Information Note on the Court’s case-law No. 139

March 2011

Uzan and Others v. Turkey (dec.) - 18240/03

Decision 29.3.2011 [Section II]

Article 1 of Protocol No. 1

Article 1 para. 2 of Protocol No. 1

Control of the use of property

Termination without compensation by State of concession agreements for electricity transmission facilities operated by private companies: inadmissible

Facts – Under a concession agreement signed in 1998 between the State and the applicant companies, the latter acquired the right to operate electricity transmission facilities, including the right to generate, distribute and trade electricity in certain regions of Turkey until 2058. In 2001 a new law on the electricity market entered into force. In 2003 the Council of Ministers terminated the concession agreement on the ground that the companies had failed to fulfil their contractual and statutory obligations, notably those arising out of the new law. Their electricity distribution sites were transferred to a public-sector company. Appeals by the applicant companies against those decisions were unsuccessful.

Law – Article 1 of Protocol No. 1: The concession agreements between the respondent State and the applicant companies concerning the electricity transmission facilities for the production, transmission, distribution and trade of electricity amounted to possessions for the purposes of Article 1 of Protocol No. 1. The termination of those agreements had constituted interference with the companies’ property rights. This had arisen in part out of the new law, the purpose of which was to reform the energy sector to provide consumers with sufficient cheap and environmentally friendly electricity, and to open up the electricity market to competition in accordance with Turkey’s international obligations. The law in question and the contractual clauses contained sufficiently accessible, precise and foreseeable provisions. The Court found no element of arbitrariness in the interpretation and application of the law and the concession agreements by the domestic courts, which had found that the termination of the contracts had been in conformity with domestic law. The interference had therefore been “in accordance with the law” and had pursued a legitimate aim in the public interest. In areas covered by economic, fiscal or social policy, the national authorities enjoyed a wider margin of appreciation. As regards the proportionality of the measures at issue, it was clear from the decisions of the domestic courts and the relevant clauses of the concession agreements that the applicant companies could not seek either reimbursement or compensation in the event of termination of the contracts for breach. They had been given notice on a regular basis to remedy the breaches of the concession agreements, in particular the refusal to make the expected investments and to apply the tariff laid down in the agreements. The domestic courts had found that those breaches had contributed to the deterioration of the electricity market. The Court could not find anything unfair in the judicial review carried out by the domestic courts. Accordingly, the termination of the agreements for breach without compensation could not be described as disproportionate to the control of the use of property in the public interest.

Conclusion : inadmissible (manifestly ill-founded).

© Council of Europe/European Court of Human Rights This summary by the Registry does not bind the Court.

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