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A ground-breaking ruling of the constitutional court: the town of Semily proved right in the land dispute with the state

Prague/Brno, 6 June 2017 – On this day, the Constitutional Court released a ground-breaking judgment concerning the validity of transferring state property to the ownership of municipalities. The court thus satisfied the constitutional complaint of the town of Semily, issuing binding instructions to general courts as to how to proceed in similar cases. The town has been represented in the proceedings by Ambruz & Dark Deloitte Legal.

“The judgment of the Constitutional Court is a positive message to other towns and municipalities even though this ruling cannot be mechanically applied to other disputes because it will always be necessary to assess each case individually as the elements may differ,” said Ondřej Chmela, a legal representative of the town of Semily from among Ambruz & Dark Deloitte Legal, in commenting on the judgment.

At present, more than 170 proceedings are underway in respect of similar cases, concerning assets worth hundreds of millions of Czech crowns.

In recent years, the Office for Government Representation in Property Affairs has started to contest the ownership titles of municipalities to plots of land they acquired in the early 1990s under the Act on Transferring Property to the Ownership of Municipalities. This also applied to the land acquired by the town of Semily.

“Although in the vast majority of cases general courts agreed with the Office for Government Representation in Property Affairs, as was also the case of the town of Semily, today’s ruling of the Constitutional Court has dramatically reversed the matter in favour of the town of Semily and other municipalities in the same situation,” says Lena Mlejnková, mayor of Semily.

In the case at hand, the town of Semily filed a complaint with the Constitutional Court regarding the preceding rulings of the Regional Court in Hradec Králové and the Supreme Court of the Czech Republic, in which the courts upheld the action of the Office for Government Representation in Property Affairs, determining that the ownership title to the land rests with the state. In doing so, the courts effectively ruled on the expropriation of land which had been in the ownership of the town for more than 20 years.

Regarding this case, the district court initially accepted the arguments of the town of Semily; however, applying earlier judicature of the Constitutional Court, the regional court and subsequently the Supreme Court of the Czech Republic ruled that the town of Semily failed to meet the conditions for transferring assets under the relevant act, the owner of the land thereby being the Czech Republic.

However, in today’s judgment, the Constitutional Court affirmed the arguments of the town’s legal representatives, stating that the town acquired the land in question by prescription and that it indisputably holds the ownership title to them.

According to the applicable law (specifically Section 1 of Act No. 172/1991 Coll., on Transferring Certain Assets from among the Czech Republic’s Property to the Ownership of Municipalities, as then amended), the assets that were transferred to the ownership of municipalities as of 24 May 1991 included assets which were owned by the state at the time and to which the right of management rested with national committees yet which were, in effect, managed by municipalities.

Since late 2011, these assets, which municipalities had considered for more than 20 years to have been lawfully acquired, have become the subject of claims by the Office for Government Representation in Property Affairs, demanding they be returned to the ownership of the state.

The Office’s reasoning was based on another ground-breaking judgment of the Constitutional Court - File. No. III ÚS 1399/11 – which interpreted some of the concepts of the above stated act differently to how they were interpreted at the time of the transfer of assets. According to the new interpretation, “... the concept of ‘management’, albeit not defined by law, needs to be inferred from the quoted legislation charging organisations with the duty to manage national assets with due managerial care; as such, they are not merely to keep records about the assets but to take care of their maintenance, protect them and use them.” Based on this ruling, the Office for Government Representation in Property Affairs initiated court proceedings against the municipalities concerned, demanding that the ownership title to the hitherto municipal assets be redefined for the reason that the municipalities have merely kept records of the assets instead of effectively managing them.

The Constitutional Court validated the legal opinion of the town of Semily, stating that the town had acted and, by definition, had had to act in good faith in that the disputed immovable assets were indeed in the ownership of the town and that they had been lawfully transferred to its ownership. “Given that the town has been re-assured by the state on a number of occasions that it is the owner of the land in question – for example by acknowledging this fact in the contracts concluded – this fact cannot be contested now that more than 20 years have passed since the acquisition of the ownership title,” adds Martin Bohuslav, leader of Deloitte Legal’s team that represented the town of Semily.

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