FIFTH SECTIONCASE OF ODESKA BUTERBRODNA KOMPANIYA, TOV v. UKRAINE(Application no. 59414/15)      JUDGMENT STRASBOURG12 December 2024 This judgment is final but it may be subject to editorial revision.In the case of Odeska Buterbrodna Kompaniya, TOV v. Ukraine,The European Court of Human Rights (Fifth Section), sitting as a Committee composed of: María Elósegui, President, Gilberto Felici, Kateřina Šimáčková, judges,and Martina Keller, Deputy Section Registrar,Having regard to:the application (no. 59414/15) against Ukraine lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) on 18 November 2015 by a Ukrainian company, Odeska Buterbrodna Kompaniya, TOV (“the applicant company”), which is based in Odesa and was represented by Mr A.V. Leshchenko, a lawyer practising in Odesa;the decision to give notice of the applicant company’s complaint under Article 1 of Protocol No. 1 to the Ukrainian Government (“the Government”), represented by their Agent, Ms M. Sokorenko, and to declare the remainder of the application inadmissible;the parties’ observations;Having deliberated in private on 21 November 2024,Delivers the following judgment, which was adopted on that date:SUBJECT MATTER OF THE CASE1.  The application concerns the invalidation of the applicant company’s title to a property in court proceedings instituted against it by a prosecutor, on the basis that the property was an unauthorised construction built on municipal land.2.  The applicant company is a private limited liability company which was founded by Mr and Ms Ye. and one other person. Mr Ye. is also its managing director.3.  As can be seen from the documents submitted by the parties, in 2001 a private entrepreneur, Ms B., decided to build a summer café in Luzanivka Park in Odesa. She obtained preliminary permits for her construction project and submitted the documents required to obtain a lease for the plot of land intended for the café. It appears that she did not obtain the lease, but built the café anyway. Building work was completed between 2004 and 2005.4.  In 2007 and 2008, in a series of commercial proceedings involving Ms B., Odesa City Council and the local prosecutor, the courts established that the café had not been “authorised for use” as was required by law for all new constructions and that Ms B. had no right to the plot of land under the café. The café was therefore an unauthorised construction pursuant to Article 376 of the Civil Code, which provided that the construction of a building was deemed to be unauthorised if it was built on a plot of land which had not been allotted to the person who was carrying out the construction; or it was allocated for a different purpose; or if there was no appropriate document granting the right to carry out construction works or works in accordance with an approved project; or if it was significantly in breach of building standards and regulations. The same Article provided that a person who had undertaken the unauthorised construction of immovable property did not acquire title to it. Title to an unauthorised construction could be acknowledged by a court if the person concerned had obtained a lease for the land on which the construction stood. That was not the case for Ms B. and it appears that the local authorities did not intend to grant her a lease.5.  On 22 January 2008 the Odesa Commercial Court of Appeal ordered the demolition of the café. From the case file it is apparent that the demolition was not enforced. The Government have not provided information about the reasons for the non-enforcement.6.  In September 2008 (in some documents the date is indicated as September 2010) Ms B. sold the café to Mr M. In the contract she undertook to complete the requisite notarial certification, but it appears that she failed to do so. Consequently, Mr M. brought a claim against her, seeking to have the contract of sale recognised as valid and to have his property rights to the café acknowledged. By a judgment of 12 July 2011, the Suvorovsky District Court of Odesa allowed his claims in full and on the basis of that judgment Mr M. registered his title to the café.7.  In December 2011 Mr and Ms Ye. bought the café from Mr M. for 614,479 Ukrainian hryvnias (UAH; approximately 57,320 euros (EUR) at the time) each. They registered their titles to the café.8.  In March 2012 the applicant company obtained ownership rights to the café as a contribution to its statutory capital by Mr and Ms Ye.9.  In April 2012 the local prosecutor, acting in the interests of the Odesa City Council, challenged the judgment of 12 July 2011 which had recognised Mr M.’s title to the café. By a judgment of 15 June 2012, the court found for the prosecutor. It established that there was no evidence that Ms B. had ever held a duly registered title to the café; the contract of sale was therefore null and void.10.  In May 2014 the prosecutor challenged the contracts between Mr M. and Mr and Ms Ye., as well as their titles and that of the applicant company to the café. The prosecutor argued that, as had been established in the earlier sets of proceedings, the café was an unauthorised construction built on municipal land. To ensure that the land was vacated by the current owner (the applicant company), all transactions between Mr M. and Mr and Ms Ye. had to be invalidated, as well as their respective titles.11.  The courts found in favour of the prosecutor at three levels of jurisdiction. The final judgment in the case was delivered by the Higher Specialised Civil and Criminal Court on 20 April 2015.12.  It appears that by a judgment of 27 January 2016, delivered in another set of proceedings, the applicant company was ordered to vacate the land in question and to demolish all unauthorised constructions on it. According to the information provided by the Government, the enforcement proceedings relating to that judgment are still ongoing.THE COURT’S ASSESSMENTALLEGED VIOLATION OF ARTICLE 1 of protocol nO. 1 to THE CONVENTIONPreliminary remarks13.  The applicant company complained under Article 1 of Protocol No. 1 that the deprivation of property to which it had been subjected had been unlawful and disproportionate. It also complained under Article 6 that insufficient reasons had been given in the courts’ decisions in the proceedings relating to the invalidation of its title.14.  The Court, being the master of the characterisation to be given in law to the facts of the case (see Radomilja and Others v. Croatia [GC], nos. 37685/10 and 22768/12, §§ 114 and 126, 20 March 2018), considers that the applicant company’s complaints fall to be examined under Article 1 of Protocol No. 1 only.Admissibility15.  The Government noted that a finding of a violation of Article 1 of Protocol No. 1 was directly related to the legality of the acquisition of property and the behaviour of the purchaser. In that connection, they stated that creating a chain of contracts for a property was a known way of committing fraud, with the aim of making it difficult for the original owner to quickly recover his or her property. In the present case, Ms B. had sold the café to Mr M., but the relevant contract had never been certified by a notary – a procedure intended to ensure the legality of such a contract, including in terms of verification of title to property. In the event that a party to a contract of sale failed to have it certified by a notary, the law provided for the possibility of bringing a claim against that party, and the court’s judgment would have the same legal effect as notarisation. That procedure was, however, sometimes abused by parties acting in bad faith and the Government submitted that that was exactly what had happened in the present case.16.  On that basis the Government argued that the title to the café in question had been obtained unlawfully and that the applicant company had no legitimate right regarding the disputed plot of land, as it had obtained the right of ownership on the basis of title deeds which had later been found by the courts to be invalid. The applicant company could therefore not claim to have “possession” within the meaning of Article 1 of Protocol No. 1.17.  The Government further argued that the applicant company’s shareholders could have lodged a claim under Article 216 of the Civil Code of Ukraine, which provided that if a deed was found to be invalid, each party was obliged to return in kind to the other party everything that it had received for the execution of that deed or, if the return in kind was impossible, to provide compensation equivalent to the value of what had been received. They provided an example of domestic case-law in that regard and further alleged that the applicant company had failed to show that the remedy proposed would not have allowed for proper consideration of its claims. The Government therefore submitted that the applicant company had failed to exhaust domestic remedies.18.  The applicant company disagreed, stating that its property rights to the café had been duly registered and that it had not been involved in a fraudulent scheme regarding that property, if any. It also noted that any claims for damages that its shareholders could have made had nothing to do with it as a separate legal entity, and that no compensatory remedies had been available for it to pursue.19.  The Court considers that the Government’s preliminary objections relate closely to the merits of the case and decides, therefore, to join both objections to its examination of the merits.Merits20.  The Government conceded that the “alienation of [the] land” had constituted an interference with the applicant company’s property rights. They argued, however, that it had been lawful (although they did not refer to precise legal provisions) and had been aimed at protecting the interests of the local community as the owner of the land. It had also been proportionate as the applicant company had had the opportunity to claim compensation for the losses caused by allegedly unlawful decisions, actions or inaction of the State authorities in the exercise of their powers, as well as having had the right to apply for compensation for non-pecuniary damage. They also noted that the judgments against the applicant company had not yet been enforced and therefore it could not be argued that it had suffered any actual losses. Lastly, they argued that the applicant company could not assert that an excessive burden had been imposed on it in view of the fact that the alienation of property had not been due to the actions of State authorities, but rather had been the result of its shareholders’ actions as the café had constituted their contribution to the applicant company’s statutory capital.21.  The applicant company agreed that there might have been a general interest in the interference in question but argued that that interference had not been lawful and proportionate. In particular, it argued that it had been a bona fide owner of the café and that the café could not have been reclaimed from it by anybody, let alone by the State. In any event, the applicant company could not be held responsible for the mistakes of the State authorities. In addition, it emphasised that its complaints related only to the invalidation of its title to the café and that it had not submitted any claims or complaints regarding the land. The applicant company further stated that it had been deprived of its property without any compensation.22.  The Court notes at the outset that the applicant company did indeed complain about the invalidation of its title to the café in question and did not raise any complaints regarding the land on which it stood. At the same time the Court observes that the café was built on municipal land which had never been allocated for that purpose by the local authorities, and that is why it was considered an unauthorised construction and its demolition was ordered. The authorities’ principal concern in the proceedings at question was to regain possession of the land that belonged to the municipality and have it restored to the state it had been in before the construction work had begun, rather than to reclaim any buildings from the applicant company. However, the proceedings led to the applicant company losing its registered title to the property built on the land.23.  The general principles concerning protection of property are well established in the Court’s case-law and have been summarised in, among other authorities, Kryvenkyy v. Ukraine (no. 43768/07, §§ 41-42 and 45, 16 February 2017).24.  In so far as the Government can be understood to be arguing that the applicant company had no “possession” within the meaning of Article of Protocol No. 1 as the property in question had been acquired unlawfully, the Court notes that there is nothing in the case file to suggest that the applicant company – or, for that matter, its founders and shareholders Mr and Ms Ye. – acted in breach of the law or were involved in any fraudulent activity. Mr and Ms Ye. bought the café from Mr. M., whose title had been duly registered by the authorities on the basis of a court decision which had been valid at the time. The Court is mindful of the unusual procedure surrounding the recognition of Mr M.’s title to the café (see paragraphs 6 and 15 above), but considers that that cannot be imputed to the applicant company (see, mutatis mutandis, Zela v. Albania, no. 33164/11, § 93, 11 June 2024). The applicant company’s title to the café had also been duly registered by the authorities and it had owned the café for at least two years without any hindrance (between 2012, when it registered its title, and 2014, when the prosecutor brought proceedings against it). The Court therefore considers that the café in question constituted the applicant company’s “possession” (see, for example, Ivanova and Cherkezov v. Bulgaria, no. 46577/15, § 68, 21 April 2016; Gazanfar Mammadov v. Azerbaijan [Committee], no. 4867/10, § 47, 23 September 2021; Azaliya, TOV and Others v. Ukraine [Committee], nos. 31211/14 and 31338/14, 9 March 2023; and Zela, cited above, §§ 55‑56). The invalidation of the applicant company’s title to the café therefore constituted an interference with its property rights. Whether the interference is seen as deprivation or control of the use of property, the applicable principles remain the same (see Ünsped Paket Servisi SaN. Ve TiC. A.Ş. v. Bulgaria, no. 3503/08, §§ 39-40, 13 October 2015, and Kryvenkyy, cited above, §§ 41-42 and 45). In particular, in order for a measure constituting an interference to comply with Article 1 of Protocol No. 1, it must be shown that it was lawful, that it was “in accordance with the general interest” and that there was a reasonable relationship of proportionality between the means employed and the aim sought to be achieved.25.  In the present case, even assuming that the impugned interference had been provided for by law and pursued an aim in the public interest, it in any event fell short of the requirement of proportionality, for the reasons set out below.26.  The Court reiterates that the need to correct an old “wrong” should not disproportionately interfere with a new right which has been acquired by an individual relying on the legitimacy of the public authority’s action in good faith. The risk of any mistake made by the State authority must be borne by the State itself and the errors must not be remedied at the expense of the individuals concerned. In the context of revoking ownership of a property transferred erroneously, the good governance principle may not only impose on the authorities an obligation to act promptly in correcting their mistake, but may also necessitate the payment of adequate compensation or another type of appropriate reparation to its former bona fide holder (see, for example, Fortetsya, MPP v. Ukraine [Committee], no. 68946/10, § 42, 11 June 2020, with further references).27.  It is true that as early as 2007 the authorities had been trying to put right the situation regarding the construction of the café and had even obtained a court order for its demolition in January 2008. The demolition, however, had not been carried out, and no explanation has been provided by the Government in that regard. That initial omission allowed the café to remain in existence and caused the subsequent course of events to unfold.28.  In this connection, the Court also notes that even after the applicant company’s title to the café had been invalidated and its demolition ordered again in 2016, no actions were undertaken to implement that judgment and the enforcement proceedings are still ongoing eight years later. The reasons for the lack of enforcement over such a long period have not been explained by the Government.29.  Furthermore, instead of seeing that fact as proof that the applicant company had not suffered any actual harm, as the Government might have contended, the Court considers it a sign of the authorities’ longstanding toleration of the existing situation or at least a reluctance to finally resolve it (see, mutatis mutandis, Öneryıldız v. Turkey [GC], no. 48939/99, § 127, ECHR 2004-XII, and Zela, cited above, § 94). At the same time, as the domestic courts’ judgments are final and enforceable, they could be executed at any time, which causes continuous uncertainty for the applicant company.30.  In that connection, the Court cannot overlook the fact that between July 2011 and March 2012 the café changed owners three times, but at no point in time did the authorities, when registering the title deeds, identify any irregularities regarding the status of the property or prevent the transactions with it, although it must have been known to them, as of 2008 at the latest, that the property was an unauthorised construction (see Zela, cited above, § 92).31.  As regards the Government’s arguments that the applicant company could have claimed compensation for losing its property, the Court observes that part of that argument relates to the alleged possibility for Mr and Ms Ye., the applicant company’s shareholders, to bring a claim for damages against Mr M. The Court fails to see, and the Government have provided no detailed explanation of their assertion, under which specific provisions of the domestic law this would have been possible and how it could have remedied the situation for the applicant company as a separate legal entity. The same holds true for the second part of the Government’s argument, namely that the applicant company could have obtained compensation for the unlawful actions or decisions of State authorities (see paragraph 20 above), which was not supported by any explanations or examples of domestic practice. The Court does not have any material before it that could suggest that any avenues for obtaining compensation were available to the applicant company.32.  Having regard to the above considerations, the Court finds that the Government’s preliminary objections are unsubstantiated and must be dismissed.33.  The above considerations are sufficient for the Court to conclude that there has been a violation of Article 1 of Protocol No. 1 to the Convention.APPLICATION OF ARTICLE 41 OF THE CONVENTIONNon-pecuniary damage and costs and expenses34.  The applicant company claimed 20,000 euros (EUR) in respect of non-pecuniary damage and 18,000 Ukrainian hryvnias (UAH) (approximately EUR 440) in costs and expenses, corresponding to the amount due under the contract between the applicant company and its representative before the Court. The applicant company stated that it had already paid UAH 9,000 (approximately EUR 220), for which a receipt was provided, and was about to pay the remaining amount. The applicant company also requested that the award for costs and expenses be paid directly into its representative’s bank account.35.  The Government contested those claims as excessive and unsubstantiated. They also reiterated their position that the application was inadmissible.36.  The Court, having regard to the finding of a violation of Article 1 of Protocol No. 1, awards the applicant company EUR 3,000 in respect of non-pecuniary damage.37.  As to costs and expenses, according to the Court’s case-law, an applicant is entitled to reimbursement only in so far as it has been shown that these were actually and necessarily incurred and are reasonable as to quantum. Although the applicant company has not yet paid the entire amount of its legal fees, it is under a contractual obligation to do so. As can be seen from the case file, Mr Leshchenko has duly represented the applicant company before the Court and is therefore entitled to seek payment of his fees under the contract. Accordingly, the Court considers that the fees have been “actually incurred” (see Belousov v. Ukraine, no. 4494/07, § 115, 7 November 2013, with further references). The Court has also accepted that awards in relation to costs and expenses can be paid directly into the bank account of an applicant’s representative (ibid., § 116, with further references).38.  In the light of the material available to it, the Court considers it reasonable to award the applicant company EUR 400 in costs and expenses, plus any tax that may be chargeable to it. This amount should be paid directly into the bank account of Mr Leshchenko.Pecuniary damage39.  The applicant company claimed UAH 1,230,000 in respect of pecuniary damage (or EUR 117,031.39 according to its calculations, as of March 2012), corresponding to the amount paid by Mr and Ms Ye. to Mr M. for the café. It has not provided any other arguments or documents in support of that claim.40.  In view of the circumstances of the present case and its findings on the merits, the Court considers that the question of the application of Article 41 of the Convention under this head is not ready for decision. That question must accordingly be reserved and the subsequent procedure fixed, having due regard to any agreement which might be reached between the Government and the applicant company (Rule 75 §§ 1 and 4 of the Rules of Court).FOR THESE REASONS, THE COURT, UNANIMOUSLY,Decides to join to the merits the Government’s preliminary objections on admissibility and dismisses them;Declares the application admissible;Holds that there has been a violation of Article 1 of Protocol No. 1 to the Convention;Holds that, as regards pecuniary damage resulting from the violation found, the question of just satisfaction is not ready for decision and accordingly,(a) reserves this question;(b) invites the Government and the applicant company to submit, within three months from the date of notification of this judgment, their written observations on this question 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;Holds(a)  that the respondent State is to pay the applicant company, within three months, the following amounts, to be converted into the currency of the respondent State at the rate applicable at the date of settlement:(i)  EUR 3,000 (three thousand euros), plus any tax that may be chargeable, in respect of non-pecuniary damage;(ii)  EUR 400 (four hundred euros), plus any tax that may be chargeable to the applicant company, in respect of costs and expenses, to be paid directly into the bank account of Mr Leshchenko;(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;Dismisses the remainder of the applicant company’s claims for just satisfaction in respect of non-pecuniary damage and costs and expenses.Done in English, and notified in writing on 12 December 2024, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court. Martina Keller María Elósegui Deputy Registrar President