Property Rights in Eastern Europe

HL Deb 29 April 1998 vol 589 cc362-78

7.25 p.m.

Lord Harris of High Cross

rose to ask Her Majesty's Government what action they intend to take to encourage eastern European candidate member states of the European Union to pursue domestic policies which respect private property rights and to provide for the restitution of property confiscated from British nationals, in conformity with Resolution 1096 of the Parliamentary Assembly of the Council of Europe.

The noble Lord said: My Lords, the general question that I wish to raise could hardly run wider or deeper into the economic, political and constitutional requirements of free societies. Since I shall have something to say about another country, Slovenia, that has much to learn about the niceties of freedom, I would dwell for a moment on the remarkable example set by this unelected House at the present time. It is not commonly seen as a cradle of democracy. Let all men wonder, therefore, that, as a humble, individual, independent Back Bencher, a mere life Member of your Lordships' House—what might be thought the lowest form of lordly life—without encouragement, by your leave or the least influence by parties, or Ministers, or Whips, I am able to require a senior member of Her Majesty's Government to come to this place, to listen to my plea and, I hope, to give some account of the Government's attitude. I am nonetheless greatly obliged to the noble Lord, Lord Whitty, for stepping into the breach amid his many other pressing responsibilities.

Large general principles are often best illustrated and brought to life by particular examples. The principle in question here concerns the western conception of the rule of law as the surest guarantee of security for every citizen's person and property. My Question amounts to asking whether Her Majesty's Government agree that a British citizen is entitled to expect equal protection of the law from another supposedly friendly government, especially a government seeking to enter the comity of western nations, and more especially one anxious to qualify for European Union membership, and, of course, for European Union subsidies.

The particular case, of which I have given notice, concerns Dr. Ljubo Sirc, born in Slovenia, Yugoslavia, whose story can be briefly recounted. Having graduated in law and economics at the University of Ljubljana in 1943, he patriotically joined Tito's partisans and tramped the hills wearing the red button. After demobilisation he rejoiced to hear of the Churchill/Roosevelt declaration in favour of multi-party democracy in eastern Europe. In that spirit he joined in the efforts to organise a democratic opposition to the ruling communists and was on good terms with western diplomats, especially the British, whom he had met in his capacity as official interpreter. In addition to immaculate English, Dr. Sirc now speaks German, French, Italian and, most recently, Russian.

In the first flush of the post-war communist dictatorship, he was denounced for treason at a show trial. In 1947, along with others, he was sentenced to death and loss of all family property in Slovenia. Execution was commuted to 10 years' imprisonment and after seven years he was released. He promptly escaped—this was in 1955—and made his way via Switzerland to England where I first met him in 1961. All these events are vividly documented in his autobiography Between Hitler and Tito. He took up an academic career starting in Bangladesh, became a British citizen in 1964 and eventually retired in 1985 from Glasgow University, in the very heartlands of New Labour, where he now lives with his British family when he is not back in Slovenia.

The first democratic government of the new Slovene Republic in 1990 lost no time quashing his sentence in January 1991 and passing an Act providing for the denationalisation and return of confiscated property to all who had been wrongly dispossessed. One aim was to restore capital into the hands of entrepreneurs who in the 1930s had remarkably raised Slovene output close to that of neighbouring Austria.

Alas, in 1992 a new government took over under the nominal banner of social democracy and liberal democracy, mouthing the rhetoric of a market economy and entrepreneurship but predominantly controlled by former communists and their hardline supporters and, in that respect, unlike Poland which the noble Baroness, Lady Cox, will be talking about shortly.

Under President Kucan and Prime Minister Janez Drnovsek there have been endless legal delays and administrative procrastination indicating a rooted reluctance to return property which would obviously strengthen the independent enterprise sector and reduce political control of the economy. Hence here we are, seven years later, and Dr. Sirc still awaits restitution of most of his family's residential and productive property. Meanwhile, a campaign to emasculate the law on denationalisation and rehabilitation was orchestrated by Igor Bavcar who is—believe it or not—the Minister for Europe.

In January 1998 a new law was enacted retrospectively discriminating against the victims of communist terror whose claims were to be assessed under vague new general rules. This not only violated the constitution but was in clear conflict with the most solemn provisions of the European Convention on Human Rights and, even more specifically, of Resolution 1096 drawn up in 1996 by the Parliamentary Assembly of the Council of Europe. This resolution is a splendid declaration of the liberal temper of the West which is a million miles—or should I say 1.6 million kilometres—from the opportunistic, even shifty, manoeuvres of fancy-named, so-called "democratic " parties still imprisoned in their communist past. I ask noble Lords to listen to the fine phrases of the resolution: The heritage of former Communist totalitarian systems includes over centralisation, bureaucratisation, monopolisation and over-regulation". It sounds almost like Mr. Blair or even Margaret Thatcher, lecturing those European corporatists. The resolution goes on to warn against, collectivism and conformism to blind obedience and other totalitarian thought patterns and specifies what it calls the, dangers of a failed transition process which it goes on to describe as, oligarchy instead of democracy, corruption instead of the rule of law, and organised crime instead of human rights. At worst, the result would be the 'velvet restoration' of a totalitarian regime". The resolution is so good that one cannot have too much of it. It continues: Material compensation should be awarded to (rehabilitated) victims of totalitarian justice, and should not be (much) lower than the compensation accorded to those unjustly sentenced for crimes under the standard penal code in force". For the avoidance of doubt, as lawyers say, Article 10 of the resolution by the Parliamentary Assembly of the Council of Europe re-emphasises that, property illegally or unjustly seized by the state, nationalised, confiscated or otherwise expropriated during the reign of communist totalitarian systems in principle be restituted to its original owners". Its concluding words are: Claims and conflicts relating to individual cases of property restitution should be decided by the courts". It is sad to report that the present communist-tainted government is now seeking to employ the abomination of retrospection—in defiance of the Slovene constitution—to amend the 1991 law on restitution and rehabilitation so as to discriminate against the victims of the earlier communist terror. Thus a government which aspires to join the European Union flaunts its contempt for the civilised requirements of the Council of Europe resolution.

This retrospective law is now to be challenged and is before the constitutional court, which was mercifully established under the coalition government in 1991, but which is now being subjected to the most deplorable intimidation from the state controlled television and press. Thus the national television first misrepresented the position of the constitutional court, then challenged the chief justice to respond and finally refused to publish his answer.

In a quite unprecedented press release the secretary of the constitutional court expressed, grave concern over the extremely immature and irresponsible conduct, not only of influential Slovenian politicians, but also of reputable lawyers and, not least, of national television, who show their contempt for what we could call the heritage of European legal civilisation". Dr. Sirc and others await the verdict of the constitutional court. It is a test case since it will clearly take much courage for the judges to rule against the government's retrospective and discriminatory schemes to weaken the rights of the victims of earlier communist oppression. What is at stake is nothing less than Slovenia's fitness to be regarded as even an apprentice candidate for European Union membership.

I understand that Her Majesty's Government cannot intervene in another country's judicial proceedings even in the interests of protecting the property of a British citizen, but I urge the Minister to take note of these deplorable proceedings and to reaffirm Resolution 1096. Indeed, its final words specifically call on the West to give "aid and assistance" to these emerging democracies. The best aid and assistance we can give is gentle but firm advice on the need to uphold the rule of law in the defence of the rights of all law-abiding citizens to the peaceful enjoyment of their freedom and lawful property. I understand that German citizens receive favourable treatment on restitution partly because the German Government have made their presence felt in eastern Europe. I now hope for a judicial word or two from the Minister on behalf of British citizens. A ringing reaffirmation of the Council of Europe's resolution would have the further advantage of guiding other governments in eastern Europe, even including Hungary and Poland, which are under constant domestic pressure to backslide into old communist ways.

In conclusion, as an economist, I would add that the scrupulous respect for property rights would have the further advantage of encouraging both domestic and international investment in the future economic prosperity of Slovenia and other eastern European countries which we all wish to see flourish.

7.38 p.m.

Baroness Cox

My Lords, I wish to make a contribution which may achieve a dubious distinction of being simultaneously somewhat wide of the mark and also too specific: wide of the mark in that I do not address the latter part of the Question of the noble Lord, Lord Harris, and too specific in that I wish to focus on just one country, Poland, as a case study or exemplar.

However, I do have the temerity to speak, despite these limitations, because I am grateful to the noble Lord, Lord Harris, for initiating this important debate on a subject which is of fundamental significance. I appreciate enormously the robust way in which he introduced the topic. I really appreciate the opportunity the debate provides to pay tribute to the remarkable achievements of the countries of central and eastern Europe in their transition from old-style communist, centralised economic systems towards the development of free markets, the encouragement of private enterprise and the right to the freedom to own private property.

I wish to take the example of Poland because I knew the situation there very well during the dark years of repression under the Soviet Union and of martial law during the 1980s. Then, I visited regularly under the auspices of two organisations, the Medical Aid for Poland Fund (MAPF) and the Jagiellonian Trust. I now visit in very different capacities, on visits which would have seemed inconceivable only 10 years ago. The differences between those visits then and my visits now are dramatic and illustrate the fundamental links between economic and political systems as well as the enormous scale of the change brought about by the emergence from totalitarian Communism to political democracy and its associated rights, including property rights.

Similar transformations have been achieved in other countries of eastern and central Europe. I have some direct experience of Romania and of the Czech Republic. However, given the time constraints, I should like to concentrate on Poland because there are many similarities, although there are, of course, many differences also.

I should like to begin with a brief trip down memory lane to highlight the scale and scope of change accompanying the economic and political transformation over the past few years. With MAPF, I used to travel on 32-tonne trucks, taking essential medical supplies which were themselves a reflection of the dire situation in a country under Communist rule. Those trucks did not contain sophisticated, modern technical equipment; they were filled with cargoes which were direct responses to urgent requests from Poland: for such basics as bandages for the University Hospital in Warsaw; catheters; syringes, needles; incubators for new-born babies; and gluten-free flour for people suffering from coeliac disease.

That dire lack of essential medical supplies was reflected in the statistics of the harsh realities of disease and death. National life expectancy for men fell five years in five years—from 69 to only 65 between 1985–89. In 1989, only 3 per cent. of men in southern Poland lived to receive their pensions at the age of 65. Those figures are almost impossible to imagine in a country on the continent of Europe from the perspective of western Europe, but those figures are repeated in all the other countries of eastern and central Europe and in the Soviet Union.

However, health statistics are only one aspect of the interrelated strands of a tapestry of man-made catastrophe. The shortages of other essentials such as food, and particularly citrus fruit, had to be seen to be believed. In all the years I visited Poland between 1982 and 1989, I saw only one lemon for sale—outside a Communist Party shop, at a price of £12. People had to queue for hours outside shops with no guarantee of food when their turn came to head the queue; old people died in those queues.

But the dire physical conditions of the people were surface manifestations of a deeper suffering, a deeper deprivation: the deprivation of freedom. To pass beyond the Iron Curtain was to feel as though one was entering a vast prison in which independent-spirited peoples were subject to political domination designed to constrain their basic political, intellectual and spiritual freedoms. With the Jagiellonian Trust, we tried to maintain spiritual, cultural and academic lifelines to parallel the medical lifeline of MAPF. Underground university meetings and the smuggling of samizdat material maintained contact with a people cut off from the rest of the world, excluded from contact with international media and deprived of access to literature, both classical and contemporary. Taking in the means for the publication of facts and ideas risked serious penalties—even blank paper could result in one's imprisonment. I was told that it was dangerous because it enabled people to write down their ideas. That was the name of the game of totalitarianism.

I hope that your Lordships will forgive those reminiscences. I believe that they are relevant. It is easy to forget the past very quickly, but an understanding of that past is helpful in appreciating the achievements and challenges of the present.

The noble Lord, Lord Harris, rightly emphasised the importance of private property rights. This concept presupposes a massive sea change in the economic and political philosophy of countries engaged in the transformation from Communism to democratic pluralism; from centralised ownership of property and the means of production, to a respect for the right to own private property and to the development of a private sector economy. This in turn requires huge changes in values, attitudes, knowledge and policies.

The achievements of Poland and of the other countries of eastern and central Europe have been phenomenal given their background before they emerged into freedom and democracy. Driving through Poland today, one can hardly believe that it is the same country as 10 years ago. There are visible changes such as new buildings and shops—available to everyone—full of high-quality goods. There are modern garages with fuels where people no longer have to wait several hours in queues simply to fill the petrol tank. The list is endless, but behind those changes are deep changes in the political and economic infrastructure.

Those changes mean that Poland has gone a very long way towards fulfilling the criteria for EU membership, including progress in development of institutions guaranteeing democracy and the rule of law; a transition to a market economy; and an ability to survive under competitive forces and market competition within the EU.

However, the concerns raised by the noble Lord, Lord Harris, do merit serious consideration, as the restitution of unlawfully confiscated property is an important element in developing the principles and policies of the development of the private sector.

During the period of transition, help from sources such as those provided by the British Know-how Fund was invaluable. Other key contributions include many kinds of partnerships with academic, political and professional institutions in the West. If I may declare an interest as Chancellor of Bournemouth University, I cite one example: a partnership between our university's School of Finance and Law with the Warsaw University of Insurance and Banking.

The establishment of the economic infrastructure of a market economy, with the development of basic financial services such as insurance and reinsurance is crucial and has been greatly assisted by such partnerships. I must add that the benefits of those partnerships are not one way. In my experience, all who have been involved from this country emphasise that they receive as much as they give, in collaboration with highly qualified and very able colleagues responding to joint challenges on a basis of very different past experiences.

To draw to a conclusion, as I have said, I am not commenting in any detail on the specific aspect of the restitution of property which forms the second part of the noble Lord's Unstarred Question because that is a complex issue and I prefer to devote my limited time to the broader issues inherent in the first part of the noble Lord's Question. The economic and political development of the countries of eastern and central Europe, with their achievement of parliamentary democracy and their progress towards a market economy, are of immense significance for the stability and peace of the whole of Europe.

Much has been achieved already and I should like to take this opportunity to congratulate those who have made those achievements possible—primarily, of course, the people themselves, with the sacrifices they have made, their vision, their courageous commitment to the values of freedom and democracy and their strenuous endeavours to turn those values into viable policies.

I hope that the Government will be able to give an assurance that they will continue to provide the appropriate assistance and encouragement which have been so valuable to enable these peoples to develop the good work that has already been accomplished and to build a future which brings even greater benefits of democratic freedom, coupled with vibrant, robust economies, enabling them to play a full part in, and to make their distinctive contributions to, the family of European nations.

7.48 p.m.

Lord Goodhart

My Lords, the noble Lord, Lord Harris of High Cross, has done the House a service by raising this issue. I cannot speak to the facts of the particular case that he raised, but I believe that respect for private property rights is essential both to the European Union and to the Council of Europe. Freedom of movement of capital is one of the basic principles of the European Community Treaty, as is the right of establishment. Any action by member states, such as seizure of property without proper compensation, would inhibit the movement of capital into and out of the country concerned and would deny an effective right of establishment. Therefore, it would plainly be inconsistent with the treaty.

Member states of the Council of Europe are bound by the first protocol to the European Convention on Human Rights to respect property rights. Article 1 of the first protocol states: Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall he 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". Article 1 of the protocol goes on to say: 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". Therefore, respect for private property rights is consistent with such matters as planning control, control over polluting discharges, control of housing standards and so on. It is also consistent with the right of the state to acquire property such as land or shares compulsorily if proper compensation is made and the acquisition is for a proper purpose. Rights of private property are therefore not absolute and unconditional.

The noble Lord has referred both to the European Union and the Council of Europe. There is a close linkage between the European Union and the European Convention on Human Rights, although the latter is a production of the Council of Europe. The European Union has not acceded to the convention; indeed, the European Court of Justice has held that it is not competent to do so. But Article 6, paragraph 2, of the Treaty of European Union (in its new numbering) states: The Union shall respect fundamental rights as guaranteed by the European Convention for the Protection of Human Rights and Fundamental Freedoms … and as they result from the constitutional traditions common to the Member States as general principles of Community law". All candidate member states from eastern Europe are members of the Council of Europe and have ratified the European Convention on Human Rights including the first protocol. I agree that for admission to the European Union a state must recognise property rights not only in theory but in practice. We are all too familiar with the constitutions of the Soviet Union and other communist states which propounded admirable principles but which were totally ignored in practice.

Her Majesty's Government and other member states of the European Union need to satisfy themselves fully that candidate states respect private property before they are admitted to the European Union. They must satisfy themselves that those states respect not only property rights but other rights contained in the convention, some of which are perhaps even more important than property rights, such as freedom of speech, freedom of assembly and association, the right to a fair trial and the right to free elections.

The main point raised by the noble Lord is perhaps his second one, which is that candidate states should be encouraged to provide for the restitution of property confiscated from British nationals. That was the subject at issue in the specific case that he eloquently presented. Certainly, that is something to be encouraged. Our record in this country is by no means spotless. As two recent debates in the House have shown, it has taken us over 50 years to provide even very limited redress for the government's failure to return the assets of German Jews confiscated during the war on the ground that technically they were enemy aliens.

It is right that eastern European states should restore the property confiscated by communist governments to the people from whom it was confiscated. They should restore such property not only to British nationals, as the Question raises, but to citizens of other states and, above all, to their own nationals or—as in the case referred to by the noble Lord—their own former nationals who, after all, have been the main victims of the confiscation. Candidate states should be encouraged to return confiscated property to its former owners where practicable and to compensate where restoration is not practicable, as Council Resolution 1096 proposes. Clearly, it is a factor to be taken into account in deciding whether a candidate state is ready to be admitted to the European Union. My only qualification is that it should not in all cases be made a necessary condition of entry to the European Union.

Candidate states have suffered the trauma of communist rule for more than 40 years since the end of the war—in some cases it began during the war—until 1989 or, in the case of Estonia, 1991. It may not in all cases be economically or legally practicable to reopen confiscations for which the present governments of those countries are not responsible and which occurred more than 50 years ago. Nevertheless, I very much support the proposition raised in this Question that, where it is practicable to do so, states should be strongly encouraged to ensure that restitution is made for the confiscation of property by the communist governments of the present candidate states.

7.55 p.m.

Baroness Rawlings

My Lords, I too thank the noble Lord, Lord Harris, for initiating this debate not only because it is an important issue worthy of your Lordships' consideration but also because I believe that by heightening this issue in the public domain our aims will be best achieved. We all know that it is wrong to remove private property from individuals. The principles of Conservatism ensure that every individual has a right to the property he has worked for or has had the good fortune to inherit. It is also right that we strive to protect the property rights of former residents of the central and eastern European countries whose property was confiscated in the past.

This can raise knotty and sensitive political and legal issues. The terms of each case vary greatly depending on which country and which nationalities one is considering. I fear that universally fair solutions are impossible and that therefore a case-by-case approach must be taken. Blanket condemnation of these countries does not appear to be constructive.

The noble Lord, Lord Harris, made particular reference to Slovenia. Slovenia had a problem with Italian residents on Slovenian territory. In 1945 they opted for Italian nationality. In 1965 the Treaty of Osimo between Italy and Yugoslavia provided for 150 million US dollars compensation to be paid through the Italian Government who had been the aggressor and had lost the war. Yugoslavia honoured the first two tranches of the payment. Later, Slovenia took over the obligation of the treaty. In the mid-1990s the Italian Government obstructed progress towards enlargement unless the Treaty of Osimo was revised to their advantage.

A compromise solution is now embodied in the Slovenian Europe Agreement to the effect that any national of the European Union who can prove to have been a Slovenian resident for more than three years may purchase property, the understanding being that Italian nationals who have received compensation may use those funds to buy back their properties. That appears to be a satisfactory solution in this particular case.

Does the Minister believe that the human rights clause of the Treaty of Amsterdam can be used satisfactorily to ensure that such issues are resolved prior to the accession of these countries? Do the Government believe that additional initiatives are necessary? If so, which?

I should like to focus on a further dimension to the Question tabled by the noble Lord. I understand private property rights to encompass the rights of those individuals and companies who invest in central and eastern Europe. I believe that foreign investors should in particular have the right to own assets, repatriate profits and capital and have adequate protection in case of bankruptcy. Legislation regarding private property thus understood is a crucial element of the legal system in respect of the future potential of these countries.

Most central and eastern European countries will need to reform or to complete the reform of their legal systems in that respect for an adequate legal system is the most important element of the framework necessary to effect the transition to a market-oriented economy. Only a market economy will deliver the economic growth that those countries need so desperately. Those of us who have visited those countries regularly will have witnessed the misery, the deprivation and the suffering caused by the oppression of communism that followed so soon after the tragedy of the war, so eloquently described by my noble friend Lady Cox. The countries are now going through more pressures, with the ultimate aim of rejoining the European fold—the paramount foreign policy objective of applicants to the EU.

Creating a framework conducive to a market economy is a complex enterprise. It requires stable, reform-oriented governments capable of maintaining macro-economic stability. Where and when that has happened, progress has been fast. If that constellation of circumstances does not occur, the consequences may be dire. Like my noble friend Lady Cox, I shall concentrate on just one country. I hope that I shall do so as well as she did with regard to Poland.

I take the case of Bulgaria which has experienced both scenarios. Since November 1989, Bulgaria has progressed remarkably peacefully through the difficult transition from communism to a democracy and from a command to a market economy. Bulgaria has proven to be an island of stability in the Balkans, setting high standards of decency and dealing admirably with foreign policy and security challenges.

However, for a long time the internal political situation was fragile. The adoption in 1991 of a new constitution, and the election in October of that same year, marked a crucial retreat from communism. The new democratic government initiated a wide-ranging programme of structural reform but they laboured under the continuing opposition of the former communists. The government crisis of October 1992 allowed the communists to regain some terrain, and the lack of a cohesive majority slowed down their reforms.

The law on ownership restoration in 1992, compensation law in 1993, and bankruptcy law in 1994 were in fact enacted. Nevertheless, tax reform remained incomplete, and the legislation regarding foreign investment and ownership still needs to be made more attractive.

The return of the former communists to government from 1994 to 1997 spelt disaster for the country. It experienced a sharp economic contraction (-10.9 per cent. in 1996, and -7.4 per cent. in 1997) and rampant inflation of over 1,000 per cent. in 1997. That crisis was due mainly to a failure to push forward the restructuring of state industries and the privatisation programme, in particular of the banking sector. That sector experienced a dramatic liquidity crisis, notably showing up the deficiency in the protection of creditors.

Out of that crisis emerged a new cross-party consensus, backed by the dynamic new president, Peter Stoyanov, elected in November 1996. After the spring 1997 election, a new democratic government came to power. The new and current government have a strong majority and are deeply committed to reform. Banking reform and privatisation—especially of large companies—were accelerated, with the clear will to involve foreign investors. In June, a new banking law was passed. In August, the first privatisation of a major state bank (the UBB) took place. In October, a new foreign investment law, lifting a number of persisting restrictions to foreign investment, reached the statute book.

The present government's commitment to reform has had an immediate impact on direct foreign investment. It jumped from 100 million dollars in 1996 to well over 500 million dollars in 1997. It is expected to grow equally dramatically this year. Bulgaria's economic prospects have also improved. This year growth is expected to be over 2.5 per cent. with inflation down 35 per cent.

Some areas of concern remain. In particular, according to the constitution, foreign persons or companies may not directly acquire land. Foreign investors can own land only if they set up or buy a stake in a Bulgarian-registered company. Other areas such as bankruptcy and company law would benefit from further refinements and clarification. Furthermore, the weakness of the administration and of the judicial system represents a real restriction of the rights of individual investors, which exist on paper. The government must create the climate of confidence which, in the first place, will attract Bulgarian expatriates to invest in the old country. They will, in turn, act as path openers to further foreign investment.

In speaking on Bulgaria I should have declared an interest as a governor of the American University, now sited in the old Communist Party headquarters outside Sofia. The last time I was there I met a student who had set up the university FM radio station when he was at the university. Today he runs the most successful FM station in Moscow, even though he is still only in his 20s. He told me with great pride that he is now able to pay for six students a year to go through his university. He was a remarkable boy. I tell that story as it is people like that who inspire and encourage investors back into a country.

I understand that those issues are to be addressed within the framework of Agenda 2000 and embodied in the accession partnerships. But can the Minister confirm that at the Luxembourg European Council the Prime Minister managed to win an agreement of which the noble Lord, Lord Richard, said: There is no pre-determined order of accession. Individual countries can catch up or be caught up".—[Official Report, 15/12/97; col. 405.] Does that mean that if they reach the required democratic and economic standards they can apply? If so, that will give countries such as Bulgaria tremendous hope for the future. Will the Minister admit that the present EU approach to enlargement is insufficient to help Bulgaria and other like central and eastern European countries speedily towards accession? How will the British Government, particularly in their current role as president of the EU, encourage the countries to act?

As I said, I have addressed only the first part of this Question. I began by thanking the noble Lord, Lord Harris, for initiating this debate, and I shall finish in the same fashion. It is only by raising the public profile of the issue in a manner such as this that we can try to persuade the Government and the countries involved to take action.

8.8 p.m.

Lord Whitty

My Lords, I, too, thank the noble Lord, Lord Harris of High Cross, for initiating this important debate, and other noble Lords who have participated. As noble Lords are aware, it is a basic principle of international law that a state ought not to expropriate the property of foreign nationals except for genuine public purposes, and with prompt, adequate, and effective compensation. The Government expect all countries to abide by those principles and, in particular, to respect the property rights of British nationals. That is particularly true, of course, of our fellow members of the EU and the 10 former Communist countries of central Europe which have embraced the free market and private property, and have sought membership of the EU.

The UK wishes all the applicant countries of central Europe to join the EU when they are ready. In order to join, each applicant country will have to be able to take on all the rights and obligations of EU membership, known as the "acquis". These include respect for fundamental rights as guaranteed by the European Convention for the Protection of Human Rights and Freedoms, set out in Articles F and 0 of the Treaty on European Union (as slightly amended by the Treaty of Amsterdam).

Before looking at the details raised in the debate, it might be useful to put the issue of private property rights in context. In part, I follow the lead of the noble Baroness, Lady Cox, who put the matter eloquently. We must recognise that the recognition of private property rights is part of the creation of a sustainable pluralistic economy and a sustainable pluralistic society and democracy. The shift to recognition of private property rights is a massive sea change in the economic and political philosophy of those countries which have undergone 50 years of totalitarian Communism.

It is part of a sea change alongside enormous achievements, for example, of Poland and other countries in transforming their societies, their economies and their politics. It is less than a decade since the fall of the Berlin wall after half a century of totalitarianism. The fact that they have not all totally, explicitly and clearly in all respects implemented the principles which we take for granted in the West should be forgiven for some period. There are enormous difficulties in these applications.

Nevertheless, all 10 central European countries have ratified the European Convention, the First Protocol of which enshrines the principle of respect for private property. That is an achievement it itself. It means that British nationals no longer need fear unjust confiscation of their property in these countries.

However, desirable as these developments are, the provisions do not operate retrospectively. In particular, there is no guarantee of restitution for those whose property was seized during World War II or under the former Communist authorities in the Soviet Union, eastern Europe or Yugoslavia. In those circumstances, Her Majesty's Government have not tolerated the unlawful confiscation of the property of British nationals.

There are a number of different instances where that might arise. In accordance with international law, Her Majesty's Government cannot normally take up a claim unless the claimant was a British national both at the time the claim arose and at the time HMG present the claim to the respondent state. Even then, the claimant must also have exhausted all available local legal remedies.

Where a large number of claims are outstanding, however, successive British governments have negotiated bilateral agreements to provide for compensation. Following the end of the Second World War, up until the downfall of Communism in Europe, the Government negotiated various compensation agreements with most of the former eastern bloc countries, including the former Soviet Union and Yugoslavia. Those agreements provided for lump sum payments to be made to HMG to compensate British nationals who had lost property in the eastern bloc. That compensation was distributed to claimants by the Foreign Compensation Commission, an independent statutory body. All the compensation funds have now been exhausted and wound up.

One of the conditions of the agreements was that the UK waived its right to make any further claims against the countries concerned in respect of the claims settled by the agreements. The UK must continue to honour those agreements.

The position is slightly different if the British national concerned also held a second nationality at the time of confiscation, particularly if it was as a national of the respondent state. Where the claimant is a dual national, HMG may take up his or her claim, although in certain circumstances it may be appropriate for the Government to do so jointly with the other government concerned. We will not normally take up the claim of a UK national if the respondent state is the state of his or her second nationality. However, we may do so if the respondent state has, in the circumstances which gave rise to the injury, treated the claimant as a UK national. Dual nationals were covered by the bilateral agreements I have mentioned, provided that both nationalities were held at the time of expropriation.

The situation is more complex where the British national seeking compensation acquired citizenship only after expropriation occurred. Such British citizens were not covered by the bilateral agreements. Instead, they must rely on local legal remedies. Thankfully, most of the states of central and eastern Europe have more recently passed laws which fully or partially provide for the restitution of property seized by the former communist authorities. Therefore, their own regimes apply. Briefly, the Czech Republic, Slovakia, Hungary, Estonia, Latvia, Lithuania, Slovenia and, in part, Bulgaria have all passed some form of restitution law. As the noble Baroness, Lady Rawlings, pointed out, those laws are variable and the degree of implementation has been variable. Nevertheless, they are committed to those laws and they form part of our assessment as to their suitability for membership of the European Union.

Poland has yet to pass property restitution legislation. All legislative proposals have so far fallen. However, the recently elected government in Poland was committed to producing such legislation in its manifesto. It is also true that in Romania opposition efforts to provide the full restitution were defeated in favour of more limited forms of compensation.

The question raised in the debate is whether Her Majesty's Government should press those governments who have yet to enact legislation to compensate those whose property was seized prior to 1989 or to advocate individual cases which may already be before the courts of a particular central European state. The general point is that the European Union accession process will require them not only to have within their body of law, but also to implement, requirements for the recognition of property which will apply in most cases, though not necessarily all.

The noble Lord, Lord Harris, suggests that it is for the British Government to press the governments of central Europe to enact full restitution laws on the basis of the Council of Europe Resolution 1096. That resolution recommends: that property…which was illegally or unjustly seized by the state, nationalised, confiscated or otherwise expropriated during the reign of communist totalitarian systems in principle be restituted to its original owners in integrum…[or] in cases where this is not possible, just material compensation should be awarded. Claims and conflicts relating to individual cases of property restitution should be decided by the courts". All the countries of central Europe are now members of the Council of Europe and are therefore committed to maintaining standards in the areas of human rights, pluralist democracy and the rule of law. However, that resolution is only a recommendation and is not in itself binding on Council of Europe member states. It is therefore best dealt with in the context of access to the European Union.

In helping British nationals to pursue claims against the governments of central Europe, Her Majesty's Government must balance a number of competing objectives. The confiscation of property obviously causes great hardship to the individuals concerned, but there is a financial burden on the countries of central Europe, all of which have undergone difficult, vital and costly economic and social transitions. The British Government believe that the full economic and social transition of central Europe, ultimately culminating in membership of the European Union is vital for the development of all Europe.

Where there are outstanding claims against the governments of central Europe by British nationals, we have ensured that the relevant authorities are aware of the public concern. The British Government may provide consular assistance on a case by case basis.

As a basic principle, the Government have offered support to those countries in developing their administrative and legal procedures in dealing with these issues. As the noble Baroness, Lady Cox, knows, the Government's Know-how Fund, which was set up to support those countries, has consistently offered to the governments of central Europe support on their legal systems, including in particular contractual and property rights.

I turn specifically to Slovenia. It is complicated partly because it has experienced a serious property crisis with the Italians which has threatened to result in a major diplomatic issue. Thankfully, it has been resolved. Also, in a sense, Slovenia was only part of the state which confiscated property. Similar problems arise with the Baltic States in that regard.

When Slovenia became independent in 1991, its parliament decided to give back to the former owners property and enterprises confiscated by the Communist regime from 1947. There are three methods of reclaiming property: normal court proceedings, summary proceedings if the claimant has documentary evidence of former ownership, and denationalisation proceedings by application to local authorities.

In a population of 2 million, Slovenia has had 40,000 claims. That is an immense legal and administrative burden. It is being dealt with by the courts or the local authorities where the property or enterprises are situated. It will be appreciated that processing those claims involves extensive checking of records and archives to trace and confirm rightful ownership. That takes a considerable amount of time. The sheer volume of claims is therefore limiting the degree to which they are processed. However, there is also a political and legal argument within Slovenia, to which the noble Lord, Lord Harris, referred.

As background to that, I need to depart somewhat from the position of the noble Lord, Lord Harris. In our view, Slovenia is a functioning democracy. It is true that in a functioning democracy, elements sometimes come to power of which we may not particularly approve. Nevertheless, basic parliamentary political democracy exists there. In Slovenia, the law was introduced in 1991 and it has denationalised and returned a vast amount of property and land within that country.

In December 1995, the national assembly passed a law in relation to the partial and temporary suspension of restitution of property which put a three-year moratorium on the return of land. That change reflected the concern that a large amount of the acreage of Slovenia was being returned to foreign owners and in particular to owners associated with the previous royal family of Yugoslavia and with the family of Thurn and Taxis who owned substantial land within Slovenia.

In the case of the ex-royal family, the constitutional court ruled the claim invalid as it was originally confiscated in relation to the abolition of the monarchy and was therefore excluded.

In January last year, the constitutional court ruled that that temporary moratorium was illegal and that it should he rescinded as from July 1997 and that in the intervening period parliament should adopt new amendments to the 1991 law and also, possibly, put them to a referendum. Neither the amendments nor the referendum has yet taken place and there is a considerable political debate within Slovenia as to what is going on.

Our concern is that that issue is nevertheless being processed through the Slovenian courts. Those claims are being processed, including the claim mentioned by the noble Lord, Lord Harris of High Cross. There are obviously other political undercurrents which are affecting the debate in Slovenia. Morality on those issues may not be quite as clear cut as it may seem. After all, I suspect that it is unlikely that the means by which the Count of Thurn and Taxis obtained the Slovenian lands over the centuries of the Austro-Hungarian empire did not entirely conform to the European Convention on Human Rights. Nevertheless, those matters must be tackled. The politics and internal affairs of Slovenia must have their own processes to try to change that law.

I cannot comment in vast detail on individual cases. The Foreign Office is well aware of that case. The noble Lord should be aware that compensation in relation to some of the claims has been settled and others are ongoing within the courts. Therefore, that case has not been severely affected by the latest moratorium.

Clearly, the Government and the European Union as a whole would wish to see the situation resolved within Slovenia. But in general, we consider that the Slovenes are capable of that resolution. Their democracy and, admittedly, relatively new free court system will be able to deal with those issues. It may take time, but any country faced with 40,000 such claims, which raise in many cases emotive and difficult legal and social issues, needs to be given time to settle them all.

We still believe that Slovenia is a functioning democracy and ought to be a member of the European Union. But at the end of the day—if I may give this comfort to the noble Lord, Lord Harris—unless respect for property rights is clearly established, neither Slovenia nor any other applicant state will be regarded as suitable for full membership of the European Union.

House adjourned at twenty-five minutes past eight o'clock.