This lecture will address the fundamental concepts of socially-owned property and socially-owned enterprises in Kosovo. I intend splitting my short presentation into three parts, the first a brief history of the notion of immovable property, the second a definition of socially-owned property , the third a definition of socially-owned enterprises. I will try to give you both a historical and an actual position as at today.

History

Most of you will be coming from jurisdictions where the idea of ownership of private property is well known in some form or other. To understand socially-owned property here you have to forget all your notions of private property. Socially-owned property in the old Yugoslavia was a home-grown adaptation of orthodox Marxism.

How did the concept of private property and the need to protect it from usurpation come about? Limiting the exercise to the notion of private ownership of land in the western world, at the earliest known times man was a hunter-gatherer, a nomad moving from place to place. Ownership was restricted to movables and typically meant personal property - clothing, personal belongings, a horse. Then man moved to agriculture. Land became identifiable as something that could be linked to a tribe or nation and was typically owned by society in common, or perhaps belonged to God or nature. As far back as 4000 BCE there is evidence of fences and ditches in the UK and in Germany, the notion of fencing off property that belonged to a community or to a tribe or to a family.
Then came the Romans and the Teutons, the Teutonic tribe in what we now call Germany. Here in the time of the Romans we can identify two different notions of property. The Greeks and the Romans of the republic were essentially nations of citizens; the citizen was important and the nation was there to help the citizen. The Teutons held that property was to be enjoyed in common and there was an absence of private ownership, except to a limited extent. The meaning of the word property has changed over the course of centuries. Roman law made some effort to allot land titles to private individuals and families. For the Romans ownership (dominium) is an absolute right. Roman law made some effort to allot land titles to private individuals.
The influence of Roman law comes down to our ages, with minute detail about the legal regulation of property rights, easements, usufruct, lease.

Fast forwarding to the Middle Ages the notion of ownership of land began a transformation from "leasehold" to "freehold." Against the will of the monarch noblemen seized the land for themselves. They created their own fiefdoms, surrounded by fences, defended b forts and ramparts. In central Europe noblemen built castles , still standing till today, to defend their land, the beautiful castles we find in Germany , Austria and Italy.

Standing in parallel there are areas which are common to all and areas which are “owned” by one person, family or group.
Later still came various movements dictated by necessity and by philosophical beliefs. Think of Locke and John Stuart Mill right down to Marx. What started as a right to use developed into a right to sell and make money and to speculate.

The notion of private ownership of property is today an accepted notion. In my view the least common factor for the concept of private possession is now found in the protection that is afforded to private property and to private possessions in the various instruments and conventions of human rights and in particular for our purposes here in Kosovo, as we shall see later, of the ECHR in Article 1 Protocol 1 to the European Convention of Human Rights.

Let us now come to Kosovo. Again forget all your ideas about private ownership. The history of Kosovo cannot be divided, for our purposes, from the history of the old Yugoslavia .

The principles of ownership in old Yugoslavia are based on the old Roman law categories. Ownership of land depends on the type of property, natural or juridical, public or private. Properties are regulated according to their nature, civil or commercial, movable or immovable. Ownership is divided as the Romans divided it, the jus utendi, the right to use, the jus fruendi, the right to enjoy its benefits and the jus disponendi, the right to alienate, to transfer. As far as public property was concerned, in the old Yugoslavia, the system functioned in a simple way. Typically a parcel of land that was in the possession of a Municipality was considered to be every citizen’s indivisible property.


Under Tito the situation did not change, as it did in other countries under communist regimes at the time. Property was not considered as belonging to the State. But a new concept was introduced. It was the concept of “social property” which was introduced in the early 1950s. Why was it introduced? Tito adamantly refused to let Yugoslavia become a satellite of the Soviet Union after World War 11 and the Yugoslav Communist party was excluded from the Communist hegemony.

However the country was not economically strong and few enterprises or concerns were profitable. The notion of social property, a collective form of ownership which is not state-property was slowly developed in an effort to generate more productivity.

The fundamental principle of socially-owned property is that it is owned by by all the citizens, namely the broader social community, and it never ceases to be owned by such community. This concept of social community therefore started by being understood as a unique group comprising every citizen of the former Yugoslavia.


Some authors say that this system is not far removed from the principle of family ownership found in the kanun, the old legal system established under the Ottoman empire which still exists in some mountainous parts of Kosovo and Serbia.
A social property is every citizen’s indivisible property, it belongs to the broad social community. Therefore what is important is not ownership but use, it is the user of social property that enjoys its benefits, almost as if he were an owner.

If we look at the philosophy behind this notion we can see that it is a rejection of the Soviet theory and a return to the Marxist orthodox theory of “factories to the workers”. Not to the state, but to the citizens, and in the case of socially-owned enterprises to the workers.


How can we distinguish social property from private ownership? It is different because it does not have the right to full alienation. I can sell you my rights of use subject to certain conditions.

Once the notion of social property was introduced, it was necessary to take privately owned property and convert it to social property. How was social property created? To create social property, land and buildings had to be taken in some way from the private ownership. Five different legal institutions were created to take away property from private ownership. Expropriation, colonization and confiscation were the main three.

• Land was expropriated against payment of a compensation. Frequently the compensation was not paid. You have a decision by a Municipality to expropriate land for public purposes, but the Municipality had no funds. Some contracts do in fact state that compensation was paid, but this was not the case.
• Land was confiscated from people who were declared enemies of the people by a criminal procedure. There were no hard and fast definitions of how one became guilty of this crime, but the moment you were declared an enemy of the people you lost all your rights including the right to any ownership of private property which immediately passed into social ownership.

• Under colonization rules, land in excess of 20 hectares owned by one person was forfeited to the state in favour of social ownership.

The right to inherit property was also restricted so that more private property was to be taken from the private inheritor and passed into social-ownership.

Typically the land taken over from private property was given to the Municipalities which in turn gave it over to cooperatives and to socially owned enterprises. Through these means a large amount of land became socially-owned. The scale of expropriation during the Civil war was massive.


Let us now look at the way in which this social property was regulated by law. Various instruments regulate socially-owned property. The fundamental principle is the notion of the right to use, not the right to own.

The Serbian Law on Registration of Real Properties in Social Ownership in 1971 states in Article 1

“ Real property in social ownership shall be registered in the public registry which registers the right to use such property…”

An important regulatory instrument is the Law on the transfer of immovable property promulgated in 1981. You will notice that the regulation is all related to the use of immovable property and not the ownership. The first provision covers practically all type of land:
“ The transfer of farmland, building land, forests and forest regions, buildings , apartments, business premises, undivided parts of immovable property and other immovable property shall be governed by this law.”

Section 2

“ In terms of this law, the transfer of immovable property shall mean:
1. the transfer of socially-owned immovable property from one socially-owned legal entity to another, the purchase of immovable property to be included into socially-owned property from citizens, citizen associations and other citizen legal entities, the alienation of immovable property from socially owned property the exchange of socially owned immovable property and the disposal of socially owned immovable property on other grounds and
2. the transfer of property title among citizens, citizen associations and other citizen legal entities and the acquiring of property title in relation to socially owned immovable property.”



The law then says that a transfer or exchange of socially-owned property can only be carried out with specific formalities. Socially-owned property can only be transferred in writing, the signatures of the parties have to be authenticated by the Court. You will ask, and what if I had private property coming from the past, before this idea of social property came into effect. The law gives you the answer in Section 3.
“The transfer of immovable property in relation to which there is property title is free unless otherwise provided by law”

The problem of buildings built by private individuals on socially-owned land needed to be solved. So the law says that the transfer of a building implies the transfer of the underlying land .
“ By the transfer of property title to a building situated on socially-owned land the new owner shall be entitled, as long as the building exists, to use the land on which such building is situated and the land required for its regular use.”

Similarly “ By the alienation of a building from socially-owned property, the holder of property title shall be entitled to use the land…”

As I said before there are limits to how much one could inherit. A person inheriting land beyond what is stipulated by law is obliged to sell the extra portion within three years or convert it into “living space” in other words to habitable apartments, otherwise “ such immovable property shall become socially-owned and the owner shall be entitled to compensation according to expropriation regulations.” He must also report to the municipal authority within 30 days of the inheritance becoming valid that he has inherited such property and he must choose which part of the property he is retaining, otherwise it will be the municipality which decides for him.

Farmland and building land, forests or forest regions cannot be alienated from socially-owned property, unless otherwise provided for by law. It can only be transferred between socially-owned legal entities. Organizations of associated labour can only transfer from socially-owned property not more than three hectares of farmland, provided the money is used to purchase other farmland within one year.
There is also a protection for the transfer of the use of other socially-owned immovable property. If the agreed price is in obvious disproportion to the market value of such property the contract may be cancelled.

These are only examples and the law goes into great detail to show that socially –owned legal entities are restricted in the way in which they can transfer assets.

So socially-owned land can only be subject to the right to use and not to ownership. In fact in the Assembly of Kosovo law of 2002 (2002/5) regarding the registration of rights over immovable property the registration about socially-owned property only refers to the right to use.



So that is the legal regime relating to socially-owned property. What is the position today? In 1999 Security Council Resolution 1244 established the UNMIK provisional administration of Kosovo, whereby UNMIK took over the administration of the province. UNMIK has taken a positive role in administration. To give just one example UNMIK Reg 2000/27 set up the administrative Department of Agriculture, forestry and rural development with full responsibility to manage these resources. Among the functions of this Department we find that the Department shall be responsible to formulate and implement a land use policy aimed at protecting agricultural land, including the criteria for re-allotting public land and modifying land use without confiscation.


The Regulations made it clear that laws which did not comply with accepted standards in human rights were not to be applicable in Kosovo and in 1999 two laws which related to immovable property were repealed. One of them was the way in which certain farm land was to be allocated to citizens.

During the Civil war massive nationalization took place, mostly not in line with the applicable laws. There are a large number of cases pending before the Courts where there is an allegation that private property was illegally taken from an owner and there is a request for restitution. Countries which previously formed part of the former Yugoslavia have put laws in place to enable restitution of property to take place. If the property was illegally expropriated, there is a mechanism for restitution. Kosovo does not have such a law. This is a problem which needs to be addressed.

We now come to Socially owned enterprises.


Over 500 business enterprises in Kosovo have been identified as potentially being Socially Owned Enterprises ("SOEs"). These Business Enterprises operate in all sectors of the economy including:
• Commercial real estate
• Hotels
• Mining and mineral processing
• Agriculture and food processing
• Construction and building materials
• Metal processing
• Textiles
• Wineries and vineyards
• Retail and wholesale trade

These strange animals are in line, conceptually, with the notion of socially-owned property. There are no private shareholders or owners as we understand the concept in Western countries. Socially owned enterprises are vehicles of social property. But they are different from social property like land. The user is identified, either as an individual or as a group. They have the right to possess, to keep the revenues and to dispose under certain conditions. Again we are reminded of the old three Roman law rights of utendi, fruendi, and disponendi.


Socially-Owned enterprises were created by the Law on Enterprises and the Law on Associated Labour of Yugoslavia. Since the NATO intervention first UNMIK, then in 2002, the Kosovo Trust Agency has the authority to administer all socially-owned enterprises that were registered in Kosovo as at the 31 st December 1988 or any subsequent date. The Agency has the mandate to privatize such enterprises in terms of a specific procedure. It can also liquidate such enterprises and reorganize them prior to privatizing them. In fact it has commenced a reorganization in arguably the largest umbrella of SOEs , the Trepca mining complex straddling the divided Mitrovica and Zvecan in the North of Kosovo.


The law on Enterprises dedicates 173 articles to deal with socially-owned companies and 4 articles for private companies. It states that the business of a socially-owned Company is managed by the workers. The workers have a strong sense of ownership of the socially-owned enterprises. In cases which we deal with in the Special Chamber of the Supreme Court, the employees of an enterprise will speak of their long years of service with pride and they cannot understand a particular Regulation passed by UNMIK which gives the entitlement to specific benefits to employees who have worked a relatively short time at the enterprise.

SOEs and socially-owned property interact in two ways. You either had an SOE created to develop socially-owned land or you created an SOE and then expropriated land to give to that SOE. The same law has the following interesting definitions”

“Article 6

SOEs can be established by other SOEs, self-management interest groups, local communities and other social legal entities, and the social political community- if performing certain economic activity is an indispensable condition of life and the work of the citizens and work of companies and other organizations and communities in certain fields or if it is indispensable for the work of bodies of that social-political community.”

Here we do not have the self-interest of the shareholders of a Company as we know it in other countries. The aim is an economic one but it has to satisfy social conditions as well. In fact it was common for the workers of an enterprise to be given the use of apartments built by the enterprise.


Article 43:
“A socially-owned Company can raise funds from citizens”
“Citizens can invest items, money and material rights into an SOE.

Article 44;
“ For the funds that an SOE raised from the citizens the citizens shall be entitled to a return of the value of those funds and compensation for the use in the form of interest rate or other advantages, in accordance with the contract.

“ Citizens shall share the joint risk and are entitled to the return of the value of those funds and remuneration for their use dependent upon the results of the business transactions of the SOE.

The decision on the manner and conditions of raising, that is investing the funds of the citizens shall be adopted by the workers’ council. “



These provisions give an idea as to the legal regulation of these enterprises. To come to the factual situation. A large number of these enterprises could not function through the ten years of turmoil between 1990 and 1999. Around 1992 special laws, laws known as interim measure laws were promulgated by Belgrade to apply to specific SOEs or to sectors. These laws applied to Kosovo. Typically the management was changed to reflect a strong Serbian presence in the work force. The managers became Serbian, Albanian employees were dismissed for the flimsiest reasons.

Some socially owned enterprises were transformed into the so-called joint stock companies, where a number of shares were bought by the new Serbian employees and the rest of the shares were taken up by Serbian banks, or by Serbian entities like the Belgrade pensioners association.
Work was scare during the period. A large number of SOE s closed down. Some SOEs which had the use of warehouses or factories, rented the factory space to individuals and the workers were given a small part of the rent in lieu of salary.

When UNMIK and then the Kosovo Trust Agency took over the administration of Kosovo the economic situation of most SOEs was disastrous.

The KTA mandate extends to administration of SOEs but also to the disposal of SOEs by a special procedure. The assets of an SOE are hived off through a special spin-off procedure and these assets are allocated to a NEWCO, a new Company. The Newco is then set up for sale by public tender. The process has had conflicting reactions from various sectors but the KTA has accelerated the process over the last year or so. Uncertainty over the actual ownership of the enterprise has hindered the speed of privatizations as the KTA finds it baffling to determine who are the actual owners of the old SOE. Indeed it is not easy to identify the owners.

A small number of cases have been filed by Belgrade lawyers at the Special Chamber claiming that some SOEs which had been transformed under interim measures to the so-called joint-stock companies were outside the scope of the privatization process and not under the administration of the KTA.


What is the effect of the legal regulation of Kosovo since 1999 on the notion of property?
Since 1999 no socially-owned enterprises can be registered in Kosovo. UNMIK Regulation 1999/24 sets out the law which is applicable in Kosovo as from the 10 th June 1999. Very briefly


1.1 The law applicable in Kosovo shall be:

(a) (a) The regulations promulgated by the Special Representative of the Secretary-General and subsidiary instruments issued thereunder; and

(b) The law in force in Kosovo on 22 March 1989.

In case of a conflict, the regulations and subsidiary instruments issued thereunder shall take precedence.


1.2 If a court of competent jurisdiction or a body or person required to implement a provision of the law determines that a subject matter or situation is not covered by the laws set out in section 1.1 of the present regulation but is covered by another law in force in Kosovo after 22 March 1989 which is not discriminatory and which complies with section 1.3 of the present regulation, the court, body or person shall, as an exception, apply that law.

1.3 In exercising their functions, all persons undertaking public duties or holding public office in Kosovo shall observe internationally recognized human rights standards, as reflected in particular in:

(a) The Universal Declaration on Human Rights of 10 December 1948;

(b) The European Convention for the Protection of Human Rights and Fundamental Freedoms of 4 November 1950 and the Protocols thereto;

(c) The International Covenant on Civil and Political Rights of 16 December 1966 and the Protocols thereto; ……………


Clearly therefore the principles of these international instruments take precedence over other laws applicable in Kosovo and the protection of the human rights instruments is supreme.


The ECHR in Article 1 Protocol 1 protects the right to peaceful enjoyment of possessions .

“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.”

When it comes to the privatization of Socially-Owned Enterprises, the law specifically obliges the Kosovo Trust Agency and the Special Chamber to observe these principles.

This is not the time and the place to discuss some issues that have arisen from the interpretation of these provisions. We have problems, for instance, when the KTA privatizes an enterprise whose assets may include some private property. However the position of Kosovo in this regard has today been placed on a par with other countries which apply the European Convention directly.

Today the notion of social ownership, in property and in enterprises has therefore no further place.




Judge Godwin Muscat Azzopardi is a founding member of Muscat Azzopardi and Associates. He presently occupies the post of International Judge with the United Nations Mission in Kosovo. He is on the bench of the Special Chamber of the Supreme Court which deals with commercial law matters and privatizations.

He can be contacted on muscata@un.org