REPUBLIC OF TURKEY
CONSTITUTIONAL COURT
PLENARY
JUDGMENT
ANO İNŞAAT VE TİCARET LTD. ŞTİ.
(Application no. 2014/2267)
21 December 2017
On 21 December 2017, the Plenary of the Constitutional Court found a violation of the right to property safeguarded by Article 35 of the Constitution in the individual application lodged by ANO İnşaat ve Ticaret Ltd. Şti. (no. 2014/2267).
THE FACTS
[9-43] The applicant is a company, established in 1970 in Ankara, and engages in construction works.
On 9 May 1977, the applicant company signed a contract with the General Directorate for State Hydraulic Works for the construction of a hydroelectric power plant, namely the Karacaören Dam and Hydroelectric Power Plant.
While the construction works were continuing, on 14 March 1980 a second contract was signed. However, upon the applicant’s request and administration’s approval, the said construction works were ended and liquidated. Afterwards, the administration calculated the expenses. The applicant company objected to the expenses calculated by the administration.
The applicant brought an action before the Ankara Civil Court. After a series of subsequent proceedings before the Civil Chambers of the Court of Cassation, the applicant was paid a certain amount of money on 23 September 2002.
The applicant lodged an application with the European Court of Human Rights (“the ECHR”) on 4 December 2002, alleging that both his right to a trial within a reasonable time and the right to property due to the delay in the payment of the amount stated in the contract with a low interest rate, which resulted in his financial loss.
The ECHR, found a violation of the applicant’s right to a trial within a reasonable time; however, it found inadmissible the alleged violation of his right to property for non-exhaustion of domestic remedies.
The action brought by the applicant on 16 March 1995 to redress the further loss it had sustained due to the delayed payment of its receivables by the General Directorate for State Hydraulic Works was separated on 16 March 1995. The proceedings were continued before the same court (Ankara Civil Court).
During the proceedings, expert reports were issued. According to one of these reports, the files pertaining to the enforcement proceedings constituting a basis for the applicant’s further loss claims had been sent to a paper mill, and it was not possible to have access to the relevant documents.
Hence, the applicant’s case was dismissed. The applicant’s subsequent appeal was also dismissed. The final judgment was served on the applicant’s lawyer on 27 January 2014.
The applicant lodged an individual application with the Constitutional Court on 20 February 2014.
44. The Constitutional Court, at its session of 21 December 2017, examined the application and decided as follows:
1. The Applicant’s Allegations and the Ministry’s Observations
45. The applicant firstly underlined the finding that some of the files pertaining to the enforcement proceedings constituting a basis for its further loss (munzam zarar) claims had been sent to a paper mill while others had been lost and could not be found again due to a flood. According to the applicant, the public authorities displayed negligence with regard to the protection of evidence and it suffered damage due to that negligence. The applicant further asserted that the proceedings were lengthy in the action it had brought for its claim and that the payment it had received late had fallen into depreciation due to the high inflation rate in the country during that time period. The applicant stated that it had lodged an application with the European Court of Human Rights (“the ECtHR”) concerning an alleged violation of the right to property and that the ECtHR had explicitly held in its decision that inflation rates must be taken into account to prevent any loss of value in the money owed. The applicant complains that its case was rejected by the inferior courts despite the decision of the ECtHR on the ground that the further loss had not been proven. On those accounts, the applicant alleges that there have been violations of the right to a fair trial and the right to property.
46. In its observations, the Ministry pointed out that the Court of Cassation follows two different practices on matters of further loss. Accordingly, the Court of Cassation has required the further loss to be tangibly proven in some of its decisions while in others it held that it must be presumptively acknowledged that creditors are to maintain the value of their money in an inflationary environment. The Ministry noted that, in the present case, the inferior courts arrived at a resolution of the dispute in line with their first observations. After referring to the ECtHR’s judgment on the case of Aka v. Turkey, in which the Strasbourg Court held that the difference between the expropriation price plus default interest paid to Mr Aka and the value of the amounts due adjusted for higher inflation rates had to be paid to the applicant, the Ministry declared that it is within the Court’s discretion to take account of these points in reaching a conclusion.
47. In its counter-statements against the Ministry’s observations, the applicant reiterated its arguments in the application form.
2.
The Court’s Assessment
48.
Article 35 of the Constitution provides as follows:
“Everyone has the right to own and inherit property.
These rights may be limited by law only in view of public interest.
The exercise of the right to property shall not contravene public interest.”
49. The Court is not bound by the legal qualification of the facts by the applicant and it makes such assessment itself (see Tahir Canan, no. 2012/969, 18 September 2013, § 16). In addition to the alleged violation of the right to property, the applicant contends that there has also been a breach of the right to a fair trial on account of the disappearance of the files pertaining to the enforcement proceedings constituting a basis for its claim for compensation of the further loss. On the other hand, the applicant’s primary complaint concerns the allegation that the money it was owed was paid after falling into loss of value. For this reason, the Court has found that all the complaints, except for the allegedly unreasonable length of trial, should be examined within the scope of the right to property.
50. The alleged violation of the right to property must be declared admissible for not being manifestly ill-founded and there being no other grounds for its inadmissibility.
Mr. M. Emin KUZ and Mr. Kadir ÖZKAYA did not agree with this conclusion.
i. Existence of Property
51. A person complaining that his/her right to property was violated must prove in the first place that such a right existed (see Mustafa Ateşoğlu and Others, no. 2013/1178, 5 November 2015, § 54).
52. The right to property safeguarded by Article 35 of the Constitution encompasses the rights over any kind of assets which has an economic and monetary value (see the Court’s judgment no. E.2015/39, K.2015/62, 1 July 2015, § 20). In this framework, along with movable and immovable properties, which undoubtedly have to be considered as property, the limited real rights and non-material rights established over those properties as well as any enforceable claims fall within the scope of the right to property (see Mahmut Duran and Others, no. 2014/11441, 1 February 2017, § 60).
53. In the present case, on 9 May 1977 the applicant company contracted with the National Water Board (Devlet Su İşleri) to construct a dam and began construction as per this contract. However, on 9 June 1988 the applicant and the National Water Board decided to liquidate the contract. As a result of liquidation, the National Water Board issued a final account for the works completed by the applicant by that date but the applicant challenged this final account by bringing an action on 10 October 1990 to claim payment of receivables. At the end of the proceedings, the trial court held on 19 April 2002 that the applicant was to receive 62,969.69 Turkish liras (TRY) and this judgment became final on 6 June 2002 once it was rectified and upheld by the Court of Cassation. This amount was paid to the applicant on 23 September 2002.
54. In the instant case, the applicant claimed that the receivable ruled by the said court constituted a possession and that it had lost value due to the high inflation rates experienced over the period between 1990 (when the action was brought before a court) and 2002 (when the payment was made); therefore, the applicant alleged that its right to property had been violated. The action for compensation of further loss, which was brought at a later date by the applicant, concerned reparation of the damage caused by the loss of value in the amount of the receivable in question, which the applicant considered as falling within its right to property. Therefore, the existence of property should be determined on the basis of the applicant’s original receivable, regardless of whether there was any further loss. In this scope, there is no doubt that the receivable in question established by a final court decision is encompassed, by virtue of its definite and enforceable nature, by the right to property. Accordingly, the process regarding the compensation of further loss, on the other hand, should be examined from the standpoint of proportionality in connection with the question of whether the receivable considered within the scope of the right to property was subjected to a loss of value.
55. Hence, as regards the impugned receivable ruled by a court, it is beyond doubt that the applicant enjoys the right to property within the meaning of Article 35 of the Constitution.
56. In view of Article 35 of the Constitution read together with other articles that touch upon the right to property, the Constitution lays down three rules in regard to interference with the right to property. In this respect, the first paragraph of Article 35 of the Constitution provides that everyone has the right to property, setting out the “right to peaceful enjoyment of possessions”, and the second paragraph draws the framework of interference with the right to peaceful enjoyment of possessions. Article 35 § 2 of the Constitution lays down the circumstances under which the right to property may be restricted in general and also draws out the general framework of conditions of “deprivation of property”. The last paragraph of Article 35 of the Constitution forbids any exercise of the right to property in contravention to the interest of the public; thus, it enables the State to control and regulate the enjoyment of property. Certain other articles of the Constitution also contain special provisions that enable the State to have control over property. It should further be pointed out that deprivation of property and regulation/control of property are specific forms of interference with the right to property (see Recep Tarhan and Afife Tarhan, no. 2014/1546, 2 February 2017, §§ 55-58).
57. In the case giving rise to the present application, the fact that the applicant’s receivable was paid after a loss of value has constituted, without any doubt, an interference with the right to property. It is understood that the late reception of the amount receivable by the applicant did not have the nature of deprivation of property, neither did it pursue the aim of controlling or regulating property. In this case, the interference with the applicant’s right to property must be examined within the framework of the first rule concerning the principle of “peaceful enjoyment of possessions”.
58. Article 35 of the Constitution does not envisage the right to property as an unlimited right; accordingly, this right may be limited by law and in the interest of the public. In interfering with the right to property, Article 13 of the Constitution must also be taken into consideration as it governs the general principles concerning the restriction of fundamental rights and freedoms. Pursuant to the article cited above, fundamental rights and freedoms may only be restricted by law, on the basis of the reasons laid down in relevant articles of the Constitution, and in conformity with the requirements of a democratic order of the society and the principle of proportionality. In order for the interference with the right to property to be in compliance with the Constitution, the interference must have a legal basis, pursue the public interest, and be carried out in accordance with the principle of proportionality (see Recep Tarhan and Afife Tarhan, cited above, § 62).
59. Article 35 § 2 of the Constitution stipulates that any interference with the right to property must be prescribed by law as it provides that the right to property may be limited by law and in the interest of the public. Similarly, governing the general principles surrounding the restriction of fundamental rights and freedoms, Article 13 of the Constitution adopts the basic principle that “rights and freedoms may only be restricted by law” (see Mehmet Arif Madenci, no. 2014/13916, 12 January 2017, § 69). Therefore, pursuant to Articles 13 and 35 of the Constitution, the first criterion to be sought in the interference with the right to property is whether it had a legal basis.
60. Equally important as the existence of the law is the necessity that the text and application of the law has legal certainty to a degree that individuals may foresee the consequences of their actions. In other words, the quality of the law plays an important role in the determination of whether the requirement of legality has been satisfied (see Necmiye Çiftçi and Others, no. 2013/1301, 30 December 2014, § 56).
61. In the present case, the inferior courts applied rediscount interest at varying rates to the receivable ruled to be paid to the applicant by the National Water Board, a public institution. This practice was based on Article 2 of the Law no. 3095. Nonetheless, the applicant raised an allegation of damage that exceeded the interest to be paid on the receivable ruled in its favour. The action for compensation of further loss filed by the applicant within the scope of Article 105 of the now-repealed Law no. 818 (Article 122 of the Law no. 6098) in this regard was dismissed by the first-instance court. The Court of Cassation upheld the court’s decision and rejected the applicant’s subsequent request for rectification, thereby rendering the decision final (see §§ 22-29 above).
62. The question of further loss (munzam zarar) was described by Article 105 of the now-repealed Law no. 818 and Article 122 of the Law no. 6098. Accordingly, where the creditor has incurred a loss that is greater than the default interest, i.e. if the damage suffered by the creditor exceeds the amount of interest accrued in the days of non-payment of the debt, the debtor shall be liable to compensate for that loss unless he/she is proven to be faultless.
63. However, as observed by the Ministry, the Court of Cassation has adopted two different practices with regard to the matters of further loss. In some cases, the Court of Cassation held that, pursuant to Article 122 of the Law no. 6098 (Article 105 of the now-repealed Law no. 818), the creditor had to prove with concrete evidence that he/she had suffered a loss beyond the default interest due to late payment of the amount receivable. According to those decisions, the increase in the foreign exchange rate or the high rate of inflation in the market will not relieve the creditor from the burden of proving that a further loss had been incurred. On the other hand, according to the second approach adopted in the practices of the Court of Cassation, the fault that would cause a liability of compensation stemming from further loss is the debtor’s very fault in going into default. No link of fault causing the loss will be sought or deliberated upon. According to these decisions, it should be presumptively acknowledged that an individual’s efforts and attempts to maintain the value of his/her money and to return a profit in an inflationary environment, at least by investing in term deposit accounts or foreign exchange accounts with continually rising rates, conforms to the ordinary flow and experiences of life. It was concluded that the debtor has the onus of proving this presumption otherwise, i.e. the absence of fault or liability on his/her own part (see §§ 37 and 38 above).
64. The Court’s duty is limited by virtue of the subsidiary nature of the individual application mechanism; in this context, the Court cannot intervene in the discretion of the inferior courts with regard to interpretation of provisions of law and examination of evidence unless there is a manifest arbitrariness or a manifest error of discretion. In this scope, it is not for the Court to interpret the rules of law regarding further loss or to examine the allegations and evidence submitted by the applicant in that respect.
65. Notwithstanding, the question that is important for the purposes of the individual application is that whether the interference with the right to property satisfied the criteria laid down in Articles 13 and 35 of the Constitution. Accordingly, the interference must be prescribed by law, pursue a legitimate aim, and also be proportionate to that aim. Having further regard to the nature of the interference, the Court will reach a conclusion as to whether the public authorities’ approach regarding the practice of law met the requirements in Article 35 of the Constitution after examining whether the interference was successful in achieving the legitimate aim pursued (for a similar approach, see Arif Güven, no. 2014/13966, 15 February 2017, § 52).
66. According to Articles 13 and 35 of the Constitution, the right to property may only be restricted in the interest of the public. The notion of public interest serves both a restrictive instrument, which allows for imposition of restrictions on the right to property where the public interest requires it, and an effective protection mechanism, which sets out limits to restrictions by preventing the imposition of any restrictions on the right to property outside public interest aims (see Nusrat Külah, no. 2013/6151, 21 April 2016, § 53).
67. The notion of public interest is considerably broad by its very nature. Taking into account the needs of the public, the legislative and executive organs have broad discretionary powers in the determination of what is in the public interest. If there is a dispute on the public interest, it is clear that the specialised first-instance courts and the courts of appeal are in a better position to resolve such disputes. The Constitutional Court cannot intervene in the discretion of the authorised public organs with regard to the determination of public interest, unless their decisions are understood to be manifestly ill-founded or arbitrary, in the individual application examination. The onus of proving that the interference is not in line with the public interest rests with the party raising such an allegation (see Mehmet Akdoğan and Others, no. 2013/817, 19 December 2013, §§ 34-36).
68. The fact that statutory and default interest rates to be applied unless it was decided otherwise has a significant role for the proper functioning of economic life. In this connection, the Court considers in the present case that the application of interest to the applicant’s receivable in accordance with the legal provisions regulating default interest pursued a legitimate aim based on public interest.
(a) General Principles
69. Pursuant to the principle of proportionality, a fair balance must be struck between the public interest sought in restricting the right to property and the individual’s rights. This fair balance will have been upset where it is found out that the applicant has personally borne an excessive burden (see Arif Güven, cited above, § 58). In the assessment of proportionality of the interference, the Court will take account of the burden imposed on the applicant from two perspectives: on the one hand, it will examine the importance of the legitimate aim sought to be achieved; and, on the other, it will have regard to the nature of the interference along with the behaviour of the applicant and the public authorities (see Arif Güven, cited above, § 60).
70. Being an instrument of exchange in economies, money represents an economic value which provides benefits for its owner such as profit, rent and interest when used in various commercial, industrial, agricultural activities and so on. The utilisation of money by persons and entities other than its owner results in the owner’s deprivation of this economic value and, in economies under the effect inflation, causes it to lose its value (i.e. its purchasing power) based on the inflation rate.
71. Where the inflation rate and, by extension, foreign exchange rates, term deposit, Treasury bill and State bond interest rates are much higher than the fixed statutory and default interest rates, the consequence turns in favour of the debtor but to the detriment of the creditor. For this reason, the debtor does not pay the debt when it is due and makes an effort to extend the length of proceedings when a legal action is filed. Thus, the number of actions and proceedings before the judiciary accumulates, the public confidence in the judiciary diminishes, the idea of obtaining claims on one’s own spreads, thereby disturbing the public order and undermining the personal and public safety (see the Court’s judgment no. E.1997/34, K.1998/79, 15 December 1998).
72. In cases where an amount receivable under the right to property is paid late, not only does the real value of the property decrease with a considerable depreciation in value of the money due to inflation during the default period, but also the creditor cannot have an opportunity to yield a return from the amount as a savings or investment tool. In this way, persons are subjected to unfairness through deprivation of their right to property (see the Court’s judgment no. E.2008/58, K.2011/37, 10 February 2011).
73. In previous applications concerning alleged suffering because of late payment of the amounts due that are prescribed by the legislature as a right or have become public debt, the Court found breaches of the right to property if the depreciations of the receivable or the amount guaranteed under a right had imposed a disproportionate burden on applicants (see Mehmet Akdoğan and Others, cited above; and Akel Gıda San. ve Tic. A.Ş., no. 2013/28, 25 February 2015). Likewise, the Court found a violation of the right to property under the proportionality aspect in an application where it was concluded that the amount of compensation awarded by courts had lost value against inflation due to the time spent over the course of legal proceedings (see Abdulhalim Bozboğa, no. 2013/6880, 23 March 2016). Furthermore, the Court held that there had been a violation of the right to property on the ground that an applicant’s retirement bonus -established by a court decision within the framework of social security payments- had been paid after depreciation and it had imposed an excessive and extraordinary burden on the applicant (see Ferda Yeşiltepe [Plenary], no. 2014/7621, 25 July 2017).
74. The action brought by the applicant for the collection of its receivable under the dam construction contract was accepted in part by the first-instance court on 19 April 2002 and upheld by the 15th Civil Chamber of the Court of Cassation on 6 June 2002 upon an appeal. Accordingly, the inferior courts ruled that the National Water Board was to pay the applicant TRY 62,969.69 for the works completed by the applicant within the scope of the contract for dam construction. However, the mere ruling on a payment in favour of the applicant has not removed the applicant’s victim status by itself. In order for the applicant’s victim status to be remedied, it is necessary to offer reparation in view of both the time of the alleged violation and the period of time during which the victim was unable to use this right.
75. In the present case, the applicant received the original due amount of TRY 62,969.69 as well as the interest payment of TRY 348,027.70. Nonetheless, the applicant complaints that its receivable lost value due to late payment and the inflationary environment witnessed in the country during the default period.
76. As mentioned above, in various judgments held on both constitutionality review and individual application, the Court has underlined that the amounts receivable fall within the right to property and that, in case of late payment of amounts due by the State, it is important to pay such an interest that is not below the inflation rates not only for the protection of individual rights but also for the purposes of public order. In this context, the Court has already acknowledged that the loss of value of receivables that are regarded to be falling within the individuals’ right to property caused by a late payment made by public authorities due to unreasonable reasons constitutes a breach of the right to property.
77. In the present case, the inferior courts established four different dates from which default interest would run in respect of the applicant’s receivables. Accordingly, the amount of TRY 486.69 became payable to the applicant on 10 October 1990; the amount of TRY 2,870.82 on 9 June 1988; the amount of TRY 55,569.36 on 16 March 1995; and the VAT-excluded amount of TRY 4,041.82 also became payable on 16 March 1995. The total amount of these receivables (TRY 62,968.91), together with the interest accrued (TRY 348,027.70), was paid to the applicant on 23 September 2002.
78. According to the Central Bank data, the rises in the inflation rates observed in the relevant periods were as follows:
- June 1988 - September 2002: 203,613% (TRY 100 in June 1988 corresponded to TRY 203,512.50 in September 2002 in real value).
- October 1990 - September 2002: 60,427% (TRY 100 in October 1990 corresponded to TRY 60,326.70 in September 2002 in real value).
- March 1995 - September 2002: 4,392% (TRY 100 in March 1995 corresponded to TRY 4,291.59 in September 2002 in real value).
79. However, for its total receivable of TRY 62,968.91 falling within the right to property, the applicant was paid TRY 348,027.70 as interest at the same period of time. It has been observed on the basis of these data that, despite the amount of interest paid, the cumulative inflation rate in the same period had been 13,254%; in other words, the applicant’s receivable was paid after having fallen into a severe depreciation against inflation, consequently amounting to less than 1% of its value. Indeed, the expert report submitted to the trial court clearly indicated that the applicant’s receivable had undergone a loss of value against inflation.
80. As a rule, public authorities are expected to pay the amounts owed to persons without a need arising for a judicial process or enforcement proceedings. In the present case, there was no reasonable justification for the late payment of the applicant’s receivable. Besides, it has been understood that the public authorities were only able to pay the receivable -ruled retrospectively by inferior courts in favour of the applicant- after the end of the proceedings and that the public authorities gained a benefit because of the length of the proceedings.
81. In conclusion, regard being had to the fact that the applicant’s receivable protected by the right to property was paid after having fallen into depreciation to a large extent against inflation, it has been found that a personally excessive and extraordinary burden was imposed on the applicant. Therefore, the Court has observed that the fair balance which needed to be struck between public interest and the applicant’s right to property was upset to the detriment of the applicant in the instant case because of the inferior courts’ strict interpretation requiring the applicant to separately prove having incurred losses.
82. Consequently, the Constitutional Court has found a violation of the right to property safeguarded by Article 35 of the Constitution.
83. The applicant alleged that there had been a violation of its right to a trial within a reasonable time on account of the lengthiness of the proceedings it had brought to claim compensation for its further loss.
84. The alleged violation of the right to a trial within a reasonable time must be declared admissible for not being manifestly ill-founded and there being no other grounds for its inadmissibility.
85. In the determination of the length of the proceedings on disputes concerning civil rights and liabilities, the period shall run from the date on which the case was filed and it shall be deemed to end when the proceedings have been completed -including, most of the time, the execution stage- or, as regards the proceedings that are still on-going, when the Court has ruled on the complaint concerning a breach of the right to a trial within a reasonable time (see Güher Ergun and Others, no. 2012/13, 2 July 2013, §§ 50 and 52).
86. Matters such as the complexity of the proceedings, the number of their levels, the attitude of the parties and the relevant authorities during the trial and the quality of the applicant’s interest in the speedy conclusion of the case are the criteria which are taken into consideration in the determination of whether or not the length of the proceedings on disputes concerning civil rights and liabilities is reasonable (see Güher Ergun and Others, cited above, §§ 41-45).
87. It is observed that the applicant filed the action for compensation of further loss on 16 March 1995 and the proceedings came to an end once the Court of Cassation dismissed the request for rectification on 26 December 2013.
88. In view of the above-mentioned principles and the Court’s previous judgments in similar applications, the length of the proceedings in the present case that lasted for nearly 18 years and 9 months must be considered unreasonable.
89. For these reasons, it must be held that there has been a violation of the right to a trial within a reasonable time protected under Article 36 of the Constitution.
90. Article 50 §§ 1 and 2 of the Code no. 6216 on Establishment and Rules of Procedures of the Constitutional Court, dated 30 March 2011, reads as follows:
“(1) At the end of the examination of the merits it is decided either the right of the applicant has been violated or not. In cases where a decision of violation has been made what is required for the resolution of the violation and the consequences thereof shall be ruled...
(2) If the determined violation arises out of a court decision, the file shall be sent to the relevant court for holding the retrial in order for the violation and the consequences thereof to be removed. In cases where there is no legal interest in holding the retrial, the compensation may be adjudged in favour of the applicant or the remedy of filing a case before the general courts may be shown. The court which is responsible for holding the retrial shall deliver a decision over the file, if possible, in a way that will remove the violation and the consequences thereof that the Constitutional Court has explained in its decision of violation.”
91. The applicant requested pecuniary compensation and retrial.
92. In the present application, the Court has concluded that there have been violations of the right to property and the right to a trial within a reasonable time.
93. Since there is legal interest in holding a retrial to redress the consequences of the violation of the right to property, a copy of the judgment must be sent to the 7th Chamber of the Ankara Civil Court of General Jurisdiction for retrial.
94. While the Court has found a violation of the applicant’s right to a trial within a reasonable time, the applicant did not request any non-pecuniary compensation. The applicant’s request for pecuniary compensation, on the other hand, concerns the alleged violation of the right to property. The finding of a violation and the ruling in favour of a retrial on the basis of that violation offers the applicant sufficient redress.
95. The total court expense of TRY 2,006.10 including the court fee of TRY 206.10 and the counsel fee of TRY 1,800, which is calculated over the documents in the case file, must be reimbursed to the applicant.
For these reasons, the Constitutional Court held on 21 December 2017:
A. 1. By MAJORITY and by dissenting opinion of Mr. M. Emin KUZ and Mr. Kadir ÖZKAYA, that the alleged violation of the right to property be DECLARED ADMISSIBLE;
2. UNANIMOUSLY that the alleged violation of the right to a trial within a reasonable time be declared ADMISSIBLE;
B. 1. By MAJORITY and by dissenting opinion of Mr. M. Emin KUZ and Mr. Kadir ÖZKAYA, that the right to property safeguarded by Article 35 of the Constitution was VIOLATED;
2. UNANIMOUSLY that the right to a trial within a reasonable time safeguarded by Article 36 of the Constitution was VIOLATED;
C. UNANIMOUSLY that a copy of the judgment be SENT to the 7th Chamber of the Ankara Civil Court of General Jurisdiction (no. E.2008/145, K.2011/544) for a retrial to redress the consequences of the violation of the right to property;
D. UNANIMOUSLY that the total court expense of TRY 2,006.90 including the court fee of TRY 206.90 and the counsel fee of TRY 1,800 be REIMBURSED TO THE APPLICANT;
E. UNANIMOUSLY that the payment be made within four months as from the date when the applicants apply to the Ministry of Finance following the notification of the judgment; In case of any default in payment, legal INTEREST ACCRUE for the period elapsing from the expiry of four-month time limit to the payment date; and
F. That a copy of the judgment be SENT to the Ministry of Justice.
In the individual application lodged by the applicant upon dismissal of the action it had brought to claim compensation for further loss, the Court has declared admissible the alleged violation of the right to property and found a violation of the said right.
The reasoning of the judgment indicates that the action brought by the applicant for the collection of its receivable under the dam construction contract was partly accepted by the first-instance court and subsequently upheld by the Court of Cassation; however, considering that the victim status could have only been removed if the payment of receivable plus its interest had been coupled with a compensation for the loss of value experienced in an inflationary environment, the Court has concluded that there has been a breach of the right to property on account of the fact that the applicant’s receivable was paid after having fallen into a severe depreciation against inflation (see §§ 74-82).
In this context, even though the judgment summarises the subject matter of the application as a violation of the right to property due to the fact that the receivable ruled on by a court was paid after the amount had undergone depreciation, the present case differs from the previous judgments cited therein in which we had found violations. From this standpoint, the present case does not concern a depreciated payment of a receivable due to a delay in the execution phase of the judgment which was rendered by an inferior court and which became final, neither does it involve an alleged violation of the right to property due to the calculation of the amount subject to a case accepted by inferior courts (see, for instance, Ferda Yeşiltepe [Plenary], no. 2014/7621, 25 July 2017).
As indicated in the Court’s judgment, the application concerns the dismissal of the applicant’s “action for compensation of further loss” filed on the basis of the Code of Obligations as even the interest accruing on the amount awarded to the applicant by the first-instance court would not cover its losses (see § 61).
Article 105 § 1 on “Further loss” of the Code of Obligations (Law no. 818), which was in force when the applicant filed the claim for compensation of further loss giving rise to the present application, and Article 122 § 1 of the Turkish Code of Obligations (Law no. 6098), which repealed the Law no. 818 and was in force when the first-instance court dismissed the compensation claim at issue, stipulate that, if the damage suffered by the creditor exceeds the amount of interest accrued in the days of non-payment of the debt, the debtor shall be liable to compensate for that loss unless he/she is proven to be faultless.
It is understood that, prior to the case concerning a claim for compensation of further loss at issue in the present application, the applicant company had signed a contract to construct a dam and a hydroelectric power plant but the work had been stopped via liquidation upon the applicant’s request. Subsequently, the applicant company filed an action to challenge the final account calculated for the costs of the works completed thus far. The trial court partly accepted the applicant’s case and awarded payment of interest in addition to the main amount owed to the applicant. Furthermore, the applicant did not consider the payments made in 2002 sufficient and filed another action for compensation in 2005, which was joined with the preceding action for compensation. In 2011 the trial court dismissed the action on the grounds that “... the report dated 9 June 1988 drawn up with respect to the liquidation of dam construction indicated that no payment of costs or compensation would be made to the claimant (applicant) company due to liquidation” and there had been no further loss incurred according to expert reports except for the interest applied to the applicant’s receivable which had been established within the main set of proceedings (and paid along with the receivable 9 years before the delivery of the judgment). That judgment became final when the Court of Cassation upheld it and dismissed the request for rectification.
In other words, although the applicant company, having failed to fulfil its commitment, requested and reached an agreement with the administration, in which it agreed not to receive any payment of compensation or costs with a view to being relieved from its contractual obligations and responsibilities, it seemingly claimed compensation for further loss as it did not find the interest accruing on the amount awarded by the trial court at the end of the action it had filed to receive payment for the costs related to the works completed by then.
In arriving at the conclusion of admissibility and violation, the majority has apparently regarded the claim for compensation of further loss as a continuation of the judgment rendered in the proceedings concerning the applicant’s partly-accepted claim for payment of receivables. Nonetheless, given that the case in question was not a claim for receivables (alacak davası) but for compensation of damages (tazminat davası), we consider that it was not appropriate to disregard the fact that, when requesting termination of the construction by way of liquidation, the applicant -as explained above- had agreed not to claim compensation in return for being relieved of its contractual commitment and the legal liability arising from its inability to fulfil it, as well as the applicant’s declaration of intent regarding its waiver of compensation claims which had been relied on by the inferior courts.
It is observed that the first-instance court initially rejected the action for compensation giving rise to the application as it found the respondent administration’s defence sufficient on the grounds that the applicant had agreed not to claim compensation and that the further loss claim fell within this scope.
As is well-established, the Court’s duty is limited on account of the subsidiary nature of the individual application mechanism; thus, the Court cannot intervene in the discretion of the inferior courts with regard to the interpretation of rules of law and examination of evidence so long as there is no manifest arbitrariness or manifest error of discretion in this respect. While this principle has been reiterated in this judgment (see § 64), the applicant’s complaints have been declared admissible without indicating any findings as to whether there had been a manifest arbitrariness or error of discretion in the rejection of the compensation claim by the inferior courts through interpretation of the relevant provisions of the Code of Obligations and examination of evidence.
In other words, the inferior courts rejected the action for compensation on the grounds that, although the Code of Obligations stipulated the filing of an action for compensation for reparation of further loss, the applicant company had waived this claim in exchange for the administration’s agreement to liquidate the construction work. Nevertheless, the majority of our Court considers the alleged violation of the applicant’s right to property admissible without establishing whether there has been any manifest arbitrariness or error of discretion in such interpretation of rules of law or regarding the assessment of the report signed between the applicant company and the administration.
On the other hand, while the judgment reads that the first-instance court held in 2004 that “the expert report submitted to the trial court clearly indicated that the applicant’s receivable had undergone a loss of value against inflation”, it is also noted that another expert report obtained by the same court in 2010 did not find any substantiated further loss incurred by the claimant (i.e. the applicant company) that had exceeded the default interest already paid on its receivables calculated for the works it had completed. The discretionary power with respect to which of the two expert reports would be used as a basis for a ruling rests with the inferior courts of instance, which have indeed been acknowledged within the Court’s judgment as having the authority over examination of evidence.
In sum, it is not possible for us to agree with the said conclusions as they are incompatible with our general principle which has been mentioned above and also reiterated in the judgment. For these reasons, while sharing the opinion on the declaration of admissibility and finding of a violation in respect of the allegation concerning the right to a trial within a reasonable time, we disagree with the majority’s decision to declare admissible the complaint concerning an alleged violation of the right to property. Understanding that the inferior court rulings did not contain a manifest error of discretion or arbitrariness and that the applicant’s assertions regarding an alleged violation of the right to property are manifestly ill-founded, we opine that this part of the application should be declared inadmissible.
Furthermore, on the basis of the reasons explained above, we cannot agree with the finding of a violation of the right to property or with the grounds relied on for this finding; namely, (i) the consideration that first-instance court’s judgment that “required the applicant to separately prove having incurred losses” was a “strict interpretation”, and (ii) the conclusion that “the fair balance which needed to be struck between public interest and the applicant’s right to property was upset to the detriment of the applicant” that has been reached without having regard to the conditions in the liquidation agreement allowing for the termination of the construction work undertaken by the applicant company or which legal liabilities did the applicant wished to be relieved of in exchange for waiving any claims for compensation (see § 81).
In this scope, we observe in the present application that the applicant company agreed not to claim any compensation with a view to being relieved of the obligations it had undertaken under a construction contract and any liabilities that might have arisen from its failure to fulfil those obligations. We further understand that the applicant company was not entitled to any receivables other than the default interest accruing due to late payment of the amounts due for the works it had completed until liquidation. Therefore, considering that a fair balance was struck between the applicant’s right to property and public interest and that the applicant was not subjected to an excessive an extraordinary burden, we disagree with the majority’s judgment finding a violation.
