Restitution: European Experience – Recommendations for Restitution: European Experience – Recommendations for SerbiaSerbia, Belgrade, , Belgrade,

23 September 200923 September 2009 Restitution: The Experience of CroatiaRestitution: The Experience of Croatia

Denationalization is one of theDenationalization is one of the most difficult and complex issues that the most difficult and complex issues that the

Republic of Croatia has to deal with after acquiring its independenceRepublic of Croatia has to deal with after acquiring its independence.. TThe he issueissue

of restitution orof restitution or compensation for the property that was taken at thecompensation for the property that was taken at the time of time of thethe

former communist regime. former communist regime.

IIt was necessary to annul effects of the forced transfer of private property intot was necessary to annul effects of the forced transfer of private property into

public/state/social property disregarding the legal basis of the transfer, andpublic/state/social property disregarding the legal basis of the transfer, and

initiate the process of denationalization.initiate the process of denationalization. But But The process of denationalizationThe process of denationalization

faces numerous problems because of its legal complexity, economic andfaces numerous problems because of its legal complexity, economic and

budgetary considerations, social and political consequences, and budgetary considerations, social and political consequences, and administrativeadministrative

difficultise. difficultise.

Croatian experiences could be instructive for Serbia as Croatia and Serbia Croatian experiences could be instructive for Serbia as Croatia and Serbia werewere

parts of the common state, socialist Yugoslavia, with a legal system that wasparts of the common state, socialist Yugoslavia, with a legal system that was

partly identical (Yugoslav legal system) and partly similar (republic legal partly identical (Yugoslav legal system) and partly similar (republic legal systems). systems).

Legal frameworkLegal framework

The main Law for Denationalization is the The main Law for Denationalization is the Law on Compensation for PropertyLaw on Compensation for PropertyTaken under the Yugoslav CommunistTaken under the Yugoslav Communist Regime (Official Gazette no. 92/96)Regime (Official Gazette no. 92/96). It . It was passed on 11 October 1996. andwas passed on 11 October 1996. and entered into force entered into force on 1 Januaryon 1 January 1997.1997. Adoption of theAdoption of the Law coincided witLaw coincided with h accession to the Councilaccession to the Council of Europe on 6 of Europe on 6 November 1996.November 1996.A core legal framework for the restitution process in Croatia also comprises the A core legal framework for the restitution process in Croatia also comprises the Law on the Taken Property Compensation Fund (Official Gazette no. 69/97, Law on the Taken Property Compensation Fund (Official Gazette no. 69/97, 105/99, 64/00) and six rulebooks on the criteria for property value determination 105/99, 64/00) and six rulebooks on the criteria for property value determination (for apartments; companies; construction land and offices; agricultural land, (for apartments; companies; construction land and offices; agricultural land, forests and forest land; movables of cultural, artistic or historical value; ships and forests and forest land; movables of cultural, artistic or historical value; ships and boats). Other laws, government decrees and rulebooks regulate other issues more boats). Other laws, government decrees and rulebooks regulate other issues more or less closely connected with restitution, such as the Law on Transformation of or less closely connected with restitution, such as the Law on Transformation of the Enterprises in Social Ownership (1991), the Law on Privatisation (1996), the the Enterprises in Social Ownership (1991), the Law on Privatisation (1996), the Law on Rent for Flats (1996), the Law on Inheritance (different texts from 1965 Law on Rent for Flats (1996), the Law on Inheritance (different texts from 1965 onwards), the Law on Ownership (1996), the Law on Land-Ownership Records onwards), the Law on Ownership (1996), the Law on Land-Ownership Records (1996), the Law on General Administrative Procedure, the Law on (1996), the Law on General Administrative Procedure, the Law on Administrative Disputes, etc. Administrative Disputes, etc.

The title of the Law itself (the Law on Compensation for The title of the Law itself (the Law on Compensation for Property Taken under Property Taken under

the Yugoslav Communist Regime) indicates the conclusion that the Yugoslav Communist Regime) indicates the conclusion that it deals with it deals with

compensation for property and not with restitution.compensation for property and not with restitution. Nevertheless, the Law Nevertheless, the Law

stipulates restitution and not only compensation as the form of stipulates restitution and not only compensation as the form of denationalization.denationalization.

The Law is based on the following postulates:The Law is based on the following postulates: redress of the old wrong must not cause a new one;redress of the old wrong must not cause a new one; the state guarantees the payment in money or securities the state guarantees the payment in money or securities

(stocks and bonds) and exceptionally in kind by returning the (stocks and bonds) and exceptionally in kind by returning the ownership of the taken property, in principle returning the ownership of the taken property, in principle returning the confiscated property into ownership;confiscated property into ownership;

vested rights of a third party (anyone who might be affected) vested rights of a third party (anyone who might be affected) are protected.are protected.

Objects of denationalization, exceptions of restitution Objects of denationalization, exceptions of restitution etc.etc.

The objects of compensation are primarily the things that The objects of compensation are primarily the things that were taken from previous owners and transferred into were taken from previous owners and transferred into public ownership such as:public ownership such as:

construction land (vacant only);construction land (vacant only); agricultural land, forest land and forests;agricultural land, forest land and forests; residential (apartment buildings and apartments), office residential (apartment buildings and apartments), office

buildings i.e. indivisible parts of these buildings and buildings i.e. indivisible parts of these buildings and apartments and business premises as separate parts of apartments and business premises as separate parts of buildings i.e. indivisible parts of these separate parts buildings i.e. indivisible parts of these separate parts together with appertaining land;together with appertaining land;

shipsships and boats and boats;; companies;companies; movable property.movable property.

Exceptions to the restitution of propertyExceptions to the restitution of propertyAs we could see, the Law stipulates possibilities for restitution of As we could see, the Law stipulates possibilities for restitution of

vacantvacantconstruction land, agricultural land, forests and forest land, office construction land, agricultural land, forests and forest land, office

buildings, shipsbuildings, shipsAnAnddmovable properties. It also determines the property that cannot be movable properties. It also determines the property that cannot be

restitutedrestitutedand that is:and that is: the property to which a third party has established a right of the property to which a third party has established a right of

ownership based on a valid legal businessownership based on a valid legal business the property that according to the Law on Privatization of Socially the property that according to the Law on Privatization of Socially

Owned Enterprises is a part of the capitalOwned Enterprises is a part of the capital property of legal persons in the area of health care, social care and property of legal persons in the area of health care, social care and

education, culture, cultural and natural heritage protection, education, culture, cultural and natural heritage protection, science, power supply and water management, sports and other science, power supply and water management, sports and other public services that have become property of these legal persons on public services that have become property of these legal persons on basis of particular regulationsbasis of particular regulations

property that is a part of network, objects, appliances and other property that is a part of network, objects, appliances and other means of public enterprises in the area of power supply, utility means of public enterprises in the area of power supply, utility services, transport and communication, as well as forestryservices, transport and communication, as well as forestry

property that is exempted from legal relations, i.e. without a property that is exempted from legal relations, i.e. without a possibility of gaining ownership right possibility of gaining ownership right

if area integrity i.e. the purpose of the premises and property usage if area integrity i.e. the purpose of the premises and property usage are infringed by restitutionare infringed by restitution

if economic or technological function of the complex is reduced by if economic or technological function of the complex is reduced by restitutionrestitution

Claims and CompensationClaims and Compensation

RRestitution or compensation claim can be filed only by the former estitution or compensation claim can be filed only by the former owner and owner and

his legal heirs in the first line.his legal heirs in the first line. The claim could have been filed within six months from the day The claim could have been filed within six months from the day

when the Law when the Law entered into force so that it expired on 1 July 1997; and for newly entered into force so that it expired on 1 July 1997; and for newly

authorised authorised persons under the amended Law on 5 January 2003.persons under the amended Law on 5 January 2003.If the property is restituted in kind, person under obligation is the If the property is restituted in kind, person under obligation is the person in whose property is the property to be restituted.person in whose property is the property to be restituted.If the property is not restituted in kind because of legal conditions, If the property is not restituted in kind because of legal conditions, compensation is paid, as a rule in bonds of the Republic of Croatia. compensation is paid, as a rule in bonds of the Republic of Croatia. Bonds are expressed in Kuna and are payable in equal semi-annual Bonds are expressed in Kuna and are payable in equal semi-annual instalments within twenty years (on 1 January and 1 July every year) instalments within twenty years (on 1 January and 1 July every year) commencing from 1 January 2000. Pecuniary compensation is paid commencing from 1 January 2000. Pecuniary compensation is paid only for confiscated flats and amounts to 25% of the compensation only for confiscated flats and amounts to 25% of the compensation determined in the way stipulated by law. The person under determined in the way stipulated by law. The person under

obligation of obligation of pecuniary compensation is the Taken Property Compensation Fund.pecuniary compensation is the Taken Property Compensation Fund.

If confiscated property is within the property of enterprises, If confiscated property is within the property of enterprises, the compensation is the compensation is

in shares and interests of these enterprises, and if this is not in shares and interests of these enterprises, and if this is not possible, the possible, the

compensation is in shares and interests from the state compensation is in shares and interests from the state portfolio of the Croatian portfolio of the Croatian

Privatisation Fund, who is the person under compensation Privatisation Fund, who is the person under compensation obligation.obligation.

The Law stipulates that total amount of the compensation The Law stipulates that total amount of the compensation cannot exceed cannot exceed

3,700,000 Kuna per person (€ 500,000) except property 3,700,000 Kuna per person (€ 500,000) except property compensation that is part compensation that is part

of the company capital in accordance with the Law on of the company capital in accordance with the Law on Privatisation of Socially Privatisation of Socially

Owned Enterprises. Owned Enterprises.

Foreign citizens and legal entitiesForeign citizens and legal entities On 5 July 2002, the Law was substantially amended with regard to the legal On 5 July 2002, the Law was substantially amended with regard to the legal position of foreign citizens (Official Gazette no. 80/02, 81/02). The main position of foreign citizens (Official Gazette no. 80/02, 81/02). The main intention of the Croatian Parliament when adopting the amendments to the Law intention of the Croatian Parliament when adopting the amendments to the Law was to resolve the situation after the Constitutional Court decision of 1999was to resolve the situation after the Constitutional Court decision of 1999.. Original Law stipulates in its Art. 11/1 that: “Foreign individuals and Original Law stipulates in its Art. 11/1 that: “Foreign individuals and legal entities do not have rights based on of this Law”. The Constitutional Court legal entities do not have rights based on of this Law”. The Constitutional Court in its decision of 1999 cancelled part of the mentioned provision with regard to in its decision of 1999 cancelled part of the mentioned provision with regard to foreign individuals. Foreign legal entities cannot realise their aspirations within foreign individuals. Foreign legal entities cannot realise their aspirations within restitution process even after that Decision. restitution process even after that Decision. There is no right of previous owner to compensation according to the amended There is no right of previous owner to compensation according to the amended Law on Compensation when compensation issue has been regulated by an Law on Compensation when compensation issue has been regulated by an international agreement (Art. 10/1). Foreign individuals as well as foreign legal international agreement (Art. 10/1). Foreign individuals as well as foreign legal entities can acquire rights within restitution process if an international agreement entities can acquire rights within restitution process if an international agreement has provided for such a solution (Art. 10/2). It means that international has provided for such a solution (Art. 10/2). It means that international agreements are the way to evade the stipulations of the Law on Compensation. It agreements are the way to evade the stipulations of the Law on Compensation. It is interesting that such an ambiguous provision of Art. 10, adopted by the is interesting that such an ambiguous provision of Art. 10, adopted by the amendments to the Law of 2002, caused a lot of problems in the course of amendments to the Law of 2002, caused a lot of problems in the course of restitution process. restitution process.

The situation was resolved by the Administrative Court only in 2008, after six The situation was resolved by the Administrative Court only in 2008, after six

years. In that period, administrative bodies and the Administrative Court did not years. In that period, administrative bodies and the Administrative Court did not

accept restitution and compensation requests filed by foreign citizens, based on accept restitution and compensation requests filed by foreign citizens, based on

the provision of Art. 10/2. Their legal opinion was that such provision asked for the provision of Art. 10/2. Their legal opinion was that such provision asked for

an international agreement in order for restitution to be possible (international an international agreement in order for restitution to be possible (international

agreement as a precondition for restitution to foreign citizens)agreement as a precondition for restitution to foreign citizens). H. However, the owever, the

Property Department of the Administrative Court changed this legal opinion into Property Department of the Administrative Court changed this legal opinion into

the contrary on its general session on 8 February 2008. Immediately after that, the contrary on its general session on 8 February 2008. Immediately after that,

the Court ruled in accordance with the changed opinion in case Class UP/II-942-the Court ruled in accordance with the changed opinion in case Class UP/II-942-

01/01-01/61, Ref. no. 514-03-03/03-2-03-3 on 14 February 2008. 01/01-01/61, Ref. no. 514-03-03/03-2-03-3 on 14 February 2008.

Institutional frameworkInstitutional framework

OOffices of state administration at the county level are state administrative ffices of state administration at the county level are state administrative bodies bodies

competent in restitution cases as first instance bodiescompetent in restitution cases as first instance bodies..

We can estimate that there are between 170 and 200 civil servants responsible We can estimate that there are between 170 and 200 civil servants responsible for for

restitution restitution and otherand other property-legal cases. The number of foreseen working property-legal cases. The number of foreseen working placeplaces s

in respective internal units is between 220 and 250, by our estimation.in respective internal units is between 220 and 250, by our estimation.

Second instance body is the Ministry of JusticeSecond instance body is the Ministry of Justice. .

There are only 8 civil servants working on second instance cases connected There are only 8 civil servants working on second instance cases connected with with

restitution and other property-legal affairsrestitution and other property-legal affairs (Rulebook foreseen 17). (Rulebook foreseen 17).

Judicial protection in all restitution cases has been ensured in the Judicial protection in all restitution cases has been ensured in the Administrative Administrative

Court. Court.

A constitutional suit is the ultimate remedy for the parties dissatisfied with A constitutional suit is the ultimate remedy for the parties dissatisfied with

decisions of administrative bodies and the Administrative Court.decisions of administrative bodies and the Administrative Court.

Economic potential of CroatiaEconomic potential of Croatia

Economic parameters for Economic parameters for Croatia – yearsCroatia – years 2002 - 2008 2002 - 2008

GDP (in million €)GDP (in million €) 28.11228.112 47.37047.370

GDP per capita (in GDP per capita (in €)€)

6.3316.331 10.68210.682

Export (in % GDP)Export (in % GDP) 39.639.6 41.941.9

Import (in % GDP)Import (in % GDP) 49.149.1 50.150.1

Budget (kuna; 1 € Budget (kuna; 1 €

= about 7,3 kuna)= about 7,3 kuna) 81.882.172.99581.882.172.995

(about (about 11.216.736.000 €)11.216.736.000 €)

127.028.232.715127.028.232.715

(about (about 17.401.127.000 €)17.401.127.000 €)

Gross external debt Gross external debt

(in million €)(in million €) 15.14315.143 39.12539.125

Budget deficitBudget deficit 6.2%6.2% 0.9%0.9%

The effects of restitutionThe effects of restitution UntilUntil 28 September 200628 September 2006., ., there had been total of 51,617 claims filled inthere had been total of 51,617 claims filled in. . 46% (about 23,740) of them46% (about 23,740) of them were were completed with full legal validity completed with full legal validity. . 61% (about 14,480) of claims were accepted, while the rest of them 61% (about 14,480) of claims were accepted, while the rest of them

(39%) were (39%) were refused. In 56% of cases that were accepted, the restitution was realised refused. In 56% of cases that were accepted, the restitution was realised

in remin rem ( (about 8,110 cases). The respective property for natural restitution fell about 8,110 cases). The respective property for natural restitution fell

under three under three categories: a) offices and apartments – 47%, b) unused construction land categories: a) offices and apartments – 47%, b) unused construction land

– 26%, – 26%, and c) agricultural land, forests and forest land – 27%. In other cases and c) agricultural land, forests and forest land – 27%. In other cases

restitution restitution was realised by means of compensationwas realised by means of compensation.. It is not possible to get information about the total amount of It is not possible to get information about the total amount of

compensation paid compensation paid in money or in bonds and shares. However, the Taken Property in money or in bonds and shares. However, the Taken Property

Compensation Compensation Fund was paid 121.4 million kuna (about € 16.6 millions) in money and Fund was paid 121.4 million kuna (about € 16.6 millions) in money and

104.2 104.2 million kuna (about €14.3 million) in bonds until mid-2003. million kuna (about €14.3 million) in bonds until mid-2003.

There were 3.482 claims of foreign individuals and legal entities (from 35 There were 3.482 claims of foreign individuals and legal entities (from 35 different states), individuals without citizenship (stateless individuals) or different states), individuals without citizenship (stateless individuals) or individuals of unclear citizenship in the second application period (5 July individuals of unclear citizenship in the second application period (5 July

2002 – 2002 – 5 January 2003), after the 2002 amendments to the Law. As many as 834 5 January 2003), after the 2002 amendments to the Law. As many as 834

claims claims (24%) were filed by the subjects with unclear citizenship or unknown (24%) were filed by the subjects with unclear citizenship or unknown headquarters. Italians filed 1,213 claims (34,8%), Austrians 444 (12,8%), headquarters. Italians filed 1,213 claims (34,8%), Austrians 444 (12,8%),

USA USA citizens 179 (5,1%), Israel citizens 163 (4,7%), Germans 148 (4,3%), etc. citizens 179 (5,1%), Israel citizens 163 (4,7%), Germans 148 (4,3%), etc.

It should It should be noted that foreign individuals and legal entities had filed as many as be noted that foreign individuals and legal entities had filed as many as

4,211 4,211 claims in the period between 1991 and 2005, irrespectively of formal claims in the period between 1991 and 2005, irrespectively of formal

legal terms. legal terms. All claims of foreign claimants ask for compensation of 756.8 million All claims of foreign claimants ask for compensation of 756.8 million

kuna (kuna (about €103.7 million)about €103.7 million)

Judicial before Administrative CourtJudicial before Administrative CourtThe Court has received total of 3,053 restitution cases in 11 years, The Court has received total of 3,053 restitution cases in 11 years,

from 1999 to from 1999 to 2009 (recent data collected for this paper). Only 46 cases (1.5%) 2009 (recent data collected for this paper). Only 46 cases (1.5%)

have been have been initiated by the Catholic Church. As few as 1,331 cases have been initiated by the Catholic Church. As few as 1,331 cases have been

resolved (only resolved (only 43.6%), mostly with negative decision (64.8% of resolved cases). 43.6%), mostly with negative decision (64.8% of resolved cases).

Decisions have Decisions have been positive in 310 cases (23.3%), while 158 cases have been been positive in 310 cases (23.3%), while 158 cases have been

resolved in other resolved in other ways. ways. The role of the Court is very important. It can, by means of its The role of the Court is very important. It can, by means of its

legal legal opinion or through decisions in individual cases, determine the opinion or through decisions in individual cases, determine the

way of resolving way of resolving cases before administrative bodies. There have been several very cases before administrative bodies. There have been several very

important legal important legal opinions of the Court, which determine the restitution process opinions of the Court, which determine the restitution process

significantlysignificantly

Key problemsKey problems

Weak preparation for restitution processWeak preparation for restitution process Imprecise and postponed legal regulationImprecise and postponed legal regulation Discrimination of applicants and beneficiaries of Discrimination of applicants and beneficiaries of

restitutionrestitution Extremely long duration of restitution processes and Extremely long duration of restitution processes and

weak administrative capacitiesweak administrative capacities Problems connected with court protection of Problems connected with court protection of

applicants’ rightsapplicants’ rights Weak and unclear political will about restitutionWeak and unclear political will about restitution

Disputes before the European Court of Human Disputes before the European Court of Human

RightsRights Number of cases 5

No. of cases per year 1999.1

2005.1

2006.1

2007.1

2008.1

Outcome of the cases Admissible2

Inadmissible3

Compensation (€) €20.540 + any tax that may be chargeable to the applicants

-

RecommendationsRecommendations 1.1. To make all possible preparations of legal regulation and To make all possible preparations of legal regulation and

administrative capacities before enactment of the restitution administrative capacities before enactment of the restitution law; law;

2. To find clear, well discussed, and broadly accepted political 2. To find clear, well discussed, and broadly accepted political goals of restitution; goals of restitution;

3. To have appropriate restitution management and firm political 3. To have appropriate restitution management and firm political leadership of the restitution process, irrespectively of the leadership of the restitution process, irrespectively of the kind and scope of restitution;kind and scope of restitution;

4. To ensure reasonable time for resolving restitution cases; 4. To ensure reasonable time for resolving restitution cases; 5. To evade any sort of procedural or substantive discrimination; 5. To evade any sort of procedural or substantive discrimination; 6. To create a complete system of court protection in order to be 6. To create a complete system of court protection in order to be

able to meet the standards of the European Convention for able to meet the standards of the European Convention for the Protection of Human Rights and Fundamental Freedoms; the Protection of Human Rights and Fundamental Freedoms;

7. Basic orientation and principles of restitution, not to cause 7. Basic orientation and principles of restitution, not to cause new wrongs while recovering old ones, could be acceptable in new wrongs while recovering old ones, could be acceptable in Serbia, also;Serbia, also;

8. Compensation in bonds should be ensured in shorter time 8. Compensation in bonds should be ensured in shorter time span (it seems that twenty years is too long a term);span (it seems that twenty years is too long a term);

9. It is advisable to regulate restitution by a single law;9. It is advisable to regulate restitution by a single law;

10. Restitution 10. Restitution in remin rem is advisable, but not at the expense of is advisable, but not at the expense of the public interest and the interests of current users;the public interest and the interests of current users;

11. It is recommendable to make compensation as close to 11. It is recommendable to make compensation as close to market value of the property as possible, having in mind market value of the property as possible, having in mind country’s economic and budgetary stability;country’s economic and budgetary stability;

12. To make land registries fully reliable before entering the 12. To make land registries fully reliable before entering the restitution process; restitution process;

13. To use external expertise of the court appointed experts in 13. To use external expertise of the court appointed experts in value estimation at least in all serious cases (for example, value estimation at least in all serious cases (for example, when property might exceed value of €10,000); when property might exceed value of €10,000);

14. To gather and systematise judicature of the neighbouring 14. To gather and systematise judicature of the neighbouring countries and to train the civil servants responsible for countries and to train the civil servants responsible for restitution before entering the restitution process;restitution before entering the restitution process;

15. To separate those civil servants who will work on restitution 15. To separate those civil servants who will work on restitution cases and to make them in charge of restitution cases only; cases and to make them in charge of restitution cases only;

16. To ensure two levels of administrative procedure before 16. To ensure two levels of administrative procedure before different administrative bodies (of first and second instance), different administrative bodies (of first and second instance), to ensure sound and fair possibilities for appeal;to ensure sound and fair possibilities for appeal;

17. To prepare adequate premises and equipment, as well as to 17. To prepare adequate premises and equipment, as well as to prepare the necessary software in advance. prepare the necessary software in advance.

THANK YOU!THANK YOU!

Dr. Ivan KoprićDr. Ivan Koprićikopric@pravo.hr

Dr. Boris LjubanovićDr. Boris Ljubanovićljboris@pravos.hr