Property Rights, Protection of
Pursuant to Art 119 ff TFEU/4(1), 98 EC, the economic policies of the Union and its Member States shall be conducted in accordance with the principle of an open market economy with free competition (European Economic Constitution; competition (internal market)). Such an economic order necessarily requires private ownership of the means of production (property). Private property must hence be protected against (disproportionate) interference by private individuals, the European Union and its Member States. The notion of property rights tends to be broader in a public and constitutional law context, with the exception of criminal law, than in that of private law. In the former context it tends to include, inter alia, intellectual property rights (intellectual property (enforcement)) as well as social security entitlements.
2. Interference by private individuals
a) Means of protecting private property
In the civil law of the Member States the protection of property in private law revolves around the notion of absolute right. It is this notion that is at the basis of the laws of ownership (or things) which—through the owner’s right to demand the return of an object from the (wrongful) possessor (or rei vindicatio)—focus on the protection and enforcement of the exclusive powers of the owner. This notion frequently results in the law of property having a suction effect on the law of tort (law of torts/delict general and lex Aquilia) as rules on the content and scope of the absolute right are complemented with liability rules (Christian von Bar). The laws of property which build on the notion of absolute right also entail rules whose breach must give rise to compensation provided there is a finding of fault. This is reflected both in the PETL (Art 2:102(3)) and the PEL Liab Dam (Art 2:206).
The protection of property in common law, by contrast, revolves around a bilateral action between a claimant and a defendant rather than the notion of absolute right. Several causes of action in tort, in particular the torts of negligence, nuisance and trespass, are provided for under common law. The function of rei vindicatio is largely fulfilled by the tort of conversion.
Under both civil and common law, the owner is entitled to demand the return of his property from the wrongful possessor, be it either under the law of property and/or tort law. The Member States’ legal orders generally give the owner the right to fend off deprivations of his property as well as physical interferences therewith.
The rules regarding the proof of ownership, however, differ considerably between Member States, especially for land. While in Germany the land register (Grundbuch) indicates the owner of a piece of land, other Member States, notably France (with the exception of Alsace-Lorraine), have either no such register or one with a mere declaratory function.
Secondary Union law increasingly includes rules with a property law dimension, but rules that specifically protect the property of private individuals remain an exception. Pursuant to Art 5(2)(c) of the European Insolvency Regulation (Reg 1346/2000) the opening of insolvency proceedings shall not, inter alia, affect the right of the (third party) owner of an asset to demand the asset from anyone having possession. The directive on product liability (Dir 85/374) provides for a right to compensation for damage caused to property by a defective product.
As far as conflict of laws is concerned, the Member States as well as the European Insolvency Regulation generally apply the lex rei sitae to property law claims or—if ownership of property must be entered in a public register—the law of the Member State under the authority of which the register is kept. On the harmonized conflict of law rules for torts see non-contractual obligations (PIL).
b) Scope of the right to property
The protection of property is subject to limitations. Interferences high above a piece of land or deep below it (mining law) can generally not be prohibited by the owner of the land. Further limitations follow from the law governing relationships between neighbours (see below for details), private law rules of necessity and the principle of bona fides. Considerations of a societal and constitutional nature are reflected to varying degrees in the property laws of Member States.
Deprivation of a piece of property. Under the laws of all Member States the owner has—provided there is a finding of fault—a right to compensation of the damage (damages) resulting from being deprived of an object or of the possibility to use it, at least where that use was not impossible anyway and the object in question is not a luxury good.
Physical damage to property. Physical damage to property attributable to a fault also triggers a right to compensation under the laws of all Member States. The notion of physical damage may, however, give rise to difficulties of interpretation, eg when the state of aggregation of an object is changed or an object is soiled.
(Other) Violations of the right of ownership. Some strict liability regimes, such as the one established by the Product Liability Directive, only provide for compensation in cases of physical damage to property but not for other violations of the right of ownership. However, outside such specific regimes, the protection of property is not limited to protection against physical interferences, neither on the Continent nor under the common law. Other violations of the right of ownership can also trigger the liability of the infringer for harm caused. Besides the cases of deprivation discussed above, violations of the right of ownership without the integrity of the object being physically interfered with occur, inter alia, when the violation results in the acquisition of ownership by a third party. Further examples include interferences with the intended use of an object (without deprivation) and, as far as land ownership is concerned, loud noise or obstructing the flow of light to the property.
The protection of property against neighbours and bona fide possessors of another’s property. Only limited protection of property rights is available vis-à-vis certain third parties. The legal systems of Member States usually provide for special liability regimes for land use damaging adjacent land. Under these regimes, the land owner is only protected against substantial interferences and sometimes only has a right to compensation but no right to injunctive relief. Generally, tort liability regimes for substantial interferences provide for strict liability, at times through special legislation for environmental liability.
The protection of the owner tends to be limited also vis-à-vis bona fide wrongful possessors. On the continent, the bona fide possessor of an object tends to be liable to the owner only to a limited extent for loss and physical damage to the property. The prerequisites for this privilege differ, however, from Member State to Member State as far as the standard of care regarding the acquisition of possession as well as the loss of or damage to the property are concerned. Under common law, by contrast, the bona fide possessor is liable in conversion independently of the level of care exercised when acquiring possession of or interfering with the property.
3. Interference by Member States and the European Community
a) Means of protecting private property
National fundamental rights protect private property against interferences by Member States. Furthermore, all Member States have ratified the 1st Protocol to the European Convention for the Protection of Human Rights and Fundamental Freedoms, the first Article of which provides for the protection of property (human rights and fundamental rights (ChFR and ECHR); European Court of Human Rights (ECtHR)).
Despite its wording, interferences with property rights by the European Union are not curtailed by Art 345 TFEU/295 EC. The Union could not carry out the activities it is entrusted with if it were not allowed to adopt measures pertaining to property rights. Article 345 TFEU/295 EC, therefore, merely forbids the Union (in principle) from challenging a privatization or nationalization undertaken by a Member States or to order one itself.
The right to property is, however, recognized as a fundamental right in the case law of the European Court of Justice (ECJ Case 44/79 – Hauer  ECR 3727 paras17 ff; ECJ Case 4/73 – Nold  ECR 491 para 14).
Even though Art 6(2) commits the Union to respect fundamental rights as guaranteed by the ECHR—as general principles of Union law—the ECHR is not directly binding on the European Union, as the EU is not yet party to it (note, however, Art 6(2) TEU and the 14th Protocol to the ECHR). Fundamental rights are, however, recognized as an integral part of the general principles of law by the Union courts. The ECJ, which must ensure their observance, consistently emphasizes the special significance of the ECHR as a source of inspiration in this respect and has held that ‘the Community cannot accept measures which are incompatible with observance of the human rights … recognized and guaranteed’ by the ECHR (ECJ Case C-260/89 – ERT  ECR I-2925 para 41).
The right to property is also protected by Art 17 of the Charter of Fundamental Rights of the European Union (see human rights and fundamental rights as well as Art 6(2) TEU on its binding nature and scope), the meaning and scope of which is the same as that of Art 1 of the 1st Protocol to the ECHR pursuant to Art 52(3) of the Charter.
On the non-contractual liability of the Community under Art 340 TFEU/288(2) EC see c) below.
b) Scope of the right to property
i) Article 1 of the 1st Protocol to the ECHR
The scope of protection against interferences by Member States is delineated first by national public law, generally constitutional law, and secondly by Art 1 of the 1st Protocol to the ECHR.
This article asserts three principles. The first sentence of its first paragraph stipulates that every natural or legal person is entitled to the peaceful enjoyment of his possessions. According to the second sentence of that paragraph 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. The second paragraph acknowledges that the states parties retain the right to enforce such laws as they deem necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties. The first sentence of the first paragraph protects against both formal expropriations, that is to say transfers of ownership, and de facto expropriations (see eg ECtHR No 7151/75; 7152/75 – Sporrong and Lönnroth, § 63).
The ECtHR has clarified that the terms property or propriété and possessions or biens used in the said article both refer to the same concept, namely to that of property. The ECtHR has consistently held that such expressions are given an autonomous meaning by the ECHR. Consequently, Art 1 of the 1st Protocol may also protect a legal interest that is not protected as a property right under national law.
According to the ECtHR, national restrictions upon the use of property may only be justified under Art 1(2) of the 1st Protocol to the ECHR if they are proportionate (principle of proportionality). The ECtHR grants the national legislature ‘a wide margin of appreciation both with regard to the existence of a problem of public concern warranting measures of control and as to the choice of the detailed rules for the implementation of such measures’ (ECtHR No 10522/ 83; 11011/84; 11070/84 – Mellacher § 45). When applying the proportionality requirement it has read into Art 1(2) of the 1st Protocol to the ECHR, the ECtHR examines whether the interference achieves a ‘fair balance’ between the demands of the general interest of the community and the requirements of the protection of the individual’s fundamental rights, ie whether there is a reasonable relationship of proportionality between the means employed and the aim pursued (ECtHR No 10522/83; 11011/84; 11070/84 – Mellacher § 48).
Pursuant to Art 41 ECHR the ECtHR affords, if necessary, just satisfaction to the injured party if the internal law of the state party concerned allows only partial reparation to be made. When finding a violation of the right to property, the ECtHR frequently allows the parties to negotiate over reparation—in the case of an illegal expropriation with the aim of restitution or reimbursement of the present market value. The ECtHR differentiates between per se illegal expropriations and expropriations that are only illegal because they were not accompanied by compensation. In the latter case full compensation is not required. If negotiations fail, the ECtHR fixes the compensation after—or without—obtaining an expert opinion. Compensation also extends to lost profits, both for expropriations and restrictions upon the use of property. Only rarely does the ECtHR engage in precise calculations. Especially when the basis for estimates is uncertain, it tends to resort to an ‘assessment on an equitable basis’ (ECtHR No 40/1993/435/514 – Loizidou § 33 f).
According to the ECtHR, the discharge of the general duty of states parties to secure within their jurisdiction the rights and freedoms defined in the ECHR ‘may entail positive obligations inherent in ensuring the effective exercise’ of these rights. ‘In the context of Article 1 of Protocol No. 1, those positive obligations may require the State to take the measures necessary to protect the right of property’ (ECtHR No 31443/96 – Broniowski § 143). The principles governing negative obligations of states parties apply mutatis mutandis to these positive obligations as well (ECtHR No 31443/96 – Broniowski § 143 ff; ECtHR No 48553/99 – Sovtransavto Holding § 96).
ii) Right to property under Union law
The Community right to property must be observed not only by the Community institutions, but also by Member States ‘when they implement Community rules’ (ECJ Case 5/99 – Wachauf  ECR 2609 para 19). The right to property was first explicitly recognized as forming part of the fundamental rights of the Community in the ECJ’s Hauer judgment of 1979, in which the court quoted Art 1 of the 1st Protocol to the ECHR. The ECJ also adopted that article’s differentiation between expropriations and restriction of the use of property and applied it to the regulation in question, namely a restriction on the new planting of vines. It then went on to cite the relevant constitutional guarantees of some Member States as well as the restrictions limiting these guarantees. After this analysis the ECJ concluded that the social function of the right to property is a constitutional precept common to the Member States (ECJ Case 44/79 – Hauer  ECR 3727 para 20 f). Subsequently, the ECJ has consistently held that restrictions may be imposed ‘on the exercise of the right to property, provided that the restrictions in fact correspond to objectives of general interest and do not constitute, in relation to the aim pursued, a disproportionate and intolerable interference, impairing the very substance of the rights guaranteed’ (ECJ Case C-210/03 – Swedish Match  ECR I-11893 para 72).
To date the ECJ has not found any disproportionate interferences with the right to property. It accords the Council a wide margin of appreciation when selecting the political objectives for the achievement of which the right to property is restricted and upholds restrictive measures as long as they are not manifestly inappropriate in relation to these objectives. Furthermore, the ECJ almost entirely foregoes an examination of the necessity and appropriateness of the measures under challenge.
The ECJ seems to assume that the right to property entails a positive obligation on the Community and Member States to protect that right (ECJ Case C-275/06 – Productores de Música de España  ECR I-271 paras 61-70) but has not thus far explicitly laid down such a duty to protect.
On the procedure governing the enforcement of Art 1 of the 1st Protocol to the ECHR and, in particular, individual applications under the ECHR see European Court of Human Rights (ECtHR).
In the Union legal order the right to property is not accompanied by a right to bring individual applications. Locus standi for individuals is much more limited in front of the Union courts. According to Art 263(4) TFEU/230(4) EC natural or legal persons may only institute proceedings against a decision addressed to them or against a decision which, although in the form of a regulation or a decision addressed to another person, is of direct and individual concern to them. The latter criteria are interpreted restrictively by the ECJ. According to the so-called ‘Plaumann formula’ a measure of general application is of such individual concern to certain natural or legal persons ‘where the measure in question affects specific natural or legal persons by reason of certain attributes peculiar to them, or by reason of a factual situation which differentiates them from all other persons and distinguishes them individually in the same way as the addressee’ (ECJ Case C-50/00 P – Unión de Pequeños Agricultores  ECR I-6677 para 36 with reference to, inter alia, ECJ Case 25/62 – Plaumann  ECR 213, 238). An individual directly but not individually concerned by an EU regulation which does not require the adoption of any additional national measures must therefore infringe the regulation, await a sanction and then challenge that sanction. The ECJ has not approved of the more lenient approach adopted by the CFI (ECJ Case C-263/02 P – Jégo-Quéré  ECR I-3425 paras 29 ff; ECJ Case C-50/00 P – Unión de Pequeños Agricultores  ECR I-6677 para 36). Article 263(4) TFEU/230(4) EC does, however, provide for a right of natural or legal persons to institute proceedings against a regulatory act which is of direct concern to them and does not entail implementing measures (in addition to the right to challenge an act that is either addressed to the person or of direct and individual concern to it). Thus, prior to the entry into force of the TFEU the Union right to property could only rarely be directly enforced by the concerned individual in front of the Union courts. In most cases, they had to take recourse to the preliminary ruling procedure pursuant to Art 267 TFEU/ 234 EC.
The availability of the action for compensation for damage under Art 340, 268 TFEU/288(2), 235 EC hardly changes this assessment and is to date of little practical significance for the protection of the right to property. For liability to arise from legislative measures, the breach committed by the Union institution concerned must be sufficiently serious, ie the Union institution must have ‘manifestly and gravely disregarded the limits on its discretion’ (ECJ Case C-352/98 P – Bergaderm  ECR I-5291 para 43). According to the ECJ, disagreeing with the CFI, there is no ‘regime providing for non-contractual liability of the Community on account of the lawful pursuit by it of its activities falling within the legislative sphere’. However, ‘a Community legislative measure whose application leads to restrictions of the right to property and the freedom to pursue a trade or profession that impair the very substance of those rights in a disproportionate and intolerable manner, perhaps precisely because no provision has been made for compensation calculated to avoid or remedy that impairment, could give rise to non-contractual liability on the part of the Community’ (ECJ Joined Cases C-120/06 P and 121/06 P – FIAMM,  ECR I-6513, para 179, 184).
d) Relationship between the two legal orders
The relationship between the Union legal order and that established by the ECHR has been clarified by the ECtHR in a case regarding the right to property, namely the Bosphorus case. In that case the applicant alleged that the impounding of its leased aircraft by the Republic of Ireland had breached its rights under Art 1 of the 1st Protocol to the ECHR. The Irish authorities had impounded the aircraft to enforce an EC regulation which had, in turn, been adopted to implement a United Nations resolution. In a preliminary ruling procedure the ECJ had come to the conclusion that the impounding of the aircraft could not be regarded as inappropriate or disproportionate (ECJ Case C-84/95 – Bosphorus  ECR I-3953 paras 11 ff, 19 ff). The ECtHR took the view ‘that the protection of fundamental rights by Union law can be considered to be, and to have been at the relevant time, “equivalent” … to that of the Convention system’ (ECtHR No 45036/98 – Bosphorus § 165). Where such equivalent protection is considered to be provided by an international (including a supranational) organization, ‘the presumption will be that a State has not departed from the requirements of the Convention when it does no more than implement legal obligations flowing from its membership of the organisation’. Any such presumption could, however, ‘be rebutted if, in the circumstances of a particular case, it is considered that the protection of Convention rights was manifestly deficient’ (ECtHR No 45036/98 – Bosphorus § 156). States parties do, however, remain fully responsible under the ECHR for all acts falling outside their strict international legal obligations. In Bosphorus, the ECtHR found that the impounding of the aircraft solely constituted compliance by Ireland with its legal obligations flowing from membership of the European Community and that the presumption of ECHR compliance had not been rebutted (ECtHR No 45036/98 Bosphorus §§ 149 ff).
The protection of the right to property against direct or indirect interferences flowing from Union law is therefore incumbent on the ECJ, which may be seized with such interferences only under narrow conditions by individuals.
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