Introduction |
Four
and a half years ago, Romania enacted Law No. 10/2001, ostensibly to
rectify the theft by the prior communist regime of billions of dollars
worth of real property belonging to its citizens – but ignoring the
billions of dollars worth of other properties also abusively confiscated
by Romania. But even this partial effort at restitution was merely a
Şmecherie –Romanian for a ruse (as we described it in the
March 2001 issue of The Romanian Digest™). As we stated, the
Law “. . . is not much more than a series of declarative statements
shrouded in insincere exceptions and procedures designed to thwart
genuine restitution and prolong communist misappropriations.” Our
description of the Law so aroused the then Prime Minister that he
actually complained about our characterization. Nevertheless, time has
proven that we were right. The vast majority of claims languish in
administrative oblivion while justice for the victims remains elusive,
and Romania continues to retain possession of most of the stolen
properties. Hiding behind the fact that its confiscatory acts predate
its international commitments to human rights, Romania overlooks the
fact that its current acts are in themselves confiscatory and are a
present violation of its international obligations.
Romania’s new government recently undertook some measures to cure a few
of the inadequacies of Law 10/2001. Among other things, regulations were
promulgated that eliminated the lengthy list of exemptions for
restitution in kind of all buildings which are in the possession of the
state – a list the extent of which we castigated in our March 2001
article as the “most unwarranted and sordid aspect” of the Law. All in
all, the government’s revisions are quite positive – but it remains to
be seen how fairly they will be implemented when put into practice.
Law No. 10/2001 outlines the legal steps that can be taken in relation
to real estate appropriated abusively by the state during the communist
regime (defined formally as the period between March 6, 1945 and
December 22, 1989). It is the most comprehensive and broadly applicable
act that seeks to right the wrongs associated with the Communist
regime’s forced seizure of properties. But the problem of returning
confiscated properties is a difficult task from a legal standpoint,
contentious from a political standpoint, and sensitive from a human
standpoint. The restoration of properties is impeded by a number of
specific complexities. First, many properties simply no longer exist as
they once were because the buildings were demolished. Second, both the
conflicting interests of those who lost property and those who acquired
it in good faith must be respected. Third, a careful balance must be
struck between the rights of various interested parties, and the
constitutional provisions regarding the right to property. Proper
consideration must be given to the preservation of equality between
those whose property rights have been restored and those who have simply
received compensation. In addition to these legal difficulties, the
government may also find itself in an economic bind if it should be
forced to find financial resources when returning properties or giving
monetary compensation.
With these various factors at play, the restitution of properties is a
process that must be carried out under certain considerations. It must
be noted that restitution is based on universally applicable legal
principles, such as the protection of the right to property and the
safeguarding against encroachments upon that right. Furthermore, the
right to property constitutes a fundamental human right. It is so
described in Protocol 1 of the European Convention on Human Rights.
Thus, any infringement, postponement or neglect within the restitution
process itself could be interpreted as a violation of human rights.
Finally, the restitution of properties confiscated by the communist
government has the added importance of acting as a condemnation of
communist abuses and a material and moral atonement for these past
wrongs. |
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The History of Romania’s Property Law |
Even when it was first enacted, the text of Law No.10/2001 (the “Law”)
was the subject of ardent disputes between the former owners and the new
holders of these properties, and was amended many times through
legislative interventions, in the form of governmental ordinances and
emergency ordinances (OUG 109/2001, OUG 145/2001, OUG 175/2001, OG
7/2001, OUG 184/2002, OUG 10/2003). For the purposes of uniform
application, the government even issued Methodological Norms for the
Implementation of Law No. 10/2001.
Despite the legislative dynamism in this field, the Law remained
unchanged in its essence, and created numerous injustices and
discriminations. The new center-right government, which formed after the
election in December 2004, heralded the reform of property laws as a
legislative priority in its “Program for Governance.” This document
specified legislative amendments with regard to property restitution,
and took responsibility for initiating legislative reforms to
Parliament, in the areas of property and of justice. |
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New Regulations |
In
June 2005, pursuant to Article 114 of the Romanian Constitution, the
Government assumed responsibility for a package of modifications to Law
10/2001. These modifications will be adopted unless, pursuant to Article
113 of the Constitution, the Chamber of Deputies and the Senate pass a
motion of censure, which is a joint session majority vote decision
withdrawing confidence from the Government and killing the bill. The law
will be fully promulgated after the President has signed it, and it has
been published in Monitorul Oficial, the gazette where statutes
are officially published. The president may request that the
Constitutional Court, which pursuant to Article 146 of the Constitution
has the power of judicial review, adjudicate the constitutionality of
the law before its adoption, but at this time, we are not aware of any
such development. As such, we foresee that these reforms will be
implemented shortly.
The general principles of the new regulations regarding properties are:
a) restitution in kind of all the buildings which are in the possession
of the state; b) the allocation of just and equitable compensation; and,
c) the protection of tenants by way of tenant-protection laws which will
remain in effect so as not to infringe on tenants’ interests.
With regard to Law no. 10/2001, an important modification is embodied by
the amendment to Article 1, which states that properties are returned
in kind, as stipulated by the Law. The modified text of the law
replaces the old wording returned, usually, in kind. In this way,
the purported imperative of restitution in kind becomes the general
rule, thus limiting arbitrary interpretations and putting a check on the
possible conflicting interests of those called upon to apply the law.
Closely related to this change is the extremely important modification
of Article 16. In the old wording of this article, former owners were
only awarded an equivalent form of restitution in the case of properties
that were used for public or social interest. Falling under this
category were those properties occupied by budgetary units from the
Departments of Education and of Health, socio-cultural establishments or
public institutions, the headquarters of legally-registered political
parties and of diplomatic missions and residences, consular offices,
representative offices of international intergovernmental organizations
accredited in Romania, and buildings used by diplomatic personnel.
The modification of Article 16 stipulates that even in cases where
seized properties now have these public uses, restitution will also be
effectuated in kind, with an added duty to the owner of maintaining that
use for a period of 3 or 5 years, depending on the situation. During
this period, the occupant must pay maintenance costs of the property. In
any case, the owners will regain possession of the property after a term
of 5 years at most. This is an important provision because many
properties seized by the Communist government now have these kinds of
public uses, and the duty to provide state institutions with adequate
headquarters in which to carry out their activities belongs to the state
and not to its citizens. On the other hand, it is ironic that some of
the nations that support the restitution of properties confiscated
abusively by the prior Romanian Communist government are also those that
have embassy and consular headquarters on these properties and actually
resist efforts of newly restituted owners to take possession of them.
One problem unresolved by the Law in its initial version was the lack of
sanctions for non-compliance that could be held out against those state
institutions that are responsible for responding to restitution
applications. Although the Law set a 60-day term in which the
applications had to be answered, this term was interpreted in many cases
as being arbitrary, and as such, institutions not respecting it were
never sanctioned. This has meant that even today, four years after the
enactment of the Law, tens of thousands of applications are still
unanswered. This situation is partially remedied by the amended Law,
which provides for civil and criminal sanctions against persons
responsible for the application of the Law who do not conform to the
terms established by it.
In order to alleviate the difficulty of proving one’s right to
restitution, the new rules have created a presumption in favor of former
owners. In other words, in the absence of evidence to the contrary, the
person whose property was abusively seized is the person who holds the
title to the property. This provision lightens the burden of proof for
former owners, and shifts it to the state, which now has the duty to
prove that the person in question was not the owner. Practically
speaking, this means that former owners no longer have to search through
archives for all kinds of documents to prove their rights, documents
that are very difficult to find, may even have been destroyed. Indeed,
the injustice of the former burden of proof was a matter for which we
first provided evidence for the US Helsinki Commission when our
colleague, Mark Meyer, testified before the US Commission on Security
and Cooperation in Europe in July 2002 in the Congress of the United
States. |
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Continuing Problems in Restitution |
The sluggishness in the process of responding to applications for
restitution -- after 4 years, only 15% of seized properties have been
restituted -- has led to the creation of a semi-clandestine market of
litigious rights in Romania. Data about persons who have registered
requests is sold by town hall employees for prices that vary according
to the phase of the case but which, on average, are one-third of the
value of the property. Subsequently, these properties are sold for a
profit of 200-300% by persons familiar with the methods needed to
“grease” the wheels of Romanian justice. This gray market has developed
in an attempt to escape from an inefficient bureaucracy, a corrupt
judiciary, and a general governmental unwillingness
to apply the law.
One problem that has remained unsolved even by the new legislative
modifications is that of the sales contracts concluded by the former
tenants of nationalized properties which represent, according to some
estimates, 85% of seized properties. In its initial version, the Law
stipulated a one-year term - from its adoption - for a judicial
challenge to these contracts. The present regulation no longer
establishes this kind of term, thereby creating a situation in which
properties purchased by tenants can no longer be returned to their
former owners. This conundrum is one of the greatest sources of
discontent for former owners, particularly because many of these sales
were carried out by less-than legal means. The government, however,
considers that the reopening of thousands of legal actions would not be
beneficial for the judicial stability that Romania requires.
Where compensation in kind is no longer possible, the Law provides for
the possibility of financial compensation through grants of shares of
stock in state-owned companies. For this purpose, a Property Fund has
been set up containing shares in major Romanian companies in which the
state holds stock such as Transelectrica, Loteria Romana, Transgaz,
Romtelecom, Posta Romana, and Petrom. Former owners can now apply for
compensation through the National Authority for Property Restitution,
which will assess the value of the properties that are the subject of
restitution demands, and which will issue damages titles that will be
turned into shares in the Property Fund. The drafters of this provision
decided that this is a “21st Century” method of compensation and the
optimal solution from a transparency point of view, since the shares
will be listed on the Bucharest Stock Exchange. Of course, whether the
valuations of the properties and the methodology to be used to make such
determinations will be fair remains an open question. |
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Conclusion |
Although there have been numerous modifications and new measures adopted
with the objective of rectifying the abuses of the former communist
government, it remains to be seen if Romania’s restitution law, in its
latest incarnation, will finally fulfill its promise. For certain
persons whose properties were wrongfully seized, the Law, although
sometimes difficult to employ due to obstacles rooted in bureaucracy and
corruption, has soothed some of the bitterness of the past. However,
there are many more claimants who have had to suffer doubly, once before
December 1989, and then under the inaction and bad will of the
post-revolution governments. For these owners, receiving abstract stocks
in lieu of concrete buildings constitutes an unacceptable exchange - one
as abusive as the original expropriation.
Nevertheless, there is progress, whatever the pace. It is now certainly
clearer and easier for owners whose properties have not yet been
destroyed or sold to get them back. In this way, perhaps some day,
another nail, of the many still missing, may be put in Communism’s
coffin. |
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Editors Note: It is our policy not to mention our clients by name in
The Romanian Digest™ or discuss their business unless it is a matter of
public record and our clients approve. The information herein is correct
to the best of our knowledge and belief at press time. Specific advice
should be sought from us, however, before investment or other decisions
are made.
Copyright 2005 Rubin Meyer Doru & Trandafir, societate civila de avocati.
All rights reserved. No part of The Romanian Digest™ may be reproduced,
reused or redistributed in any form without prior written permission
from the publisher.
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