court has been prepared to accept, albeit implicitly, the existence of special laws laying down specific conditions that apply to one or more named individuals (see Former King of Greece and Others (merits), cited above, §§ 80–82; The Holy Monasteries v. Greece, 9 December 1994, Series A no. 301-A; Stran Greek Refineries and Stratis Andreadis v. Greece, 9 December 1994, Series A no. 301-B; and, under Article 6 § 1, Ruiz-Mateos v. Spain, 23 June 1993, Series A no. 262). Similarly, as regards the assessment of the precision of terms in the applicable law, the Court has recognised, in relation to reforms carried out in a State after its transition from a totalitarian regime to a democracy, that in the particular context of central and eastern European States it had to take into account the consequences of the transition to democracy and the specific circumstances of each case (see 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, § 166, 15 March 2007).

In the present case it is not in dispute that the impugned expropriation was carried out on the basis of the Law of 30 October 1997 on expropriation for the needs of the State of land within the Free Commercial Port of Riga (see paragraph 54 above). The Court must therefore ascertain whether that law met the requirement of ‘lawfulness’ as defined in its case-law.

In this connection the Court notes that in Latvian law the formal decision on expropriation is taken not by the executive but by Parliament in the form of a special law. The General Expropriation Act, enacted in 1923 and as applicable at the material time, subjected any expropriation of real estate to the following procedure: first the Government submitted to Parliament an expropriation proposal that had to satisfy certain criteria; then, on the basis of that proposal, Parliament enacted a special law ordering the expropriation of the property concerned; lastly, it was for the expropriating public authority to enter into negotiations with the owner for the purpose of reaching a friendly agreement as to the amount of the compensation, failing which the authority would refer the matter to the competent court for settlement of the dispute and determination of the final sum to be paid in compensation. The Court notes that the law which superseded the General Expropriation Act of 1923 retained the mechanism that applied where the State and the owner could not reach a friendly settlement (see paragraph 52 above).

The Court observes that this is a feature of the Latvian legal system, dating back to 1923, and enshrined in Article 105 of the Constitution in 1998 (see paragraph 40 above). Far from being specific to Latvia, the practice of expropriation by means of ad hominem laws (see, in particular, Ruiz-Mateos, cited above, together with, mutatis mutandis, Gorraiz Lizarraga, cited above, § 58) is part of a nineteenth-century liberal tradition with the aim of ensuring the protection of ownership against abuse by the executive by subjecting any expropriation to parliamentary approval on a case-by-case basis. Illustrations of this can be found in section 3 of the French Public Interest Expropriation Act of 3 May 1841, which obliged the legislature to record in a special legislative instrument the public interest of any major public works, and in the Belgian laws of 17 April 1835 and 27 May 1870, under which the public interest of major public works had in some cases to be established by Parliament in the form of a statute. In its judgment of 16 December 2005 the Latvian Constitutional Court emphasised that this feature of Latvian expropriation law was protective of the right of ownership (see paragraph 62 above). In any event, the Court reiterates that it is in the first place for the domestic courts to rule on the constitutionality of domestic law (see Jahn and Others, cited above, § 86). For its part, it finds that the general principles and objectives of the expropriation system set up by Latvian law do not, as such, raise any issue of ‘lawfulness’ within the meaning of Article 1 of Protocol No. 1.

In the present case, however, the Court notes that on 5 August 1997 the Cabinet, acting by virtue of its delegated legislative power, adopted Regulation no. 273 ordering the expropriation of all the properties at issue in the present case. That Regulation, together with the Law of 30 October 1997 by which it was confirmed, was interpreted by the domestic courts as providing for a derogation from the General Expropriation Act of 1923, making it possible to disregard the usual expropriation procedure in the case of the applicants and to limit the amount of the compensation by reference to Article 2 of the Supreme Council's decision of 1992. Prior to the adoption of Regulation no. 273 and the enactment of the Law confirming it, the applicants could have expected that any expropriation of their property would be carried out in accordance with the 1923 General Expropriation Act. Admittedly, the special Law of 30 October 1997 was on a par with the 1923 Act in the legislative hierarchy and the applicants have never argued that, in Latvian constitutional law, Parliament cannot derogate from an ordinary law by a subsequent law of equal rank. For their part, the domestic courts found that the legal basis for the impugned expropriation was compliant with Latvian law.

As regards the limitation of the compensation paid to the applicants — the subject of their complaint — the Court notes that it was apparent from Article 2 of the Supreme Council's decision of 1992, as amended by the Law of 19 December 1996, that this provision was one of general application, that it had entered into force before the impugned expropriation and that, in view of its wording, the applicants could expect it to be applied to them. In addition, this provision was declared by the Latvian Constitutional Court to be compliant with Article 1 of Protocol No. 1 (see paragraph 61 above).

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 (see paragraphs 23 in fine, 30–35 and 103 above). 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 (see paragraph 131 below).

Even if it has taken place ‘subject to the conditions provided for by law’ — implying the absence of arbitrariness — and in the public interest, an interference with the right to the peaceful enjoyment of possessions must always strike a ‘fair balance’ between the demands of the general interest of the community and the requirements of the protection of the individual's fundamental rights. In particular, there must be a reasonable relationship of proportionality between the means employed and the aim sought to be realised by any measure depriving a person of his possessions (see Scordino, cited above, § 93).

In determining whether this requirement is met, the Court recognises that the State enjoys a wide margin of appreciation with regard both to choosing the means of enforcement and to ascertaining whether the consequences of enforcement are justified in the general interest for the purpose of achieving the object of the law in question (see Chassagnou and Others v. France [GC], nos. 25088/94, 28331/95 and 28443/95, § 75, ECHR 1999-III, and Herrmann v. Germany [GC], no. 9300/07, § 74, 26 June 2012). Nevertheless, the Court cannot abdicate its power of review and must therefore determine whether the requisite balance was maintained in a manner consonant with the applicants' right to the peaceful enjoyment of their possessions, within the meaning of the first sentence of Article 1 of Protocol No. 1 (see Jahn and Others, cited above, § 93).

Compensation terms under the relevant legislation are material to the assessment whether the contested measure respects the requisite fair balance and, notably, whether it imposes a disproportionate burden on the applicants. The Court has already held that the taking of property without payment of an amount reasonably related to its value would normally constitute a disproportionate interference. In many cases of lawful expropriation, such as a distinct taking of land for road construction or other ‘public interest’ purposes, only full compensation may be regarded as reasonably related to the value of the property (see Former King of Greece and Others v. Greece [GC] (just satisfaction), no. 25701/94, § 78, 28 November 2002; see also, mutatis mutandis, Papachelas v. Greece [GC], no. 31423/96, § 48, ECHR 1999-II; and Efstathiou and Michailidis & Co. Motel Amerika v. Greece, no. 55794/00, § 26, ECHR 2003-IX). On this point, the Court cannot equate a lawful expropriation, complying with domestic law requirements, with a constructive expropriation that seeks to confirm a factual situation arising from unlawful acts committed by the authorities (see Guiso-Gallisay v. Italy (just satisfaction) [GC], no. 58858/00, §§ 94–95, 22 December 2009).

Moreover, the Court reiterates that, where an individual's property has been expropriated, there should be a procedure ensuring an overall assessment of the consequences of the expropriation, including the award of an amount of compensation in line with the value of the expropriated property, the determination of the persons entitled to compensation and the settlement of any other issues relating to the expropriation (see Efstathiou and Michailidis & Co. Motel Amerika, cited above, § 29). As to the amount of the compensation, it must normally be calculated based on the value of the property at the date on which ownership thereof was lost. Any other approach could open the door to a degree of uncertainty or even arbitrariness (see Guiso-Gallisay (just satisfaction) [GC], cited above, § 103).

However, Article 1 of Protocol No. 1 does not guarantee a right to full compensation in all circumstances (see Broniowski, cited above, § 182). Admittedly, a total lack of compensation can be considered justifiable only in exceptional circumstances (see Former King of Greece and Others (merits), cited above, § 89). Legitimate objectives of ‘public interest’, such as pursued in measures of economic reform or measures designed to achieve greater social justice, may call for less than reimbursement of the full market value (see James and Others, cited above, § 54); in such cases, the compensation does not necessarily have to reflect the full value of the property in question.

This principle applies all the more forcefully when laws are enacted in the context of a change of political and economic regime, especially during the initial transition period, which is necessarily marked by upheavals and uncertainties; in such cases the State has a particularly wide margin of appreciation (see, among other authorities, Kopecký v. Slovakia [GC], no. 44912/98, § 35, ECHR 2004-IX; Jahn and Others, cited above, § 116 (a); and Suljagić v. Bosnia and Herzegovina, no. 27912/02, § 42, 3 November 2009). Thus, for example, the Court has held that less than full compensation may also be necessary a fortiori where property is taken for the purposes of ‘such fundamental changes of a country's constitutional system as the transition from a monarchy to a republic’ (see Former King of Greece and Others (merits), cited above, § 87). The Court reaffirmed that principle in Broniowski (cited above, § 182), in the context of a property restitution and compensation policy, specifying that a scheme to regulate property, being ‘wide-reaching but controversial … with significant economic impact for the country as a whole’, could involve decisions restricting compensation for the taking or restitution of property to a level below its market value. The Court has also reiterated these principles regarding the enactment of laws in ‘the exceptional context of German reunification’ (see Maltzan and Others v. Germany (dec.) [GC], nos. 71916/01, 71917/01 and 10260/02, §§ 77 and 111–112, ECHR 2005-V, and Jahn and Others, cited above).

Lastly, in order to assess the conformity of the State's conduct with the requirements of Article 1 of Protocol No. 1, the Court must conduct an overall examination of the various interests in issue, having regard to the fact that the Convention is intended to guarantee rights that are ‘practical and effective’, not theoretical or illusory. It must go beneath appearances and look into the reality of the situation at issue, taking account of all the relevant circumstances, including the conduct of the parties to the proceedings, the means employed by the State and the implementation of those means. Where an issue in the general interest is at stake, it is incumbent on the public authorities to act in good time, and in an appropriate and consistent manner (see Fener Rum Erkek Lisesi Vakfı v. Turkey, no. 34478/97, § 46, 9 January 2007, and Bistrović v. Croatia, no. 25774/05, § 35, 31 May 2007).

The Court observes at the outset that the value of the impugned properties was assessed on three separate occasions. The first estimation was made in 1994 when the land was acquired by the applicants in the form of a donation; the value indicated by the parties in the contracts of donation was LVL 500 or LVL 1,000 for each plot of land. The Court thus notes that the applicants themselves initially decided to assess their properties at an exceptionally low value and the parties agreed that this assessment was to be used solely for the calculation of the registration tax. Leaving aside the question of the parties' good faith as regards their tax obligations, it should be noted that this calculation was never relied on in the subsequent expropriation and compensation procedure.

In 1996 the second evaluation of the properties in issue, carried out by the Real Estate Valuation Centre of the State Land Authority, was based on their cadastral value. Following that evaluation, their value was fixed at approximately EUR 900,000 for the first applicant's property and over EUR 5 million for the second applicant's property. The Court would point out that the cadastral value of a property, far from being a theoretical or fanciful sum, is the value that is used as the basis for calculating the land tax to be levied thereon.

The third and last evaluation, carried out in 1997, was intended to determine the compensation to be awarded to the applicants in the event of expropriation. The compensation, calculated on the basis of the value of the properties in 1940, was fixed at about EUR 850 for the first applicant and about EUR 13,500 for the second applicant. These were indeed the sums that the applicants received by way of compensation under the Law of 19 December 1996, which was enacted after the applicants had acquired the land at issue (see paragraph 53 above).

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 (see paragraph 47 above); secondly, because the land at issue was subject to a statutory servitude for the benefit of the port (see paragraph 56 above); 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.

Nevertheless, the Court observes an extreme disproportion between the official cadastral value of the land and the compensation received by the applicants: that received by the first applicant constituted less than one thousandth of the cadastral value of his land, and the compensation awarded to the second applicant was some 350 times lower than the total cadastral value of all his properties (see, mutatis mutandis, Urbárska Obec Trenčianske Biskupice v. Slovakia, no. 74258/01, §§ 123–124, 27 November 2007). In the Court's view, such disproportionate awards are almost tantamount to a complete lack of compensation. As the Court has already indicated above, only very exceptional circumstances may justify such a situation. It is accordingly for the Court to ascertain whether such circumstances existed in the present case, by examining in turn the two points raised by the Government in this connection, namely the applicants' personal situations and conduct, together with the general historical and political background to the impugned measure.

As regards, first, the personal situations of the applicants, the Court notes that their good faith as to the acquisition of the property in question has never been disputed at national level (see, mutatis mutandis, N.A. and Others v. Turkey, no. 37451/97, § 39, ECHR 2005-X). Whilst the Government have appeared to call into question before the Court the circumstances in which the applicants became the owners of the land at issue, the Court finds that the Latvian authorities never took legal action to challenge the validity of the 1994 contracts of donation, whereas they could have done so based on the relevant provisions of the Civil Code (see paragraph 59 above). On the contrary, they formally recognised the applicants' right of ownership by registering the land in their names and by paying them rent. In those circumstances the Court does not find any reason to question the conformity of the donations with the requirements of Latvian law or the validity of the applicants' right of ownership.

The Court notes that whilst the applicants acquired the land at issue by way of donation, the parties agreed that this had taken place in return for certain services rendered by the applicants to the donors (see the specific provision of the Civil Code cited in paragraph 60 above). It would therefore be incorrect, strictly speaking, to assert that the property in question was acquired ‘free of charge’. In any event, a donation being definable as a transaction entered into with an animus donandi, the manner in which the applicants acquired their property cannot be held against them (see paragraph 115 above). Similarly, whilst it is true that the applicants possessed their land for only about three years, that fact does not affect the value of the property and does not by itself justify a significant reduction in compensation. Consequently, the Court concludes that the applicants' personal circumstances and conduct did not in themselves justify the award of such minimal sums.

As to the general historical and political background to the case, the Government argued that the impugned measure fell into the broader framework of the denationalisation process following Latvia's restoration of independence and that the present case had to be examined in that context. Even though the measure was not formally taken under the legislation on denationalisation or land and real-estate reform — which was removed from the scope of Article 1 of Protocol No. 1 as a result of the reservation made by Latvia (see Kozlova and Smirnova v. Latvia (dec.), no. 57381/00, ECHR 2001-XI, and Liepājnieks v. Latvia (dec.), no. 37586/06, § 49, 2 November 2010) — the Court finds it appropriate to go beyond a formalistic approach and to consider the land reform in its broader sense. However, it finds that by the time of their expropriation, all the disputed plots of land had already, with final effect, been denationalised and allotted to individuals. In this connection, the Court cannot equate individuals who had not yet recovered their property with those who were already in possession of a valid title deed (see, in this connection, Kopecký, cited above, §§ 53–61).

The Court observes that the Government relied on its judgment in the case of Jahn and Others (cited above), but would point out that the latter concerned the rectification ex post facto, by legislation, of manifestly unfair situations that had been created by the property restitution process. The Court recognises that in that case it found, in view of the convincing social- justice reasons put forward by the national authorities in the exceptional context of German reunification, that the absence of compensation did not upset the ‘fair balance’ to be struck between the protection of property and the requirements of the general interest (ibid., § 117), but it would emphasise that it was the unique nature of the general political and legal context — and not simply the exceptional nature of the circumstances — that secured its acceptance of expropriation without compensation. In the Court's view the background to the two cases is fundamentally different, in particular as regards the three points that led it to find that the Jahn and Others case was exceptional in nature (ibid., § 116).

First, the circumstances of the enactment of the relevant legislation in the present case and in Jahn and Others are not really comparable. The Modrow Law at issue in Jahn and Others had been enacted by a parliament that had not been democratically elected, during a transitional period between two regimes that was inevitably marked by upheavals and uncertainties. In those circumstances, even if the applicants had acquired formal title, they could not be sure that their legal position would be maintained (ibid., § 116 (a)). However, in the present case the laws were enacted by a democratically elected parliament and there was no reason why the applicants could not maintain their rights, except in the event of fraudulent enrichment to the detriment of the former owners, but, as the Court has already noted, neither the validity of the contracts of donation nor the good faith of the applicants has been called into question by the Latvian authorities. In addition, unlike that of the applicants in the Jahn and Others case, the status of Mr Vistiņš and Mr Perepjolkins as property owners was unquestionably sound and the claims deriving from the enjoyment of their possessions had been further strengthened by the Free Commercial Port of Riga Act, which had subjected their land to profitable servitudes (see paragraph 56 above).

Secondly, the time taken by the legislature is a factor to be taken into consideration in assessing proportionality (see Althoff and Others v. Germany, no. 5631/05, § 71, 8 December 2011). In the case of Jahn and Others a fairly short period of time (two years) had elapsed between German reunification and the enactment of the second Property Rights Amendment Act. Having regard to the huge task facing the German legislature when dealing with, among other things, all the complex issues relating to property rights raised by the transition to a democratic, market-economy regime, the Court acknowledged that it had intervened within a reasonable time to correct the — in its view, unjust — effects of the Modrow Law and that it could not be criticised for failing to realise the full effect of that Law on the very day on which German reunification had taken effect (ibid., § 116 (b)). In the present case, however, all the events at issue took place more than three years after the final re-entry into force of the democratic Constitution of 1922 and more than five years after the restoration of independence of Latvia, that is to say, well after the end of the period of historic upheaval (see, in this respect, Ždanoka v. Latvia [GC], no. 58278/00, §§ 18–27, ECHR 2006-IV). It follows that, whilst it was still open to the Latvian legislature, in 1997, to correct any errors that may have been committed during the land reform, it could nevertheless be expected to uphold the principle of legal certainty and to refrain from imposing excessive burdens on individuals.

Thirdly and lastly, in the case of Jahn and Others the objectives of the second Property Rights Amendment Act were legitimate, and the Court therefore recognised that the Federal Republic of Germany's parliament could not be deemed to have been manifestly unreasonable in considering that it had a duty to correct the effects of the Modrow Law for reasons of social justice. Likewise, the balancing of the relevant interests carried out by the German Federal Constitutional Court, in examining the compatibility of that amending Law with the Basic Law, had not been arbitrary. Given the ‘windfall’ from which the applicants had benefited as a result of the Modrow Law, the fact that the relevant correction had been made without paying any compensation was not disproportionate. In particular, the second Property Rights Amendment Act did not benefit the State alone, but in some cases also provided for the redistribution of land to farmers (ibid., § 116 (c)). By contrast, the Court questions whether ‘social justice’ may be invoked in the present case, where the expropriation at issue was of benefit solely to the State, which did not redistribute any of the property to individuals.

In sum, unlike the case of Jahn and Others, the present case is not one where a manifestly unjust situation that emerged in the process of denationalisation had to be remedied by the legislature ex post facto within a relatively short time in order to restore social justice. As the general context and the specific circumstances of the two cases are fundamentally different, the Jahn and Others judgment cannot usefully be relied upon to justify the lack of sufficient compensation observed in the present case.

Moreover, the Court notes that shortly after being deprived of their property, the applicants received significant amounts from the Free Commercial Port of Riga for the rent arrears due to them and the servitudes to which their land was subjected. Those amounts — calculated this time on the basis of the current value, and not that of 1940 — were respectively 95 times higher than the compensation granted to the first applicant and 40 times higher than that granted to the second applicant. The Court, noting that the rent arrears due to the applicants derived from a separate legal basis from that of the compensation awarded to them, is unable to agree with the Government's argument that the former sufficed to make up for the insignificance of the latter. In any event, the disproportion between the rent arrears and the compensation awarded confirms that the compensation was unreasonably low.

Lastly, the Government failed to show that the legitimate aim relied on, namely that of optimising the management of the infrastructure of the Free Port of Riga in the general context of the State's economic policy, could not be fulfilled by less drastic measures than expropriation compensated for by purely symbolic sums. Whilst the Court recognises that the Government are entitled to invoke the State's budgetary difficulties, these do not, however, constitute an imperative capable of justifying the adoption of such exceptional measures. In principle, it is not for the Court to indicate to the Contracting Parties what concrete legislative or regulatory measures should be taken in order to comply with their obligations. That being said, an exchange of land or a reduction in the rent due to the applicants — for as long as the State did not have the requisite budgetary resources to expropriate their land in return for fair compensation — are readily conceivable examples of such measures. Furthermore, the authorities could have calculated the compensation on the basis of the cadastral value of the land at the date on which the applicants had actually lost their title instead of using the cadastral value from 1940 (see Guiso-Gallisay (just satisfaction) [GC], cited above, § 103). However, there is no evidence in the file that such measures were discussed or even envisaged at national level.

In those circumstances, even though Article 1 of Protocol No. 1 did not, in the present case, require the reimbursement of the full cadastral or market value of the expropriated properties, the Court finds that the disproportion between their current cadastral value and the compensation awarded — resulting, moreover, from a retrospective legislative amendment which created an inequality to the State's advantage and to the applicants' disadvantage — is too significant for it to find that a ‘fair balance’ was struck between the interests of the community and the applicants' fundamental rights (see, mutatis mutandis, Urbárska Obec Trenčianske Biskupice, cited above, § 126, and Althoff, cited above, § 73).

Having regard to all the relevant circumstances of the present case, the Court finds that the State overstepped the margin of appreciation afforded to it and that the expropriation complained of by the applicants imposed on them a disproportionate and excessive burden, upsetting the ‘fair balance’ to be struck between the protection of property and the requirements of the general interest.

Accordingly, there has been a violation of Article 1 of Protocol No. 1.