Restitution Reversal

Introduction

What can be said of a Parliament that favors the holders of stolen property over the victims of the theft? Are the victims of human rights abuses in Romania less significant than their abusers? Should the possessor of stolen property in Romania have greater rights to possession or compensation than the actual owners of the property? Are not the answers to these questions self-evident, even in Romania? Undoubtedly, but apparently not to the overwhelming majority of Romanian Parliamentarians who just adopted new amendments to Romania’s Restitution Law 10/2001 (“Law 10”), granting rights to certain buildings and land abusively confiscated by the communist regime to persons who knowingly took possession of them, by striping away any right to the return of those properties to their rightful owners (proposed Law no. 891/17.12.2007 (hereinafter “the proposed law”)). In the topsy-turvy world of Romania’s Parliament, converters of land and buildings have been granted greater rights than the victims from whom they were taken.

Law 10 has as its purpose the restitution to the rightful owners of all buildings and land confiscated by the communist regime, but the sole purpose of the proposed law is the protection of the persons who bought apartments in confiscated buildings on the basis of Law 112/1995. That law was an abomination that provided windfall opportunities to persons who had knowingly occupied stolen property without providing any relief whatsoever to the persons from whom it was stolen. Twelve years later, rather than rectifying this outrage, Parliament has embraced it, codified it, and extolled it at the expense of the victims of communism.

There is nothing ignoble in seeking some form of reasonable protection for people living in apartments that were wrongfully sold to them by the post-communist government. There are numerous mechanisms that can provide protection and compensation to such persons – but not one of them would be through effectively eliminating restitution in kind of buildings sold on the basis of Law 112/1995; and there is nothing fair or reasonable in enshrining discriminatory treatment towards the rightful owners of land and buildings abusively confiscated by the communist regime in favor of the occupiers who had leased or bought such properties from the state knowing full well that they were stolen from someone else.

The proposed law has been sent for promulgation to Romania’s President, Traian Basescu, on June 30, 2008. Decency, a respect for human rights and for Romania’s own constitution, mandates that the President return the proposed law forthwith to Parliament without promulgation. If the President promulgates the law in the form adopted by Parliament, an immoral and unconstitutional imbalance will exist in the protection of property in Romania. The proposed law breaches the constitutionally protected ownership rights of the former owners by artificially and discriminatorily creating an unjustified exemption from in kind restitution. Promulgation of the proposed law would be a repudiation of the acclaimed tenets of the President and the government to provide justice to the victims of communism.

History of Law 10/2001

The restitution process in Romania began, oddly enough, not with actual restitution, but with the sale of apartments in stolen buildings to the state’s then lessees on the basis of Law 112/1995. The regime in 1995 was apparently more interested in the votes of those persons than the rights of the victims of predecessor governments. Indeed, one might suggest that the regime at that time was feathering the nests of its cohorts since it is primarily those persons who reaped the greatest gains by pilfering the best of Romania’s stolen loot. It was not for another six years that Romania did anything for the victims of communism. When Law 10 came into force, in-kind restitution of properties sold on the basis of Law 112/1995 became possible – but only if a court annulled the sale purchase agreements concluded on the basis of that law. In order to stymie the former owners, Law 10 provided for only a one year term in which those sale purchase agreements could be annulled. This was only one small element in a scheme that was more a schmecherie (a ruse) than a legitimate effort to provide justice to the victims of communism. It was, instead, a scheme to solidify the injustices of decades of Romanian misrule to benefit a small elite cadre of politicians and their supporters.

In 2005, the coalition government of Prime Minister Calin Popescu Tariceanu breathed life – and justice – into Law 10 through amendments set forth in Law 247/2005, among which were ones that eliminated a host of restrictions on in-kind restitution for buildings and land such as embassies, public institutions, museums, historical buildings and so on.

Misapplied Standards

While Law 10, as amended by Law 247/2005, provided that the buildings and land abusively confiscated by the state or other legal entities on the basis of Law 139/1940 or in the period between March 6th 1945 and December 22nd 1989 are to be restituted in kind, the proposed law states that restitution can also be granted in the equivalent if in kind restitution is not possible. Although, in principle, this might seem to be a fair conclusion, there is nothing whatsoever fair, reasonable or balanced in the proposed law. It establishes as equal under law, restitution in the equivalent with in kind restitution for buildings and land – a principle which exists nowhere else in the world except, suddenly, in Romania. Throughout the world, the return of land and buildings is subject to a higher standard than the payment of cash because real property is unique and cannot be replicated simply by money; throughout the world, the right of ownership is sanctified over the rights of squatters – but not in Romania. Stepping back in time to the initial version of Law 10, the proposed law now permits an interpretation of property rights where in kind restitution is no longer the priority. Compounding the offense, the compensation to be provided to the actual owners in lieu of the return of their unique land and buildings is not at all equal to the real value of what was stolen from them.

Proposed Law Designed to Benefit Elite

The official reasoning behind the proposed law has been grounded in the sanctimonious language of the social protection of persons that have bought apartments on the basis of Law 112/1995. But those persons whom the Parliament seeks to protect are not poor unwitting innocents but, to a large extent, party and government officials and important persons in business and politics who bought, literally for petty cash, the most significant of Romania’s stolen estates by taking advantage of Law 112/1995 and who now want to ensure that they will not be forced to give them back. But, sadly, Romania may be in for a rude awakening. By protecting persons who have, in effect, converted the assets of the victims of communism, the Romanian State opens itself up to the possibility of a collective action by citizens of other nations under the terms of their respective bilateral investment treaties for wrongful expropriation. Already, in the United States, an organization called the Association of the Victims of Romanian Communism has been formed and, pursuant to recent ICSID decisions, it may be able to bring a collective action against Romania – with the unfortunate result for the Romanian people that they and not the actual converters, will end up paying for the restitution of such properties and penalties out of additional taxes.

New International Court Actions Likely

By the creation of this new exemption from in-kind restitution, the Romanian Parliament flagrantly ignores the case law of the European Court of Human Rights and defies the principles of the European Convention on Human Rights. The proposed law will undoubtedly lead to further actions before the Court and to further decisions against Romania with additional payments from the state budget.

Occupiers Gain More Rights than Rightful Owners

The proposed law goes even further in creating new rights for the occupiers of the stolen properties, by allowing them to sell the properties they bought on the basis of Law 112/1995 freely on the market at any price. Currently, Article 43 of Law 10, which is proposed for elimination, provides that the lessees are only allowed to sell such nationalized property to the rightful owners for a period of 10 years after they acquired the property. If they do not abide by this provision, than the sale-purchase agreement in favor of another person other than the rightful owner will be null and void. Article 43, paragraph 2, also currently provides that under the penalty of absolute nullity, it is illegal to transfer (alienate) in any way land or buildings acquired on the basis of Law 112/1995, as amended, until a final, irrevocable court decision on the claims of the rightful owners, former owners, or, as the case may be, successors is rendered. Therefore, by the abrogation of Article 43, all of the limitations imposed upon the lessees in regard to the sale of the properties will be removed and the apartments will be freely sold on the market – even if there is a claim from the rightful owner pending for such property.

The desire of the Romanian Parliament to protect the occupiers of the stolen properties led to the amendment of Article 18 point c) of Law 10 by replacing the word “legal” with “Law 112/ 1995 as amended”. Although the amendment of a single word might be minor, it makes a world of difference here because it represents yet another way in which the Romanian Parliament has sought to blanket the occupiers of stolen properties with the protection of the law. The proposed law expressly provides that one of the situations in which restitution is granted exclusively by equivalent, is when the land or building has been previously sold by observing the provisions of Law 112/1995. In the current text of Law 10, the scope is wider because restitution by equivalent is applicable not only to transactions concluded in observance of Law 112/1995, but to transactions concluded with the observance of the legal provisions in force at that time. The new wording comes to limit the scope of the said legal provision, but at the same time ease and increase its applicability since it points to one single law.

If a court had previously annulled a sale purchase agreement by which someone acquired a stolen property under Law 112/1995, the proposed law grants that person a priority for an apartment from the housing funds administrated by the local councils and/or by the Ministry of Development, Public Works and Housing; as well as the right to live in such an apartment and to purchase it – and the sum paid for the stolen property that was restituted to the rightful owner will be considered as an advance payment for the new apartment or building.

One of the most outrageous and appalling aspects of the proposed law is the provision that grants greater compensation to the converters of stolen property bought on the basis of Law 112/1995, than the restitution provided in the equivalent to the actual owners. Article 50¹ provides that the owners who acquired property in accordance with Law 112/1995, have the right to be compensated by the state at the property’s full market value according to international appraisal standards, if their sale purchase agreements have been voided by a final and irrevocable court decision. Incredibly, this means that the lessees that have paid an insignificant subsidized price for the acquired property are now entitled to a much greater amount of money than they had paid for the property. The amount of money that must be refunded to the lessees is to be provided by the state budget, and the taxpayers of Romania must bear the cost of all of these transactions. Ironically, the real owners, the actual persons victimized by the communist regime, do not get cash equivalents at today’s market value, but receive shares in the yet unlisted Property Fund in amounts based upon the book value of their property at the time of compensation, and then find themselves as players on the risky Bucharest stock market selling at steep discounts from the already discounted value of their shares. So the possessors of the stolen property, where their agreements are found to be null and void, obtain much larger sums than they actually paid, while the entitled owners, if they are to receive any compensation, would obtain sums far less than the market value of the property and not even in cash. Such largesse exemplifies perfectly the real purpose of the proposed law – the feathering of the nests of the cadres of the unworthy holders of such properties, which includes many of the Parliamentarians who cast their votes in favor of this dreadful proposed law.

Interference in System of Legal Deeds

The proposed law also interferes with the Romanian system of legal deeds, creating for the purpose of the protection of the occupiers of stolen properties, a new category of authenticated deed, i.e., in addition to the categories provided by the Romanian Civil Procedure Code, the proposed law provides that the sale-purchase agreements concluded by observing the provisions of Law 112/1995 are considered by law as authenticated deeds and represent unassailable ownership titles. By this device, the Romanian Parliament has basically created a much stronger presumption of legality for such transactions than over a private deed.

The proposed law adds a provision that states that the rightful owner is obligated to follow the provisions of Law 10/2001 after its enforcement and that its provisions are to be applied with priority. This is a text that attempts to clarify the dispute that exists in legal writings and practice as to whether restitution claims can be based on the Civil Code as well as Law 10. However, it still does not do so since it introduces the term “with priority” which is not a legal term and could lead to multiple interpretations, most of them unfavorable to the rightful owners in the sense of limiting in kind restitution. This provision of the proposed law will lead to much injustice. The provision appears to be a well placed piece in a greater puzzle meant to protect the occupiers of stolen properties. It arises from the General Prosecutor of Romania’s request to the High Court of Cassation and Justice to clarify whether restitution claims based on the Romanian Civil Code could still be admissible after Law 10 entered into force. But the High Court of Cassation and Justice did not really clarify the issue leaving it as blurry as it was before. The court stated that the provisions of Law 10 have to be applied with priority, but without actually defining what this priority means. Therefore, the court left room for various interpretations. Since the court did not settle the issue, the proposed law intends to enshrine as law the findings of the High Court of Cassation and Justice, giving them a greater importance and applicability. This could mean that some ordinary courts will apply the provisions of Law 10, the priority aspect in particular, in all cases in which rightful owners will claim their property right by also applying all of the exemptions from restitution in-kind in Law 10.

Conclusion

The proposed law provides a similar favored protectionism for Romania’s current elite than that which Ceausescu granted to his communist nomenklatura – the victims remain out in the cold, while the privileged elite savor the spoils of their illegal confiscations.

The idea that Parliament is somehow engaged in a good faith effort at social protection is poppycock. Everyone in Romania, including the city halls and the then lessees, knew that the apartments being purchased and leased under Law 112/1995 belonged to some other person during or prior to the communist takeover. They bought with full knowledge that the properties had been wrongfully converted and while it is just and proper to take mind of the plight of people now confronted with the return of such properties to their rightful owners, the proposed law is a preposterous exercise in immorality for the protection of undeserved profits of mostly elite members of Romanian society. Shamefully, the victims of communism have once more been victimized – and in many cases by the very same people or families who victimized them under communism.

And what of owners not affected by Law 112/1995 who await in-kind restitution from the city halls of Romania? Some have achieved success, particularly in smaller jurisdictions. But those unfortunate enough to have claims pending before the Bucharest City Hall have, in large part, received only indolence and insolence. Currently, 31,629 claims remain open for over six years out of a total of 42,493 registered by 2002. In other words, it has taken the Municipality of Bucharest more than six years to handle only 25% of all of the claims registered with it. How many claimants have died in the interim waiting for justice from the Bucharest Municipality, and how many will still die without ever achieving a just result?

Romania has always had a way of turning bullion into sewage. It is now in the process of turning its virtuous restitution efforts of 2005 into a misplaced and immoral effort at the over-protection of the knowing possessors of stolen property at the expense of their victims.

The article was published based upon approval of:

Rubin Meyer Doru & Trandafir

SOCIETATE CIVILA DE AVOCATI / LAWYERS PROFESSIONAL CORPORATION

IN ASOCIERE CU / AFFILIATED WITH HERZFELD & RUBIN, P.C.

http://www.hr.ro