Institutional guarantee and theory of the “essence” of the right to property (“Wesensgehalt”)

In Case No. U 5/98-II, the Constitutional Court considered the aforementioned institutional guarantee of the right to property. A number of provisions of the RS Constitution were challenged in these proceedings. The Constitutional Court defined criteria for the Entities’ legislation relating to property rights, first of all ownership right deriving from the BiH Constitution.²⁰⁰⁷ The Preamble of the BiH Constitution provides that the parties are desiring “to promote the general welfare and economic growth through the protection of private property and the promotion of a market economy”. Moreover, the ownership right is guaranteed by Article II of the BiH Constitution. The ownership right is not only an individual right requiring judicial protection against unjustified interference but also a kind of institutional safeguard for the functioning of market economy. Insofar as the ownership right is concerned, the constitutional obligation of Bosnia and Herzegovina and the Entities to create the necessary legal framework derives from this. The restrictions imposed by the legislature, such as they are explicitly defined in Article 1 of Additional Protocol No. 1 to the ECHR (paragraph 15), implicitly derive from the ownership rights – in the manner mentioned in the Preamble and Article I.4 of the BiH Constitution (the four fundamental freedoms of the so-called common market). If the European Court of Human Rights, in case the State considers it necessary to interfere with property rights, weighs the general interests of the community, on the one hand, and the obligation to protect the rights of the individual one the other hand, this means that it weighs in general and assumes that there is a privately owned property. If the actions of the legislature led to a full reduction of private property – for example, by the nationalisation of industrial branches – then the ownership right would be significantly restricted, particularly if the private property – as it is provided for by the BiH Constitutional Court – is explicitly indicated as a condition for the functioning of a market economy. The supremacy if the BiH Constitution over the Constitutions of the Entities would be a dead letter if private property were abolished. This idea, as it is stated by the Court, can be found in the jurisprudence of the constitutional courts of Central Europe. According to that case-law, the main content of human rights and freedoms, their nucleus and essence, must not be affected regardless of the circumstances. The absolute margin to restrict the rights guaranteed by the Constitution is underlined by the legislature.

Taking into account this standard, the request in Case No. U 5/98, whereby the applicant requested the Court to declare certain provisions of the Entities’ Constitutions unconstitutional, was successful. The challenged provisions were contrary to the fundamental provisions of the BiH Constitution relating to the significance of private property and the principle of a market economy. However, the BiH Constitutional Court declared Article 58, paragraph 1 of the RS Constitution constitutional, since this provision could be interpreted in a manner not to be incompatible with the BiH Constitution. This provision reads as follows:

“Property rights and obligations relating to socially-owned resources and the conditions of transforming the resources into other forms of ownership shall be regulated by law.”

Article 58, paragraph 1 of the RS Constitution can hold grounds if the standard and obligation deriving from the BiH Constitution apply. The challenged provision of Article 58, paragraph 1 of the Constitution of RS can be interpreted as being a legal authorization or constitutional obligation of Republika Srpska to transform all socially owned property into other forms of property, particularly private property.²⁰⁰⁸ In contrast to this, interpreting this regulation as maintaining the category of socially owned property would be unconstitutional. This is a heritage of the old communist self-management system and can no longer be considered to be in conformity with the promotion of a market economy required by the BiH Constitution because it creates, in theory and practice, serious obstacles to any privatisation process necessary in Bosnia and Herzegovina to establish a properly functional market economy.²⁰⁰⁹

In contrast to this, the Court partially quashed Article 59 of the RS Constitution. This Article read as follows:

“Natural resources, urban construction sites, real estate and property of particular economic, cultural and historical significance determined by law to be of general interest, shall be State-owned. Certain goods of general interest may also be privately owned under the conditions determined by law.

Under the conditions determined by law, the right of use may be instituted on property of general interest as well as on urban construction sites.

The use and exploitation of property of special cultural, scientific, artistic or historical significance, or significant for the protection of nature or the environment, may be restricted against a full compensation to the owner

The protection, use, improvement and management of the property of general interest, as well as the payment of compensation for the use of property of general interest and urban construction site shall be regulated by law”.

With respect to the challenged provision of Article 59 of the Constitution of RS, the Constitutional Court has found the following: Paragraph 1 of the Article provides that natural resources, urban construction sites, real estate, and certain goods of general interest shall be state-owned as a rule. Since paragraph 2 of the same Article, as an exception, allows for privately owned property of certain goods of the general interest (demonstrated by the wording “may also be privately owned”), the entire understanding of privately owned property as a rule and an exception to this rule is reversed through this legislative restriction. The same rule applies to paragraph 3 of the same Article on the use of goods of general interest and urban construction sites. The organisation of the first three paragraphs of the challenged Article therefore clearly establishes a constitutional obligation that natural resources, urban construction sites, real estate and certain goods of general interest must be state-owned. However, such a rule goes far beyond the boundaries imposed by the standards of the Constitution of BiH outlined above. To declare natural resources, urban construction sites, and real estate to be state-owned property ex constitutione infringes on the very “essence” of privately owned property as an individual right and an institutional safeguard.²⁰¹⁰

On the other hand, Article 59, paragraph 4 of the RS Constitution is compatible with the BiH Constitution.²⁰¹¹ This Article indicates legitimate aims relating to goods of general interest, where the authorization to put limitations on ownership does not fully exclude privately owned property. Furthermore, this Article provides the owner with full compensation. The provisions of paragraph 5 do not violate the BiH Constitution either, since they do not violate the essence of that right.²⁰¹² Therefore, the matter does not relate to deprivation but to the restriction of private property all the more so since compensation is prescribed.