Communicated on 22 November 2016
FIRST SECTION
Application no. 50939/10
VAVAN LTD
against Armenia
lodged on 3 September 2010
STATEMENT OF FACTS
The applicant, Vavan Ltd (hereinafter “the applicant company”), is a limited liability company with its registered office in Yerevan. It is represented before the Court by Ms C. Vine and Ms N. Gasparyan, lawyers practising in London and Yerevan respectively.
A. The circumstances of the case
The facts of the case, as submitted by the applicant, may be summarised as follows.
On 5 June 2000 the Mayor of Yerevan (“the Mayor”) made a decision to allocate a plot of land measuring 300 sq. m to Mr. V. The plot of land was situated in front of the Language Institute located at the intersection of Sayat‑Nova and Abovyan Streets in central Yerevan.
On 29 July 2000 a 10-year land lease was concluded between the Mayor and Mr V., stipulating that the land be used for the purpose of building and running an outdoor café. Clause 5.6 of the land lease contract established that the lessee (Mr. V.) was entitled to request compensation from the lessor (the Mayor) in the event of early termination of the contract if the land were to be taken in response to state or public needs.
In 2001 Mr. V. founded the applicant company and became its director.
It appears that the construction of the café was completed in 2001. It covered an area of 238 sq. m, and also comprised pavilions measuring an additional 22.3 sq. m. In 2002 a corresponding ownership certificate was issued in respect of this property.
On 26 November 2001 the applicant company applied to the Mayor’s office, seeking to extend the term of the lease.
Taking into consideration the size of the investment made for the reconstruction of communications and the improvement of the surrounding area, on 24 December 2001 the Mayor acceded to the applicant company’s request and decided to extend the term of the lease to 25 years.
On 13 September 2002 the applicant company signed a new lease contract with the Mayor’s office. Clause 4.5 of this contract stipulated that the lessee (the applicant company) would be entitled to claim compensation for damage incurred in the event of premature unilateral termination of the contract. According to clause 20.1, the Mayor’s office was entitled to terminate the contract prematurely and unilaterally if the applicant company defaulted on the payment of rental fees by more than three months.
On 2 November 2003 the Government adopted Decree no. 1310-N permitting the National Academy of Science to donate the building and the auxiliary structures of the Language Institute to the Armenian Apostolic Church (hereafter “the Church”) for the purpose of building a Patriarchate in Yerevan and authorised the Mayor to procure the documentation needed for the transfer of those buildings and the auxiliary structures and plots of land occupied by them and needed for their maintenance.
It appears that the applicant company continued operating its café without hindrance. It alleges that the café was popular among the residents of Yerevan and served on average between 800 and 1,000 customers per day.
On 26 August 2008 the Mayor informed the applicant company that in pursuance of Government Decree no. 1310-N it was necessary to cease operating the café, remove the structures erected, and restore the land to its original condition.
On 28 August 2008 the Mayor annulled the decision of 5 June 2000 and unilaterally terminated the land lease contract concluded with the applicant company. In doing so, it relied on Government Decree no. 1310-N, but also mentioned that the applicant company had a considerable amount of outstanding debt arising from the rental charges and calculated penalties. A letter was sent to the applicant company on 29 August 2008 informing it about this decision.
The applicant company alleges that on 30 August 2008 police officers and representatives of the Mayor’s office had the café and its fixtures and fittings demolished.
On 12 September 2008 the applicant company commenced civil proceedings against the Mayor’s office and the Ministry of Finance, requesting compensation for losses incurred as a result of the termination of the lease. The company based its claim on the argument that the premature termination of the land lease contract had not been carried out in accordance with the Civil Code – under which it could be unilaterally carried out only following a court decision – and on the valuation report prepared at its request by Karutsaget Ltd., a licensed valuation company. According to the report, the market value of the café, as provided in the ownership certificate, was estimated at between 185,000,000 and 215,000,000 Armenian drams (AMD). The respondents submitted their objections to the claim, arguing that the termination of the lease contract had not been implemented as an expropriation to meet any public need, but had simply been a consequence of the applicant company’s failure to pay the rental charges since 2006.
On 25 March 2009 the Ministry of Finance filed additional objections to the applicant company’s claim, also contesting the admissibility of the valuation report prepared by Karutsaget Ltd. on the grounds that it did not comply with the legal requirements and it was for this reason that Karutsaget Ltd.’s licence had been suspended two months after the issuance of the report, on 9 January 2009.
On 5 June 2009 the Kentron and Nork-Marash District Court of Yerevan dismissed the claim on the basis that the valuation report submitted by the applicant company could not be accepted as proper evidence, since upon examination of this report the State Real Estate Registry had found that it had been compiled in violation of the relevant legislation and for that reason had suspended the licence granted to Karutsaget Ltd.
On 3 July 2009 the applicant company appealed against the judgment of the District Court, arguing, in particular, 1) that the valuation report had been drawn up in accordance with the legal requirements – and maintaining that, if the District Court had had doubts regarding the admissibility of that evidence, it could have obtained its own expert opinion on the market value of the café – and 2) that by dismissing the claim – providing neither any legal grounds nor the requisite reasoning – the District Court had violated the applicant company’s right to property as guaranteed by the Constitution and the Convention.
On 24 December 2009 the Civil Court of Appeal dismissed the applicant company’s appeal and upheld the judgment of the District Court. It stated in particular that the termination of the lease had been implemented in conformity with the law and, consequently, the submissions concerning the violation of the applicant company’s rights guaranteed by the Constitution and the Convention were ill-founded, that the evaluation report prepared by Karutsaget Ltd. had been rightly assessed by the District Court in the light of other evidence of the particular case, and that the District Court had not been under a duty to obtain an alternative expert opinion for the purpose of calculating the applicant company’s losses.
On 25 January 2010 the applicant company lodged an appeal on points of law.
On 3 March 2010 the Court of Cassation declared the applicant company’s appeal inadmissible for lack of merit.
B. Relevant domestic law
1. The Constitution of 1995 (following the amendments introduced on 27 November 2005, in force with effect from 6 December 2005)
According to Article 19, everyone has the right to a public hearing of his case by an independent and impartial court within a reasonable time, in conditions of equality and with respect for all the requirements of a fair trial, in order to have his violated rights restored and also the validity of the charge against him determined.
According to Article 31, everyone has the right to dispose of, use, manage and bequeath his property in the way he sees fit. No one can be deprived of his property, save by a court in cases prescribed by law. Property may be expropriated for the needs of society and the State only in exceptional cases of paramount public interest, in a procedure prescribed by law and with prior equivalent compensation.
2. The Civil Code (in force from 1 January 1999)
Article 466
Grounds for amending and terminating a contract
“1. The amendment and termination of a contract can be carried out by agreement of the parties, unless otherwise stipulated by law or the contract.
2. A contract may be amended or terminated by a court at the request of one of the parties only in the event of an essential breach of the contract by the other party or in other circumstances provided for by law or the contract.
3. ...”
Article 622
Premature termination of a contract at the lessor’s request
“At the lessor’s request the lease contract can be prematurely terminated by a court, if the lessee:
1) has used the property while substantially or repeatedly breaching the terms of the contract or the purpose of the property;
2) has substantially worsened the condition of the property;
3) has failed to pay rental charges more than twice after expiry of the time-limit for such payment as established by the contract ;
4) ...
In accordance with Article 466 § 2 of the present Code, the lease contract may also provide other bases for termination of the contract at the lessor’s request.”
3. The Land Code (in force from 15 June 2001)
According to Article 100 § 2, a land lease or right of use in respect of land may be terminated on the basis determined by law or on the basis prescribed in the contract governing such lease or use.
4. The Code of Civil Procedure (in force from 1999)
According to Article 60 § 1, in order to clarify issues requiring specialised knowledge which arise during the examination of a case, the court may order a forensic examination either in response to an application submitted by a party (parties) or on its own initiative.
5. The Law “On the alienation of property for the needs of society and the State” (in force from 30 December 2006)
Under Article 13 § 1, if an alienation contract is not entered into within seven days of the compensation sum being deposited into a holding account by the purchaser, or if the property is not alienated in accordance with Article 12 of this law, the purchaser must apply to the court with an alienation claim within one month.
6. Government Decree No. 1310-N of 2 October 2003 on the transference of a building and auxiliary structures to the Armenian Apostolic Church
The above Decree states as follows:
“The Government of the Republic of Armenia hereby resolves:
1. to permit the National Academy of Sciences of the Republic of Armenia to transfer to the Armenian Apostolic Church the building and the auxiliary structures (workshops) of the Language Institute of the National Academy of Sciences of the Republic of Armenia and the Institute of Economics of the National Academy of Sciences of the Republic of Armenia located at the intersection of Sayat‑Nova and Abovyan streets in Yerevan city for the purpose of building a Patriarchate in Yerevan.
2. to entrust the Mayor of Yerevan with the preparation of the requisite documents for the transfer of the building and the auxiliary structures (workshops), as well as the land occupied by them and necessary for their maintenance, located at the intersection of Sayat-Nova and Abovsyan streets.”
COMPLAINTS
1. The applicant company complains under Article 6 § 1 of the Convention that the trial was unfair since the District Court did not admit the valuation report submitted by it, nor did it provide an independent valuation or otherwise determine the amount of compensation to be awarded to the applicant company.
2. The applicant company complains under Article 1 of Protocol No. 1 to the Convention that it was unlawfully deprived of its possessions since the early termination of the land lease was not carried out in accordance with the law, it was not for a legitimate purpose, and it imposed an excessive burden on the applicant company, as no compensation was awarded.
QUESTIONS TO THE PARTIES
1. Was the interference with the applicant company’s possessions compliant with the guarantees of Article 1 of Protocol No. 1?
2. Did the applicant company have a fair hearing in the determination of its civil rights and obligations in accordance with Article 6 § 1 of the Convention?
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