Five German plaintiffs had inherited plots of land that had been assigned to their families, subject to encumbrances on transfer rights, by the German Democratic Republic (GDR) after the 1945 agrarian reform. On March 16, 1990, before reunification, the Modrow Act, named after GDR parliamentary president Hans Modrow, came into effect, lifted assignment restrictions and granted such landowners full ownership. After reunification, the plaintiffs were required to transfer their land to tax authorities under Germany's Second Property Rights Amendment Act ("PRAA") of July 14, 1992, without compensation.

Later, as a statute enacted by the GDR's first freely-elected parliament, the Modrow Act became part of German domestic law. The court held that, notwithstanding the situation before the Modrow Act, the plaintiffs had acquired full ownership in 1990. While the court acknowledged the legislature's objective of correcting the results of the Modrow Act, it ruled that the PRAA illegally deprived the plaintiffs of their property because the PRAA failed to provide for adequate compensation. Article 1 of Protocol No. 1 of the European Convention of Human Rights requires a fair balance between the protection of property and the requirements of general interest.

The ruling is likely to trigger a wave of claims for compensation valued at billions of Euros.

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