FIFTH SECTION
DECISION
Application no. 64284/14
WEST EAST GROUP LTD
against Ukraine
The European Court of Human Rights (Fifth Section), sitting on 17 October 2024 as a Committee composed of:
María Elósegui, President,
Kateřina Šimáčková,
Stéphane Pisani, judges,
and Martina Keller, Deputy Section Registrar,
Having regard to:
the application (no. 64284/14) against Ukraine lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) on 11 September 2014 by a Ukrainian company, West East Group Ltd. (ТОВ «Вест Іст Груп», “the applicant company”), which was represented by Mr V.A. Lysenko, a lawyer practising in Kyiv;
the decision to give notice of the complaint under Article 1 of Protocol No. 1 to the Convention to the Ukrainian Government (“the Government”), represented by their Agent, Ms M. Sokorenko, and to declare the remainder of the application inadmissible;
the parties’ observations;
Having deliberated, decides as follows:
SUBJECT MATTER OF THE CASE
1. The case concerns the invalidation of the applicant company’s 49-year land-lease contract with the local authorities which had been granted to it to erect a residential building. The applicant company relied on Article 1 of Protocol No. 1.
2. The applicant company was registered in 2000 and had been operating in Crimea with its registered office in Yalta. In 2006 it began a procedure to obtain a lease for a 1.47 ha plot of land for the construction of a residential building (hereafter – “the land”). In connection with that procedure, it had obtained a number of permits for land allocation from different authorities, including the State Land Resources Agency and Yalta City Department for Land Resources, the Crimea Department for Water Resources and the Azov‑Black Sea Ecological Inspectorate, the Republican Committee for the Protection of Cultural Heritage and the local healthcare authorities.
3. On 2 April 2009 the Alupka Town Council decided to allow the applicant company to lease the land specifying that it was designated as land for “urban construction” and included land which had been classified as land for “green spaces” and land for “public use”.
4. On 9 June 2009 the parties signed a 49-year lease contract, according to which the plot of land was classified as land for “urban construction” and as “recreational land”. The applicant company had to respect a 100-metre water-protection zone as part of the plot of land was located on the seashore.
5. In February 2013 the local prosecutor initiated proceedings to have the 2009 decision of the Alupka Town Council and the lease contract invalidated. He argued that the plot of land should not have been allocated for construction as it was located within the water-protection zone and within the resort area. No residential construction was permitted on such land. The prosecutor also noted that by a judgment which had come into force on 20 December 2012, several Alupka Town Council officials had been convicted of having unlawfully allocated land to the applicant company. One of the pieces of evidence in those proceedings was an expert conclusion confirming that the land could not be allocated for residential construction and was classified as protected land.
6. The applicant company disagreed, arguing that it had obtained all necessary permits for the allocation of the land. It further stated that while the Water Code did indeed establish a two-kilometre water-protection zone along the seashore, within urban settlements the water-protection zone was to be established according to the actual circumstances and as defined by special technical documentation to be adopted by the respective municipality. No such documentation had been issued by the Alupka Town authorities. Moreover, there were residential buildings on the plots of land adjacent to the disputed one.
7. On 10 June 2013 the Crimea Commercial Court allowed the prosecutor’s claims.
8. On 4 November 2013 the Sevastopol Commercial Court of Appeal quashed this judgment and ruled against the prosecutor. It found that the disputed land was classified as land for “urban construction” and had been used by the applicant company according to its purpose.
9. On 1 April 2014 the High Commercial Court of Ukraine, upon a cassation appeal by the prosecutor, quashed the appellate court’s judgment and upheld the local court’s findings. Referring to Articles 88 § 5 and 90 § 1 of the Water Code and Article 60 §§ 1 and 3 of the Land Code, the court established that the legislation provided for a two-kilometre water-protection zone along the seashore and around coastal lakes which could only be used to build specific objects, for example, sanatoriums and other healthcare facilities. The Alupka Town Council could not take a decision to establish a protection zone that was smaller than that set out by the legislation. Therefore, both the decision of 2 April 2009 and the subsequent lease contract of 9 June 2009 were declared null and void.
10. In its submissions to the Court the applicant company provided no information as to whether it had started any construction works on the plot of land at issue or how it had actually been using the land.
THE COURT’S ASSESSMENT
11. Relying on Article 1 of Protocol No. 1, the applicant company argued that the invalidation of the lease contract had violated its property rights.
12. The Government argued that the applicant company could not be considered a victim of the alleged violation because following the occupation of Crimea it had re-registered itself under Russian law. Furthermore, it was unclear what effects (if any) the final judgment delivered on 1 April 2014 (that is, after the date when, as established in the decision on admissibility in Ukraine v. Russia (re Crimea) (dec.) [GC], nos. 20958/14 and 38334/18, § 338, 16 December 2021), Ukraine lost control over the territory of Crimea) had had on the applicant’s rights. The Government provided information from open sources showing that a legal entity with the same name as the applicant company had been registered under Russian law in August 2014 (registration no. 1149102031418). Its director was indicated as Ms Ye., a Russian national, and its registered office was listed as being in Yalta, at the same address previously registered to the Ukrainian company. Among the founders of this new legal entity there was a company Ch., which was also the founder of the applicant company in the present case. The Government also provided a copy of a court judgment, delivered on 2 March 2023 by the Court of Arbitration of the Republic of Crimea of the Russian Federation, also obtained from open sources, which involved the company West East Group (as registered under Russian law) and the city of Yalta. The dispute before the court concerned the amount of rent to be paid by the company to the city and the change to the use of the same plot of land which was at issue in the present case. That judgment indicated that several modular houses had been built on the disputed plot of land and they had been rented out by the company West East Group as holiday homes. It was also noted in that judgment that in 2019 a new 49-year lease contract between the city authorities and the company West East Group was being prepared.
13. The Government further argued that the applicant company had failed to exhaust domestic remedies as it could have claimed damages for the unlawful actions or decisions of the State authorities or the reimbursement of the cost of maintenance of the reclaimed property or any money it had invested in it. In the alternative, the Government maintained that the application was manifestly ill-founded.
14. The applicant company disagreed with the Government’s arguments. It reiterated that the company West East Group was still registered under Ukrainian law (registration no. 30973294) and that its director was Mr Zh. It further noted that “it was conceivable” that a company with the same name had been registered in Crimea after its occupation by Russia, for example, by the former employees of the Ukrainian company who had stayed in Crimea. Lastly, it argued that the fact that Ukraine had lost control over the Crimean Peninsula did not prevent the Ukrainian courts from giving a final judgment in the case depriving it of its rights over the disputed plot of land and that after the occupation had ended it would still not be able to use the land as planned.
15. The Court notes at the outset that, based on the material before it, the applicant in the present case is the Ukrainian company West East Group Ltd (ТОВ «Вест Іст Груп»).
16. As regards the admissibility issues raised by the Government, the Court does not consider it necessary to rule separately on them given that the applicant company’s complaint is in any case manifestly ill‑founded for the following reasons.
17. The general principles regarding interference with the peaceful enjoyment of possessions have been summarised in, for example, Kryvenkyy v. Ukraine (no. 43768/07, § 42, 16 February 2017). In particular, the Court must assess whether the interference was lawful and effected in the public interest and whether it pursued a legitimate aim by means reasonably proportionate to the aim sought to be realised (ibid.).
18. The Court notes that on 9 June 2009 the applicant company concluded a lease contract by which it was entitled to use the land at issue for a period of forty-nine years with the purpose of developing a residential construction project. The applicant company had previously obtained numerous permits for that purpose (see paragraph 2 above). Accordingly, it had a legitimate expectation of being able to use the land and carry out its activities on it. Those legitimate expectations and attached economic interests were sufficiently important to constitute a substantive interest which amounted to “possessions” within the meaning of Article 1 of Protocol No. 1. The invalidation of the lease contract by a court decision therefore constituted an interference with the applicant’s possessions (see Budivelno investytsiyna grupa 1 v. Ukraine [Committee], no. 56903/10, §§ 39-40 and 44, 17 December 2020, with further references).
19. As to lawfulness, the Court notes that the domestic courts established that the land in question fell under the two-kilometre water protection zone and could not have been used for residential construction. In so ruling they relied, in particular, on the provisions of the Water Code that had been in place since its adoption in 1995 (see paragraph 9 above). While the applicant company had obtained permits for construction from different authorities before concluding the lease contract, it appears that such a clear legislative requirement could not have been overridden by the decisions of the local authorities. As to the applicant company’s argument before the domestic courts that in urban settlements water protection zones had to be established by the local authorities based on the actual situation on the ground and that no respective technical documents were adopted for Alupka (see paragraph 6 above), the Court notes that in that case the application of the general two‑kilometre rule would have appeared to be all the more reasonable. With this, the applicant company was or should have been aware that the land was located in such a special zone and that there was a possibility that its entitlement to that land could be annulled (see Shynkarenko v Ukraine (dec.), no. 64661/11, 15 October 2019, § 28).
20. In this connection the Court reiterates that it is primarily for the national authorities, notably the courts to interpret and apply domestic law. While it is not bound by the findings of domestic courts and remains free to make its own appreciation in the light of all the material before it, in normal circumstances it requires cogent elements to lead it to depart from the findings of fact reached by the domestic courts. In the circumstances of the present case, and in the absence of any evidence to the contrary, the Court finds no cogent elements to question the conclusion reached by the domestic courts in this regard (see, Ibrahimbeyov and Others v. Azerbaijan, no. 32380/13, §§ 47-48, 16 February 2023).
21. It follows that the interference with the applicant company’s property rights was a lawful consequence of the application of the relevant domestic provisions. It was aimed at securing the respect for the rule of law and was thus in the public interest.
22. As to proportionality, the Court must determine whether a fair balance has been struck between the demands of the general interest in this respect and the interest of the individual company concerned. The Court recognises that the State enjoys a wide margin of appreciation with regard to the means to be employed and to the question of whether the consequences are justified in the general interest for the purpose of achieving the objective pursued (see, for example, G.I.E.M. S.R.L. and Others v. Italy [GC], nos. 1828/06 and 2 others, § 293, 28 June 2018).
23. The Court notes that the measure at issue prevented further use of the land as intended by the applicant company because of the restrictions in domestic law. At the same time, the applicant company has not argued that before the proceedings to invalidate the lease contract were initiated in 2013 it had started any construction works, obtained investment or otherwise commenced its planned activities (contrast Budivelno investytsiyna grupa 1, cited above, § 51). Furthermore, the applicant company has not argued that it had suffered any concrete financial damage (contrast Kryvenkyy, §§ 19 and 35, and Budivelno investytsiyna grupa 1, § 54, both cited above). The Court observes in that connection that the acquisition of land for development purposes in general, let alone at the seashore, carries a high commercial risk because it is dependent on many factors, such as economic and market forces as well as changes to or the revocation of decisions of planning authorities. In the absence of any information regarding the actual negative consequences that the applicant company might have suffered, the Court considers that the present interference cannot be said to have placed a disproportionate burden on it.
24. Having regard to all of the above considerations, the Court finds that, in the circumstances of the present case, the interference complained of cannot be considered to have been arbitrary or to have failed the proportionality test under Article 1 of Protocol No. 1.
25. It follows that the present complaint is manifestly ill‑founded and must be rejected pursuant to Article 35 §§ 3 (a) and 4 of the Convention.
For these reasons, the Court, unanimously,
Declares the application inadmissible.
Done in English and notified in writing on 14 November 2024.
Martina Keller María Elósegui
Deputy Registrar President