5.  The applicants are joint owners of the property at number 274, Republic Street, Valletta. The property, known as the “King’s Own Band Club” (hereinafter referred to as “the KOBC”), is a four‑storey building of 864 square metres, and is located in a prime site in Malta’s capital city.
6.  Initially, the property belonged to the applicants’ ascendants. In 1946, the applicants’ ascendants entered into a rent agreement with the KOBC, whereby they willingly rented the said property for 500 pounds sterling (GBP) annually (around 1,164.69 euros (EUR)). In 1955 legislation specifically regulating the lease of property to band clubs (Act V of 1955, hereinafter “the 1955 amendments”) was introduced.
7.  By law (The Civil Code read in conjunction with the Re‑letting of Urban Property (Regulation) Ordinance – see relevant domestic law below), the applicants are obliged to renew, on an annual basis, the lease entered into by their ascendants, and may not demand an increase in rent. According to the applicants’, the property’s market rental value (in 2014) was EUR 269,100 annually.
8.  Part of the property is utilised as a band club, and part of the property is operated as a restaurant and bar. The applicants claim that the operation of the restaurant and bar is a profitable economic activity that generates an income to the caterer of around EUR 150,000 or more annually.
9.  In 2009, amendments were introduced to allow for increases in certain rents and to establish a cut-off date for existing protected leases relating to commercial properties, which are thus to come to an end in 2028. These amendments did not affect the applicants’ property which is rented out as a band club. The amendments however also gave the relevant Minister the power to regulate conditions relating to clubs, thus allowing for the possibility of future amendments (see paragraph 19 below).
10.  In 2011, the applicants filed proceedings before the Civil Court (First Hall) in its constitutional jurisdiction. The proceedings were brought against the Attorney General (hereinafter referred to as “the AG”), the Prime Minister (hereinafter referred to as “the PM”) and the King’s Own Band Club (the lessee). The applicants claimed that their right to peaceful enjoyment of the property as protected under Article 1 of Protocol No. 1 to the Convention was being breached. They claimed that they were being denied the use of their property without being provided with adequate compensation. The applicants further submitted that, in 2009, the law had been amended, allowing for an increase in rent and the establishment of a cut‑off date for existing “protected rents”, but the amendments in the law did not cover properties rented out as clubs. Therefore, in contrast with other commercial rents, the annual rent for the club could not be raised, and the rent contract could not be terminated. The applicants claimed that the law was discriminatory and was therefore in violation of Article 14 of the Convention.
11.  On 8 October 2013, the Civil Court (First Hall) in its constitutional jurisdiction found that the applicants had suffered a violation of Article 1 of Protocol No. 1 to the Convention in so far as the interference with the applicants’ property rights had not been proportionate. The applicants had submitted that the property had a rental value of EUR 269,100 a year, while the AG and the PM had submitted that the property had a rental value of EUR 93,000 a year. Irrespective of which value one was to consider, the court concluded that the rent being received by the applicants was disproportionate. Keeping in mind the estimated rental values presented before the court, and the income that the KOBC was generating from its bar, the court awarded EUR 300,000 in damages to the applicants (to be paid half by the AG and the PM jointly, and half by the KOBC). The costs of the proceedings were to be paid, half by the AG and PM, and the other half by the KOBC.
12.  The court further concluded that the applicants had not suffered any discrimination as no satisfactory proof had been presented showing that they were discriminated against when compared to other owners leasing their property as a club.
13.  The AG, PM and KOBC filed an appeal before the Constitutional Court.
14.  On 6 February 2015 the Constitutional Court overturned in part the judgment of the first‑instance court, and concluded that there had been no violation of the applicants’ rights. The Constitutional Court ordered that the costs of proceedings at both instances be paid by the applicants.
15.  The Constitutional Court found that contrary to that pleaded by the Government, the applicants did have title of ownership over the property at issue. However, in line with domestic case-law the Constitutional Court concluded that, because the agreement had been entered into voluntarily with full knowledge of the consequences it would lead to (that is, that the rent due could not be raised and the rent agreement could not be terminated), then the applicants could not allege a violation of their rights. This was so, even if due to the rate of inflation throughout the years, the rent due was now to be considered low. The Constitutional Court further held that the amendments to the law of 2009, mentioned by the applicants, did not affect their position which remained the same as that when the rent agreement had been entered into [in 1946], and therefore there was no reason for the principle of pacta sunt servanda (“agreements must be complied with”) not to be given full effect.
16.  On 6 May 2015, the applicants filed an application for retrial. They claimed that the Constitutional Court had committed an error of fact and applied a wrong interpretation of the law. They noted that the protection given in law to clubs was introduced in 1955 while their predecessors in title had entered into a lease agreement in 1946.
17.  Nevertheless, the applicants also instituted proceedings before this Court on 20 July 2015.
18.  On 3 February 2016 the Constitutional Court rejected the applicants’ request for a re‑trial. The Constitutional Court held that, as the law stood, retrial could not be applied in regard to a case of a constitutional nature. The costs of the proceedings were to be paid by the applicants.
19.  Pending the constitutional redress proceedings (on appeal), on 1 January 2014, the Conditions Regulating the Leases of Clubs Regulations (hereinafter ‘the Regulations’), Subsidiary Legislation Chapter 16.13 of the Laws of Malta came into force (see relevant domestic law).
20.  The Regulations provided that the rent payable to the owners by the band clubs holding the property under title of lease was to be increased by 10% (from the previous year) every year until 2016 and as from 1 January 2016 the rent was to be increased by 5% (from the previous year) every year until 2023, following which it would increase every year according to the index of inflation. As from 2015 the tenant also had to pay an additional rent calculated at the rate of 5% on the annual income derived by the club. As a result in 2015 the total annual rent paid to the applicants by the KOBC was EUR 2,876. 26 and in 2016 EUR 3,017.20,