ZIAUNYS v. THE REPUBLIC OF MOLDOVA - 42416/06 - Chamber Judgment [2014] ECHR 138 (11 February 2014)

In the case of Ziaunys v. the Republic of Moldova,

The European Court of Human Rights (Third Section), sitting as a Chamber composed of:

          Josep Casadevall, President,
          Alvina Gyulumyan,
          Ján Šikuta,
          Luis López Guerra,
          Kristina Pardalos,
          Valeriu Griţco,
          Iulia Antoanella Motoc, judges,
and Santiago Quesada, Section Registrar,

Having deliberated in private on 21 January 2014,

Delivers the following judgment, which was adopted on that date:

PROCEDURE

1. The case originated in an application (no. 42416/06) against the Republic of Moldova lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by a Lithuanian national, Mr Gintaras Ziaunys (“the applicant”), on 13 October 2006.

2. The applicant was represented by Mr R. Rinkevicius, a lawyer practising in Vilnius. The Moldovan Government (“the Government”) were represented by their Agent, Mr L. Apostol.

3. The applicant alleged, in particular, that he had been unlawfully deprived of his property, contrary to the requirements of Article 1 of Protocol No. 1 to the Convention.

4. On 17 December 2009 the application was communicated to the Government.

5. Having been given leave to intervene in the proceedings pursuant to Article 36 § 1 of the Convention and Rule 44 § 1 of the Rules of Court, the Lithuanian Government did not submit any observations concerning the present case.

THE FACTS

I. THE CIRCUMSTANCES OF THE CASE

6. The applicant was born in 1965 and lives in Vilnius.

7. The applicant is a member of the International Banknote Society, the American Numismatic Association and the Collectors’ Club of Vilnius.

8. On 12 December 2000 the applicant signed a contract with the Educational Coin Company (“the company”), registered in the United States of America (“the USA”), according to which he would deliver to the company 8,500 kg of banknotes (in five and ten rouble notes) issued by the self-proclaimed Bank of the “Moldavian Republic of Transdniestria (MRT)” (see further details about the events leading to the creation of the self-proclaimed “MRT” in Ilaşcu and Others v. Moldova and Russia [GC], no. 48787/99, ECHR 2004-VII). In exchange, under the contract, he had the right to select items from the company’s wholesale catalogue to a value of 7,000 United States dollars (USD).

9. On 26 January 2001 the applicant bought from the “MRT” bank 13,590,000 “MRT” roubles (in five and ten rouble banknotes) issued in 1994. The banknotes issued in 1994 were no longer in circulation in the “MRT”, having been replaced by new banknotes in 2000. Such banknotes have never been in official circulation in Moldova and had been accepted as payment only in the “MRT” and only prior to 2000.

10. On 1 February 2001 the applicant submitted to Moldovan customs 353 sealed bags of banknotes issued by the “MRT” bank in 1994. He asked for permission to ship the items to the USA, in accordance with the contract with the company. He declared that the paper in the bags had a numismatic value of USD 7,000.

11. The customs authority decided to store the bags in its warehouse until a decision could be taken about what to do with them. Subsequently, the bags were moved to the premises of the State Tax Inspectorate (“the STI”), where they have remained since.

12. By a decision of 23 July 2003 and further to a report of 25 August 2003, the Customs Department decided not to return the banknotes to the applicant and to transfer them instead to the STI for free as the items were banned from general circulation in Moldova.

13. The applicant asked on a number of occasions for the return of the items confiscated from him. On an unknown date in 2005 he initiated court proceedings to have the decisions taken in July and August 2003 set aside and the items returned to him.

14. On 19 April 2005 the Chişinău Court of Appeal dismissed his court action as lodged out of time. On 3 August 2005 the Supreme Court of Justice quashed that decision and ordered a rehearing of the case by the lower court.

15. On 7 November 2005 the Chişinău Court of Appeal allowed the applicant’s claims in part. The court found that the banknotes under examination had never been introduced into general circulation in Moldova and had never been exchanged for the official currency of the country. There was no evidence in the file that the banknotes had been manufactured for circulation in Moldova. The applicant had officially declared the 353 bags of banknotes, which he considered to be waste paper with numismatic value, in order to transport them abroad. Moreover, it had to be presumed that he had obtained the items in a lawful manner, unless proof to the contrary had been adduced. However, nobody had claimed a property right in respect of the relevant items. The court concluded that the Customs Department and the STI had acted unlawfully.

16. On 17 May 2006 the Supreme Court of Justice quashed the lower court’s judgment and delivered a new one, rejecting all his claims. The court found that, in accordance with Articles 1 and 2 of the Money Act (see paragraph 19 below), only the National Bank of Moldova had the right to issue banknotes, and that the “MRT” bank had not been given such a right. As a result, the banknotes issued by the “MRT” bank could not be introduced into legal circulation and could not, under Article 206 of the Civil Code (see paragraph 18 below), be the lawful object of the contract of 26 January 2001. That judgment was final.

II. RELEVANT DOMESTIC LAW

17. The relevant part of the Moldovan Constitution reads as follows:

“Article 46. Private property rights and their protection.

(1) The right of private property, and claims against the State, shall be guaranteed.

(2) No one may be expropriated except for reasons dictated by public necessity, as established by law and against just and appropriate compensation made in advance.”

18. The relevant provisions of the Civil Code reads as follows:

“Article 285. Assets.

(1) Assets are patrimonial rights and any things which can be individually or collectively owned.

(2) Things are tangible items which can be the subject of civil rights and obligations”..

“Article 206. Object of legal acts

... 2. The object of a legal act must be lawful, in legal circulation and be specific or specifiable, at least generically”.

“Article 219. Effects of legal acts that are void

1. A legal act that is void shall be inoperative retroactively, with effect from the time of its conclusion. ...

2. Each party must return everything received on the basis of a legal act that is void; if restitution cannot be made, the party must pay the monetary value of the [other party’s] contribution.

3. A party, and any third party, to a legal act who has acted in good faith has the right to be compensated for damage caused by the legal act that is void .”

“Article 220. Nullity of acts contrary to the law, public order or good morals.

1. A legal act, or any part thereof, which is contrary to binding rules shall be void, unless the law provides otherwise.

2. A legal act, or any part thereof, which is contrary to the law, public order or good morals shall be void.”

“Article 286. Legal circulation of assets

Assets may circulate freely, except in cases where their circulation is limited or prohibited by law”.

19. The relevant provisions of the Money Act (Law no. 1232 of 15 December 1992) reads as follows:

“Article 1. Currency unit.

The currency unit of the Republic of Moldova is the leu (Moldovan), which is equal to 100 bani. Currency put into circulation may be in paper form (banknotes) or metallic form (coins).

Article 2. Issue.

The National Bank of Moldova has the exclusive right to put into circulation (issue) leu and coins and the right to withdraw them, as well as the right to establish the value of banknotes and their distinctive signs.”

THE LAW

I. ALLEGED VIOLATION OF ARTICLE 1 OF PROTOCOL No. 1 TO THE CONVENTION

20. The applicant complained that his right of property had been breached by the seizure of the banknotes belonging to him. He relied on Article 1 of Protocol No. 1 to the Convention, 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

21. The Government argued that the application was manifestly ill-founded, since the applicant had not adduced prima facie evidence that he had had a property right.

22. The Court considers that this issue is closely related to the merits of the application. It therefore joins the Government’s objection to the merits.

B. Merits

1. The submissions of the parties

23. The applicant submitted that the Moldovan authorities had groundlessly seized the banknotes from him, thus causing him pecuniary and non-pecuniary damage.

24. The Government argued that the applicant had not had a “possession” within the meaning of Article 1 of Protocol No. 1 to the Convention. He had obtained “MRT” roubles through a purchase contract which could not be considered valid since its object was items banned from circulation in Moldova. This had been confirmed by the Supreme Court of Justice. Moreover, the applicant could not have had a “legitimate expectation” of obtaining a property right over such banknotes, as they were banned from circulation, being considered “unlawful items”. The case was similar to Agneessens v. Belgium (no. 12164/86, Commission decision of 12 October 1988, Decisions and Reports 58, p.81), where the Commission had found that “there can be no deprivation of possessions if a conditional claim lapses as a result of non-fulfilment of the condition”. Moreover, the case was somewhat similar to Handyside v. the United Kingdom (7 December 1976, § 63, Series A no. 24), in which the British authorities had seized the book printed for the applicant in order to protect the morals of others. In the present case, the Moldovan authorities had been protecting the sovereignty of the country, which was undermined by actions taken by “MRT” such as issuing banknotes other than the only currency recognised in Moldova, the Moldovan leu. To accept the applicant’s request to export the banknotes outside Moldova would be tantamount to officially recognising the possibility that “MRT”-issued banknotes could be put into circulation. This was unlawful and unacceptable.

25. Furthermore, the banknotes seized from the applicant did not have any value. The right to obtain items from the company to the amount of USD 7,000, which the applicant claimed to have acquired under the contract, was a conditional claim that depended on the fulfilment of the contract. Since the contract could not be fulfilled as it contravened Moldovan public order, the applicant could not hope to obtain anything from the company on the basis of that contract, nor claim any damages from the Moldovan authorities for his inability to fulfil the contract.

2. The Court’s assessment

(a) Whether the applicant had a “possession”

26. The Court reiterates that “possessions” within the meaning of Article 1 of Protocol No. 1 can be either “existing possessions” (see Van der Mussele v. Belgium, 23 November 1983, Series A no. 70, p. 23, § 48) or assets, including claims, in respect of which an applicant can argue that he has at least a “legitimate expectation” that they will be realised (see, for example, Pressos Compania Naviera S.A. and Others v. Belgium, 20 November 1995, § 31, Series A no. 332, and Gratzinger and Gratzingerova v. the Czech Republic (dec.), no. 39794/98, § 69, ECHR 2002-VII).

27. In the present case, the Court notes that it has not been argued, and there is nothing in the file to show, that the applicant intended to put the banknotes in question into circulation, which at the relevant time were not accepted as real money anywhere in the world, including in the self-proclaimed “MRT”. On the contrary, he had a contract to transfer the banknotes to a numismatic company, to be sold as an otherwise worthless item with purely collector value. This clearly distinguishes the present case from situations where counterfeit money is seized which could in principle be traded for goods or services, and also from situations concerning money issued by a self-proclaimed entity and which is in circulation within that entity and thus on the internationally recognised territory of the State.

28. The other issue, on which the Supreme Court of Justice insisted, was that, in Moldova, only its National Bank had the right to issue banknotes. Therefore banknotes issued by other entities, such as the “MRT” banks, were unlawful and could not be part of the “legal circuit”. The Government termed them “unlawful items” that had to be seized. The Court notes first that the applicant was never accused of having issued any banknotes. Moreover, it considers that this reasoning and the term used are very broad, as many other items could be included in this category. For instance, any old coin or old banknote would have to be considered “unlawful”. The notion of “unlawful items” as defined by the Government is unacceptably flexible and allows for selective application by the authorities, without any clear criterion. It is also apparent from the Government’s submissions under Article 41 of the Convention (see paragraph 40 below) that despite considering them “unlawful items”, these banknotes could be returned to the applicant in the event of this Court’s finding of a violation of Article 1 of Protocol No. 1 to the Convention and that, moreover, in such a case the applicant would be able to fulfil the contract by delivering the bills to the company.

29. The Court is far from suggesting that a State cannot protect its sovereignty by seizing assets of self-proclaimed entities or items produced by them, even when owned by third parties. This is especially true when the items concerned inherently convey a statement concerning sovereignty, such as money bills or flags. However, in doing so, the authorities interfere with the right of property of particular individuals or groups, an interference which must be lawful and justified.

30. More generally, the Court finds that a person in possession of an item must be presumed to have a property right over that item until proof to the contrary is adduced. In the present case the first-instance court expressly relied on this principle (see paragraph 15 above). Indeed, even if the contract between the applicant and the “MRT” bank was void, nobody other than the applicant claimed ownership of the banknotes, which were also in his physical possession, and he thus had to be assumed to be their owner. This distinguishes the case from those where a person attempts to obtain possession of an item and the authorities refuse him or her such a right. It also makes this case different from Agneessens, cited above, in which, unlike in the present case, the applicant no longer wanted to obtain the return of money bills, but rather compensation for the loss of value of those bills during the time of their retention by the Belgian authorities.

31. The presumption of ownership is valid even if the owner has failed to comply with certain conditions attached to possessing an item, such as obtaining a licence (see Waldemar Nowakowski v. Poland, no. 55167/11, § 45, 24 July 2012, where the Court subscribed to the parties’ view that confiscation of old weapons for which the owner had not obtained a licence as required by law constituted an interference with his property right). In the case of Bosphorus Hava Yolları Turizm ve Ticaret Anonim Şirketi v. Ireland [GC] (no. 45036/98, §§ 141 et seq., ECHR 2005-VI) the applicant company could no longer use leased aircraft, following sanctions adopted by the United Nations Security Council and the European Union. By virtue of these sanctions, all aircraft belonging to the former Yugoslavia (FRY) were to be impounded. This rendered the contract signed between the applicant company and a FRY airline for the lease of two aircrafts void for lack of a lawful object. However, the Grand Chamber did not have any doubt as to the applicability of Article 1 of Protocol No. 1 to the Convention on account of the applicant company’s inability to use the aircraft after it was impounded by Ireland. In that case the applicant company was essentially seeking to continue using aircrafts, the use of which was unlawful in international law, yet this did not preclude the applicability of Article 1 of Protocol No. 1 to the Convention.

32. The Court concludes that the applicant, who physically held 353 bags of banknotes, had a “possession” within the meaning of Article 1 of Protocol No. 1 to the Convention.

(b) Whether there was an interference with the applicant’s possession

33. The Court considers that the seizure of the banknotes clearly interfered with the applicant’s possession.

34. The Court notes the Government’s argument, mirroring that of the Supreme Court of Justice, that the issuing and circulation of banknotes in Moldova by any entity other than the National Bank of Moldova, was contrary to various legal requirements (see paragraphs 18 and 19 above).

35. The Court reiterates that the applicant was never accused of issuing money bills. It also refers to its finding in paragraph 27 above that there is no evidence of an attempt to put the banknotes in the applicant’s possession into circulation. He officially declared the bills to the Moldovan customs authority and clearly stated their numismatic value and destination. Moreover, those bills could not be in circulation in 2001 since by then they were no longer accepted as money anywhere. Accordingly, the legislation relied on by the Supreme Court of Justice and the Government concerning circulation of money bills could not serve as a basis for seizing the applicant’s property.

36. The Court notes that neither the Supreme Court of Justice nor the Government indicated a specific legal provision clearly providing for the seizure of property in cases similar to the one under examination. The Supreme Court of Justice referred to three legal provisions (Articles 1 and 2 of the Money Act and Article 206 of the Civil Code, see paragraph 16 above). However, none of these provides for the seizure of banknotes. Moreover, while under Article 206 of the Civil Code the contract between the applicant and the “MRT bank” could be annulled for lack of a lawful object, under Article 219 of the same code (see paragraph 18 above), the effect of the nullity of a contract was that the parties had to return their relevant contributions to each other. This would imply returning the banknotes to the applicant in order to return them to the “MRT” bank. Even assuming that administrative or criminal law provided for the seizure of unlawfully created or obtained items as a penalty, it is to be noted that neither administrative nor criminal proceedings were instituted against the applicant.

37. The foregoing considerations are sufficient to enable the Court to conclude that the interference with the applicant’s property right was not “subject to the conditions provided for by law” within the meaning of Article 1 of Protocol No. 1 to the Convention.

There has accordingly been a violation of that provision in the present case.

II. APPLICATION OF ARTICLE 41 OF THE CONVENTION

38. 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 damage

39. The applicant claimed 12,220 euros (EUR) in respect of pecuniary damage. He relied on the contract with an American numismatic company according to which he had the right to select items from the company’s catalogue to the amount of USD 7,000 (see paragraph 8 above), in exchange for the “MRT” banknotes, and on a contract for the freight of the banknotes which he had had to pay, in addition to various expenses such as court fees and Moldovan visa fees.

40. The Government submitted, first, that the applicant had incorrectly converted various sums claimed from USD into euros. Second, the main claim - the lost revenue under the contract with the numismatic company, -was to be rejected since he could still fulfil the contract in the event that the Court found a violation of Article 1 of Protocol No. 1 to the Convention and the banknotes were returned to him by the Moldovan authorities. Moreover, under the contract, all expenses related to the transaction were to be covered by the applicant. Therefore, if the Court were to make an award, it should be limited to the difference between the sum payable under the contract (USD 7,000, corresponding to EUR 6,465) and the expenses which the applicant would have incurred in performing that contract, as specified by the applicant in his just satisfaction claims (approximately EUR 4,585).

41. In view of its finding of a violation of Article 1 of Protocol No. 1 to the Convention and having regard to the parties’ submissions, the Court awards the applicant EUR 1,900 in respect of pecuniary damage.

B. Non-pecuniary damage

42. The applicant claimed EUR 20,000 in compensation for the non-pecuniary damage caused to him as a result of his inability to recover his property and the distress which he had endured for six years.

43. The Government submitted that the amount claimed was exaggerated. They considered that the case resembled that of Balan v. Moldova (no. 19247/03, 29 January 2008) in some respects. The award for non-pecuniary damage made in that case (EUR 5,000) would also seem appropriate in the present case.

44. Taking into account the circumstances of the case and deciding on an equitable basis, the Court awards the applicant EUR 5,000.

C. Costs and expenses

45. The applicant made no claims in this respect.

D. Default interest

46. 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. Declares the application admissible;

2. Holds that there has been a violation of Article 1 of Protocol No. 1 to the Convention;

3. 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, to be converted into the currency of the respondent State at the rate applicable at the date of settlement:

(i) EUR 1,900 (one thousand nine hundred euros), plus any tax that may be chargeable, in respect of pecuniary damage;

(ii) EUR 5,000 (five thousand euros), plus any tax that may be chargeable, in respect of non-pecuniary damage.

(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 applicant’s claim for just satisfaction.

Done in English, and notified in writing on 11 February 2014, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.

Santiago Quesada Josep Casadevall
Registrar President

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