After World War II, with the Communist Party’s takeover of power in the former Yugoslavia, certain property was confiscated and nationalised. The confiscated property was declared state property, property of public interest, or communal property. One of the important conditions that Serbia must fulfil as part of its EU accession is to return these properties to their former owners or heirs.
On 26 September 2011 the Serbian parliament enacted the Restitution and Compensation Act (the Restitution Act). Under the Restitution Act current owners that legally acquired ownership rights over confiscated and nationalised property will remain as such. Another key principle of the Restitution Act is that restitution has priority over compensation.
Persons entitled to restitution and compensation
The Restitution Act details the categories of persons entitled to restitution. An aspect common to all categories is that a person entitled to restitution must be someone (or their legal successor) whose property (i) was confiscated and nationalised, (ii) has not been remedied by a foreign country, and (iii) has been rehabilitated. Furthermore, restitution is awarded solely for property confiscated and nationalised based on regulations in force up to 15 February 1968.
The Republic of Serbia, local self-governments, autonomous provinces, state-owned companies, and companies in their ownership must return both movable and immovable property to persons entitled to restitution.
If the property subject to restitution is being rented for commercial activities, the lease agreement will remain in force for three years from the date the restitution decision came into force.
For a mortgage on a property subject to restitution, the property will be returned mortgage-free, and the Republic of Serbia will become a guarantor for obligations secured by the mortgage.
Property exempt from restitution includes: (i) property in public ownership, according to the Constitution, (ii) property used by government bodies to conduct their activities, (iii) property used for medical, educational, cultural and similar purposes, (iv) property belonging to an entity subject to privatisation but not yet privatised, (v) property used for representational purposes by the National Parliament and the President, (vi) property used by diplomatic- consular representatives, (vii) property that has been sold in the course of privatisation, (viii) nationalised companies.
The Republic of Serbia is the obligor when compensation is awarded.
Compensation is given in the form of government bonds. For reasons of economic stability of the country the aggregate limit of compensation covered by government bonds is set at EUR two billion and limited to EUR 500,000 per person, increasing 2 percent per annum from 1 January 2015. The amount owed in bonds will be repaid in annual instalments until their maturity – typically 15 years from their issuance. The compensation terms and conditions (yearly instalments under government bonds, etc.) are to be regulated by the government by 31 December 2014.
Furthermore, bonds can be freely traded on the stock exchange and are not subject to any tax.
The Restitution Act provides for the formation of a government agency responsible for implementing the process of restitution and compensation, including rendering first instance decisions on requests for restitution and compensation.
The process of restitution will begin once the Restitution Agency issues a public announcement, within 120 days from the Restitution Act entering into force, calling for the submission of restitution and compensation requests by affected persons. Interested persons are entitled to submit a request for restitution and compensation within two years from the day of the Restitution Agency announcement. Submitting a request to the Restitution Agency begins the process. The Agency may suspend the procedure until the completion of proceedings for rehabilitation, which are governed by a separate Rehabilitation Act. The Restitution Agency must render a decision within six months or, in complex cases, one year from the day the procedure began.
A person who has property restituted acquires the ownership right over the property and may register this right in the real estate register based on the decision on restitution.
On the basis of a decision awarding compensation, the responsible authority will issue government bonds.
For reasons of economic stability of the country the aggregate limit of compensation covered by government bonds is set at EUR two billion and limited to EUR 500,000 per person, increasing 2 percent per annum from 1 January 2015.