CEDH · CASELAW;DECISIONS;DECGRANDCHAMBER;ENG — 2 mars 2005

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Wildhaber , President ,   Mr   C.L. Rozakis ,   Mr   J.-P. Costa ,   Mr   G. Ress ,   Mr   L. Caflisch ,   Mr   K. Jungwiert ,   Mr   J. Casadevall ,   Mr   B. Zupančič ,   Mr   J. Hedigan ,   Mr   M. Pellonpää ,   Mrs   H.S. Greve ,   Mr   A.B. Baka ,   Mr   R. Maruste ,   Mr   K. Traja ,   Mrs   E. Steiner ,   Mrs   E. Fura-Sandström   Mrs   A. Gyulumyan, judges , and     Mr   E. Fribergh , Deputy Registrar , Having regard to the above-mentioned applications lodged on 3, 17 and 18 May 2001 respectively, Having regard to the decision of 11 March 2004 by which the Chamber of the Third Section, to which the applications had initially been assigned, relinquished jurisdiction in favour of the Grand Chamber (Article 30 of the Convention), Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicants, Having regard to the parties' oral observations at the hearing on 22   September 2004, Having deliberated on 22 September 2004 and 2 March 2005, delivers the following decision: THE FACTS 1.     There are seventy-one applicants (see detailed list appended). Sixty-nine of them are natural persons, of whom sixty-eight are German nationals and one a Swedish national. Two of them, the Alfred Töpfer Foundation and a company, Man   Ferrostaal, are legal entities incorporated under German law. At the hearing on 22 September 2004, in respect of the first application forty-five applicants were represented by Mr   T.   Gertner, a lawyer. One of these applicants was also represented by Mr   S. von Raumer, a lawyer. Two other applicants were represented by Mr von Raumer, one of whom was also represented by Mr   M.   Nettesheim, a professor. In respect of the second and third applications, the twenty-four applicants were represented by Mr C. Lenz and Mr W. Peukert, lawyers. The respondent Government were represented by Mr K. Stoltenberg, their Agent, and by Mrs A.   Wittling-Vogel, Deputy Agent, assisted by Mr   J.   Frowein and Mr R.   Motsch, professors, as counsel, and by Mr   H.-J.   Rodenbach and W.   Marx, as advisers. A.     The circumstances of the case 2.     The facts of the case, as submitted by the parties, may be summarised as follows. 1. Background to the case 3.     The applications concern one of the major issues to arise after the reunification of Germany: compensation for those whose property was expropriated either between 1945   and   1949 in the Soviet Occupied Zone of Germany following the land reform ( Bodenreform ) or after 1949 in the German Democratic Republic (GDR). 4.     During the negotiations between the Governments of the Federal Republic of Germany (FRG) and the GDR (after the first democratic elections, held there on 18 March 1990) and the four former occupying powers (France, the United Kingdom, the United States and the Soviet Union), the two German Governments issued a Joint Declaration on 15   June   1990 on the Resolution of Outstanding Property Issues ( Gemeinsame Erklärung der Bundesrepublik Deutschland und der Deutschen Demokratischen Republik zur Regelung offener Vermögensfragen/ Gemeinsame Erklärung – see paragraph 38 below), which lays down the fundamental principles ( Eckwerte ) relating to property issues. 5.     These principles were subsequently implemented by the legislature, first in the Resolution of Outstanding Property Issues Act/Property Act   ( Gesetz über die Regelung offener Vermögensfragen / Vermögensgesetz ) of 23 September 1990 (see paragraphs 41-46 below) and secondly in the Act governing indemnification pursuant to the Resolution of Outstanding Property Issues Act and State compensation for expropriations carried out on the basis of the laws or other powers of the occupying force/Indemnification and Compensation Act ( Gesetz über die Entschädigung nach dem Gesetz zur Regelung offener Vermögensfragen und über staatliche Ausgleichsleistungen für Enteignungen auf besatzungsrechtlicher oder besatzungshoheitlicher Grundlage/ Entschädigungs–und Ausgleichsleistungsgesetz – “ the EALG ”) of 27   September 1994, which itself comprises two Acts (see paragraphs   47-55 below). 6.     With regard to rehabilitation, the legislature enacted the Victims of Illegal Prosecutions on “Accession” Territory (Rehabilitation and Compensation) Act / Criminal Rehabilitation Act ( Gesetz über die Rehabilitierung und Entschädigung von Opfern rechtsstaatswidriger Strafverfolgungsmassnahmen im Beitrittsgebiet / Strafrechtliches Rehabilitierungsgesetz – see paragraphs 57-58 below) of 29   October   1992 and the Annulment of Unlawful Administrative Decisions on “Accession” Territory (Derivative Rights) Act /Administrative Rehabilitation Act ( Gesetz über die Aufhebung rechtsstaatswidriger Verwaltungsentscheidungen im Beitrittsgebiet und die daran anknüpfenden Folgeansprüche / Verwaltungsrechtliches Rehabilitierungsgesetz – see paragraphs 59-60 below) of 23 June 1994. 2. The applicants' position 7.     Sixty-five applicants are natural persons who are the heirs of the owners of land or buildings that were expropriated under the land reform implemented in the Soviet Occupied Zone of Germany between 1945 and 1949. The two legal entities among the applicants also owned land that was expropriated during that period.     After the reunification of Germany they unsuccessfully applied to the relevant authority for restitution of their land and/or buildings. 8.     Three of these applicants also applied to the administrative authorities under the Administrative Rehabilitation Act for the rehabilitation of their ascendants. One of them applied to the Dessau Administrative Court ( Verwaltungsgericht ), which gave judgment on 22 March 2001 dismissing the application. In a decision of 16 May 2002 the Federal Administrative Court ( Bundesverwaltungsgericht ) refused to entertain an appeal on points of law   ( Revision ) by the applicant, referring to its two leading judgments of 21   February 2002 on the subject (see paragraph 34 below). In a decision of 12 August 2002 the Federal Constitutional Court ( Bundesverfassungsgericht ) also refused to entertain the applicant's appeal. 9.     Five applicants, including one of the sixty-five claimants mentioned in paragraph 7 above, are natural persons who are the heirs of owners of land or buildings that were expropriated after 1949 pursuant to a decision of the GDR authorities. After German reunification they applied for restitution of their land and/or buildings. The relevant authorities rejected the applications on the grounds laid down in the Property Act, namely that the third parties who had acquired the property in the meantime had done so in good faith or that restitution was impossible in practice. 10.     Twenty-one of the applicants applied to the Federal Constitutional Court arguing that the Indemnification and Compensation Act was incompatible with the Basic Law ( Grundgesetz ). In a leading judgment of 22 November 2000 the Federal Constitutional Court dismissed their application (see paragraphs 23-32 below). 3. The leading judgments of the Federal Constitutional Court on the land reform 11.     The Federal Constitutional Court delivered four leading judgments on the land reform. They concern, in particular, the constitutionality of the various statutes governing property or rehabilitation issues enacted by the legislature after German reunification (for details of the provisions of these statutes, see paragraphs 41-60 below). (a) The Federal Constitutional Court's judgment of 23 April 1991 12.     In the first leading judgment on the land reform, delivered on 23   April 1991, the Federal Constitutional Court held that the exclusion of any right to restitution for persons whose property had been expropriated between 1945 and 1949 did not infringe the Basic Law. 13.     The Constitutional Court found that the expropriations in question, although carried out by the German authorities, had been ordered by the Soviet occupying authorities and had consequently been based on the sovereign power of the occupying forces. The FRG Government's power to conclude the Unification Treaty and include in it the amendments to the Basic Law necessitated by unification flowed from its constitutional obligation to attain German unity. The manner in which those amendments had been made violated neither formal nor substantive law. 14.     The Constitutional Court held that the rule in question did not violate any of the complainants' constitutional rights as they were no longer in a legal position that could have been affected by it. 15.     The expropriations had been considered legitimate by the Soviet and GDR authorities. The FRG could not be held responsible for measures taken at a time when the Basic Law had not even been in force. Under the law then in force in the zones occupied by the Western Allied Powers the complainants had also lost their standing to contest the confiscation of their property. Under that law confiscation measures effected by a foreign State were to be considered valid if carried out within that State's sovereign powers. 16.     Furthermore, unless it was caused by its own organs, the FRG was not bound fully to compensate damage resulting from the Second World War. In respect of compensation payments for such damage, the FRG had a wide margin of appreciation and could take into account other expenditure and budgetary requirements. 17.     The Constitutional Court also found that there had not been a violation of the right to equal treatment. It relied on evidence given by the Federal Minister for Foreign Affairs, Mr Klaus Kinkel, and other high-ranking officials, showing, in the court's opinion, that the Soviet Union had agreed to German unification on condition that the legality of the confiscations between 1945 and 1949 would not be called into question, which meant that restitution was effectively ruled out. It had also been the object of the GDR to ensure in the Unification Treaty that social peace was maintained on its territory after unification. The FRG had therefore had to accept that condition in order not to block the process of unification. The rule whereby property owners whose property had been confiscated between 1945 and 1949 were treated differently from those whose property had been confiscated later was, in the circumstances, sufficiently justified. 18.     The Constitutional Court added:   “In respect of the expropriations without compensation [between 1949 and 1990], which do not fall within the scope of no. 1, fourth sentence, of the Joint Declaration [see paragraph 38 below], the legislature has elected to compensate the former owners on the basis of the principle of restitution of the expropriated property. This may be relevant for the amount of compensation payable in lieu of restitution. If the legislature opts for that solution it cannot exclude all reparation for the expropriations carried out pursuant to the Occupation laws or the powers of the occupying authorities [between 1945 and 1949]. ... The applicants' complaint that the rule laid down in no. 1, fourth sentence, of the Joint Declaration infringes their fundamental rights in so far as the reference to mere compensation excludes the full reparation required by the Constitution is unfounded. As has already been stated, the rules do not specify any criteria relating to the amount of compensation. There is no principle in the Basic Law requiring full reparation for the expropriations in issue in the present case. In calculating the compensation the legislature is also entitled, within the scope of the margin of appreciation available to it in all cases, to take account of its financial means having regard to the other duties incumbent on the State. The principles for compensating war damage apply here mutatis mutandis... Accordingly, the legislature can take account of all the damage to be compensated, which includes other heads of damage besides those affecting property. In assessing the damage affecting property regard must be had to other assets – relating, for example, to life, health, freedom and occupational prospects – that were also affected during the period in question ... Besides that, the legislature is entitled to take account of additional tasks arising from the reconstruction activities in the new Länder . In assessing the State's economic and financial situation and the various tasks incumbent on it, the legislature has a particularly wide margin of appreciation... Faced with the disastrous economic situation in the new Länder which, as is already apparent, will require several hundred billion in subsidies to redress, there is no constitutional obligation at the outset to provide reparation to the same value as restitution . However, the legislature does have to take account of Article 3 § 1 of the Basic Law [principle of equality] in determining the global rules relating to compensation. In these circumstances, the fact that part of the property concerned belongs to the public authorities does not allow the applicants to draw any conclusions to their advantage. The economic bankruptcy brought about by the poor management of the former German Democratic Republic's economy, which does not engage the responsibility of the Federal Republic of Germany, is not cancelled out by the existence of these assets. Nor does the fact that their property happens to be still available allow the former owners to demand preferential treatment regarding the amount of compensation compared to other persons who were expropriated or to victims of unjust measures who have suffered damage of a different kind. This also applies to those who are able to reacquire their former property. ... (b) The Federal Constitutional Court's judgment of 18 April 1996 19.     In the second leading judgment on the land reform the Federal Constitutional Court dismissed the appeal by the appellants who had argued that the Soviet Union had not specified any conditions regarding the non-restitution of property confiscated between 1945 and 1949 during the negotiations concerning German unification. 20.     The Constitutional Court, confirming its first leading judgment on the land reform, held that the FRG had had a wide margin of appreciation during the negotiations concerning German reunification. Accordingly, in so far as the Constitutional Court had power to examine the issue, the FRG Government had not acted contrary to their obligations by considering,   having regard to the position adopted by the Soviet Union and the GDR on the expropriations under the land reform, that the expropriations carried out between 1945 and 1949 were no longer reversible. (c) The Federal Constitutional Court's judgment of 22 November 2000 21.     On 29 June 1995 some of the applicants applied to the Federal Constitutional Court for a ruling on the issue of the divergence in value between reparation in the form of restitution of the property and reparation in the form of indemnification or compensation. They submitted that some of the provisions of the Indemnification and Compensation Act were incompatible with the Basic Law in that they generally prescribed amounts that were less than the current market value of the expropriated property or property that was to be returned in accordance with the Property Act. 22.     On 28 March 2000 the Federal Constitutional Court held a hearing during which it heard evidence from the claimants and the FRG Government and all the Governments of the Länder situated in the former GDR. 23.     On 22 November 2000 the First Division ( Senat ) of the Federal Constitutional Court, composed of eight judges, delivered the third leading judgment on the land reform. It pointed out at the outset that it was not required to examine the constitutionality of reparation for injustices committed by another State from the standpoint of the protection of the right of property guaranteed by Article 14 of the Basic Law. The provisions of the Indemnification and Compensation Act had not infringed the applicants' property right since neither the Joint Declaration of the two German States nor the initial version of section 9 of the Property Act had created concrete rights protected by Article 14 of the Basic Law for persons whose property had been expropriated by the GDR and by the Soviet occupying force. Accordingly, the sole issue which fell to be examined by the Constitutional Court was the constitutionality of the Indemnification and Compensation Act in the light of the principles of social justice and the rule of law (Article 20 §§ 1 and 3 of the Basic Law) and that of the prohibition of arbitrariness (Article 3 § 1 of the Basic Law). It stated that, in accordance with the “social justice” principle, the State community had a duty to apportion the burdens borne by certain groups of persons by means of a statute, which alone would establish concrete rights to indemnification or compensation for the victims. In setting up that system, the legislature had a very wide margin of appreciation regarding both the nature and scope of the reparation awarded. The legislature could thus determine the amount of the   indemnification or compensation according to the financial means at its disposal and could take into account its other expenditure and charges. 24.     The Constitutional Court then examined the various provisions of the Indemnification and Compensation Act. (i) The Indemnification Act 25.     The Constitutional Court found, unanimously, that sections 1 (terms and conditions of payment of indemnification) and 3(1) (basis for calculating indemnification) of this Act were compatible with the Basic Law. There were indeed objective reasons for treating persons who were entitled to restitution differently from those entitled to indemnification. The aim of restitution was to set up new property structures in the Länder of the former GDR, whereas in calculating indemnification payments the State could take account of the financial means available to it and of the other funds committed for reconstruction measures. As reunification had been carried out very quickly, leading to a very substantial increase in property prices, reimbursement of the current market value of the property would not have been financially feasible. Furthermore, even persons whose property had been returned had not always received the full value, given the condition of the property. Those who had only had a right of usufruct over their property under GDR law had also suffered substantial financial loss. Similarly, the decision to make the payments at a later date was acceptable as a compromise between the interests of the State and those of the persons concerned. 26.     The Constitutional Court then held, by four votes to four – section 15(4), third sentence, of the Federal Constitutional Court Act ( Bundesverfassungsgerichtsgesetz ) provides that where an equal number of votes are cast no breach of the Basic Law can be established – that section 7(1) of this Act (progressive reduction of rights to indemnification according to the value of the property) was also compatible with the Basic Law. 27.     Four judges found that the provision did not infringe the principle forbidding arbitrariness because the legislature was not obliged to have regard to the real value of the property in determining the amount of indemnification. It also had to situate the indemnification in the context of the other compensatory or rehabilitative measures taken and the other priority expenditure associated with German reunification, such as the creation of infrastructure in the areas of communication, information and education, and reducing unemployment in the former GDR. Furthermore, account also had to be taken of the fact that many people had suffered other injustices in the GDR, such as interference with their freedom, health or occupational prospects, which could not be indemnified in the same way. The State could support those people only through state measures designed to give them the same chances and the same living conditions as those existing in the rest of Germany. 28.     The other four judges gave a dissenting opinion. In their view, the amount of indemnification had to reflect the real value of the expropriated property, which was no longer the case if it was less than fifty per cent of the value of the property. Thus, on grounds of providing social protection for the poorest people, the reduction percentages were still acceptable for rights to indemnification of less than DEM 90,000, and for rights to indemnification of more than DEM   500,000. However, they were not acceptable regarding rights to indemnification ranging between DEM   90,000 and DEM   500,000, where there were no objective reasons for reducing the indemnification so substantially. This concerned above all individual houses or small buildings. For the sake of social solidarity, that category of persons should be awarded an appreciable amount of indemnification and no less than fifty per cent of their rights. The financial reasons relied on did not justify such a drastic reduction in the amount of indemnification. Furthermore, the legislature could have provided for alternative solutions, such as the attribution of substitute land on favourable conditions. (ii) The Compensation Act 29.     The Constitutional Court found that limiting compensation to natural persons did not infringe the principle of social justice. For the purposes of the Property Act, persons eligible for compensation did not have to be treated identically since that Act applied only to persons who had a prima facie right to restitution but for whom restitution was impossible in practice or who did not seek it. Under the Compensation Act, however, persons whose property had been expropriated between 1945 and 1949 had no right to restitution on principle. 30.     The Constitutional Court went on to hold that the fact that the nature and amount of compensation were governed by the same terms and conditions as under the Property Act did not infringe the Basic Law either. 31.     It also held, by seven votes to one, that encumbrances affecting the land could be taken into account when calculating compensation without this breaching the Basic Law. The same was true of the taking into account of amounts received in compensation, including interest, under the Equalisation of Burdens (War Losses) Act ( Lastenausgleichsgesetz – see paragraph 50 below). 32.     The Constitutional Court added that the programme for the acquisition of certain land ( Flächenerwerbsprogramm – see paragraph 54 below) did not infringe either the principle of the rule of law or the rule forbidding arbitrariness as the legislature was pursuing two objectives: (i) to enable those whose agricultural or forestry land had been expropriated to redevelop it on preferential conditions, and (ii) to set up a support programme for agriculture and the water and forest industries in the Länder of the former GDR. (d)   The Federal Constitutional Court's judgment of 4 July 2003 33.     In its fourth leading judgment on the land reform the Federal Constitutional Court held that the exclusion of the right to administrative rehabilitation coupled with restitution of property for those whose property had been expropriated between 1945 and 1949 (section   1   §   1, third sentence, of the Administrative Rehabilitation Act taken in conjunction with section 1(8) of the Property Act – see paragraphs 59 and 43 below) did not infringe the Basic Law. 34.     In its judgment the Constitutional Court referred to the two leading judgments the Federal Administrative Court had given on 21   February   2002, in which it had ruled in the following terms: “2. By virtue of the reference to section 1(8) of the Property Act, the Administrative Rehabilitation Act is inapplicable to expropriations carried out under the Occupation laws or the powers of the occupying authorities (1(8)(a)). That also concerns the expropriating measures referred to in section 1(1), first sentence, of the Administrative Rehabilitation Act. Section 1(1), third sentence, of that Act is not confined to merely reiterating that the cases referred to in section 1(8) of the Property Act are also among the measures referred to in section 1(1), second sentence, which do not fall within the scope of the Administrative Rehabilitation Act. This reference was not necessary. Rather, the section specifies that, save in the cases referred to below (under 2.2), the expropriations carried out under the Occupation laws or the powers of the occupying authorities cannot in any circumstances be annulled; in that connection it is of little importance by which of the two Acts they would be governed if the clause did not exist... . 2.1. This interpretation is confirmed by the drafting history of the Administrative Rehabilitation Act. In respect of section 1(1), third sentence, the Government made the following submissions: '[Under that provision] two categories of expropriation are excluded from the scope of the Property Act and the Administrative Rehabilitation Act: expropriations without compensation in the industrial domain that were effected for the benefit of the Länder of the Soviet Occupied Zone and expropriations carried out under the so-called democratic land reform. That choice was due to the decisive attitude of the Soviet Union, which maintained that, in accordance with public international law, the expropriations carried out under its occupation were not a matter within the discretion of the two German States and should remain untouched ( unangetastet ). That also had to be respected in the context of the Administrative Rehabilitation Act.' The idea behind the Act is therefore that both categories of expropriation have to be regarded as unfair persecution and should therefore confer the right to rehabilitation under the terms of the new Act if the exclusion clause had not been inserted. The legislature decided to award compensation for any illegal interference with property under the Occupation under the Compensation Act, regardless of whether the measures in question had been persecutory. In the light of those considerations, no different conclusion can be drawn in the present case. 2.2 The applicant cannot rely on section 1(7) of the Property Act to which section 1(8)(a) of that Act taken in conjunction with section 1(1), third sentence, of the Administrative Rehabilitation Act refers. Admittedly, that provision also allows restitution of property confiscated under the Occupation laws or other powers of the occupying authorities, but it requires the expropriation decision to have been annulled under other provisions. No other provision can be found in the Administrative Rehabilitation Act, however, precisely because of the exclusion clause. If in the present case an annulment [of the expropriating measure] is not possible, the reference contained in section 1(1), third sentence, can only be to the unlimited exclusion clause, that is, section 1(8)(a), first sentence, of the Property Act. Accordingly, rehabilitation under the Administrative Rehabilitation Act in respect of the categories of expropriation concerned in the present case is expressly excluded under the provisions of that Act. It follows that the applicant cannot seek an annulment of the expropriation order concerning his father's property.” 35.     The Constitutional Court held that the interpretation the Federal Administrative Court had given of the exclusion clause contained in section 1(1), third sentence, of the Administrative Rehabilitation Act, after examining its wording and purpose, was not arbitrary. It pointed out that the main intention of the legislature in inserting that sentence in section 1(1) had been to prevent the exclusion of the right to restitution provided for in section 1(8) of the Property Act being circumvented by means of the Administrative Rehabilitation Act. 36.     The Constitutional Court also compared the applicant's position with that of the heirs of persons who had been convicted in criminal proceedings and could apply for rehabilitation under the Criminal Rehabilitation Act and claim restitution of the property in question if the rehabilitation also concerned it. The applicant could not apply for rehabilitation of that kind because his father's property had been confiscated without there having been a criminal conviction; his administrative rehabilitation fell foul of the exclusion clause in section 1(1), third sentence, of the Administrative Rehabilitation Act. The Constitutional Court held that the difference in treatment applied to the applicant was justified because there were objective reasons for it. A criminal conviction was a far greater and more serious interference with a person's sphere of freedom than a measure in the form of an administrative decision. This was evidenced by, among other things, the assortment of possible penalties available to the criminal courts ranging from a prison sentence and other interferences with the victim's freedom to capital punishment, and including pecuniary penalties. As a general rule, a person who had incurred a criminal penalty was in greater need of rehabilitation than someone who had merely been expropriated, a measure which mainly affected his or her property. The German authorities could not therefore be found to have acted unconstitutionally in considering that, unlike administrative expropriations, a criminal conviction was such a serious interference that it justified the restitution of confiscated property via rehabilitation proceedings. 37.     The Constitutional Court held that the interpretation of section 1(1), third sentence, of the Administrative Rehabilitation Act and its application to the instant case did not fall foul of the principles of the rule of law and social justice provided for in Article 20   §§   1 and 3 of the Basic Law. It reiterated on that point that the heirs of victims of expropriations carried out under the Occupation laws or other powers of the occupying authorities were not wholly deprived of the right to compensation for the injustice suffered, but were entitled to compensation under the Act governing State compensation for expropriations carried out on the basis of the laws or other powers of the occupying force / Compensation Act ( Gesetz über staatliche Ausgleichsleistungen für Enteignungen auf besatzungsrechtlicher oder besatzungshoheitlicher Grundlage ) which it had found to be compatible with the Basic Law in its judgment of 22 November 2000. B.     Relevant domestic law and practice 1. The Joint Declaration of the FRG and the GDR on the Resolution of Outstanding Property Issues 38.     The relevant passages of this Joint Declaration read as follows: “The division of Germany, the resulting population movement from East to West and the divergent legal systems in the two German States have given rise to numerous property-law problems which affect many citizens in the German Democratic Republic and the Federal Republic of Germany. In resolving the property issues ahead, the two Governments agree that various interests are to be balanced in a socially compatible manner. Legal certainty and legal clarity as well as the right of ownership are principles by which the Governments of the German Democratic Republic and the Federal Republic of Germany shall be guided in resolving the property issues ahead. Only in this way can enduring legal peace ( Rechtsfrieden ) be guaranteed in a future Germany.   The two German Governments agree on the following fundamental values ( Eckwerte ):     1. The expropriations carried out on the basis of the Occupation legislation or the other powers of the occupying authorities [between 1945 and 1949] can no longer be revoked ( die Enteignungen auf besatzungsrechtlicher bzw. besatzungshoheitlicher Grundlage sind nicht mehr rückgängig zu machen ). The Governments of the Soviet Union and the German Democratic Republic see no means of revising the measures taken at that time. The Government of the Federal Republic of Germany takes note of this in view of historical developments. It is of the opinion that a final decision on any state compensation ( etwaige staatliche Ausgleichsleistungen ) must remain a matter for a future all-German parliament. ... 3. Expropriated real estate is in principle to be returned to the former owners or their heirs, having regard to the type of case specified in sub-paragraphs (a) and (b) below. (a) It is not possible to restore rights of ownership over land and buildings whose use or purpose has been altered, in particular by being dedicated to public purposes, used for housing developments, for commercial purposes or incorporated into new business units. Compensation will be paid in these cases, in so far as it has not already been made pursuant to the laws and regulations applicable to citizens of the German Democratic Republic.   (b) In so far as citizens of the German Democratic Republic have in good faith acquired ownership or rights of user in rem ( dingliche Nutzungsrechte ) over real estate, socially acceptable indemnification ( sozialverträglicher Ausgleich ) is to be made to the former owners by substituting real estate ( Grundstücke ) of a comparable value or by paying compensation. The same applies, mutatis mutandis , for real estate the ownership of which was transferred to third parties by the state trustees. The details still need to be settled. (c) Former owners or their heirs who are entitled to restitution of their property can choose to receive compensation in lieu of restitution. ... 9. In so far as property has been seized in connection with criminal proceedings in violation of the rule of law, the GDR will create the statutory basis required to correct such seizures in proceedings that conform with the principles of justice ( justizförmiges Verfahren ).” 2. The German Unification Treaty 39.     The Joint Declaration became a constituent part of the Unification Treaty ( Einigungsvertrag ) of 31 August 1990, the relevant provisions of which are worded as follows:   Article 3 Entry into force of the Basic Law     “Provided that there is no provision in this Treaty to the contrary, when the accession takes effect the Basic Law of the Federal Republic of Germany.... shall enter into force, together with the amendments contained in Article 4, in the Länder of Brandenburg, Mecklenburg-West Pomerania, Saxony, Saxony-Anhalt and Thuringia, and the part of Berlin to which it has not applied hitherto.”   Article 4 Amendments to the Basic Law as a result of accession     “The Basic Law of the Federal Republic of Germany shall be amended as follows:   1. ...   4. The present wording of Article 135(a) shall become paragraph 1 of that Article. The following paragraph shall be inserted after that paragraph:   (2) Paragraph 1 shall apply mutatis mutandis to liabilities of the German Democratic Republic or its controlling authorities and liabilities incurred by the Federation..... in connection with the transfer of assets of the German Democratic Republic to the Federation... and to liabilities resulting from measures taken by the German Democratic Republic or its controlling authorities.”   5.   The following new Article 143 shall be inserted into the Basic Law:   (1) The law in the territory referred to in Article 3 of the Unification Treaty may only derogate from the provisions of the present Basic Law for as long as it takes, as a result of the differing conditions in the two countries, to fully adapt to the constitutional order but by 31 December 1992 at the latest. Derogations shall not infringe Article 19, paragraph 2, and shall be compatible with the principles enshrined in Article 79, paragraph 3.   (2) Derogations from sections II, VIII, VIII(a), IX, X and XI shall be permissible until 31 December 1995 at the latest.   (3) Irrespective of paragraphs 1 and 2, Article 41 of the Unification Treaty and its implementing provisions shall also remain in force to the extent that they provide that the interference with property in the territory referred to in Article 3 of that Treaty shall not be reversed.” Article 17 Rehabilitation “The Contracting Parties reiterate their intention to create a statutory basis for the rehabilitation of victims of a political prosecution or a judicial decision contrary to the rule of law and the Constitution. The rehabilitation of these victims of the unjust regime of the Socialist Unity Party of the GDR ( Sozialistische Einheitspartei Deutschlands – “the SED” ) must be accompanied by adequate compensatory measures.”   Article 41 Settlement of property issues     “(1) The Joint Declaration on the resolution of outstanding property issues made on 15 June 1990 by the Government of the Federal Republic of Germany and the Government of the German Democratic Republic (Annex III) shall be a constituent part of this Treaty.   (2) ...   (3) As to the rest, the Federal Republic of Germany shall not enact legal rules that conflict with point 1 of the above-mentioned Joint Declaration.”   40.     The fundamental principles regarding property issues set out in the Joint Declaration were subsequently implemented by the legislature, first in the Property Act of 29   September 1990 and then in the Indemnification and Compensation Act of 27 September 1994. 3. The Resolution of Outstanding Property Issues Act / Property Act 41.     On 29 September 1990 the Property Act of 23   September 1990 came into force. That Act was also to be part of the Unification Treaty, which provided that the Property Act would continue to exist in Germany after reunification of the two German States on 3 October 1990. The aim of the Act was to resolve disputes over property situated in the former GDR in a socially acceptable way in order to achieve enduring legal order in Germany. 42.     Section 1(7) provides: “This Act applies mutatis mutandis to the restitution of property in connection with the annulment, under other provisions ( nach anderen Vorschriften ), of unlawful decisions in the sphere of criminal law, criminal administrative law and administrative law.” 43.     The relevant part of section 1(8) provides: “This Act does not apply ... to a)        Expropriations of property carried out under the Occupation laws or the