FOURTH SECTION

CASE OF YAVASHEV AND OTHERS v. BULGARIA

(Application no. 41661/05)

JUDGMENT

STRASBOURG

6 November 2012

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 Yavashev and Others v. Bulgaria,
The European Court of Human Rights (Fourth Section), sitting as a Chamber composed of:
	Lech Garlicki, President,
	David Thór Björgvinsson,
	Päivi Hirvelä,
	George Nicolaou,
	Ledi Bianku,
	Vincent A. De Gaetano, judges,
	Pavlina Panova, ad hoc judge,
	Fatoş Aracı, Deputy Section Registrar,
Having deliberated in private on 16 October 2012,
Delivers the following judgment, which was adopted on that date:
PROCEDURE
1.  The case originated in an application (no. 41661/05) against the Republic of Bulgaria lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by two Bulgarian nationals, Mr Anani Vladimirov Yavashev and Mr Stefan Vladimirov Yavashev, and a national of the United States of America, Mr Christo Vladimirov Javasheff (“the applicants”), on 14 November 2005.
2.  The applicants were represented by Ms S. Margaritova-Vuchkova, a lawyer practising in Sofia. The Bulgarian Government (“the Government”) were represented by their Agent, Ms R. Nikolova, of the Ministry of Justice.
3.  The applicants alleged, in particular, that they had been unjustifiably deprived of property that they had obtained by restitution.
4.  On 16 June 2008 Zdravka Kalaydjieva, the judge elected in respect of the Republic of Bulgaria, withdrew from sitting in the case. On 4 April 2012 the President of the Fourth Section appointed Pavlina Panova as an ad hoc judge from the list of three persons whom Bulgaria had designated as eligible to serve as such judges (Article 26 § 4 of the Convention and Rule 29 § 1 of the Rules of Court).
5.  In the meantime, on 15 March 2011 the Court declared the application partly inadmissible and decided to give the Government notice of the complaint concerning the applicants’ alleged deprivation of a plot of land and two buildings. It also decided to rule on the admissibility and merits of the remainder of the application at the same time (Article 29 § 1 of the Convention).
THE FACTS
I.  THE CIRCUMSTANCES OF THE CASE
6.  The applicants were born in 1932, 1938 and 1935 respectively. The first and second applicants live in Sofia, Bulgaria, and the third applicant lives in New York, the United States of America. They are brothers.
A.  Background
7.  The applicants’ father owned a factory, together with the adjacent plot, in the town of Gabrovo. In 1947 the property was nationalised under the Nationalisation of Private Industrial and Mining Undertakings Act 1947. In the following years the authorities added a storey to the main factory building, transformed the factory into a school, and transformed the adjacent plot, together with other plots, into a schoolyard. The transformation was reflected in the relevant zoning plan. In 1964 the property was entered in the State properties register.
8.  In 1983 the applicants’ father died, leaving them as his only heirs.
9.  After the Restitution of Ownership of Nationalised Real Property Act 1992 (“the 1992 Act” – see paragraphs 25‑30 below) came into force on 25 February 1992, the applicants asked the mayor of Gabrovo to strike the property out of the State properties register. On 30 November 1992 the mayor granted their request, reasoning that the conditions for restitution were in place and that the applicants had become owners of the property by the operation of the Act. The restituted property consisted of a plot of land of 3,730 square metres, the first storey of the two-storey main building of 620 square metres (the second storey, which, as noted above, had been added by the authorities after the nationalisation, remained the property of the municipality), a one-storey accessory building of 200 square metres, and a second one-storey accessory building of 60 square metres. On 28 March 1996 the applicants obtained a notary deed certifying their title to the property.
10.  In the following years the municipality continued to use the building as a school, with the applicants’ consent. However, the municipality sought to settle the issue of its use of the school. In a letter of 13 March 1995 the mayor invited the second applicant to a meeting to discuss the future amount of rent to be paid by the municipality. The outcome of the meeting was not specified by the parties. In a letter of 3 September 1996 the mayor advised the applicants that the municipality intended to start a procedure for the expropriation of the property or its purchase. When the applicants objected, this initiative was abandoned.
11.  In a contract of 3 August 1998 the applicants allowed the municipality to use the property in return for a monthly rent of 3,646,000 old Bulgarian levs (BGL). The municipality also agreed to pay the applicants BGL 34,637,000 as compensation for use of the property between 15 October 1997 and 3 August 1998.
12.  On 21 January 1999 the municipal council adopted a resolution to start a procedure for the purchase of the property. It appears that the resolution was subsequently abandoned.
13.  On 17 May 2001 the municipal council adopted a resolution for the purchase of the property. The price was set at the equivalent of 180,000 United States dollars.
B.  The administrative and judicial review proceedings against the municipal council’s resolution of 17 May 2001
14.  On 22 June 2001 the regional governor of Gabrovo ordered the suspension of the execution of the municipal council’s resolution of 17 May 2001. She noted, in particular, that since 1960 the main building and the yard had accommodated a school. She went on to say that the property served the needs of the local community and was municipal public property, that it had never been returned to the applicants, and that the mayor’s decision to strike it out of the State properties register had been made in error.
15.  The governor also brought judicial review proceedings to have the resolution set aside. On 31 October 2001 the Gabrovo Regional Court dismissed her claim. It found that the governor’s assertions that the property had not been returned to the applicants and had remained municipal property were ill-founded. On appeal, in a final judgment of 15 July 2002 the Supreme Administrative Court disagreed and set the resolution aside. It held, inter alia, that the school was municipal public property by virtue of the Constitution of 1991 and interpretative decision no. 19 of 1993 of the Constitutional Court (see paragraph 31 below), and had never been returned to the applicants. The court went on to say that since it had not been possible to return the property to the applicants, they were entitled to compensation under the Compensation of Owners of Nationalised Real Property Act 1997 (“the 1997 Act” – see paragraphs 35‑39 below).
C.  Civil proceedings concerning the applicants’ title to the property
16.  Meanwhile, on 1 April 2001 the municipality stopped paying rent to the applicants. On an unspecified date in 2002 they filed a claim for non‑payment of rent against the municipality with the Gabrovo District Court. The municipality filed a counterclaim, seeking a judicial declaration that it was the owner of the property.
17.  On 3 July 2002 the Gabrovo District Court granted the applicants’ claim and dismissed the municipality’s counterclaim. The municipality appealed, but on 20 December 2002 the Gabrovo Regional Court upheld the lower court’s judgment.
18.  The municipality appealed on points of law. On 14 October 2004 the Supreme Court of Cassation granted its claim in respect of the main building. It held, in particular, that the municipality had reconstructed that building in such a way that a new building, different from the nationalised one, had been created. That building had been earmarked to accommodate a school and thus serve the needs of the community. The court went on to say that in view of that, the main building could not have been returned to the applicants and had remained the property of the municipality. The judgment in this part was final. The court remitted the remainder of the case, which concerned the two accessory buildings and the plot of land, for re‑examination. It instructed the lower court to examine which part of the plot existed independently of the school, because only that part could have been returned. As for the accessory buildings, the lower court had to determine whether they had been part of the school compound and on that basis decide whether or not they had been subject to restitution.
19.  Having re-examined the case, on 7 October 2005 the Gabrovo Regional Court dismissed the applicants’ claim and allowed the municipality’s counterclaim. It found, in particular, that under the relevant zoning plan the plot of land, together with another plot, had been earmarked to serve the school. The court went on to say that the two accessory buildings and the plot of land were functionally connected with the main building and served the needs of the school. Therefore, they could not have been severed and returned to the applicants.
20.  On 12 December 2007 the Supreme Court of Cassation upheld that judgment and held that the property in question had always belonged to the municipality. In the court’s view, the property had been municipal public property at the time when the 1992 Act had come into force, and had therefore not been subject to restitution. The adoption in 1996 of the State Property Act 1996 and the Municipal Property Act 1996 (see paragraph 32 below) had not in itself transformed State and municipal property into private and public property, as that transformation had already been envisaged in the Constitution of 1991. The two Acts had simply laid down the detailed rules governing those types of property. The court went on to say that since the property could not be returned to the applicants, they were entitled to compensation under the 1997 Act (see paragraph 26 below). In addition to those findings, the court also endorsed the findings of the Gabrovo Regional Court and held, in particular, that the disputed plot of land was part of a bigger plot, did not feature as a discrete plot in the zoning plan, and could not therefore have been returned.
D.  Further developments
21.  Following the Supreme Court of Cassation’s ruling of 14 October 2004 in respect of the main building (see paragraph 18 above), in 2005 the municipality lodged a claim for unjust enrichment against the applicants with the Sofia City Court. It sought repayment of allegedly wrongly paid rent in the amount of 151,207 new Bulgarian levs (BGN), plus interest for the period between 3 August 1998 and 31 March 2001. The proceedings are still pending.
22.  On 24 November 2005 the applicants applied for compensation under the 1997 Act (see paragraphs 35‑39 below). On 25 January 2006 the governor dismissed the application, saying that the applicants had missed the one-year time-limit laid down in the Act, which had expired in 1998. The applicants sought judicial review. In a final judgment of 17 May 2007, the Supreme Administrative Court upheld the governor’s decision.
23.  On 27 March 2008 the applicants sent a letter to the chairperson of the municipal council and the mayor of Gabrovo, seeking compensation. Meetings with representatives of the municipal council followed. On 25 May 2008 the applicants sent another letter to the council’s chairperson and the mayor, reiterating their request. According to the applicants, the authorities did not react to that letter.
24.  On 21 October 2010 the municipal council adopted a resolution to close down the school. In April 2011 the applicants sent letters to the mayor, the municipal council and the regional governor, saying that after the closure of the school the property had become private municipal property and should be returned to them.
II.  RELEVANT DOMESTIC LAW
A.  Restitution of property taken under the Nationalisation of Private Industrial and Mining Undertakings Act 1947
25.  In 1992, after the fall of the communist regime, Parliament adopted the Restitution of Ownership of Nationalised Real Property Act 1992 (Закон за възстановяване собствеността върху одържавени недвижими имоти). It came into force on 25 February 1992 and provided, in section 2(1) and (3) and section 4, that former owners, or their heirs, of real property nationalised under, inter alia, the Nationalisation of Private Industrial and Mining Undertakings Act 1947, regained ownership of their nationalised properties if (a) the properties still existed in their state prior to nationalisation, (b) they were still owned by, in particular, the State or municipalities, and (c) no adequate compensation had been received by the owners at the time of nationalisation.
26.  Section 3(3) provided that where restitution was impossible the former owners or their heirs were to be compensated in a manner to be set out in a separate statute. That statute – the Compensation of Owners of Nationalised Real Property Act 1997 – was adopted and came into force in November 1997 (see paragraphs 35‑39 below).
27.  Section 6(3) read in conjunction with (2) of the 1992 Act provided that if a restituted property had accommodated, among others, hospitals or schools, they could continue to use it for a period of three years after the Act’s coming into force, but had to pay, from the date of restitution, regulated rent to the persons in whose favour the property had been returned. The meaning of that provision was not entirely clear. It appears that it concerned property which was being used as a hospital or a school; even if all the conditions for the restitution of such property were in place, in view of its designated use it was warranted not to return it immediately to its former owners, so that its pre-restitution occupiers could continue to use it for a certain period of time (реш. № 515 от 10 май 1995 г. по гр. д. № 1381/1994 г., ВС, IV г. о.).
28.  The restitution of ownership under the 1992 Act was by operation of law. There was no need for an administrative or judicial decision certifying that the conditions for restitution were in place. In particular, mayors’ decisions to strike property out of the State properties register were internal acts with no effect on property rights (реш. № 115 от 21 март 1994 г. по гр. д. № 3428/1993 г., ВС, III г. о.).
29.  The Bulgarian courts have sought to clarify the restitution conditions laid down in the 1992 Act, in particular the exact meaning of the condition that the property had to still exist in its state prior to nationalisation (see paragraph 25 above). In an interpretative decision of 17 May 1995 (тълк. реш. № 1 от 17 май 1995 г. по гр. д. № 3/1994, ВС, ОСГК), the former Supreme Court found that condition not to mean that a property should have remained in the exact same state it had been at the time of nationalisation. Subsequent modifications concerning its designated use did not preclude restitution. It was enough for the property to exist as a discrete object of a property right and within the boundaries that it had had at the time of nationalisation.
30.  The above-mentioned condition was further clarified in subsequent case‑law. In particular, the Supreme Court of Cassation has held that if the designated use of the nationalised property has been modified by virtue of a zoning plan and the property has been transformed into an element of the public infrastructure, such as a public square, the property does not constitute a discrete object of a property right and does not exist in its boundaries at the time of nationalisation. In such cases, restitution is not possible (реш. № 1343 от 21 октомври 2001 г. по гр. д. № 1233/2001 г., ВКС, IV г. о.).
B.  The concept of “municipal public property”
31.  The Constitution of 1991 provides that property is private and public (Article 17 § 2), and that the legal regime of property that belongs to the State and the municipalities is to be governed by statute (Article 17 § 4). In its interpretative decision no. 19 of 21 December 1993 (реш. № 19 от 21 декември 1993 г. по к. д. № 11 от 1993 г., обн., ДВ, бр. 4 от 12 януари 1994 г.), the Constitutional Court held that although Article 17 § 2 of the Constitution made a distinction between public and private property, it did not lay down criteria for that distinction. The leading criteria were: who had title to the property, the property’s nature and designated use. The court went on to say that only the State and the municipalities could own public property. By contrast, private property could be owned not only by the State and the municipalities, but also by private persons. Lastly, the court noted that it was within the power of the legislature to give a definition of property belonging to the public domain.
32.  The State Property Act 1996 and the Municipal Property Act 1996 came into force on 1 June 1996. At the material time the Municipal Property Act 1996 provided, inter alia, that municipal public property was property designated as such by statute or property that served the needs of the community in a permanent manner (section 3(2)(1) and (2)(3)). Such property is inalienable – it cannot be transferred to third parties or acquired by adverse possession (section 7(1) and (2)). The State Property Act 1996 contains similar provisions in respect of State public property.
33.  In its decision no. 4 of 11 March 1998 (реш. № 4 от 11 март 1998 г. по к. д. № 16 от 1997 г., обн., ДВ, бр. 30 от 17 март 1998 г.), the Constitutional Court held that restitution was possible only in respect of private property as only the private property of the State or the municipalities could be transferred to individuals or non-State entities. In particular, the restitution of State public property had been prohibited by the 1992 Act and the 1997 Act. This was so because restitution could not affect property that belonged to the public domain and was protected by the Constitution because it served constitutionally established public interests.
34.  In line with the two 1996 Acts, in March 1998 the National Education Act 1991 was amended to provide that property earmarked for use by municipal schools was in the public domain and constituted municipal public property (section 10(3) (since 2009 subsection (4)) in fine).
C.  Compensation in lieu of restitution
35.  In November 1997 Parliament adopted the Compensation of Owners of Nationalised Real Property Act 1997 (Закон за обезщетяване на собственици на одържавени имоти). It came into force on 22 November 1997 and provided for the compensation of former owners of nationalised property or their heirs in cases where it was impossible to return the property because it had become State or municipal public property, had been acquired in good faith by third parties, or had been transformed by construction or otherwise (section 2(1)).
36.  Under section 6(1), applications for compensation had to be made to the regional governor or the relevant minister within one year after the Act had come into force, that is, until 22 November 1998.
37.  The former owners could choose the manner of compensation, except in cases where the property had become State or municipal public property before 25 February 1992, the date on which the 1992 Act had come into force (section 2(4)). In that case, compensation was only in the form of compensatory bonds (реш. № 9371 от 7 декември 2001 г. по адм. д. № 3193/2001, ВАС, III о., реш. № 7511 от 16 юли 2003 г. по адм. д. № 2202/2003 г., ВАС, III о.), which could be used, in particular, in tenders for the privatisation of State-owned companies (section 4(2)).
38.  If the property had become State or municipal public property after 25 February 1992, the former owners were entitled to compensation equal to the fair market value of the property at the time when the 1997 Act had come into force (section 2(7)).
39.  In its above-mentioned decision no. 4 of 11 March 1998 (see paragraph 33 above), the Constitutional Court held that the reason for the difference in the manner of compensation was in the fact that any transfers of property to the State which had taken place after the coming into force of the 1992 Act in effect amounted to expropriations and called for the payment of compensation equivalent to the fair market value of the property.
D.  State liability for damages
40.  Section 1 of the State Responsibility for Damage Caused to Citizens Act 1988 (Закон за отговорността на държавата за вреди, причинени на граждани), in July 2006 renamed the State and Municipalities Responsibility for Damage Act (Закон за отговорността на държавата и общините за вреди – “the 1988 Act”), provides that the State and municipalities are liable for damage suffered by individuals (and since 1 January 2006 also legal persons) as a result of unlawful decisions, actions or omissions by their organs and officials committed in the course of or in connection with the carrying out of administrative action. Section 8(2) provides that if another statute provides for a special manner of indemnification, the Act does not apply. It seems that the domestic courts are not inclined to allow claims under section 1 of the Act in situations where, as in the present case, the claimants have failed to make applications for compensation under the 1997 Act in a timely manner (реш. № 4137 от 23 март 2011 г. по адм. д. № 15208/2010 г., ВАС, ІІІ о.).
THE LAW
I.  ALLEGED VIOLATION OF ARTICLE 1 OF PROTOCOL No. 1
41.  The applicants complained that with its judgment of 12 December 2007 the Supreme Court of Cassation had unjustifiably deprived them of their property, namely the plot of land and the two accessory buildings. They relied on Article 1 of Protocol No. 1, which reads as follows:
“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”
A.  Admissibility
42.  The Government submitted that the applicants had failed to exhaust domestic remedies as they had not brought a claim against the relevant authorities under section 1 the 1988 Act (see paragraph 40 above) or applied for compensation under the 1997 Act (see paragraphs 35‑39 above).
43.  The Court finds that the question of exhaustion of domestic remedies is closely related to the merits of the complaint. The Court therefore joins the objection to the merits.
44.  The Court further considers that any issues relating to the compatibility ratione materiae of the complaint with the provisions of the Convention are more appropriately addressed at the merits stage (see, mutatis mutandis, Valkov and Others v. Bulgaria, nos. 2033/04, 19125/04, 19475/04, 19490/04, 19495/04, 19497/04, 24729/04, 171/05 and 2041/05, § 75, 25 October 2011).
45.  Lastly, the Court considers that the complaint is not manifestly ill‑founded within the meaning of Article 35 § 3 (a) of the Convention or inadmissible on any other grounds. It must therefore be declared admissible.
B.  Merits
1.  The parties’ submissions
46.  The Government submitted that the 1992 Act had not produced any effects on the disputed property because the conditions for restitution had not been met. They further argued that the mayor’s decision to strike the property out of the State properties register could not create any possession or give rise to any legitimate expectation. In their view, the applicants were not in possession of the plot and the rental agreement between them and the municipality was irrelevant for their alleged title to the plot.
47.  The Government further submitted that even assuming that the applicants had an existing possession or a legitimate expectation and that the Supreme Court of Cassation’s judgment of 12 December 2007 had amounted to interference with their possessions, that interference had been in the public interest and proportionate because the applicants had been entitled to compensation under the 1997 Act. The fact that, although knowing that restitution was impossible, they had failed to avail themselves of that opportunity within the statutory time-limit could not be attributed to the authorities.
48.  The applicants maintained that they had had a possession within the meaning of Article 1 of Protocol No. 1 because their property had been returned to them by the operation of the 1992 Act. They relied, in particular, on the wording of section 6(3) of that Act which, in their view, allowed the restitution of properties accommodating schools. Moreover, the municipality had been recognising their ownership for ten years. Also, the applicants had a notary deed certifying their title, and were paying property taxes.
49.  The applicants submitted that the Supreme Court of Cassation’s judgment of 12 December 2007 had unjustifiably interfered with their possessions. In their view, that court’s finding that the 1992 Act had never produced any effect because the property at issue had been municipal public property had been in breach of domestic law. That approach had been arbitrary because the concept of “municipal public property” had been introduced as late as 1996. The applicants argued that the court’s further findings that the conditions for restitution had not been met on account of the transformation of the property into a school had been also arbitrary and in breach of domestic law.
50.  In the applicants’ view, the situation had in effect amounted to a new expropriation, which had been disproportionate because they could not have applied for compensation. In contrast with the situations obtaining in Ivanova and Others v. Bulgaria ((dec.), no. 66467/01, 1 December 2009) and Velikin and Others v. Bulgaria ((dec.), no. 28936/03, 1 December 2009), in the present case they had been in possession of the property, and the municipality had not contested their title. They could not therefore have been reasonably expected to apply for compensation within the time-limit laid down in the 1997 Act.
2.  The Court’s assessment
(a)  Scope of the complaint
51.  The Court notes at the outset that it is competent to examine only that part of the complaint which concerns the plot of land and the two accessory buildings. The applicants’ complaint under Article 1 of Protocol No. 1 in respect of the main building was declared inadmissible in the partial decision in the present case (see Yavashev and Others v. Bulgaria (dec.), no. 41661/05, 15 March 2011).
(b)  Existence of an interference with possessions
52.  The parties disagreed as to whether the applicants had had a property interest amounting to a possession within the meaning of Article 1 of Protocol No. 1. The Court must therefore start by determining whether the applicants’ position with regard to the plot of land and the two accessory buildings was such as to attract the protection of that Article.
53.  In that connection, the Court agrees with the applicants’ argument that the present case must be distinguished from Velikin and Others and Ivanova and Others (both cited above). In those cases, the applicants’ rei vindicatio claims based on alleged restitution by the operation of the 1992 Act had been dismissed by the domestic courts on the grounds that the properties in issue had always been State or municipal public properties, which had rendered restitution impossible. The Court, for its part, found that the applicants had never obtained effective restitution of those properties and had therefore not had an existing possession within the meaning of Article 1 of Protocol No. 1. Nor had they had a legitimate expectation because their alleged title to the properties had always been contested by the authorities and the applicants had been unable to enter into possession of the properties.
54.  Turning to the present case, the Court takes note of the applicants’ averment that their property was returned to them by virtue of the 1992 Act. However, having regard to the wording of the relevant provisions of that Act and the subsequent case-law of the domestic courts (see paragraphs 25‑30 above), the two Acts adopted in 1996 and the legislative amendment of 1998 (see paragraphs 32 and 34 above), and the Supreme Court of Cassation’s judgment of 12 December 2007 which found that the property had never been returned to the applicants (see paragraph 20 above), the Court does not consider that it is for it to determine whether the property was or was not subject to restitution under Bulgarian law. It observes that no legitimate expectation can be said to arise where there is a dispute as to the correct interpretation and application of domestic law and the applicants’ submissions are ultimately rejected by the national courts (see Kopecký v. Slovakia [GC], no. 44912/98, § 50, ECHR 2004‑IX).
55.  That said, the Court cannot overlook the fact that for a number of years the Gabrovo municipality – which was competent to manage the property – treated the applicants as its owners (contrast Velikin and Others, cited above, §§ 67 in fine and 68). Not only did the mayor strike the property out of the State properties register in November 1992, but in 1995 the municipality initiated negotiations for the payment of rent (see paragraphs 9 and 10 above). Later, in spite of the legislative changes in 1996‑98, which elucidated the concept of property belonging to the public domain and made it clear that premises accommodating schools were in the public domain, the municipality started effectively paying rent to the applicants and agreed to pay them compensation for its past use of the property, thus continuing to acknowledge them as owners (see paragraph 11 above).
56.  The Court is mindful of the fact that in contrast to other cases against Bulgaria, where the recognition of title to restituted property had been made by an authority mandated by law to decide whether the conditions for restitution had been met (see Debelianovi v. Bulgaria, no. 61951/00, § 9, 29 March 2007; Naydenov v. Bulgaria, no. 17353/03, § 68, 26 November 2009; Mutishev and Others v. Bulgaria, no. 18967/03, § 123, 3 December 2009; and Lyubomir Popov v. Bulgaria, no. 69855/01, §§ 111 and 117, 7 January 2010), in the instant case no such authority was envisaged by the relevant law (see Ivanova and Others, cited above). Nevertheless, the Court considers that the general wording of the 1992 Act, coupled with the municipality’s continued recognition of the applicants’ title for almost ten years, gave rise to a proprietary interest protected under Article 1 of Protocol No. 1 (see, mutatis mutandis, Zwierzyński v. Poland, no. 34049/96, §§ 63‑64, ECHR 2001‑VI; Öneryıldız v. Turkey [GC], no. 48939/99, §§ 127‑29, ECHR 2004‑XII; Bruncrona v. Finland, no. 41673/98, § 79, 16 November 2004; Osman v. Bulgaria, no. 43233/98, §§ 96‑97, 16 February 2006; Hamer v. Belgium, no. 21861/03, §§ 75‑76, ECHR 2007‑V (extracts); Depalle v. France [GC], no. 34044/02, §§ 62‑68, ECHR 2010‑...; Brosset-Triboulet and Others v. France [GC], no. 34078/02, §§ 65‑71, 29 March 2010; and Bilozir and Rizova v. Ukraine (dec.), no. 37863/05, 28 September 2010). In addition to that, although the courts later decided that the property in question was not subject to restitution under domestic law, it cannot be overlooked that the applicants had a right to compensation in lieu of restitution, which could be regarded as another proprietary interest protected under Article 1 of Protocol No. 1. It is true that this right became time-barred before the applicants could exercise it. However, the only reason for their failure to file a compensation claim within the statutory time-limit was the continued recognition – later found erroneous – of their title by the authorities. Article 1 of Protocol No. 1 is therefore applicable.
57.  The Court further considers that the judgment of 12 December 2007 in which the Supreme Court of Cassation held that the plot of land and the two accessory buildings had never been returned to the applicants because they did not exist independently of the main building and had always been municipal public property interfered with the applicants’ right to peaceful enjoyment of their possessions. However, the Court does not consider it necessary to determine whether that interference amounted to a deprivation of property. The complexity of the factual and legal position in the present case prevents it from being classified in a precise category. In view of that, and bearing in mind that the situation envisaged in the second sentence of the first paragraph of Article 1 is a particular instance of interference with peaceful enjoyment of possessions as guaranteed by the general rule set forth in the first sentence, the Court considers that it should examine the situation complained of in the light of that general rule (see, mutatis mutandis, Beyeler v. Italy [GC], no. 33202/96, § 106, ECHR 2000‑I, and The Synod College of the Evangelical Reformed Church of Lithuania v. Lithuania (dec.), no. 44548/98, 5 December 2002).
58.  The Court must now determine whether the interference with the applicants’ rights under Article 1 of Protocol No. 1 was lawful and in the public interest, and whether it struck a fair balance between the demands of the general interest of the community and the applicants’ rights.
(c)  Justification for the interference
59.  The first and most important requirement of Article 1 of Protocol No. 1 is that an interference by a public authority with the peaceful enjoyment of possessions should be lawful. The Court has consistently held that the terms “law” or “lawful” in the Convention do not merely refer back to domestic law but also relate to the quality of the law, requiring it to be compatible with the rule of law (see, among many other authorities, James and Others v. the United Kingdom, 21 February 1986, § 67, Series A no. 98).
60.  Concerning the applicants’ assertion that the manner in which the domestic courts applied the concept of “municipal public property” to their case was arbitrary, the Court firstly observes that it has only limited power to deal with alleged errors of fact or law committed by the national courts (see, among many other authorities, Kopecký, cited above, § 56). Secondly, the Court refers to its findings in Velikin and Others (cited above, §§ 70‑74) and Ivanova and Others (cited above), where it examined in detail analogous rulings of the Bulgarian courts in respect of similar facts and found that those rulings were not arbitrary. It went on to say that the courts’ approach had not run counter to the principle of legal certainty. It sees no reason to hold otherwise in the present case.
61.  As to whether the impugned interference was in the public interest, the Court reiterates that because of their direct knowledge of their society and its needs, the national authorities are in principle better placed to appreciate what is “in the public interest”. In the case at hand, the impugned domestic court judgments did nothing more than enforce binding legal rules on the status of certain properties (see, mutatis mutandis, Maslenkovi v. Bulgaria, no. 50954/99, § 32, 8 November 2007). Their aim was to correct a perceived mistake in the application of those rules by the municipal authorities. In those circumstances, the Court is satisfied that the interference pursued a legitimate aim in the public interest (see, mutatis mutandis, Moskal v. Poland, no. 10373/05, § 62, 15 September 2009).
62.  However, even if it is lawful, devoid of arbitrariness and in the public interest, an interference with the right to the peaceful enjoyment of possessions must strike a fair balance between the demands of the general interest of the community and the applicants’ rights. In particular, there must be a reasonable relationship of proportionality between the means employed and the aim sought to be realised (see, among many other authorities, Sporrong and Lönnroth v. Sweden, 23 September 1982, § 69, Series A no. 52, and Scordino v. Italy (no. 1) [GC], no. 36813/97, § 93, ECHR 2006‑V).
63.  The Court has recognised that the Contracting States have a wide margin of appreciation when passing laws in the context of a change of political and economic regime and, in particular, in the context of a transition from a totalitarian state to a democratic society (see Credit Bank and Others v. Bulgaria (dec.), no. 40064/98, 30 April 2002; Jahn and Others v. Germany [GC], nos. 46720/99, 72203/01 and 72552/01, § 113, ECHR 2005‑VI; 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, § 172, 15 March 2007; and Suljagić v. Bosnia and Herzegovina, no. 27912/02, § 42 in fine, 3 November 2009). In the present case, the general character of the 1992 Act and the subsequent legislative and case-law developments show a continuing effort on the part of the authorities to take into account the relevant interests involved, private and public, and to achieve a better balance between them (see, mutatis mutandis, Velikovi and Others, cited above, § 179).
64.  In its judgment of 12 December 2007 the Supreme Court of Cassation essentially ruled with final effect that the municipality had erred in law by recognising the applicants’ title to the property. In that connection, the Court observes that as a general principle the authorities should not be prevented from correcting their mistakes, even those resulting from their own negligence. Holding otherwise may lead to a situation which runs contrary to the public interest (see Bilozir and Rizova, and, mutatis mutandis, Moskal, §§ 72-73, both cited above). The Court is therefore unable to find that the ruling of 12 December 2007 was in itself a disproportionate measure.
65.  That said, the Court cannot lose sight of the fact that it took the authorities almost ten years to realise that a mistake had been made. The first steps in that respect were taken as late as 2001, when the regional governor suspended the municipality’s intended purchase of the school on the ground that it had always belonged to the municipality (see paragraph 14 above). The time taken by the authorities to intervene is a factor to be taken into consideration in assessing the proportionality of an interference with possessions (see Jahn and Others, cited above, § 116, and Althoff and Others v. Germany, no. 5631/05, § 70, 8 December 2011). The passage of time is especially relevant in the present case as the 1997 Act, which provided for compensation in cases where property could not be restituted because it belonged to the public domain, laid down a time-limit, expiring one year after the Act’s coming into force, for submitting applications for compensation (see paragraph 36 above). In this connection, the Court observes that compensation terms under the relevant legislation are likewise material to the assessment whether the contested measure respects the requisite fair balance and imposes a disproportionate burden on the applicants (see Jahn and Others, § 94, and Althoff and Others, § 63, both cited above).
66.  At the time of the adoption of the 1997 Act the municipality had been recognising the applicants’ title for a number of years and continued to do so, with the result that the applicants had a justified assumption that the plot of land and the two accessory buildings had been returned to them. Despite the somewhat unclear tenor of the relevant provisions of the 1992 Act and the already existing concept of property belonging to the public domain, in the absence of any judicial decision interpreting and applying the relevant provisions to the applicants’ case it was not unreasonable for them to rely on the municipality’s recognition and not apply for compensation in lieu of restitution on time (contrast Velikin and Others, cited above, § 79).
67.  It does not appear that the applicants had any other means of obtaining such compensation. In particular, the Government’s assertion that the applicants could have brought a claim for damages under section 1 of the 1988 Act is completely unsubstantiated by reference to relevant case‑law, and the Act’s wording and the domestic courts’ case-law suggest the opposite (see paragraph 40 above).
68.  In view of that, and bearing in mind that a considerable period of time passed between the striking of the property out of the State properties register and the dispute over the applicants’ title, the complete lack of any compensation appears disproportionate (see Althoff and Others, cited above, §§ 72-73).
69.  Having regard to the particular circumstances of the case and in spite of the wide margin of appreciation afforded to the State in the exceptional transitional context, the Court finds that the impossibility for the applicants to apply for compensation for reasons imputable to the authorities upset the fair balance that needed to be struck between the protection of their rights and the demands of the general interest.
70.  In conclusion, the Court dismisses the Government’s objection of non‑exhaustion of domestic remedies and finds that there has been a violation of Article 1 of Protocol No. 1.
II.  APPLICATION OF ARTICLE 41 OF THE CONVENTION
71.  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.  Damage
72.  In respect of pecuniary damage, the applicants stated that they should be given back their property or, failing such, should be given equivalent property or paid a sum of money reflecting its value, namely BGN 470,000 (240,307.18 euros (EUR)). In support of their claim they presented a valuation report drawn up in 2008 for the main building, the plot of land and the two accessory buildings. According to that report, the value of the plot of land was BGN 246,030.80 (EUR 125,793.55), and the value of the two accessory buildings was BGN 50,234 (EUR 25,684.24).
73.  The applicants further claimed EUR 20,000 each, or EUR 60,000 in total, in respect of non-pecuniary damage.
74.  The Government contested the claims as exorbitant.
75.  The Court notes at the outset that the breach of Article 1 of Protocol No. 1 essentially concerned the lost possibility for the applicants to obtain compensation for the plot of land and the two accessory buildings. It reiterates in this respect that a judgment in which the Court finds a breach of the Convention or its Protocols imposes on the respondent State a legal obligation to put an end to that breach and make reparation for its consequences in such a way as to restore as far as possible the situation existing before the breach (see, as a recent authority, Kozacıoğlu v. Turkey [GC], no. 2334/03, § 80, 19 February 2009).
76.  At the same time, the Court notes that where the basis of the violation found is a failure to strike a fair balance between the public interest and the individual’s rights rather than illegality, just satisfaction need not necessarily reflect the idea of wiping all the consequences of the interference in question, and compensation need not always equal the full value of the property. Legitimate objectives of public interest, such as measures of economic reform, may call for less than reimbursement of the full market value (see Todorova and Others v. Bulgaria (just satisfaction), nos. 48380/99, 51362/99, 60036/00 and 73465/01, § 8, 24 April 2008).
77.  In the light of the above considerations, the fact that the Court cannot speculate as to the amount of compensation that the applicants may have obtained if they had applied for it in good time, and the impossibility to quantify exactly the applicants’ loss, the Court considers that it must fix a lump sum in respect of the pecuniary and non-pecuniary damage suffered by them. Ruling on an equitable basis, it awards jointly to all three applicants the sum of EUR 20,000, plus any tax that may be chargeable.
B.  Costs and expenses
78.  The applicants claimed EUR 5,398 in legal fees for the proceedings before the Court, of which EUR 4,000 was for the preparation of the initial application and EUR 1,300 for the subsequent legal work done by Ms S. Margaritova-Vuchkova. They also requested that the amount of EUR 1,300 be paid directly into Ms S. Margaritova-Vuchkova’s bank account. In support of their claim the applicants presented a contract for legal representation with Ms S. Margaritova-Vuchkova and a time-sheet for 22½ hours of work at an hourly rate of EUR 60. For the remainder of the requested amount, namely EUR 4,098, the applicants did not present any documents showing that they had undertaken to pay this amount or had actually paid it.
79.  The applicants also claimed BGN 2,700 (EUR 1380.49) for costs and expenses incurred in the domestic proceedings. In support of their claim they presented contracts for legal representation in the proceedings against the regional governor’s refusal to pay them compensation under the 1997 Act (see paragraph 22 above), in another set of proceedings against the municipality, and in the pending proceedings for the payment of rent (see paragraph 21 above).
80.  The applicants further claimed BGN 280 (EUR 143.16) for translation costs, BGN 450 (EUR 230.08) for the cost of the valuation report and BGN 8.9 (EUR 4.55) for postal expenses. In support of these claims they presented the relevant receipts.
81.  The Government contested the claims as excessive.
82.  According to the Court’s case-law, an applicant is entitled to the reimbursement of costs and expenses only in so far as it has been shown that these have been actually and necessarily incurred and are reasonable as to quantum. With regard to the claim for legal fees for the Strasbourg proceedings, the Court considers that the claim has been substantiated only for the amount of EUR 1,300. The Court makes no award in respect of the costs and expenses incurred in the domestic proceedings. The attempt to obtain judicial review of the governor’s decision (see paragraph 22 above) was bound to fail and therefore does not appear to have been an effective remedy that the applicants had to exhaust. As for the proceedings for the payment of rent, they are still pending (see paragraph 21 above). It is therefore unclear whether the applicants will have to bear the costs and expenses incurred for them. With regard to the remainder of the claim, the Court considers it reasonable to award the whole sum claimed, namely EUR 377.79. In conclusion, the Court awards jointly to the applicants EUR 1,677.79, of which EUR 1,300 are to be paid directly into the bank account of the applicants’ representative, Ms S. Margaritova-Vuchkova.
C.  Default interest
83.  The Court considers it appropriate that the default interest rate 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
1.  Joins to the merits the Government’s objection on the issue of non‑exhaustion of domestic remedies and declares the remainder of the application admissible;

2.  Holds that there has been a violation of Article 1 of Protocol No. 1 and dismisses in consequence the Government’s objection on the issue of non‑exhaustion of domestic remedies;

3.  Holds
(a)  that the respondent State is to pay jointly to the three applicants, within three months from the date on which the judgment becomes final in accordance with Article 44 § 2 of the Convention, the following amounts, to be converted into Bulgarian levs at the rate applicable at the date of settlement:
(i)  EUR 20,000 (twenty thousand euros), plus any tax that may be chargeable, in respect of pecuniary and non-pecuniary damage;
(ii)  EUR 1,677.79 (one thousand six hundred and seventy-seven euros and seventy-nine cents), plus any tax that may be chargeable to the applicants, in respect of costs and expenses; EUR 1,300 (one thousand three hundred euros) of that amount is to be paid directly to Ms S. Margaritova-Vuchkova;
(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;

4.  Dismisses the remainder of the applicants’ claim for just satisfaction.
Done in English, and notified in writing on 6 November 2012, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.
	Fatoş Aracı	Lech Garlicki
	Deputy Registrar	President