Unemployment benefits mistakenly paid by Croatian government do not have to be repaid, European Court of Human Rights finds

Čakarević v Croatia (European Court of Human Rights, First Section, Application no. 48921/13, 26 April 2018)

Summary

Ms Ilinka Čakarević, a Croatian national, brought proceedings against the Croatian government in relation to debt recovery proceedings brought by the government after they overpaid her unemployment benefits. Ms Čakarević was successful before the European Court of Human Rights, with the Court finding that, although there was no legal basis in domestic Croatian law for the unemployment payments to continue after a period of 12 months, this was not decisive in the circumstances of the case. Ms Čakarević was entitled to rely upon an administrative decision granting her unemployment benefits, and it was not her responsibility to check that the decision was legally correct. The Court also held that "mistakes solely attributable to State authorities should in principle not be remedied at the expense of the individual concerned, especially where no other conflicting private interest is at stake".

Facts

Ms Čakarević became unemployed in December 1995 and was granted unemployment benefits by the Croatian Employment Bureau. The Croatian legislation governing unemployment benefits provided that unemployed people who met certain criteria were entitled to unemployment benefits, for a maximum period of 12 months. Nevertheless, the Croatian Employment Bureau continued to pay Ms Čakarević unemployment benefits until March 2001, when it informed Ms Čakarević that her unemployment benefits had been terminated with effect from June 1998. Shortly after Ms Čakarević's unemployment payments ceased, the Croatian Employment Bureau alleged that Ms Čakarević was required to repay approximately €2,600 (plus interest) in employment benefits that she was not entitled to receive.

Ms Čakarević lodged appeals against this decision, arguing that she had the right to unemployment benefits until she retired. She pursued the decision through the domestic Croatian courts. The case heard by the European Court of Human Rights focused on the lawfulness of the Croatian government's debt recovery proceedings against Ms Čakarević, not on her right to continuing unemployment benefits.

Decision

Whether "possession" has a narrow or broad meaning

Ms Čakarević argued that the Croatian courts’ decision following debt recovery proceedings that she had to repay the overpayment violated Article 1 of Protocol No. 1 to the European Convention on Human Rights, which provides for the right to peaceful enjoyment of one's possessions.

The Croatian government argued that the amount Ms Čakarević had been ordered to repay had been the possession of the State, not the possession of Ms Čakarević, and so Article 1 of Protocol No. 1 did not apply.

The Court noted that the concept of "possessions" is broad and not limited to the ownership of physical goods; certain other rights and interests constituting assets may also be regarded as property rights, and may be regarded as "possessions". The Court further noted that a property right might be, in certain circumstances, subject to revocation, but it does not prevent it from being a "possession" for the purposes of Article 1 of Protocol No. 1. Accordingly, a legitimate expectation of obtaining an asset may also be covered by Article 1 of Protocol No. 1.

The Court further held that the issue to be examined in each case is whether the circumstances of the case, when considered as a whole, conferred title to a substantive interest protected by Article 1 of Protocol No. 1. In this case, the Court made its assessment with a view to the fact that from 1998 to 2001, Ms Čakarević had received payments on the basis of an administrative decision granting her unemployment benefits. The Court further opined that an individual should in principle be entitled to rely on the validity of an administrative decision

in his or her favour, and on the implementing measures already taken pursuant to it, provided that neither the beneficiary nor anyone on his or her behalf has contributed to such a decision having been wrongly made or wrongly implemented. Thus, while an administrative decision may be subject to revocation for the future, an expectation that it should not be called into question retrospectively should usually be recognised as being legitimate, at least unless there are weighty reasons to the contrary in the general interest or in the interest of third parties.

Whether a "legitimate expectation" can be a "possession"

The Court found several factors supporting the argument that Ms Čakarević's legitimate expectation could be considered to be a "possession" within the meaning of Article 1 of Protocol No. 1. These factors were capable of "inducing a belief" in Ms Čakarević that she was entitled to receive the unemployment benefits:

• Ms Čakarević had not contributed to the incorrect decision to continue providing her with unemployment benefits;
• the government had not contested Ms Čakarević's good faith in receiving the contested unemployment benefits;
• the administrative decision which Ms Čakarević relied upon in receiving the payments did not refer to the fact that the payments were due to cease after 12 months; and
• a long period of time (over three years) had elapsed after the expiry of the 12 month payment period during which the authorities continued to make payments to Ms Čakarević and failed to raise any issues about the validity of the payments.

Proportionality analysis

Although Ms Čakarević's legitimate expectation had been established as amounting to a "possession", the Court's enquiry as to whether the Croatian government had violated Article 1 of Protocol No. 1 did not end there. The Court assessed whether the government's action was proportionate. Although the "margin of appreciation available to the legislature in implementing social and economic policies should be a wide one", the Court opined that that margin narrows where a mistake is solely attributable to a government authority.

The Court also noted that the amount of money Ms Čakarević incorrectly received was relatively small, and had been consumed to satisfy Ms Čakarević's basic living expenses. This was compounded by the Court's reiteration of earlier decisions that, where a public interest issue is at stake (such as in this case), "it is incumbent on the public authorities to act in good time, in an appropriate and consistent manner". The government failed in that regard in Ms Čakarević's case.

Accordingly, the Court found that the Croatian authorities had violated Article 1 of Protocol No. 1. Ms Čakarević was awarded €2,600 in non-pecuniary damages, as well as an amount for costs and interest.

Commentary

The Čakarević case has some parallels with experiences of Centrelink customers in Australia to whom Centrelink has issued debt recovery notices through its "robo-debt" program launched in July 2016. A 2017 report by the Commonwealth Ombudsman stated that complaints about Centrelink to the Ombudsman had increased by 87 percent from July 2016 to January 2017. In a number of cases, Centrelink customers who have queried their debts have had the amounts substantially reduced, sometimes to a nil balance.

The full decision is available here.

Sarah Hort is a Graduate at Ashurst.