Lithgow v UK Ser A vol 102 (1986) 2/1984/74/112-118

1977, Trying to save the industry, the Labour Party nationalised the UK aircraft and shipbuilding industries. The next government (a conservative one) that did not want to pay compensation defended the case, it is said that this defences was one of the ‘greatest own goals in recent political history’, since that party did not agree with the nationalisation. The applicants had certain of their interests nationalised under the Aircraft and Shipbuilding Act 1977. Whilst not contesting the principle of nationalisation the applicants claimed that the compensation which they received was grossly inadequate and discriminatory, since inter alia, inflation was not taken into account. The applicants alleged that they had been victims of breaches of Art 1 of protocol 1 to the Convention: ‘Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided by law and by general principles of IL’ ‘The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties’ Resolution 106. The Court recall that Article 1… guarantees the right of property …. Comprising ‘three distinct rules’ … peaceful enjoyment of property… depravation of possession … subject[ed] …to certain conditions … right of state to control the use of property 107. The applicants were clearly ‘deprived of (their possessions) within the meaning of … article 1 indeed, this point was not disputed before the Court…. Were the applicants deprived of their property ‘in the public interest’ and subject to the conditions provided by law’? 111. The applicants argued that the reference in the second sentence of Article 1 (P1-1) to the ‘general principles of international law’ meant that the international law requirement of, so they asserted, prompt, adequate and effective compensation for the deprivation of property of foreigners also applied to nationals 112. The Commission has consistently held that the principles in question are not applicable to a taking by a State of the property of its own nationals. The Government supported this opinion 113. As a matter of general international law, the principles in question apply solely to non-nationals. They were specifically developed for the benefit of non-nationals

114. As regards a taking of property effected in the context of a social reform or an economic restructuring, there may well be good grounds for drawing a distinction between national and non-nationals as far as compensation is concerned. … non-nationals are more vulnerable to domestic legislation: unlike nationals, they will generally have played no part in the election or designation of its author nor have been consulted on its adoption 119. The Court concludes that the general principles of international law are not applicable to a taking by a State of the property of its own nationals. 120. The Court recalls that not only must a measure depriving a person of his property pursue … a legitimate aim ‘in the public interest’, but there must also be a reasonable relationship of proportionality between the means employed and the aim sought to be realised. This latter requirement was expressed in other terms in the … Sporrong and Lönnroth judgment by the notion of the ‘fair balance’ that must be struck between the demands of the general interest of the community rights … the requisite balance will not found if the person concerned has had to bear ‘an individual and excessive burden’ 121. The Court further accepts the Commission’s conclusion as to the standard of compensation: the taking of property without payment of an amount reasonable related to its value would normally constitute a disproportionate interference which could not be considered justifiable under Article 1. (P1-1) Article 1 (P1-1) does not, however, guarantee a right to full compensation in all circumstances, since legitimate objectives of ‘public interest’… may call for less than reimbursement of the full market value Both the nature of the property taken and the circumstances of the taking … give rise to different considerations which may legitimately be taking into account in determining a fair balance between the public interest and the private interest concerned. 122. [after asserting that] the State enjoyed a margin of appreciation in deciding whether to deprive an owner of his property [the Court said] A decision to enact nationalisation legislation will commonly involve consideration of various issues on which opinions within a democratic society may reasonably differ widely… national authorities are in principle better placed than the international judge to appreciate what measures are appropriate in this area and consequently the margin of appreciation available to them should be a wide one… It would … be artificial … to divorce the decision as to the compensation terms from the actual decision to nationalise, since the factors influencing the latter will of necessity also influence the former… The Court’s power of review in the present case is limited to ascertaining whether the decisions regarding compensations fell outside the United Kingdom’s margin of appreciation ; it will respect the legislature’s judgment in this connection unless that judgment was manifestly without reasonable foundation. 129. The Court does not consider …. That the United Kingdom acted unreasonable and outside its margin of appreciation in opting for the hypothetical … method [of compensation]