Croatia to face changes in the field of Expropriation Law

Lexology, May 27, 2014

1. Introduction

In the past few years Croatian economy showed continuous downturn. One amongst the reasons for such a negative trend and permanently falling GDP is Croatian dependence on foreign capital and the lack of direct foreign investments.

Implementation of large investment projects and drawing the assets from the EU funds for their realization inevitably require well organized legal system and stable laws, particularly the ones in the field of ownership rights. Because of sensitive character and drastic outcomes it may produce to the fundamental rights of individuals, within the materia of the ownership law, the Expropriation Law deserves special attention.

The current Expropriation Law showed to be of a limited scope in terms of fast and effective implementation of large infrastructural projects through realization of public private partnerships and similar models of investment. However, considering improvements to the Expropriation Law, the Government should be able to recognize that boosting foreign investments cannot be achieved by adoption of one particular law such as the Expropriation Law but rather the whole package of incentive investment measures need to be introduced, primarily in the field of tax law. Prompted by recent activities of the Croatian Parliament, it is needless to say that retroactive application of the tax laws, especially in the field of taxation of dividends, interests and capital gains, as well as frequent alterations and modifications of other “core laws” do not appear to be investment friendly. As it had proved over the years, the continuity of even bad laws sometimes seems to be a much better solution that uncertain legal system caused by frequent changes of the laws. Again, it should not be left out that the Expropriation Law without fast acting and expeditious administrative and judicial system shall remain the dead letter.

2. Basic features of the intended Expropriation Law

Considering the purpose of the ownership law, its importance for the stability of legal system and the meaning for the rights of individuals, when considering an institute of expropriation, a number of laws including the Croatian Constitution shall be taken into consideration. Already, the fundamental act – the Croatian Constitution guarantees the ownership right and provides for a possibility of an exceptional seizure/limitation of ownership if it turns out to be in the interest of Croatia and in return for the market value of the expropriated property. The institute of expropriation is in more details regulated in the Expropriation Law which is currently in the process of alteration in the Croatian Parliament.

  • facilitating position of potential investors in the administrative procedure which is instigated with the purpose of determining the public interest of Croatia in respect to realization of certain project (which is a precondition for later expropriation);
  • introduction of more transparent provisions in respect to supervision and control by the administrative court of the administrative acts proclaiming certain projects to be of the interest for Croatia;
  • if certain project is proclaimed to be a strategic project in terms of determining the importance of the project for the state, the expropriation procedure shall be conducted by the competent ministry, which novelty is believed to shall have contributed to the expeditious implementation of such expropriation procedures;
  • application of the new improved method for the evaluation and assessment of the value of the property subject to expropriation procedure;
  • possibility of the parties to the expropriation (beneficiary and the owner) to mutually determine the appropriate court expert for evaluation of the property subject to expropriation;
  • introduction of the fixed term for reaching an amicable solution, after expiry of which the beneficiary may instigate the expropriation procedure;
  • introduction of an obligation of the public authority to publish on its website the proposal on expropriation which is filed by the beneficiary along with all the relevant data concerning properties subject to expropriation;
  • notification of the owner of the property subject to expropriation of the registration of the notification on expropriation into the land registry;
  • institution of the beneficiary’s obligation to compensate the costs of the expropriation procedure to the owner of the expropriated property except the ones unjustifiably caused by the owner;
  • institution of the register of expropriated properties containing inter alia information on the remuneration and compensation paid for the expropriated property in question, which is believed to contribute to the transparency and expeditious expropriation proceedings;
  • in case of establishment of an easement right on the property, the owner has been put an option to ask for a complete expropriation, if such established easement right entirely prevents the enjoyment and exercise of the ownership right.

Final remarks

To which extent the proposed changes to the Expropriation Law shall be adopted by the Croatian Parliament and until when remains unknown. It is certain that the proposed text aims at facilitating potential investors in implementation of the expropriation procedures, which in time showed to be a major administrative obstacle for realization of attractive investment projects. Yet, the new Enforcement Law should to maximum extent possible safeguard that its implementation in practice does not become the major instrument for achievement of unjustified individual personal interests to the detriment of the individual rights.

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