5.  The first applicant, Mr Shakhruddi Sharaniyevich Miltayev, was born in 1958 and lives in Grozny, Chechnya. The second applicant, Mrs Zarema Vakhayevna Meltayeva, is his niece. She was born in 1976 and lives in Argun, Chechnya. 6.  The facts of the case are partly disputed by the parties. Their submissions and the relevant documents may be summarised as follows. 7.  The applicants ran a private photo laboratory in a rented room in the house at 63 Shosseynaya Street in the town of Argun in Chechnya. On 30 December 2000 the second applicant entered into a lease agreement with Mr U., the owner of the house at 63 Shosseynaya Street, for the renting of one room in the house for commercial purposes – to install a Kodak photo laboratory. 8.  On 27 July 2001, during the passage of a tank convoy through the town, it appears that a skirmish took place between the military and unidentified members of illegal armed groups. A shot from a tank set the house at 63 Shosseynaya Street on fire and the applicants’ photo laboratory, along with all their equipment and other belongings, was destroyed. 9.  On 28 July 2001 the local fire service drew up a report finding that the fire had damaged the house, that shelling had been its cause and that no fire crews had been involved. They made a preliminary estimation of the damage at 1,955,951 Russian roubles (RUB). 10.  On 28 July 2001 a commission set up by the Argun town administration recorded the destruction of the house at 63 Shosseynaya Street, which had “burned as a result of shelling”. 11.  On 28 and 29 July 2001 a commission consisting of the head of the council of elders and two employees of the local convenience store drew up a report listing the losses to the applicants’ possessions. The report stated that, as a result of shooting by the federal forces on 27 July 2001, the applicants’ property in the house at 63 Shosseynaya Street had been completely destroyed by fire. The list of possessions included a Gretag Kodak micro laboratory, a Honda electric motor; and various office equipment. 12.  On 30 July 2001 the second applicant and the owner of the house, Mr U., made written statements describing the events of 27 July. Both indicated that the fire had started after 10 p.m. and that firefighters could not be called in view of curfew. The second applicant attached, in addition, a list of the goods and equipment lost and their value. 13.  On unspecified dates three other local residents, eye-witnesses to the events, made written statements pointing to a shot from the tank as the cause of the fire which had destroyed the laboratory. 14.  On 28 July 2001 the second applicant lodged a complaint with the Argun Town Department of the Interior (“GOVD”). The document referred to a shot from a tank as the cause of the fire. 15.  On 3 August 2001 the local office of the Department of the Interior opened an investigation into the alleged offence of causing damage to the applicants’ property by negligent use of a “source of increased danger” (источник повышенной опасности). The decision reads as follows:
“At or around 10 p.m. on 27 July 2001 a federal military convoy was passing through the town of Argun when it fired a shot at a photo laboratory at 63 Shosseynaya Street. Its actions set the building on fire and caused substantial pecuniary loss, estimated at RUB 1,955,351.” 16.  On 17 August 2001 the second applicant was questioned by the police as a witness. She explained that the photo laboratory had been owned by her uncle, the first applicant. At about 10 p.m. on 27 July 2001 a convoy of tanks had passed along the street; there had been an exchange of fire between the soldiers and unidentified armed persons. As a result of the shelling, the laboratory had been set on fire. When questioned on 22 December 2003, the second applicant confirmed her previous statements. 17.  On 3 September 2001 the investigation was suspended owing to the absence of identified culprits. 18.  On 4 September 2003 the head of the Argun GOVD issued a note to the second applicant confirming that her property, a Gretag photo laboratory valued at 1,955,351 Russian roubles (RUB) had been destroyed on 27 July 2001 as a result of shelling. 19.  The proceedings were resumed on 21 November 2003. In December 2003 the Argun military commander replied to the GOVD that “on 27 June 2001” no tank columns had passed through Argun. The applicants drew the attention of the investigators to the fact that the wrong date had been referred to in that reply. However it does not appear that any further steps have been taken to discover which military units were involved in the incident. 20.  On 25 December 2003 the first applicant was granted the status of victim in the criminal proceedings. The decision referred to a shot from a tank as the cause of the damage to the applicant’s property. 21.  On the same day the first applicant was questioned as a victim. He stated that he had owned the laboratory situated in the rented room at 63 Shosseynaya Street since 1999. On 27 July 2001, at about 10 p.m., he had been at the laboratory together with four other persons. At that time a tank column had been passing through the street. Unidentified persons had fired shots with automatic guns and the applicant and the others had taken cover in the cellar of a nearby house. About one hour later, when the shooting subsided, they had come out and found the house and the laboratory on fire. 22.  Two other persons who had been at the laboratory at the time were questioned in December 2003 and gave similar statements. 23.  On 27 December 2003 the prosecutor again stayed the investigation because the offenders had not been identified. The proceedings were resumed on 11 March 2005 and terminated on the same date with reference to the expiry of the statutory time-limit for prosecution. The first applicant was informed accordingly. 24.  On 7 November 2008 the Chechnya Department of the Investigative Committee quashed the decision of 11 March 2005. The investigator pointed to the incomplete nature of the investigation and ordered, in particular, that the owner of the house, the neighbours and other witnesses, as well as the members of the commissions which had inspected the house immediately after the events and drawn up the relevant reports, be questioned. 25.  The applicants sued the Russian Ministry of Defence, claiming compensation for their destroyed property and for non-pecuniary damage. 26.  On 25 March 2005 the Presnenskiy District Court of Moscow issued its judgment. It held that under Article 1069 of the Civil Code the State was only liable in respect of damage caused by its agents if they had acted unlawfully. The District Court noted that the military operation in Chechnya had been authorised by Presidential Decree no. 2166 of 30 November 1994, and Government Decree no. 1360 of 9 December 1994. Both decrees had been found to be compatible with the Constitution by the Constitutional Court on 31 July 1995. The District Court concluded that the Ministry had not acted unlawfully in respect of the applicants. 27.  The court further held that under Article 1079 of the Civil Code, damage caused by a “source of increased danger” had to be compensated by the person or entity using it. However, in the court’s view, the applicants had not adduced any evidence confirming that their property had been destroyed by such source of danger owned by State agents. Accordingly, it dismissed the applicants’ claims. 28.  On 19 August 2005 the Moscow City Court upheld the first-instance judgment. 29.  The Government submitted a copy of a purchase contract of 22 April 1997 according to which the equipment for the photo laboratory had been bought by “the charity foundation Asir” and its president Mr A. The value of the goods was given as 51,556 US dollars (USD). On 3 June 1997 the foundation had transferred the amount of RUR 118,240,277 to the vendor. On 10 June 1997 the president of Asir, Mr A., had issued a power of attorney authorising a Mr G. to collect the equipment. 30.  In November 2008 the State Tax Inspectorate Office for Chechnya informed the police investigator in Argun that the “Gretok-260” photo laboratory was not listed as a legal entity and that neither applicant had been registered as a private entrepreneur. 31.  The applicants, in reply, submitted a notice issued by the local village administration of Tevzan in the Vedeno District confirming that the applicants had run a private photo business since 1994. They also submitted an undated statement co-signed by Mr G. and another individual stating that the first applicant had been the legal owner of the photo laboratory.