CASE OF C.A. ZRT. AND OTHERS v. HUNGARY

FIRST SECTION

CASE OF C.A. ZRT. AND OTHERS v. HUNGARY

(Applications nos. 11599/14 and 4 others – see appended list)

JUDGMENT
(Just satisfaction)

STRASBOURG

16 May 2024

This judgment is final but it may be subject to editorial revision.

In the case of C.A. Zrt. and Others v. Hungary,

The European Court of Human Rights (First Section), sitting as a Committee composed of:

 Faris Vehabović, President,
 Carlo Ranzoni,
 Erik Wennerström, judges,
and Liv Tigerstedt, Deputy Section Registrar,

Having deliberated in private on 9 April 2024,

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

PROCEDURE

1.  The case originated in five applications (nos. 11599/14, 11602/14, 31185/14, 11100/15 and 29258/16) against Hungary lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”), by the applicants listed in the appended table on the dates specified therein.

2.  In judgments delivered on 1 September and 13 October 2020 respectively (“the principal judgments”), the Court held that the applicants had been deprived of their possessions, specifically their usufruct rights on various plots of arable land, in breach of the requirement of proportionality and that, consequently, there had been violations of Article 1 of Protocol No. 1 (see C.A. Zrt. and T.R. v. Hungary (merits) [Committee], nos. 11599/14 and 11602/14, 1 September 2020; Agro-Pacht Kft. v. Hungary (merits) [Committee], no. 31185/14, 13 October 2020; Szajki Mezőgazdasági Zrt. v. Hungary (merits) [Committee], no. 11100/15, 13 October 2020; and Kothencz v. Hungary (merits) [Committee], no. 29258/16, 13 October 2020).

3.  Under Article 41 of the Convention, the applicants claimed pecuniary and non-pecuniary damage as well as costs and expenses. However, since the question of the application of Article 41 of the Convention was not ready for decision, the Court reserved it in whole and invited the Government and the applicants to submit, within six months, their written observations on that issue and, in particular, to notify the Court of any agreement they might reach.

4.  The parties did not reach an agreement on just satisfaction within the time allocated for that purpose. The applicants and the Government each filed observations, which were transmitted to the other party for comments.

5.  On 3 October 2022 the applicant company Agro-Pacht Kft. (application no. 31185/14) notified the Court of its withdrawal of any just satisfaction claims, since the parties had reached a settlement covering damages as well as costs and expenses.

THE LAW

6.  Having regard to the similar subject matter of the applications, the Court finds it appropriate to examine them jointly in a single judgment.

7.  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.”

8.  The Court notes that the applicant company has withdrawn its claims for just satisfaction following a settlement with the Government (see paragraph 5 above). Therefore, the Court concludes that the applicant company may be regarded as no longer wishing to pursue the application. This application should therefore be struck out of the Court’s list of cases pursuant to Article 37 § 1 (a) of the Convention.

(a)   The parties’ submissions

(i)      The applicants

(α)     C.A. Zrt. (application no. 11599/14)

9.  In its observations of 11 March 2021, the applicant company claimed pecuniary damage in the amount of 362,531,941 Hungarian forints (HUF) (approximately 1,000,000 euros (EUR)) for the years 2014 to 2020, and an additional HUF 520,000,000 (EUR 1,434,000) as loss of profit incurred 2020 to 2030 as established by an expert valuation report, together with accrued interests in the amount of HUF 29,550,342 (EUR 81,500). It argued that it had incurred and would incur such damage because of the premature termination of its usufruct rights on various plots of arable land amounting to altogether 272.3 hectares. The figures were based on the statutory value of expropriated arable land.

(β)      T.R. (application no. 11602/14)

10.  In his observations of 29 April 2021, the applicant claimed HUF 31,173,630 (EUR 97,700) in respect of pecuniary damage which he had incurred because of the premature termination of his usufruct rights on two distinct plots of arable land amounting to 13 hectares. The calculations were based on the value of the rights as well as on the loss of future profit (e.g., loss of estimated production profit, and the loss of access to the “single area payment scheme” of the European Union’s Common Agricultural Policy, among others). He further claimed accrued interests amounting to HUF 2,588,139 (EUR 8,000).

(γ)      Szajki Mezőgazdasági Zrt. (application no. 11100/15)

11.  The applicant company claimed a total of EUR 395,080 in respect of pecuniary damage which it had incurred because of the early termination of its usufruct rights on various plots of arable land (150 hectares). In its submissions, as per a valuation report prepared by an expert auditor, this figure represented the loss of future profits reasonably expected under the usufruct rights but for the impugned measure. In particular, the calculations were based on the applicant company’s historical performance in the years between 2010-2014. The average of profits reached during these reference years were projected on one hectare of utilised arable land, and the resultant figure was multiplied by the number of hectares concerned for the duration of the contracts (10 years).

(δ)      Mr Kothencz (application no. 29258/16)

12.  In his observations dated 24 June 2022, the applicant claimed a sum of HUF 31,781,250 (EUR 89,000) for the damages suffered which corresponded to his loss of revenues for a period of 6 years and 3 months counted from the termination of his usufruct rights in the land register, in respect of 56 hectares.

(ii)    The Government

13.  In their observations made on various dates during the principal proceedings, the Government rejected the applicants’ just satisfaction claims without presenting alternatives to the calculations put forward by the applicants.

14.  In their subsequent observations submitted on 27 January 2022, after the adoption of the principal judgment, the Government raised an objection that domestic remedies had not been exhausted, on the ground that a new domestic remedy had been introduced on 22 December 2021 – a view not shared by the applicants arguing that the new remedy was ineffective. However, the Government did not submit any observations on just satisfaction under Article 41 of the Convention.

(b)   The Court’s assessment

15.  At the outset, the Court reiterates that, under Rule 55 of the Rules of Court, any plea of inadmissibility must be raised by the respondent Contracting Party, in so far as the nature of the objection and the circumstances so allow, in its written or oral observations on the admissibility of the application (see N.C. v. Italy [GC], no. 24952/94, § 44, ECHR 2002‑X).

16.  The Court notes that in the present case, the Government raised an objection as to the non-exhaustion of the domestic remedies subsequently to the adoption of the principal judgment.

17.  The Court reiterates that if the victims, after exhausting in vain the domestic remedies before complaining to the Court of a violation of their rights, were obliged to do so a second time before being able to obtain from the Court just satisfaction, the total length of the procedure instituted by the Convention would scarcely be in keeping with the ideas of the effective protection of human rights. Such a requirement would lead to a situation incompatible with the aim and object of the Convention (see, for example, De Wilde, Ooms and Versyp v. Belgium (Article 50), 10 March 1972, § 16 in fine, Series A no. 14, and Koprivica v. Montenegro (just satisfaction), no. 41158/09, § 14, 23 June 2015).

18.  It follows that, in the present stage of the proceedings in these applications, the Government are precluded from relying on a failure to exhaust domestic remedies.

19.  The Court further 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 reparation or allows only partial reparation, Article 41 of the Convention empowers the Court to afford the injured party such satisfaction as appears to it to be appropriate (see Akhverdiyev v. Azerbaijan (just satisfaction), no. 76254/11, § 25, 21 March 2019, and Maharramov v. Azerbaijan (just satisfaction), no. 5046/07, § 12, 9 May 2019).

20.  Moreover, there must be a clear causal connection between the damages claimed by the applicants and the violation of the Convention. In appropriate cases, this may include compensation in respect of loss of earnings (see, among other authorities, Barberà, Messegué and Jabardo v. Spain (Article 50), 13 June 1994, § 16-20, Series A no. 285‑C).

21.  The Court further reiterates that legitimate objectives in the “public interest”, such as those 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 Cauchi v. Malta, no. 14013/19, § 103, 25 March 2021).

22.  In the principal judgments, the Court held that the enactment of the impugned measure served a legitimate aim, however, having had regard to the short transitory period, the lack of any compensatory scheme and the importance that the usufruct lease rights had for the applicants, the Court found the measure to be disproportionate.

23.  The Court notes that the Government did not put forward any alternative calculation method as opposed to the ones proffered by the applicants. For their part, the applicants presented detailed arguments and, in applications nos. 11599/14 and 11100/15, also expert valuation reports.

24.  However, despite the applicant’s calculations, the Court notes that potential changes of the regulatory environment should be taken into account when calculating loss of profits (see Könyv-Tár Kft. and Others v. Hungary (just satisfaction), no. 21623/13, § 33, 5 October 2021). In the principal judgments, the Court did not hold that the applicants had had a legitimate expectation of an unchanged regulatory environment. Instead, it held that there was a clear trend, foreshadowing the possibility of the implementation of further restrictive regulation of usufruct rights with foreign beneficiaries. Such regulatory risks, however, were not assumed by the valuations of the applicants – or the experts involved – when calculating the pecuniary damages. The Court therefore considers that the circumstances of the present cases do not lend themselves to a precise assessment of pecuniary damage, since this type of damage involves many uncertain factors – such as regulatory risks unaccounted for by the valuation report submitted by the applicant company (ibid.).

25.  Without speculating on the profits which the applicants would have achieved if the violation of the Convention had not occurred and if they had been able to continue their normal operations, the Court nevertheless observes that the applicant companies suffered a real loss of opportunities.

26.  Having regard to the above elements, the Court considers it appropriate to award them lump sums, which include any accrued interests, in compensation for the losses resulting from the violation found. It considers it reasonable to award an aggregate sum of:

– EUR 410,000 to C.A. Zrt. (application no. 11599/14);

– EUR 18,500 to T.R. (application no. 11602/14);

– EUR 155,000 to Szajki Mezőgazdasági Zrt. (application no. 11100/15),

– EUR 54,000 to Mr Kothencz (application no. 29258/16).

27.  The applicants C.A. Zrt. (application no. 11599/14), T.R. (application no. 11602/14) and Szajki Mezőgazdasági Zrt. (application no. 11100/15) each claimed EUR 10,000 euros as non-pecuniary damage. Mr Kothencz (application no. 29258/16) made no separate claim under this head.

28.  The Government did not comment on these claims.

29.  Ruling on an equitable basis, the Court awards to each of the applicants C.A. Zrt. (application no. 11599/14), T.R. (application no. 11602/14) and Szajki Mezőgazdasági Zrt. (application no. 11100/15) the sum of EUR 5,000 under this head. Since Mr Kothencz (application no. 29258/16) made no specific claim for non-pecuniary damage, the Court makes no award in this respect.

30.  The applicant company C.A. Zrt. (application no. 11599/14) claimed EUR 8,400 plus VAT for legal fees (42 hours billed at EUR 200 plus VAT) as well as HUF 508,000 as expert fee.

31.  The applicant T.R. (application no. 11602/14) claimed EUR 8,400 plus VAT for legal fees (42 hours billed at EUR 200 plus VAT).

32.  The applicant company Szajki Mezőgazdasági Zrt. (application no. 11100/15) claimed EUR 10,845 plus VAT (68.4 hours of legal and 11.7 hours of paralegal work, billed at EUR 150 and EUR 50, respectively).

33.  Mr Kothencz (application no. 29258/16) made no separate claim under this head.

34.  The Government did not comment on these claims.

35.  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 are reasonable as to their quantum. Regard being had to the documents submitted by the parties and the above criteria, the Court considers it reasonable to award to each of the applicants C.A. Zrt. (application no. 11599/14), T.R. (application no. 11602/14) and Szajki Mezőgazdasági Zrt. (application no. 11100/15) the sum of EUR 5,000 to cover all costs and expenses incurred. The applicant, Mr Kothencz (application no. 29258/16), having made no specific claim for costs and expenses, the Court makes no award in this respect.

FOR THESE REASONS, THE COURT, UNANIMOUSLY,

(a)  that the respondent State is to pay the remaining applicants, within three months, the amounts set out in the appended table, to be converted into the currency of the respondent State at the rate applicable at the date of settlement:

(b)  that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the amounts awarded at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points;

Done in English, and notified in writing on 16 May 2024, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.

 Liv Tigerstedt Faris Vehabović
 Deputy Registrar President

APPENDIX

List of cases and awards of just satisfaction

[1]  Plus any tax that may be chargeable to the applicants.