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Impermissibly interpreting the law in conformity with the constitution instead of referring the case to the Federal Constitutional Court violates the right to the lawful judge

Press Release No. 5/2015 of 27 January 2015

Order of 16 December 2014
1 BvR 2142/11

In an order published today, the First Senate of the Federal Constitutional Court granted the constitutional complaint an expropriation authority had lodged against a decision by the Federal Court of Justice (Bundesgerichtshof) concerning compensation for so-called isolated property-superseding planning. Since under the applicable procedural law the expropriation authority itself is a party to the compensation proceedings and not the legal entity it belongs to, it is entitled to the judicial guarantees of Art. 101 sec. 2 sentence 2 and Art. 103 sec. 1 of the Basic Law (Grundgesetz – GG). By impermissibly interpreting the Building Code (Baugesetzbuch – BauGB) in conformity with the Constitution instead of referring the case to the Federal Constitutional Court, the challenged decision of the Federal Court of Justice violated the right to the lawful judge under Art. 101 sec. 1 sentence 2 GG. Accordingly, the Federal Constitutional Court reversed this decision and remanded the case to the Federal Court of Justice.

Facts of the Case and Procedural History:

The case concerns the amount of compensation due for the loss of property rights to a plot of land in B. Following destruction during the war, no new residential buildings have been constructed on the plot in question nor on a neighbouring plot; these two are the only undeveloped plots on the block. In 1993, the area in which the plot lies was declared a redevelopment zone. The reasons for the redevelopment regulation stated inter alia that “in order to secure the existence of green spaces […] undeveloped plots must be secured for public open spaces”. In 2004, permission to develop the plot was denied. As a result, the owners requested the municipality to acquire the plot. The expropriation authority set the compensation at EUR 105,500. According to an expert opinion, this amount corresponded to the plot’s commercial value based on its actual use at the time. The plot’s commercial value if used as a building plot – which would have been permissible at the time – would, however, have been EUR 225,000. According to the expropriation authority, the decisive factor in choosing the lower compensation was that the plot was not developed during the seven-year period of § 42 secs. 2 and 3 BauGB. Subsequently, the owners applied for a judicial decision.

Legal recourse before the regular courts ended with a decision by the Federal Court of Justice according to which the owners were entitled to compensation in the amount of EUR 225,000. This decision was supported by the argument that in “isolated” property-superseding planning, i.e. if the plan that later results in expropriation is not accompanied by a general restriction on certain uses within the planning zone, owners are entitled to compensation that reflects the permissible use – notwithstanding the seven-year limitation under § 42 secs. 2 and 3 BauGB. According to the court, this rule also applies if a construction permit was denied for conflicting with the aims of the intended redevelopment; the reference made in § 95 sec. 2 no. 7 BauGB must be interpreted in conformity with the Constitution in this case as well. This judgment is challenged by the constitutional complaint of the expropriation authority.

Key Considerations of the Senate:

The constitutional complaint is admissible and well-founded.

1. The fact that the complainant is a public authority does not render the constitutional complaint inadmissible. What concerns a possible violation of the right to the lawful judge (Art. 101 sec. 1 sentence 2 GG), it is entitled to lodge a complaint.

According to the jurisprudence of the Federal Constitutional Court, legal entities under public law are entitled to the right to the lawful judge (Art. 101 sec. 1 sentence 2 GG) as well as to the right to be heard in court (Art. 103 sec. 1 GG) if in the course of their official duties they are a party to court proceedings. Contrary to the fundamental rights under Arts. 1 to 17 GG, which legal entities under public law generally cannot rely on, Art. 101 sec. 1 sentence 2 GG and Art. 103 sec. 1 GG also contain objective principles of procedure that apply to all court proceedings and must, therefore, benefit anyone who, under the relevant procedural law, may be a party to the proceedings or is directly affected by them. This rule is based on the concept that the function of judicial decisions in a state under the rule of law is justified only if these decisions are made in accordance with such requirements of an orderly procedure that are indispensable in the interest of reaching a just judicial decision.

These principles even apply if the relevant procedural law allows public authorities to be parties to proceedings before the regular courts – as was the case here. If the law permits a public authority to be a party to court proceedings instead of the legal entity it belongs to, the public authority is entitled to take all procedural actions and may exercise all procedural rights. According to this rule, public authorities that are parties to court proceedings may not be deprived of the judicial guarantees in the respective proceedings. In the case at hand, § 222 sec. 1 sentence 2 BauGB allows the complainant to be a full party to the initial court proceedings instead of the legal entity it belongs to, since – being the expropriation authority – it did the administrative act that set the amount of compensation for the purchased plot. Therefore, in the initial proceedings, the complainant was entitled to the right to the lawful judge and may claim a violation of this right by way of constitutional complaint.

The complainant is not entitled to lodge a constitutional complaint, however, to the extent that it claims that the principle according to which under the rule of law courts are bound by the law (Art. 20 sec. 3 GG) and the principle of separation of powers (Art. 20 sec. 2 sentence 2 GG) were violated because the Federal Court of Justice allegedly not only incorrectly differentiated Art. 14 sec. 1 from Art. 3 GG but also transgressed the boundaries of judicial development of law. With a few exceptions that are not applicable here, the state and its subdivisions are barred from relying on fundamental rights of material character.

2. The Federal Court of Justice violated the complainant’s right to the lawful judge (Art. 101 sec. 1 sentence 2 GG) by impermissibly interpreting the law in conformity with the Constitution in-stead of complying with its obligation under Art. 100 sec. 1 GG to refer the case to the Federal Constitutional Court.

a) Not every erroneous transgression of the limitations imposed on the regular courts constitutes a violation of Art. 101 sec. 1 sentence 2 GG. A violation is possible, however, if the regular court completely failed to recognise the importance and scope of this guarantee or if it applied the relevant procedural rules in a way that was objectively arbitrary. Regular courts further violate Art. 101 sec. 1 sentence 2 GG if they fail to comply with their constitutional duty under Art. 100 sec. 1 GG to refer the case to the Federal Constitutional Court and thereby deprive a party to the proceedings of their lawful judge – in this case the Federal Constitutional Court. In particular, regular courts violate the right to the lawful judge if they refrain from referring to the Federal Constitutional Court a case concerning a provision that they would otherwise consider to be unconstitutional because they impermissibly interpret that provision in conformity with the Constitution.

b) In the case at hand, the Federal Court of Justice correctly recognised both the importance of Art. 101 sec. 1 sentence 2 GG as being a guarantee equivalent to a fundamental right as well as the scope of the resulting guarantee of the lawful judge. Even though the challenged judgment remains silent on the issue, the Federal Court of Justice by no means ignored the possibility of a duty of referral but, by continuing its line of jurisprudence on “isolated” property-superseding planning, implicitly rejected the necessity for such a referral because of the assumed possibility of interpreting the Building Code in conformity with the Constitution.

c) However, the Federal Court of Justice did violate the guarantee of the lawful judge by impermissibly assuming possible an interpretation in conformity with the Constitution, not applying § 95 sec. 2 no. 7 BauGB, which it deemed to be unconstitutional, and not referring the case to the Federal Constitutional Court in violation of Art. 100 sec. 1 GG.

aa) In principle, not every error by the regular courts in applying a provision on competences constitutes a violation of the Constitution. However, the duty of referral enshrined in Art. 100 sec. 1 GG is – unlike other provisions on competences – not based in a mere act of parliament, but possesses constitutional rank. The provision is intended to prevent the regular courts from overriding the legislature’s intention by not applying its law. Laws passed under the aegis of the Basic Law must be adhered to, unless the Federal Constitutional Court made a general determination that they are void or invalid. In addition, there must be no contradictive court decisions regarding the applicability of individual laws. The duty of referral also serves to prevent legal uncertainty and legal fragmentation that might result from diverging decisions by the regular courts.

The importance of these constitutional aims justifies generally regarding a violation of Art. 100 sec. 1 GG not merely as a harmless error in applying the law but as a deprivation of the lawful judge that violates the Constitution. Therefore, when it comes to the application of the law as such, no particularly severe error is necessary on the part of the regular courts for a failure to refer the case to the Federal Constitutional Court in accordance with Art. 100 sec. 1GG to simultaneously constitute a violation of the guarantee of the lawful judge under Art. 101 sec. 1 sentence 2 GG. What is decisive is whether the manner in which the regular courts applied the law to the individual case – e.g. by not referring the case and instead interpreting the law in conformity with the Constitution in the present case – was permissible.

bb) According to these standards, the Federal Court of Justice violated Art. 101 sec. 1 sentence 2 GG by refusing to refer the case to the Federal Constitutional Court for specific judicial review.

(1) The duty of referral under Art. 100 sec. 1 GG comes to bear if the regular court is convinced of the unconstitutionality of a law that is essential for its decision – unless that law may be interpreted in conformity with the Constitution. It is not sufficient, however, if the regular court merely doubts whether the law in question is constitutional. The Federal Court of Justice, however, was so convinced. The challenged judgment refers to the Federal Court of Justice’s previous jurisprudence on the issue of “isolated” property-superseding planning. The Federal Court of Justice developed the principles of this jurisprudence on the basis of its conviction that the other relevant reduction clauses of the law on planning-related damage are also unconstitutional. It now extends these principles to apply to the present case in which a construction permit was denied for conflicting with the aims of the intended redevelopment.

(2) Contrary to the decision of the Federal Court of Justice, an interpretation in conformity with the Constitution is obviously not possible in the present case.

(a) To begin with, there is no statutory basis that could serve as point of departure for an interpretation in accordance with the Constitution. The wording of § 95 sec. 2 no. 7 BauGB contains nothing that could justify the Federal Court of Justice’s restrictive interpretation, according to which some cases do not fall into the scope of the provision. The provision’s wording does not permit an interpretation pursuant to which commercial values of plots that are excluded under §§ 40 to 42 BauGB should under certain circumstances be taken into account after all. The provision being one that refers to other provisions, such a restriction can also not be based on its context.

(b) Primarily, however, it is the provision’s aim as well as the legislative intention – as evidenced by the provision’s history – that prevent such a reduction. During the course of the legislative process of 1976 that led to the inclusion of the seven-year period, a majority of the competent Bundestag committee on regional development planning, construction and urban development found that the extensive compensation paid on the basis of a plot’s commercial value, even if the plot was not actually used to the full extent possible, had often maimed planning processes. Municipalities were regularly prevented from conducting even urgently required planning, because they would not have been able to pay the resulting compensation. As a result of the legislative process, compensation for planning-related damages is limited to a plot’s actual use; a compensation for uses that are permissible but have not been realised may only be sought within a protective period of seven years.

(3) The Federal Court of Justice’s assumption in the initial proceedings that § 95 sec. 2 no. 7 BauGB could be interpreted in conformity with the Constitution transgressed the boundaries of permissible interpretation and, therefore, becomes relevant under constitutional law. Even though this error is not gross and the jurisprudence of the Federal Court of Justice has in more than a decade only met with little opposition by scholars, the requirements for a permissible interpretation in conformity with the Constitution were clearly not fulfilled.