Latvia: The Concept And Content Of Property Rights In Latvian Law

The place of property in the Latvian system of property law, sources and methodological problems.

To understand the concept of property law it is essential to understand its place in the Latvian legal system. Therefore, to point out a membership in the group of rights in rem contributes little to explaining the concept of property. Thus, for example, knowing that things can be tangible or intangible (The Civil Law, hereafter CL, - Article 841) and knowing that property can be held in all that is not definitely removed from general circulation by law (CL, Article 929), we can conclude that property rights can exist in intangible things. However, not everyone regards this assertion as correct. Therefore, such a conclusion is not self-evident from what was said before, even if we know the content of the relevant norms of the CL.

It would be even less possible to draw any conclusions about the concept and content of property if the content of these norms was indeterminate. However, taking into account that the composition of rights in rem in various legal systems can vary, that therefore, it has no special, unchanging internal structure, the assumption that the concept and content of property is dependent on its place in the system of rights in rem and its structure, it should not be given a particular methodological meaning.

Comparing the development of this chapter here in Latvia, we can establish that in 1937, its content had not significantly changed. In the CL, we do not find, as in its predecessor, the Compilation of Local Laws (CLL), inheritable leases. Various forms of acquisition of rights, such as immemorial dominion with regard to acquiring property, adverse possession with regard to servitudes. In contrast to Roman law, neither the CLL nor the CL has any other form of ius in re aliena – the right to build (superficius).

Also, the mutual relationships of the concepts comprising rights in rem do not give particularly clarity. It would be logical to assume that the broader concept within rights in rem, those, such as things, possession, property and entitlement to a thing belonging to another are equally ordered, belonging to one and the same species of "rights in rem". However, this is not so. Some of these pertain to rights (property, rights to things belonging to another); others (things) are nothing more than the objects of such rights. Still others (possession) are characterized both as rights and as facts. Therefore, instead of a logically equally ordered system of concepts, we rather find essentially different concepts which have in common that they happen to be contained in Chapter 3 of the CL.

The development of these norms and the system, historically, can be explained rather demonstratively. The classification of things mainly characterizes the objects of property by characteristics derived from circulation within the civil law. It is not hard to establish that they were created at different times. For example, the division of things into tangible and intangible applies to relatively recent developments in the law, because only in medieval times such concepts developed as the separation of rights, that is, the possession of intangible rights, from a debtor, that is, the possibility to alienate a claim by cession, not by a procedural power of attorney under so-called classical Roman law, which also applied to later periods of development. The division between real property and chattels had no special meaning before a register of property (title or cadastral) system was founded, thereby, at best, in the late Middle Ages. At the same time, the description of real property in the CL does not point to this important differentiating feature – the register, but preserves the characterization provided by early Roman law (things are movable/chattels or real/immovable according to whether they could or could not be moved from one place to another without outward damage -- CL Article 842). Only a remark in CL Article 842 with reference to the railroad indicates some changes over time. For instance, the destruction of fungible goods does not end the obligation, the object of which is the delivery of such goods. The rule that stolen goods (res furviva) may not be gained by adverse possession applies only to unique things. The concept of aggregation of property determines the fate of individual things within the aggregation in cases of unclear terms of contract, etc. This division is found in full in classic Roman law. In other words, the sequence of the classification of things is by no means chronological nor formed by a method of formal logic. Since things are still classified in two opposing groups, then this classification is easily formed as a hierarchical structure. The latter has, undeniably, formed already as a result of pandectic law, which expresses a proclivity toward academic classification.

The mutual relationships of other concepts in the section on property rights have formed completely differently. Property, since the start of time, has been seen as a self-evident concept much as a god in any religious teaching. The most essential is not defined and anyone trying to do so is to be seen as a heretic. Therefore, the definition of property has been left to various critics of a society built on private property, starting with Proudhon’s famous "property is theft" ¹ and ending with the "triad" (possession, use and disposition rights) under the Soviet legal system, or as ius utendi et abutendi (the right to use and destroy).

Possession originally developed as an ad hoc form of protection of a status in fact in the interests of social order and security². When the social order changed, this form of protection was "lost". As a result, the fact of the existence of possession as a legal institution loses any explanation and justification. But as it has traditionally preserved its place in "the system", the temptation arises to "utilize" it for other purposes, for example, as a substitute for property, even when it can be clearly seen that this institution, which is outside the chapter on property rights, has nothing in common with property. This is confirmed by the well-known saying of Roman lawyers, that possession and property have nothing in common (nihil commune habet possessio cum proprietatis). The "utilization" of possession is one of the most interesting novelties of Latvian law. One of these novelties is the use of possession in good faith to replace the concept of the beneficiary in good faith that is missing from the CL. So, for example: "Taking into account that …G.L. is not a beneficiary in good faith (CL, Article 910) (emphasis by the author – J.R.), her rights may not be defended by reference to an entry in the Land Register. ³" It suffices to examine Article 910 of the CL as cited by the Senate to establish that the phrase "beneficiary in good faith" cannot be found there. It cannot be found it the CL. However, the kind of possession (good faith, bad faith, legal, illegal) does not and cannot have any effect on the property title. Therefore it may not, at least within the system of concepts of the CL, serve as an instrument in discussing the legal force of an entry in the Land Register.

Another novelty, the introduction of the concept of illegal possession, which also does not occur in the CL: "Illegal possession is not protected by law." ⁴ It is clear that in this case, something else was meant. From where did the Senate adopt the concepts of good faith beneficiary and illegal possession? By examining legislation in force, we find the concept of good faith beneficiary only in the law on Denationalization of Housing Property in the Republic of Latvia and the law On the Return of Buildings to Their Legal Owners. However, in context it can be understood that in these laws, adopted before the renewal of the CL, this concept was incorporated from Article 154 of the LSSR Civil Code⁵. The concept of illegal possession, also not found in the CL, was adopted from Article 153 of the LSSR Civil Code⁶. From the aforementioned source, as well as from the system of socialist law as a whole, it unmistakably follows that the term "possession" is used in a completely different meaning, firstly because the LSSR Civil Code does not foresee the institution of possession and the protection of possession, secondly, possession in this act as in the Soviet system of civil law in general, can only be understood as part of the aforementioned "triad", that is, one of the subjective rights of the owner. Thereby, "reading" into the CL a phrase that is not even there, the Senate has not merely "erred", but put into this rather original use of the concept of possession a completely different meaning, alien to the CL. In the first "novelty" – pointing to the illegal nature of the possession as an obstacle to using a claim for property (Article 154 of the LSSR Civil Code has an analog to the restrictions on claims on property of Article 1065 of the CL, that is taken from Swiss law), one expresses the Hand muss Hand wahren (one hand protects the other) principle. In other words, one cannot reclaim a thing from a person to whom the owner has willingly given it. To regain property, one must claim either on contract or on wrongful self-enrichment. The defendant has neither property nor possession, which, according to the CL, is "possession of property is actual control over property conforming to ownership rights" (Article 876), but – as understood in the CL – only mere holding (Article 909, CL). It is clear that the defendant in the case described objects to the demand for property not because his possession is "legal" or "illegal" but on the basis that the plaintiff, who has willingly given the object to the defendant, has no right to demand ownership, even though he, possibly, retains property rights.

The second "novelty" – in complete contradiction of the principle set forth in the CL: "Every possession (that is, regardless of whether the possession is legal or illegal – J.R.) shall be protected by law" (Article 912), in addition, not only "reading into" the CL an organically alien term, but also turning it from an independent institute to an attribute of property laws, the Senate has also drawn a conclusion that in no way results from the context and sense of the law. In the decision that is cited in civil case SKC-1 the dispute is not about possession, but about rights, therefore reference to norms concerning possession are completely out of place and in contradiction to the basic postulates of the CL: "From possession arises the right to protect existing possession and to renew possession that has been taken away. These rights are associated with every possession independently of whether it is legal or illegal, in good faith or in bad faith" (Article 911, CL).

The third novelty – expanding the mechanism of protecting property rights, granting protection also to non-owners in cases when courts see considerations of justice, which it is not possible to base on claims for ownership taken separately. In this case, too, the Senate has "complemented" the arsenal of claims to property, using, in the Senate’s view, a "multifunctional" concept of possession as a helping instrument: "In accordance with Articles 911 and 912 of the CL, it follows from possession a right to the protection of existing possession and to the renewal of divested possession. These rights are associated with every possession independently of whether it is legal or illegal, in good faith or in bad faith. Every possession shall be protected by law. It is on this basis that the claim is made. Therefore the appellant’s reference that property can be reclaimed only by a claim for property is baseless." ⁷

In the aforementioned three decisions we can establish not only the "expansion" of the traditional understanding, but at the same time, also the losses caused by this kind of improvised interpretation – it is not hard to determine that in the second decision, the generalization is not only in contradiction with the CL, but also, at the same time, completely opposite to the generalization that the Senate made in the third aforementioned decision.

Currently it is premature to say whether this significantly modified understanding of the content of property law will have any lasting significance. But to disregard the described manner of decision would not be especially far-sighted. Here we have to deal with a trend, not a particular exception. At the same time, one cannot avoid seeing that this interpretation of the law was achieved ignoring clear and unambiguous prescripts of the law. If "No ownership action shall be accepted from a person who has taken away possession by force, so long as the person dispossessed has not been restored thereto and not received compensation for all losses and expenditures" (Article 923 of the CL) – an unambiguous reference to the fact that the CL incorporates the principle of Roman law that nihil commune habet possessio cum proprietatis, how is it possible that a claim for property is filed based on norms that foresee the protection of possession, in addition, as in the case at hand, by a person who has never been the owner of the object to be reclaimed?

However, one may not ignore several self-evident things. First, possession as an independent institute does not enjoy the protection of the courts. Second, not all claims can be fitted into the "Procrustean bed" of the archaic norms of property claims under the CL. Third, the important concept of a beneficiary’s good faith is lacking in the CL. Fourth, the concept of possession is impermissibly ambiguous, because in addition to possession "as a fact" there is "legal possession", as well as the right of an owner to possess (Article 1038 of the CL). Fifth, the relationship has not been clearly defined between possession as a protected condition (Articles 875-926) and possession as a prerequisite to acquiring property (Articles 998 – 1031 of the CL), in addition one has not evaluated the need for the existence of the institution of adverse possession in context with a presumption of property rights, that follows from registration of property in the Land Register (Article 993 of the CL).

The relationship between ownership and possession: the historical aspect.

In order to understand the norms of the CL historically, it is necessary to "spend great effort learning Roman law as treated by their pandects, in addition to these, Old German medieval law…"⁸. In addition… the principles of Old German and Roman (pandect) law exclude each other…can a small country afford such a luxury? ⁹"

V. Sinaiskis pointed out the archaic character of the norms of the CLL: " For quite a few years Latvia heroically uses the legislation created in Rome for Rome, which is now outlived by all nationalities and which, amended and held together with hoops, continues to live only in Latvia and Estonia" ¹⁰. Since the quoted essay, Latvia has lived "quite a few years" in the Soviet system and now, as the only one, returns to this same system held together with hoops.

The reference to the recent origin of this act, which, at the time of its renewal gave the right to consider the Latvian CL of 1937 to be one of the newest, and, therefore, self-evidently, most modern codes, in the passage of time proved to be misleading. Only with the passage of time did problems with the interpretation and application of this act appear. Together with the almost unaltered copying of the predecessor of this law, the CLL, its problems were inherited. The necessity to review, in court practice, the obsolete system created additional tension in connection with the necessity to correctly understand a system whose content, due to differing historical influences, is not easily understood. Soon enough the same problems with the application of this law made themselves felt, which were already intensively discussed, when discussing the necessity to modernize the CLL.

Ever since the well known German academic Jhering¹¹ turned his attention to this phenomenon, the issue of whether the concept of property encompasses or does not encompass an interest, is the subject of dispute in jurisprudence. Depending on the answer to this question, whether the owner uses property rights in one’s own interest or not, the content of property changes. So, for example, one of the prerogatives of an owner – the right to destroy a thing belonging to him (ius abutendi), can come into contradiction with his own or society’s interests, and the solution depends on how we understand these interests. In the understanding as used in the CL, the relationship of property to the owner’s and to a greater extent, society’s interests – nowhere appears. Where there is a possible conflict, the CL stands for unrestricted use of property rights, disregarding any other kinds of considerations. "Owners may possess property belonging to them, acquire the fruits thereof, use it at their discretion for the increase of their property and, generally, use it in any manner whatsoever, even if losses are caused thereby to other persons" (Article 1038 of the CL).

With the amendments to the Constitution adopted on October 23, 1998, a new context appeared for understanding property. Article 105 of the Constitution declares: "Everyone has the right to own property. Property shall not be used contrary to the interests of the public. Property rights may be restricted only in accordance with law. Expropriation of property for public purposes shall be allowed only in exceptional cases on the basis of a specific law and in return for fair compensation."

As the Constitutional Court has pointed out "the intention of the legislature was to achieve mutual harmony between the human rights norms contained in the Constitution and international human rights norms (see, for example, the decision of the Constitutional Court of June 27, 2003 in case No. 2003–04–01, point 1 of the conclusive part and the decision of January 17, 2005 in case No. 2004–10–01 point 7, subpoint 1). In interpreting the Constitution and Latvia’s international obligations, a solution must be found that ensures their harmony, not contrast (see the decision of the Constitutional Court of May 13, 2005 in case No. 2004-18-0106, point 5)." ¹²

The Constitutional Court has recognized that the content of Article 105 of the Constitution is similar to the content of Article 1 of the First Protocol of the ECHR (see the decision of the Constitutional Court of May 20, 2002 in case No. 2002-01-03, the conclusions). ¹³

The European Convention on Human Rights (hereafter ECHR), Article 1 of Protocol 1 states: "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 for by law and by the general principles of international law.

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."

It is not hard to establish that the differences in both aforementioned normative acts are sufficiently fundamental and that the formulation used in Article 105 of the Constitution of the Republic of Latvia is significantly broader. However, to evaluate these differences and the consequences thereof is not the purpose of this essay. But it is important also in this instance to keep in mind that there are significant differences in the concept of property and factors limiting it in two different normative documents within one and the same legal system. So far, no one has thought of discussing the issue of the conformity of some norms of the CL to Article 105 of the Constitution. However, the conflict is sufficiently dramatic.

Thanks to the not especially successful paraphrasing of Article 1, paragraph 2 of the First Protocol of the European Convention on Human Rights in Article 105 of the Constitution of the Republic of Latvia, the rights of the state to restrict the use of property rights subordinate this principle not to the will of the legislature, but to the views of the court.

As said before, the dual understanding of property – not only the peculiarity of Latvian law, that to some extent, can follow from the aforementioned terminological ambiguity, lead to the next, in this case, peculiar only to Latvia – to that, that the law, judicial practice, and academic jurisprudence lean toward considering only tangible things as the object of ownership. ¹⁴` This view is based on a single reference in the law, the limitation in Article 1050 of the CL, which prescribes that a claim for property can only be raised to recover a tangible thing, that is, a norm that in and of itself has no connection to determining the object of ownership, greatly narrows the range of objects of ownership, categorically excluding from it intangible things. ¹⁵ This acknowledgment has gained expression both in academic jurisprudence and in judicial practice. In academic jurisprudence – by declaring that property rights are rights only to tangible things¹⁶, in judicial practice – by denying the application of the norms of property law to individual objects of intellectual property¹⁷ or even to claims¹⁸, to aggregates of things, including companies. As Konradi and Valters pointed out, "…a shop, that is, not only a collection of tangible things (universitas rerum in the narrow meaning), but a collection of tangible and intangible (rights) things, may not be the object of vindication, as is directly and clearly determined by Article 906 of the Civil Law" (in the cited text, there is reference to a norm of the Collection of Local Laws. It conforms to Article 1050 of the CL – J. R.) ¹⁹.

To some extent, the causes of such a narrowed interpretation of the object of ownership apparently have their roots in the history of the development of Latvian law. The term "intellectual property" is not very old. It was mentioned for the first time in court practice and literature around the middle of the 19th century, that is, shortly before Bunge finished the work of codification²⁰. It is no wonder that for this reason, it does not appear in the Compilation of Local Laws. The changes in correction with the coming into force of the 1937 CL affected property law very little. It is worthy of admiration that this archaic understanding proved so tenacious, especially in view of the rapid development of this content that could be observed in the last third of the past century, after this term was implemented and widely used, which is connected to the founding of the World Intellectual Property Organization (WIPO) ²¹ in the middle of the 20th century, more precisely, in 1967. In Latvian academic jurisprudence and practice, this term is still put in quotation marks, thereby demonstrating an attitude toward it as some kind of surrogate for property rights. Such a view is not only in contradiction of modern legal knowledge and practice. The narrow understanding of property rights inevitably leads to a narrow understanding of the subjective rights of individual owners. One should take into account that such concepts as piracy have been brought over from the concept of intellectual property. Disregarding the disputed issues, which mainly are linked to the content and extent of the term "intellectual property", ²² this category of the law, as a right to intangible things has taken stable root in both theory²³ and in the latest legislation of other countries²⁴, as well as in court practice. The European Court of Human Rights has also pointed out that violations of intellectual property rights are to be qualified as violations of Protocol 1, paragraph 1, part one of the European Convention on Human Rights, and claims with regard to such violations may be heard by this court. ²⁵ A reference to intellectual property in the CL is necessary.

In contrast to the skeptical attitude of the proponents of the narrower understanding of the object of ownership regarding intellectual property as "property", which, as mentioned, can be explained by the recent origins of this institution, a similar attitude toward liabilities as property is rather explained by the strong influence of Roman law. In this case, the narrowed view of the object of ownership is brought in by the relics of Roman law in the CL, which are tellingly manifested in the norms regarding guaranty and the cession of claims. It is the narrower view of the object of ownership that is the reason why court practice, initially, did not perceive bank guarantees, that is, abstract liabilities, which, in essence, are not linked to the primary debtor’s liability differently than an ordinary guaranty liability²⁶. It is also debatable whether it is necessary to preserve the limitation in Article 1050 of the CL that excludes the possibility that intangibles can be the object of a claim of ownership. This principle, by the way, is in contradiction with court practice that, by equating claims of inheritance²⁷ to claims of ownership, and so-called claims for reform of ownership, ²⁸ has significantly expanded the boundaries for interpreting and applying these norms. Therefore, firstly, one is not particularly convinced by reference to Article 1050 as a basis for the narrowed understanding of the object of ownership, secondly, one must examine how much principle significance the restriction on the object of a claim for ownership in Article 1050 has, and whether the latter is not a concession to ritual traditions of ancient Roman law, where form undoubtedly dominated content. ²⁹

By contrast with earlier problems arising from internal contradictions in the law, the problem discussed in this subsection to a greater degree arises from various possibilities for interpreting the law and, therefore must be regarded as largely theoretical. However, at the same time, this problem, as the ones before, is the product of the ambiguous construction of the law and the system.

1. The concept of property that is derived from the place of property in the Latvian civil law system is difficult to understand without the context of the structure of property law. In turn, Part Three of the CL, "Property Law" consists of elements incorporated at various times that are not logically derived one from the other and are better explained historically than methodologically.
2. The CL Property Law section and the ownership law section therein has changed little when one compares the compilation of local laws and the 1937 edition of the CL. As in the previous period, that is, up until 1937, this section contains elements of Roman and German law, therefore, in order to understand the individual norms of this section, knowledge is necessary of Roman law in its pandect interpretation as well as German law. A lack of such knowledge can be the cause of an incorrect interpretation of individual norms of the CL or even of institutions. One example of this kind of interpretation is the interpretation of possession. Possession is an independent institution in the CL, which has nothing in common with ownership. In Latvian judicial practice possession and the norms in this subchapter are interpreted as one of the elements of property law. This kind of interpretation is more characteristic of the legislation that was in force before the CL was renewed in 1993. In turn, the functioning of some norms is not logically justified in the context of the public Land Register system.
3. It is possible to explain the relationship between ownership and possession historically, however, taking into account that the legislation currently in force lacks several important attributes, for example, a special mechanism for protecting possession, the existence of possession as an independent institution is disputable.
4. One of the most debatable issues that are connected to the concept of ownership is the relationship between property and interests. In this aspect, the norms of the CL, which describe property, are in sharp dissonance with Article 105 of the Constitution that was added as a result of the amendments of the Constitution in 1998, as well as the Chapter 1, part 1 of the First Protocol of the European Convention on Human Rights, which is a distant prototype for Article 105 of the Constitution. In addition, certain problems may be caused by the fact that Article 105 of the Constitution, as is the view in the practice of the Constitutional Court, to a large extent reflects the aforementioned Chapter 1, part 1 of the First Protocol of the European Convention on Human Rights, but significantly differs from the latter.
5. Problems of terminology are also characteristic of Latvian legislation, namely, the word "property" at the same time can describe property rights as well as the object of ownership to which these rights apply, and each time the word is used, its content cannot be understood without context.
6. A disputable issue in Latvian academic jurisprudence is the issue of intangibles as objects of property rights. Against generally accepted practice and against the sense of the CL, some authors do not recognize intangibles as full-fledged objects of property rights. To some extent this conclusion is derived from the fact that the CL does not point to the existence of the category of intellectual property.
7. The terminology and system of the CL, which is characterized by repetition of concepts and different characterizations of one and the same concept, does not give sufficiently comprehensive material for forming a contemporary definition of property.
8. The aforementioned conclusions are material for serious thought about the necessity to reform the Property Law section of the CL. Unfortunately, at present, the intellectual resources and academic bases for this task are lacking.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.