The calculation of compensation in compulsory expropriation is determined by the commercial value of the property

JUDGMENT

Kostov and others v. Bulgaria 14.05.2020 ( no.66581/12 and 25054/15)

see here

SUMMARY

The case concerned the applicants’ complaints that they had been awarded disproportionately low
amounts of compensation when property they owned on the outskirts of Sofia was expropriated by
the State for the construction of roads.

The Court, which is currently considering 20 similar applications, noted that the applicants had been
awarded compensation which was far below any estimates for land expropriated from other owners
in the same area. It concluded that the domestic legislation applied to their case had not provided
compensation which was reasonably related to the value of their land.

PROVISION

Article 1 of the First Additional Protocol

PRINCIPAL FACTS

The applicants are three Bulgarian nationals, Nedyalko Kostov, Severina Popova and Boris Velichkov.

They were born in 1971, 1951 and 1944, respectively, and live in Sofia.

The first applicant’s land was expropriated in 2011 to build a junction on the Sofia-Varna motorway,
while the second and third applicants’ land was expropriated in 2013 to build the ring road around
Sofia. The first applicant was awarded an average of 0.22 Bulgarian levs (BGN, equivalent to
0.11 euros (EUR)) per square metre as compensation for his land, and the second and third
applicants were awarded BGN 0.84 (EUR 0.43) per square metre.

The applicants brought judicial-review proceedings complaining that the compensation was too low,
and in breach of the domestic law which, in the event of expropriation, provided for the award of
compensation equivalent to the market value of comparable properties.

In the proceedings a plot of land sold for BGN 225 (EUR 115) per square metre was identified as
comparable to the first applicant’s property and a plot sold for BGN 25 (EUR 13) per square metre as
comparable to the second and third applicants’ property.

In judgments handed down in 2012 and 2014, the Supreme Administrative Court found, however,
that one comparable property was not sufficient to establish the market value of the expropriated
land. The amount of compensation therefore had to be calculated on the basis of Government
formulas set out in a Regulation under the domestic law, which led to the amounts of compensation
awarded during the expropriation.

In July 2006 the Constitutional Court upheld legal amendments to the method of calculating
compensation, although four of the 12 judges dissented. Among other things, the dissenters
expressed worries that the new system would not lead to just levels of compensation.

THE DECISION OF THE COURT…

Article 1 of Protocol No. 1

The salient question for the Court was whether the interference in question had been proportionate,
in other words, whether the authorities had struck a fair balance between the demands of the
general interest of the community and the requirement to protect the applicants’ rights.

It thus had to determine whether the applicants had been awarded an amount of compensation
under the Regulation that was reasonably related to the value of their expropriated land at the time
of the expropriation, as required by the Convention.

Under domestic law, the owners of expropriated property had to receive “equivalent”
compensation, which, according to the national Constitutional Court, meant “the market value
which the owner could receive if the property were sold on the free market”. Owing to a lack of
comparable properties, the applicants’ compensation had been set under the Regulation.
The Court noted the wide range of valuations for land belonging to other owners of expropriated
plots in the same area as those of the applicants. While those amounts could not definitively
establish the market value of the applicants’ land, they had at least to be taken as an indication of
market prices.

Furthermore, there had been major discrepancies between the values which were indicative of
market prices – between BGN 6 (EUR 3) and BGN 225 (EUR 115) in the case of the first applicant and
between BGN 20.05 (EUR 10) and BGN 25 (EUR 13) in the case of the second and third applicants –
and the compensation actually awarded – an average of BGN 0.22 (EUR 0.11) per square metre for
the first applicant and BGN 0.84 (EUR 0.43) per square metre for the second and third.

The Supreme Administrative Court had never addressed the question of such discrepancies in terms
of the individual characteristics of the applicants’ property. However, those discrepancies seemed to justify precisely the fears expressed by judges who had dissented in a Constitutional Court judgment of July 2006 in a case on the calculation of values for expropriated land.

The Government had argued that the applicants’ compensation had been adequate by referring to
the low taxable value of their land and had also pointed to statistical data on the prices of
agricultural land in the region of Sofia.

However, the Court noted that it had not been claimed that the value for taxation purposes,
calculated at national level, corresponded to a property’s fair market value. There was also no such
correspondence in the domestic law when it came to determining “equivalent” compensation.
It had also not been explained how the statistical data had been compiled, or whether they were
based on real values in transactions with agricultural land or on ones declared by the parties.

The Court also found irrelevant two additional circumstances relied on by the Government: the
relatively low price the first applicant had paid for his land in 2008 and the low income which the
second and third applicants had gained from theirs before expropriation. The Court observed that
the rules concerning the calculation of the “equivalent” compensation required under domestic law
did not refer to any such factors.
The Court concluded that the application of the rules provided for in the Regulation had not led to

the award of compensation that was reasonably related to the value of the applicants’ land. The
expropriation had imposed a disproportionate and excessive burden on the applicants, upsetting the
fair balance to be struck between the protection of property and the requirements of the general
interest. There had thus been a violation of Article 1 of Protocol No. 1.

Other articles

Having regard to its findings under Article 1 of Protocol No. 1, the Court found that no separate issue
arose under Article 6 § 1.

Just satisfaction (Article 41)

Pecuniary damage

The first applicant

The Court noted that it was unable to make an assessment as to any award in respect of pecuniary
damage due to the first applicant owing to the deficiencies in the domestic valuation process.
It thus found that a reopening of the domestic proceedings would be an appropriate means to
remedy the violation of the applicant’s rights which it had found: that could be sought under Article
239 of the Code of Administrative Procedure for the reopening of administrative judicial proceedings
where the Court had found a violation of the Convention.

If his case was to be re-examined by the domestic courts, they would, in principle, be obliged, on the
strength of Article 5 § 4 of the Constitution, to apply Article 1 of Protocol No. 1, as interpreted in the
Court’s case-law, where the applicable domestic rules conflicted with it.

It thus dismissed the first applicant’s claim for pecuniary damage for the value of his land. It also
rejected his claim for interest.

Second and third applicants

The second and third applicants had failed to submit any specific or quantified claim in respect of
pecuniary damage and the Court, having regard to the requirements of Rule 60 of the Rules of Court,
made no award under that head.

However, it observed that they also had the possibility to seek a reopening of the proceedings and a
reassessment of their compensation after the finding of a violation of Article 1 of Protocol No. 1.

Non-pecuniary damage and costs and expenses

The Court awarded 5,000 euros (EUR) to the first applicant and EUR 5,000 jointly to the second and
third applicants in respect of non-pecuniary damage. It awarded EUR 2,302 to the first applicant and
EUR 2,520 to the second and third applicants in respect of costs and expenses.


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