Communicated on 21 April 2016

FIFTH SECTION

Application no. 61324/09 KLIMAT INKOM V&CO OOD and others against Bulgaria lodged on 27 October 2009

STATEMENT OF FACTS

The applicant company, Klimat Inkom V&Co OOD, is a Bulgarian limited liability company having its registered office in Sofia. It is wholly owned by the two individual applicants, Mr Danail Kirilov Vidolov and Ms Vera Gancheva Vidolova , Bulgarian nationals who were born in 1941 and 1946 respectively and live in Sofia. The three applicants are represented before the Court by Mr M. Ekimdzhiev and Ms G. Chernicherska , lawyers practising in Plovdiv.

A. The circumstances of the case

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

1. The 1997 contract

On 5 February 1997 the applicant company bought from another company, I. – a former State-owned enterprise which in the beginning of the 1990s had been registered as a State-owned company – two industrial buildings situated in Sofia, with respective surfaces of 1,590 and 1,062 square metres, as well as the land they were standing on and the adjoining land, totalling 5,152 square metres. In July 1997 the applicant company paid in full the price agreed upon, and in August 1997 took possession of the buildings and started using them.

2. Rei vindicatio proceedings

In 2003 the company I., already privately-owned, brought against the applicant company a rei vindicatio action, claiming back the properties described above. It argued that the 1997 sale contract had been null and void because, in particular, it had not been concluded before a notary as required by law, and that consequently property had never validly passed to the applicant company.

The action, examined by three levels of court, was allowed in a final judgment of the Supreme Court of Cassation of 27 April 2004. The national courts found that, indeed, domestic law required that the contract should be concluded before a notary, which the parties had not done. As claimed by I., this rendered the contract null and void.

In addition, the national courts dismissed an objection raised by the applicant company that it had acquired the disputed properties through adverse possession. They considered that the sale contract ’ s nullity ab initio automatically rendered the applicant company a bad-faith possessor, which meant that the period of acquisitive prescription applicable to it was ten years. The period at issue had not passed before I. had brought its action in 2003.

Accordingly, the courts ordered the applicant company to surrender possession of the properties at issue to I .

3. Insolvency proceedings against the applicant company

In separate proceedings, in 2007 the company I. requested that the applicant company be declared insolvent. The request was allowed on 9 April 2008 by the Sofia City Court, which also ordered the applicant company ’ s winding up. Upon appeal, that decision was quashed on 6 November 2008 by the Sofia Court of Appeal. The applicant company ’ s situation after that is unknown.

B. Relevant domestic law and practice

Section 18 of the Obligations and Contracts Act ( Закон за задълженията и договорите ) requires that all contracts concerning rights in rem should be concluded before a notary (“ с нотариален акт ”). Other pieces of legislation provide for exceptions to that rule, most notably in respect of contracts concerning State- or municipally-owned properties and contracts concluded in the context of privatisation.

By section 110 of the Obligations and Contracts Act, except where provided otherwise, all claims become extinguished after the expiry of five years. Where the claim is for the recovery of something given under a contract which is deemed null and void, the period at issue is considered to start from the moment the contract is concluded (see in particular Interpretative decision no. 1 of 28 May 1979 of the Plenary Meeting of the Supreme Court, Постановление № 1 от 28.V.1979 г. по гр. д. № 1/79 г., Пленум на ВС ; also Решение № 172 от 21.03.2011 г. на ВКС по гр. д. № 80/2010 г., IV г. о., ГК ; Решение № 1 00 от 2 0 .0 6 .2011 г. на ВКС по т. д. № 194/2010 г., T К , II т.о.; Решение № 160 от 23.07.2009 г. на ВтАС по в. гр. т. д. № 329/2009 г., ГК ).

Real properties can be acquired through adverse possession, after five or ten years of possession, depending on whether the possessor has acted in good or bad faith (section 79 of the Property Act – Закон за собствеността ). Possession based on a null and void transaction is automatically considered to be in bad faith (see in particular Interpretative decision no. 6 of 27 December 1974 of the Plenary Meeting of the Supreme Court, Постановление № 6 от 27.XII.1974 г. по гр. д. № 9/74 г., Пленум на ВС ).

COMPLAINTS

The applicants complain, relying on Article 1 of Protocol No. 1 and Article 13 of the Convention, that the applicant company was unfairly deprived of the property it had acquired on the strength of the 1997 contract, in particular because at the time it paid in full the price agreed upon and subsequently had no means to recover it.

Mr Vidolov and Ms Vidolova complain in their individual capacity, as well as in their capacity of owners of the applicant company, stating that they would wish to replace it in case it is wound up.

QUESTIONS TO THE PARTIES

1. Has the applicant company been deprived of its possessions in accordance with the requirements of Article 1 of Protocol No. 1? In particular, was the fair balance required under that provision achieved, in view of the fact that, in application of the rules of domestic law as interpreted by the courts, in 2003 when the company I. brought proceedings against it the applicant company could no longer seek the price it had paid under the 1997 sale contract (the five-year limitation period had expired), but I., on its part, could still seek to recover the properties it had sold (due to the automatic application of ten-year period of adverse possession)?

2. Did the applicant company have at its disposal an effective domestic remedy for its Convention complaints, as required by Article 13 of the Convention?