TRIBUNAL CONSTITUCIONAL Portugal

RULING Nº 174/05

31 of March of 2005

Headnotes:

The constitutional concept of "fair compensation" is based on three tenets:

a. it is prohibited to award purely nominal, derisory or symbolic compensation;

b. due regard for the principle of equal sharing of expenses;

c. the public interest in compulsory purchase taking into consideration.

According to the first two aspects, the concept of fair compensation implies that criteria leading to the award of purely nominal, derisory or symbolic compensation must be rejected as unconstitutional and that fair compensation inevitably implies due regard for the principle of the equality of citizens vis-à-vis public expenses. In cases of compulsory purchase of property for public-interest purposes (Article 62.2 of the Constitution), the fair compensation referred to in the article in question should not therefore be calculated on the basis of the actual or tangible market value but instead on a "statutorily defined market value" or a "normal or usual value". The requirement therefore is that the value of the property in question be calculated according to a combination of its market price and a scale of "standard" values.

Article 62.2 of the Constitution stipulates that compensation awarded for compulsory purchase must be fair but contains no directly, objectively applicable criteria for calculating amounts of compensation nor any indication as to the ways or means of assessing the prejudice resulting from the compulsory purchase. There is a legal loophole here, which was left by the Constitution to the legislature. Nonetheless, the expression "fair compensation" cannot be regarded as empty words. It is actually a very meaningful expression, capable of placing substantial limits on the ordinary legislature power of discretion.

Summary:

The Constitutional Court reviewed the constitutionality of a joint Minister of Finance and the Minister of Agriculture decree setting the rules for the compensation of livestock owners whose animals were compulsorily slaughtered and disposed of (following a diagnosis of BSE, bovine spongiform encephalopathy) and to whom compensation was to be awarded for sanitary slaughter, along with an amount equivalent to the market value of the animals.

The Constitutional Court did not rule that the provisions of the joint decree issued by the Minister of Finance and the Minister of Agriculture on the amount of compensation payable to owners whose animals had been slaughtered as a result of measures to eradicate bovine spongiform encephalopathy were unconstitutional as it did not consider that any of the criteria deriving from its case-law for determining "fair compensation" were called into question by the application of the conditions for compensation for the compulsory slaughter of animals set out in the provisions in question.

In view of the market price of meat, the total compensation decided on was not therefore nominal, derisory or symbolic. It was higher than the sum which would have resulted from a value calculated on the basis of the price at which the meat from the slaughtered animals could otherwise have been sold; it also ensured that the expenses were fairly distributed, in that all taxpayers had to share the cost of eliminating the hazard detected on the applicant's cattle farm, and protected the public interest, both by eliminating the risk (given that all the animals on farms on which infected cattle had been detected were slaughtered and not just those that were contaminated) and by ensuring compensation higher than the market value so as to prevent farmers from being tempted to hide infected animals.

Furthermore, for the purposes of determining compensation according to the value of the slaughtered animals - which, on a cattle farm, would be primarily destined for slaughter - it was not unreasonable for the law to take account of the type of animals involved when calculating their value - an approach which was also justified by the wide variety of situations to be compensated for. This did not, however, mean that "each specific circumstance" pertaining to each animal or herd of animals had to be assessed and taken into account.

The issue was not therefore the actual amount of compensation decided in the specific case under consideration. "Fair compensation" was a statutory criterion and could, in certain cases, be lower than the market value, whereas the compensation awarded had actually been set just above the market value (or a particular market value: the sale price per kilogramme). Firstly, the criteria which had to be taken into consideration under the rules in the impugned decree produced values which were close, according to forecasts, to those that the market would have yielded under current conditions, and ruled out the danger of a major depreciation caused by the existence of a disease that could be passed on to human beings. Secondly, the factors to be taken into consideration provided a means of distinguishing the various uses to which the cattle were to be put and took account of the value of the meat from the animals on the basis of an average, which was then corrected by an amount of compensation awarded according to the quality of the potential and anticipated use of each of the nine different categories of animals defined. The sums awarded should also be viewed as compensation for lost profits.