The indexation of damages for an expropriated immovable property P 13/14
‘Article 227 of the Act on the Management of Immovable Property is constitutional; the said article prescribed that, until the announcement of the indices of price changes of immovable properties, the indexation of the amounts of damages for expropriated immovable properties should be based on the indices of the prices of consumer goods and services (inflation indices),’ said the Constitutional Tribunal.
On 9 March 2017 at 9.00 a.m., the Constitutional Tribunal considered a question of law referred by the Voivodeship Administrative Court in Rzeszów with regard to the indexation of damages for an expropriated immovable property.
The Constitutional Tribunal adjudicated that Article 227 of the Act of 21 August 1997 on the Management of Immovable Property is consistent with Article 2, Article 21(2), and Article 64(1) of the Constitution.
Moreover, the Constitutional Tribunal decided to discontinue the review proceedings as to the remainder.
The ruling was unanimous.
First of all, the Constitutional Tribunal noted that although the challenged provision of the Act on the Management of Immovable Property had been formally repealed, it still continued to constitute a higher-level norm for reviewing the legality of administrative decisions issued prior to the normative changes – in the light of the principle of tempus regit actum – within the scope of administrative-court proceedings.
Therefore, the provision is subject to application by administrative courts. For this reason, there was no ground for discontinuing the review proceedings due to the fact that Article 227 of the said Act had ceased to have effect, especially that the normative content expressed therein was repeated by the legislator in Article 5(4) of the Act on the Management of Immovable Property (in its new wording).
With regard to the doubts of the court referring the question as to the insufficient precision of Article 227 of the said Act, the Constitutional Tribunal compared that provision with other provisions that made reference to various statistical data and held that Article 227 of the Act on the Management of Immovable Property did not manifestly breach the standards of appropriate legislation. Interpreting the provision in the light of the essence of indexation, administrative authorities have the possibility of setting objective criteria for indexing the amounts of damages. In the Tribunal’s view, a potential ruling on the unconstitutionality of Article 227 of the said Act would result in opposite consequences to those assumed by the court referring the question. Indeed, in those circumstances, taking account of the fact that the President of the Central Statistical Office of Poland had not announced the indices of price changes of immovable properties, the said Act would provide for no substitute criterion, i.e. an inflation index, which could only worsen the state of legal uncertainty.
The Constitutional Tribunal disagreed with the allegation that the circumstance where a presumably transitional provision had been in force for 19 years constituted a sufficient ground for ruling the said provision to be unconstitutional. The Tribunal emphasised that such a circumstance had not arisen from the defective wording of Article 227 of the Act on the Management of Immovable Property but from the fact that the President of the Central Statistical Office of Poland had not fulfilled his duty to announce the indices of price changes of immovable properties. However, it is not the Tribunal’s task to assess any activities or negligence of authorities responsible for applying the law. As regards the assessment of the constitutionality of that particular legal regulation, the Tribunal deemed that the inclusion of the transitional provision did not infringe the principle of the protection of citizens’ trust in the state and its laws, and, in fact, it constituted the realisation thereof. Indeed, if the legislator had not prescribed in the said Act that a different index (i.e. an inflation index) was to be applied until the announcement of the indices of price changes of immovable properties, it would not be clear how to carry out the aforementioned indexation. In its question of law, the Voivodeship Administrative Court also mentioned that an inflation index may not be applied to the indexation of the amounts of damages for expropriated immovable properties, as the dynamics of changes in the prices of consumer goods and services did not reflect the changes that had been occurring on the market of immovable properties. According to the court referring the question, an inflation index is less advantageous to previous owners, and therefore the requirement to apply the said index leads to an infringement of constitutional rights, including the right to just compensation for the expropriation of an immovable property. The Tribunal also noticed that the allegation formulated in that manner was only hypothetical in character.
Indeed, if in the market of immovable properties there was stagnation or a decrease in prices of immovable properties, then the application of an inflation index could prove advantageous to previous owners. The Tribunal also stressed that there was no constitutional right to the indexation of damages; nor was there one constitutionally admissible model of indexation. Within that scope, the legislator exercises relative discretion in shaping the mode of indexation. The Tribunal might interfere solely in the situation where the legislator’s selected mode of indexation would create only an illusory protection of the property interests of previous owners. However, such a conclusion does not arise automatically from a, hypothetically, disadvantageous nature of an inflation index.
The hearing was presided over by Judge Małgorzata Pyziak-Szafnicka, and the Judge Rapporteur was
Judge Piotr Pszczółkowski.