European Court of Human Rights

 

 

SECOND SECTION

CASE OF TEGULUM S.A. v. THE REPUBLIC OF MOLDOVA

(Application no. 53982/11)

 

 

 

 

 

 

JUDGMENT

STRASBOURG

1 February 2022

 

This judgment is final but it may be subject to editorial revision.

In the case of Tegulum S.A. v. the Republic of Moldova,

The European Court of Human Rights (Second Section), sitting as a Committee composed of:

          Egidijus Kūris, President,
          Pauliine Koskelo,
          Gilberto Felici, judges,
and Hasan Bakırcı, Deputy Section Registrar,

Having regard to:

the application (no. 53982/11) against the Republic of Moldova lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by Tegulum S.A., a company incorporated in Moldova;

the decision to give notice of the application to the Moldovan Government (“the Government”);

the parties’ observations;

Having deliberated in private on 11 January 2022,

Delivers the following judgment, which was adopted on that date:

INTRODUCTION

1.  The case concerns the withdrawal of the applicant company’s right to exploit a limestone and gravel quarry. The applicant company complains of a violation of its rights under Article 1 of Protocol No. 1 to the Convention and Article 6 of the Convention.

THE FACTS

2.  The applicant is a company incorporated in Moldova in 1992, which was represented by Mr A. Rogac, a lawyer practising in Chișinău.

3.  The Government were represented by their Agent, Mr O. Rotari.

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

5.  Based on an act dated 17 May 1990 transferring the mining perimeter to the applicant company’s balance sheet and an act dated 26 June 1991 confirming the mining perimeter of 24.2 ha, the applicant company was authorised until 2035 to extract minerals from the Vărăncău limestone and gravel deposits. According to the applicant company, the quarry was exploited until 1997.

6.  On 26 September 2008 the applicant company obtained a licence issued by the Licensing Chamber (Camera de Licențiere din Republica Moldova) for the exploitation of mineral deposits for a period of five years. For the exploitation of a certain deposit, it needed to be included in the Annex of the license. For this purpose, the company was required to sign with the local public administration a lease contract for the land on which the respective deposit was located.

7.  On 1 October 2008 the applicant company requested the Vărăncău mayor to sign a lease contract noting that the Vărăncău quarry was on its balance sheet and had been exploited until 1997. On 21 October 2008 the Vărăncău mayor refused the request noting that the decision was not within the mayor’s exclusive competence and that the applicant failed to confirm its right to exploit the Vărăncău mineral deposit.

8.  The applicant company initiated proceedings against the Vărăncău mayor. In a second round of court proceedings, on 2 November 2011 the Soroca District Court rejected the applicant company’s claims, finding that the local council, and not the mayor, was the competent authority to sign the lease and that the applicant company failed to submit information concerning the mining perimeter. The applicant company did not appeal against this judgment because, after the withdrawal of its right to exploit the quarry (see paragraphs 12-17 below), it lost interest in pursuing its claims against the local authority.

9.  Meanwhile, on 26 February 2009 the applicant company informed the State Agency for Geology and Mineral Resources (Agenția Geologie și Resurse Minerale, “the Agency”) about the conflict with the local authority and about the resulting delay in the exploitation of the quarry, announcing their readiness to proceed within a delay of ten days after the mineral deposit was included in the annex of its license, as required by law.

10.  On 11 March 2009 the Ministry of Economy and Commerce issued the applicant company the Act no. 485 confirming the mining perimeter at the Vărăncău quarry. The act extended the perimeter to 27.4 ha and the exploitation time until the exhaustion of mineral deposits at the site.

11.  On 28 May 2010 the Agency ordered a control of the applicant company’s mining activity at the Vărăncău quarry.

12.  On 29 September 2010 the Ministry of Environment (“the Ministry”) adopted the Order no. 83 about the revocation of the applicant company’s right to exploit the Vărăncău mineral deposits. The Ministry cited Section 32 (1) (i) of the Mining Code and the fact that the applicant company failed to exploit the Vărăncău quarry for more than two years without well-founded reasons. The Ministry ordered the Agency to annul the mining perimeter granted to the applicant company. On 1 October 2010 the Agency annulled Act no. 485 dated 11 March 2009 confirming the mining perimeter.

13.  On 29 October 2010 the Ministry announced a call of offers for the exploitation of the Vărăncău quarry.

14.  On 5 November 2010, after exhausting the preliminary procedure, the applicant company appealed in court against the orders of the Ministry and of the Agency and requested their suspension until a judgment on the merits was delivered. The applicant argued, inter alia, that the two years of non-use should be calculated from 11 March 2009 and that, in any case, the failure to exploit the quarry in the two preceding years had been imputable to the Vărăncău local authority. It also contended that the legal procedure had been breached because the Ministry failed to provide a warning letter and to grant it a delay of three months to redress the situation. The applicant company also argued that the provisions of the Mining Code, referred to in Order no. 83, had been used retroactively, because the code had entered into force only on 17 July 2009 and the previous version of the Mining Code did not contain a similar provision on non-use.

15.  On 1 December 2010 the Chișinău Court of Appeal rejected the applicant company’s claims as ill-founded. The court emphasised that the applicant company had not exploited the quarry since 1990, had not obtained a license for this purpose before 2008 and had also failed to submit annual reports on the volume of extracted minerals and on taxes to be levied in connection with the extraction of minerals. The court noted that the mining regulations in force before 2009, such as the 2006 General Regulation, contained similar provisions concerning the withdrawal of the mining perimeter in case of non‑use for more than two years after the assignment of the mining perimeter. The court dismissed the applicant’s argument that the calculation of the two‑year period should start from 11 March 2009 finding that Act no. 485 was secondary and resulted from the act dated 17 May 1990 transferring the mining perimeter to the applicant company’s balance sheet. The court did not respond to the applicant’s argument concerning the Ministry’s failure to respect the legal procedure and did not rule on the applicant company’s request to suspend the administrative acts.

16.  The applicant company appealed against the judgment of the Chișinău Court of Appeal reiterating its arguments and noting that the court had acted ultra vires by drawing conclusions that the applicant had failed to comply with other legal provisions than those on which had relied the Ministry in the contested decision.

17.  On 13 April 2011 the Supreme Court of Justice rejected the applicant company’s appeal on points of law reiterating the arguments of the Court of Appeal. The court did not respond to the applicant’s argument concerning the Ministry’s failure to send a warning letter and to grant a three-month delay to redress the situation.

RELEVANT LEGAL FRAMEWORK

18.  The relevant provisions of the Mining Code, in force since 17 July 2009, read as follows:

“Section 32. Grounds for the limitation, suspension or revocation of the right to use mining perimeters

(1) The right to use a mining perimeter may be limited, suspended or revoked if:

...

i) the mining perimeter is not used according to its destination without well-founded reasons for two years; ...

Section 33. Procedure for the revocation of the right to use a mining perimeter

... (2) In the cases provided under Section 32 (1) letters (g)-(k), the decision to revoke the right to use a mining perimeter may be adopted by the competent authority three months after the beneficiary of the perimeter had received a written warning concerning the committed violations if in this time-limit the beneficiary failed to redress the notified violations. ”

19.  The relevant provisions of the General Regulation on the assignment and registration of mining perimeters for the exploitation of mineral deposits, approved by the Decree of the Standardization and Metrology Service no. 1905-RT from 22 March 2006, read as follows:

“6.5. The assignment of a mining perimeter is legalised by issuing an act confirming the mining perimeter and by making the requisite inscription in the top right corner of the topographic plan.

...

7.2. The right to use a mining perimeter can also be terminated if the beneficiary ... did not start the exploitation of the mineral deposit during two years after the perimeter had been assigned to that beneficiary.”

THE LAW

I.  ALLEGED VIOLATION OF ARTICLE 1 OF PROTOCOL No. 1 to THE CONVENTION

20.  The applicant complained that the withdrawal of its right to exploit the quarry had had the effect of infringing its right to peaceful enjoyment of its possessions as secured by Article 1 of Protocol No. 1 to the Convention, which reads as follows:

“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law ...”

A.    Admissibility

21.  The Court notes that this complaint is neither manifestly ill-founded nor inadmissible on any other grounds listed in Article 35 of the Convention. It must therefore be declared admissible.

B.    Merits

1.     The parties’ submissions

22.  The applicant argued that the annulment on 1 October 2010 of the Act no. 485 confirming the mining perimeter dated 11 March 2009, which amounted to the withdrawal of its right to exploit the quarry, had not been carried out in accordance with the domestic law and had not been necessary in a democratic society. In particular, the failure to exploit the quarry since 11 March 2009 did not amount to two years and was imputable to the Vărăncău local authority and not to it, and the law provided for the possibility to withdraw the right to exploit a mining perimeter only if the non-use had been without well-founded reasons. Moreover, the Ministry failed to issue a warning letter and to grant a three‑month delay allowing the applicant company to explain or redress the situation before proceeding to the revocation of the respective right. The 2009 Mining Code provision on non-use had been used retroactively. Finally, the law provided for three possible sanctions - limitation, suspension and withdrawal - and neither the Ministry nor the domestic courts explained why the harshest sanction had been appropriate in this situation. The domestic courts had disregarded the arguments put forward by the applicant company and reached conclusions which were unjust and arbitrary.

23.  The Government did not dispute the fact that the applicant company’s right to extract minerals from the Vărăncău quarry constituted a possession within the meaning of Article 1 of Protocol No. 1 to the Convention and that its revocation amounted to an interference with the applicant company’s right to peaceful enjoyment of that possession. In the Government’s opinion the interference in question constituted a measure of control of use of property which fell to be examined under the second paragraph of Article 1 of Protocol No. 1 to the Convention. The interference in question was provided for by law, in force before and after 2009, which provided that the right to exploit a mining perimeter could be withdrawn if not used for two years. The applicant company had failed to exploit the Vărăncău quarry since 1990 and had obtained a license for this purpose only in 2008, the validity of which was not affected by the contested decision. In this sense, the Government distinguished the case from that of Megadat.com v. Moldova (no. 21151/04, ECHR 2008) where the applicant company’s license was effectively withdrawn.

24.  According to the Government, the applicant company sustained no loss because it had never actually started the exploitation of the said mineral deposit. Therefore, the measure applied by the Ministry of Environment was in the general interest and a fair balance was struck between the demands of the general interest and the individual interests of the applicant company.

2.     The Court’s assessment

25.  It is undisputed between the parties that the applicant company’s right to exploit the said quarry, provided by Act no. 485 confirming the mining perimeter dated 11 March 2009, constituted a possession for the purposes of Article 1 of Protocol No. 1 to the Convention and that the annulment of this document constituted an interference with the applicant company’s right to the peaceful enjoyment of their possessions. Such interference constitutes a measure of control of the use of property which falls to be examined under the second paragraph of Article 1 of Protocol No. 1 to the Convention and must be lawful and proportionate to the aim pursued (see Gospodăria țărănească Chiper Terenti Grigore v. the Republic of Moldova, no. 71130/13, §§ 27-29, 2 June 2020, with further references).

26.  The Court reiterates that where an issue in the general interest is at stake it is incumbent on the public authorities to act in good time, in an appropriate manner and with utmost consistency (see Beyeler v. Italy [GC], no. 33202/96, § 120, ECHR 2000‑I). The Court will examine whether the domestic authorities and courts complied with these principles.

27.  In so far as the lawfulness of the interference is concerned, the Court finds that the issue of practical compliance with the law is closely related to whether the interference was “necessary in a democratic society” and will therefore examine this issue below. The Court also considers it unnecessary, for the purposes of the present case, to determine the question of the legitimate aim pursued by the interference. It will leave this issue open and will focus on the question of proportionality.

28.  The Court notes from the outset that although the applicant company had had in the past other documents authorising it to exploit the Vărăncău quarry, the impugned measure concerned only Act no. 485 from 11 March 2009. This act was issued in 2009 by the Ministry of Economy and Commerce, despite the non-use of the quarry before that date for more than two years; it did not refer to any preceding acts, provided for a larger mining perimeter and authorised the extraction of minerals for a longer period than the acts issued in the 1990s (see paragraph 10). The issuance of this act must have led the applicant company to believe that it could exploit the said mineral deposit once it succeeded making the necessary amendments to the annex of its license. Despite this expectation, another ministry invalidated this act (see mutatis mutandis, Megadat.com v. Moldova, cited above, §71) on the ground of non-use without well-founded reasons.

29.  The Court notes that the Ministry did not specify in its order the exact period of non-use which was imputed to the applicant company and that the 2009 Mining Code did not contain explicit provisions as to when the two‑year period started running (see paragraph 18). While the 2006 General Regulation referred explicitly to “two years after the mining perimeter had been assigned to the beneficiary” (see paragraph 19), the Chișinău Court of Appeal rejected the applicant’s argument that the calculation should start on 11 March 2009 finding that the 2009 act was secondary to the documents issued in the 1990s (see paragraph 15), implying that the time started running from 1990. At the same time, the Court observes that the documents from 1990 and 1991 had not been annulled or concerned by the impugned measure.

30.  It is undisputed that the applicant company failed to exploit the quarry in the two years preceding the order of the Ministry. During this period the applicant company informed the Agency that the reason for its delay in exploiting the quarry was the conflict with the local authority and had sought the Agency’s intervention to mediate the conflict but to no avail (see paragraph 9 above). Even assuming that this was the relevant period to be taken into consideration, the Court observes that the authorities have never addressed the reasons of such failure and whether they were or not imputable to the applicant company. This was particularly relevant since the domestic law allowed for sanctions to be applied only if there were no “well-founded reasons” for the failure to exploit the deposits (see paragraph 18 above).

31.  In respect of the procedural safeguards available to the applicant company to defend its interests, it is undisputed that the Ministry had not issued a warning and had not granted the applicant company a three-month delay to redress the situation, as prescribed by Section 33 of the Mining Code. The Court notes with regret that the domestic courts have not addressed this argument, although it was particularly relevant since the domestic law explicitly provided for such a procedure (see paragraph 18 above) and it represented an important safeguard before withdrawing the right to exploit a mineral deposit (see also Megadat.com v. Moldova, cited above, §§ 73-74; Gospodăria țărănească Chiper Terenti Grigore v. the Republic of Moldova, cited above, §§ 37-39).

32.  The Court further observes that while the domestic law provided for gradual sanctions - limitation, suspension and withdrawal–, neither the Ministry nor the domestic courts assessed why in the case of the applicant company the application of the harshest sanction had been necessary. There is nothing in the materials of the case to indicate that the applicant company had been notified of any wrongdoings nor that it failed to comply with any warning from the authorities.

33.  Moreover, the Court notes that the Ministry had announced a call of offers for the same mining perimeter before the applicant company managed within the legal time limit to appeal against the decision to revoke its right of exploitation and before the Court of Appeal could examine the request to suspend the impugned decision.

34.  In respect of the applicant company’s allegations that legal provisions in the new Mining Code had been used retroactively, the Court observes that the applicant company did not dispute the domestic courts’ and the Government’s argument that the Moldovan mining legislation, both before and after the entry in force of the new Mining Code on 17 July 2009, contained similar provisions concerning the consequences of non-use of a mineral deposit for two years. Although, as noted above, the new law was not explicit concerning the calculation of this time-limit, the domestic courts addressed the retroactivity argument (see paragraph 15) and the Court does not find that that assessment was in any way manifestly arbitrary.

35.  The foregoing considerations are sufficient to enable the Court to conclude that, even assuming that the interference with the applicant’s possessions had been lawful, the revocation of the applicant company’s right to exploit a quarry due to non-use, as the harshest possible sanction, without clarity as to relevant period of non-use and to the reasons of non-use, as well as in the absence of any warning and possibility to redress the situation, did not strike a fair balance between the demands of the public interest, on the one hand, and the applicant’s rights to the peaceful enjoyment of its possessions on the other.

36.  There has therefore been a violation of Article 1 of Protocol No. 1 to the Convention.

II.  ALLEGED VIOLATION OF ARTICLE 6 OF THE CONVENTION

37.  The applicant company complained that the proceedings as a result of which its right to exploit the quarry was revoked had not been fair. It relied on Article 6 § 1 of the Convention.

38.  Having regard to the facts of the case, the submissions of the parties and its findings under Article 1 of Protocol No. 1 to the Convention, the Court considers that it is not necessary to examine either the admissibility or the merits of the complaint under Article 6 (see Kaos GL v. Turkey, no. 4982/07, § 65, 22 November 2016; and Ghiulfer Predescu v. Romania, no. 29751/09, § 67, 27 June 2017).

III.  APPLICATION OF ARTICLE 41 OF THE CONVENTION

39.  Article 41 of the Convention provides:

“If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party.”

40.  The applicant company claimed the restitution of the right to exploit the Vărăncău mineral deposit or, alternatively, 134,941,029.96 euros (EUR) in respect of pecuniary damage, representing loss of profit and actual losses. The applicant company submitted copies of its financial reports and of contracts for the sale of gravel and limestone.

41.  The applicant company also claimed EUR 70,000 in respect of non‑pecuniary damage and EUR 5,045.76 in respect of costs and expenses. The applicant company submitted an invoice for postal services (EUR 45.76), as well as a legal contract and proof of payment for legal services before the Court (EUR 5,000).

42.  The Government submitted that there was no causal link between the claimed pecuniary damage and the alleged violation, and that the claims for non-pecuniary damage and for costs and expenses were excessive and unsubstantiated.

43.  In the circumstances of the present case, the Court considers that, as far as the award of pecuniary damage is concerned, the question of the application of Article 41 is not ready for decision. That question must accordingly be reserved and the subsequent procedure fixed, having regard to any agreement which might be reached between the Government and the applicant (Rule 75 §§ 1 and 4 of the Rules of Court).

44.  However, the Court awards the applicant EUR 5,000 in respect of non-pecuniary damage and in full the claim for costs and expenses, plus any tax that may be chargeable on the applicant.

45.  The Court considers it appropriate that the default interest rate should be based on the marginal lending rate of the European Central Bank, to which should be added three percentage points.

FOR THESE REASONS, THE COURT, UNANIMOUSLY,

1.      Declares the complaint under Article 1 of Protocol No. 1 to the Convention admissible;

2.      Holds that there has been a violation of Article 1 of Protocol No. 1 to the Convention;

3.      Holds that there is no need to examine the admissibility or the merits of the complaint under Article 6 of the Convention;

4.      Holds that the question of the application of Article 41 of the Convention in respect of pecuniary damage is not ready for decision and accordingly,

(a)  reserves the said question;

(b)  invites the Government and the applicant company to submit, within three months from the date on which the judgment becomes final, in accordance with Article 44 § 2 of the Convention, their written observations on the amount of pecuniary damages to be awarded to the applicant and, in particular, to notify the Court of any agreement that they may reach;

(c)  reserves the further procedure and delegates to the President of the Committee the power to fix the same if need be;

5.      Holds

(a)  that the respondent State is to pay the applicant company, within three months, the following amounts, to be converted into Moldovan lei at the rate applicable at the date of settlement:

(i) EUR 5,000 (five thousand euros), plus any tax that may be chargeable, in respect of non-pecuniary damage;

(ii) EUR 5,045.76 (five thousand forty five euros and 76 cents), plus any tax that may be chargeable, in respect of costs and expenses;

(b)  that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amounts at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points;

6.      Dismisses the remainder of the applicant company’s claim for just satisfaction.

Done in English, and notified in writing on 1 February 2022, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.

             Hasan Bakırcı                                                     Egidijus Kūris
          Deputy Registrar                                                      President