CASE OF KIRILOVA AND OTHERS v. BULGARIA
Violation of P1-1;Not necessary to examine Art. 13;Pecuniary damage - reserved;Non-pecuniary damage - reserved;Costs and expenses partial award - Convention proceedings
Christos Rozakis
13. All applicants – or their ancestors – owned real estate which was expropriated during the 1980s or the early 1990s. At the time of the expropriations they were awarded compensation in the form of flats which the authorities undertook to construct and deliver, but which have – with one exception (see paragraph 71 below) – remained unfinished and undelivered until present. The specific circumstances of each case are described below. 14. Mrs Kirilova and her husband owned jointly a house with a yard in the centre of Sofia. 15. By a mayor's order of 29 May 1985 their house was expropriated with a view to the construction of a school and a street. The order, based on section 98(1) of the Territorial and Urban Planning Act of 1973 („Закон за териториалното и селищно устройство“ – “TUPA”)(see paragraphs 73 and 74 below), provided that Mrs Kirilova and her husband were to be compensated with one flat and their son, Mr Kirilov, was to be compensated with another flat. Both flats were to be situated in a building which the municipality intended to construct. The expropriated house was valued at 29,311.59 old Bulgarian levs (BGL). 16. By a supplementary order of 28 July 1986, based on section 100 of TUPA (see paragraph 75 below), the mayor indicated the exact flats with which Mrs Kirilova, her husband, and Mr Kirilov were to be compensated, specifying the building in which they would be located and their precise surface. 17. The expropriated house was pulled down and the construction of the school started. Mrs Kirilova and her husband, and their two children, Mr Kirilov and Ms Schneider, were settled in a municipal flat in the outskirts of Sofia, pending the construction of the flat offered in compensation. In 1993 Mrs Kirilova's husband died. 18. The construction of the building in which the flats offered in compensation would be located did not start as planned, apparently because of financial difficulties experienced by the municipality. 19. On 22 July 1997 Mrs Kirilova, Mr Kirilov and Ms Schneider lodged complaints with the municipality, the regional governor, the Parliament, the Ministry of Finance and the Ministry of Construction and Urban Development, stating that the flats allocated to them as compensation had not been constructed, apparently due to lack of funds. They stated that they had been waiting in vain, despite their repeated complaints. They also alleged that since 1986 the municipality had built and sold flats to other persons, but had never found funds to discharge its obligation to them. They requested to be given other flats as compensation. Their request was placed on a waiting list. 20. By letters of 5 December 1997 and 14 April 1998 the municipality informed Mrs Kirilova, Mr Kirilov and Ms Schneider that the construction of the flats was expected to start in 1998 and that additional funds were needed. 21. On 2 January 2001 Mrs Kirilova died. Mr Kirilov and Ms Schneider are her only heirs. 22. In April 2004 the municipality served on Mr Kirilov and Ms Schneider updated orders under section 100 of TUPA, which had been made on 19 November 2003 and 12 February 2004 respectively. The orders provided that the two applicants were to be offered other flats, not the originally intended ones, due to a modification of the plan of the building under construction. 23. At the time of the latest information from the two applicants (19 April 2004), the construction of the building in which their flats were to be situated had advanced, but it was still unfinished. 24. Mr Ilchev owned part of a house with a yard in Sofia, where he lived. 25. By a mayor's order of 16 March 1988 the house was expropriated for the construction of a subway station. The order, based on section 98(1) of TUPA, provided that Mr Ilchev was to be compensated with a threeroom flat in a building which the municipality intended to construct. The house was valued at BGL 8,484.30. 26. Shortly thereafter the house was occupied and Mr Ilchev was settled in a small municipal flat in the outskirts of the city pending the construction of the flat offered in compensation. 27. In July 1989 the expropriated house was pulled down and a subway station was built on the site. 28. By a supplementary order of 8 September 1989, based on section 100 of TUPA, the mayor indicated the exact flat with which Mr Ilchev was to be compensated, specifying the exact building in which it would be located and its precise surface. 29. The construction of this building never started, apparently because of financial difficulties experienced by the municipality and also because its construction would interfere with the ongoing process of restitution of certain plots of land to their former owners. 30. Mr Ilchev made numerous complaints to the municipal authorities, to no avail. By a letter of 19 June 1998 the deputymayor advised him that the construction of the building in which the flat offered in compensation would be situated could not start because of changes in the zoning plan. After a new plan was drawn up, a new building designed, and financing secured for its construction, Mr Ilchev would be invited to choose another flat. 31. On 21 December 2000 Mr Ilchev requested from the municipality to be allotted another flat, to no avail. 32. Meanwhile, on 9 February 1996, Mr Ilchev commenced proceedings against the municipality under the State Responsibility for Damage Act (see paragraph 80 below). He complained that the municipality had failed to deliver the flat offered in compensation and sought BGL 3,000,000 as compensation for the pecuniary and nonpecuniary damage he had suffered. After being invited by the court to specify and itemise his claims, on 11 March 1996 Mr Ilchev stated that he sought BGL 1,000,000 as compensation for the pecuniary damage he had sustained on account of the delay in the delivery of the flat, and BGL 2,000,000 as compensation for the non-pecuniary damage, which consisted in insecurity and the impossibility to use and dispose of his property. 33. In a judgment of 23 July 1999 the Sofia City Court partially allowed Mr Ilchev's action, awarding him 500 new Bulgarian levs (BGN) in compensation for nonpecuniary damage and BGN 536.45 in compensation for pecuniary damage. It held that the municipality's failure to provide Mr Ilchev with a flat was an omission contrary to section 1 of the State Responsibility for Damage Act. 34. Mr Ilchev appealed, claiming that the amount of compensation was too low. The municipality of Sofia also appealed. The Sofia Court of Appeals reversed the Sofia City Court's judgment, holding that the applicant had failed to request the cancelling of the expropriation and had thus been the one at fault for the obtaining situation. 35. Mr Ilchev appealed on points of law to the Supreme Court of Cassation. In a judgment of 16 October 2001 that court quashed the Sofia Court of Appeals' judgment and remitted the case. It held, inter alia, that Mr Ilchev had suffered damages because of the municipality's failure to build and deliver him a flat. The restitution of the expropriated property was impossible because the house had been pulled down for the construction of a subway station. Since the omission of the municipality had been unlawful, Mr Ilchev was entitled to claim compensation for the delay. The court further held that the authorities' obligation to compensate the damage suffered by Mr Ilchev on account of the delay, although stemming from their failure to provide him with a flat, was different from that underlying obligation. 36. On remittal, the Sofia Court of Appeals, in a judgment of 2 October 2002, upheld the Sofia City Court's judgment, but awarded to Mr Ilchev an additional BGN 280.27 in compensation for pecuniary damage, together with interest as from 9 February 1996, when the action had been commenced (see paragraph 32 above), until settlement. It held, inter alia, that the municipality's failure to build and deliver the flat allotted to Mr Ilchev in compensation for his house had been an illegal omission within the meaning of section 1 of the State Responsibility for Damage Act and that the damage suffered by the applicant was a direct and proximate result of this omission. The court also held that the applicant's allegation that the amount of the compensation was too low was partially wellfounded. The applicant, who was an acting officer in the army, had been living on army premises during the weekdays and could have rented the prospective flat out. The amount which he would have received in rent between 1988, when the flat had been due, and 1996, when the action had been commenced, was BGN 280.27. 37. The municipality appealed to the Supreme Court of Cassation, arguing that the action was inadmissible and unfounded. The Supreme Court of Cassation declared the appeal inadmissible by a decision of 13 April 2004. It held that the amount in controversy was below BGN 5,000 and that the Sofia Court of Appeals' judgment was therefore not subject to appeal on points of law. The municipality did not appeal against this decision and the Sofia Court of Appeals' judgment of 2 October 2002 entered into force. 38. Following the entry into force of the Sofia Court of Appeals' judgment, on 26 October 2004 Mr Ilchev was issued a writ of execution against the municipality of Sofia for the amount of BGN 1,315.72 in respect of pecuniary and nonpecuniary damage and BGN 0.70 in respect of costs and expenses for the proceedings, plus interest at the statutory rate as from 9 February 1996, when the action had been commenced (see paragraph 32 above), until settlement. 39. On 29 November 2004 Mr Ilchev presented the writ to the financial department of the municipality and requested to be paid the awarded amount. On 9 January 2005, in response to an inquiry by Mr Ilchev, the municipality informed him that no amounts had been earmarked in its budget for the payment of the amount due to him. On the date of the latest information from the parties (19 January 2005), the amount was still unpaid. 40. Ms Metodieva owned, together with her sister, one half of a house with a yard in the town of Nikopol, which she rented out. 41. By a mayor's order of 16 May 1990 the house was expropriated for the creation of a municipal green space. The order, based on section 98(1) of TUPA, provided that Ms Metodieva was to be compensated with a oneroom flat in a building which the municipality intended to construct. Ms Metodieva's sister was compensated in cash. The applicant's share of the house was valued at BGL 567 (that amount represented ½ of the value of Ms Metodieva's and her sister's share of the house, which amounted to BGL 1,133.65). 42. The construction of the building never started because of financial difficulties experienced by the municipality, and it was eventually altogether left out of the municipal construction program. 43. Meanwhile Ms Metodieva's house was pulled down. Instead of a green space, in 1993 an office building for the State Savings Bank was constructed on the plot. 44. Ms Metodieva made an attempt to obtain the cancelling of the expropriation, relying on a 1992 restitution law, but her attempt failed as that law only concerned expropriations carried out before 21 April 1990. 45. In December 1997 Ms Metodieva asked the mayor to issue a supplementary order under section 100 of TUPA and indicate the exact flat with which she was to be compensated. In January 1998 the mayor replied that such an order could not be issued as the construction of the building in which the flat was to be located had not started. 46. In May 1998 Ms Metodieva requested the mayor to set a date when she could select another flat. As the mayor did not reply, she filed an appeal against his implied refusal with the Pleven Regional Court. In a judgment of 16 October 1998 the Pleven Regional Court quashed the refusal and referred the matter back to the mayor with instructions to issue an order under section 100 of TUPA, in which to specify the exact flat with which the applicant was to be compensated. Apparently the mayor did not issue such an order because there were no flats available. 47. In the meantime, on 4 August 1997, the mayor explained that he could not offer Ms Metodieva a flat as there were no vacant ones with parameters equivalent to those set forth in the expropriation order. 48. Ms Metodieva also filed complaints with the regional governor and the Ministry of Finance, to no avail. 49. On 6 July 1998, pursuant to a request by Ms Metodieva, a municipal commission carried out a new valuation of the expropriated house, setting Ms Metodieva's share at BGL 792,000. 50. Ms Metodieva appealed against this valuation and on 13 January 1999 it was quashed by the Nikopol District Court on the ground, inter alia, that Ms Metodieva had not been notified of the procedure. The matter was referred back to the municipality. 51. On the request of Ms Metodieva on 29 March 2000 the Nikopol District Court interpreted its judgment, specifying, inter alia, that the valuation of the property should be made in accordance with section 102 of the Property Act. 52. On 22 June 2000 a municipal commission reassessed the value of the expropriated house, basing its assessment on its market price at the time of the expropriation. The value thus obtained was BGL 1,133.65 for Ms Metodieva's and her sister's half of the house. 53. On appeal by Ms Metodieva the Nikopol District Court, in a judgment of 1 March 2001, quashed the valuation, holding, inter alia, that the new valuation should be based on the market prices at the time it is being carried out. 54. Both the municipality and Ms Metodieva appealed, and in a judgment of 3 June 2002 the Supreme Administrative Court quashed the lower court's judgment, expressly holding, inter alia, that the new valuation should be made on the basis of the market price at the time of the expropriation, in accordance with section 102 of the Property Act. The court remitted the case to the mayor. 55. By an order of 23 August 2002 the mayor valued Ms Metodieva's and her sister's half of the house at BGN 1.13, expressly specifying that the valuation had been made on the basis of the market prices at the time of the expropriation. 56. On appeal by Ms Metodieva, the Pleven Regional Court, in a judgment of 13 December 2002, declared the order void and referred the case back to the mayor. It held, inter alia, that both the house and the flat offered in compensation should be valued on the basis of the market prices at the time of the expropriation. 57. On appeal of the mayor, the Supreme Administrative Court, in a judgment of 21 May 2003, quashed the lower court's judgment, holding that the mayor's order had not been void. If there had been irregularities with the valuation, the lower court should have revalued the house instead of referring the matter back to the mayor. The court remitted the case to the Pleven Regional Court with instructions that a new valuation of the house be carried out. 58. In a judgment of 19 April 2004 the Pleven Regional Court valued Ms Metodieva's and her sister's share of the expropriated house at BGN 3,225.29. It held, inter alia, that a valuation based on the market prices at the time of the expropriation, which had taken place a long time before, would impinge on the adequacy of the compensation. In the court's view, the valuation had to be based on the market prices at the time of the delivery of its judgment. According to the expert's report drawn up during the proceedings, the value thus obtained was BGN 3,225.29. 59. The mayor appealed, arguing, inter alia, that the valuation of the expropriated house and, respectively, of the flat offered in compensation, should be done on the basis of the market prices at the time of the expropriation. 60. In a final judgment of 27 October 2004 the Supreme Administrative Court quashed the Pleven Regional Court's judgment and held that the value of Ms Metodieva's and her sister's half of the house was BGN 2,524.50. The court reasoned, inter alia, that a valuation under section 102 of the Property Act had to be based, as a rule, on the market prices at the time of the expropriation. However, no evidence about these prices had been adduced by the municipality. The only data available was that in the expert's report drawn up during the proceedings before the Pleven Regional Court (see paragraph 58 above), which indicated that the value of the property at the time of the mayor's order – 23 August 2002 (see paragraph 55 above) – was BGN 2,524.50. The court instructed the mayor that this new valuation only replaced the original valuation made at the time of the expropriation, but did not change the manner of compensation. Therefore, the mayor had to issue an order under section 100 of TUPA and specify the exact flat with which Ms Metodieva was to be compensated, thus completing the expropriation procedure. However, it was open to Ms Metodieva to request to be compensated in cash instead. 61. It does not seem that Ms Metodieva has since requested that the manner of compensation be changed to cash. 62. Ms ShoilevaStambolova's and Mr Shoilev's father owned half of a house with a yard in Sofia, where he and the two of them lived. 63. By a mayor's order of 8 February 1983 the house was expropriated for the construction of a subway station. The order, based on section 98(1) of TUPA, provided that Ms ShoilevaStambolova's and Mr Shoilev's father was to be compensated with a flat and that Ms ShoilevaStambolova was to be compensated with another flat. Both flats were to be situated in a building which the municipality intended to construct. The house was valued at BGL 39,451. The applicants' father appealed and the Sofia City Court increased the valuation with BGL 947, thus making it BGL 40,398. Thus, the applicants' father's share of the house was valued at BGL 20,199. 64. In 1984 the house was occupied and pulled down. Ms ShoilevaStambolova's and Mr Shoilev's father was offered to be settled in a municipal flat in the outskirts of the city, pending the construction of the flat offered in compensation. Considering, however, that the flat was not suitable for his needs, he chose to rent another flat and left the municipal one uninhabited. 65. By a supplementary order of 7 March 1984, based on section 100 of TUPA, the mayor indicated the exact flats with which the two applicants' father and Ms ShoilevaStambolova were to be compensated, specifying the buildings in which they would be located and their precise surface. 66. In 1985 Ms ShoilevaStambolova's flat was finished. BGL 100 of the valuation of the her father's house was applied towards the value of that flat. The remainder (BGL 19,223) was paid by Ms ShoilevaStambolova and she was allowed to take possession of it. However, the applicants' father's flat was not constructed, apparently because the design for the building in which it was to be located was changed. 67. In 1989 the applicants' father requested to be allotted another flat. By a mayor's order of 27 March 1989 he was allotted a new flat in lieu of the one originally intended as compensation. This order, like the original one, specified the exact location and surface of the new flat. The construction of the building in which the flat thus allotted was to be located started in 1989, but was halted soon after, because of lack of funds. 68. On 25 February 1998 Ms ShoilevaStambolova's and Mr Shoilev's father died. The two are his only heirs. 69. In 2001 Ms ShoilevaStambolova and Mr Shoilev wrote to the mayor. They asked whether there were any plans for the completion of the building in which the flat allotted in compensation would be located. In the alternative, they asked whether they could receive another equivalent flat or cash and, if so, what would be the amount of such monetary compensation. By a letter of 9 May 2001 the mayor informed them that there were no plans to finish the building. Their application for recompensation was sixth on the waiting list but at the time there were no flats available. If they opted for cash compensation, the amount which they would be entitled to would be BGN 20.20. 70. On 11 July 2003 Ms ShoilevaStambolova and Mr Shoilev were informed that the plan of the building in which their future flat would be situated had been changed and were invited to choose a new flat. They did so on 6 August 2003, which was confirmed by a revised order under section 100 of TUPA of 9 September 2003. The new flat was almost similar in size and position as the previous one. 71. In early 2004 the construction of the building in which the flat was to be situated was finalised and on 26 May 2004 the municipality delivered the flat to Ms ShoilevaStambolova and Mr Shoilev. 72. At the relevant time expropriations of residential units for public use were regulated by TUPA. 73. Expropriations were effected by order of the mayor, which had to designate the property to be expropriated and its valuation, and specify the manner (property or cash) and amount of compensation due to the dispossessed owner (sections 95(1), 98(1)(1) and 98(1)(2) of TUPA). 74. If the owner was to be compensated with a flat which had not yet been constructed, the order had to specify the type and the general features of such a flat (section 98(1)(4) of TUPA). 75. A supplementary order had to indicate the exact premises offered in compensation and their valuation (section 100 of TUPA). By section 103(1) of TUPA, that supplementary order had the effect of vesting title in the flat offered in compensation, even though it was still nonexistent. 76. The Supreme Court has held that both the initial order providing for compensation and the supplementary order create vested rights for the expropriated owners and may be modified only in limited circumstances (решение № 301 от 29 април 1980 г. по гр.д. № 62/1980 г. на ВС, III г.о.; решение № 713 от 7 септември 1982 г. по гр.д. № 627/1982 г. на ВС, III г.о.). One such case would be if the expropriated owner submitted, prior to receiving the flat, a notarised request for a modification of the order to provide for compensation in cash, for compensation with a smaller flat, or compensation with a flat situated elsewhere (section 103(5) of TUPA). 77. Owners who had not received the flats due within a certain period of time (initially three years and later one year) – either because of changes in the municipal construction program (the respective building being left out of it) or because the building was earmarked for other purposes – could request cancelling of the expropriation or a fresh valuation of the expropriated property (section 109(1) and (2) of TUPA, superseded in 1990 by section 102(7) and (8) of the Property Act). This could be done either before or after the supplementary order. However, once the supplementary order was issued, cancelling of the expropriation was only possible if the land had not been cleared for groundwork or the expropriated building had not yet been demolished. In the latter case the only remaining option would be a fresh valuation (section 109(4) of TUPA, superseded in 1990 by section 102(9) of the Property Act). 78. The valuation of the expropriated property had to be based on the market price of the property at the time of the expropriation (section 102(1) of the Property Act). The fresh valuation is subject to judicial review (section 138(2)(2) of TUPA and решение № 2181 от 3 май 1999 г. по адм. д. № 4433/1998 г. на ВАС, ІІ о.). 79. In 1996 and 1998 all these provisions were superseded by rules giving enhanced protection to expropriated owners. However, the new legislation provides that the above provisions, although repealed, continue to govern pending expropriation proceedings which were commenced under TUPA or section 102 of the Property Act and in which the State has taken possession of the expropriated property before 30 October 1998 (paragraph 3(1) of the Act for Amending TUPA of February 2000 and paragraph 9(1) of the transitional and concluding provisions of the Territory Planning Act of 2001). 80. Section 1 of the State Responsibility for Damage Act of 1988 („Закон за отговорността на държавата за вреди, причинени на граждани“), which entered into force on 1 January 1989, provides that the State is liable for damage suffered by private persons as a result of unlawful acts or omissions by civil servants, committed in the course of or in connection with the performance of their duties. The State's liability is strict, i.e. no fault is required on the part of the civil servant in the commission of the unlawful acts or omissions (section 4 in fine). Section 7 of the Act provides that the action in responsibility must be brought against the authority employing the civil servant concerned. Section 4 of the Act provides that compensation is due for all damage which is the direct and proximate result of the unlawful act or omission of the civil servant. Section 8(2) of the Act provides that if another statute provides for a special manner of indemnification, the Act does not apply. 81. By paragraph 2 of Article 399 of the Code of Civil Procedure, a person who has an enforceable pecuniary claim (e.g. a judgment debt) against the State or a state body receives payment out of funds earmarked for that purpose under the institution's budget. 82. The writ of execution evidencing the claim must be submitted to the financial department of the institution. If there are no funds available under the budget of the state body concerned, the higher administrative body should undertake the necessary steps to ensure that funds become available under the budget for the following year. 83. Enforcement proceedings and judicial review of the execution of a judgment are not possible where the debtor is a state institution. Until December 1997 paragraph 1 of Article 399 of the Code expressly prohibited enforcement proceedings against state institutions. Although that provision was repealed in December 1997, the legal regime remained unchanged, as paragraph 2 of Article 399 was not amended. 84. According to data published by the Bulgarian National Bank, the average exchange rate of the United States dollar in February 1991 (the first month for which such data is available), was BGL 24.32. In July 1998, when the municipality carried out a fresh valuation of Ms Metodieva's house (see paragraph 49 above), the average rate was BGL 1,799.15. In June 2000, when the municipality again reassessed the value of the house (see paragraph 52 above), the rate was BGN 2.06. In August 2002, when the third valuation was carried out (see paragraph 55 above), the average rate was BGN 2.00. In February 2005 (the latest month for which such data is available), the average rate was BGN 1.50.