Communicated on 15 April 2015

FOURTH SECTION

Application no. 55854/10 KRAUJAS HES against Latvia lodged on 21 September 2010

STATEMENT OF FACTS

1. The applicant “ Kraujas HES” is a limited liability company with its registered address in Ērgļi parish , Latvia (the “applicant company”) . It is represented before the Court by its board member, Mr I. Blaus .

A. The circumstances of the case

2. The facts of the case, as submitted by the applicant company , may be summarised as follows.

1. HEP project

3. The applicant company was established with a view to constructing and operating a hydroelectric power station (the “HEP”) on the river Ogre. For this purpose, on 27 June 2001, it acquired property rights over two land plots in Madona district. On 9 May 2002 these property rights were recorded in the relevant domestic register. The applicant company also concluded lease agreements with owners of adjacent properties as well as carried out further steps to develop its project in accordance with law.

4. On 14 December 2001 the relevant authority ( Madonas reģionālā vides pārvalde ) issued the technical specification for the applicant company ’ s HEP project on the river Ogre.

5. On 15 January 2002 the Cabinet of Ministers adopted regulation no. 27 (2002). It contained a list of rivers, where construction of any hydroelectric power dams was prohibited to protect fishery resources (Annex 1). This prohibition did not apply to those HEP projects, which had already been submitted to the Ministry of Economics with a view to receiving the relevant permit in accordance with law. The applicant company ’ s project for the HEP on the river Ogre was expressly included in the latter list (Annex 2).

6. On 24 January 2002 and 28 February 2002 the relevant municipal councils included the HEP on the river Ogre in general spatial plans for their respective territories.

7. On 21 February 2002 the Ministry of Economics issued permit no. 47, which granted the applicant company ’ s application to develop HEP project on the river Ogre, that is (to say), to set up the necessary hydroelectric power generating equipment (900 kW) on the river Ogre.

2. Subsequent restrictions

(a) Micro-reserve

8. On 19 March 2002 the local office of the State Forest Service ( Valsts mežu dienests ) issued order no. 44 and included one of the applicant company ’ s land plots in a micro-reserve designed for protection of particularly rare species and their habitats.

9. The applicant company, together with owners of other affected properties, contested this decision in court.

10. On 18 October 2002 the first-instance court upheld the claim.

11. On 15 May 2003 the appellate court quashed the first-instance court ’ s ruling and dismissed the claim. It was noted, inter alia , that the present dispute did not relate to expropriation but rather restriction of property rights; a reference was made to section 1082 of the Civil Law. Issues of compensation for these restrictions could only be decided by the legislator.

12. On 8 October 2003 the Senate of the Supreme Court upheld the appellate court ’ s ruling.

(b) Protected area

13. On 8 March 2004 the Cabinet of Ministers adopted amendments to regulation no. 83 (1999) and included, among other things, the applicant company ’ s both land plots in a specially protected nature territory – nature park “Ogre valley”.

3. Compensation proceedings

14 . On 31 January 2006 the applicant company claimed compensation in accordance with a special law – which had taken effect on 1 January 2006 – the L a w o n the Rights of Landowners to Compensation for R estrictions on Economic Activities in Specially Protected Natur e Territories and Micro - reserves ( Likums “Par zemes īpašnieku tiesībām uz kompensāciju par saimnieciskās darbības ierobežojumiem īpaši aizsargājamās dabas teritorijās un mikroliegumos ” , hereinafter – the “ Law”).

15. On 30 March 2006 the relevant authority ( Dabas aizsardz ības pārvalde ) rejected the applicant company ’ s claim. On 19 May 2006 the refusal was upheld by another authority ( Vides pārraudzības valsts birojs ).

16. On 19 June 2006 the applicant company seized the administrative courts to contest the refusal. It requested to quash it and to oblige the relevant authority to issue a new decision and to compensate pecuniary damages (lost profit) in the amount of LVL 454,230 (EUR 648,900) caused by restrictions on its economic activities. It later specified its claim and claimed net profit after taxes for the period from 1 January 2003 to 31 December 2007 in the amount of LVL 429,180 (EUR 613,114), covering unrealised financial benefit, which it, as a landowner, could not obtain because of restrictions on its economic activities.

17. On 18 May 2008 the first-instance court dismissed the claim. With reference to section 3 of the L a w , it noted that two forms of compensation were available – (monetary) compensation and allocation of another land plot . The applicant company had claimed ( monetary) compensation. Section 6 (1) of the Law set out specific circumstances in which landowners could claim (monetary) compensation for restrictions on economic activities – it was only in the area of forestry. In other areas, the only possible form of compensation was allocation of another land plot. Only one of the applicant company ’ s land plots had restrictions in the area of forestry. Under section 6 (2) of the Law (monetary) compensation for restrictions in the area of forestry was only available if these restrictions were set after the registration of the property rights in the relevant domestic register. The applicant company did not have a subjective right to claim compensation since its property rights were registered after its land plot ’ s inclusion in the micro-reserve. Compensation claim, in accordance with section 8 of the Law, was examined by the relevant authority only in so far as it concerned restrictions in the area of forestry. A request for the other form of compensation – allocation of another land plot – was to be examined by another authority ( Valsts zemes dienests ). Lastly, a reference was made to the right to property enshrined in the Constitution, and it was noted that it was not absolute – it could be restricted in accordance with law. The legislator had passed the Law with a view to protecting interests of those landowners, who were restricted in using their property located in the specially protected nature territories.

18. On 30 March 2009 the appellate court dismissed the applicant company ’ s appeal. It upheld the reasoning of the first-instance court and added the following. The appellate court explained that the landowners were entitled to claim (monetary) compensation only for restrictions in the area of forestry. For other restrictions the legislator had initially envisaged the possibility of allocating another land plot. However, this form of compensation was not offered in practice and was, later on, replaced with another form of compensation – buying back of the land plot by the State. The first-instance court, on the grounds of legal provisions in force at the material time, had correctly held that the applicant company had not been prevented from applying to the competent authority with a request to have another land plot allocated. As the applicant company had not made that request, the court could not examine whether the necessary conditions were met.

19. The appellate court also held that the lack of specific compensation mechanism in the Law did not prevent the applicant company from claiming damages in the courts of general jurisdiction on the grounds of Articles 92 and 105 of the Constitution, section 29 of the Law on Specially Protected Nature Territories and section 10 (2) and (3) of the Law on the Conservation of Species and Biotopes. Also, the applicant company had not been prevented from claiming compensation from the relevant authority for, inter alia , refusing to issue a building permit in breach of the principle of legal certainty. However, the case-material indicated that the applicant company had not yet started the HEP ’ s construction and did not receive new technical specifications following the expiry of the term for those which had been issued (see paragraph 4 above).

20. On 9 July 2010 the Senate of the Supreme Court in an extended composition of eight judges, following a hearing, dismissed the applicant company ’ s appeal on points of law. The Senate considered that the issue before it was whether the applicant company was entitled to claim lost profit as compensation for restrictions of economic activities on its land plots, which had been included in the territory of the micro-reserve and the nature park.

21. First of all, the Senate referred to Article 105 of the Constitution and examined its scope in light of Article 1 of Protocol No.1 to the Convention, with reference to various judgments by the Constitutional Court, as well as by the Court in Strasbourg.

22. Second, it considered that all protected nature territories were established with the purpose of nature conservation. Establishing of micro-reserves and inclusion of properties in specially protected nature territories (nature parks) in accordance with law were to be considered as restriction on property rights with the legitimate aim of environmental protection. Before the Senate, the applicant company had argued that the said restrictions did not allow it to proceed with the construction of HES and did not allow the respective economic activity, as a result of which it did not gain profit, compensation for which it claimed before the administrative courts.

23. Third, the Senate referred to sections 29 and 30 of the Law on Specially Protected Nature Territories and examined drafting history of these provisions in Parliament. Like the lower courts, it also referred to sections 3, 6 and 8 of the Law, as well as sections 5 and 7 of the said Law. The Senate expressly dismissed the applicant company ’ s argument that it had a right to claim compensation for lost profit as a result of restrictions of economic activities on its land plots. It upheld and further explained the lower courts ’ conclusions that the Law did not provide for any other (monetary) compensation than for restrictions on economic activities in the area of forestry. At the same time, the Senate concluded that the applicant company had merely requested compensation for lost profit and had not asked compensation for economic restrictions in the area of forestry, allocation or another land plot or that the State buys back its land.

24. The Senate also rejected the applicant company ’ s argument that it could claim compensation on the grounds of section 92 of the Administrative Procedure Law. At the same time, the Senate disagreed with the appellate court ’ s finding that the applicant company could claim compensation in the courts of general jurisdic tion on the grounds of Articles 92 and 105 of the Constitution, section 29 of the Law on Specially Protected Nature Territories and section 10 (2) and (3) of the Law on the Conservation of Species and Biotopes. The issue of compensation was exclusively regulated by the Law.

25. Lastly, the Senate expressed a view that the applicant company could lodge a constitutional complaint with the Constitutional Court if it considered that it could not receive adequate compensation for restrictions on its property rights and if it considered that the legal provisions of the Law were not compatible with the Constitution.

B. Relevant domestic law

26. The Law on Specially Protected Nature Territories ( Likums “ Par īpaši aizsargājamām dabas teritorijām ” ), sets out the following specially protected nature territories: strict nature reserves ( dabas rezervāti ), national parks ( nacionālie parki ), biosphere reserves ( biosfēras rezervāti ), nature parks ( dabas parki ), nature monuments ( dabas pieminekļi ), nature reserves ( dabas liegumi ) and protected landscape areas ( aizsargājamo ainavu apvidi ) (section 2). In accordance with section 5 of this law, n ature parks are territories that represent the natural, cultural and historical values of a particular area, and that are suitable for recreation, education and the instruction of society (paragraph 1) . Organisation of recreation and economic activities in nature parks must be carried out by ensuring the preservation of the natural, cultural and historical values located in such parks (paragraph 2) .

27. Section 29 of this Law has been amended on several occasions.

Section 29 ( as in force from 7 April 1993 to 3 April 2002)

“L andowners and users in protected territories have the right to tax concessions or other form of compensation laid down in law, if abiding by the rules set for protection and use of protected territories cause them loss.”

Section 29 ( as in force from 3 April 2002 to 25 December 2003)

“1. L andowners and users in protected territories have the right to tax concessions or other form of compensation laid down in law, if abiding by the rules set for protection and use of protected territories cause them loss.

2. In circumstances where, following of the restoration of property rights over land, it is included in strict nature reserves [or] nature reserves ..., landowners have the right to request the exchange of their land for land of equivalent value owned by the State or local governments if they are dissatisfied with the newly imposed restrictions.”

Section 29 (as in force from 25 December 2003 to present)

“1. L andowners and users in protected territories have the right to tax concessions laid down in laws and regulations .

2. Landowners also have the right to compensation laid down in law for restrictions on economic activit ies in protected territories, including in the cases laid down in law – the right to receive compensation or to request the exchange of the ir land for land of equivalent value owned by the State or local governments .”

28. Section 30 of this Law has also been amended on several occasions.

Section 30 ( as in force from 28 November 1997 to 3 April 2002)

“In order to receive compensation for restrictions on economic activities in protected territories, landowners and users shall submit their loss statement to the local government. The local government examines the application, taking into account the expert opinion, and, together with a representative from the Ministry of Environmental Protection and Regional Development and the applicant, comes to an agreement about the amount of compensation, its form and source of financing within two months.

If no agreement has been reached, landowners and users have the right to lodge a claim in court in accordance with law.”

Section 30 ( as in force from 3 April 2002 to 25 December 200 3 )

“ The conditions and procedures for granting the compensation set out in section 29 of this law, as well as procedure for the exchange of equivalent property shall be laid down by the Cabinet of Ministers. ”

Section 30 ( as in force from 25 December 2003 to present )

“ The conditions and procedures for granting the compensation provided for in s ection 29 of this Law shall be laid down in a separate law. ”

29. The Law on the Conservation of Species and Biotopes ( Sugu un biotopu aizsardzības likums ) (effective since 19 April 2000) provides for establishing of micro-reserves ( mikroliegumi ) i n order to ensure satisfactory conservation of specially protected species and biotopes (section 8(2)). Micro-reserves are territories, which are established to ensure conservation of the specially protected species or biotopes outside specially p rotected n ature t erritories (section 1). No provisions for compensation on restriction of economic activities were included until 11 October 2005, when section 10 was amended to include paragraph 2 as follows:

“Landowners have the right to compensation for restrictions of economic activities in micro-reserves laid down in law.”

30. On 30 June 2005 Parliament passed t he Law on the Rights of Landowners to Compensation for Restrictions on Economic Activities in Specially Protected Natur e Territories and Micro-reserves ( Likums “ Par zemes īpašnieku tiesībām uz kompensāciju par saimnieciskās darbības ierobežojumiem īpaši aizsargājamās dabas teritorijās un mikroliegumos ” ). It took effect on 1 January 2006 (it was in force until 1 June 2013). This law provided for landowners ’ right to receive compensation for restrictions on economic activities and set out the conditions thereof (section 2). Two forms of compensation were available: (monetary) compensation, which was to cover landowners ’ unrealised financial benefit ( neieg ūtais mantiskais labums ), and allocation of another land plot (section 3). In accordance with transitional provisions, landowners could ask that another land plot be allocated only from 1 January 2007 onwards; on the latter date the entry into force of this transitional provision was postponed for one more year. Lastly, this form of compensation was excluded from the law effective from 1 January 2008. From then on, another form of compensation was introduced: buying back of the land plot by the State .

31. Landowners could ask only one form of compensation (section 5(3)). Section 6 set out the necessary conditions to acquire compensation for restriction of economic activities in the area of forestry. Section 7 set out the necessary conditions for allocation of another land plot.

COMPLAINT

32. The applicant company complains under Article 1 of Protocol No. 1 to the Convention that by setting up a micro-reserve and nature park on its land plots, the State effectively prohibited developing of the HES project and, therefore, the applicant company could not bear fruit from its property. The applicant company lost all its investment in the HEP project. It cannot obtain compensation at the domestic level.

QUESTIONS TO THE PARTIES

1. The applicant company are required to provide specific information and documents relating to the amount of its actual financial investment in the hydroelectric power station project on the river Ogre.

2. Has the applicant company exhausted all effective domestic remedies, as required by Article 35 § 1 of the Convention?

3. Has there been an interference with the applicant company ’ s peaceful enjoyment of possessions, within the meaning of Article 1 of Protocol No. 1 to the Convention ?

4. If so, was that interference necessary to control the use of property in accordance with the general interest?

5. D id that interference impose an individual and excessive individual burden on the applicant company ? What procedural safeguards have been put in place at the domestic level to ensure that the operation of the system and its impact on the applicant company ’ s property rights were neither arbitrary nor unforeseeable (see Immobiliare Saffi v. Italy, [GC], no. 22774/93, § 59, ECHR 1999-V )