Lietuviškai
Case No. 39/01-21/02
THE CONSTITUTIONAL COURT OF THE REPUBLIC OF
LITHUANIA
RULING
ON THE COMPLIANCE OF PARAGRAPH 4 OF ARTICLE 3 OF
THE REPUBLIC OF LITHUANIA LAW ON THE
REORGANISATION OF JOINT-STOCK COMPANIES "BŪTINGĖS
NAFTA", "MAŽEIKIŲ NAFTA" AND "NAFTOTIEKIS" WITH
THE CONSTITUTION OF THE REPUBLIC OF LITHUANIA
17 March 2003
Vilnius
The Constitutional Court of the Republic of Lithuania,
composed of the Justices of the Constitutional Court Armanas
Abramavičius, Egidijus Jarašiūnas, Egidijus Kūris, Kęstutis
Lapinskas, Zenonas Namavičius, Augustinas Normantas, Jonas
Prapiestis, Vytautas Sinkevičius, and Stasys Stačiokas,
with the secretary of the hearing-Daiva Pitrėnaitė,
in the presence of:
the representative of the Seimas of the Republic of
Lithuania, the party concerned, who was Daina Petrauskaitė, a
senior consultant to the Legal Department of the Office of the
Seimas,
pursuant to Articles 102 and 105 of the Constitution of
the Republic of Lithuania and Article 1 of the Law on the
Constitutional Court of the Republic of Lithuania, on 5 March
2003 in its public hearing heard Case No. 39/01-21/02 which
originated in petitions of the Vilnius Regional Administrative
Court and a group of members of the Seimas, the petitioners,
requesting to investigate as to whether the provision "after
the strategic investor acquires the shares under Item 1 of
Paragraph 1 of this Article, neither State nor municipal
institutions will be permitted to raise additional claims to
the joint-stock company 'Mažeikių nafta' or its subsidiaries
concerning activity or failure to act of the joint-stock
company 'Mažeikių nafta' or its subsidiaries or as regards
other events, all of which took place prior to the acquisition
of the shares by the strategic investor" of Paragraph 4 of
Article 3 of the Republic of Lithuania Law on the
Reorganisation of Joint-stock Companies "Būtingės nafta",
"Mažeikių nafta" and "Naftotiekis" (wording of 5 October 1999)
is not in conflict with the principles of a just society and of
a state under the rule of law which are entrenched in the
Preamble to the Constitution of the Republic of Lithuania as
well as with the provisions of Paragraphs 1 and 2 of Article 5
and Paragraphs 3, 4 and 5 of Article 46 thereof.
By the Constitutional Court decision of 23 October 2002,
these petitions were joined into one case.
The Constitutional Court
has established:
I
1. On 5 October 1999, the Seimas adopted the Republic of
Lithuania Law on Amending and Supplementing Articles 3 and 4 of
the Law on the Reorganisation of Joint-stock Companies
"Būtingės nafta", "Mažeikių nafta" and "Naftotiekis" (Official
Gazette Valstybės žinios, 1999, No. 86-2560). By the said law
one consolidated the provision "after the strategic investor
acquires the shares under Item 1 of Paragraph 1 of this
Article, neither State nor municipal institutions will be
permitted to raise additional claims to the joint-stock company
'Mažeikių nafta' or its subsidiaries concerning activity or
failure to act of the joint-stock company 'Mažeikių nafta' or
its subsidiaries or as regards other events, all of which took
place prior to the acquisition of the shares by the strategic
investor" in Paragraph 4 of Article 3 of the Republic of
Lithuania Law on the Reorganisation of Joint-stock Companies
"Būtingės nafta", "Mažeikių nafta" and "Naftotiekis".
2. The Vilnius Regional Administrative Court, a
petitioner, was investigating an administrative case. The said
court suspended the investigation of the case by its ruling and
applied to the Constitutional Court with a petition requesting
to investigate as to whether the provision "after the strategic
investor acquires the shares under Item 1 of Paragraph 1 of
this Article, neither State nor municipal institutions will be
permitted to raise additional claims to the joint-stock company
'Mažeikių nafta' or its subsidiaries concerning activity or
failure to act of the joint-stock company 'Mažeikių nafta' or
its subsidiaries or as regards other events, all of which took
place prior to the acquisition of the shares by the strategic
investor" of Paragraph 4 of Article 3 of the Republic of
Lithuania Law on the Reorganisation of Joint-stock Companies
"Būtingės nafta", "Mažeikių nafta" and "Naftotiekis" (wording
of 5 October 1999; hereinafter also referred to as the Law) is
not in conflict with the principles of a just society and of a
state under the rule of law which are entrenched in the
Preamble to the Constitution of the Republic of Lithuania as
well as with the provisions of Paragraphs 1 and 2 of Article 5
and Paragraphs 3, 4 and 5 of Article 46 thereof.
3. A group of members of the Seimas, a petitioner, has
applied to the Constitutional Court with a petition requesting
to investigate as to whether the provision "after the strategic
investor acquires the shares under Item 1 of Paragraph 1 of
this Article, neither State nor municipal institutions will be
permitted to raise additional claims to the joint-stock company
'Mažeikių nafta' or its subsidiaries concerning activity or
failure to act of the joint-stock company 'Mažeikių nafta' or
its subsidiaries or as regards other events, all of which took
place prior to the acquisition of the shares by the strategic
investor" of Paragraph 4 of Article 3 of the Law is not in
conflict with the principles of a just society and of a state
under the rule of law which are entrenched in the Preamble to
the Constitution of the Republic of Lithuania as well as with
the provisions of Paragraphs 1 and 2 of Article 5 and
Paragraphs 3, 4 and 5 of Article 46 thereof.
II
The requests of the petitioners are based on the following
arguments.
1. The legislator deprived state and municipal
institutions of the opportunity to raise additional claims to
one of economic entities by the provision of Paragraph 4 of
Article 3 of the Law which stipulates that after the strategic
investor acquires the shares under Item 1 of Paragraph 1 of
this article, neither state nor municipal institutions will be
permitted to raise additional claims to the joint-stock company
"Mažeikių nafta" or its subsidiaries concerning activity or
failure to act of the joint-stock company "Mažeikių nafta" or
its subsidiaries or as regards other events prior to the
acquisition of the shares by the strategic investor. Due to
this the said institutions lost an opportunity to raise
additional claims which might be grounded on the activities,
failure to act of the aforementioned companies or events, all
of which took place prior to a certain date, i.e. liability of
the aforementioned companies before state or municipal
institutions became impossible for almost a limitless time
period, save the cases when the claims of institutions are not
additional.
2. The petitioners maintain that under the Republic of
Lithuania Law on Competition, the Competition Council is a
public body implementing the state competition policy, which
controls how this law is being followed (Paragraph 1 of Article
18). The Chairperson of the Competition Council and its members
shall be appointed by the President of the Republic upon the
presentation by the Prime Minister (Paragraph 1 of Article 20).
The Chairperson of the Competition Council shall submit annual
reports on the Competition Council activities to the Seimas and
the Government (Item 4 of Paragraph 1 of Article 21). The
Competition Council is not accountable only to the Seimas as
the legislative power. The procedure of formation of the
Council confirms that the President and the Government also
enjoy certain rights of control. The petitioners believe that
the aforementioned provision of Paragraph 4 of Article 3 of the
Law is in conflict with Paragraphs 1 and 2 of Article 5 of the
Constitution, also, that by the aforesaid provision of the Law
the Seimas restricted the powers of the Competition Council and
violated the principle of separation of state powers.
3. Paragraph 3 of Article 46 of the Constitution provides
that the state shall regulate economic activity so that it
serves the general welfare of the Nation. According to the
petitioners, one of the forms of the regulation is
establishment and application of legal liability to economic
entities. The disputed provision of the Law deprives a state
institution of an opportunity to regulate the activities of
certain economic entities through the application of liability.
The ensuring of freedom of fair competition is directly related
with proper regulation of economic activity and protection of
interests of consumers by the state. The Competition Council is
a state institution implementing the state competition policy
the essence of which is safeguarding of fair competition in the
Republic of Lithuania. Under Paragraph 3 of Article 40 of the
Law on Competition, for violation of this law an action may be
brought against economic entities not later than within three
years from the date of infringement, and in case of continued
violation-from the date of performance of the last acts. The
petitioner maintains that the disputed provision of the Law
deprives the Competition Council of an actual opportunity to
apply liability under the Law on Competition. Alongside, the
state lost an opportunity to defend the interests of part of
consumers and safeguard the freedom of fair competition, while
this is in conflict with Paragraphs 3, 4 and 5 of Article 46 of
the Constitution.
4. Under Paragraph 1 of Article 46 of the Law on
Competition, the economic entities which violate this law must
compensate for damage caused to other economic entities or
natural and legal persons according to the procedure
established by law. In the opinion of the petitioner, since the
Competition Council begins investigations into violations of
the Law on Competition and it also establishes violations,
then, in case it has no opportunity to raise claims, the
compensation for damage under Article 46 of the Law on
Competition becomes a problematic one. The petitioners assert
that due to these arguments there exists a ground to believe
that the disputed provision is in conflict with the principles
of a just society and of a state under the rule of law which
are entrenched in the Preamble to the Constitution.
III
In the course of the preparation of the case for the
Constitutional Court hearing, written explanations were
received from the representative of the Seimas, the party
concerned, who was D. Petrauskaitė, a senior consultant to the
Legal Department of the Office of the Seimas.
1. It is maintained in the explanations that by the Law
one attempted, while attracting investments, to ensure a
successful reorganisation of one of the most important sectors
of the economy of this country and to establish peculiarities
of the conditions of investing to the joint-stock company
"Mažeikių nafta" which would operate after the reorganisation
of the companies pointed out in the law, while taking account
of the investment conditions discussed in the letter of intent
signed between the Government and the USA Williams
International Company on 29 July 1998. It is pointed out in
Item 1.c of Paragraph 3 of the letter of intent, which in the
course of deliberation of the said draft Law was presented to
the Seimas as an annex to the draft Law, that "the Investment
Agreement or the Final Agreement will contain a provision
regarding exemption of Williams International Company and the
project company from liability for all the obligations of the
joint-stock companies 'Būtingės nafta', 'Naftotiekis' and
'Mažeikių nafta', which have not be taken over or revealed,
including, for example, taxes not paid in the past". Upon
adoption of the Law, conditions were created for the Government
to sign, under the conditions discussed in the letter of
intent, an investment agreement with the USA Williams
international Company, the strategic investor, on 29 July 1998.
2. In the opinion of D. Petrauskaitė, one should
understand "additional claims" indicated in Paragraph 4 of
Article 3 of the Law as claims by state and municipal
institutions to the joint-stock company "Mažeikių nafta" or its
subsidiaries, which appeared due to their activities or failure
to act prior to the acquisition of the shares belonging to the
joint-stock company "Mažeikių nafta" by the strategic investor
and which are raised by the said companies after that, to pay
sums (taxes not paid to the state, as well as penalties, fines,
etc.) which, in concluding the agreement with the strategic
investor, are not pointed out in the information documents
presented by the joint-stock company "Mažeikių nafta".
3. According to the representative of the party concerned,
taxes, fines, which are calculated for the sums of taxes paid
overdue, as well as the penalties imposed by the Competition
Council are paid to the state budget. Under the disputed norm,
the joint-stock company "Mažeikių nafta" into which, according
to the investment agreement with the state, the strategic
investor Williams International Company makes investments, as
well as its subsidiaries, is exempted from the fulfilment of
the claims (additional claims) to the state, which were not
revealed, at the time of conclusion of the agreement, to the
strategic investor. Thus, the state assumes losses which might
appear due to the fact that in the agreements concluded by the
Government and annexes thereto the information, statements
and/or confirmations are incorrect and imprecise.
4. D. Petrauskaitė notes that at the time of the
preparation to conclude the investment agreement, one attempted
to reveal all liabilities of the joint-stock company "Mažeikių
nafta" to the state. The "additional claims" indicated in the
disputed norm are the claims which were unknown to the parties
to the agreement or the parties were unable to know them at the
time of conclusion of the agreement. Concluding the investment
agreement with Williams International Company through its
institutions, the state was acting as a subject of civil legal
relations. From the standpoint of civil law, the state, while
assuming possible losses due to unrevealed debt liabilities to
it (the state) to the other party at the time of conclusion of
the agreement, was acting as a faithful party to the agreement.
The payment of additional sums, which are indicated in the
disputed norm, would make impact on the amount of the floating
capital and of the profit of the joint-stock company "Mažeikių
nafta", also on the obligations of the parties to the
investment agreement related thereto, which might violate the
interests of the strategic investor.
5. According to the representative of the party concerned,
the disputed norm did not deprive state institutions of the
right to apply legal liability to the joint-stock company
"Mažeikių nafta" but merely restricted application of certain
liability measures under certain conditions for a certain time
period. Under Paragraph 3 of Article 127 of the Constitution,
taxes, other contributions to the budgets, and levies shall be
established by the laws of the Republic of Lithuania. Thus, it
is within the competence of the Seimas to establish
contributions to the state budget, also, to exempt one from
their payment. Therefore, in the opinion of D. Petrauskaitė,
the Seimas did not interfere with the competence of the
executive and there are no grounds to assert that the disputed
norm is in conflict with the principle of a state under the
rule of law established in the Constitution as well as
Paragraphs 1 and 2 of Article 5 thereof.
6. D. Petrauskaitė notes that the norms of Article 3 of
the Law regulate the relations related with the reorganisation
of one sector of the economy of this country in the fulfilment
whereof privatisation of economic objects is of utmost
significance. The choice of privatisation methods is influenced
by peculiarities of the development of this country, the
condition of state-owned enterprises, the situation of the
economy of this country and other factors. Implementing the
economic reform, the state, without violating the principles
and norms of the Constitution, may establish differentiated
legal regulation. Taking account of this, one is to draw a
conclusion that there is no ground to regard the disputed legal
norm as being in conflict with Paragraph 3 of Article 46 of the
Constitution. The prohibition to monopolise production and the
market does not mean that it is prohibited to state the
existence, in a law, of a monopoly in a particular sector of
economy or otherwise to reflect actual monopolistic relations
and to regulate them in a respective manner. The joint-stock
company "Mažeikių nafta" dominates in the market, however, in
itself the fact that, under the disputed norm, this company and
its subsidiaries are exempted from fulfilment of the additional
claims to the state, which are pointed out in the disputed
norm, does not create any conditions for the enterprise to
abuse the domination in the market. Therefore, in the opinion
of the representative of the party concerned, the disputed norm
is not in conflict with Paragraph 4 of Article 46 of the
Constitution.
7. The representative of the party concerned also points
out that the disputed norm is applied to the claims of state
and municipal institutions, therefore it is applied to the
Competition Council, too. One is to draw a conclusion that the
norms of the Law are applicable only to the claims which
appeared when public liabilities are not fulfilled. Civil and
public liabilities are of different content. They appear on
different grounds, their legal regulation is based on different
principles, and their violation gives rise to different legal
effects. The construction of the nature of competition law of
the Republic of Lithuania is inseparable from that of the
nature of competition law of the European Union. In certain
respects, competition law pertains to private law, while in
certain respects it pertains to public law. The disputed norm
does not prohibit the Competition Council from applying two
sanctions from the three established in Article 40 of the Law
on Competition (except for a penalty, which is an economic
sanction). Thus, there is no ground to assert that the disputed
norm deprives state institutions of the right to regulate,
through liability, the activities of economic entities, to
defend the interests of consumers and to protect freedom of
fair competition.
8. In the opinion of the representative of the party
concerned, the disputed provision of Paragraph 4 of Article 3
of the Law is not in conflict with Paragraphs 1 and 2 of
Article 5, Paragraphs 3, 4 and 5 of Article 46 of the
Constitution as well as the constitutional principle of a state
under the rule of law.
IV
In the course of the preparation of the case for the
Constitutional Court hearing, written explanations were
received from R. Stanikūnas, Chairman of the Competition Board,
N. Eidukevičiaus, Vice-minister of Economy, G. Švedas,
Vice-minister of Justice, V. Vadapalas, Director General of the
Department of European Law under the Government of the Republic
of Lithuania, Prof. O. G. Rakauskienė and Assoc. Prof. G.
Davulis, both of whom work at the Faculty of Public
Administration, the Law University of Lithuania, as well as
Assoc. Prof. M. Kučinskienė, Assoc. Prof. Z. Gineitienė,
lecturers G. Jatuliavičienė and E. Vabalas, all of whom who
work at the Department of Economics of Enterprises of the
Faculty of Economics, Vilnius University.
V
At the Constitutional Court hearing, the representative of
the Seimas, the party concerned, who was D. Petrauskaitė,
virtually reiterated the arguments set forth in her written
explanations.
The Constitutional Court
holds that:
1. By the Law on the Amendment and Supplement of Articles
3 and 4 of the Law on the Reorganisation of Joint-stock
Companies "Būtingės nafta", "Mažeikių nafta" and "Naftotiekis",
which was adopted on 5 October 1999, the Seimas altered
Articles 3 and 4 of the Law on the Reorganisation of
Joint-stock Companies "Būtingės nafta", "Mažeikių nafta" and
"Naftotiekis" and in Paragraph 4 of Article 3 of the said law
it consolidated the provision "after the strategic investor
acquires the shares under Item 1 of Paragraph 1 of this
Article, neither State nor municipal institutions will be
permitted to raise additional claims to the joint-stock company
'Mažeikių nafta' or its subsidiaries concerning activity or
failure to act of the joint-stock company 'Mažeikių nafta' or
its subsidiaries or as regards other events, all of which took
place prior to the acquisition of the shares by the strategic
investor".
The Vilnius Regional Administrative Court and the group of
members of the Seimas, the petitioners, request to investigate
whether the said provision of Paragraph 4 of Article 3 of the
Law is not in conflict with the principles of a just society
and of a state under the rule of law which are entrenched in
the Preamble to the Constitution as well as with the provisions
of Paragraphs 1 and 2 of Article 5 and Paragraphs 3, 4 and 5 of
Article 46 thereof.
2. Paragraph 4 of Article 3 of the Law on the
Reorganisation of Joint-stock Companies "Būtingės nafta",
"Mažeikių nafta" and "Naftotiekis" (wording of 5 October 1999)
establishes the provision disputed by the petitioners as well
as provides for the procedure of the reorganisation of
joint-stock companies "Būtingės nafta", "Mažeikių nafta" and
"Naftotiekis", the conditions and procedure of investments into
the company continuing its activities after the reorganisation,
and the requirements for the owners of the blocks of shares.
It is noted in the explanations of the representative of
the Seimas, the party concerned, that by this law one attempted
to create conditions for the Government to sign an investment
agreement with the strategic investor.
By its 29 September 1998 Resolution "On the Recognition of
the Strategic Investor", the Seimas recognised the United
States Williams International Company as a strategic investor
and granted the right to it to acquire some shares of the
joint-stock company "Mažeikių nafta" which was to continue its
activities after the reorganisation.
It is established in the Republic of Lithuania Law on the
Amendment of Article 3 of the Law on the Reorganisation of
Joint-stock Companies "Būtingės nafta", "Mažeikių nafta" and
"Naftotiekis", adopted on 12 September 2002, that the rights
and duties of the strategic investor, as provided for in this
law, may devolve to the successor of the rights and duties of
the strategic investor under respective agreements, which is
the investor confirmed by the Seimas.
By its 17 September 2002 Resolution "On the confirmation
of the Netherlands Limited Company Yukos Finance B.V. as an
investor", the Seimas confirmed the Netherlands Limited Company
Yukos Finance B.V. as the investor taking over the rights and
duties of the United States Williams International Company
under the respective 29 October 1999 and 18 June 2002
agreements on investments into the joint-stock company
"Mažeikių nafta". It was also established in the same
resolution of the Seimas that such a decision is valid and is
also applicable to the companies which control the Netherlands
Limited Company Yukos Finance B.V. or the companies controlled
by the latter on the condition and only until when the
Netherlands Limited Company Yukos Finance B.V. is controlled by
the Russian Federation joint-stock company Yukos Oil
Corporation.
3. The Constitutional Court has considered a case in which
one inter alia was deciding an issue of the compliance of the
29 October 1999 Republic of Lithuania Law on the Reorganisation
of the Joint-stock Companies "Būtingės nafta", "Mažeikių nafta"
and "Naftotiekis", the 3 June 1999 Law on Amending and
Supplementing Article 3 of the Law on the Reorganisation of the
Joint-stock Companies "Būtingės nafta", "Mažeikių nafta" and
"Naftotiekis", the 5 October 1999 Law on Amending and
Supplementing Articles 3 and 4 of the Law on the Reorganisation
of the Joint-stock Companies "Būtingės nafta", "Mažeikių nafta"
and "Naftotiekis" with the Constitution. In the Constitutional
Court ruling of 18 October 2000, it was recognised that the
provisions of Paragraph 4 of Article 3 of the Law stipulating
that the Government, in the agreements with the strategic
investor and the joint-stock company "Mažeikių nafta", has the
right to assume basic property liabilities in the name of the
state, including recovery of losses, to the extent that that
the right of the Government is established to obligate itself
to cover losses to the strategic investor and the joint-stock
company "Mažeikių nafta" even in such a case when the strategic
investor and/or the joint-stock company "Mažeikių nafta" are
responsible for the losses, also to the extent that the
Government has the right to obligate itself in the name of the
state to cover losses even in such a case when such losses are
incurred due to adoption of the laws enforcing norms of the
Constitution and/or protecting the values established in the
Constitution were in conflict with the Constitution. In the
said case the Constitutional Court did not investigate as to
whether the provision "after the strategic investor acquires
the shares under Item 1 of Paragraph 1 of this Article, neither
State nor municipal institutions will be permitted to raise
additional claims to the joint-stock company 'Mažeikių nafta'
or its subsidiaries concerning activity or failure to act of
the joint-stock company 'Mažeikių nafta' or its subsidiaries or
as regards other events, all of which took place prior to the
acquisition of the shares by the strategic investor" of
Paragraph 4 of Article 3 of the Law was not in conflict with
the Constitution.
4. The beginning of the application of the disputed
provision of Paragraph 4 of Article 3 of the Law is linked with
a certain legal fact, i.e. with the fact that the strategic
investor acquires the shares under Item 1 of Paragraph 1 of
Article 3 of this law in which it is provided that the
strategic investor, recognised as such by the Seimas upon the
presentation by the Government, shall be granted the right to
acquire shares of the new issue of the joint-stock company
"Mažeikių nafta" which continues its activities after the
reorganisation, the total nominal value whereof does not exceed
33 percent of the authorised capital of this company.
5. While deciding whether the disputed provision of
Paragraph 4 of Article 3 of the Law is not in conflict with the
Constitution, it is necessary to elucidate as to the meaning of
the notions "state institutions" "municipal institutions" and
the formula "additional claims concerning activity or failure
to act of the joint-stock company 'Mažeikių nafta' or its
subsidiaries or as regards other events prior to the
acquisition of the shares by the strategic investor" which are
employed therein.
5.1. The notion "state institutions" employed in disputed
Paragraph 4 of Article 3 of the Law includes all state
institutions, i.e. all institutions which are a constituent
part of the state mechanism and through which the state
implements its functions.
5.2. The notion "municipal institutions" means
subordination of corresponding institutions to a certain
municipality. A municipality is the community of an
administrative unit of state territory which enjoys the right
to self-government guaranteed by the Constitution
(Constitutional Court ruling of 24 December 2002). In its
ruling of 18 February 1998, the Constitutional Court held that
the Constitution determines local self-government as a local
public administration system operating on the basis of
self-action principles, which is not directly subordinate to
state power institutions. Municipal institutions are
established for the realisation of the interests of
municipalities, also for the direct implementation of laws,
Government resolutions and decisions of municipal councils. It
was held in the Constitutional Court ruling of 24 December 2002
that municipal councils, as well as the executive bodies
accountable to them, and other institutions established by
municipal councils, are to be regarded as municipal
institutions.
5.3. The legislator, while pointing out the claims that
will not be permitted to be raised to the joint-stock company
"Mažeikių nafta" and its subsidiaries by state and municipal
institutions, employed the notion "additional claims". Thus,
while defining the claims in the disputed provision, one
underlined the criterion: the claims must be additional ones.
It needs to be noted that under the valid laws and other
legal acts state and municipal institutions may raise various
claims to entities of economic activity due to their activities
or failure to act, also, as regards other events. One of them
are to be linked with the implementation of the competence of
state and municipal institutions, others arise from civil and
other legal relations. The disputed provision of Paragraph 4 of
Article 3 of the Law indicates the claims by state or municipal
institutions concerning activity or failure to act of the
joint-stock company "Mažeikių nafta" or its subsidiaries or as
regards other events which were not stated prior to the
acquisition of the shares by the strategic investor under Item
1 of Paragraph 1 of Article 3 of the Law as additional claims.
5.4. Thus, it is possible to judge from the legal
regulation established in the disputed provision of Paragraph 4
of Article 3 of the Law that by this provision the joint-stock
company "Mažeikių nafta" and its subsidiaries, after the
strategic investor acquires some of their shares under the Law,
are exempted from liability concerning their activity or
failure to act or as regards other events prior to the
acquisition of the shares by the strategic investor under Item
1 of Paragraph 1 of Article 3 of the Law, save the liability
subsequent to the claims raised by state and municipal
institutions prior to the acquisition of the shares by the
strategic investor under Item 1 of Paragraph 1 of Article 3 of
the Law, also the liability subsequent to the claims raised by
other entities.
6. The petitioners request to investigate whether the
disputed provision of Paragraph 4 of Article 3 of the Law is
not in conflict with Paragraphs 3, 4 and 5 of Article 46 of the
Constitution.
6.1. Paragraphs 3, 4 and 5 of Article 46 of the
Constitution provide:
"The State shall regulate economic activity so that it
serves the general welfare of the Nation.
The law shall prohibit monopolisation of production and
the market and shall protect freedom of fair competition.
The State shall defend the interests of the consumer."
6.2. It needs to be noted that the principles set down in
Article 46 of the Constitution constitute a whole, which is the
constitutional basis of the economy of this country. The
principles are in harmony with each other, and this
pre-supposes their balance, therefore each of them must be
interpreted without denying another constitutional principle
(Constitutional Court ruling of 6 October 1999). It is
impossible to construe the content of Paragraphs 3, 4 and 5 of
Article 46 of the Constitution by only taking account of the
fact that under Article 46 of the Constitution Lithuania's
economy shall be based on the right of private ownership and
individual freedom of economic activity and initiative
(Paragraph 1) and that the state shall support economic efforts
and initiatives that are useful to the society (Paragraph 2).
6.3. Paragraph 3 of Article 46 of the Constitution
provides that the state shall regulate economic activity so
that it serves the general welfare of the Nation. This
provision of the Constitution consolidates a principle which
establishes the directions, ways and limits of regulation of
economic activity (Constitutional Court rulings of 14 March
2002 and 9 April 2002). The state, while regulating economic
activity so that it serves the general welfare of the Nation,
must coordinate the interests of the person and of society, and
not to deny the principle of fair competition and other
principles of the Lithuanian economy, which are entrenched in
the Constitution.
6.4. While construing Paragraph 4 of Article 46 of the
Constitution, the Constitutional Court has noted that the
provision "the law shall prohibit monopolisation of production
and the market" means that it is prohibited to introduce a
monopoly, i.e. that it is prohibited to grant, by law, an
economic entity exceptional rights to operate in a certain
sector of economy due to which this sector would become
monopolised. However, the prohibition to monopolise production
and the market does not mean that it is prohibited, under
certain circumstances, to state in the law the existence of
monopoly in a certain sector of economy or to reflect factual
monopolistic relations otherwise and to regulate them
accordingly. Such a statement creates legal preconditions to
apply corresponding requirements to the monopolist in the
course of protection of the rights and legitimate interests of
other economic entities and consumers (Constitutional Court
rulings of 6 October 1999, 18 October 2000, and 9 April 2002).
The provision of Paragraph 4 of Article 46 of the
Constitution that the law shall protect freedom of fair
competition means also the obligation for the legislator to
establish by laws such legal regulation so that production and
the market would not be monopolised, that freedom of fair
competition would be ensured and measures would be provided for
for its protection.
6.5. Paragraph 5 of Article 46 of the Constitution
consolidates the right of the state to protect the interests of
consumers. This constitutional provision implies that the laws
and other legal acts ought to establish various measures of
protection of the interests of consumers, that state
institutions ought to control economic entities how the latter
are following the requirements established by laws and other
legal acts.
6.6. According to the petitioners, the provision "after
the strategic investor acquires the shares under Item 1 of
Paragraph 1 of this Article, neither State nor municipal
institutions will be permitted to raise additional claims to
the joint-stock company 'Mažeikių nafta' or its subsidiaries
concerning activity or failure to act of the joint-stock
company 'Mažeikių nafta' or its subsidiaries or as regards
other events, all of which took place prior to the acquisition
of the shares by the strategic investor" of Paragraph 4 of
Article 3 of the Law means that liability is not applied to
certain entities of economic activity, and that one may not
also raise the claims arising from violation of the laws
regulating competition. Therefore, in the opinion of the
petitioners, the disputed legal regulation does not serve the
general welfare of the Nation, the state does not have any
opportunity to protect freedom of fair competition and defend
the interests of part of consumers. The petitioners maintain
that such legal regulation is in conflict with the provisions
of Paragraphs 3, 4 and 5 of Article 46 of the Constitution.
6.7. It needs to be noted that provided one violated the
provisions of Paragraphs 4 and 5 of Article 46 of the
Constitution, one also violates Paragraph 3 of Article 46 of
the Constitution in which it is established that the state
shall regulate economic activity so that it serves the general
welfare of the Nation, or preconditions are created to violate
Paragraph 3 of Article 46 of the Constitution.
6.8. While investigating whether the disputed provision of
the Law is not in conflict with freedom of fair competition
entrenched in Paragraph 4 of Article 46 of the Constitution,
one is to note that the legislator, while taking account of
peculiarities of economic activity in certain sectors of
economy, may regulate economic activity in a differentiated
manner, however, while doing so, he may not deny the
fundamentals of the Lithuanian economy, which are consolidated
in the Constitution.
6.8.1. The prohibition, which is entrenched in the
disputed provision of Paragraph 4 of Article 3 of the Law, for
state and municipal institutions to raise additional claims to
the joint-stock company "Mažeikių nafta" or its subsidiaries
concerning activity or failure to act of the joint-stock
company "Mažeikių nafta" or its subsidiaries or as regards
other events prior to the acquisition of the shares by the
strategic investor under Item 1 of Paragraph 1 of Article 3 of
the Law is an absolute one. It has been mentioned that the
disputed provision indicates the claims by state or municipal
institutions concerning activity or failure to act of the
joint-stock company "Mažeikių nafta" or its subsidiaries or as
regards other events which were not stated prior to the
acquisition of the shares by the strategic investor under Item
1 of Paragraph 1 of Article 3 of the Law as additional claims.
These claims are linked with the implementation of the
competence of state or municipal institutions and/or such
claims arise from civil or other legal relations. Thus, by the
legal regulation established in Paragraph 4 of Article 3 of the
Law a legal situation is created under which state and
municipal institutions cannot raise also such claims concerning
activity or failure to act of the joint-stock company "Mažeikių
nafta" or its subsidiaries or as regards other events prior to
the acquisition of the shares by the strategic investor under
Item 1 of Paragraph 1 of Article 3 of the Law which they would
have to raise in the course of discharging the functions
assigned to them by the Constitution and laws, also in the
course of the control whether the economic entities indicated
in the disputed provision of the Law have been following the
laws and other legal acts protecting freedom of fair
competition. Under such legal regulation, the economic entities
indicated in the disputed provision of the Law are placed in an
advantageous position: in their regard the legal norms
protecting freedom of fair competition concerning their
activity or failure to act or as regards other events prior to
the acquisition of the shares by the strategic investor under
Item 1 of Paragraph 1 of Article 3 of the Law are not applied,
with the exception of cases when state and municipal
institutions raised claims prior to the acquisition of the
shares by the strategic investor under Item 1 of Paragraph 1 of
Article 3 of the Law, also, when claims are raised by other
entities.
6.8.2. It needs to be noted that under the disputed
provision of Paragraph 4 of Article 3 of the Law, not only
state but also municipal institutions cannot raise the said
additional claims. It has been mentioned that municipal
institutions are established so that the interests of the
communities enjoying the right to self-government might be
realised, also that the laws, Government resolutions and
decisions of municipal councils would be directly implemented.
Thus, these institutions also cannot raise the requirements
that ought to be raised in defending not only the rights and
legitimate interests of the state but also the communities
enjoying the right to self-government and of municipal
institutions themselves. Such regulation is incompatible with
the concept of self-government enshrined in the Constitution
and ought to be assessed as violating Article 122 of the
Constitution in which it is established that municipal councils
shall have the right to apply to court regarding the violation
of their rights, thus also as violating Paragraph 2 of Article
120 of the Constitution under which municipalities shall act
freely and independently within their competence, which shall
be established by the Constitution and laws.
6.8.3. The implementation of the rights and legitimate
interests of various economic entities, including that in the
relations of fair competition, may be linked with decisions of
state and municipal institutions and claims arising from these
decisions. In case state and municipal institutions are
prohibited from raising claims concerning activity or failure
to act of the joint-stock company "Mažeikių nafta" or its
subsidiaries or as regards other events prior to the
acquisition of the shares by the strategic investor under Item
1 of Paragraph 1 of Article 3 of the Law, the rights and
legitimate interests of the said economic entities the
implementation whereof is linked with the claims raised by
state and municipal institutions would be violated.
6.8.4. The legal regulation established in the disputed
provision of Paragraph 3 of Article 4 of the Law means that the
entities indicated therein are exempted from liability for
unlawful activities or unlawful failure to act by the
joint-stock company "Mažeikių nafta" or its subsidiaries or as
regards other events prior to the acquisition of the shares by
the strategic investor under Item 1 of Paragraph 1 of Article 3
of the Law, save the liability subsequent to the claims raised
by state and municipal institutions prior to the acquisition of
the shares by the strategic investor under Item 1 of Paragraph
1 of Article 3 of the Law, also the liability subsequent to the
claims raised by other entities.
It has been mentioned that the state, while regulating the
economic activity so that it serves the general welfare of the
Nation, must coordinate the interests of the persons and
society, and not deny fair competition and other fundamentals
of the Lithuanian economy established in the Constitution.
The legislator, while seeking to restructure a certain
sector of economy of this country, may choose various ways of
its restructuring (thus also to attract a strategic investor).
When establishing differentiated regulation of a certain sector
of economy and establishing a specific situation of individual
economic entities, the legislator must provide for in the law
also the measures which would permit to compensate damage or
make amends to other entities, which are not compensated by the
economic entities in regard of which the specific legal
situation has been established.
Thus, while establishing, in the law, that municipal and
state institutions will not be permitted to raise additional
claims concerning their activity or failure to act or as
regards other events prior to the acquisition of the shares by
the strategic investor under Item 1 of Paragraph 1 of Article 3
of the Law, the legislator ought to have provided for in the
law also the measures which would permit to compensate damage
or make amends to other entities, which are not compensated by
the economic entities in regard of which the specific legal
situation is established due to the fact that state and
municipal institutions may not raise additional claims
concerning the activity or failure to act by the said economic
entities or as regards other events. The legal regulation
whereby the entities indicated in the disputed provision of the
Law are in part exempted from liability regardless of the
rights and legitimate interests of other entities or while
denying them are incompatible with freedom of fair competition
entrenched in the Constitution.
6.8.5. Taking account of the arguments set forth, one is
to conclude that
1) the disputed provision of Paragraph 4 of Article 3 of
the Law is in conflict with Paragraph 4 of Article 46 of the
Constitution;
2) the disputed provision of Paragraph 4 of Article 3 of
the Law to the extent that it is established that municipal
institutions will not be permitted to raise the additional
claims indicated in this provision is in conflict with
Paragraph 2 of Article 120 and Article 122 of the Constitution.
6.9. Under Paragraph 5 of Article 46 of the Constitution,
the state has a duty to establish, by laws and other legal
acts, various measures of protection of the interests of
consumers, and state institutions must control how economic
entities are following the requirements of protection of the
rights and legitimate interests of consumers.
6.9.1. While assessing the compliance of the disputed
provision of Paragraph 4 of Article 3 of the Law with Paragraph
5 of Article 46 of the Constitution, it needs to be noted that
the prohibition, which is consolidated in the disputed
provision, for state and municipal institutions to raise
additional claims concerning activity or failure to act of the
joint-stock company "Mažeikių nafta" or its subsidiaries or as
regards other events prior to the acquisition of the shares by
the strategic investor under Item 1 of Paragraph 1 of Article 3
of the Law also includes claims related to the protection of
the rights and legitimate interests of consumers. Although the
disputed norm does not prohibit state and municipal
institutions to control how one is following the measures of
protection of the rights and legitimate interests of consumers,
however, if it becomes clear in the course of discharging the
control function by them that due to the activity of failure to
act by the joint-stock company "Mažeikių nafta" or its
subsidiaries, or due to other events the interests of consumers
have been violated, in case one is prohibited from raising
corresponding claims, such control becomes ineffective. Thus,
due to such regulation state and municipal institutions cannot
discharge all the powers assigned to them in the course of
ensuring protection of the rights and legitimate interests of
consumers. Thus, preconditions are created to violate the
rights and legitimate interests of consumers.
6.9.2. It needs to be noted that the legislator, while
regulating the relations of a certain sector of economy in
which a specific legal situation of certain economic entities
is established, and while providing for in other laws the
exceptions of regulation of the said relations, must also
establish additional legal measures which would ensure the
protection of the rights and legitimate interests of consumers.
Upon establishment by law that state and municipal
institutions are not permitted to raise additional claims
concerning activity or failure to act of the joint-stock
company "Mažeikių nafta" or its subsidiaries or as regards
other events prior to the acquisition of the shares by the
strategic investor under Item 1 of Paragraph 1 of Article 3 of
the Law, and since additional measures of protection of the
rights and legitimate interests of consumers have not been
established, one has created preconditions to violate the
rights and legitimate interests of consumers.
6.9.3. Taking account of the arguments set forth, one is
to draw a conclusion that the disputed provision of Paragraph 4
of Article 3 of the Law is in conflict with Paragraph 5 of
Article 46 of the Constitution.
6.10. It has been mentioned that the principles entrenched
in Article 46 of the Constitution constitute an indivisible
whole, that in case the provisions of Paragraphs 4 and 5 of
Article 46 of the Constitution are violated, one also violates
Paragraph 3 of Article 46 of the Constitution or preconditions
are created to violate it.
It has been held in this Ruling of the Constitutional
Court that the disputed provision of Paragraph 4 of Article 3
of the Law is in conflict with Paragraphs 4 and 5 of Article 46
of the Constitution. Having held this, one is also to hold that
the said provision is also in conflict with Paragraph 3 of
Article 46 of the Constitution.
7. The petitioners request to investigate whether the
disputed provision of Paragraph 4 of Article 3 of the Law is
not in conflict with the principles of a just society and a
state under the rule of law, which are enshrined in the
Preamble to the Constitution.
7.1. The constitutional principle of a state under the
rule of law is a universal principle upon which the entire
Lithuanian legal system and the Constitution of the Republic of
Lithuania itself are based; the content of a state under the
rule of law reveals itself in various provisions of the
Constitution and is to be construed inseparably from the
striving for an open, just, and harmonious civil society, which
is proclaimed in the Constitution.
The principle of a state under the rule of law which is
entrenched in the Constitution implies, along with the other
requirements, that human rights and freedoms should be ensured,
that all institutions implementing state power as well as other
state institutions must act on the basis of law and in
compliance with law, that the Constitution has the supreme
legal power and that laws, Government resolutions and other
legal acts must be in conformity with the Constitution.
One of essential elements of the state under the rule of
law principle which is entrenched in the Constitution is the
principle of legal security. It means the duty of the state to
ensure certainty and stability of legal regulation, to
safeguard the rights of participants of legal relations, as
well as to respect legitimate interests and legitimate
expectations.
It also needs to be noted that the principle of a state
under the rule of law is inseparable from justice, which is one
of the objectives of law as means of regulation of social
relations. It is possible to administer justice by ensuring a
balance of interests, by evading fortuities and arbitrariness
as well as opposition of interests.
Thus, the principle of a state under the rule of law
entrenched in the Constitution is inseparable of the imperative
of justice and vice versa.
An inseparable element of the content of the principle of
a state under the rule of law as well as a necessary condition
of administration of justice is the right of the person to
apply to court. Under Paragraph 1 of Article 30 of the
Constitution, the person whose constitutional rights or
freedoms are violated shall have the right to apply to court.
Paragraph 1 of Article 109 of the Constitution provides that in
the Republic of Lithuania, justice shall be administered solely
by courts.
7.2. Under the disputed provision of the Law, after the
strategic investor acquires the shares under Item 1 of
Paragraph 1 of Article 3 of the Law, state and municipal
institutions will not be permitted to raise additional claims
to the joint-stock company "Mažeikių nafta" or its subsidiaries
concerning activity or failure to act of the joint-stock
company "Mažeikių nafta" or its subsidiaries or as regards
other events prior to the acquisition of the shares by the
strategic investor. It needs to be noted that the prohibition
established in the disputed provision for state and municipal
institutions to raise the said claims is absolute: it includes
the prohibition for state and municipal institutions to raise
claims grounded on agreements, as well as laws and other legal
acts. The prohibition for state and municipal institutions to
raise the said claims also means prohibition that they raise
claims attempting to defend constitutional values. Meanwhile,
the implementation of the rights and legitimate interests of
other entities may depend on raising of the aforesaid claims.
7.3. It has been mentioned that a duty for the legislator
stems from the constitutional principle of a state under the
rule of law to ensure the certainty and stability of legal
regulation, to safeguard the rights and legitimate expectations
of the participants of legal relations, as well as to guarantee
legal security.
The legislator may establish the legal regulation whereby
certain economic entities are exempted, to a certain extent,
from liability for performed actions or failure to act or as
regards other events, however, while establishing such legal
regulation, in the law the legislator must also provide for
measures enabling to compensate damage or make amends for other
entities, which certain economic entities do not pay to them
due to the fact that they are exempted from the liability.
It needs to be noted that the implementation of the rights
and legitimate interests of various entities depends on the
claims raised by state and municipal institutions. The
entities, the implementation of the rights and legitimate
interests of which depends also on the claims raised by state
and municipal institutions, had a possibility to reasonably
expect that state and municipal institutions would discharge
the functions assigned to them and would raise additional
claims regarding violation of the rights and legitimate
interests of the aforementioned entities regardless of the fact
whether these rights and legitimate interests had been violated
because of activity or failure to act of the joint-stock
company "Mažeikių nafta" or its subsidiaries or as regards
other events pointed out in the disputed provision of the Law
prior to the acquisition of the shares by the strategic
investor under Item 1 of Paragraph 1 of Article 3 of the Law or
after such acquisition. After the law prohibited state and
municipal institutions from raising the said additional claims,
the aforementioned entities found themselves at a disadvantage,
since state and municipal institutions cannot defend their
rights and legitimate interests by raising additional claims
concerning activity or failure to act of the joint-stock
company "Mažeikių nafta" or its subsidiaries or as regards
other events prior to the acquisition of the shares by the
strategic investor under Item 1 of Paragraph 1 of Article 3 of
the Law. Therefore, by the legal regulation established in the
disputed provision of the Law one does not pay heed to the
requirements of protection of legal certainty and legal
security as well as of legitimate expectations.
7.4. The prohibition established in the disputed provision
for state and municipal institutions to raise additional claims
concerning activity or failure to act of the joint-stock
company "Mažeikių nafta" or its subsidiaries or as regards
other events prior to the acquisition of the shares by the
strategic investor under Item 1 of Paragraph 1 of Article 3 of
the Law also includes the claims concerning activity or failure
to act of the aforesaid economic entities or as regards other
events prior to the acquisition of the shares by the strategic
investor under Item 1 of Paragraph 1 of Article 3 of the Law,
which could be raised by state and municipal institutions in
court. Under the disputed provision, municipal institutions,
while implementing the rights and legitimate interests of the
communities enjoying the right to self-government, also, while
directly implementing laws, Government resolutions and
decisions of municipal councils, will not be able to raise the
said additional claims concerning activity or failure to act of
the joint-stock company "Mažeikių nafta" or its subsidiaries or
as regards other events prior to the acquisition of the shares
by the strategic investor under Item 1 of Paragraph 1 of
Article 3 of the Law in the course of the implementation of the
rights and legitimate interests of the communities enjoying the
right to self-government, also, while directly implementing
laws, Government resolutions and decisions of municipal
councils.
Thus, the judicial protection of the rights and legitimate
interests of the aforementioned participants of legal relations
becomes restricted due to the legal regulation established in
the disputed provision of Paragraph 4 of Article 3 of the Law.
Some of these entities cannot raise the additional claims in
court, which are indicated in the disputed provision of the
Law, while others, although they are not formally prohibited
against raising such claims to the entities indicated in the
Law and applying to court, however, in case state and municipal
institutions do not raise corresponding claims, all-sufficient
judicial protection of the rights and legitimate interests of
such entities is impossible. The legal regulation whereby
opportunities are restricted to defend violated rights and
legitimate interests in court is incompatible with the
constitutional principle of a state under the rule of law.
7.5. Taking account of the arguments set forth, one is to
draw a conclusion that the disputed provision of Paragraph 4 of
Article 3 of the Law is in conflict with the constitutional
principle of a state under the rule of law.
8. The petitioners request to investigate whether the
disputed provision of Paragraph 4 of Article 3 of the Law is
not in conflict with Paragraphs 1 and 2 of Article 5 of the
Constitution.
Having held that the disputed provision of Paragraph 4 of
Article 3 of the Law is in conflict with Paragraphs 3, 4 and 5
of Article 46 of the Constitution as well as the constitutional
principle of a state under the rule of law, also, that the said
provision to the extent that it is established that municipal
institutions will not be permitted to raise the additional
claims indicated in this provision is in conflict with
Paragraph 2 of Article 120 and Article 122 of the Constitution,
the Constitutional Court will not investigate further the
compliance of the disputed provision of the Law with the other
articles (parts thereof) 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
on the Constitutional Court of the Republic of Lithuania, the
Constitutional Court of the Republic of Lithuania has passed
the following
ruling:
1. To recognise that the provision "after the strategic
investor acquires the shares under Item 1 of Paragraph 1 of
this Article, neither State nor municipal institutions will be
permitted to raise additional claims to the joint-stock company
'Mažeikių nafta' or its subsidiaries concerning activity or
failure to act of the joint-stock company 'Mažeikių nafta' or
its subsidiaries or as regards other events, all of which took
place prior to the acquisition of the shares by the strategic
investor" of Paragraph 4 of Article 3 of the Republic of
Lithuania Law on the Reorganisation of Joint-stock Companies
"Būtingės nafta", "Mažeikių nafta" and "Naftotiekis" is in
conflict with Paragraphs 3, 4 and 5 of Article 46 of the
Constitution of the Republic of Lithuania as well as the
constitutional principle of a state under the rule of law.
2. To recognise that the provision "after the strategic
investor acquires the shares under Item 1 of Paragraph 1 of
this Article, neither State nor municipal institutions will be
permitted to raise additional claims to the joint-stock company
'Mažeikių nafta' or its subsidiaries concerning activity or
failure to act of the joint-stock company 'Mažeikių nafta' or
its subsidiaries or as regards other events, all of which took
place prior to the acquisition of the shares by the strategic
investor" of Paragraph 4 of Article 3 of the Republic of
Lithuania Law on the Reorganisation of Joint-stock Companies
"Būtingės nafta", "Mažeikių nafta" and "Naftotiekis" provision
to the extent that it is established that municipal
institutions will not be permitted to raise the additional
claims indicated in this provision is in conflict with
Paragraph 2 of Article 120 and Article 122 of the Constitution
of the Republic of Lithuania.
This Constitutional Court ruling is final and not subject
to appeal.
The ruling is promulgated in the name of the Republic of
Lithuania.
Justices of the Constitutional Court: Armanas Abramavičius
Egidijus Jarašiūnas
Egidijus Kūris
Kęstutis Lapinskas
Zenonas Namavičius
Augustinas Normantas
Jonas Prapiestis
Vytautas Sinkevičius
Stasys Stačiokas