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FOURTH
SECTION
CASE OF ROCK RUBY HOTELS LTD v. TURKEY
(Application
no. 46159/99)
JUDGMENT
(Just
satisfaction)
STRASBOURG
26 October 2010
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 Rock Ruby Hotels Ltd v. Turkey,
The
European Court of Human Rights (Fourth Section), sitting as a Chamber
composed of:
Nicolas
Bratza,
President,
Lech
Garlicki,
Ljiljana
Mijović,
David
Thór Björgvinsson,
Ján
Šikuta,
Päivi
Hirvelä,
Işıl
Karakaş,
judges,
and
Fatoş Aracı, Deputy
Section Registrar,
Having
deliberated in private on 5 October 2010,
Delivers
the following judgment, which was adopted on that date:
PROCEDURE
- The
case originated in an application (no. 46159/99) against the Republic
of Turkey lodged with the Court under Article 34 of the Convention
for the Protection of Human Rights and Fundamental Freedoms (“the
Convention”) by a company incorporated under Cypriot law,
Rock Ruby Hotels Ltd (“the applicant”), on 25
January 1999.
- In
a judgment delivered on 22 September 2009 (“the principal
judgment”), the Court dismissed various preliminary objections
raised by the Turkish Government and found a continuing violation of
Article 1 of Protocol No. 1 to the Convention by virtue of the fact
that the applicant company was denied access to and control, use and
enjoyment of its property as well as any compensation for the
interference with its property rights. Furthermore, it found that it
was not necessary to examine the applicant's complaint under Article
14 of the Convention (Rock Ruby Hotels Ltd v. Turkey,
no. 46159/99, §§ 11, 20 and 22 and points 1-3 of
the operative provisions, 22 September 2009).
- Under
Article 41 of the Convention the applicant company sought just
satisfaction of 3,571,287 Cypriot pounds (CYP –
approximately 6,101,900 euros (EUR)) for the deprivation of its
properties concerning the period between January 1987, when the
respondent Government accepted the right of individual petition, and
31 December 2007. Two valuation reports, setting out the basis of the
applicant's loss, were appended to its observations. Furthermore, the
applicant claimed approximately EUR 1,541,607 in respect of
non-pecuniary damage and EUR 10,240.32 for the costs and
expenses incurred before the Court.
- Since
the question of the application of Article 41 of the Convention was
not ready for decision, the Court reserved it in whole and invited
the Government and the applicant to submit, within three months,
their written observations on that issue and, in particular, to
notify the Court of any agreement they might reach (ibid., §§
38 and 41, and point 4 of the operative provisions).
- On
4 March 2010 the Court invited the applicant and the Government to
submit any materials which they considered relevant to assessing the
1974 market value of the property concerned by the principal
judgment. The applicant was moreover invited to submit written
evidence that the property at stake was still registered in its name
or to indicate and substantiate any transfer of ownership which might
have taken place.
- The
applicant and the Government each filed observations on these
matters. On 26 May 2010 the applicant produced a certificate of
ownership of Turkish-occupied immovable property issued by the
Department of Lands and Surveys of the Republic of Cyprus. It
transpires from this document that on 11 March 2010 the property
described in paragraph 13 below was registered in the name of “Rock
Ruby Hotels Limited”.
THE LAW
I. PRELIMINARY ISSUE
- In
a letter of 22 April 2010 the Government requested the Court to
decide that it was not necessary to continue the examination of the
applicant's just satisfaction claims. They invoked the principles
affirmed by the Grand Chamber in Demopoulos and Others v. Turkey
([GC] (Dec.), nos. 46113/99, 3843/02, 13751/02, 13466/03,
10200/04, 14163/04, 19993/04, 21819/04, 1 March 2010) and argued
that the applicant should address its claims to the Immovable
Property Commission (the “IPC”) instituted by the “TRNC”
Law 67/2005. They reiterated their position on the issue of
exhaustion of domestic remedies in the present case and in other
similar cases on 8 and 22 June 2010.
- The
Court first observes that the Government's submissions were
unsolicited; they were received by the Registry long after the
expiration of the time-limit for filing comments on just satisfaction
and almost two months after the delivery of the Grand Chamber's
decision in Demopoulos. It could therefore be held that the
Government are estopped from raising the matter at this stage of the
proceedings.
- In
any event, the Court cannot but reiterate its case-law according to
which objections based on non-exhaustion of domestic remedies raised
after an application has been declared admissible cannot be taken
into account at the merits stage (see Demades v. Turkey (merits),
no. 16219/90, § 20, 31 July 2003, and Alexandrou
v. Turkey (merits), no. 16162/90, § 21, 20 January
2009) or at a later stage. This approach has not been modified by the
Grand Chamber, as the cases of Demopoulos and Others had not
been declared admissible when Law 67/2005 entered into force and when
Turkey objected that domestic remedies had not been exhausted.
- Furthermore,
the Court considers that its previous finding in the present case
that the applicant was not required to exhaust the remedy introduced
by Law 67/2005 constitutes res judicata. It recalls that after
the compensation mechanism before the IPC was introduced, the
Government raised an objection based on non-exhaustion of domestic
remedies. This objection was rejected in the principal judgment (see
paragraph 11 of the principal judgment and point 1 of its operative
provisions). The Government also unsuccessfully requested the
referral of the case to the Grand Chamber.
- It
follows that the Government's request to stay the examination of the
applicant's claims for just satisfaction should be rejected. The
Court will therefore continue to examine the case under Article 41 of
the Convention.
II. APPLICATION OF ARTICLE 41 OF THE CONVENTION
- 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. Pecuniary and non-pecuniary damage
1. The parties' submissions
(a) The applicant
- In
its just satisfaction claims of 31 July 2002, the applicant requested
CYP 1,686,014 (approximately EUR 2,880,723) for pecuniary damage. It
relied on an expert's report assessing the value of its losses which
included the loss of annual rent collected or expected to be
collected from renting out its property, plus interest from the date
on which such rents were due until the day of payment. The rent
claimed was for the period dating back to January 1990 until
1 January 2003. The applicant did not claim compensation for any
purported expropriation since it was still the legal owner of the
property. The valuation report contained a description of the Rock
Ruby hotel (see paragraph 8 of the principal judgment), located in
Conon street in Kyrenia, and of the plot of land on which the hotel
was built. The latter consisted of 56 rooms (each one with a private
bath or shower and veranda) and 116 beds. Twenty of these rooms had
been created following an expansion programme completed by late
1973. The hotel was situated on a seaside plot (plot no. 192,
sheet/plan 12/12, block D, land area 1,989 m²) at a short
distance west of Kyrenia harbour. The plot had a rectangular shape,
flat surface at sea level, with a frontage of 60 metres on Conon
street and 30 metres on the sea. The hotel was fully air conditioned
and centrally heated and had a number of facilities (reception area,
cafeteria, open-air restaurant, outdoor swimming pool, garden). The
applicant company alleged that the hotel was operating at an annual
profit of about CYP 66,400 (approximately EUR 113,451). The applicant
company also underlined that in 1974 the town of Kyrenia was one of
the most popular tourist resorts of Cyprus. The demand for hotel
accommodation in Kyrenia was high and good hotels were achieving high
occupancy rates.
- The
starting point of the valuation report was the income receivable in
July 1974. Having regard to the attractiveness of the hotel and to
the profits made by other similar hotels in Cyprus, the Rock Ruby
could have obtained CYP 35 (approximately EUR 59) per room per month.
Taking into account that the hotel had 56 rooms and after the
deduction of a percentage of 10 % for possible outgoings, the
1974 annual rental value was estimated at CYP 21,168
(approximately EUR 36,167). This sum was subsequently adjusted to
1990 values by taking into account:
(a) the nature of the area were the property was situated;
(b) the trends of rents for the period 1970 – 1974 in
similar areas;
(c) the trends of rents for the period after 1974 in the unoccupied
areas of Cyprus (based on the Consumer Price Index 1960 – 2002
for Rents and Housing issued by the Department of Statistics and
Research of the Government of Cyprus, increased by a percentage of
25 %).
- Finally,
compound interest for delayed payment was applied at a rate of 8 %
per annum up to the end of 2000 and of 6% per annum for the years
2001 – 2002 (the total interest claimed amounted to
CYP 643,567 – approximately EUR 1,099,598).
- On
23 January 2008, following a request from the Court for an update on
the developments of the case, the applicant submitted updated claims
for just satisfaction, which were meant to cover the loss of the use
of the property from 1 January 1987 to 31 December 2007. It produced
a revised valuation report, which, on the basis of the criteria
adopted in the previous report, concluded that the whole sum due for
the loss of use was CYP 1,775,803,
plus CYP 1,795,483 for interest. The total sum claimed under this
head was thus CYP 3,571,287 (approximately EUR 6,101,900). The
applicant also requested the additional amount of EUR 17,000 per
month, to be adjusted in accordance with inflation for a period of 18
years or until the date on which the Turkish army will leave its
possession vacant.
- On
26 May 2010 the applicant produced another revised valuation report,
which was meant to cover the loss of use for the period between
1 January 1987 and 30 June 2010. The expert appointed by the
applicant considered that the whole sum due to his client for
pecuniary damage was EUR 6,575,029.
- The
expert produced a synoptic table of “comparable sales within
the area of Kato Kyrenia”, showing that in 1972-1973 four
building sites had been sold at CYP 23.92, CYP 25.46, CYP 45.30 and
CYP 70 per square metre. Only the most expensive building site had a
location comparable to the applicant's property. The expert therefore
assumed that the land on which the Rock Ruby Hotel was constructed
had a 1974 market value of CYP 55 (approximately EUR 94) per square
metre. As the plot had an extent of 1,989 square metres, its 1974
price was CYP 109,395 (approximately EUR 186,912). On the basis of a
table of “average cost per square metre of dwellings in the
private sector 1984-2008”, the expert considered that the cost
of construction could be fixed at CYP 4,000 (approximately EUR 6,834)
per room, inclusive of the common areas and furniture. As the hotel
had 56 room, the overall cost of its construction was CYP 224,000
(approximately EUR 382,726). Applying a “development factor”
of 1.25, he concluded that the overall 1974 market value of the
property described in paragraph 13 above was CYP 417,000
(approximately EUR 712,486).
- In
its just satisfaction claims of 31 July 2002, the applicant claimed
CYP 873,000 (approximately EUR 1,491,607) in respect of
non-pecuniary damage. In particular, it claimed CYP 30,000
(approximately EUR 51,258) for the anguish and frustration
suffered on account of the continuing violation of its property
rights. It stated that this sum had been calculated on the basis of
the sum awarded by the Court in the Loizidou v. Turkey
case ((just satisfaction), 28 July 1998, Reports of
Judgments and Decisions 1998-IV), taking into account,
however, that the period of time for which the damage was claimed in
the instant case was longer. The applicant also claimed CYP 843,000
(approximately EUR 1,440,349) for the violation of its rights
under Article 14 of the Convention, which was aggravated by the
fact that the Turkish army was using the hotel for its own purposes.
- Finally,
in its updated claims for just satisfaction of 23 January 2008, the
applicant requested the additional sum of EUR 50,000 for
non-pecuniary damage.
(b) The Government
21. The
Government filed comments on the applicant's updated claims for just
satisfaction on 30 June 2008, 15 October 2008 and 22 June 2010. They
pointed out that the present application was part of a cluster of
similar cases raising a number of problematic issues and submitted
that as an annual increase of the value of the property had been
applied, it would be unfair to add compound interest for delayed
payment. Moreover, Turkey had recognised the jurisdiction of the
Court on 21 January 1990, and not in January 1987. In any event, the
alleged 1974 market value of the property was exorbitant, highly
excessive and speculative; it was not based on any real data with
which to make a comparison and made insufficient allowance for the
volatility of the property market and its susceptibility to
influences both domestic and international. The report submitted by
the applicant had instead proceeded on the assumption that the
property market would have continued to flourish with sustained
growth during the whole period under consideration.
- The
Government produced a valuation report prepared by the
Turkish-Cypriot authorities, which they considered to be based on a
“realistic assessment of the 1974 market values, having regard
to the relevant land records and comparative sales in the areas where
the properties [were] situated”. This report contained two
proposals, assessing, respectively, the sum due for the loss of use
of the property and its present value. The second proposal was made
in order to give the applicant the option to sell the property to the
State, thereby relinquishing title to and claims in respect of it.
- The
report prepared by the Turkish-Cypriot authorities specified that it
would be possible to envisage, either immediately or after the
resolution of the Cyprus problem, restitution of the property
described in paragraph 13 above. In case the conditions for
restitution were not fulfilled, the applicant could claim financial
compensation, to be calculated on the basis of the loss of income (by
applying a 5 % rent on the 1974 market value) and increase in
value of the property between 1974 and the date of payment. Had the
applicant applied to the IPC, the latter would have offered CYP
292,145.54 (approximately EUR 499,159) to compensate the loss of use
and CYP 311,174.61 (approximately EUR 531,672) for the value of
the property. According to an expert appointed by the “TRNC”
authorities, the 1974 open-market value of the applicant's hotel was
CYP 50,847 (approximately EUR 86,877). Upon fulfilment of certain
conditions, the IPC could also have offered the applicant exchange of
its property with Turkish-Cypriot properties located in the south of
the island.
- In
their comments of 22 June 2010, the Government recalled that in the
case of Demopoulos and Others (cited above) the Grand Chamber
had found that the IPC was an adequate domestic remedy for those
claiming a violation of Article 1 of Protocol No. 1. Notwithstanding
the adoption of a judgment on the merits, it would still be open to
the applicant to apply to the IPC, which would calculate the current
value and the 1974 value of the property “in a credential way
based on actual data”. On 27 May 2010 the IPC had sent a letter
to the applicant's representative, inviting his client to introduce
an application before it.
- The
Government recalled that under Law No. 67/2005, the following means
of redress were available: a) restitution; b) compensation;
c) exchange. The relevant provisions of the law at issue are
described in Demopoulos and Others (cited above, §§
35-37).
- The
Government further noted that in making its assessment as regarded
compensation for the loss of use, the IPC had collected data from the
Department of Lands and Surveys on the 1973-1974 purchase prices for
comparable properties. It had also examined the development of
interest rates of the Cyprus Central Bank. The loss of income was
then calculated by assuming that the obtainable rent would have been
5 % of the value of the properties; this last value had been
modified every year on the basis of the land market value index.
Cyprus Central Bank interest rates had been applied on the sums due
since 1974.
- Being
in possession of the land registers, the
Turkish-Cypriot authorities
were in a better position than the applicants and the Greek-Cypriot
authorities to assess the market values of the properties in a
realistic and reliable manner. The applicants had put forward
exaggerated claims and had tended to inflate the 1974 values of their
possessions. The Government therefore requested the Court to
rule on compensation on the basis of the calculations made by the
Turkish-Cypriot authorities, which were “credential and
objective in every aspect”.
- The
report prepared by the Turkish-Cypriot authorities confirmed that it
would be possible to envisage restitution of the property described
in paragraph 13 above. Had the applicant applied to the IPC, the
latter would have increased its offer up to CYP 334,137.41
(approximately EUR 570,907) to compensate the loss of use and up
to CYP 340,623.89 (approximately EUR 581,990) for the value of
the property. The expert appointed by the authorities of the
“TRNC” also confirmed the 1974 open-market value of the
applicant's property as indicated in paragraph 23 above.
- Finally,
the Government considered that the amount claimed in respect of
non-pecuniary damage was excessive and unrealistic; given the
existence of an effective domestic remedy, the Court should keep the
award for such damage to a minimum.
2. The Court's assessment
- The
Court recalls that it has concluded that there had been a continuing
violation of the applicant's rights guaranteed by Article 1 of
Protocol No. 1 by reason of the complete denial of the rights of the
applicant company with respect to its peaceful enjoyment of its hotel
in northern Cyprus (see paragraph 20 of the principal judgment).
Furthermore, its finding of a violation of Article 1 of Protocol No.
1 was based on the fact that, as a consequence of being continuously
denied access to its real estate since 1974, the applicant company
had effectively lost all access and control as well as all
possibilities to use and enjoy its property (see paragraph 18 of the
principal judgment). It is therefore entitled to a measure of
compensation in respect of losses directly related to this violation
of its rights as from the date of deposit of Turkey's declaration
recognising the right of individual petition under former Article 25
of the Convention, namely 22 January 1987, until the present time
(see Cankoçak v. Turkey, nos. 25182/94 and 26956/95,
§ 26, 20 February 2001, and Demades v. Turkey (just
satisfaction), no. 16219/90, § 21, 22 April 2008).
- In
connection with this, the Court observes that the affirmation of
ownership of Turkish-occupied immovable property produced by the
applicant company (see paragraph 6 above) show that on 11 March 2010
it was still the owner of the hotel described in paragraph 13 above.
- In
that regard, the Court observes that the valuations furnished by the
applicant company involve a significant degree of speculation due to
the absence of real data with which to make a comparison and make
insufficient allowance for the volatility of the property market and
its susceptibility to influences both domestic and international (see
Loizidou (just satisfaction), cited above). An even higher
degree of speculation is involved in the calculations concerning the
applicant company's alleged loss of the profits which might have been
obtained from running its hotel business. Accordingly, in assessing
the pecuniary damage sustained by the applicant company, the Court
has, as far as appropriate, considered the estimates provided by it
(see Xenides-Arestis v. Turkey (just satisfaction),
no. 46347/99, § 41, 7 December 2006). In general
it considers as reasonable the approach to assessing the loss
suffered by the applicant company with reference to the annual ground
rent, calculated as a percentage of the market value of the property
that could have been earned during the relevant period (see Loizidou
(just satisfaction), cited above, § 33, and Demades
(just satisfaction), cited above, § 23). Furthermore,
the Court has taken into account the uncertainties, inherent in any
attempt to quantify the real losses incurred by the applicant company
(see Loizidou v. Turkey (preliminary objections), 23
March 1995, § 102, Series A no. 310, and (merits)
18 December 1996, § 32, Reports 1996-VI).
- The
Court notes that notwithstanding its request to submit material
relevant to assessing the 1974 market value of the applicant's
property, the parties have produced few elements in this respect. The
Government have relied on the accuracy of the IPC's calculations
(see paragraphs 22 and 26-27 above), while the applicant company has
produced a synoptic table of “comparable sales within the
area of Kato Kyrenia”, showing that in 1972-1973 four building
sites had been sold at CYP 23.92, CYP 25.46, CYP 45.30 and
CYP 70 per square metre (see paragraph 18 above).
- The
Court further observes that the applicant submitted an additional
claim in the form of annual compound interest in respect of the
losses on account of the delay in the payment of the sums due. While
the Court considers that a certain amount of compensation in the form
of statutory interest should be awarded to the applicant company, it
finds that the rates applied by it are on the high side (see, mutatis
mutandis, Demades (just satisfaction), cited above, §
24). Moreover, the Court does not see why the fact, claimed by the
applicant (see paragraph 10 of the principal judgment and paragraph
16 above), that its hotel had been used by the Turkish army should
give entitlement to an additional monthly sum.
- Finally,
the Court recalls that it is empowered to award
pecuniary compensation for non-pecuniary damage to commercial
companies. Non-pecuniary damage suffered by such companies may
include heads of claim that are to a greater or lesser extent
“objective” or “subjective”. Among these,
account should be taken of the company's reputation, uncertainty in
decision-planning, disruption in the management of the company (for
which there is no precise method of calculating the consequences) and
lastly, albeit to a lesser degree, the anxiety and inconvenience
caused to the members of the management team (see Comingersoll
S.A. v. Portugal, no. 35382/97, § 35, ECHR 2000-IV).
- In
the instant case, the violation of the applicant company's rights
under Article 1 of Protocol No. 1 must have caused it, its directors
and shareholders considerable inconvenience and prolonged uncertainty
in the conduct of the company's business. It is therefore legitimate
to consider that the applicant company was left in a state of
uncertainty that justifies making an award of moral compensation (see
also, mutatis mutandis, Demades (just satisfaction),
cited above, § 29, and Xenides-Arestis (just
satisfaction), cited above, § 47).
- Having
regard to the above considerations, the Court is of the opinion that
the sums claimed by the applicant in respect of pecuniary and
non-pecuniary damage (respectively EUR 6,575,029 and EUR
1,541,607 – see paragraphs 17 and 19-20 above) are
manifestly excessive. At the same time, the amount which the “TRNC”
authorities could have offered the applicant in respect of loss of
use (EUR 570,907 – see paragraph 28 above) does not seem
to take into due account the size and the nature of the hotel owned
by the applicant and described in paragraph 13 above. It had 56 rooms
with private bath or shower and veranda and was built on a plot of
land facing the sea of a total area of 1,989 square metres. Making
its assessment on an equitable basis, the Court decides to award the
applicant company EUR 1,000,000 in respect of pecuniary and
non-pecuniary damage.
B. Costs and expenses
- In
its just satisfaction claims of 31 July 2002, relying on bills from
its representative, the applicant company sought CYP 4,034.1
(approximately EUR 6,892) for the costs and expenses incurred before
the Court. This sum included CYP 800 (approximately EUR 1,366) for
the costs of the expert report assessing the value of its hotel. On
15 January 2004, it claimed additional expenses amounting to CYP
2,645 (approximately EUR 4,519). In its updated claims for just
satisfaction of 23 January 2008, the applicant company submitted
additional bills of costs for the new valuation report and for legal
fees amounting to EUR 392.15 and EUR 2,955.5 (including V.A.T.)
respectively. It indicated that the overall sum claimed for cost and
expenses was EUR 10,240.32 (including V.A.T.). Finally, on 26 May
2010 the applicant submitted that its further legal fees and expert
report's costs amounted to EUR 1,000 and EUR 2,955 respectively.
- The
Government did not comment on this point.
- According
to the Court's case-law, an applicant is entitled to reimbursement of
his costs and expenses only in so far as it has been shown that these
have been actually and necessarily incurred and were reasonable as to
quantum (see, for
example, Iatridis v. Greece (just
satisfaction) [GC], no. 31107/96, § 54, ECHR 2000-XI).
- The
Court notes that the case involved perusing a certain amount
of factual and documentary evidence and required a fair degree of
research and preparation. In particular, the
costs associated with producing valuation reports in view of the
continuing nature of the violation at stake were essential to enable
the Court to reach its decision regarding the issue of just
satisfaction (see Demades (just satisfaction), cited
above, § 34).
- Although
the Court does not doubt that the fees claimed were actually
incurred, it considers the amount claimed for the costs and expenses
relating to the proceedings before it excessive and decides to award
a total sum of EUR 8,000.
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
- Dismisses the Government's request to
stay the examination of the applicant's claims for just satisfaction;
- Holds
(a) that
the respondent State is to pay the applicant, within three months
from the date on which the judgment becomes final in accordance with
Article 44 § 2 of the Convention, the following
amounts:
(i) EUR
1,000,000 (one million euros), plus any tax that may be chargeable,
in respect of pecuniary and non-pecuniary damage;
(ii) EUR
8,000 (eight thousand euros), plus any tax that may be chargeable to
the applicant, in respect of costs and expenses;
(b) that
from the expiry of the above-mentioned three months until settlement
simple interest shall be payable on the above amounts 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's claim
for just satisfaction.
Done in English, and notified in writing on 26 October 2010, pursuant
to Rule 77 §§ 2 and 3 of the Rules of Court.
Fatoş Aracı Nicolas Bratza
Deputy Registrar President
