FOURTH SECTION

DECISION

Application no . 64128/12 Danuta DOBRZAŃSKA and Wiktor DOBRZA Ń SKI against Poland

The European Court of Human Rights (Fourth Section), sitting on 2 February 2016 as a Chamber composed of:

András Sajó , President, Vincent A. D e Gaetano , Boštjan M. Zupančič , Nona Tsotsoria , Krzysztof Wojtyczek , Iulia Antoanella Motoc , Gabriele Kucsko-Stadlmayer , judges, and Françoise Elens-Passos, Section Registrar ,

Having regard to the above application lodged on 20 September 2012 ,

Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicants,

Having regard to the comments submitted by the Polish Government,

Having deliberated, decides as follows:

THE FACTS

1 . The applicants, Ms Danuta Dobrzańska and Mr Wiktor Dobrza ń ski , are Polish nationals, who were born in 1928 and 1941 respectively and live in Sosnowiec. They were represented before the Court by Mr Z. Cichoń , a lawyer practising in Cracow.

2 . The Polish Government (“the Government”) were represented by their Agent, Ms J. Chrzanowska of the Ministry of Foreign Affairs.

A. The circumstances of the case

3 . The facts of the case, as submitted by the parties, may be summarised as follows.

1. The applicants ’ attempts before the administrative authorities to have an expropriation decision revoked and to be granted compensation

4 . The applicants are the legal successors of former owners of land situated in Niwka , Poland. In 1951 the applicants ’ legal predecessors were obliged to transfer their property to the State Treasury without compensation. The transfer was confirmed by a protocol dated 8 February 1951 issued by the Ministry of Mining.

5 . On 19 September 2002, at the applicants ’ request, the Minister of Economy declared the 1951 protocol null and void. This decision entitled the applicants to seek compensation on the basis of the relevant provisions of the Code of Administrative Proceedings.

6 . The applicants applied to the Ministry of Economy for compensation for the loss of profit they could have made had they had the property at their disposal. Their request concerned the period between 17 October 1997 (the date of entry into force of the 1997 Constitution) and 19 September 2002 (the date on which the property in question was returned to the applicants).

7 . On 9 July 2008 the Ministry of Economy refused to grant the applicants compensation for lost profit, finding that the rights to the property in question had been restored to the applicants and that they had not proved that they had sustained any further damage. It also found that according to the case-law of the Polish Supreme Court and Constitutional Court, the applicants could not seek compensation for the loss of expected profit which they had allegedly sustained before the entry into force of the 1997 Constitution.

2. Proceedings before the civil courts

8 . The applicants then applied to the civil courts seeking compensation for the loss of expected profit. On 18 December 2008 they lodged a claim with the Warsaw Regional Court. Subsequently, they limited their claim to the period from the entry into force of the 1997 Constitution until 2008; they maintained that the conduct of the authorities had prevented them from using their property even after its return. They claimed 126,726.75 zlotys (PLN) and requested exemption from the court fees.

9 . On 12 January 2009 the applicants ’ request was granted and they were exempted from court fees in excess of PLN 300 (approximately 75 euros (EUR)).

10 . On 9 July 2009 the applicants further limited their claim to compensation for the period between 1997 and 2002.

11 . On 22 July 2010 the Warsaw Regional Court dismissed the applicants ’ claim. The court admitted that the Supreme Court ’ s case-law had gone in two opposite directions; the first line of case-law accepted that in situations similar to that of the applicants they could seek both actual loss (damnum emergens ) and loss of expected profit ( lucrum caessans ), whereas the second line limited the compensation to actual loss only. The court decided to base its judgment on the latter case-law of the Supreme Court and held that it could not grant the applicants compensation for loss of expected profit because the right to full compensation had not been inserted in the Polish Constitution until 17 October 1997, when the Constitution entered into force, whereas the damage in question had occurred before that date.

12 . Taking into consideration the incoherent case-law of the Supreme Court, the Regional Court applied Article 102 of the Code of Civil Proceedings and decided not to impose the costs of the proceedings on the applicants.

13 . The applicants appealed against the first-instance judgment.

14 . On 20 January 2011 the applicants ’ lawyer requested that the court stay the proceedings pending a decision by the Supreme Court on the legal issue in question.

15 . On 21 January 2011 the Warsaw Court of Appeal granted the request and stayed the proceedings.

16 . On 31 March 2011 the Supreme Court, sitting as a full bench, adopted a resolution (III CZP 112/10) in which it acknowledged that the respective provisions of civil and administrative law had given rise to serious difficulties and to divergent interpretation in judicial practice. It held that in situations similar to that of the applicants, if a final decision had been given in breach of the law before the entry into force of the 1997 Constitution, compensation on the basis of Article 160 of the Code of Administrative Proceedings would not include lucrum caessans even if the loss of expected profit had happened after the entry into force of the 1997 Constitution.

17 . On 31 January 2012 the proceedings before the Warsaw Court of Appeal were resumed.

18 . On 15 March 2012 the Court of Appeal referred to the above ‑ mentioned Supreme Court resolution of 31 March 2011 and held that compensation for loss of expected profit could be granted only if the wrongful decision had been issued after the entry into force of the 1997 Constitution. Finding that the loss in the applicants ’ case had occurred before that date, it dismissed the applicants ’ appeal.

19 . The court did not impose the costs of the proceedings on the applicants.

20 . The applicants did not lodge a cassation appeal, since it would not have had any prospects of success; the Supreme Court would have had to follow the resolution adopted in 2011 by the Supreme Court plenary.

B. Relevant domestic law and practice

21 . Article 77 of the Polish Constitution, which entered into force on 17 October 1997, provides:

“ 1. Everyone is entitled to compensation for damage caused by the unlawful acts of a public authority.

2. A statute shall not bar access to court to persons seeking redress for any breach of their freedoms or rights.”

Compensation for damage caused by unlawful administrative decisions

23 . The relevant part of Article 156 § 2 of the Code of Administrative Procedure reads as follows:

“A decision shall not be revoked ... if more than ten years has passed since the date on which it was delivered or if the decision had irreversible legal consequences.”

24 . Article 158 § 2 of the Code of Administrative Proceedings reads as follows:

“If it is impossible to set aside a decision for reasons referred to in Article 156 § 2, the administrative authority shall only declare that the challenged decision has been issued in flagrant breach of the law and shall give reasons for refusing to set it aside.”

25 . The relevant part of Article 160 of the Code of Administrative Proceedings, as applicable to the applicants ’ case, reads:

“Anyone who has suffered loss on account of the issuing of a decision in a manner contrary to Article 156 § 1 or on account of the revocation of such a decision may claim compensation for actual damage, unless he has been responsible for the circumstances mentioned in this provision.”

26 . By a judgment of 23 September 2003 (K 20/02) the Constitutional Court declared Article 160 of the Code of Administrative Proceedings unconstitutional in so far as it limited the scope of compensation to actual damage only. The Constitutional Court held that its judgment applied only to losses which had occurred after the entry into force of the 1997 Constitution, that is, after 17 October 1997.

27 . On 1 September 2004 the Law of 17 June 2004 on amendments to the Civil Code and other statutes ( Ustawa o zmianie ustawy – Kodeks cywilny oraz niektórych innych ustaw ) (“the 2004 Amendment”) entered into force. The relevant amendments were in essence aimed at enlarging the scope of the State Treasury ’ s liability in tort under Article 417 of the Civil Code, including the addition of a new Article 417 1 . New Article 417 1 § 2 of the Civil Code provides that compensation can be claimed for damage caused by way of an unlawful and final decision, after the unlawfulness of such a decision has been declared in separate administrative proceedings. The 2004 Amendment abrogated Article 160 of the Code of Administrative Procedure. However, under the transitional provisions of section 5 of the 2004 Amendment, Article 417 of the Civil Code as applicable before 1 September 2004 and Article 160 of the Code of Administrative Procedure apply to all events and legal situations that subsisted before that date.

28 . An administrative decision in respect of a compensation claim was amenable to appeal before a civil court.

Article 417 § 1 of the Civil Code, as applicable after 1 September 2004, provides:

“The State Treasury, or [as the case may be] a self-government entity or other legal person responsible for exercising public authority, shall be liable for any damage ( szkoda ) caused by an unlawful act or omission [committed] in connection with the exercise of public authority.”

29 . Following the judgment of the Constitutional Court, the domestic courts, including the Supreme Court, took two different approaches in interpreting the term “time in which loss occurred”.

30 . According to the first approach, which could be observed from 2006 onwards, the decisive date was that on which the original decision had been issued. This, in turn, meant that if the decision in question had been issued before the entry into force of the Constitution, only actual damage could be compensated for. The first approach was adopted by the Supreme Court in its judgments of 25 January 2006 (I CK 273/05), 26 April 2006 (III CZP 125/05), 12 September 2007 (I CSK 220/07), 5 December 2007 (I CSK 301/07), 16 April 2009 (CSK 524/08), 18 June 2009 (II CSK 26/09) and 15 October 2009 (I CSK 66/09).

31 . According to the second approach adopted for the first time in 2008, loss could occur after the entry into force of the Constitution even if the decision constituting the source of the loss had been issued long before that date. In such circumstances, a claimant could effectively seek full compensation for both: actual loss and expected profit. This approach was adopted by the Supreme Court in the jud gments of 22 January 2008 (case no. 376/07), 8 February 2008 ( I CSK 477/07), 12 March 2008 (I CSK 435/07), 9 January 2009 (I CSK 272/08), 14 May 2009 (I CSK 306/08) and 14 May 2009 (I CSK 485/08).

32 . On 8 January 2010 the President of the Supreme Court requested that a bench of the Civil Chamber composed of seven judges convene to clarify a legal question and adopt a resolution. The issue concerned the substantive law governing compensation claims in respect of damage caused by administrative decisions issued before 1 September 2004 where the unlawfulness of the decisions had been declared by way of an administrative decision given after that date. The President noted, inter alia , that two strands had developed in the case-law of the Supreme Court and other courts, against a background of serious difficulties concerning the temporal scope and consequences of the Law of 17 June 2004 as to the applicable substantive law (see paragraphs 11 and 16 above). These divergences decisively affected the compensation rights of individuals in respect of whom unlawful administrative decisions had been made prior to 1 September 2004.

33 . On 24 August 2010 the Civil Chamber of the Supreme Court, sitting as a bench of seven judges, requested the full composition of that Chamber to adopt a resolution clarifying the issues raised by the President ( III CZP 4/10 ). The Chamber noted that the issue had given rise to serious discrepancies in judicial practice, including that of the Supreme Court itself. Considering the importance of the issues involved and the fact that previous decisions and resolutions of the Supreme Court had failed to bring uniformity to judicial practice, a resolution by the Civil Chamber of the Court sitting as a full bench was called for.

34 . On 31 March 2011 the Civil Chamber of the Supreme Court, sitting as a full bench, adopted a resolution (III CZP 112/10). It acknowledged that the applicable provisions had given rise to serious difficulties and to divergent interpretations in judicial practice. The Supreme Court held that former Article 160 of the Code of Administrative Procedure was applicable. It further held that:

“If a final administrative decision which was deficient ( wadliwa ) was issued before the date of entry into force of the Constitution, compensation due on the basis of Article 160 § 1 of the Code of Administrative Proceedings shall not encompass lost profits, even if the damage occurred after the entry into force of the Constitution.”

35 . On 24 April 2014 the Constit utional Court gave judgment (SK 56/12) holding as follows:

“Article 160 § 1 of the Code of Administrative Proceedings in conjunction with Article 5 of the Act of 17 June 2004 amending the Civil Code, as far as it limits compensation for damaged caused by an unlawful act of a public authority to actual loss in cases where the deficient final decision was issued before 17 October 1997:

a . is consistent with Article 2 [rule of law in a democratic state] and with Article 32 § 1 [equality before the law] of the Constitution;

b . is not inconsistent with Article 77 § 1 of the Constitution.”

COMPLAINTS

36 . The applicants complained, under Article 1 of Protocol No. 1 to the Convention, that as a result of the divergent case-law of the Polish Supreme Court they had been deprived of compensation for the loss they had sustained after the entry into force of the 1997 Constitution. They further complained that, as a result of the Supreme Court ’ s case-law, which disproportionately protected the State Treasury against claims by private individuals, they had had to bear an excessive burden and that the existing legal provisions guaranteeing the right to compensation had become ineffective and illusory.

THE LAW

Alleged violation of Article 1 of Protocol No. 1 to the Convention

37 . The applicants complained that as a result of discrepancies in the case-law of the domestic courts, they had been denied compensation for the loss of profit they could have made had they been able to rent their property. They relied on Article 1 of Protocol No. 1 to the Convention, which reads as follows:

“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

38 . The Government contested that argument.

Admissibility of the application

39 . The Government submitted that the present application should be found inadmissible as incompatible ratione materiae with the Convention. They submitted that the applicants ’ “claims” were not sufficiently established to be enforceable, nor could they be considered as creating for the applicants a legitimate expectation of obtaining compensation.

40 . Where the proprietary interest is in the nature of a claim, it may be regarded as an “asset” only where it has a sufficient basis in national law, for example where there is settled case-law of the domestic courts confirming it (see Kopecký v. Slovakia [GC], no. 44912/98, § 52, ECHR 2004 ‑ IX; Draon v. France [GC], no. 1513/03, § 68, 6 October 2005; and Anheuser-Busch Inc. v. Portugal [GC], no. 73049/01, § 65, 11 January 2007). No legitimate expectation can be said to arise where there is a dispute as to the correct interpretation and application of domestic law and the applicant ’ s submissions are subsequently rejected by the national courts (see Kopecký , cited above, § 50).

41 . In cases against Poland the Court has acknowledged that entitlement to seek pecuniary compensation was a proprietary interest attracting the protection of Article 1 of Protocol No. 1 (see Plechanow v. Poland , no. 22279/04, § § 84-86, 7 July 2009, and Sierpiński v. Poland , no. 38016/07, § 66, 3 November 2009) .

42 . The Court considers that the present case differs from the Polish cases referred to above, in which the applicants had an uncontested right to compensation under Article 160 of the Code of Administrative Proceedings (see paragraph 42 above).

Firstly, in the present case the property in question could be and was returned to the applicants. The 2002 decision of the Minister of the Economy revoked the 1951 decision. In order to issue such a decision, the Ministry had to have found that the original decision had not had any irreversible legal consequences; otherwise he would have had to refuse to revoke the decision and to establish that it had been issued in flagrant breach of the law (see paragraphs 23 and 24 above). It follows that the reparation of damage caused by the 1951 decision could be effected by the restitution of the property, which happened in the present case. By returning the property to the applicants, the corrective decision of 2002 was in fact enforced.

Secondly, the applicants considered that the damage they had suffered consisted not only of actual loss but also of loss of expected profit which they could have made had the property been returned to them earlier. The proceedings before the domestic courts concerned only the element of lost profit and, at the relevant time, it was a matter of interpretation of domestic law – in particular as regards establishing the period of time in which the loss had occurred – whether further compensation for the loss of expected profits was awarded or not. There was no domestic provision comparable to Article 160 of the Code of Administrative Proceedings which would expressly grant the right to claim compensation for lost profit. Likewise, as noted above, the case-law of the domestic courts, including the Supreme Court, was not settled at that time and was contradictory (see paragraph 11 above). The applicants were clearly aware of that, because they asked the court to stay the proceedings until the matter of interpretation of the relevant provisions had been decided by seven judges of the Supreme Court (see paragraph 14 above).

43 . It follows from the above considerations that whereas it could be said that there was sufficient basis in the domestic law to recognise actual loss as “possessions” within the meaning of Article 1 of Protocol No. 1 to the Convention, the same cannot be said loss of expected profit. A claim for the latter did not have a sufficient basis either in the relevant domestic provisions or in the practice of the domestic courts. It follows that the loss of expected profit claimed by the applicants cannot be considered as amounting to a possession within the meaning of Article 1 of Protocol No. 1 to the Convention. Consequently, the Court finds that this provision is not applicable to the circumstances of the case at hand and that the present application must be rejected as incompatible ratione materiae with the Convention, in accordance with Article 35 §§ 1 and 3 of the Convention.

For these reasons, the Court, unanimously,

Declares the application inadmissible.

Done in English and notified in writing on 25 February 2016 .

             Françoise Elens-Passos András Sajó Registrar President