THIRD SECTION. CASE OF BITTÓ AND OTHERS v. SLOVAKIA. (Application no /09) JUDGMENT (Just satisfaction) STRASBOURG. 7 July 2015 FINAL 07/10/2015

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1 THIRD SECTION CASE OF BITTÓ AND OTHERS v. SLOVAKIA (Application no /09) JUDGMENT (Just satisfaction) STRASBOURG 7 July 2015 FINAL 07/10/2015 This judgment has become final under Article 44 2 of the Convention. It may be subject to editorial revision.

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3 BITTÓ AND OTHERS v. SLOVAKIA (JUST SATISFACTION) JUDGMENT 1 In the case of Bittó and Others v. Slovakia, The European Court of Human Rights (Third Section), sitting as a Chamber composed of: Josep Casadevall, President, Luis López Guerra, Ján Šikuta, Kristina Pardalos, Johannes Silvis, Valeriu Griţco, Iulia Antoanella Motoc, judges, and Stephen Phillips, Section Registrar, Having deliberated in private on 9 June 2015, Delivers the following judgment, which was adopted on that date: PROCEDURE 1. The case originated in an application (no /09) against the Slovak Republic lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms ( the Convention ) by twenty-one Slovakian nationals on 28 May In a judgment delivered on 28 January 2014 ( the principal judgment ), the Court held that there had been a breach of Article 1 of Protocol No. 1 in that the Slovak authorities, when pursuing the rent control scheme, had failed to strike the requisite fair balance between the general interests of the community and the protection of the applicants right of property. 3. Under Article 41 of the Convention the applicants sought just satisfaction (further details are set out in paragraphs 137 and 140 of the principal judgment). 4. Since the question of the application of Article 41 of the Convention was not ready for decision, the Court reserved it and invited the Government and the applicants to submit, within three months, their written observations on that issue and, in particular, to notify the Court of any agreement they might reach ( 139 and 142, and point 5 of the operative provisions of the principal judgment). 5. The applicants and the Government each filed further observations. 6. Following the delivery of the principal judgment the applicants representatives informed the Court that one of the applicants, Mr Juraj Motešický, had died on 9 July Mr Jozef Motešický, his son who had inherited the property in issue, expressed the wish to pursue the application in his late father s stead.

4 2 BITTÓ AND OTHERS v. SLOVAKIA (JUST SATISFACTION) JUDGMENT THE LAW I. LOCUS STANDI OF THE SON OF THE DECEASED APPLICANT 7. As Mr Jozef Motešický is the heir of the applicant Mr Juraj Motešický, the Court considers that he has a legitimate interest to continue the present proceedings in his late father s stead (see Ergezen v. Turkey, no /10, 29, 8 April 2014; and Gülbahar Özer and Others v. Turkey (revision), no /06, 8, 10 June 2014). II. ARTICLE 41 OF THE CONVENTION 8. 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 1. The parties submissions (a) The aplicants 9. The applicants challenged the method used and conclusions reached in the opinion of the Forensic Engineering Institute in Žilina of 15 November 2012 on which the Government relied. In particular, the legal regime of easements over property underlying that opinion was incomparable to leases. Among other things, landlords were obliged to maintain at their own expense the houses in respect of which rent-control applied, whereas persons benefiting from an easement had to participate in repairs and maintenance of the relevant property. The starting point for determination in the above opinion of the damage by analogy to an easement was At that time the ratio of controlled rent to market rental value had been highest over the entire period. For determination of damage in respect of the preceding years interest rate of 2012 was used which was similarly at the lowest level. In addition, the opinion reduced the value with reference to several factors which had no objective basis. The applicants also questioned the standing of the above institution which they considered to be directly linked to the Ministry of Justice. 10. The applicants relied on information provided by the National Association of Real Estate Agencies of Slovakia in According to it, average monthly rental price of 1 to 3-room flats in Bratislava Staré Mesto in original shape had been EUR 8 per square metre in 2013 (within a range

5 BITTÓ AND OTHERS v. SLOVAKIA (JUST SATISFACTION) JUDGMENT 3 from EUR 5 to 12); EUR 9 in 2010 (ranging from EUR 8 to 13), and EUR 12 in 2009 (within a range between EUR 7 and 17). Those data were concordant with the valuation submitted by experts of the applicants in respect of their flats in the same area. By contrast, the market rental value as indicated in the expert opinion submitted by the Government was considerably lower, namely between EUR 5 and The inverse yield methodology used in the expert opinions submitted by the applicants was internationally recognized for valuation of housing stock and it was current in Slovak practice, too. 11. With reference to statistical information, the applicants further argued that Slovakia had availed itself of sufficient housing stock permitting to abandon the rent control scheme prior to becoming a Contracting Party to the Convention. The argument that no award should be made in respect of the period up to 2008, until when the Government considered the rent control scheme as having been justified, was therefore unacceptable. 12. The applicants disagreed with the Government that no just satisfaction should be awarded to those who had purchased the houses in issue. Those buyers had legitimately expected that the rent control would be terminated within a short period as proclaimed by the Government. Furthermore, there was no indication that the market value of such houses had been different from other similar property. 13. As regards pecuniary damage, for the period between 18 March 1992 (date of entry into force of the Convention in respect of the former Czech and Slovak Federal Republic, of which Slovakia is one of the successor States) and 30 April 2014, the claims were based on opinions prepared by experts at the applicants request and expense. They included default interest determined under rates applicable under Slovak law. For the subsequent period the applicants claimed additional sums for each day. The individual applicants claims in respect of pecuniary damage are detailed in the Appendix. 14. Finally, with reference to their situation and the duration of implementation of the rent-control scheme, each applicant claimed EUR 50,000 in respect of non-pecuniary damage. (b) The Government 15. The Government contested the method used by the experts chosen by the applicants to determine the alleged pecuniary damage as being inappropriate and resulting in an excessive valuation. Among other things, the experts had incorrectly included in their valuation the joint ownership share of land on which the houses were built. Their opinions were based on unrealistic assumptions that the payback period in case of housing stock was twenty-five years only and that all flats concerned would have been let for market rent throughout the period during which the rent-control scheme had applied. There were several discrepancies in the opinions and the

6 4 BITTÓ AND OTHERS v. SLOVAKIA (JUST SATISFACTION) JUDGMENT conclusions did not correspond to the actual situation at the rental market. The Court should base its decision on the opinion submitted by the Forensic Engineering Institute in Žilina on 15 November 2012 (see column G. of Appendix 4 to the principal judgment) as complemented by another opinion of 4 July The applicants objections as to the alleged lack of independence of that body were groundless. 16. The applicants claims in respect of default interest were also incorrectly determined and excessive. 17. Any award in respect of pecuniary damage should not relate to the entire period of implementation of the rent-control scheme. With reference to legislative amendments, regulatory measures and a number of documents, the Government suggested that 2008 should be taken as the starting date as from which the rent-control scheme had imposed an excessive burden on the applicants in violation of Article 1 of Protocol No Since the applicants who had purchased the flats must have been aware that the rent-control scheme applied to those flats and since that fact must have been reflected in the purchase price, their claims in respect of pecuniary damage should be rejected. 19. Finally, the Government maintained that the applicants claim in respect of non-pecuniary damage was excessive. Any award should reflect the situation of the individual applicants, in particular the duration of the period during which the rent-control scheme applied in respect of the property and the way of its acquisition. 2. The Court s assessment 20. The Court reiterates that a judgment in which it finds a breach of the Convention or its Protocols imposes on the respondent State a legal obligation to put an end to the breach and make reparation for its consequences in such a way as to restore as far as possible the situation existing before the breach. If national law does not allow or allows only partial reparation to be made, Article 41 empowers the Court to afford the injured party such satisfaction as appears to it to be appropriate (see, for example, Kurić and Others v. Slovenia (just satisfaction) [GC], no /06, 79-80, ECHR 2014). 21. In assessing the pecuniary damage sustained by applicants in similar cases as the present one, the Court has, as far as appropriate, considered the estimates provided and had regard to the information available to it on rental values on the national property market during the relevant period. It has considered the legitimate purpose of the restriction imposed, recalling that legitimate objectives of public interest, such as pursued in measures of economic reform or measures designed to achieve greater social justice, may call for less than reimbursement of the full market value (see Statileo v. Croatia, no /10, 156, 10 July 2014; Amato Gauci v. Malta,

7 BITTÓ AND OTHERS v. SLOVAKIA (JUST SATISFACTION) JUDGMENT 5 no /06, 77, 15 September 2009; or Ghigo v. Malta (just satisfaction), no /05, 18, 17 July 2008). 22. In view of the nature of the breach found and the underlying factual circumstances (see 116 of the principal judgment), the Court takes the view that the redress for pecuniary damage suffered by the applicants is to be limited to appropriate compensation. 23. Its determination should be based, among other things, on the difference between rent under free market conditions and the rent to which the applicants were entitled under the domestic legislation and which the Court had found to be inadequate (see Statileo v. Croatia, cited above, 157). However, in view of its practice referred to above and the particular circumstances of the present case (see, in particular, paragraphs 104 and 106 of the principal judgment), an appropriate compensation will not have to reflect the idea of a total elimination of all the consequences of the breach found. 24. The parties submitted expert opinions based on different valuation methods and the conclusions of which vary significantly. In that respect the Court recalls that it is not bound, in principle, to follow the domestic calculations (see Ghigo v. Malta (just satisfaction), cited above, 17). 25. In the principal judgment (paragraph 116) the Court found a breach of Article 1 of Protocol No. 1 on account of the continued implementation of the rent control scheme. Presently it is not its task to determine, as suggested by the Government, whether and, if so until when, rent control could have been considered justified for the purpose of Article 1 of Protocol No As to the Government s argument that the two applicants who had bought the flats in issue in 2005 had been aware of the restrictions under the rent-control scheme, the Court held in the principal judgment (paragraph 117) that those applicants could reasonably expect that the rent-control scheme would be dismantled shortly after the purchase in view of the Government s plans and declarations. Furthermore, in similar cases it has held that the protection provided under the Convention should not be subjected to the way applicants had acquired their landlords rights (see R & L, s.r.o. and Others v. the Czech Republic, nos /05, 25784/09, 36002/09, 44410/09 and 65546/09, 103, 3 July 2014, with further references). 27. Under Article 41 of the Convention the purpose of awarding sums by way of just satisfaction is to provide reparation solely for damage suffered by those concerned to the extent that it is a consequence of the violation found that cannot otherwise be remedied. It is therefore not for the Court to quantify the amount of any damage which some of the applicants may suffer as a result of implementation of the rent-control scheme in the future (see also Amato Gauci v. Malta, cited above, 80). The Court

8 6 BITTÓ AND OTHERS v. SLOVAKIA (JUST SATISFACTION) JUDGMENT therefore dismisses the applicants claim for subsequent losses, without prejudice to any future claims they may have. 28. In view of the documents before it and also in view of the inherently uncertain character of the damage flowing from the breach found, the Court considers it appropriate to have recourse to equitable considerations, while taking into account the fact that the applicants claims comprised sums in respect of default interest and its practice in that respect (see also Vistiņš and Perepjolkins v. Latvia (just satisfaction) [GC], no /01, 36, ECHR 2014; Ghigo v. Malta (just satisfaction), cited above, 20; Anthony Aquilina v. Malta, no. 3851/12, 72, 11 December 2014). The Court further accepts that the applicants sustained non-pecuniary damage on account of the violation found, such that an award on that basis is also justified. 29. On the basis of the above considerations and given the circumstances of the case and the stakes involved for the applicants, the Court considers it appropriate to award the following aggregate sums covering all heads of damage (see also Centro Europa 7 S.r.l. and Di Stefano v. Italy [GC], no /09, 222, ECHR 2012), plus any tax that may be chargeable on those amounts: 1. Bittó Mária 2. Bíreš Ján Applicants 3. Studencová Zuzana 4. Spišák František 5. Spišáková Vlasta 6. Dobšovič Viktor 7. Dobšovičová Martina 8. Fridrichovský Marian 9. Barányiová Eva 10. Fridrichovský Juraj 11. Getlíková Kamila 12. Suchal Alexander 13. Suchalová Emília Sum awarded (EUR) 216, ,000 32, , , ,000 96, ,000 53, , ,000

9 BITTÓ AND OTHERS v. SLOVAKIA (JUST SATISFACTION) JUDGMENT Babjak Samuel 15. Babjaková Jana 16. Zemko Jozef 17. Vojtášová Hildegarda 18. Vojtáš Boris 19. Ščasná Lucia 20. Motešická Lucia 21. Motešický Juraj B. Costs and expenses 190,000 38, ,000 79, , ,000 TOTAL 2,170, While relying on their earlier arguments (see also paragraphs 140 and 141 of the principal judgment) the parties made further submissions as regards the claims in respect of costs and expenses. 31. Under that head the applicants claimed the global sum of EUR 218,914. It comprised the following items: (i) EUR 85, for legal representation of the applicants in proceedings before the Court; (ii) EUR 8,325 in respect of legal assistance provided at domestic level in the context of submissions to and negotiations with public authorities and presentations to the media; (iii) EUR 3,435 for the costs of translation of the submissions to the Court; (iv) EUR 4,284 in respect of the expert opinion elaborated in 2010; (v) EUR 117, for expert opinions determining the amount of pecuniary damage suffered by individual applicants; and (vi) EUR for the standpoint of the National Association of Real Estate Offices of Slovakia of As to the costs of the expert opinions (see point (v) in the preceding paragraph), they were determined in accordance with the relevant domestic regulations. Documents attached to two of the reports indicate that the applicants concerned were initially liable to pay an advance to the experts. This corresponded to EUR 100 for the opinion in respect of the first flat in a given house and EUR 50 in respect of the other flats valued and situated in the same house. Any further sums were payable by the applicants only in the event that they were successful and the Court made an award under Article 41 in respect of costs and expenses. The sums due were to be determined in accordance with the agreement depending on the Court s actual award. On 30 September 2014 the applicants submitted solemn

10 8 BITTÓ AND OTHERS v. SLOVAKIA (JUST SATISFACTION) JUDGMENT declarations confirming that they were liable to pay the experts costs as determined pursuant to the Ministry of Justice Regulation 491/ The Government challenged the legal costs claimed by the applicants as being excessive. Among other things they objected that, when calculating their costs, the applicants experts had applied a 50% increase for urgent nature of their work and another increase of 30% for its exceptional complexity. The Government argued that the Court should award only the sums actually incurred and disregard the agreement between the applicants and the experts on further amounts being payable depending on the outcome of the Convention proceedings. There was no call for any award in respect of the claim for legal assistance at domestic level. 34. 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 were actually and necessarily incurred and were reasonable as to quantum (see, for example, Tarakhel v. Switzerland [GC], no /12, 142, 4 November In the Court s view, the sum claimed in respect of legal assistance at domestic level is not related to legal representation which can be considered as having caused costs necessary, under the domestic legal order, for the rectification of the violation found. The Court therefore makes no award under this head. 36. As to the claim for the costs and expenses incurred in proceedings under the Convention, the Court agrees with the Government that the sums claimed, in particular as regards expert opinions concerning the rental value of the individual flats of the applicants and the reimbursement of lawyers fees, are excessive. Regard being had to the complexity of the case, the number of applicants, the documents in its possession and the above criteria, the Court considers it reasonable to award the following sums: (i) 25% of the global sum claimed in respect of expert opinions on rental value of individual flats, namely EUR 29,351. That amount is to be apportioned pro rata among the applicants according to the costs of their individual expert opinions; (ii) 50% of the global sum claimed for the costs of the applicants legal representation in the proceedings under the Convention, namely EUR 42,613, to be apportioned pro rata according to the individual applicants claims; (iii) EUR 7,958 in respect of the expert opinion of 2010, translation costs and the standpoint of the National Association of Real Estate Offices of Slovakia of 2014 (see points (iii), (iv) and (vi) in paragraph 31 above. 37. Thus the award in respect of costs and expenses totals EUR 79,922.

11 BITTÓ AND OTHERS v. SLOVAKIA (JUST SATISFACTION) JUDGMENT 9 C. Default interest 38. 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, 1. Holds, unanimously, that Mr Jozef Motešický has standing to continue the present proceedings in Mr Juraj Motešický s stead; 2. Holds, by six votes to one, (a) that the respondent State is to pay the applicants, within three months from the date on which the judgment becomes final in accordance with Article 44 2 of the Convention: (i) EUR 2,170,000 (two million one hundred seventy thousand euros), plus any tax that may be chargeable, in respect of pecuniary and non-pecuniary damage (paragraph 29); (ii) EUR 79,922 (seventy-nine thousand nine hundred and twentytwo euros), plus any tax that may be chargeable to the applicants, in respect of costs and expenses (paragraphs 36 and 37); (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; 3. Dismisses, unanimously, the remainder of the applicants claim for just satisfaction. Done in English, and notified in writing on 7 July 2015, pursuant to Rule 77 2 and 3 of the Rules of Court. Stephen Phillips Registrar Josep Casadevall President

12 10 BITTÓ AND OTHERS v. SLOVAKIA (JUST SATISFACTION) JUDGMENT In accordance with Article 45 2 of the Convention and Rule 74 2 of the Rules of Court, the separate opinion of Judge Motoc is annexed to this judgment. J.C.M. J.S.P.

13 BITTÓ AND OTHERS v. SLOVAKIA (JUST SATISFACTION) JUDGMENT - SEPARATE OPINION 11 DISSENTING OPINION OF JUDGE MOTOC 1. My first objection is the path taken by the Court in this case. The general rule followed by the Court is in calculating pecuniary damage, the starting point is the loss caused at domestic level. As stated by the Court in the context of Article 46 in the case of Statileo v. Croatia (no /10, 10 July 2014): Whilst in finding a violation of Article 1 of Protocol No. 1 to the Convention in the present instance the Court has primarily focused on the particular circumstances of the applicant s case, it adds by way of a general observation that the problem underlying that violation concerns the legislation itself and that its findings extend beyond the sole interests of the applicant in the instant case...this is therefore a case where the Court considers that the respondent State should take appropriate legislative and/or other general measures to secure a rather delicate balance between the interests of landlords, including their entitlement to derive profit from their property, and the general interest of the community including the availability of sufficient accommodation for the less well-off in accordance with the principles of the protection of property rights under the Convention... It is not for the Court to specify how the rights of landlords and lessees... should be balanced against each other. The Court has already identified the main shortcomings in the current legislation, namely, the inadequate level of protected rent in view of statutory financial burdens imposed on landlords, restrictive conditions for the termination of protected lease, and the absence of any temporal limitation to the protected lease scheme The situation in this case is different from Ghigo v. Malta (just satisfaction, no /05, 17 July 2008) where the Court did not consider itself to be bound by the domestic calculations. In that case, the Court considered at paragraph 17 that the Government s calculations are merely speculative and based on another legal regime which was not pertinent to the applicant s premises. Furthermore,... in its principal judgment the Court solely considered whether the requisition order imposed on the applicant creating a landlord-tenant relationship with fixed minimal rents infringed the applicant s rights under Article 1 of Protocol No. 1. In our case we do not have such a situation. 3. Subsidiarily, I consider that the system applied in this case it is not an objective one. 4. When dealing with cases of deprivation of property the Court has accepted that [l]egitimate objectives of public interest, such as pursued in measures of economic reform or measures designed to achieve greater social justice, may call for less than reimbursement of the full market value (see James and Others v. the United Kingdom, 21 February 1986, Series A no. 98, 54 in fine).

14 12 BITTÓ AND OTHERS v. SLOVAKIA (JUST SATISFACTION) JUDGMENT - SEPARATE OPINION 5. The use of equity must be based on legal norms, because when mention is made of a court dispensing justice or declaring the law, what is meant is that the decision finds its objective justification in considerations lying not outside but within the rules, and in this field it is precisely a rule of law that calls for the application of equitable principles (North Sea Continental Shelf, note 146, 88.) 6. It is again regrettable that the Court prefers to replace an objective legal reasoning with a rather speculative ruling, which does not allow for ascertaining whether the judges have based their ruling on a realistic, rather than a hypothetical, economic value and whether, therefore, they have offered full redress. As one dissenting judge correctly asserted in Hentrich, the Court should not shelter behind equity but rule on the legal issues and invite experts to provide it with the data which would enable it to assess the value of the land, if need be in equity. Deciding in equity, like any other judicial decision, requires a clear and reliable view of the facts (see Dissenting opinion of Judge Martens in Hentrich v. France (Article 50), 3 July 1995).

15 Appendix Applicant Pecuniary damage for the period between 18 March 1992 and 30 April 2014 (EUR) Actual damage (A) BITTÓ AND OTHERS v. SLOVAKIA (JUST SATISFACTION) JUDGMENT 13 Default interest (B) Applicants claims in respect of pecuniary damage Pecuniary damage (A+B) Data for calculation of pecuniary damage for the period from 1 May 2014 (EUR) Applicant 2a) Amount of actual damage for the period between 18 March 1992 and 31 March b) Estimated amount of actual damage for each following day of default 1. Bittó Mária , , ,52 1. Bittó Mária ,19 43,16 2. Bíreš Ján , , ,23 2. Bíreš Ján ,54 10,06 3. Studencová Zuzana , , ,22 3. Studencová Zuzana ,89 0,00 4. Spišák František , , ,89 4. Spišák František ,47 68,25 5. Spišáková Vlasta , , ,89 5. Spišáková Vlasta ,47 68,25 6. Dobšovič Viktor 6. Dobšovič Viktor 7. Dobšovičová Martina , , ,09 7. Dobšovičová Martina ,27 32,89 8. Fridrichovský Marian , , ,70 8. Fridrichovský Marian ,69 66,71 9. Barányiová Eva , , ,97 9. Barányiová Eva ,57 0, Fridrichovský Juraj , , , Fridrichovský Juraj ,17 13, Getlíková Kamila , , , Getlíková Kamila ,56 0, Suchal Alexander 12. Suchal Alexander , , , Suchalová Emília 13. Suchalová Emília ,55 0, Babjak Samuel 14. Babjak Samuel , , , Babjaková Jana 15. Babjaková Jana ,04 0, Zemko Jozef , , , Zemko Jozef ,45 1, Vojtášová Hildegarda 17. Vojtášová Hildegarda , , , Vojtáš Boris 18. Vojtáš Boris ,87 0, Ščasná Lucia , , , Ščasná Lucia ,70 0, Motešická Lucia , , , Motešická Lucia ,24 0, Motešický Juraj , , , Motešický Juraj ,79 0,00 TOTAL , , ,30 TOTAL 304,24