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Vardanyan v/s Armenia

    Applications Nos. 8001 of 07

    Decided On, 25 July 2019

    At, European Court of Human Rights

    By, THE HONOURABLE PRESIDENT KSENIJA TURKOVIC
    By, THE HONOURABLE JUSTICE KRZYSZTOF WOJTYCZEK
    By, THE HONOURABLE JUSTICE ALEŠ PEJCHAL
    By, THE HONOURABLE JUSTICE PAULIINE KOSKELO
    By, THE HONOURABLE JUSTICE TIM EICKE
    By, THE HONOURABLE JUSTICE JOVAN ILIEVSKI & THE HONOURABLE JUSTICE RAFFAELE SABATO

    For the Appearing Parties: -----------



Judgment Text

PROCEDURE

1. The case originated in an application (no. 8001/07) against the Republic of Armenia lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms ("the Convention") by three Armenian nationals, Mr Yuri Vardanyan ("the first applicant"), Mrs Shushanik Nanushyan ("the second applicant") and Mr Artashes Vardanyan ("the third applicant"), on 19 February 2007.

2. In a judgment delivered on 27 October 2016 ("the principal judgment"), the Court held that the first applicant’s complaints concerning the breach of the principle of legal certainty and equality of arms, lack of a fair hearing by an impartial tribunal and deprivation of property were admissible while the complaints raised by the second and third applicant s were inadmissible. The Court further held that the re-examination of the question of whether the first applicant had title to a certain plot of land had violated the guarantees of Article 6 1 of the Convention and Article 1 of Protocol No. 1. Furthermore, the Court held that the process of expropriat ing the first applicant’s house had not been carried out under the conditions provided by law, in breach of the requirements of Article 1 of Protocol No. 1. Moreover, the Court held that the first applicant’s right to an impartial tribunal and the principle of equality of arms had been infringed, in violation of the guarantees of a fair procedure contained in Article 6 1 of the Convention (see Vardanyan and Nanushyan v. Armenia, no. 8001/07, 27 October 2016).

3. Under Article 41 of the Convention, the first applicant sought the restitution of his plot of land. In the alternative, he claimed 10,381,842.05 euros (EUR), this allegedly being the market value of the plot of land of which he had been dispossessed. The first applicant sought EUR 1,048,097.55 as compensation for the value of his expropriated house. The first applicant further more sought EUR 12,000 in respect of non - pecuniary damage.

4. Since the question of the application of Article 41 of the Convention was not ready for decision, the Court reserved it and invited the Government and the first applicant to submit, within three months, their written observations on that issue and, in particular, to notify the Court of any agreement they might reach (ibid., 108; see also point 5 (a) and (b) of the operative provisions).

5. The first applicant and the Government each filed observations.

6. Armen Harutyunyan, the judge elected in respect of Armenia, was unable to sit in the case (Rule 28). Accordingly, the President of the Chamber decided to appoint Pauliine Koskelo to sit as an ad hoc judge (Rule 29 2 (b)).

THE LAW

7. Article 41 of the Convention provides:

"If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party."

A. Pecuniary damage

1. The parties' submissions

(a) The first applicant’s claims

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/>8. The first applicant maintained his claim of EUR 1,048,097.55 in respect of pecuniary damage as regards the house. He submitted that it had not been possible for experts to provide an estimate of the market value of the house owing to the insufficiency of the available data and relied on the submissions that he had made previously, before the principal judgment was adopted.

9. The first applicant argued that the assessment of compensation for the house should be based on the current market value of the house, calculated on the basis of the market value per square metre of newly-constructed buildings in the area in question, less the sum of 54,494,000 Armenian drams (AMD - approximately EUR 100,000) already awarded in the domestic proceedings. In the first applicant’s submission the market value per square metre of buildings constructed near his house was on average 1,600,000 (approximately EUR 2,900) per square metre. The market value of his house (measuring 395. 6 square metres) would thus amount to AMD 632,960,000 (approximately EUR 1,1 48,000). Deducting the sum awarded at domestic level in compensation - that is to say AMD 54,494,000 (approximately EUR 100,000) - would result in the amount claimed.

10. As regards the plot of land, the first applicant submitted that according to official information received from the State Real Estate Registry, the land in question had been alienated to a private property development company. Given the circumstances, the first applicant considered that awarding him the full market value of the land as at the date of (or the closest possible date to) the making of that award would constitute the most appropriate form of redress. The first applicant claimed EUR 2,651,332.

11. In support of that claim, the first applicant submitted a n expert valuation report dated 26 June 2017. The report stated that owing to the insufficient amount of data available it had not been possible to determine the market value of the building that had been situated on the plot of land in question or the market value of the land (taking into account the improvements made to it - namely the multi-apartment residential building currently located on it). The expert relied on the sale - offer prices of three "analog ues" - that is to say the advertised sale prices of three plots of land in the "small centre " (???????????) of Yerevan. He then adjus ted those prices to take into account the differences between the respective location s of the " analogues " used in the comparison and that of the plot of land in question. The expert’s application of that adjustment had been based on the assumption that one of the factors affecting market price was the distance of a piece of real estate from Republic Square - that is to say land parcels closer to Republic Square were more expensive, and the plot of land in question was much closer to the square than the "analogues". Taking into account the above criteria, the expert estimate d the market value of the land as EUR 2,305,506 in total as at 30 May 2017 - the date on which the actual valuation was carried out. The first applicant considered that this sum should be increased by 15% - that is to say EUR 345,826, the sum constituting the amount of the financial incentive he would have been entitled to had the land been lawfully expropriated.

12. The first applicant further more sought compensation for loss of income in the amount of EUR 1,525,514 on the grounds that he had been prevented from exercising his lawful rights in respect of his plot of land as of 2 March 2007, the date of the final decision in the proceedings concerning his title to the land (see paragraph 36 of the principal judgment). The first applicant maintained that the amount of lost income should be calculated on the basis of the market value of his land, as estimated in a valuation report of 9 December 2013 accepted by the Yerevan Mayor’s Office for the purposes of alienating a larger parcel of land (which included his plot of land) to a private property developing company. The expert had calculated that the value of the land was AMD 543,529 (approximately EUR 992) per square metre. Thus, taking into account the proportion of the first applicant’s land, its market value as at 9 December 2013 would amount to EUR 1,221,777. The first applicant submitted that compensation for loss of income should be determined on the basis of this amount by applying the bank reference rate adopted by the Central Bank of Armenia (which is used for the calculation of compensation for non-payment or delayed payment under domestic law). In the alternative, the first applicant suggested that the amount of lost income be calculated with reference to the average bank deposit interest rate; according to a statement issued by a commercial bank and submitted by the first applicant, that amounted to approximately 12% between 2007 and 2017.

(b) The Government’s position

13. The Government argu ed that 2 March 2007, the date of the final decision in the proceedings concerning the first applicant’s title to the plot of land, should be considered as the date as of which they should fulfil their obligations. In the Government’s view the pecuniary damage sustained by the first applicant as a result of the loss of his title to the plot of land should be calculated on the basis of its market value - namely, AMD 276,230,000 (as estimated in an expert report dated 19 May 2005 - see paragraph 20 of the principal judgment). Having converted this amount in to euros at the 2 March 2007 exchange rate, the amount of capital liability would be EUR 589,877,08. Since it was the Court’s practice to calculate the interest rate on the basis of the marginal lending rate of the European Central Bank (to which should be added three percentage points), the Government considered that it was a reasonable approach to calculate the amount of interest according to the same principle. Hence, the total interest due in respect of the sum of EUR 589,877,08 for the period between 2007 and 2017 would be EUR 304,038. The final award under this head would thus amount to EUR 893,915,08.

(c) The first applicant’s response to the Government’s observations

14. The first applicant contested the manner in which the Government had suggested that the amount of compensation due to him as regards the plot of land and lost income be calculated. In addition, the Government’s submissions had contained no mention of the first applicant being compensated for his having been unlawful ly dispossessed of his house or of the reimbursement of the expenses borne by him.

15. In particular, the first applicant contested the Government’s view that the market value of the land should be determined on the basis of the expert valuation report of 1 9 May 2005. He maintained that it was the current market value of the property that should be awarded to him as compensation, together with the additional sums stated in his submissions concerning his claims. He maintained his claims as regards compensation for the house, which had not at all been addressed in the Government’s submissions.

16. Furthermore, the first applicant contested the method by which the amount in lost income had been calculated by the Government. He considered that the method applied by the Court for calculating default interest rate was of no relevance to the cal culation of the amount of lost income. In his claims the first applicant had presented an itemised calculation of his lost income, referring to the most recent estimation of the market value of the land based on the expert report of 9 December 2013 (see paragraph 12 above). Although he had not contributed to that report, the first applicant considered that there was nothing to indicate that that report - which had been accepted by the Mayor and the Council of Yerevan as an adequate estimation of the market value of an area of land which also included his plot of land - had not been credible at the moment of its delivery.

(d) The Government’s comments on the first applicant’s claims

17. The Government contested the credibility of the expert valuation report of 26 June 2017 (see paragraph 11 above) presented by the first applicant in support of his claim for compensation for pecuniary damage with regard to the land. In particular, t he Government questioned the expert’s professionalism and objectiveness, as well as the data and the methodology that had been used in the report to determine the market value of the plot of land in question, which, in their opinion, had been significantly overestimated. They questioned the suitability of the "analogues" used by the expert in the comparative analysis of real estate prices in central Yerevan and pointed to the alleged inaccuracy of certain data - in particular, the distance from Republic Square of the "analogous" plots of land indicated in the expert report; this had resulted in the significant overestimation of the value of the land at issue. In t he Government’s submission the expert’s unjustified assumption that the distance of real estate from Republic Square was a determinative factor regarding its market price had in its turn also distorted the results of the valuation. Furthermore, this assumption had been refuted in the very same report, in which the expert had provided data concerning offer prices for plots of land in the centre of Yerevan.

18. The Government considered that the amount of compensation due to the first applicant in respect of pecuniary damage with regard to the land should be calculated on the basis of its market value at the material time, as determined in the expert report dated 19 May 2005 (see paragraph 13 above and paragraph 20 of the principal judgment). That report was, in the Government’s opinion, the only credible and reliable source of information to be used for the determination of the market value of the first applicant’s plot of land.

19. The Government reiterated the position expressed in their initial submissions as regards the manner of the calculation of compensation with regard to the plot of land (see paragraph 13 above). Having applied the same calculation method, the Government considered that the amount of compensation to be paid to the first applicant in this respect was EUR 903,106,66.

20. As regards the first applicant’s claim concerning the house, the Government submitted that the first applicant had already received adequate compensation for the expropriation of the house in the domestic proceedings. They considered that the method used to calculate the amount of compensation for the house (see paragraph 9 above) had not been reasoned or substantiated.

21. The Government further more contested the first applicant’s claim in respect of alleged loss of income. They disagreed with the first applicant taking the valuation report of 9 December 2013 as a basis for the calculation of his alleged los s of income, arguing that the report reflected neither the market value of the land at the material time nor its current value. Furthermore, at the time when that valuation was carried out the re was already a building erected on it. Overall, the Government considered the first applicant’s claim in this respect to be of a speculative nature and requested the Court to reject it in its entirety.

2. The Court’s assessment

22. The Court reiterates that a judgment in which it finds a breach imposes on the respondent State a legal obligation to put an end to that breach and to make reparation for the consequences thereof in such a way as to restore as far as possible the situation existing before the breach (see Iatridis v. Greece (just satisfaction) [GC], no. 31107/96, 32, ECHR 2000 - XI). The Contracting States that are parties to a case are in principle free to choose the means whereby they will comply with a judgment in which the Court has found a breach. This discretion as to the manner of the execution of a judgment reflects the freedom of choice attached to the primary obligation of the Contracting States under the Convention to secure the rights and freedoms guaranteed (Article 1). If the nature of the violation allows of restitutio in integrum it is the duty of the State held liable to effect it, the Court having neither the power nor the practical possibility of doing so itself. If, however, national law does not allow - or allows only partial - reparation to be made for the consequences of the breach, Article 41 empowers the Court to afford the injured party such satisfaction as appears to it to be appropriate (see Brumarescu v. Romania (just satisfaction) [GC], no. 28342/95, 20, ECHR 2001 - I).

23. The nature and the extent of the just satisfaction to be afforded by the Court under Article 41 of the Convention directly depend on the nature of the breach (see Shesti Mai Engineering OOD and Others v. Bulgaria, no. 17854/04, 101, 20 September 2011).

24. In the case at hand, in its principal judgment the Court made two different findings with regard to the first applicant’s complaints concerning his having been dispossessed of his house and plot of land.

25. In particular, with regard to the house, the Court found that its expropriation had not been carried out in compliance with "conditions provided for by law" and had therefore been in breach of Article 1 of Protocol No. 1 to the Convention. In doing so, the Court referred to its previous findings with regard to identical complaints in a number of cases against Armenia (see paragraphs 99 and 100 of the principal judgment; see also Minasyan and Semerjyan v. Armenia, no. 27651/05, 69-77, 23 June 2009, and Tunyan and Others v. Armenia, no. 22812/05, 35-39, 9 October 2012).

As regards the first applicant having been dispossessed of the land, the Court found that the re-examination in a different set of proceedings of the question of whether the first applicant had title to the land had been contrary to the principle of legal certainty, as it had disregarded the final nature of the decision of 22 September 1997 of the Presidium of the Supreme Court (upheld by the decision of the Plenary Session of the Court of Cassation of 29 December 1998). The applicant being dispossessed of the land at issue had thus been unlawful in the sense of the Convention and contrary to Article 6 1 of the Convention and Article 1 of Protocol No. 1 (see paragraphs 68-71 and 96 of the principal judgment).

26. The Court observes that the property at issue is a house that occupied a very central location in Yerevan measuring 395. 6 sq. m with an underlying plot of land measuring 1,385.6 sq. m. in total, in respect of which the first applicant had full ownership of 1, 208. 5 sq. m. and shared ownership of 177. 1 sq. m.

27. The Court notes that no restitution of the property is possible owing to the fact that the house has been demolished (see paragraph 51 of the principal judgment) while the plot of land has been alienated to a third party (see paragraph 10 above). T he Court therefore considers that an award in respect of pecuniary damage must be made.

28. As regards the house, the Court notes that it has previously awarded pecuniary damages in an identical situation (see Minasyan and Semerjyan v. Armenia (just satisfaction), no. 27651/05, 17-21, 7 June 2011), which it finds to be fully applicable to the present case in so far as it concerns the issue of compensation for the first applicant’s loss of his house. Using the same approach and making an assessment based on all the material at its disposal, the Court estimates the pecuniary damage suffered as a result of the loss of the house at EUR 102,000.

29. With regard to the land, the Court notes that in establishing the pecuniary damage arising from violations of Article 6 1 of the Convention and Article 1 of Protocol No. 1 on account of the setting aside of a final judicial decision in an applicant’s favour (contrary to the res judicata principle), the Court’s traditional approach has been to order either (i) restitutio in integrum, or (in the event that restitutio in integrum has not prove d possible) (ii) payment of a sum reflecting the value of the property at the point in time that the Court is reaching its decision (see Brumarescu, cited above, 22 and 23, and Kehaya and Others v. Bulgaria (just satisfaction), nos. 47797/99and 68698/01, 20-22, 14 June 2007). Such an approach was also adopted in an other case against Armenia raising similar issues, where the Court ordered the payment of the current value of the property as compensation for pecuniary damage (see Simonyan v. Armenia, no. 18275/08, 30 and 31, 7 April 2016).

30. The Court is of the opinion, however, that the particular features of the present case make it inappropriate to apply the principles laid down in the above-cited case -law for the following reasons.

Firstly, the first applicant lost ownership of the land in question as a result of the re-examination, in a distinct set of proceedings, of the question of whether he had title in respect of it although that question had already been determined by final and binding judicial decisions (see paragraph 96 of the principal judgment). This fact subsequently precluded the expropriation of the said land in the normal course of the events. That is, the first applicant lost ownership of the land without any payment of compensation, as opposed to the house, which was expropriated albeit in a procedure which was found by the Court to have been in breach of the requirements of Article 1 of Protocol No. 1 to the Convention (see paragraphs 99 and 100 of the principal judgment).

Secondly, restitutio in integrum, being the primary means of compensation for pecuniary damage arising from the breach, became impossible for the first applicant already in 2013, when the plot in question was alienated to the property developer along with other parcels of neighbouring land (see paragraph 12 above).

31. In these circumstances, while acknowledging that the first applicant is entitled to receive the full value of the land, the Court considers that the date to be taken into consideration in assessing the pecuniary damage should not be that on which the Court’s judgment is delivered but the date on which he lost ownership of the land (see Guiso-Gallisay v. Italy (just satisfaction) [GC], no. 58858/00, 103, 22 December 2009).

32. In this context, the Court decides to reject the first applicant’s claims in so far as they are based on the value of the land on the date of the Court’s judgment and to determine the level of compensation with reference to the market value of the land at the moment when the first applicant lost ownership thereof. The reference date in the present case should therefore be 2 March 2007, the date when the Court of Cassation refused to grant the first applicant leave to appeal against the judgment of the Court of Appeal dated 15 September 2006 (see paragraph s 35 and 36 of the principal judgment).

33. This being said, the Court notes that regrettably the parties have not provided it with a reliable basis to assess the market value of the land in question at the time when the first applicant was deprived of it.

As a consequence, the Court has available to it only the following information about the market value of the land at different points in time: the valuation report of 19 May 2005, referred to by the Government (see paragraphs 13 and 18 above); the valuation report of 9 December 2013 accepted by the Yerevan Mayor’s Office (see paragraph 12 above); and the expert report of 26 June 2017 commissioned by the first applicant and submitted by him in support of his claims (see paragraph 11 above).

34. As regards i n particular the valuation report of 19 May 2005, a side from the fact that the relevant valuation had been commissioned by the acquirer and carried out almost two years before the reference date (see paragraph 20 of the principal judgment), th e market value indicated in that report was never examined, let alone accepted, by the domestic courts simply because, as mentioned above, no expropriation proceedings were ever initiated in respect of the land in question. The Court therefore sees no justification for taking into account the valuation report of 19 May 2005 in making its assessment.

35. In addition, the Court considers that the expert report of 26 June 2017 submitt ed by the first applicant cannot be accepted as fully reliable either. Firstly, in his comparative analysis the expert used offer prices for what he considered to be "analogous" pieces of real estate, as opposed to prices paid in actual transactions involving land in the same area (see paragraph 11 above). Secondly, as pointed out by the Government, the distance from Republic Square was considered by the expert to be an important influential factor for the determination of the market price, and the expert applied the relevant adjustment in order to take into account the close proximity of the land in question to Republic Square. However, according to the table in the report showing offer prices for plots of land in the city centre, there were plots of land which had higher offer prices than those plots of land that were closer to Republic Square. Lastly, taking into account Armenian real estate market trends between 2013 and 2017, it seems highly unlikely, if not impossible, that the market price of the land in question could have increased by almost 90% in less than four years taking into account the market value of the land indicated in the expert report of 9 Dec ember 2013 (see paragraph 12 above) whose credibility has not been disputed by the parties. What is more, the first applicant relied on the latter report to support his claim in respect of lost income (see paragraph 16 above).

36. In these circumstances, the Court finds it reasonable to take as a basis for its assessment the undisputed market value of the land reflected in the expert report of 9 Dec ember 2013. The Court’s finding in this respect is further reinforced by the fact that it was in 2013 that the alternative of restitution became impossible for the first applicant.

37. According to the report of 9 Dec ember 2013 the market value of the first applicant’s land would correspond to EUR 1,221,777. The Court sees no reason to augment this amount by 15%, as suggested by the first applicant (see paragraph 11 above). On the other hand, t his amount should be converted to current value to offset the effects of inflation (see, mutatis mutandis, Minasyan and Semerjyan, cited above, 20).

38. Lastly, in so far as t he first applicant’s claim for compensation for lost income is concerned, this claim was based on the total interest calculated on the basis of the bank reference rate set by the Central Bank of Armenia with regard to the market value of the land, as indicated in the valuation report of 9 December 2013. In the alternative, the first applicant suggested that the average bank deposit interest rates be taken into account (see paragraph 12 above).

39. As regards calculation of interest taking into account the bank reference rate set by the Central Bank of Armenia with regard to the market value of the land in 2013, the Court firstly observes that it is not bound by domestic legal provisions applicable to calculation of damages. Secondly, the Court agrees with the Government’s approach whereby they dispute the first applicant’s calculation of the amount of lost income on the basis of the value of the land, as determined in the valuation report of 2013.

40. As to the first applicant’s suggestion of calculating interest based on the average bank deposit interest rates, t he Court notes that in the present case the property at issue is a plot of land which the first applicant and his family had used for the purposes of their residence. The Court further notes that, had the first applicant received the relevant compensation in due time, he could have earned income on the funds, for instance by depositing them in a bank. In view of the fact that the Court has already accepted that the amount of compensation based on the value of the property should be adjusted for inflation, the Court considers it reasonable to make a further adjustment of the award to cover a certain loss of real interest. Ruling on a discretionary basis, the Court therefore considers it reasonable to award the first applicant EUR 1,500,000 in respect of pecuniary damage sustained as a result of deprivation of his plot of land.

41. In view of the foregoing, the Court considers that the first applicant’s claim for compensation for lost income is of a speculative nature and should therefore be rejected in its entirety.

42. The final award for pecuniary damage is thus EUR 1,602,000.

B. Non-pecuniary damage

43. The Government suggested a settlement in the amount of AMD 2,000,000 (EUR 3,500), in accordance with the relevant provisions of the Civil Code concerning compensation for non-pecuniary damage suffered as a result of violations of fundamental and Convention rights, and taking into account the Court’s previous awards under this head in similar cases.

44. The first applicant left the matter of just satisfaction in respect of non-pecuniary damage to the Court’s discretion. At the same time, he found it difficult to understand the reasoning behind the Government’s suggestion that a possible award for non-pecuniary damage should be calculated on the basis of the relevant domestic civil-law provisions.

45. The Court considers that the feelings of powerlessness and frustration experienced over such a prolonged period of time arising from his having been unlawful ly deprived of his possessions have caused the first applicant non-pecuniary damage that should be compensated for in an appropriate manner. Ruling on an equitable basis, as required by Article 41 of the Convention, it decides to award EUR 6,000 to the first applicant under this head.

C. Costs and expenses

46. The first applicant claimed the reimbursement of the cost of the valuation report submitted in support of his claims in respect of pecuniary damage with regard to the plot of land. He submitted an invoice showing that his son, the third applicant, had pa id 380,000 Russian roubles (EUR 5,7 00) for the expert opinion on the market value of his property (see paragraph 11 above).

47. The Government considered this claim to be excessive.

48. In accordance with the Court’s case-law, an applicant is entitled to the reimbursement of costs and expenses only in so far as it has been shown that these have been actually and necessarily incurred and are reasonable as to quantum.

49. As noted above, the invoice for the expert’s report had been made out to the first applicant’s son, the third applicant. Thus, it has not been shown that the first applicant had himself borne the claimed costs (see Voskuil v. the Netherlands, no. 64752/01, 92, 22 November 2007). At the same time, the Court observes that the third applicant’s complaints were declared inadmissible by the Court in the principal judgment (see paragraphs 103 and 104 of the principal judgment). That being so the Court rejects the claims under this head.

D. Default interest

50. The Court considers it appropriate that the default interest rate should be based on the marginal lending rate of the European Central Bank, to which should be added three percentage points.

FOR THESE REASONS, THE COURT, UNANIMOUSLY,

1. Holds

(a) that the respondent State is to pay the first applicant, within three months from the date on which the judgment becomes final, in accordance with Article 44 2 of the Convention, the following amounts, to be converted into the currency of the respondent State at the rate applicable at the date of settlement:

(i) EUR 1, 602,000 (one million six hundred and two thousand euros), plus any tax that may be chargeable, in respect of pecuniary damage;

(ii) EUR 6,000 (six thousand euros), plus any tax that may be chargeable, in respect of non-pecuniary damage;

(b) that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amounts at a rate equal to the marginal lending rate of the European Central Bank during the default period, plus three percentage points;

2. Dismisses the remainder of the first applicant’s claim for just satisfaction.

Done in English, and notified in writing on 25 July 2019, pursuant to Rule 77 2 and 3 of the Rules of Court
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