Restitution: European Experience – Recommendations for Serbia, Belgrade, 23 September 2009 Restitution: The Experience of Croatia
Denationalization is one of the most difficult and complex issues that the Republic of Croatia has to deal with after acquiring its independence. The issue of restitution or compensation for the property that was taken at the time of the former communist regime. It was necessary to annul effects of the forced transfer of private property into public/state/social property disregarding the legal basis of the transfer, and initiate the process of denationalization. But The process of denationalization faces numerous problems because of its legal complexity, economic and budgetary considerations, social and political consequences, and administrative difficultise. Croatian experiences could be instructive for Serbia as Croatia and Serbia were parts of the common state, socialist Yugoslavia, with a legal system that was partly identical (Yugoslav legal system) and partly similar (republic legal systems).
Legal framework The main Law for Denationalization is the Law on Compensation for Property Taken under the Yugoslav Communist Regime (Official Gazette no. 92/96). It was passed on 11 October 1996. and entered into force on 1 January 1997. Adoption of the Law coincided with accession to the Council of Europe on 6 November 1996. A core legal framework for the restitution process in Croatia also comprises the Law on the Taken Property Compensation Fund (Official Gazette no. 69/97, 105/99, 64/00) and six rulebooks on the criteria for property value determination (for apartments; companies; construction land offices; agricultural land, forests and forest land; movables of cultural, artistic or historical value; ships and boats). Other laws, government decrees and rulebooks regulate other issues more or less closely connected with restitution, such as the Law on Transformation of the Enterprises in Social Ownership (1991), the Law on Privatisation (1996), the Law on Rent for Flats (1996), the Law on Inheritance (different texts from 1965 onwards), the Law on Ownership (1996), the Law on Land-Ownership Records (1996), the Law on General Administrative Procedure, the Law on Administrative Disputes, etc.
The title of the Law itself (the Law on Compensation for Property Taken under the Yugoslav Communist Regime) indicates the conclusion that it deals with compensation for property and not with restitution. Nevertheless, the Law stipulates restitution and not only compensation as the form of denationalization. The Law is based on the following postulates: n redress of the old wrong must not cause a new one; n the state guarantees the payment in money or securities (stocks and bonds) and exceptionally in kind by returning the ownership of the taken property, in principle returning the confiscated property into ownership; n vested rights of a third party (anyone who might be affected) are protected.
Objects of denationalization, exceptions of restitution etc. The objects of compensation are primarily the things that were taken from previous owners and transferred into public ownership such as: n n n construction land (vacant only); agricultural land, forest land forests; residential (apartment buildings and apartments), office buildings i. e. indivisible parts of these buildings and apartments and business premises as separate parts of buildings i. e. indivisible parts of these separate parts together with appertaining land; ships and boats; companies; movable property.
Exceptions to the restitution of property As we could see, the Law stipulates possibilities for restitution of vacant construction land, agricultural land, forests and forest land, office buildings, ships Andmovable properties. It also determines the property that cannot be restituted and that is: n the property to which a third party has established a right of ownership based on a valid legal business n the property that according to the Law on Privatization of Socially Owned Enterprises is a part of the capital n property of legal persons in the area of health care, social care and education, culture, cultural and natural heritage protection, science, power supply and water management, sports and other public services that have become property of these legal persons on basis of particular regulations n property that is a part of network, objects, appliances and other means of public enterprises in the area of power supply, utility services, transport and communication, as well as forestry n property that is exempted from legal relations, i. e. without a possibility of gaining ownership right n if area integrity i. e. the purpose of the premises and property usage are infringed by restitution n if economic or technological function of the complex is reduced by restitution
Claims and Compensation Restitution or compensation claim can be filed only by the former owner and his legal heirs in the first line. The claim could have been filed within six months from the day when the Law entered into force so that it expired on 1 July 1997; and for newly authorised persons under the amended Law on 5 January 2003. If the property is restituted in kind, person under obligation is the person in whose property is the property to be restituted. If the property is not restituted in kind because of legal conditions, compensation is paid, as a rule in bonds of the Republic of Croatia. Bonds are expressed in Kuna and are payable in equal semi-annual instalments within twenty years (on 1 January and 1 July every year) commencing from 1 January 2000. Pecuniary compensation is paid only for confiscated flats and amounts to 25% of the compensation determined in the way stipulated by law. The person under obligation of pecuniary compensation is the Taken Property Compensation Fund.
If confiscated property is within the property of enterprises, the compensation is in shares and interests of these enterprises, and if this is not possible, the compensation is in shares and interests from the state portfolio of the Croatian Privatisation Fund, who is the person under compensation obligation. The Law stipulates that total amount of the compensation cannot exceed 3, 700, 000 Kuna person (€ 500, 000) except property compensation that is part of the company capital in accordance with the Law on Privatisation of Socially Owned Enterprises.
Foreign citizens and legal entities On 5 July 2002, the Law was substantially amended with regard to the legal position of foreign citizens (Official Gazette no. 80/02, 81/02). The main intention of the Croatian Parliament when adopting the amendments to the Law was to resolve the situation after the Constitutional Court decision of 1999. Original Law stipulates in its Art. 11/1 that: “Foreign individuals and legal entities do not have rights based on of this Law”. The Constitutional Court in its decision of 1999 cancelled part of the mentioned provision with regard to foreign individuals. Foreign legal entities cannot realise their aspirations within restitution process even after that Decision. There is no right of previous owner to compensation according to the amended Law on Compensation when compensation issue has been regulated by an international agreement (Art. 10/1). Foreign individuals as well as foreign legal entities can acquire rights within restitution process if an international agreement has provided for such a solution (Art. 10/2). It means that international agreements are the way to evade the stipulations of the Law on Compensation. It is interesting that such an ambiguous provision of Art. 10, adopted by the amendments to the Law of 2002, caused a lot of problems in the course of restitution process.
The situation was resolved by the Administrative Court only in 2008, after six years. In that period, administrative bodies and the Administrative Court did not accept restitution and compensation requests filed by foreign citizens, based on the provision of Art. 10/2. Their legal opinion was that such provision asked for an international agreement in order for restitution to be possible (international agreement as a precondition for restitution to foreign citizens). However, the Property Department of the Administrative Court changed this legal opinion into the contrary on its general session on 8 February 2008. Immediately after that, the Court ruled in accordance with the changed opinion in case Class UP/II-94201/01 -01/61, Ref. no. 514 -03 -03/03 -2 -03 -3 on 14 February 2008.
Institutional framework Offices of state administration at the county level are state administrative bodies competent in restitution cases as first instance bodies. We can estimate that there are between 170 and 200 civil servants responsible for restitution and other property-legal cases. The number of foreseen working places in respective internal units is between 220 and 250, by our estimation. Second instance body is the Ministry of Justice. There are only 8 civil servants working on second instance cases connected with restitution and other property-legal affairs (Rulebook foreseen 17). Judicial protection in all restitution cases has been ensured in the Administrative Court. A constitutional suit is the ultimate remedy for the parties dissatisfied with decisions of administrative bodies and the Administrative Court.
Economic potential of Croatia Economic parameters for Croatia – years 2002 - 2008 GDP (in million €) 28. 112 47. 370 6. 331 10. 682 Export (in % GDP) 39. 6 41. 9 Import (in % GDP) 49. 1 50. 1 Budget (kuna; 1 € = 81. 882. 172. 995 (about 11. 216. 736. 000 €) 127. 028. 232. 715 (about 17. 401. 127. 000 €) 15. 143 39. 125 6. 2% 0. 9% GDP per capita (in €) about 7, 3 kuna) Gross external debt (in million €) Budget deficit
The effects of restitution Until 28 September 2006. , there had been total of 51, 617 claims filled in. 46% (about 23, 740) of them were completed with full legal validity. 61% (about 14, 480) of claims were accepted, while the rest of them (39%) were refused. In 56% of cases that were accepted, the restitution was realised in rem ( about 8, 110 cases). The respective property for natural restitution fell under three categories: a) offices and apartments – 47%, b) unused construction land – 26%, and c) agricultural land, forests and forest land – 27%. In other cases restitution was realised by means of compensation. It is not possible to get information about the total amount of compensation paid in money or in bonds and shares. However, the Taken Property Compensation Fund was paid 121. 4 million kuna (about € 16. 6 millions) in money and 104. 2 million kuna (about € 14. 3 million) in bonds until mid-2003.
There were 3. 482 claims of foreign individuals and legal entities (from 35 different states), individuals without citizenship (stateless individuals) or individuals of unclear citizenship in the second application period (5 July 2002 – 5 January 2003), after the 2002 amendments to the Law. As many as 834 claims (24%) were filed by the subjects with unclear citizenship or unknown headquarters. Italians filed 1, 213 claims (34, 8%), Austrians 444 (12, 8%), USA citizens 179 (5, 1%), Israel citizens 163 (4, 7%), Germans 148 (4, 3%), etc. It should be noted that foreign individuals and legal entities had filed as many as 4, 211 claims in the period between 1991 and 2005, irrespectively of formal legal terms. All claims of foreign claimants ask for compensation of 756. 8 million kuna ( about € 103. 7 million)
Judicial before Administrative Court The Court has received total of 3, 053 restitution cases in 11 years, from 1999 to 2009 (recent data collected for this paper). Only 46 cases (1. 5%) have been initiated by the Catholic Church. As few as 1, 331 cases have been resolved (only 43. 6%), mostly with negative decision (64. 8% of resolved cases). Decisions have been positive in 310 cases (23. 3%), while 158 cases have been resolved in other ways. The role of the Court is very important. It can, by means of its legal opinion or through decisions in individual cases, determine the way of resolving cases before administrative bodies. There have been several very important legal opinions of the Court, which determine the restitution process significantly
Key problems n n n Weak preparation for restitution process Imprecise and postponed legal regulation Discrimination of applicants and beneficiaries of restitution Extremely long duration of restitution processes and weak administrative capacities Problems connected with court protection of applicants’ rights Weak and unclear political will about restitution
Disputes before the European Court of Human Rights Number of cases 5 No. of cases per year 1999. 1 Outcome of the cases Compensation (€) 2005. 1 Admissible 2 € 20. 540 + any tax that may be chargeable to the applicants 2006. 1 2007. 1 Inadmissible 3 - 2008. 1
Recommendations 1. To make all possible preparations of legal regulation and administrative capacities before enactment of the restitution law; 2. To find clear, well discussed, and broadly accepted political goals of restitution; 3. To have appropriate restitution management and firm political leadership of the restitution process, irrespectively of the kind and scope of restitution; 4. To ensure reasonable time for resolving restitution cases; 5. To evade any sort of procedural or substantive discrimination; 6. To create a complete system of court protection in order to be able to meet the standards of the European Convention for the Protection of Human Rights and Fundamental Freedoms; 7. Basic orientation and principles of restitution, not to cause new wrongs while recovering old ones, could be acceptable in Serbia, also; 8. Compensation in bonds should be ensured in shorter time span (it seems that twenty years is too long a term); 9. It is advisable to regulate restitution by a single law;
10. Restitution in rem is advisable, but not at the expense of the public interest and the interests of current users; 11. It is recommendable to make compensation as close to market value of the property as possible, having in mind country’s economic and budgetary stability; 12. To make land registries fully reliable before entering the restitution process; 13. To use external expertise of the court appointed experts in value estimation at least in all serious cases (for example, when property might exceed value of € 10, 000); 14. To gather and systematise judicature of the neighbouring countries and to train the civil servants responsible for restitution before entering the restitution process; 15. To separate those civil servants who will work on restitution cases and to make them in charge of restitution cases only; 16. To ensure two levels of administrative procedure before different administrative bodies (of first and second instance), to ensure sound and fair possibilities for appeal; 17. To prepare adequate premises and equipment, as well as to prepare the necessary software in advance.
THANK YOU! Dr. Ivan Koprić ikopric@pravo. hr Dr. Boris Ljubanović ljboris@pravos. hr
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