Latvian Property and Collateral Law and Protection of Foreign Investments
| Author | Janis Rozenfelds |
| Pages | 108-113 |
Janis Rozenfelds
Latvian Property and Collateral Law and Protection of Foreign Investments
Main sources are the Constitution of the Republic of Latvia, the Latvian Civil Law Act, and the Commercial Pledge Act. The Latvian Civil Law Act as a code of institutional system, which is similar to the French code, was restored in Latvia in its structure of 1937.
Part III of the Latvian Civil Law Act, which specifically deals with property and collateral rights, was introduced by the Act on the Time and Procedure by which the Part of Introduction, Inheritance Rights and Rights on Things of the Renewed Republic of Latvia 1937 Civil Law Act Takes Effect as of 7 July 1992.
Initially, the Constitution of Latvia did not deal with any property rights at all. Amendments of such kind were passed only in 1998, when the additional chapter 8 on fundamental human rights was introduced, which included section 105 stating that everyone has the right to property. This important amendment introduced a new understanding of property rights compared to a more conservative view reflected in the Latvian Civil Law Act.
The Latvian Civil Law Act states in section 927 that property means having total power over a thing, i.e. the right to possess and use it, receive all possible benefit from it, handle it and demand the return of it from any third person by claiming ownership. In addition to this general principle, section 928 declares that although property may be restricted according to private will or by the law, any of such restrictions shall be interpreted in its narrow meaning, and in case of doubt it shall always be assumed that the property is without restriction.
According to section 1038 an owner may be in possession of a thing, which belongs to him or her, receive its fruits, use it at will to increase his or her assets, and in general, use it in any way, even though it may cause a loss to another person.
Contrary to these provisions, section 105 of the Constitution states that property may not be used against the interests of society.
The Latvian Civil Law Act uses common classification of things as tangible and intangible (section 841). However, in dealing with a difficult question, what could be a subject of property rights, the Latvian Civil Law Act is nearly as narrow as the early Roman law. This approach is causing difficulties each time when one is confronted with the problem of rights regarding intangible things.
Although the Latvian Civil Law Act declares that a subject of property may be anything that has not been taken out of circulation by law (section 929), this general declaration is not supported by any other norm. Even further, in dealing with particular elements of the property rights, the authors of the Latvian Civil Law Act carefully avoided using the term "property" in relation to intangibles. Thus, regarding the claim of ownership, section 1050 expressly states that the subject of a claim of ownership may be a separate item as well as an aggregate of things consisting only of tangible things, but not a thing, which is composed of both ? tangible and intangible things.
There is no doubt that in light of such clearly stated limits, a claim for intangible things is out of the question ? it is hardly surprising that the same narrow approach also prevails in practice. The Latvian Constitutional Court found in favour of this more narrow approach. It was a particular case of interpreting section 105 in the meaning that a person's right to property does not include his or her right to certain claims1.
As provided for by section 842, tangible things are either movable or immovable, "depending on whether or not they can be moved without exterior damage from one place to another". This general principle apparently includes not only land, but, by extension, buildings as well as other permanent structures. In the Latvian legal environment this fullest sense of the word "immovable" was not only extensively used with regard to buildings, but somehow led to a phenomenon, which could be defined as separation of buildings from the land in a way which is not clearly defined by the Latvian law and is regarded in the Latvian practice as an exclusion from the common principles the Civil Law Act is based on.
It must be pointed out that the 7 July 1992 Act on the Time and Procedure by Which the Part of Introduction, Inheritance Rights and Rights on Things of the Renewed Republic of Latvia 1937 Civil Law Act Takes Effect has established a very important principle as compared with the original meaning of the Latvian Civil Law Act.
As section 968 of the Latvian Civil Law Act states, a building, constructed on and firmly attached to a piece of land, shall be considered a part of same. According to section 973 trees and other plants, which have been replanted on another person's land, belong to its owner from the time they have become rooted in this land.
Section 14 of the 7 July 1992 Act stated otherwise ? that the provisions of sections 968 and 973 of the Civil Law Act shall not be applicable in cases when a building has been built (legally acquired in another way) or the orchard (trees) has been planted on the land allocated for this purpose in accordance with the laws in effect at that time, but the...
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