ECHR judgment of July 3, 2018 in the case of Volokitin (Volokitin) and others v. the Russian Federation (application No. 74087/10 and others).
In 2010, complainants were assisted in preparing applications. Subsequently, the applications were merged and communicated to the Russian Federation.
The case has successfully examined applications about the inability of the authorities of the respondent state to establish an effective procedure, with the help of which it would be possible to return money on government bonds. The case was a violation of Article 1 of Protocol No. 1 to the Convention.
THE CIRCUMSTANCES OF THE CASE
On December 30, 1980, the Council of Ministers of the Union of Soviet Socialist Republics decided to issue bonds of a state internal winning loan to finance certain state programs (hereinafter, 1982 bonds). Soviet citizens could either buy bonds for their money or exchange them for bonds of the state domestic winning loan of 1966. After the collapse of the Union of Soviet Socialist Republics, the authorities of the Russian Federation assumed obligations on bonds of the state internal winning loan of the former Union of Soviet Socialist Republics on the 1982 loan.
From 1995 to 2000, a number of laws and by-laws were adopted in the Russian Federation, in accordance with which Soviet securities, including 1982 bonds, were converted into special Russian target bonds that had a denomination in "debt rubles". From 2003 to the present, the application and enforcement of these laws and regulations were regularly suspended; the last time January 1, 2017 until January 1, 2020 the Applicants, 15 people, as owners of these targeted bonds appealed to the financial authorities of the Russian Federation and the courts of the Russian Federation, demanding payments on securities. Their claims were rejected on procedural and substantive grounds.
QUESTIONS OF LAW
Regarding compliance with Article 1 of Protocol No. 1 to the Convention. The “property” of the claimants consisted in their right to receive a certain form of compensation or reimbursement for the 1982 national domestic winnings bonds that they currently own. With the enactment of the 1995 Federal Law on the Restoration and Protection of the Savings of Citizens of the Russian Federation, the authorities of the Russian Federation pledged to repay the debts confirmed by the bonds of the 1982 state domestic win-win loan. The repeated suspension of the execution of the relevant legal norms was based on decisions taken in the framework of the legislative process, therefore, the restriction of the applicants' right to respect for their property was “prescribed by law”. Considering the poorly regulated nature of the transition of the Russian Federation from a planned to a market economy and the consequences of the 1998 financial crisis for the country's economy, setting budget priorities in favor of spending on vital social needs to the detriment of exclusively material requirements was a legitimate goal in the public interest.
As for achieving a fair balance between the common interest and the rights of the applicants, the legislative authorities of the Russian Federation immediately adopted the regulations required for the implementation of the 1995 Federal Law on the Restoration and Protection of Citizens of the Russian Federation. However, since 2003, the application of existing legal norms in practice has been constantly postponed. Since the census of the bonds and the assessment of their total value were not completed, there was no assessment of the amount of budget funds needed to pay the debt due to other priority social payments. The Government were unable to provide a convincing justification for the lengthy, for more than 15 years, non-execution of the rights of the applicants, which they were granted under Russian law.
In addition, the applicants did not behave passively, rather, they showed an active attitude to the problem, sending inquiries to the competent authorities and filing complaints with the courts of the Russian Federation. There is no indication that the applicants would be held responsible or would intentionally contribute to the state of affairs that they appealed. Due to the actions of the authorities of the Russian Federation, the applicants were in a state of uncertainty, which in itself did not comply with the obligation to ensure the principle of respect for property, namely, the obligation to act in a timely, proper and consistent manner when it comes to a matter of common interest.
RESOLUTION
The case was a violation of the requirements of Article 35 of the Convention (adopted unanimously).
COMPENSATION
In application of Article 41 of the Convention. The Court awarded the applicant in compensation for the following amounts.
(a) Material damage. The poorly regulated development of the Russian economy and the continuing suspension of the relevant legislation affected the value of the bonds and the amount to be awarded to claimants as compensation for actual damage (damnum emergens). The inability of the state to establish a payment scheme for debt obligations could not be interpreted as requiring any special method of calculation or determination in abstracto of the current value of debt obligations.
Damnum emergens (lat.) - the amount of losses actually incurred by a certain point (as opposed to lost profits).
Consequently, the situation of applicants who, in Soviet times, bought bonds at full value, should be distinguished from the situation of those who bought bonds later due to various relevant financial risks. In this regard, the European Court asked the applicants to clarify the time and method of purchasing bonds of the state domestic winning loan of 1982, as well as their value, if it was paid.
The number of bonds owned by the three applicants corresponded to the provided explanation of their origin. The European Court awarded the applicants amounts from 2,000 to 6,000 euros, the claims of the remaining applicants were rejected.
(b) Moral harm. Under this point, the Court awards to each of the above three applicants EUR 1,800.
As for the other applicants, for whom it was not possible to establish the time they purchased the bonds and the period of ownership of the securities, the finding of a violation would constitute sufficient fair compensation.
Regarding compliance with Article 46 of the Convention. There was a systemic problem arising from the continued inability of the authorities to ensure the exercise of the right of bondholders to any compensation for debt and to execute previous judgments of the European Court on the same matter, which is a practice incompatible with the provisions of the Convention. Consequently, the authorities of the respondent state should immediately begin substantive negotiations with the Committee of Ministers of the Council of Europe on what measures may be necessary to be taken in order to execute this Resolution and the previous decisions concerning the 1982 national domestic benefit bonds.