Case No. 47/04
THE CONSTITUTIONAL COURT OF THE REPUBLIC OF LITHUANIA
RULING
ON THE COMPLIANCE OF PARAGRAPH 2 OF ARTICLE 15 OF THE
REPUBLIC OF LITHUANIA LAW ON ELECTRICITY (WORDING OF 1
JULY 2004) WITH THE CONSTITUTION OF THE REPUBLIC OF
LITHUANIA
4 December 2008
Vilnius
The Constitutional Court of the Republic of Lithuania,
composed of the Justices of the Constitutional Court Armanas
Abramavičius, Toma Birmontienė, Pranas Kuconis, Kęstutis
Lapinskas, Zenonas Namavičius, Ramutė Ruškytė, Egidijus Šileikis,
Algirdas Taminskas, and Romualdas Kęstutis Urbaitis,
with the secretary of the hearingDaiva Pitrėnaitė,
in the presence of:
the representative of a group of Members of the Seimas of
the Republic of Lithuania, the petitioner, who was Gytis
Kaminskas, an advocate,
the representative of the Seimas of the Republic of
Lithuania, the party concerned, who was Dainius Zebleckis, senior
advisor of the Civil Law Unit of 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, in its public
hearing on 18 November 2008 heard case No. 47/04 subsequent to
the petition of a group of Members of the Seimas of the Republic
of Lithuania, consisting of Julius Sabatauskas, Rimantas
Sinkevičius, Alfonsas Macaitis, Kęstutis Kriščiūnas, Viktoras
Rinkevičius, Kazimira Danutė Prunskienė, Antanas Baura, Gražina
Šmigelskienė, Edvardas Karečka, Jūratė Juozaitienė, Nikolaj
Medvedev, Ona Babonienė, Jonas Korenka, Gintautas Mikolaitis,
Dobilas Jonas Kirvelis, Mindaugas Bastys, Petras Papovas, Jonas
Jurkus, Janė Narvilienė, Algimantas Salamakinas, Giedrė
Purvaneckienė, Antanas Valys, Virmantas Velikonis, Valerijus
Simulik, Gintautas Kniukšta, Nijolė Steiblienė, Jonas
Čiulevičius, Egidijus Klumbys, Gintautas Babravičius, Vasilijus
Popovas, and Artur Plokšto, the petitioner, requesting to
investigate as to whether the provision "the equipment of a
customer may be connected to transmission network only in cases
where the operator of the distribution network refuses, due to
established technical or maintenance requirements, to connect the
equipment of the customer to the distribution network which is on
the territory indicated in the licence of the distribution
network operator" of Paragraph 2 of Article 15 of the Republic of
Lithuania Law on Electricity (wording of 1 July 2004) is not in
conflict with Paragraph 2 of Article 5, Paragraphs 1, 2, 4, and 5
of Article 46 of the Constitution of the Republic of Lithuania
and with the constitutional principle of a state under the rule
of law.
The Constitutional Court
has established:
I
A group of Members of the Seimas, the petitioner, applied to
the Constitutional Court with a petition requesting to
investigate as to whether the provision "the equipment of a
customer may be connected to transmission network only in cases
where the operator of the distribution network refuses, due to
established technical or maintenance requirements, to connect the
equipment of the customer to the distribution network which is on
the territory indicated in the licence of the distribution
network operator" of Paragraph 2 of Article 15 of the Law on
Electricity (wording of 1 July 2004) is not in conflict with
Paragraph 2 of Article 5, Paragraphs 1, 2, 4, and 5 of Article 46
of the Constitution and with the constitutional principle of a
state under the rule of law.
After the petition of the group of Members of the Seimas had
been received at the Constitutional Court and after the
preliminary investigation had been carried out, seven members of
the Seimas (J. Jurkus, A. Plokšto, E. Karečka. G. Mikolaitis, A.
Salamakinas, J. Juozaitienė, and O. Babonienė) applied to the
Constitutional Court with a request to revoke their signatures in
the said petition of the group of members of the Seimas and to
adopt a decision to refuse to consider the said petition.
The Constitutional Court decided to accept the petition of
the group of Members of the Seimas, the petitioner, for
consideration. Such decision was substantiated by the fact that
in case one granted the request of the Members of the Seimas to
revoke their signatures one would virtually deny the already
implemented right of the group of Members of the Seimas to apply
to the Constitutional Court, i.e. "one would deny the legitimate
expectation of the other 24 members of the Seimas who signed the
aforesaid petition <
> that their already implemented right to
apply, together with the other members of the Seimas, to the
Constitutional Court requesting to investigate the compliance of
a legal act with the Constitution, will not be denied after their
common request is received at the Constitutional Court and the
procedural actions which are indicated in the Law on the
Constitutional Court and the Rules of the Constitutional Court
are commenced" (Constitutional Court decision of 15 December
2004).
II
1. The group of Members of the Seimas, the petitioner,
substantiate the petition and the doubt set forth in it by the
doctrine of the Constitutional Court set forth in the rulings of
18 June 1996, 29 May 1997, 3 June 1999, and 6 October 1999, as
well as by the Directive 2003/54/EC of the European Parliament
and of the Council of 26 June 2003 concerning common rules for
the internal market in electricity (hereinafter also referred to
as Directive 2003/54/EC or the Directive).
According to the petitioner, the Seimas, while passing legal
acts, must secure that they do not conflict with one another and
that the are harmonised; the right of the Seimas to adopt, amend,
supplement laws and other legal acts and to recognised them as no
longer valid, is undisputable, however, the Seimas may implement
it only by following the procedure established in the
Constitution and the principles of harmonisation of legal acts;
in itself, the freedom of economic activity of an individual does
not guarantee competition, therefore, the state must protect fair
competition; the possibility for competition becomes diminished
or competition is removed from the corresponding market when a
monopoly becomes dominant in it; the state must limit
monopolistic tendencies by legal means. If there exists a
monopoly, the state regulates the monopolistic economic activity
by establishing, in a law, corresponding requirements to the
monopolist.
In addition, Article 1 of the Law on Electricity provides
that the provisions of this act are harmonised with the acts of
the European Union, which are specified in the annex to this law.
The annex points out, among other legal acts, Directive 2003/54/
EC. Under Article 150 of the Constitution, the Constitutional Act
"On Membership of the Republic of Lithuania in the European
Union" is a constituent part of the Constitution. Paragraph 2 of
the said Constitutional Act provides that norms of the European
Union law shall be a constituent part of the legal system of the
Republic of Lithuania. Therefore, in the opinion of the
petitioner, it is also important to consider the disputed
provision of the law also in accordance with the European Union
law.
The petitioner notes: "Directive 2003/54/EC does not
establish any direct limitations on the customer to connect his
equipment to the electricity transmission network, nor any
obligation to connect only to the electricity distribution
network, nor does it establish the right and freedom of the
consumer to connect to any electricity network at his discretion.
Presumably, if the freedom to choose the supplier (and that of
the supplier to choose the customer) could not be implemented
otherwise but only by directly connecting the customer to the
electricity transmission network, the limitations established in
the law might be regarded as an improper implementation of the
directive. The RL Law on Electricity virtually grants such a
right to the consumer (para. 33 and 35 of art. 2, art. 15),
however, paragraph 2 of Article 15 of the said law provides for
limitations."
2. In the course of the preparation of the case for the
Constitutional Court hearing, the 5 January 2007 letter from the
advocate G. Kaminskas, a representative of the petitioner, was
received wherein additional explanations were presented as to the
conflict of the disputed provision of the Law on Electricity with
the Constitution. In his another letter of 29 January 2007, the
same representative of the petitioner specified the said
additional explanations.
III
In the course of the preparation of the case for a
Constitutional Court hearing written explanations were received
from the representatives of the Seimas, the party concerned, who
were Vaclovas Karbauskis, a Member of the Seimas, and Paulius
Griciūnas, senior advisor of the Legal Department of the Office
of the Seimas, in which it is asserted that the disputed
provision of Paragraph 2 of Article 15 of the Law on Electricity
(wording of 1 July 2004) is not in conflict with the provisions
of the Constitution specified by the petitioner.
Such position is substantiated inter alia by the fact that
the disputed legal regulation "does not deny the right of the
customers to demand that their equipment be connected to the
electricity network", but it merely establishes "the procedure
for connecting to electricity network", which "is in line with
the principle of separation of the transmission and distribution
activities and with the principle of rational development of
networks". In addition, the established procedure for connecting
the equipment of customers to electricity network is directly
related with "the chosen conception of regulation of the prices
for transmission of electricity" in the aspect that "when the
amount of the distributed electricity diminishes, the
distribution price increases for the customers" and "if the
equipment of the customers who use much electricity is directly
connected to the transmission network, while bypassing the
transmission network, the amount of electricity distributed by
the distribution network would decrease and, correspondingly, the
distribution price would increase for the rest of the users of
the distribution network", therefore, the disputed provision of
the law "secures the stability of the electricity price and thus
protects the interests of those customers, which are financially
weak and most vulnerable, i.e. the interests of the population
and small enterprises". According to the petitioner, the fact is
of importance that the expenses of the operator of the
distribution network, which are linked with the connecting the
equipment of the consumers and the distance of transmission of
electricity, are covered by all users of the distribution network
by paying for distribution of electricity. Therefore, the
disputed legal regulation seeks to achieve a balance of interests
of society.
The position of the representatives of the party concerned
is also substantiated by the interpretation of the provisions of
Directive 2003/54/EC that, allegedly, the Directive does not
limit the right of the user of electricity to connect the
equipment directly to the electricity transmission network, since
it does not regulate such matters altogether; nor does the
Directive establish any obligation to connect the equipment of
customers of electricity only to the electricity distribution
network, however, it does not prohibit any such legal regulation
which is established in the disputed provision of the Law,
either. According to the representatives of the party concerned,
it is clear from the Directive that these matters are within the
competence of Member States and must be decided on the national
level.
IV
In the course of the preparation of the case for judicial
consideration written explanations were received from V.
Uspaskich, the Minister of Economy of the Republic of Lithuania,
D. Kriaučiūnas, Director General of the European Law Department
under the Ministry of Justice of the Republic of Lithuania, R.
Stanikūnas, Chairman of the Competition Council of the Republic
of Lithuania, F. Petrauskas, General Director of the State
Consumer Rights Protection Authority, V. Jankauskas, Chairman of
the National Control Commission for Prices and Energy, S.
Juodvalkis, Vice-president of the Lithuanian Consumers
Association, and J. Vilemas, Chairman of the Council of the
Lithuanian Energy Institute.
V
In the course of the preparation of the case for judicial
consideration a letter titled "On the information about the
instituted violation procedure regarding Directive 2003/54/EC of
23 June 2003" was received from V. Sarapinas, the Government
Secretary, whereby the Constitutional Court was informed about
the 12 December 2006 Reasoned Opinion No. 2006/2059 of the
European Commission addressed to the Republic of Lithuania on
insufficient transfer of Directive 2003/54/EC of the European
Parliament and of the Council of 26 June 2003 concerning common
rules for the internal market in electricity into national law
and about the answer of V. Navickas, the Minister of Economy of
the Republic of Lithuania, "On Reasoned Opinion No. 2006/2059" to
the Secretariat-General of the European Commission. The
obligations which the Republic of Lithuania failed to carry out
subsequent to Directive 2003/54/EC, which were pointed out in the
said Reasoned Opinion of the European Commission, are not related
with Paragraph 2 of Article 15 of the Law on Electricity (wording
of 1 July 2004) whose provision is disputed in the constitutional
justice case at issue.
VI
1. On 8 May 2007, while preparing the case for the hearing
and taking account of the fact that the Law on Electricity
(wording of 1 July 2004) implements the Directive which,
according to the reference of the recital thereof, was adopted
while acting in accordance with the procedure laid down in the
Treaty establishing the European Community, and, meanwhile, under
the Constitutional Act "On Membership of the Republic of
Lithuania in the European Union" (which is a constituent part of
the Constitution), in the event of collision, the norms of the
European Union law arising from the founding Treaties of the
European Union shall have supremacy over the laws of the Republic
of Lithuania, the Constitutional Court adopted the Decision "On
the application to the Court of Justice of European Communities
for a preliminary ruling" whereby it decided to apply to the
Court of Justice of European Communities for a preliminary ruling
on this issue: Is Article 20 of Directive 2003/54/EC of the
European Parliament and of the Council of 26 June 2003 concerning
common rules for the internal market in electricity and repealing
Directive 96/92/EC to be construed as obliging Member States to
establish the legal regulation whereby any third party has the
right, at its discretion, providing there exists "the necessary
capacity" of electricity system, to choose as to which system
electricity transmission or electricity distributionit wishes to
connect, while the operator of such system has a duty to grant
access to such network?
While reasoning such an application, the Constitutional
Court inter alia noted in the said decision that the provisions
of Paragraph 2 of the Constitution Act of the Republic of
Lithuania "On Membership of the Republic of Lithuania in the
European Union" (which is a constituent part of the Constitution)
establish expressis verbis the collision rule, which consolidates
the priority of application of European Union legal acts in the
cases where the provisions of the European Union arising from the
founding Treaties of the European Union compete with the legal
regulation established in Lithuanian national legal acts
(regardless of what their legal power is), save the Constitution
itself (Constitutional Court rulings of 14 March 2006 and 21
December 2006).
The Constitutional Court also noted that Paragraph 1 of
Article 20 titled "Third party access" of Chapter VII of the
Directive establishes a duty of Member States to create a system
of third party access to the transmission and distribution
systems based on published tariffs, applicable to all eligible
customers and applied objectively and without discrimination
between system users. If the clause "a system of third party
access to the transmission and distribution systems <
>,
applicable to all eligible customers" is construed only
linguistically, one could presume that Member States must create
a system, where all eligible customers are granted access, if
they wish so, to transmission as well as distribution systems.
Paragraph 2 of this article provides for a single reservation in
granting this access: one may refuse access where it lacks the
necessary capacity; the Directive does not provide explicitly for
any other reservations when the system operator could refuse to
connect the electricity equipment to the transmission or
distribution system. The said presumption that all eligible
customers are granted access, if they wish so, to transmission as
well as distribution systems is supported by the fact that
Paragraph 3 of Article 2 titled "Definitions" of the Directive
defines the notion "transmission" as "the transport of
electricity on the extra high-voltage and high-voltage
interconnected system with a view to its delivery to final
customers or to distributors, but not including supply"; thus, it
is established expressis verbis that transmission of electricity
to the customer also includes transport of electricity to inter
alia final customers. The linguistic construction of this notion
would permit to assert that also direct transmission to the final
customer is possible, without making use of distribution
networks. On the other hand, the provisions of the Directive can
be construed not only linguistically, but also while taking
account of not only the provisions of the Directive by which the
competition in the electricity market is promoted. Therefore, it
is necessary to give an answer to the question whether the
provisions of Article 20 of the Directive mean that Member States
are required to ensure that every (even household) customer might
enjoy the right to connect directly to electricity transmission
networks. In other words, one is to find out whether the
Directive requires that legal acts of Member States consolidate
the right of every customer to choose as to whichtransmission or
distributionnetworks he desires to connect directly, or whether
the Directive consolidates only a possibility for the customer to
be connected to a network, so that his electricity needs and
reasonable electricity price might be ensured.
On 9 October 2008, the Court of Justice of European
Communities adopted a preliminary ruling in which it ruled:
"Article 20(1) of Directive 2003/54/EC of the European
Parliament and of the Council of 26 June 2003 concerning common
rules for the internal market in electricity and repealing
Directive 96/92/EC is to be interpreted as defining the Member
States' obligations only in respect of the access and not the
connection of third parties to the electricity transmission and
distribution systems and as not laying down that the system of
network access that the Member States are required to establish
must allow an eligible customer to choose, at his discretion, the
type of system to which he wishes to connect.
Article 20 must also be interpreted as not precluding
national legislation which lays down that an eligible customer's
equipment may be connected to a transmission system only where
the distribution network operator refuses, on account of
established technical or operating requirements, to connect to
its system the equipment of the eligible customer which is on the
territory included in its licence. It is, however, for national
courts to verify that the implementation and application of that
access system takes place in accordance with objective and non-
discriminatory criteria between the users of the transmission and
distribution systems."
VII
At the Constitutional Court hearing, the advocate G.
Kaminskas, the representative of the group of Members of the
Seimas, the petitioner, reiterated the arguments set forth in his
written explanations and presented additional arguments, also, he
answered to the questions given to him and he presented questions
to the specialists.
At the Constitutional Court hearing, D. Zebleckis, a senior
advisor of the Civil Law Unit of the Legal Department of the
Office of the Seimas, the representative of the Seimas, the party
concerned, assented to the arguments set forth in the written
explanations of the Members of the Seimas V. Karbauskis and P.
Griciūnas, former representatives of the Seimas, the party
concerned.
At the Constitutional Court hearing the specialistsProf.
Hab. Dr. J. Vilemas, Chairman of the Council of the Lithuanian
Energy Institute, V. Poderys, Chairman of the National Control
Commission for Prices and Energy, and A. Zaremba, Director of the
Energy Department of the Ministry of Economytook the floor and
gave answers to presented questions.
The Constitutional Court
holds that:
I
1. A group of Members of the Seimas, the petitioner,
requests to investigate whether the provision "the equipment of a
customer may be connected to transmission network only in cases
where the operator of the distribution network refuses, due to
established technical or maintenance requirements, to connect the
equipment of the customer to the distribution network which is on
the territory indicated in the licence of the distribution
network operator" of Paragraph 2 of Article 15 of the Law on
Electricity (wording of 1 July 2004) is not in conflict with
Paragraph 2 of Article 5, Paragraphs 1, 2, 4, and 5 of Article 46
of the Constitution and with the constitutional principle of a
state under the rule of law.
2. The Constitutional Court has held that the provisions of
Article 46 of the Constitution are interrelated and supplement
one another (rulings of 23 February 2000, 18 October 2000, and 26
January 2004), that the principles entrenched in these provisions
are harmonised among one another, that there is a balance among
them, that each of these constitutional principles must be
construed without denying another constitutional principle
(rulings of 6 October 1999, 17 March 2003, 13 May 2005, and 5
March 2008).
3. Taking account of this, in the constitutional justice
case at issue the Constitutional Court will investigate whether
the disputed provision of Paragraph 2 of Article 15 of the Law on
Electricity (wording of 1 July 2004) is not in conflict with
Paragraph 2 of Article 5, Article 46 of the Constitution and with
the constitutional principle of a state under the rule of law.
II
1. Paragraph 2 of Article 5 of the Constitution provides
that the scope of power shall be limited by the Constitution.
While construing this provision, the Constitutional Court has
noted more than once that the Seimas, as the issuer of laws and
other legal acts, is independent insofar as its powers and its
broad discretion, inter alia the discretion to regulate economic
activity, are not limited by the Constitution, inter alia the
constitutional principles of a state under the rule of law,
separation of powers, responsible governance, protection of
legitimate expectations, legal clearness, and other principles.
2. The principles laid down in Article 46 of the
Constitution constitute a whole, which is the constitutional
basis of the economy of this country (Constitutional Court
rulings of 6 October 1999, 17 March 2003, 13 May 2005, and 5
March 2008).
The Constitutional Court has held the following: the formula
"the State shall regulate economic activity" of Paragraph 3 of
Article 46 of the Constitution means not the right of the state
to administer all or certain economic activity at its discretion,
but its right to establish legal regulation of economic activity,
i.e. establishment of limitations (prohibitions) and conditions
of economic activity, regulation of procedures in legal acts
(ruling of 13 May 2005); "Legal regulation is a form of
establishment of certain social order. Peculiarities of legal
regulation depend on the specific character of the regulated
social relations" (rulings of 6 October 1999 and 13 May 2005);
due to complexity of economic activity and dynamism of particular
relations, regulation in this area may be subject to change
(ruling of 13 May 2005); legal regulation of economic activity is
not an end in itself, it is a means of social engineering and a
way to seek welfare of the Nation through law (rulings of 13 May
1995, 31 May 2006, and 30 June 2008); the content of the notion
"general welfare of the Nation" is revealed in each concrete case
by taking account of economic, social and other important factors
(rulings of 6 October 1999, 18 October 2000, 26 January 2004, and
13 May 2005); on the other hand, the "general welfare of the
Nation" cannot be opposed to the welfare, rights and legitimate
interests of the economic entity itself, i.e. the entity the
activity of which is regulated (ruling of 13 May 2005); freedom
of individual economic activity is "inseparable from an
opportunity of a person, who is willing to engage in an economic
activity or, conversely, who is willing to drop it, to get into
the market without artificial barriers and to abandon it without
artificial barriers" (ruling of 13 May 2005); it is prohibited to
introduce a monopoly, i.e. 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, it is not 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 (rulings of 18 October 2000, 17
March 2003, and 26 January 2004); individual economic activity
may be restricted when it is necessary to protect the interests
of consumers, fair competition and the other values entrenched in
the Constitution; the prohibitions provided for in the law must
be reasonable, adequate to the objective sought, non-
discriminatory, and clearly formulated (rulings of 13 May 2005
and 21 January 2008); under the Constitution, it is permitted to
limit the rights and freedoms of the person, as well as the
freedom of economic activity, if the following conditions are
followed: this is done by means of legislation; the limitations
are necessary in a democratic society in order to protect the
rights and freedoms of other persons and values entrenched in the
Constitution, as well as constitutionally important objectives;
the limitations do not deny the nature and essence of the rights
and freedoms; the constitutional principle of proportionality is
followed (ruling of 31 May 2006); proper state regulation of
economic activity is linked with protection of interests of
consumers, which 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 (ruling of 17 March
2003); the special measures of protection of the interests of
consumers are: restriction of establishment of discriminatory
prices, state regulation of the size of prices and tariffs for
the goods of the monopolistic market, establishment of the
requirements for the quality of goods as well as other
requirements for monopolistic entity of economy etc. (ruling of 6
October 1999).
It needs to be noted that the constitutional values upon
which the economy of this country is based are related with other
constitutional values (Constitutional Court ruling of 13 May
2005), inter alia with the constitutional principle of a state
under the rule of law.
3. The Constitutional Court has noted more than once that
the constitutional principle of a state under the rule of law
implies inter alia the hierarchy of legal acts and various
requirements to the legislator inter alia in the aspect that the
legal regulation established in laws must be non-contradictory,
it must be based upon the objective differences of the situation
of the subjects of the regulated social relations, it must secure
the consistency and inner harmony. In addition, "legal norms must
be formulated precisely, they may not contain ambiguities"
(Constitutional Court ruling of 13 May 2005)
In the context of the constitutional justice case at issue
it needs to be noted that the legislator, while implementing the
corresponding norms of the European Union law by the disputed
legal regulation, must inter alia follow the requirement, which
stems from the constitutional principle of a state under the rule
of law, to base the established legal regulation upon the
objective differences of the situation of the subjects of the
regulated social relations, to secure the hierarchy of legal acts
and the inner harmony of the system of domestic law.
It also needs to be noted that, under Paragraph 2 of the
Constitutional Act "On Membership of the Republic of Lithuania in
the European Union", the norms of the European Union law shall be
a constituent part of the legal system of the Republic of
Lithuania.
It has been mentioned that the Constitutional Court held
that the Constitution expressis verbis established the collision
rule consolidating the priority of application of European Union
legal acts in the cases where the provisions of the European
Union arising from the founding Treaties of the European Union
compete with the legal regulation established in Lithuanian
national legal acts (regardless of what their legal power is),
save the Constitution itself (Constitutional Court rulings of 14
March 2006, 21 December 2006 and 8 May 2007).
III
1. While construing the disputed legal regulation
established in the provision "the equipment of a customer may be
connected to transmission network only in cases where the
operator of the distribution network refuses, due to established
technical or maintenance requirements, to connect the equipment
of the customer to the distribution network which is on the
territory indicated in the licence of the distribution network
operator" of Paragraph 2 of Article 15 (wording of 1 July 2004)
of the Law on Electricity, it is important to reveal the
historical legal context of this regulation and the content of
the notions and formulas employed therein.
2. After the restoration of the independent State of
Lithuania on 11 March 1990, the then existing state
(monopolistic) electricity energy sector, in which electricity
generation, transmission and supply were not separate, but were
run and developed in a centralised manner, persisted for some
time. In this context it needs to be noted that the equipment of
some big manufacturing enterprises was connected to the high-
voltage networks as far back as the time of Soviet government.
Five enterprises of the Soviet period, on the grounds of which
the joint-stock company (hereinafter referred to as JSC) Achema,
JSC Akmenės cementas, JSC Ekranas, JSC Lifosa and the state-owned
enterprise Visagino energija came into being in the Republic of
Lithuania, were connected to the high-voltage electricity
networks (the present transmission networks) and ran local
networks designed for meeting the requirements of residents
living in adjacent territory (established customers). In
addition, during the Soviet period the equipment of six big
enterprises, on the grounds of which JSC Dirbtinis pluoštas, the
closed joint-stock company (hereinafter referred to as the CJSC)
Kauno vandenys, the special purpose joint-stock company Lietuvos
geležinkeliai, JSC Mažeikių nafta, JSC Mažeikių elektrinė, and
JSC Vilniaus energetinė statyba came into being in the Republic
of Lithuania, was connected to the high-voltage electricity
networks, i.e. to the present transmission networks.
3. After the Constitution had been adopted by the 25 October
1992 referendum and after it came into force on 2 November 1992,
there appeared a duty to the legislator, when he regulated
relations linked with electricity, to heed the requirements
stemming from the Constitution, inter alia Article 46 thereof.
4. It needs to be mentioned that, on 28 March 1995, the
Seimas adopted the Republic of Lithuania Law on Energy, which
came into force on 14 April of the same year, and in which it was
inter alia provided: "The principal goals of the State energy
policy are as follows: <
> reliable, good-quality and cost-
effective production and supply of electricity <
>" (Article 3);
"Electric <
> energy <
> prices and tariffs may be differentiated
according to consumer groups, energy quality, reliability of
supply <
>" (Paragraph 2 of Article 15). It also needs to be
mentioned that, on 23 June 1998, the Seimas adopted the Law "On
Ratifying the Energy Charter Treaty and the Energy Charter
Protocol on Energy Efficiency and Related Environmental Aspects"
which came into force on 24 July of the same year. The said law
ratified the 17 December 1994 Energy Charter Treaty, which inter
alia provides that "Each Contracting Party shall work to
alleviate market distortions and barriers to competition in
Economic Activity in the Energy Sector" (Paragraph 1 of Article
6). In addition, it needs to be mentioned that, on 5 October
1999, the Seimas adopted the Resolution "On Approving the
National Energy Strategy". In the National Energy Strategy
approved by the said resolution it was established that "in
Lithuania, there would be the least electric energy supply
expenses <
> if the electricity sector would, without delay, be
restructured till 2001, and after one prepares to work under the
free market conditions, and after electric energy generation,
transmission and supply are separated" (Section 1 "Electricity"
of Chapter 4 "Energy Supply Strategy" of the National Energy
Strategy).
5. On 18 May 2000, the Seimas adopted the Republic of
Lithuania Law on Reorganising the Special Purpose Joint-stock
Company Lietuvos energija, which came into force on 2 June of the
same year. This law provided for the ways and procedure of
reorganisation of the said special purpose joint-stock company.
6. On 20 July 2000, the Seimas adopted the Republic of
Lithuania Law on Electricity. The law established the basic
principles regulating the generation, transmission, distribution,
and supply of electricity in the Republic of Lithuania with
account of the requirements of European Union law, as well as it
established the relations between suppliers of electricity and
their customers, and the conditions for the development of
competition in the electricity sector (Article 1). It was
established in Paragraph 1 of Article 7 of the said law that the
electricity sector shall comprise electricity producers,
suppliers, transmission and distribution undertakings, the market
operator, and operators of the transmission and distribution
networks. It was established in Paragraph 2 of Article 15 (which
regulates the principles of transmission activities) of the same
law that the transmission system operator, following the rules
for operation of power plants and electricity networks approved
by the Government or a body authorised by it, the grid code and
other legal acts, must ensure that conditions for the connection
to the transmission system of generating installations,
distribution systems, and customers' equipment are in conformity
with the rules for operation of electricity networks approved by
the Government or a body authorised by it and are non-
discriminatory. Paragraph 2 of Article 47 of the law commissioned
the Government, prior to a corresponding date, to draw up and/or
adopt legal acts and approve legal acts necessary for the
implementation of this law. In this context it needs to be noted
that, under Paragraph 1 of Article 10 of this law, inter alia the
electricity distribution activity was subject to licensing, while
under Paragraph 2 of the same paragraph the licensing procedure
shall be approved by the Government or an institution authorised
by it.
The Law on Electricity (wording of 20 July 2000) has been
amended and supplemented more than once, however, said Paragraph
2 of Article 15 thereof has not been amended or supplemented.
7. On 28 June 2001, the Seimas adopted the Republic of
Lithuania Law on Amending the Law on Reorganising the Special
Purpose Joint-stock Company Lietuvos energija, which came into
force on 18 July 2001. By Article 1 of this law, the Law on
Reorganising the Special Purpose Joint-stock Company Lietuvos
energija (18 May 2000) was set forth in a new wording.
The following was established in Paragraph 1 of Article 2 of
the Law on Reorganising the Special Purpose Joint-stock Company
Lietuvos energija (wording of 28 June 2001): "The special purpose
joint-stock company 'Lietuvos energija' shall be reorganised
according to the method of division of companies, i.e. by
separating from the special purpose joint-stock company 'Lietuvos
energija', which shall continue its activity after reorganisation
as a company, the parts of property, rights and obligations and
by establishing new companies based on them." In addition,
Paragraph 2 of Article 2 of the same law prescribed: "The
property assigned to regional affiliated units of electricity
network exploitation, except 330 kV and 110 kV voltage
electricity networks as well as buildings, constructions, and
equipment needed to operate and administer them, as well as other
property, shall be separated from the special purpose joint-stock
company 'Lietuvos energija'. On the basis of property assigned to
the individual regional affiliated units of electricity network
exploitation an economically reasonable company (companies) of
electricity distribution network shall be established." Thus,
this legislative regulation created a legal basis for separation
the energy transmission networks (system) from the distribution
networks (system).
On 29 October 2001, on such basis the Government adopted
Resolution No. 1264 "On Assenting to the Project of
Reorganisation of the Special Purpose Joint-stock Company
Lietuvos energija and on Granting the Authorisations" in which it
was inter alia established: "To assent to the project of
reorganisation of the special purpose joint-stock company
Lietuvos energija"; "To commission the Ministry of Economy, which
is the possessor of the state-owned shares, to authorise its
representative to vote in the general meeting of shareholders of
the special purpose joint-stock company Lietuvos energija in
order that the following decisions would be adopted: <
> to
approve the articles of association of the joint-stock companies
Lietuvos energija, Rytų skirstomieji tinklai, Vakarų skirstomieji
tinklai, Lietuvos elektrinė, and Mažeikių elektrinė.
Thus, the state (monopolistic) electricity system which had
been formed during the Soviet time was reformed; out of the
former centralised monopolistic system one formed the electricity
transmission system whose operator was JSC Lietuvos energija, and
two distribution networks, which were run by the joint-stock
companies Rytų skirstomieji tinklai, and Vakarų skirstomieji
tinklai.
8. It is clear from the material of the case that
corresponding power plants generate electricity, and the Ignalina
Atomic Power Plant is the biggest of these power stations; JSC
Lietuvos energija is the operator of the transmission system
which transports (transmits) electricity by means of high-voltage
electricity networks to regions of Lithuania in which the
operators of distribution networks transmit the electricity that
is suitable for use by the consumers; the JSC Rytų skirstomieji
tinklai, an operator of distribution networks, provides services
to the eastern part of Lithuania, while JSC Vakarų skirstomieji
tinklai, an operator of distribution networks, provides services
to the western part of Lithuania; in addition, there are five
more companies (JSC Achema, JSC Akmenės cementas, JSC Ekranas,
JSC Lifosa, the state-owned enterprise Visagino energija, and
CJSC Prekybos namai Giro (formerlyJSC Ekranas)) that possess
electricity distribution licences, which specify the
corresponding territory (which, as a rule, coincides with the
territory of the former Soviet period enterprises previously
connected to the high-voltage networks) of activity for each
enterprise.
9. On 5 December 2001, the Government, while following the
Law on Electricity (wording of 20 July 2000), adopted Resolution
No. 1474 "On Approving the Legal Acts Necessary for the
Implementation of the Republic of Lithuania Law on Electricity"
whereby it inter alia approved the Rules for Licensing the
Activity in the Electricity Sector. These rules were amended and
set forth in a new wording by Government Resolution No. 588 "On
Amending Resolution of the Government of the Republic of
Lithuania No. 1474 'On Approving the Legal Acts Necessary for the
Implementation of the Republic of Lithuania Law on Electricity'
of 5 December 2001" of 14 May 2003.
10. On 1 July 2004, the Seimas adopted the Republic of
Lithuania Law on Amending the Law on Electricity, which came into
force on 10 July of the same year.
The Law on Electricity (wording of 1 July 2004) established
the basic principles regulating the generation, transmission,
distribution, and supply of electricity in the Republic of
Lithuania, the relations between providers of electricity
services and their customers as well as the conditions promoting
competition in the electricity sector (Paragraph 1 of Article 1);
in addition, it was established that the provisions of this law
had been harmonised with "the legal acts of the European Union
listed in the annex to this law". This annex inter alia pointed
out the Directive 2003/54/EC of the European Parliament and of
the Council of 26 June 2003 concerning common rules for the
internal market in electricity and repealing Directive 96/92/EC.
The Law on Electricity (wording of 1 July 2004) has not been
amended or supplemented.
11. Article 15 ("Principles of Transmission Activities") of
the Law on Electricity (wording of 1 July 2004) provides:
"1. The transmission system operator shall be responsible
for stability and reliability of the electricity system,
performance of the national balance function as well as provision
of system services in the territory of the Republic of Lithuania,
operation, maintenance, management and development of
interconnectors to other systems by eliminating bottlenecks in
the transmission networks in accordance with its customers needs.
2. The transmission system operator shall be responsible for
ensuring that conditions for the connection of equipment of
electricity producers, distribution network operators and
customers are in conformity with the requirements laid down in
legal acts and that discriminatory conduct is excluded. The
equipment of a customer may be connected to transmission network
only in cases where the operator of the distribution network
refuses, due to established technical or maintenance
requirements, to connect the equipment of the customer to the
distribution network which is on the territory indicated in the
licence of the distribution network operator.
3. The transmission system operator shall provide, on the
basis of reciprocity, the operator of any other system with
sufficient information to ensure the secure and efficient
operation, co-ordinated development, integrity and
interoperability of the interconnected system.
4. The transmission system operator shall be responsible for
ensuring objective and non-discriminatory conditions for the
access to the system for transmission networks users."
12. While comparing the legal regulation established in
Article 15 (of the wordings of 20 July 2000 and 1 July 2004) of
the Law on Electricity, it is clear that this legal regulation
differs inter alia in that Paragraph 2 of Article 15 of the Law
on Electricity (wording of 1 July 2004) consolidated a new
provisions whereby the customers' equipment could be connected to
the transmission grid only in certain cases.
13. While construing the disputed provision "the equipment
of a customer may be connected to transmission network only in
cases where the operator of the distribution network refuses, due
to established technical or maintenance requirements, to connect
the equipment of the customer to the distribution network which
is on the territory indicated in the licence of the distribution
network operator" of Paragraph 2 of Article 15 of the Law on
Electricity (wording of 1 July 2004), it is important to reveal
the content of the notions (the formulations "the equipment of a
customer", "transmission network", "distribution network", "the
operator of the distribution network", "established technical or
maintenance requirements", "the territory indicated in the
licence of the distribution network operator") in a systemic
manner, i.e. to take account of the fact that, under the
provisions of Article 15 and other articles of this law:
- the customer is any person who purchases electricity for
consumption (Paragraph 35 of Article 2);
- the transmission system operator manages the transmission
network in which electricity is transmitted from its producer to
its distribution operator or customer (Paragraph 18 of Article
2), and is responsible for stability and reliability of the
electricity system, as well as provision of system services in
the territory of the state (Paragraph 18 of Article 2 and
Paragraph 1 of Article 15). The transmission system operator
shall be responsible for ensuring that conditions for the
connection of equipment of electricity producers, distribution
network operators and customers are in conformity with the
requirements laid down in legal acts and that discriminatory
conduct is excluded (Paragraph 1 of Article 15). In addition, the
transmission system operator must "give duly substantiated
reasons in writing for refusal to provide the existing and
potential customers with the service of electricity transport"
and "such a refusal must be substantiated by technical criteria
only" (Item 7 of Article 17);
- the distribution network operator manages the distribution
network, by which electricity is transmitted (supplied) to the
customer, and is responsible for the maintenance and development
of the network (Paragraph 30 of Article 2). The distribution
network operator must inter alia ensure non-discriminatory
conditions for using the distribution network to users of the
network (Paragraph 2 of Article 19), connect the customer and
producer equipment, located in the territory specified in the
license for distribution activity, to the distribution network in
accordance with the corresponding technical specifications (Item
6 of Article 21). In addition, the distribution network operator
must give duly substantiated reasons in writing for refusal to
provide the existing and potential customers with energy
transport service and such a refusal must be substantiated by
technical criteria only (Item 7 of Article 21);
- the technical or maintenance requirements, which must be
followed by the distribution network operator when he decides on
the possibility to connect the equipment of the consumer to the
distribution network, are established by the Government or an
institution authorised by it (Article 5, Paragraph 1 of Article
48);
- the exclusive rights to engage in activity are granted to
the distribution network operator in the territory specified in
his licence (Paragraph 5 of Article 10).
14. Thus, while construing the disputed provision of
Paragraph 2 of Article 15 (wording of 1 July 2004) of the Law on
Electricity in the context of the entire legal regulation
established in this article and in other articles (parts thereof)
of this law, it needs to be held that, under the established
legal regulation, the right must be ensured to the customer to
have access to the electricity system; the transmission network
is designed for transmission of generated electricity to regions
and for this purpose electricity producers are connected to the
distribution system operators; the equipment of all consumers
must be connected to the distribution network with the exception
of the cases where the connection of the equipment of the
customer is impossible due to established technical or
maintenance requirements; only in such cases the equipment of the
customer can be connected to the transmission network.
It needs to be noted that such model of electricity system
where the electricity transmission and distribution systems are
separated is widespread in Member States of the European Union.
In such model the equipment of the customer is, as a rule,
connected to the electricity distribution system, i.e. to the
distribution network.
15. It has been mentioned that the disputed provision is
entrenched in the Law on Electricity (wording of 1 July 2004)
which implements Directive 2003/54/EC. In addition, it has been
mentioned that by the 8 May 2007 decision the Constitutional
Court applied to the Court of Justice of European Communities for
a preliminary ruling regarding whether Article 20 of the
Directive ("Electricity customers should be able to choose their
supplier freely. Nonetheless a phased approach should be taken to
completing the internal market for electricity to enable industry
to adjust and ensure that adequate measures and systems are in
place to protect the interests of customers and ensure they have
a real and effective right to choose their supplier") is to be
construed as obliging Member States to establish the legal
regulation whereby any third party has the right, at its
discretion, providing there exists "the necessary capacity" of
electricity system, to choose as to which systemelectricity
transmission or electricity distributionit wishes to connect,
while the operator of such system has a duty to grant access to
such network.
It has also been mentioned that, on 9 October 2008, the
Court of Justice of European Communities adopted a preliminary
ruling in which it ruled that Article 20 does not lay down that
"the system of network access that the Member States are required
to establish must allow an eligible customer to choose, at his
discretion, the type of system to which he wishes to connect" and
that it does not preclude national legislation "which lays down
that an eligible customer's equipment may be connected to a
transmission system only where the distribution network operator
refuses, on account of established technical or operating
requirements, to connect to its system the equipment of the
eligible customer which is on the territory included in its
licence. It is, however, for national courts to verify that the
implementation and application of that access system takes place
in accordance with objective and non-discriminatory criteria
between the users of the transmission and distribution systems."
Such a decision is inter alia substantiated by the following
arguments:
- the freedom of choice of customers, which is established
in the Directive, is equally ensured when the provider connects
them both to the transmission system and to the distribution
system;
- Member States retain a certain flexibility in steering
system users towards one or another type of system, provided,
however, that they do so for non-discriminatory reasons and in
accordance with objective considerations. System users thus have
a right of access to the electricity system, but Member States
may decide that the connection is to be made on one or another
type of system. It is necessary, however, to verify that the
criteria chosen by Member States are objective and non-
discriminatory;
- in that respect, the wish to prevent large customers from
connecting directly to transmission systems, which would result
in the costs related to the distribution systems falling on small
customers alone and, thus, in an increase in the price of
electricity, may justify the obligation to connect primarily to a
distribution system. It is, however, for national courts alone to
verify the truth of those grounds and whether they are based on
objective and non-discriminatory criteria.
It needs to be noted that the jurisprudence of the Court of
Justice of European Communities as a source of construction of
law is also important to construction and application of
Lithuanian law (Constitutional Court rulings of 21 December 2006
and 15 May 2007).
IV
On the compliance of the provision of Paragraph 2 of Article
15 of the Law on Electricity (wording of 1 July 2004) with
Paragraph 2 of Article 5, Article 46 of the Constitution and with
the constitutional principle of a state under the rule of law.
1. While deciding whether the provision "the equipment of a
customer may be connected to transmission network only in cases
where the operator of the distribution network refuses, due to
established technical or maintenance requirements, to connect the
equipment of the customer to the distribution network which is on
the territory indicated in the licence of the distribution
network operator" of Paragraph 2 of Article 15 of the Law on
Electricity (wording of 1 July 2004) is not in conflict with
Paragraph 2 of Article 5, Article 46 of the Constitution and with
the constitutional principle of a state under the rule of law, it
needs to be noted that, as it has been held in this
Constitutional Court ruling:
- the formula "the State shall regulate economic activity"
of Paragraph 3 of Article 46 of the Constitution means not the
right of the state to administer all or certain economic activity
at its discretion, but its right to establish legal regulation of
economic activity, i.e. establishment of limitations
(prohibitions) and conditions of economic activity, regulation of
procedures in legal acts; peculiarities of legal regulation
depend on the specific character of the regulated social
relations;
- legal regulation of economic activity is not an end in
itself, it is a means of social engineering and a way to seek
welfare of the Nation through law; the content of the notion
"general welfare of the Nation" is revealed in each concrete case
by taking account of economic, social and other important
factors;
- it is not 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;
- the prohibitions provided for in the law must be
reasonable, adequate to the objective sought, non-discriminatory,
and clearly formulated; in each case a legislatively established
prohibition of economic freedom of a person must be clear and
designed for protection of the values (fair competition,
interests of consumers, etc.) established in the Constitution;
- under the Constitution, it is permitted to limit the
rights and freedoms of the person, as well as the freedom of
economic activity, if the following conditions are followed: this
is done by means of legislation; the limitations are necessary in
a democratic society in order to protect the rights and freedoms
of other persons and values entrenched in the Constitution, as
well as constitutionally important objectives; the limitations do
not deny the nature and essence of the rights and freedoms; the
constitutional principle of proportionality is followed;
- individual economic activity may be restricted when it is
necessary to protect the interests of consumers, fair competition
and the other values entrenched in the Constitution; the special
measures of protection of the interests of consumers are:
restriction of establishment of discriminatory prices, state
regulation of the size of prices and tariffs for the goods of the
monopolistic market, establishment of the requirements for the
quality of goods as well as other requirements for monopolistic
entity of economy etc.
- due to complexity of economic activity and dynamism of
particular relations, regulation in this area may be subject to
change.
2. It has been mentioned that such model of electricity
system where the electricity transmission and distribution
systems are separated is widespread in Member States of the
European Union; in such model the equipment of the customer is,
as a rule, connected to the electricity distribution system, i.e.
to the distribution network.
3. Under the legal regulation, which is disputed in the
constitutional justice case at issue, the equipment of the
customer is connected to the distribution network, while it is
permitted to connect such equipment to the transmission network
only in the cases where, due to established technical or
maintenance requirements, the operator of the distribution
network refuses to connect the equipment (which is in the
territory of the activity of the distribution network operator
specified in the licence) of the customer to the distribution
network. Such legal regulation does not deny the right of the
consumer to have access to the electricity energy system and this
regulation is applied to all customers. Thus, such legal
regulation equally ensures the right of all customers to have
access to the electricity system.
The limitation of the opportunity of the customer to choose
the electricity provider (either the operator of the distribution
network or the operator of the transmission network), which is
established in the disputed provision of Paragraph 2 of Article
15 of the Law on Electricity (wording of 1 July 2004), is not
absolute, and it does not create any preconditions for the
discrimination of the customer. In itself, such legal regulation
does not mean that a certain group of persons is discriminated or
that a certain group of persons is granted privileges. Quite to
the contrary, by such legal regulation one seeks to equally
ensure the interests of electricity customers. Thus, such legal
regulation seeks to ensure the general welfare of the Nation as
well.
Therefore, the legal regulation which is established in
Paragraph 2 of Article 15 of the Law on Electricity (wording of 1
July 2004) and which is disputed in this constitutional justice
case does not violate the imperatives stemming from Article 46 of
the Constitution.
It also needs to be noted that the Seimas, while
establishing the legal regulation in Paragraph 2 of Article 15 of
the Law on Electricity (wording of 1 July 2004), which is
disputed in the constitutional justice case at issue, did not
exceed the powers granted to it by the Constitution. Thus, there
are not any grounds to state that the disputed legal regulation
violates also the requirements arising from Paragraph 2 of
Article 5 of the Constitution, or that the constitutional
principle of a state under the rule of law is deviated from.
4. Taking account of the arguments set forth, one is to draw
a conclusion that the provision "the equipment of a customer may
be connected to transmission network only in cases where the
operator of the distribution network refuses, due to established
technical or maintenance requirements, to connect the equipment
of the customer to the distribution network which is on the
territory indicated in the licence of the distribution network
operator" of Paragraph 2 of Article 15 of the Law on Electricity
(wording of 1 July 2004) is not in conflict with Paragraph 2 of
Article 5, Article 46 of the Constitution and with the
constitutional principle of a state under the rule of law.
Conforming to Articles 102 and 105 of the Constitution of
the Republic of Lithuania and Articles 1, 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:
To recognise that the provision "the equipment of a customer
may be connected to transmission network only in cases where the
operator of the distribution network refuses, due to established
technical or maintenance requirements, to connect the equipment
of the customer to the distribution network which is on the
territory indicated in the licence of the distribution network
operator" of Paragraph 2 of Article 15 of the Republic of
Lithuania Law on Electricity (wording of 1 July 2004; Official
Gazette Valstybės žinios, No. 107-3964) is not in conflict with
Paragraph 2 of Article 5, Article 46 of the Constitution of the
Republic of Lithuania and with the constitutional principle of a
state under the rule of law.
This ruling of the Constitutional Court 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
Toma Birmontienė
Pranas Kuconis
Kęstutis Lapinskas
Zenonas Namavičius
Ramutė Ruškytė
Egidijus Šileikis
Algirdas Taminskas
Romualdas Kęstutis Urbaitis