Lietuviškai
THE CONSTITUTIONAL COURT OF
THE REPUBLIC OF LITHUANIA
R U L I N G
On the compliance of item 7, Part 1 of Article 37,
Article 39, Parts 1 and 2 of Article 40, Article
45 and Parts 2 and 3 of Article 46 of the Law of
the Republic of Lithuania on Commercial Banks with
the Constitution of the Republic of Lithuania
18 April 1996, Vilnius
The Constitutional Court of the Republic of Lithuania,
composed of the justices of the Constitutional Court Egidijus
Jarašiūnas, Kęstutis Lapinskas, Zigmas Levickis, Augustinas
Normantas, Vladas Pavilonis, Jonas Prapiestis, Pranas Vytautas
Rasimavičius, Teodora Staugaitienė, and Juozas Žilys,
the secretary of the hearing - Daiva Pitrėnaitė,
the party concerned - Feliksas Kolosauskas, a member of
the Seimas, and Gintaras Kukauskas, the deputy head of the
Legal Division of the Bank of Lithuania, both the
representatives of the Seimas,
pursuant to Part 1 of Article 102 of the Constitution of
the Republic of Lithuania and Part 1 of Article 1 of the Law of
the Republic of Lithuania on Constitutional Court, in its
public hearing on 2 April 1996 conducted the investigation of
Case No.12/95 subsequent to the petition submitted to the Court
by the Panel of Civil Cases of the Court of Appeal of Lithuania
requesting to investigate if item 7, Part 1 of Article 37,
Article 39, Parts 1 and 2 of Article 40, Article 45, and Parts
2 and 3 of Article 46 of the Law of the Republic of Lithuania
on Commercial Banks are in compliance with the Constitution of
the Republic of Lithuania.
The Constitutional Court
has established:
I
On 4 October 1995, the petitioner - the Panel of Civil
Cases of the Court of Appeal of Lithuania - was investigating
Civil Case No.2-36/1995 subsequent to individual complaints of
the persons of the third party Z. Barkauskas, Č. Maciulevičius,
J. Sprindžiūnas and K. Stelingys concerning the 12 May 1995
ruling of Vilnius district court to institute bankruptcy
proceedings against the joint-stock credit bank "Nida".
The said court suspended the investigation of this case
and appealed to the Constitutional Court requesting to
investigate if item 7, Part 1 of Article 37, Article 39, Parts
1 and 2 of Article 40, the provision "the court shall institute
bank bankruptcy proceedings following a statement of the bank's
insolvency by the Bank of Lithuania" of Article 45 of the Law
of the Republic of Lithuania on Commercial Banks (Official
Gazette "Valstybės Žinios" No.2-33, No.107-2411, 1995;
No.19-495, 1996; hereinafter in the ruling referred to as "the
Law") are in compliance with Parts 1 and 2 of Article 23, and
Part 1 of Article 46 of the Constitution, as well as if Article
45, and Parts 2 and 3 of Article 46 of the Law are in
conformity with Part 1 of Article 29 and Part 2, Article 109 of
the Constitution.
II
The request of the petitioner to investigate the
compliance of the said legal norms with the Constitution is
based upon the following legal arguments.
1. It is established in Part 4, Article 1 of the Law on
Commercial Banks that in their activities banks shall comply
with the Company Law of the Republic of Lithuania and other
legal acts, unless the Law provides otherwise, as well as with
their statutes (bylaws). According to Article 2 of the Law, the
bank is an enterprise functioning on the basis of share
capital, whereas the share capital is the nominal value of all
registered shares. It is established in Part 1, Article 32 of
the Company Law that shares are the securities of investments
evidencing the participation of their holders in the company's
capital and entitling them proprietary and non-proprietary
rights. A shareholder of the bank shall be an individual who
has acquired at least one share of the bank in accordance with
the procedure established by laws. Thus the share capital
belongs to the company by its property right (in this case to
the credit bank "Nida" which was established by close manner),
and the shareholders who have acquired the shares of the bank
become the owners of the bank, they have the right of property
to shares. The right of property is the owner's right to
manage, utilise and dispose of his property. The owner's rights
to his property do not depend upon other persons. In item 7 of
Part 1, Article 37 of the Law it is established that the Bank
of Lithuania is entitled to suspend the powers of the bank
council, remove from office the board of the bank, the head of
the bank administration and appoint a temporary bank
administrator, and it would mean that a state institution, the
Bank of Lithuania, takes over private property - the property
of a commercial bank - at its command and manages it. The Bank
of Lithuania has applied this sanction in regard of the
governing bodies of the joint-stock credit bank "Nida". It is
also important that the bank council is formed by the general
meeting of the shareholders.
After the Bank of Lithuania has taken over the property of
a commercial bank at its command by and commenced the
management of the said property, the shareholders-owners of the
bank are deprived of the possibility to manage and utilise
their property. Thereby the right to private property, as well
as the freedom of people's activity and their initiative, is
restricted.
Therefore, in the opinion of the Panel of Civil Cases of
the Court of Appeal of Lithuania, there exist grounds to
suppose that the norm of item 7 of Part 1, Article 37 of the
Law contradicts Parts 1 and 2, Article 23, as well as Part 1,
Article 46 of the Constitution.
2. Item 7 of Part 1, Article 37 of the Law entitles the
Bank of Lithuania to apply sanctions to banks, whereas the
procedure and effects of their application are discussed in
Articles 39 and 40 of the Law. Therefore due to corresponding
arguments doubts arise if Article 39, Parts 1 and 2 of Article
40, and the provision "the court shall institute bank
bankruptcy proceedings following a statement of the bank's
insolvency by the Bank of Lithuania" of Article 45 of the Law
correspond with Parts 1 and 2 of Article 23, as well as Part 1,
Article 46 of the Constitution.
3. Article 45 of the Law provides for the subjects by a
statement of whose the court shall institute bankruptcy
proceedings, whereas Parts 2 and 3 of Article 46 of the Law
establish the actions of the court which it undertakes upon
receiving a statement concerning instituting bank bankruptcy
proceedings. Part 1, Article 29 of the Constitution
consolidates the equality of all people before the law, the
court, and other state institutions and officers. The
procedural equality of parties is consolidated in the Code of
Civil Procedure (CCP). The aforementioned norms of the Law are
to be interpreted from their content as being obligating. Hence
it would follow that upon receiving a statement from the
subject established in Article 45 of the Law the court shall
pass a procedural decision in favour of the subject that
brought in the action, viz., it shall institute bank bankruptcy
proceedings (Article 45), that same day appoint the bank
administrator on the recommendation of the Bank of Lithuania
and fix his/her remuneration (Part 2, Article 46), pass a
decision to institute bank bankruptcy proceedings within 7 days
(Part 3, Article 46). Therefore, in the opinion of the
petitioner, the aforesaid norms of the Law may be assessed as
violating the principle of people's equality before the court
which is consolidated in Part 1, Article 29 of the
Constitution.
Besides, in the opinion of the petitioner, there exist
grounds to suppose, that the aforesaid norms of the Law
contradict Part 2, Article 109 of the Constitution which
consolidates the independence of judges and courts while
administering justice. The requirements of the obligating
manner as established in the said norms impede the court and
make it dependent upon the will of the subject that submits the
statement concerning instituting bankruptcy proceedings. The
said norms also obligate the court to estimate the conclusion
about the bank's insolvency of the Bank of Lithuania as the
only and uncontested evidence to base the instituting bank
bankruptcy proceedings. Thereby the court is deprived of the
possibility to pass an alternative procedural decision - to
refuse to institute bank bankruptcy proceedings.
III
1. Feliksas Kolosauskas, a representative of the party
concerned, the Seimas, during the preparation of the case for
the Court hearing explained in writing that banks, unlike other
enterprises which operate on the basis of share capital,
subsist on re-lending borrowed means (deposits and other means
subject to being returned) but not on their own means. The
property relations which appear in these activities, their
development are regulated by special banking laws, and not only
in Lithuania but elsewhere as well. For instance, the Bank of
England, one of the oldest central banks in the world,
administers the supervision of banks pursuant to the Banking
Law passed in 1979, and to laws-directives of the European
Economic Community (EEC). The chief aim of the supervision of
the banks of Great Britain is to guarantee the safety of
deposits. The following sanctions are provided for to
unreliable banks in Great Britain: restriction of their
activity, change of administration, amalgamation of banks,
taking over their control, revocation of licence, and
liquidation of the bank. Most principles of these sanctions, a
little modified, are applied in most countries the world over,
they are universal.
Taking this into account, and pursuant to the provisions
of Part 1 of Article 6, Part 2 of Article 23, Article 28, and
Part 3 of Article 46 of the Constitution, the provisions
regulating supervision of the commercial banks of Lithuania, as
well as sanctions which are to be applied to non-reliable
banks, were legitimised in the Law.
2. In the opinion of the party concerned, item 7, Part 1
of Article 37, Article 39, Parts 1 and 2 of Article 40, and the
provision "the court shall institute bank bankruptcy
proceedings following a statement of the bank's insolvency by
the Bank of Lithuania" of Article 45 of the Law do not
contradict Parts 1 and 2 of Article 23, and Part 1 of Article
46 of the Constitution. In his explanation he presented the
following legal arguments.
2.1. Since upon executing actions provided in the
aforementioned articles of the Law (suspending the powers of
the bank council, removing from office the board of the bank
and the head of the bank administration, as well as appointing
a temporary bank administrator, following a statement of the
bank insolvency seeking instituting bank bankruptcy proceedings
by the court), the property rights of the owners - shareholders
- of the bank remain the same, the execution (accomplishment)
of such actions cannot be estimated as infringement upon their
property.
2.2. The essence of banking activity is re-lending of
borrowed money. Therefore it is of crucial importance to secure
the balance between the commitments of the bank to its
creditors and the commitments of the bank debtors to the bank.
If the council of the bank, its board and administration for
some reasons are not able to balance the commitments to the
bank with the commitments of the bank to its creditors, and if
the risk level of the bank activity is too high, then in case
of the bank's bankruptcy the creditors of the bank suffer the
greatest losses. Therefore certain provisions of the Law
entitle the Bank of Lithuania, as the institution of
supervision, to apply or initiate sanctions, so that the
shareholders-owners of the bank, when managing, utilising and
disposing of their property, might not violate the property of
other people, and might not infringe upon the inviolability of
the property. The strictest sanctions are applied in case when
it is established that the bank is insolvent, i.e., when cash
assets of the bank become lower than the commitments to the
other owners.
2.3. The aforementioned articles and their parts of the
Law do not contradict Parts 1 and 2 of Article 23, as well as
Part 1 of Article 46 of the Constitution, also for the reason
that it is established in Article 28 of the Constitution that
"while exercising their rights and freedoms, persons must
observe the Constitution and the laws of the Republic of
Lithuania, and must not impair the rights and interests of
other people". The sanctions for unreliable banks, as legalised
in the Law, just exactly co-ordinate and consolidate the
provisions of Parts 1 and 2 of Article 23, Article 28, and Part
3 of Article 46 of the Constitution. The Bank of Lithuania, on
the grounds of the rights granted to it by the Law to apply
sanctions to banks, has an opportunity to ensure the
inviolability of the bank creditors' property, as well as legal
protection of property.
2.4. It is impossible to treat unreservedly the provision
declared in Part 1, Article 46 of the Constitution that
Lithuania's economy shall be based on the right to private
ownership, freedom of individual economic activity, and
initiative. The limits of this freedom and initiative are
established in Article 28 of the Constitution. Therefore the
established restrictions concerning managing, utilising, and
disposing of the property of bank's shareholders-owners are
reasonable when ensuring the inviolability of the property of
other people. The 13 December 1993 ruling of the Constitutional
Court "On the compliance of the second part of Article 148 of
the Criminal Code of the Republic of Lithuania as well as items
1 and 2, Article 93 of the Code of the Criminal Procedure of
the Republic of Lithuania with the Constitution of the Republic
of Lithuania" contains a similar provision stipulating that
neither Constitution nor valid system of other laws, nor
universally recognised norms of international law deny the
opportunity to alienate the property or restrict its
management, utilisation or disposal under conditions and
procedure prescribed by the law.
2.5. The ensuring of the inviolability of property, as
well as other constitutional guaranties and compliance of laws
with them, may not be interpreted outside the whole text of the
Constitution because it is provided in Part 1 of Article 6 of
the Constitution that the Constitution shall be an integral and
directly applicable statute.
On the grounds of the presented arguments the
representative of the party concerned pointed out that the
contested norms of the Law are in conformity with Parts 1 and 2
of Article 23, and Part 1 of Article 46 of the Constitution,
they ensure the implementation of the said constitutional
norms, as well as that of the norm of Article 28 of the
Constitution.
3. In the opinion of the representative of the party
concerned, Article 45, Parts 2 and 3 of Article 46 of the Law
on Commercial Banks are in compliance with Part 1 of Article 29
of the Constitution.
These disputed norms of the Law create conditions to
protect the inviolability of other people's property when the
shareholders-owners of the bank by inappropriately managing,
using and disposing of their as well as borrowed property bring
about an actual danger to impede property rights of other
people - creditors - and to violate Part 1 of Article 23 and
Article 28 of the Constitution. Therefore the norms of the Law
whereby it is sought to protect the inviolability of the
property of other people - creditors - ensure the provision
consolidated in Part 1 of Article 29 of the Constitution which
stipulates that all people shall be equal before the law, the
court, and other State institutions and officers, and never
violate it.
4. Article 45 and Parts 2 and 3 of Article 46 of the Law
are in conformity with Part 2 of Article 109 of the
Constitution as these norms do not violate the independence of
judges and courts when they administer justice. It is
impossible to interpret the aforesaid articles of the Law as
obligating, they do not make the court dependent on the will of
the subject who submitted a statement to institute bankruptcy
proceedings and they do not obligate the court to assess the
conclusion of the Bank of Lithuania regarding the insolvency of
the bank to be the only and incontestable legal fact to ground
the instituting of bankruptcy proceedings.
In the opinion of the representative of the party
concerned, the court, upon receiving a statement regarding
instituting bank bankruptcy proceedings of the subjects
enumerated in Article 45 of the Law, and when there is a
conclusion of the Bank of Lithuania concerning the insolvency
of the bank, has, by taking advantage of the opportunities
granted it by the law, to assess the validity of the conclusion
submitted by the Bank of Lithuania, and only afterwards to pass
the decision to institute bank bankruptcy proceedings. This is
provided for in Part 2 of Article 121 of the CCP where it is
established that the statement regarding instituting bank
bankruptcy proceedings must be investigated in the court of
first instance no later than within 7 days from the day of
reception of the statement. Part 3, Article 46 of the Law
provides for 7 days' time limit to institute bank bankruptcy
proceedings, too.
The representative of the party concerned in his
explanation noted that, in his opinion, when deciding if the
court ruling to institute bankruptcy proceedings to the bank
"Nida" is in conformity with laws, item 7, Part 1 of Article
37, Article 39, Parts 1 and 2 of Article 40 of the Law were not
to be applied. Therefore the Constitutional Court ought not to
investigate the question of the compliance of the said norms
with the Constitution.
In the process of judicial investigation the
representatives of the party concerned confirmed the arguments
set forth in the aforementioned explanation. In their opinion,
the disputed norms of the Law do not contradict the
Constitution.
Gintaras Kukauskas, a representative of the party
concerned, explained in addition that Articles 45 and 46 do not
provide that the court must institute bankruptcy proceedings.
These articles merely enumerate the subjects entitled to submit
their statements, as well as the content of the said
statements. The requirement to appoint the bank administrator
on the day of reception of the statement is conditioned by the
necessity to protect the bank's, as well as the creditors'
property. In the opinion of the representative of the Seimas,
the wording of the aforementioned articles of the Law may be
contradicting the CCP, but this is not the case regarding the
Constitution. The statement of the bank's insolvency by the
Bank of Lithuania is indispensable whereby it is sought to
prevent a purposely instituting bank bankruptcy proceedings
following the statement of the shareholders. The representative
of the Seimas noted that insolvency is defined in the Law
differently than in the Law on Enterprise Bankruptcy. The board
of the Bank of Lithuania establishes the criteria of insolvency
by its decision.
The Constitutional Court
holds that:
According to Part 2 of Article 110 of the Constitution and
Part 1 of Article 67 of the Law on the Constitutional Court, in
cases when there are grounds to believe that the law or other
legal act applicable in a certain case contradicts the
Constitution, the judge shall suspend the investigation and
shall appeal to the Constitutional Court to decide whether the
law or other legal act in question complies with the
Constitution.
The petitioner - the Panel of Civil Cases of the Court of
Appeal of Lithuania - requests the Court to investigate if item
7, Part 1 of Article 37, Article 39, Parts 1 and 2 of Article
40, the provision "the court shall institute bank bankruptcy
proceedings following a statement of the bank's insolvency by
the Bank of Lithuania" of Part 1 of Article 45 of the Law are
in compliance with Parts 1 and 2 of Article 23, and Part 1 of
Article 46 of the Constitution, as well as if Article 45, Parts
2 and 3 of Article 46 of the said Law are in conformity with
Part 1 of Article 29, and Part 2 of Article 109 of the
Constitution.
In the opinion of the representative of the party
concerned, the norms of Articles 37, 39 and 40 of the Law
should not be applied while investigating a civil case in the
Court of Appeal of Lithuania, therefore the Constitutional
Court ought not to investigate the question of their compliance
with the Constitution.
The Constitutional Court notes that it shall not decide
what legal or juridical norms the court should apply in a
particular case. This is a prerogative of the court which
investigates the case. The 4 October 1995 ruling of the Panel
of Civil Cases of the Court of Appeal of Lithuania has been
adopted pursuant to Part 2 of Article 110 of the Constitution,
and Part 1 of Article 67 of the Law on Constitutional Court,
this request is grounded with legal arguments, therefore the
question of constitutionality of the norms of the Law as
indicated by the petitioner is to be investigated in these
proceedings of the Constitutional Court.
1. On the compliance of item 7, Part 1 of Article 37,
Article 39, Parts 1 and 2 of Article 40, the provision "the
court shall institute bank bankruptcy proceedings following a
statement of the bank's insolvency by the Bank of Lithuania" of
Article 45 of the Law on Commercial Banks with Parts 1 and 2 of
Article 23, and Part 1 of Article 46 of the Constitution.
1.1. It is consolidated in Part 1 of Article 23 of the
Constitution: "Property shall be inviolable." This is a
provision of the Chapter "The Individual and the State" of the
Constitution, wherein the main rights and freedoms of people
are consolidated. In this provision the constitutional
principle of the inviolability of private property is
formulated. The Constitutional Court in its 13 December 1993
ruling held: "Inviolability of property means, on the one hand,
the right of the owner as the possessor of subjective rights to
property, to require from other individuals not to violate his
own rights as well as the duty of the state, on the other hand,
to defend and protect property against illegal encroaching upon
it" (Official Gazette "Valstybės Žinios", No.70-1320, 1993).
It is established in Part 2 of Article 23 of the
Constitution "The rights of ownership shall be protected by
law." This provision stipulating that subjective property
rights are regulated and protected by laws consolidates the
basic rule of the institute of property law. In the case in
question the arguments which the Constitutional Court indicated
when interpreting Part 2 of Article 23 of the Constitution in
its said 13 December 1993 ruling are important: "[...] as far
as the theory of law is concerned, the protection of property
rights by legal means presuppose, in turn, appropriate limits
to such protection, as law in all cases of the regulation of
public relations is valid only within certain limits." Thus
subjective property right is an element of the absolute legal
relation where the owner is opposed to all other persons who
must abstain from violating this law. On the other hand, the
owner, when exercising his property rights, is not entirely
free. It is established in Article 28 of the Constitution:
"While exercising their rights and freedoms, persons must
observe the Constitution and the laws of the Republic of
Lithuania, and must not impair the rights and interests of
other people." Therefore subjective property right may be
defined as the law protected opportunity of the owner to manage
the possessions which belong to him, to utilise and dispose of
them at his discretion and in his interests, not overstepping,
however, the limits imposed by the law, and not impairing the
rights and freedoms of other people.
It should be noted that the doctrine of human rights along
with the democratic states' law which bases itself on it
recognises certain opportunity to restrict property rights, as
well as some other basic human rights. But here the essential
provision is followed that the fundamentals of the content of
any basic human right may not be violated by restrictions. If
such a right were restricted so that reasonable limits were
exceeded, or its legal protection were not ensured, in that
case there would be grounds to assert that the fundamentals
themselves of such a right are violated, and that would be
equivalent to the denial of this right.
Article 17 of the European Convention of Human Rights
contains such a fundamental prohibition: "Nothing in this
Convention may be interpreted as implying for any State, group
or person any right to engage in any activity or perform any
act aimed at the destruction of any of the rights and freedoms
set forth herein or at their limitation to a greater extent
than is provided for in the Convention."
Article 1 of the First Protocol is devoted to the
protection of property in the Convention wherein it is
established:
"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."
It is pointed out in the review of practical application
of the Convention by the European Commission of Human Rights
and the European Court of Human Rights: Part 2, Article 1 of
the First Protocol establishes that the laws which the State
deems necessary to control the use of property in accordance
with the general interest do not violate the said Article of
the Convention. In the aforementioned provision of Article 1 a
well-known legal principle is expressed which is recognised by
every State of the Convention: the legislator is entitled to
establish rules restricting opportunities of property owners in
the general interest. Of course, such rules are much varied.
The Court controls the measures adopted by the States under the
rule of proportionality (The European System for the Protection
of Human Rights/ R.St.J.Macdonald, F.Matcher, H.Petzold (Eds.)
1993. P. 526).
Thus, to summarise it, we can assert that the protection
of private property as established in the Constitution agrees
in essence with the international understanding of protection
of the right to property.
1.2. The right to property is closely connected with
freedom of the individual which is proclaimed in the
Constitution because the main function of the right to property
is to give its possessor corresponding freedom in the field of
economy, too.
The provision "Lithuania's economy shall be based on the
right to private ownership, freedom of individual economic
activity, and initiative" of Part 1 of Article 46 of the
Constitution expresses the constitutional principle defining
the economic basis of the country. Freedom of economic activity
means the right to possess property, the right to freely choose
occupation and business, as well as dwelling place. Freedom of
economic activity is freedom of contracts, freedom of fair
competition, equal rights of entities of economic activity. In
other words, freedom of individual economic activity and
initiative is the whole complex of legal opportunities which
creates preconditions for an individual to adopt decisions
necessary for his economic activity by himself.
Freedom of economic activity is not limitless. It is
reckoned to be one of the public rights when implementing them
public interests are affected, therefore they are regulated
more than individual freedoms. From the point of view of
liberal doctrines, the sphere of decisions regarding economic
sphere adopted by the state institutions must be minimal. The
practice and law of contemporary democratic states ground
themselves in essence on the fact that the state may not
arbitrarily (e.g., by violating the principle of equality) and
without restrictions limit freedom of economic activity.
Part 1 of Article 46 of the Constitution establishes the
principle of freedom of individual economic activity and
initiative for implementation of which other parts of the same
article are devoted. When assessing the disputed norms of the
Law, one ought to pay attention to Part 3 of Article 46 of the
Constitution wherein it is established that the State shall
regulate economic activity so that it serves the general
welfare of the people.
1.3. While judging if the contested norms are in
compliance with the principles of protection of private
property, as well with those of individual economic activity
and initiative as consolidated in the Constitution, it is
necessary to emphasise a common feature of legal regulation of
property relations - differentiation which is conditioned by
the growing intensity of economic life, accumulation of
capital, and other factors. Due to the differentiated
regulation of property relations (taking into consideration the
peculiarities of the field of regulated property relations, the
nature, function of possessions, their specific purpose, and
different situation of entities), there appear types of
property law - industrial law, commercial law, financial law -
which have less and less features of classical civil law.
Banking under the conditions of market economy is, first
of all, the economic activity in a specific field of the
capital on loan. The accumulation, circulation, distribution of
means in the banks are performed partly in accordance with
general norms of civil law, but owing to peculiarities of
bank's activity special legal regulation is necessary, too. For
such a purpose the Law on Commercial Banks is passed in Article
1 whereof it is established that in their activities banks
shall comply with the Company Law and other legal acts, unless
this Law provides otherwise, as well as with their statutes
(bylaws). According to the Law, the bank is an enterprise
functioning on the basis of share capital, whereas the share
capital - the nominal value of all registered shares (Article
2).
The means acquired for shares are received by the
joint-stock enterprise (by the bank in the case in question)
for the utilisation, disposal and management. After certain
shares have been acquired, the shareholders' former property
right disintegrates: on its basis there appear proprietary and
non-proprietary rights of the shareholder: to get a portion of
the profit of the enterprise (dividends), a portion of the
possessions of the enterprise undergoing liquidation, to
transfer shares at the disposal of other persons, to take part
in the management bodies of the enterprise, etc. The
shareholders' property right is peculiar in that the object of
the property right is not a material one, it is the rights and
duties provided for in laws and the statute (bylaw) of the
enterprise. Meanwhile the main property right of the
enterprise, thus that of the bank too, is the property right to
material possessions registered as share capital.
The co-ordinated shareholders' will regarding management,
utilisation and disposal of the possessions is implemented
through the joint-stock company (the bank). The managing bodies
of the bank shall be comprised of the shareholders' meeting,
the council and the board of the bank, and the head of the bank
administration (Article 16 of the Law). In their relation with
the third party, including the state, these bodies represent
the economic entity - the bank - which possesses the rights of
legal person, and they express the will of the legal person.
The argument of the petitioner, that after applying the
disputed norms of the Law "the shareholders-owners of the bank
are deprived of the possibility to manage and utilise their
property", does not quite correspond the aforesaid provisions
of general character of share law. In this case the Law speaks
about the sanctions for the legal person, i.e., the bank, as
well as about the restrictions of the property rights'
implementation of the bank, but not about the sanctions for the
shareholders.
Shareholders' private ownership right to shares, as well
as the bank's ownership right its to possessions, is protected
by Article 23 of the Constitution. The protection of property
rights, however, may be differently regulated in laws when
taking account of different situation of subjects of property
rights in view of the pursuit of their ends. The activity of
the bank as an economic entity is of exceptional character. The
bank is an enterprise functioning on the basis of share capital
which accepts deposits and other repayable funds and/or gives
loans, and assumes all the risks and responsibility related
thereto, and engages in other activities specified by this Law.
Thus the financial basis of the bank's economic activity is of
two-fold character: share capital and borrowed means. It should
be noted that the borrowed means exceed significantly the share
capital. As the essence of the banks' activity is re-lending of
borrowed money, it is important to ensure the balance of the
commitments of the bank for its creditors, and those of the
debtors for the bank. If the bank's council, its board,
administration for certain reasons did not balance the
commitments for the bank with those of the bank for its
creditors, and if the degree of the risk of bank's activity
became too high, in the case of the bankruptcy and liquidation
of the bank the depositors and other creditors, as well as the
shareholders would suffer losses.
Article 1 of the Law defines the purpose of the Law which
is to regulate the activities of commercial banks in order to
assure a stable, reliable, efficient and safe functioning of
banks, and such a purpose conditions corresponding supervision
of banks' activities. In modern democratic states, as a rule,
the state bank, or sometimes a specially formed state
institution, is commissioned to supervise functions of banks'
activities.
It is established in Article 125 of the Constitution:
"In the Republic of Lithuania, the central bank shall be
the Bank of Lithuania, which is owned by the State. [...]
The procedures for the organisation and activities of the
Bank of Lithuania as well as its powers shall be established by
law."
According to item 10, Article 8 of the Law on the Bank of
Lithuania, the Bank of Lithuania shall issue and revoke
licenses of the banks of the Republic of Lithuania and foreign
banks, as well as other credit institutions in the Republic of
Lithuania and supervise their activities. This obligation of
the Bank of Lithuania is derived from its principal objective -
to achieve stability of currency of the Republic of Lithuania,
and while implementing it the Bank of Lithuania must ensure the
reliable functioning of the currency market and the system of
credit and settlements (Article 7 of the Law on the Bank of
Lithuania). A form of banks' supervision, among others, is the
application of sanctions by the Bank of Lithuania to banks and
other credit institutions which violate the laws and other
legal acts passed by the Bank of Lithuania, or when their
chosen risky manner of activities may cause instability in the
financial system or affect the interests of clients and
depositors, or when by their activities they are seeking to
monopolise certain spheres of the financial system of the
Republic of Lithuania (item 4, Part 1 of Article 36 of the Law
on the Bank of Lithuania).
1.4. The application of sanctions to banks is regulated in
the Chapter "Sanctions" of the Law on Commercial Banks. The
petitioner doubts if item 7, Part 1 of Article 37, Article 39,
as well as Parts 1 and 2 of Article 40 of this Chapter, are in
compliance with the Constitution.
It is established in item 7, Part 1 of Article 37 of the
Law: "The Bank of Lithuania seeking to protect the interests of
depositors, and to assure the safety, trustworthiness and
stability of the bank and banking system shall have the right
to apply to banks the following sanctions: [...] to suspend the
powers of the bank council, remove from office the board of the
bank, the head of the bank administration and appoint a
temporary administrator of the bank."
Article 39 of the Law prescribes that the powers of the
bank council shall be suspended, the bank board and the head of
the administration shall be removed, and a temporary
administrator shall be appointed if trustworthiness and
stability of the bank are threatened but there is a real
possibility to remedy the situation upon suspending the powers
of the bank council, removing the bank board and the head of
administration. The temporary administrator shall be appointed
for a period of up to one year.
The legal status of the temporary administrator is defined
in Parts 1 and 2 of Article 40 of the Law: "The temporary
administrator is a manager of the bank appointed by the Bank of
Lithuania for the term of the suspension of powers of the bank
council and removal of the bank board and head of the
administration. From the day of the appointment of the
temporary administrator all the powers of the council, the
board and the head of the administration shall be passed to the
temporary administrator and all decisions of the above bodies
passed after the appointment shall be illegal and
unenforceable."
The doubt of the petitioner regarding the conformity of
the aforesaid norms of the Law to Parts 1 and 2 of Article 23,
as well as Part 1 of Article 46 of the Constitution, is based
on such a general legal argument: "Upon taking over the
property of a commercial bank at its command by the Bank of
Lithuania and commencing the management of the said property,
the shareholders-owners of the bank are deprived of the
possibility to manage and utilise their property. Thereby the
right to private property, as well as the freedom of people's
activity and their initiative, is restricted."
It should be noted that the disputed norms of the Law do
not establish the Bank's of Lithuania right to take over the
property of a commercial bank at its command and to manage it.
Upon application of the sanction provided for in item 7, Part 1
of Article 37 of the Law, the bank further functions as and an
independent economic entity, the legal status of its property
does not change, the shareholders' property rights to shares
persist. However, the suspension of the activities of the bank
bodies and the transfer of the bank's management to the
temporary administrator is restriction of the rights of legal
person (the bank) to manage the property which belongs to it,
as well as restraint of freedom of economic activity and
initiative. When judging if all this corresponds the provisions
of Articles 23 and 46 of the Constitution as pointed out by the
petitioner, the objective which is sought should be assessed
according to the aforementioned requirement of proportionality,
and if this sanction meets the objective.
The judgement in this case is to be linked with Article 28
of the Constitution wherein it is established: "While
exercising their rights and freedoms, persons must observe the
Constitution and the laws of the Republic of Lithuania, and
must not impair the rights and interests of other people."
Legal persons also have a constitutional obligation to observe
the Constitution and the laws, as well as not to impair the
rights and interests of other people.
Although it would be incorrect to assert that the state
(its institutions, officers) never impairs human rights but it
is the state that guarantees and protects human rights, it is
the state that bears most of the responsibility to protect
human rights and create appropriate conditions to implement the
said rights. The state performs its function to protect human
rights in varied manner. A conclusion is to be made out of the
content of Article 28 of the Constitution that to persons who
when exercising their rights and freedoms do not observe the
Constitution and the laws, and impair the rights and freedoms
of other people, corresponding sanctions may be applied, among
them the restrictions of their property rights, restraints of
their economic activity and initiative.
In Part 1 of Article 38 of the Law it is prescribed that
the Bank of Lithuania shall apply the sanctions if at least one
of the following conditions is present:
"1) furnishing of incorrect information to the Bank of
Lithuania;
2) failure to provide the Bank of Lithuania with required
information or documents which are necessary for banking
supervision;
3) non-compliance with the established standards; and
4) violation of any laws or legal acts of the Republic of
Lithuania."
Besides, the sanction - a temporary suspension the powers
of the bank council, removal from office the board of the bank
and the head of the bank administration - provided for by item
7, Part 1 of Article 37 of the Law may be applied only under
the conditions established by Article 39: first, it must be
held that trustworthiness and stability of the bank are
threatened; second, the appearance of such a situation is
linked with the activities of the existing management bodies of
the bank; third, there exists a real possibility to remedy the
situation upon suspending the powers of the bank council,
removing the bank board and the head of the administration, and
appointing a temporary administrator.
Thus the possibility of application of sanctions for the
bank is linked in the Law with violations of law committed by
the management bodies of the bank, to non-performance of the
requirements regarding economic activities. At the same time it
should be noted that the main objective of the sanction -
suspension of the activities of the management bodies of the
bank - which is regulated by the contested norms of the Law is
a preventive one: if there appears threat to trustworthiness
and stability of the bank, thereby it is attempted to protect
the interests of depositors, to assure the safety,
trustworthiness and stability of the bank and banking system.
The bank, disposing of the means of others, assumes
corresponding risks and responsibilities, its share capital is
the guarantor of the protection of the borrowed capital. By the
said sanction it is also sought to preserve the bank's assets
and to improve its functioning.
Disputed Parts 1 and 2 of Article 40 of the Law define the
rights and the obligations of the temporary administrator. In
Article 39 the aim of the administrator's appointment is
formulated, and the powers which the temporary administrator is
granted by Article 40 of the Law oblige him to act in the
interests of the bank.
It should be noted that according to Article 40 of the Law
the temporary administrator may not without the authorisation
or agreement of the shareholders' meeting sell or otherwise
transfer, mortgage the bank's real estate, reorganise or
liquidate the bank save for the cases provided for in Part 7 of
Article 34, as well as to decide other questions which are
within the competence of the shareholders' meeting. The
temporary administrator must inform the Bank of Lithuania and
the shareholders' meeting of the developments and results of
administration within the terms set by them and according to
the established procedure. The temporary administrator shall be
liable in accordance with the procedure established by the laws
of the Republic of Lithuania for the damage inflicted on the
bank through his fault.
Part 3 of Article 37 of the Law and Part 2 of Article 37
of the Law on the Bank of Lithuania consolidate the right to
appeal against the validity of the Bank's of Lithuania
resolution concerning the application of sanctions against the
bank in court.
The liability of the temporary administrator provided for
in the law, as well as the possibility to appeal against the
validity of the Bank's of Lithuania resolution, is a
significant guaranty of the protection of the property rights
of the party concerned.
The whole complex of the arguments set forth permits to
draw a conclusion that the contested norms of the Law
regulating the application of the sanction indicated in item 7,
Part 1 of Article 37, and defining the status of the temporary
administrator comply with Parts 1 and 2 of Article 23, as well
as Part 1 of Article 46 of the Constitution.
1.5. Article 45 of the Law stipulates: "The court shall
institute bank bankruptcy proceedings following a statement of
the bank's insolvency by the Bank of Lithuania as well as in
accordance with the resolution of the shareholders' meeting or
the statement of the creditors, provided only there is a
conclusion of the Bank of Lithuania concerning the bank
insolvency."
The petitioner doubts if the provision "the court shall
institute bank bankruptcy proceedings following a statement of
the bank's insolvency by the Bank of Lithuania" of the article
is in conformity with the principle of the protection of the
property, freedom of peoples' economic activity and initiative
which is established in the Constitution. In the opinion of the
petitioner, "this provision entitles the Bank of Lithuania to
insist upon bankruptcy proceedings to be instituted against a
commercial bank, i.e., to seek to influence the activity of the
private capital enterprise".
When judging the compliance of the disputed norm with the
Constitution it should be noted that the right to institute
bank bankruptcy proceedings is linked with existence of a
conclusion of the Bank of Lithuania concerning the bank
insolvency. In very general terms insolvency may be defined as
a situation when the property owner is not capable to cover his
debts after dues have fallen, i.e., the bank's possessions
(property) become smaller than it is required to repay debts
and there appears threat to the property of depositors and
other creditors. The bank, as well as the creditors, is
concerned to look for ways out of the situation unfavourable
for both parties. For this purpose the bankruptcy procedure -
the appointment of the bank administrator, the reorganisation
or rehabilitation of the bank in order to avoid its bankruptcy,
as well as the liquidation of the bank - may be used (Article
44 of the Law).
According to Article 45 of the Law, the Bank of Lithuania,
the shareholders' meeting, creditors are entitled to initiate
the institution of the bank bankruptcy procedures in the court.
Thus it is impossible to draw a conclusion on the basis of this
article that to do this is an exclusive right of the Bank of
Lithuania. In the disputed provision of the Law, one way - a
concrete manifestation of banking supervision, i.e., the right
to submit to the court a statement regarding a bank's
insolvency - to accomplish tasks raised to the Bank of
Lithuania is consolidated. This right of the Bank of Lithuania
is based upon the responsibility for its supervised field of
economic activity. The right to represent the interests of the
bank's creditors when initiating bankruptcy proceedings of the
bank which fails to perform its commitments is justified by the
necessity to safeguard and protect property rights of these
persons the number of whose, as a rule, is great (Article 23 of
the Constitution).
The provision "the court shall institute bank bankruptcy
proceedings following a statement of the bank's insolvency by
the Bank of Lithuania" of Article 45 of the Law signifies the
right of the Bank of Lithuania - one of the three subjects
which are provided for in the Law - to submit to the court a
statement regarding the institution of the bank bankruptcy
proceedings. Institution of civil proceedings when the
statement corresponds the CCP requirements (in the case in
question - the conditions established in Article 45 of the Law)
is the obligation of the court, and not only its right. It
should be noted that in the said article of the Law the
foreseen institution of bankruptcy proceedings in accordance
with the resolution of the shareholders' meeting or the
statement of the creditors might cause just the same procedural
and material effect.
On the basis of the arguments set forth a conclusion is to
be made that the provision "the court shall institute bank
bankruptcy proceedings following a statement of the bank's
insolvency by the Bank of Lithuania" of Article 45 of the Law
is in compliance with Parts 1 and 2 of Article 23, and Part 1
of Article 46 of the Constitution.
2. On the compliance of Article 45, Parts 2 and 3 of
Article 46 of the Law on Commercial Banks with Part 1 of
Article 29, and Part 2 of Article 109 of the Constitution.
2.1. It is established in Part 1 of Article 29 of the
Constitution: "All people shall be equal before the law, the
court, and other State institutions and officers."
The principle of equality of all people before the law is
the basis of democratic society. The constitutional provision
"all people shall be equal before the law" requires that basic
rights and freedoms for every person equally with others and
with no exceptions should be consolidated in the legal system
of the country. In this provision a formal equality of all
people is proclaimed. The Constitutional Court in its 28
February 1996 ruling held "[...] the constitutional principle
of equality of people of its own accord does not deny the fact
that law may establish different legal regulation concerning
certain categories of people who are in different situation.
This should also be applied to legal persons, and not only to
natural persons [...]" (Official Gazette "Valstybės Žinios"
No.25-630, 1996).
The provision "all people shall be equal before the court"
of the principle of equality of all people consolidated in Part
1 of Article 29 of the Constitution is a constituent part of
this principle. In a democratic state, the court is the main
institutional guarantee of human rights and freedoms. Part 1 of
Article 30 of the Constitution stipulates: "Any person whose
constitutional rights and freedoms are violated shall have the
right to appeal to court." This is the principle of priority
and universality of constitutional legal protection the
effectiveness of which is directly linked with the
constitutional principle "all people shall be equal before the
court".
The courts administer justice, i.e., they judge legal
conflicts by adopting legal decisions. Justice is administered
by applying special procedural forms the purpose of which is to
assure person's rights in judicial procedure, to facilitate to
reveal the actual circumstances of the case, and to pass the
right decision. According to Part 2 of Article 1 of the CCP,
"cases concerning disputes arising out of [...] bankruptcy
legal relations", shall be investigated by the process
established by the laws of civil procedure. The principle of
people's equality before the court manifests itself in the
process of civil procedure as the principle of the procedural
equality of parties. As it is stipulated in Part 1 of Article
35 of the CCP: "Procedural equality of parties shall be equal."
The dispute of equal parties in the procedure, where each party
of the proceedings enjoys all possibilities during judicial
investigation, expresses the essence of the civil procedure.
The parties, as well as other persons taking part in the
case (the third party, its representatives, etc.), by taking
advantage of the procedural rights seek to achieve that the
court passed the decision which meets their interests.
Depending on the procedural situation, persons taking part in
the proceedings have certain rights and obligations which are
characteristic only of them. Procedural rights and obligations
of persons taking part in the proceedings are somewhat
differently regulated in particular, viz., action,
administrative, special civil legal proceedings (Part 4 of
Article 35 of the CCP).
Judicial procedure of civil proceedings, thus, as well as
procedural rights of persons participating in the proceedings,
along with the CCP, are established by other laws as well,
including the Law on Commercial Banks, constitutionality of the
disputed norms whereof is investigated in the case in question.
2.2. It is established in Parts 2 and 3 of Article 109 of
the Constitution:
"While administering justice, judges and courts shall be
independent.
While investigating cases, judges shall obey only the
law."
Judicial independence is based upon the principle of the
separation of powers. In the democratic state the role of the
judicial power is that courts when judging legal conflicts
ensure the implementation of law expressed in the Constitution,
in laws, and other legal acts that do not contradict the former
and the latter. Independence of the judge and the court when
implementing justice is the independence from the institutions
of the state power and government, state officers, political
parties and public organisations, individual citizens and, it
goes without saying, from direct and indirect influence of the
persons taking part in the proceedings (the notion of the
principle of judicial independence was investigated by the
Constitutional Court in its 6 December 1995 ruling (Official
Gazette "Valstybės Žinios", No.101-2264, 1995)).
According to the Doctrine of Human Rights, judicial
independence in a democratic society is regarded as significant
guarantee of human rights and freedoms. This is consolidated in
many international documents. For instance, Article 6 (1) of
the European Convention for the Protection of Human Rights and
Fundamental Freedoms reads: "In the determination of his civil
rights and obligations or of any criminal charge against him,
everyone is entitled to a fair and public hearing within a
reasonable time by an independent and impartial tribunal
established by law." These are general provisions applied for
both civil and criminal proceedings.
2.3. In Part 2 of Article 44 of the Law it is established
that unless this Law establishes otherwise, the Enterprise
Bankruptcy Law shall apply to banks, and in Part 3 of the said
Article it is prescribed that bank bankruptcy procedure shall
be investigated exclusively in court as distinguished from the
judicial and extrajudicial bankruptcy procedure provided for in
the Enterprise Bankruptcy Law. The Chapter "Procedure for
Instituting Bankruptcy Proceedings against Banks and Court
Investigation of Cases" of the Law determines the institution
of such type of civil proceedings and peculiarities of their
investigation.
It is stipulated in Article 45 entitled "Conditions of
Instituting Bank Bankruptcy Proceedings" of the Law: The court
shall institute bank bankruptcy proceedings following a
statement of the bank's insolvency by the Bank of Lithuania as
well as in accordance with the resolution of the shareholders'
meeting or the statement of creditors, provided only there is a
conclusion of the Bank of Lithuania concerning the bank
insolvency."
It is also established in contested Parts 2 and 3 of
Article 46 entitled "Instituting Bankruptcy Proceedings in
Court":
"Upon receiving a statement which conforms with the
conditions set forth in Article 45, the court shall that same
day appoint the bank administrator on the recommendation of the
Bank of Lithuania and fix his/her remuneration.
The court shall pass a decision to institute bankruptcy
proceedings within 7 days and must:
1) notify the known creditors, the bank's correspondent
banks and the manager of the register of the initiation of
bankruptcy proceedings as well as make a public announcement
thereof indicating: the court in which the proceedings are to
be held and the case number; the requisites of the bank which
is going bankrupt; time period during which creditors' claims
will be accepted;
2) suspend other court proceedings instituted against the
bank and inform other courts, where proceedings against the
bank have been instituted, of the existence of bankruptcy
proceedings so as to have all other legal actions against the
bank suspended."
The petitioner points out that pursuant to these norms of
the obligating manner the courts must pass "a procedural
decision in favour of the subject that brought in the action",
i.e., upon receiving a statement, to institute bank bankruptcy
proceedings, to appoint the bank administrator on the
recommendation of the Bank of Lithuania, to perform other
mandatory actions. Therefore, the petitioner concedes, the said
norms violate the equality before the court principle of the
persons participating in the proceedings.
While judging the conformity of the disputed norms of the
Law with the principle of the equality of all people before the
court which is consolidated in Article 29 of the Constitution,
an account should be taken of the following legal aspects of
this question: the nature of bank bankruptcy proceedings, and
the peculiarities of investigation of civil proceedings of this
type.
After the bank has become insolvent, i.e., under the
situation when the bank has less possessions than it is
necessary to settle accounts according to its commitments, the
property rights of depositors and other creditors are violated.
As insolvency essentially signifies the loss of the bank's
property, property rights of shareholders are affected as well.
However, when there exists bank's insolvency, the interests and
the opinion of creditors and shareholders concerning possible
solutions may differ. According to disputed Article 45 of the
Law, when there is a conclusion of the Bank of Lithuania
concerning the commercial bank insolvency, both parties are
entitled on their own accord to appeal to the court requesting
to institute bank bankruptcy proceedings so that thereby their
violated rights were protected. The Bank of Lithuania which is
obligated by the law to ensure the reliable functioning of the
currency market and the system of credit and settlements, is
also entitled to submit a statement to the court regarding the
bank insolvency. It should be noted that the right of the state
institution which supervises banking to immediately apply
sanctions to the insolvent bank so that its depositors were
protected and the remaining assets were preserved, is
essentially not contested in bankruptcy law of foreign
countries because after the failure of a private bank state
interests are affected, and not only those of a limited private
sphere.
People's right to appeal to the court is implemented by
the procedure established by the CCP and other laws. If a
person enjoys a subjective procedural right to appeal to the
court and has correspondingly accomplished it, the norms of the
CCP do not provide for an opportunity to reject his
application. The acceptance of the application, as a procedural
act, at the command of the court means institution of civil
proceedings in court (Article 5 of the CCP).
Institution of bank bankruptcy proceedings in court is
regulated in the Law on Commercial Banks taking account of
peculiarities of such types of civil proceedings. According to
the theory of law, when there exists a competition between
general procedural norms, i.e., those of the CCP, and special
procedural norms, i.e., those of the Law on Commercial Banks,
the latter shall be applied. In disputed Article 45 of the Law
supplementary conditions (as a matter of fact, different from
those laid down in the Enterprise Bankruptcy Law) concerning
instituting bank bankruptcy proceedings in court: 1) only the
subjects enumerated in this article are entitled to submit a
statement (the will of the shareholders must be declared in a
resolution of shareholders' meeting pursuant to the prescribed
procedure and manner); 2) there must be a conclusion of the
Bank of Lithuania concerning the bank insolvency. In this norm
of the Law essentially the same conditions to initiate bank
bankruptcy proceedings are established for the enumerated
subjects. In this case a general rule of civil procedure is
valid: when there exist conditions as indicated in the Law, the
proceedings shall be initiated.
Institution of bank bankruptcy proceedings in court
following a statement of a person who enjoys the corresponding
subjective right means the implementation of any person's right
to appeal to court as consolidated in Part 1 of Article 30 of
the Constitution. The norms of the Law which consolidate this
right do not violate the principle of equality of all people
before the court. After bank bankruptcy proceedings following a
statement of one of the subjects indicated in the Law have been
instituted, other persons who have legitimate property
interests take part in the investigation of such civil
proceedings, i.e., they take part in the bank bankruptcy
procedure which is investigated by legal manner. Every person
taking part in the proceedings has the rights and obligations
which are determined by the CCP and which correspond his
procedural status, as well as the rights characteristic of
judicial bank bankruptcy procedure provided for by the Law.
Therefore the statement of the petitioner that instituting bank
bankruptcy proceedings is "a procedural decision in favour of
the subject that brought in the action" is not a grounded one.
When speaking about peculiarities of instituting bank
bankruptcy proceedings in court, the point of view of the
European Commission of Human Rights set forth in its 10 March
1981 decision regarding the admissibility of the application
should be mentioned. The applicant X on the grounds of Article
6 (1) of the European Convention for the Protection of Human
Rights and Fundamental Freedoms, alleged violation of his right
of defence in court by the Antwerp Commercial Court which
adjudicated him bankrupt. In the said decision of the
Commission it was held that the court which adjudicated the
applicant bankrupt ex officio was acting pursuant to a legal
act constituting an exception from the ordinary procedure. It
is impossible to assert that this court "was establishing" new
rights and obligations. Its function was not to solve a dispute
but to protect existing and potential creditors. In the opinion
of the Commission, Article 6 (1) of the Convention is not
applicable to urgent proceedings which lead to the adjudication
of bankruptcy. It is noted in the decision of the Commission
that, on the other hand, the said initial decision of the
Antwerp Commercial Court affected the applicant's rights,
therefore it could itself be disputed and its legality
challenged before a tribunal offering all the guarantees
mentioned in Article 6 (1) of the Convention. The applicant X
was able to form an objection which was subsequently
investigated in court by following a procedure that complied in
every respect with Article 6 (1) of the Convention (European
Commission of Human Rights. Commission Européene des Droits de
L'Homme. Decisions and reports. Décisions et rapports. No. 24.
P. 198).
The measures provided for in disputed Parts 2 and 3 of
Article 46 of the Law (appointment of the administrator,
notification of the creditors, the manager of the register of
the initiation of bankruptcy proceedings, etc.) are aimed to
protect the property rights of the depositors and those of
other persons concerned. Therefore these norms of the Law may
not be assessed as contradicting the principle of all people's
equality before the court.
According to Part 4 of Article 46 of the Law, the decision
of the court to institute bankruptcy proceedings may be
appealed against in the manner established by the CCP. This is
a significant guarantee of protection of people's rights and
freedoms in judicial institutions.
A conclusion is to be made from the arguments set forth
that disputed Article 45, as well as Parts 2 and 3 of Article
46 of the Law, is in compliance with Part 1 of Article 29 of
the Constitution.
2.4. In the opinion of the petitioner, there exist grounds
to consider that the said norms of the Law violate the
principle of judicial independence as pursuant to the said
norms the court must submit to the will of the party concerned
that has presented the statement, i.e., to institute bank
bankruptcy proceedings. It is alleged in the petition that
these contested norms of the Law obligate the court to assess a
conclusion of the Bank of Lithuania concerning the bank
insolvency as the only and uncontested legal argument to
legitimate the institution bank bankruptcy proceedings, and
thereby the said norms deprive the court of the opportunity to
pass an alternative decision - to refuse to institute
bankruptcy proceedings.
When judging the compliance of the aforesaid norms of the
Law with Part 2 of Article 109 of the Constitution, wherein it
is established that while administering justice, judges and
courts shall be independent, it is necessary to once again
emphasise peculiarities of the contested norms of the Law:
these are special norms regulating procedural manner of a
particular category of civil proceedings. They establish
supplementary conditions regarding instituting bank bankruptcy
proceedings in court.
Dispositive, as well as imperative methods of judicial
regulation are applied in civil procedure law. The norm of
dispositive character is the aforementioned Article 5 of the
CCP wherein it is established that the proceedings shall be
instituted at the initiative of the party concerned, and not of
the court. There exists, however, an imperative in Article 5 of
the CCP: the court must institute civil proceedings provided
the statement of the party concerned complies with the
requirements of the norms of the civil procedure. The disputed
norms of the Law are to be interpreted analogously: the court
must institute bank bankruptcy proceedings if the statement of
the party concerned is in conformity with general requirements
of the norms of the CCP, as well as with supplementary
conditions indicated in the Law. Thus institution of bank
bankruptcy proceedings in court is linked with fulfilment of
the corresponding requirements of procedural character. It
should not
be assessed as violation of the principle of independence
of judges and courts.
It is established in disputed Article 45, Parts 2 and 3 of
Article 46 of the Law that the court shall institute bank
bankruptcy proceedings following a statement of a corresponding
subject provided only there is a conclusion of the Bank of
Lithuania concerning the bank insolvency. This is the
requirement of the admissibility of the means of arguing basing
itself on the rule formulated in Article 64 of the CCP which
states that the case circumstances which must be confirmed with
certain means of arguing pursuant to the law may not be
confirmed by any other means of arguing. The admissibility of
the means of arguing is the question of procedural form of
presenting evidence, and not that of its content. As
institution of civil proceedings is based on the establishment
of legal facts of procedural character, thus, according to the
requirements of the said norms of the Law, to ground
institution of bank bankruptcy proceedings the means of
argumentation, viz., a conclusion of the Bank of Lithuania
concerning the bank insolvency, are necessary.
Laws do not define any criterion of the bank insolvency.
Article 9 of the Law on the Bank of Lithuania entitles the Bank
of Lithuania to issue legal acts within the limits of its
jurisdiction. It is established in item 1 of the 8 March 1995
resolution of the Bank of Lithuania "On Insolvency of Banks"
that banks shall be considered insolvent when net assets of the
bank are less than its commitments. It should be noted that the
right of the Bank of Lithuania, as the state institution, to
supervise the activities of banks, to announce the fact of the
bank insolvency, presupposes corresponding obligation of
responsibility of the legitimacy of the insolvency conclusion.
No evidence has the established beforehand power for the
court. While investigating a civil case, the court investigates
and judges the content of the so-called necessary evidences.
All parties taking part in proceedings are entitled to
participate when the court investigates evidences. Thus during
judicial investigation of bank bankruptcy proceedings (when
judging the questions of the bank's reorganisation or its
rehabilitation in order to avoid its bankruptcy, as well as the
question of bank's reorganisation) the court may freely check
the fact of the bank insolvency.
On the grounds of the arguments set forth a conclusion is
to be made that Article 45, Parts 2 and 3 of Article 46 are in
compliance with Part 1 of Article 29, as well as Part 2 of
Article 109 of the Constitution.
Conforming to Article 102 of the Constitution of the
Republic of Lithuania and Articles 53, 54, 55 and 56 of the Law
of the Republic of Lithuania on the Constitutional Court, the
Constitutional Court has passed the following
ruling:
To recognise that item 7, Part 1 of Article 37, Article
39, Parts 1 and 2 of Article 40, Article 45 and Parts 2 and 3
of Article 46 of the Law of the Republic of Lithuania on
Commercial Banks are in compliance with the Constitution of the
Republic of Lithuania.
This Constitutional Court ruling is final and not subject
to appeal.
The ruling is promulgated on behalf of the Republic of
Lithuania.