Case No. 23/05-18/07
THE CONSTITUTIONAL COURT OF THE REPUBLIC OF LITHUANIA
RULING
ON THE COMPLIANCE OF PARAGRAPH 2 (WORDING OF 10 OCTOBER
2000) OF ARTICLE 5 OF THE REPUBLIC OF LITHUANIA NATURAL
GAS LAW AND ITEM 10 OF THE RULES OF LICENSING THE
TRANSMISSION, DISTRIBUTION, STORAGE AND SUPPLY OF
NATURAL GAS AS APPROVED BY RESOLUTION OF THE GOVERNMENT
OF THE REPUBLIC OF LITHUANIA NO. 743 "ON THE APPROVAL OF
THE RULES OF LICENSING THE TRANSMISSION, DISTRIBUTION,
STORAGE AND SUPPLY OF NATURAL GAS" OF 19 JUNE 2001 WITH
THE CONSTITUTION OF THE REPUBLIC OF LITHUANIA AND OF
ITEM 37 (WORDING OF 23 DECEMBER 2002) OF THESE RULES
WITH THE CONSTITUTION OF THE REPUBLIC OF LITHUANIA,
PARAGRAPH 1 OF ARTICLE 15 OF THE REPUBLIC OF LITHUANIA
LAW ON ENERGY, PARAGRAPH 1 OF ARTICLE 14 OF THE REPUBLIC
OF LITHUANIA NATURAL GAS LAW, PARAGRAPH 2 OF ARTICLE 1.
2, PARAGRAPH 3 OF ARTICLE 1.3 AND ARTICLE 2.80 OF THE
CIVIL CODE OF THE REPUBLIC OF LITHUANIA AND WITH ARTICLE
4 OF THE REPUBLIC OF LITHUANIA LAW ON COMPETITION
29 April 2009
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, Egidijus Šileikis and Romualdas
Kęstutis Urbaitis,
with the secretary of the hearingDaiva Pitrėnaitė,
in the presence of the representative of the Seimas of the
Republic of Lithuania, a party concerned, Julius Veselka, a
Member of the Seimas (representing the Seimas, a party concerned,
in the part of the case subsequent to petition No. 1B-16/2007 of
the Supreme Administrative Court of Lithuania, the petitioner),
in the presence of the representatives of the Government of
the Republic of Lithuania, a party concerned, who were Neringa
Pažūsienė, Director of the Law and Public Procurement Department
of the Ministry of Economy of the Republic of Lithuania
(representing the Government, a party concerned, in the part of
the case subsequent to petition No. 1B-29/2005 of the Vilnius
Regional Administrative Court, the petitioner), Lina
Lukoševičiūtė, Head of the Legislative and Law Application
Division of the Law and Public Procurement Department of the
Ministry of Economy (representing the Government, a party
concerned, in the part of the case subsequent to petition No. 1B-
16/2007 of the Supreme Administrative Court of Lithuania, the
petitioner) and Gintautas Danaitis, chief specialist of the Gas
and Local Resources Division of the Energy Resources Department
of the Ministry of Economy (representing the Government, a party
concerned, in the case subsequent to petition No. 1B-16/2007 of
the Supreme Administrative Court of Lithuania and petition No.
1B-29/2005 of the Vilnius Regional Administrative Court),
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 21 April 2009 heard constitutional justice case No.
23/05-18/07 subsequent to the following:
1) the petition of the Supreme Administrative Court of
Lithuania, the petitioner, requesting to investigate whether
Paragraph 2 of Article 5 of the Republic of Lithuania Natural Gas
Law and the provision "licences to transmit, distribute and store
gas shall be issued only to enterprises which have the gas
systems under the ownership right or use them in any other legal
ways" of Item 10 of the Rules of Licensing the Transmission,
Distribution, Storage and Supply of Natural Gas as approved by
Resolution of the Government of the Republic of Lithuania No. 743
"On the Approval of the Rules of Licensing the Transmission,
Distribution, Storage and Supply of Natural Gas" of 19 June 2001
were not in conflict with Articles 46 and 54 of the Constitution
of the Republic of Lithuania (petition No. 1B-16/2007);
2) the petition of the Vilnius Regional Administrative
Court, the petitioner, requesting to investigate whether the
provision "37.9. Establish for free customers the price of gas
supply which would not exceed the price cap of gas supply
established by the Commission" of Resolution of the Government of
the Republic of Lithuania No. 2091 "On Supplementing Resolution
of the Government of the Republic of Lithuania No. 743 'On the
Approval of the Rules of Licensing the Transmission,
Distribution, Storage and Supply of Natural Gas' of 19 June 2001"
of 23 December 2002 was not in conflict with Article 5, Paragraph
1 of Article 7, Article 23, Paragraph 1 of Article 46, Item 2 of
Article 94 of the Constitution of the Republic of Lithuania, with
the constitutional principle of a state under the rule of law, as
well as with Paragraph 1 of Article 15 of the Republic of
Lithuania Law on Energy, Paragraph 1 of Article 14 of the
Republic of Lithuania Natural Gas Law, Paragraph 2 of Article 1.
2, Paragraph 3 of Article 1.3 and Article 2.80 of the Civil Code
of the Republic of Lithuania, and Article 4 of the Republic of
Lithuania Law on Competition (petition No. 1B-29/2005).
By the Constitutional Court Decision "On joining petitions
into one case" of 1 October 2007, petition No. 1B-16/2007 (case
No. 18/07) of the Supreme Administrative Court of Lithuania, the
petitioner, and petition No. 1B-29/2005 (case No. 23/05) of the
Vilnius Regional Administrative Court, the petitioner, were
joined into one case and it was given reference No. 23/05-18/07.
The Constitutional Court
has established:
I
1. The Supreme Administrative Court of Lithuania, the
petitioner, was investigating an administrative case. By its
ruling, the said court suspended the consideration of the case
and applied to the Constitutional Court with a petition
requesting to investigate whether Paragraph 2 of Article 5 of the
Natural Gas Law and the provision "licences to transmit,
distribute and store gas shall be issued only to enterprises
which have the gas systems under the ownership right or use them
in any other legal ways" of Item 10 of the Rules of Licensing the
Transmission, Distribution, Storage and Supply of Natural Gas as
approved by Government Resolution No. 743 "On the Approval of the
Rules of Licensing the Transmission, Distribution, Storage and
Supply of Natural Gas" of 19 June 2001 (hereinafter also referred
to as the Rules) are not in conflict with Articles 46 and 54 of
the Constitution.
2. The Vilnius Regional Administrative Court, the
petitioner, was investigating an administrative case. By its
ruling, the said court suspended the consideration of the case
and applied to the Constitutional Court with a petition
requesting to investigate whether the provision "37.9. Establish
for free customers the price of gas supply which would not exceed
the price cap of gas supply established by the Commission" of
Government Resolution No. 2091 "On Supplementing Resolution of
the Government of the Republic of Lithuania No. 743 'On the
Approval of the Rules of Licensing the Transmission,
Distribution, Storage and Supply of Natural Gas' of 19 June 2001"
of 23 December 2002 was not in conflict with Article 5, Paragraph
1 of Article 7, Article 23, Paragraph 1 of Article 46, Item 2 of
Article 94 of the Constitution, with the constitutional principle
of a state under the rule of law, as well as with Paragraph 1 of
Article 15 of the Law on Energy, Paragraph 1 of Article 14 of the
Natural Gas Law, Paragraph 2 of Article 1.2, Paragraph 3 of
Article 1.3 and Article 2.80 of the Civil Code, and Article 4 of
the Law on Competition.
II
1. Petition No. 1B-16/2007 of the Supreme Administrative
Court of Lithuania is based on the following arguments.
1.1. After the legal regulation which obliged enterprises
seeking to get licences to transmit, distribute and store gas to
have the gas systems under the ownership right or use them in any
other legal ways has been established in Paragraph 2 of Article 5
of the Natural Gas Law and repeated in Item 10 of the Rules, one
created artificial and disproportionally big barriers for the
objective soughtan unlimited number of persons who seek to get
the said licence in the corresponding territory were obliged even
before the start of the licensed activity, to build gas systems
or purchase them in other way for which big investments are
necessary, however, the licence in the concrete territory could
be granted only to one enterprise. In such a case, other
enterprises which purchased gas systems, could experience damage
(losses) the compensation of which was not provided for; the
realisation of the unexploited gas systems could also become
problematic.
Such legal regulation did not encourage the initiative of
new enterprises, it artificially limited freedom of economic
activity and competition in the gas sector, created legal
preconditions for the formation of the monopolistic gas market,
it could violate the interests of the consumers and harm the
common benefit of society, as the licence was granted under the
formal criteria, often favourable for one enterprise, when
account was taken not of the fact what benefit would be provided
for satisfying the society needs by the person who got the
licence, but of the fact whether the enterprise had gas systems.
Such legal regulation, in the opinion of the petitioner, might be
in conflict with Article 46 of the Constitution.
1.2. By the said legal regulation, one created such
situation where the purchased gas systems could remain
unexploited and could impede rational exploitation of land and
harm the natural environment, thus, the petitioner had doubts
regarding the compliance of the said provisions with Article 54
of the Constitution.
2. The petition No. 1B-29/2005 of the Vilnius Regional
Administrative Court, the petitioner, is based on the following
arguments.
2.1. Under Paragraph 1 (wording of 16 May 2002) of Article
15 of the Law on Energy, the principles of regulation (i.e. the
way the price is regulatedby approving the price cap or
otherwise) and nomenclature (i.e. what prices are regulated) of
regulated prices in the state energy sector may be established
only in the law. However, neither the Natural Gas Law, nor other
laws established or establish the regulation of gas supply prices
for free customers. Neither is the Government granted the right
to amend or supplement the list of prices (regulated by a law) of
natural gas sector and to establish a different way of price
regulation or to transfer such right to institutions authorised
by the Government.
The fact that Paragraph 3 of Article 12 of the Natural Gas
Law (wording of 10 October 2000) establishes the rights of gas
suppliers to conclude gas supply contracts with free customers
(in Item 24 of Article 2 of this law, the free customer is
defined as "consumer having the freedom of choice in selecting a
supplier") and distribution enterprises, Article 7 thereof
provides that one of the obligatory elements of the gas supply
contract shall be the price and Article 14 which regulates the
state regulation of gas prices, while enshrining a finite list of
prices regulated by the state in the gas sector, does not provide
for the regulation of prices for free customers, permits to make
an assumption that the legislator did not seek to regulate supply
prices for free customers in the gas sector and left the right
for the economic entity to independently establish or agree with
free customers regarding the price of gas supply.
Therefore, the Government, having supplemented by its
Resolution No. 2091 "On Supplementing Resolution of the
Government of the Republic of Lithuania No. 743 'On the Approval
of the Rules of Licensing the Transmission, Distribution, Storage
and Supply of Natural Gas' of 19 June 2001" of 23 December 2002
the Rules by Item 37.9 which enshrined the duty of the enterprise
which is engaged in gas supply "[to] establish for free customers
the price of gas supply which would not exceed the price cap of
gas supply established by the Commission", supplemented the
finite list of prices regulated by the state in the gas sector
established in Paragraph 1 (wording of 10 October 2000) of
Article 14 of the Natural Gas Law and thus created a legal norm
of new character, i.e. it regulated what is not regulated in the
Natural Gas Law, thus, it exceeded its competence and, in
addition, it restricted the natural gas suppliers' right to
ownership, i.e. the right to receive the corresponding income
from business, as well as freedom and initiative of economic
activity.
Referring to the Constitutional Court doctrine, the
petitioner also noted that by means of a substatutory legal act
one realises the norms of the law, however, such legal act may
not replace the law itself and create the new legal norms of
general nature which by their power would compete with the norms
of the law (Constitutional Court ruling of 14 January 1994);
legal acts of lower level may not conflict with legal acts of
higher level, and no legal act may conflict with the Constitution
(Constitutional Court ruling of 12 July 2001).
Therefore, the petitioner, inter alia referring to the
doctrinal provisions of the Constitutional Court rulings of 14
January 1994, 20 April 1995, 18 April 1996, 21 April 1998, 14
March 2002, 3 December 2003 and 26 January 2004, had a doubt
whether the disputed Government resolution, to the extent that it
supplements the Rules by Item 37.9 which enshrined the duty of
the enterprise which is engaged in gas supply "[to] establish for
free customers the price of gas supply which would not exceed the
price cap of gas supply established by the Commission" was not in
conflict with Article 5, Item 2 of Article 94, Paragraph 1 of
Article 7, Article 23 and Paragraph 1 of Article 46 of the
Constitution, as well as with the principle of a state under the
rule of law which, according to the petitioner, is enshrined in
the Preamble to the Constitution, also with Paragraph 1 (wording
of 10 October 2000) of Article 14 of the Natural Gas Law and the
provision enshrined in Paragraph 1 (wording of 16 May 2002) of
Article 15 of the Law on Energy that the principles of regulation
of state regulated prices and nomenclature may be established
only in energy sector laws.
2.2. Having supplemented the Rules by the said provision,
the Government, exceeding the competence granted to it, regulated
the civil relations which had not been regulated by laws yet,
enshrined the administrative method which was not provided for in
the laws, whereby the activity of the natural gas suppliers was
regulated, and unlawfully restricted the right of the gas
enterprises to freely establish the price of gas supply for free
customers which was guaranteed by Paragraph 1 (wording of 16 May
2002) of Article 15 of the Law on Energy and Paragraph 1 (wording
of 10 October) of Article 14 of the Natural Gas Law.
Therefore, the petitioner had a doubt whether Item 37.9
(wording of 23 December 2002) of the Rules was not in conflict
with the prohibition to limit the rights in other way than by
means of a law which is enshrined in Paragraph 2 of Article 1.2
of the Civil Code, with the requirement for the Government and
other state institutions to adopt legal acts only in cases and to
the extent provided for in the Civil Code and other legal acts
which, according to the petitioner, is enshrined in Paragraph 3
of Article 1.3 of the Civil Code, and with the imperative
requirement to consolidate the application of administrative
methods for civil legal relations in laws and not in the
substatutory legal acts, which, according to the petitioner, is
enshrined in Article 2.80 of the Civil Code.
2.3. Natural gas may be replaced by other resources of
energy, i.e. it competes with them, for example, with fuel oil
and other petroleum products the prices of which were not
regulated for free customers, therefore, Item 37.9 of the Rules,
which enshrines the duty of the enterprise which is engaged in
gas supply "[to] establish for free customers the price of gas
supply which would not exceed the price cap of gas supply
established by the Commission" did not ensure the freedom of fair
competition and the preconditions were created to distort the
conditions of competition in the market of supply of energy
resources, one discriminated the natural gas suppliers and
restricted their rights to freely compete with other suppliers of
energy resources which in this case fall into a better position.
Therefore, the petitioner, inter alia referring to the
doctrinal provisions of the Constitutional Court ruling of 6
October 1999 that the guarantee of the protection of fair
competition means prohibition for state authority or local
government institutions regulating economic activity to adopt
decisions which distort or are capable of distorting fair
competition, had a doubt whether Item 37.9 (wording of 23
December 2002) of the Rules which enshrined the duty of the
enterprise which is engaged in gas supply "[to] establish for
free customers the price of gas supply which would not exceed the
price cap of gas supply established by the Commission" was not in
conflict with Paragraph 4 of Article 46 of the Constitution and
with the principles of fair competition and prohibition of
discrimination which, according to the petitioner, are enshrined
in Article 4 (wording of 23 March 1999) of the Law on
Competition.
III
In the course of preparation of the case for the
Constitutional Court hearing, written explanations from the
former representative of the Seimas, a party concerned, who was
P. Vilkas, a Member of the Seimas (representing the Seimas, a
party concerned, in the part of the case subsequent to petition
No. 1B-16/2007 of the Supreme Administrative Court of Lithuania,
the petitioner), the representatives of the Government, a party
concerned, who were N. Pažūsienė and G. Danaitis (representing
the Government, a party concerned, in the part of the case
subsequent to petition No. 1B-29/2005 of the Vilnius Regional
Administrative Court, the petitioner), L. Lukoševičiūtė and G.
Danaitis (representing the Government, a party concerned, in the
case subsequent to petition No. 1B-16/2007 of the Supreme
Administrative Court of Lithuania, the petitioner) were received
in which it is stated that the disputed legal regulation was not
in conflict with the corresponding legal regulation of higher
power, inter alia the Constitution.
1. As regards petition No. 1B-16/2007 of the Supreme
Administrative Court of Lithuania, the petitioner, the position
of P. Vilkas, a Member of the Seimas, the representative of the
Seimas, a party concerned, is based on the following arguments.
1.1. The requirement enshrined in Paragraph 2 (wording of 10
October 2000) of Article 5 of the Natural Gas Law is equally
applied to all enterprises which seek to get the licence for
transmission, distribution and storing activities. In addition,
also in other sectors of energy (electricity and heating), for
enterprises which seek to get the licence for transmission and
distribution activities, an analogous requirement is established.
1.2. The enterprise which, under the procedure established
in the Rules, has been issued the licence to transmit, distribute
and store gas, immediately gains the right and the duty to carry
out the activity of transmission, distribution and storing of gas
which is not possible at all without having the system of
transmission, distribution and storing of natural gas which is
equipped according to the established requirements and connected
with the functioning system, without which the person could not
satisfy the needs of consumers in the gas sector and would be of
no use both for oneself and for other members of society.
1.3. Paragraph 1 (wording of 16 May 2002) of Article 13 of
the Law on Energy enshrines an imperative provisionthe
territories of transmission and distribution in which the
operator has exclusive rights to carry out its activity shall be
specified in the transmission and distribution licences.
Therefore, in order to ensure the safe and continuous
transportation of gas to its consumers, the activity of
transmission and distribution of natural gas through pipelines
remains a natural monopoly, while only the extraction
(production) and supply (trade) of gas is liberalised.
2. By Ordinance of the Speaker of the Seimas No. 9 "On
Amending Ordinance of the Speaker of the Seimas No. 142 of 25
April 2007" of 15 December 2008, the representative of the
Seimas, the party concerned, was replaced: J. Veselka, a Member
of the Seimas, was authorised to represent the Seimas at the
Constitutional Court. In his letter of 9 April 2009 to the
Constitutional Court, J. Veselka specified that he virtually
consented to the arguments set forth in the written explanations
of P. Vilkas, a Member of the Seimas, the former representative
of the Seimas, and he also stated that there were doubts
regarding the compliance of the disputed law and Rules with the
Constitution.
3. The position of L. Lukoševičiūtė and G. Danaitis, the
representatives of the Government, a party concerned, regarding
petition No. 1B-16/2007 of the Supreme Administrative Court of
Lithuania, the petitioner, is based on the following arguments.
3.1. One of the requirements for the enterprises which seek
to get the licence for transmission, distribution or storing
activity (obligation to build or purchase otherwise the systems
of natural gas even before the beginning of the licensed
activity) enshrined in Paragraph 2 (wording of 10 October 2000)
of Article 5 of the Natural Gas Law is equally applied to all
enterprises which seek to get the licence for transmission,
distribution or storing activity and due to that no artificial
and disproportionate obstacles are created for the objective
sought. Before issuing the licence, one must verify the
enterprise's technological, financial and management capabilities
to fulfil the established conditions of the licensed activity. In
other energy sectors (electricity and heating), an analogous
requirement for enterprises which seek to get the licence for
transmission and distribution activity is established.
3.2. A person, who, under the procedure established in the
Rules, was issued the licence of gas transmission or
distribution, immediately gains the right and the duty to perform
the function of the operator of the transmission or distribution
system (i.e. to supply the service of gas transmission or
distribution in the territory specified in the licence),
therefore, in order to be able to carry out the activity of
transmission, distribution and storing of natural gas and to
ensure the continuous and safe supply of gas to consumers at the
lowest cost, it must have the facilities.
The licence may not be conditional, i.e. no "postponement"
condition may be raised to it so that the conditions necessary
for the implementation of the licensed activity, for example,
acquisition of technological equipment (gas system) would be
carried out already after issuing a licence, as it would be in
conflict with the aims and principles of licensing and the
provisions of Article 46 of the Constitution would be violated.
In such case there would arise a situation that an enterprise,
which has the licence to transmit, distribute or store natural
gas, would not be able to carry out this licensed activity, as it
would have no necessary technological capabilities and it is not
clear whether it would ever acquire them. Therefore, the
requirement that those who wish to get a licence to engage in the
corresponding activity must have the right to the facilities
without which the licensed activity is impossible is established
while seeking to defend the public interest and the rights of
consumers by ensuring safe and reliable transmission and
distribution of gas to consumers.
3.3. The activity of transmission and distribution is not
linked to building of the systems of transmission or
distribution. Under Paragraph 2 (wording of 10 October 2000) of
Article 5 of the Natural Gas Law, in order the licence to
transmit, distribute and store natural gas would be issued, it is
not necessary to possess the natural gas systems by right of
ownership, it is not necessary to build them, but it is
sufficient to use them on other legal grounds, i.e. it is
sufficient to have acquired the right to natural gas systems by
any of the transactions provided for in the Civil Code and this
does not mean that building the natural gas system or investments
for such building are obligatory.
3.4. Paragraph 1 (wording of 16 May 2002) of Article 13 of
the Law on Energy consolidates an imperativein transmission and
distribution licences, one specifies the territories of
transmission and distribution in which the operator has exclusive
rights to carry out its activity. Therefore, in the natural gas
sector (as in electricity and heating sectors), the activity of
transmission and distribution of natural gas through pipelines
remains a natural monopoly, while the extraction (production) and
supply (trade) of gas is liberalised.
3.5. The building of gas systems must meet the environmental
requirements established by legal acts, in addition, the gas
transmission enterprise has the duty to inform, under the
established procedure, the Ministry of Economy about the
beginning of building and use of the transmission systems. The
Natural Gas Law provides that permits to install the transmission
and distribution systems are not issued if the existing
capacities are not used. The transmission and distribution
systems must meet the requirements of designing, building and
exploitation so that the compatibility of containers and
mechanisms and safe operation would be ensured. Thus, following
the specified provisions of the legal acts whereby one seeks to
protect the interests of consumers, natural environment and to
ensure the step-by-step and effective development of gas systems,
a situation, where different persons would build different gas
systems in the same territory, is impossible. The competitive gas
transmission systems may not be installed. By these provisions,
the state fulfils the duty to take care of natural environment
which is established in Article 54 of the Constitution.
3.6. Seeking to ensure compensation for damage, Paragraph 2
(wording of 10 October 2000) of Article 21 of the Natural Gas Law
provides that "persons shall compensate for the damage caused by
their illegal activities to other persons, enterprises,
institutions and organisations, in accordance with the procedure
established by laws". The general principle of responsibility for
damage committed by the unlawful actions of state institutions is
also established in Article 6.271 of the Civil Code, according to
which the persons who think that due to unlawful actions of the
state institutions, damage was incurred to them, shall have the
right to apply to court under procedure established by legal
acts.
4. The position of N. Pažūsienė and G. Danaitis, the
representatives of the Government, the party concerned, regarding
petition No. 1B-29/2005 of the Vilnius Regional Administrative
Court, the petitioner, is based on the following arguments.
4.1. The Law on Energy (wording of 16 May 2002) granted the
Government the right to regulate the principles of establishment
of prices regulated by the state; the law also established that
the Government or institutions authorised by it, while
implementing the state management of energy, shall approve the
rules for licensing the activity in the field of energy, shall
have the right, in cases established by laws, to attribute
public-interest-related obligations to the enterprises engaged in
energy activities and to implement other functions established in
the Law on Energy and other laws. The Natural Gas Law (wording of
10 October 2000) does not regulate the price of gas supply
directly, however, Paragraph 2 (wording of 16 May 2002) of
Article 1 of the Law on Energy provides that the provisions of
other laws which regulate the activity in the energy sector shall
be valid inasmuch as they are not in conflict with the Law on
Energy.
Article 8 of the Republic of Lithuania Law on Prices
enshrines the right of the Government to restrict price and
tariff increases for a period not exceeding 6 months, if the
dynamics of market prices and tariffs cause or are likely to
cause a disturbance in the functioning of economy, which, in its
turn, affects the interests of the economy of the Republic and
its residents. The representatives of the Government, a party
concerned, drew one's attention to the fact that the provision
which is disputed by the petitioner was effective as from 28
December 2002 to 19 July 2003.
Therefore, taking account of the specified provisions of
laws in which the administrative methods of economic gas supply
activity are established, a conclusion is drawn that the
Government had the basis established by a laws to regulate the
prices of gas supply.
4.2. In Lithuania, natural gas is supplied from the only
external source of gas supplythe Russian Federation open joint-
stock company "Gazprom" which owns part of the shares of the main
Lithuanian gas systems' operators. Lithuania has no gas pipes'
connections with the natural gas networks of other states (except
Russia, Belarus and Latvia). Without a necessary infrastructure
and with only two natural gas suppliers operating in the market,
which are not competing with each other, the free customers have
no possibilities to choose another supplier and they have no
technical possibilities to use fuel of other kind. Thus,
Lithuania is absolutely dependent on one enterprise and the gas
supplier may dictate any conditions of gas supply agreements
(inter alia groundlessly big prices for gas supply). Therefore,
in this case there are no conditions in the gas sector to fully
implement a free and competitive market, as well as to fully
implement the competition of natural gas with other resources of
energy in such gas market, and the principle of contractual
freedom is not applied.
When natural gas is used for production of energy and/or
heating, and energy is supplied for several hundred thousand
consumers, in order to avoid the abuse of the dominant position
by gas supply enterprises and to avoid violation of interests of
the consumers upon establishment of the prices of gas supply
which are not fair, the state has the right and at the same time
the duty to regulate the activity of the gas supply enterprises
and the prices of gas which is supplied to the consumers.
Therefore, following the Law on Energy, the Natural Gas Law and
the Law on Prices, the Government had the right to regulate the
activity of natural gas supply, as well as establishment of
prices for gas supply as one of the constituent parts of
regulation of the natural gas supply activity.
The disputed Government resolution established the
regulation of the natural gas supply activity for all economic
entities engaged in this activity, and this means that equal
conditions were established for all the economic entities which
have licences to supply natural gas. Thus, this Government
resolution did not distort the competition conditions.
4.3. The representatives of the Government, the party
concerned, noted that in the cover letter-proposal of the draft
Government Resolution No. 2091 "On Supplementing Resolution of
the Government of the Republic of Lithuania No. 743 'On the
Approval of the Rules of Licensing the Transmission,
Distribution, Storage and Supply of Natural Gas' of 19 June 2001"
of 23 December 2002 to the Government, it is specified that the
purpose of the disputed legal regulation was to restrict the
increase of prices of natural gas for free customers and, at the
same time, the increase of prices of energy for all the
consumers.
Therefore, by adopting the disputed resolution, whereby it
partially regulated the price of gas supply for free customers,
the Government did not violate the constitutional principle of
contractual freedom, as it took account of the then situation in
the Lithuanian gas market, the unfavourable situation of
consumers and of the principles of good faith, reasonableness and
justice (these principles should not be in conflict with any
conditions of any contract established upon agreement between the
parties), and, by protecting society and the weaker party of the
agreementthe consumersfrom the groundlessly big prices for gas
supply (it needs to be emphasised that the said Government
resolution virtually restricted not the price itself, but the
difference between the price of gas which is bought by the gas
supplier and the price of that which is sold, i.e. the margin),
i.e. by defending the public interest, the Government implemented
the provision of Paragraph 3 of Article 46 of the Constitution
that "the State shall regulate economic activity so that it
serves the general welfare of the Nation" and the provision of
Paragraph 5 of Article 46 thereof that "the State shall defend
the interests of the consumer".
IV
In the course of the preparation of the case for the
Constitutional Court hearing, written explanations from R. A.
Stanikūnas, Chairman of the Competition Council of the Republic
of Lithuania, V. Poderys, Chairman of the National Control
Commission for Prices and Energy, D. Kriaučiūnas, Director
General of the European Law Department under the Ministry of
Justice, and V. Miškinis, Head of the State Energy Inspectorate
under the Ministry of Economy, were received.
V
1. At the Constitutional Court hearing, J. Veselka, a Member
of the Seimas, the representative of the Seimas, a party
concerned, virtually reiterated the arguments set forth in his
written explanations, as well as provided additional
explanations.
2. At the Constitutional Court hearing, N. Pažūsienė, L.
Lukoševičiūtė and G. Danaitis, the representatives of the
Government, a party concerned, virtually reiterated the arguments
set forth in their written explanations and answered to the
questions of the justices of the Constitutional Court, and N.
Pažūsienė also provided additional explanations.
The Constitutional Court
holds that:
I
1. The Supreme Administrative Court of Lithuania, the
petitioner, requests to investigate whether Paragraph 2 of
Article 5 of the Natural Gas Law and the provision "licences to
transmit, distribute and store gas shall be issued only to
enterprises which have the gas systems under the ownership right
or use them in any other legal ways" of Item 10 of the Rules of
Licensing the Transmission, Distribution, Storage and Supply of
Natural Gas as approved by Government Resolution No. 743 "On the
Approval of the Rules of Licensing the Transmission,
Distribution, Storage and Supply of Natural Gas" of 19 June 2001
are not in conflict with Articles 46 and 54 of the Constitution.
In its ruling whereby it applied to the Constitutional
Court, the petitioner did not specify which wording of Paragraph
2 of Article 5 of the Natural Gas Law it disputes, however, it is
obvious from the arguments of its petition that it disputed
Paragraph 2 of Article 5 of the Natural Gas Law which was set
forth in the wording of 10 October 2000.
2. The Vilnius Regional Administrative Court, the
petitioner, requests to investigate whether the provision "37.9.
Establish for free customers the price of gas supply which would
not exceed the price cap of gas supply established by the
Commission" of Government Resolution No. 2091 "On Supplementing
Resolution of the Government of the Republic of Lithuania No. 743
'On the Approval of the Rules of Licensing the Transmission,
Distribution, Storage and Supply of Natural Gas' of 19 June 2001"
of 23 December 2002 is not in conflict with Article 5, Paragraph
1 of Article 7, Article 23, Paragraph 1 of Article 46, Item 2 of
Article 94 of the Constitution, with the constitutional principle
of a state under the rule of law, as well as with Paragraph 1 of
Article 15 of the Law on Energy, Paragraph 1 of Article 14 of the
Natural Gas Law, Paragraph 2 of Article 1.2, Paragraph 3 of
Article 1.3 and Article 2.80 of the Civil Code, and Article 4 of
the Law on Competition.
2.1. It is obvious from the arguments of the petition of the
Vilnius Regional Administrative Court, the petitioner, that the
Constitutional Court is requested to investigate the compliance
of the provision "The enterprise which is engaged in gas supply,
must: <...> 37.9. Establish for free customers the price of gas
supply which would not exceed the price cap of gas supply
established by the Commission" of Item 37 (wording of 23 December
2002) of the Rules with the Constitution, as well as with the
provisions of the Law on Energy, the Natural Gas Law, the Civil
Code and the Law on Competition.
2.2. It is obvious from the arguments of the Vilnius
Regional Administrative Court, the petitioner, that the
Constitutional Court is inter alia requested to investigate the
compliance of the provision "The enterprise which is engaged in
gas supply, must: <...> 37.9. Establish for free customers the
price of gas supply which would not exceed the price cap of gas
supply established by the Commission" of Item 37 (wording of 23
December 2002) of the Rules with:
- not entire Article 23 of the Constitution, but only with
Paragraphs 1 and 2 of the said article;
- not only Paragraph 1 of Article 46 of the Constitution,
but also Paragraph 4 of this article;
- Paragraph 1 (wording of 16 May 2002) of Article 15 of the
Law on Energy;
- Paragraph 1 (wording of 10 October 2000) of Article 14 of
the Natural Gas Law;
- Paragraph 2 (wording of 18 July 2000) of Article 1.2 of
the Civil Code, Paragraph 3 (wording of 18 July 2000) of Article
1.3 thereof and Article 2.80 (wording of 18 July 2000) thereof;
- Article 4 (wording of 23 March 1999) of the Law on
Competition.
2.3. Therefore, the Vilnius Regional Administrative Court,
the petitioner, requests to investigate the compliance of the
provision "The enterprise which is engaged in gas supply, must:
<...> 37.9. Establish for free customers the price of gas supply
which would not exceed the price cap of gas supply established by
the Commission" of Item 37 (wording of 23 December 2002) of the
Rules of Licensing the Transmission, Distribution, Storage and
Supply of Natural Gas approved by Government Resolution No. 743
"On the Approval of the Rules of Licensing the Transmission,
Distribution, Storage and Supply of Natural Gas" of 19 June 2001
with Article 5, Paragraph 1 of Article 7, Paragraphs 1 and 2 of
Article 23, Paragraphs 1 and 4 of Article 46 and Item 2 of
Article 94 of the Constitution, with the constitutional principle
of a state under the rule of law, with Paragraph 1 (wording of 16
May 2002) of Article 15 of the Law on Energy, Paragraph 1
(wording of 10 October 2000) of Article 14 of the Natural Gas
Law, Paragraph 2 (wording of 18 July 2000) of Article 1.2 of the
Civil Code, Paragraph 3 (wording of 18 July 2000) of Article 1.3
thereof and Article 2.80 (wording of 18 July 2000) thereof, and
with Article 4 (wording of 23 March 1999) of Article 4 of the Law
on Competition.
3. It needs to be noted that, on 20 March 2007, the Seimas
adopted the Republic of Lithuania Law on Amending the Natural Gas
Law which came into force on 19 April 2007. By this law, the
Natural Gas Law (wording of 10 October 2000 with subsequent
amendments and supplements) was amended and set forth in a new
wording.
On 15 July 2003, the Government adopted Resolution No. 908
"On Amending Resolution of the Government of the Republic of
Lithuania No. 743 'On the Approval of the Rules of Licensing the
Transmission, Distribution, Storage and Supply of Natural Gas' of
19 June 2001" which came into force on 19 July 2003 and by which
Item 37.9 (wording of 23 December 2002) of the Rules was
recognised as no longer effective.
On 5 December 2007, the Government adopted Resolution No.
1304 "On the Approval of the Rules of Licensing the Transmission,
Distribution, Storage and Supply of Natural Gas" which came into
force on 16 December of the same year and whose Item 1 approved
the Rules of Licensing the Transmission, Distribution, Storage,
Liquefaction and Supply of Natural Gas and Item 3 recognised
Government Resolution No. 743 "On the Approval of the Rules of
Licensing the Transmission, Distribution, Storage and Supply of
Natural Gas" of 19 June 2001 (with subsequent amendments and
supplements) as no longer effective.
The Constitutional Court has held more than once that in
such cases, when a court investigating a case applies to the
Constitutional Court after it has had doubts concerning the
compliance of a law or other legal act applicable in the case
with the Constitution (other legal act of higher power), the
Constitutional Court has a duty to investigate the request of the
court regardless of the fact whether the disputed law or other
legal is valid or not.
II
On the compliance of Paragraph 2 (wording of 10 October
2000) of Article 5 of the Natural Gas Law with Articles 46 and 54
of the Constitution.
1. In this constitutional justice case one inter alia
disputes the fact whether the legal regulation established in
Paragraph 2 (wording of 10 October 2000) of Article 5 of the
Natural Gas Law was not in conflict with the Constitution.
2. It needs to be noted that before coming into force of the
Natural Gas Law (wording of 10 October 2000), the relations
linked to the economic activity in the sphere of natural gas were
regulated by the legal acts which regulated the relations of
energy activities (the activities linked to prospecting for
energy resources, extraction, transportation, distribution
thereof, energy production and transmission, trade in energy or
exploitation of energy installations).
2.1. For instance, on 31 August 1992, the Government adopted
Resolution No. 642 "Regarding the Situation in the Energy System
of the Republic of Lithuania and Improvement of Consumers' Supply
with Energy Resources". By this resolution, the Government,
"taking account of the difficult situation which arose in the
energy system", decided to demonopolise, as from 1 September
1992, the procedure of supply for the consumers of the Republic
of Lithuania with energy resources by creating economic
conditions which would encourage the legal and natural persons to
supply these resources (Item 1), it permitted for state and
private enterprises to freely import into the Republic of
Lithuania and realise oil, oil products, coal, gas and other
resources of energy without limiting the amounts that are
imported and without applying to them the customs duty and
general and individual excise duties (Item 1.1), obliged the
Ministry of Energy and the municipalities of cities (regions) to
permit the legal and natural personsthe suppliers of natural
gasto use the trunk and local gas pipelines according to the
agreements (Item 2.1).
2.2. On 28 March 1995, the Seimas adopted the Law on Energy
which came into force on 14 April of the same year. This law
established the general provisions for energy activity, the
grounds for energy development, functioning and management, inter
alia purposes of energy policy, the main provisions for the use
of energy resources, the rights and duties of consumers of
energy, the principles of formation of the national energy
strategy and the grounds for administration and management of
energy.
2.3. Article 17 (wording of 28 March 1995) of the Law on
Energy established that a licence shall be required for engaging
in energy activity (Paragraph 1) and that the procedure for
issuing energy licences shall be established by the Government
(Paragraph 2).
On 22 March 1996, the Government adopted Resolution No. 383
"On Approving the Rules of Licensing Energy Activity" whereby it
approved the Rules of Licensing Energy Activity (Item 1) and
established that these rules shall come into force as from 1 June
1996 (Item 2). Item 10 of the rules approved by this Government
resolution inter alia established that enterprises, which wish to
get the licence to engage into energy activity linked to
transportation of gas, its distributions by pipes, shall present
the certificates from the corresponding institutions about the
preparation to carry out the specified work.
2.4. On 26 March 1998, the Seimas adopted the Republic of
Lithuania Law on Amending Articles 1, 3, 4, 5, 6, 8, 9, 11, 12,
13, 14, 15 and 17 of the Law on Energy which came into force on
10 April 1998. Article 13 of this law amended Article 17 (wording
of 7 October 1997) of the Law on Energy and it inter alia
established that only the enterprises which have been granted a
licence issued according to the procedure established by the
Ministry of Economy may engage in the exploitation of energy
facilities (electricity, heating, combustible natural gas and
liquefied hydrocarbon gas); the licences shall be issued by the
State Energy Inspectorate under the Ministry of Economy.
On 28 August 1998, the Government, while following Article
17 (wording of 26 March 1998) of the Law on Energy, adopted
Resolution No. 1036 "On Recognising Resolution of the Government
of the Republic of Lithuania No. 383 'On Approving the Rules of
Licensing Energy Activity' of 22 March 1996 as no Longer
Effective and on Establishing the Terms for Changing the Licences
of Energy Activities into the Permits for Energy Facilities
Exploitation Business" which came into force on 3 September 1998.
By this resolution one inter alia established that the licences
of energy activity which were issued following Government
resolution No. 383 of 22 March 1996 shall be changed into the
permits for energy facilities exploitation business.
2.5. While comparing the legal regulation established in
Article 17 (wording of 28 March 1995) of the Law on Energy with
the one established in Article 17 (wording of 26 March 1998) of
the Law on Energy, it needs to be held that under Article 17
(wording of 26 March 1998) of the Law on Energy, enterprises
wishing to engage themselves in energy activity, instead of
energy licences which had been required until then according to
Article 17 (wording of 28 March 1995) of the Law on Energy had to
get the permits for energy facilities exploitation business. It
needs to be noted that both licences and business permits are
essentially documents of the system of permits, which grant the
right to a corresponding economic entity to engage into a certain
economic activity, therefore, according to their purpose, they
may be assessed as identical documents.
3. On 10 October 2000, the Seimas adopted the Natural Gas
Law which, under Paragraph 1 (wording of 21 December 2000) of
Article 23 of this law, came info effect as from 1 July 2001
(save the exception specified in the law). Under Article 1 of the
Natural Gas Law, it was designed for establishing the general
principles of the natural gas sector and the activities of
natural gas enterprises and relations with the consumers (in the
supply, distribution, transmission and storage of natural gas).
4. Article 5 titled "Licences" of the Natural Gas Law
(wording of 10 October 2000) established the following:
"1. Gas enterprises must hold a licence for the following
types of activities:
1) transmission;
2) distribution;
3) storage;
4) supply.
2. The licences for transmission, distribution and storing
of gas shall be issued to enterprises having ownership right of
the gas systems or using them by other legal means.
3. The licences shall be issued, suspended, and revoked and
the licensed activity shall be controlled by the State Prices and
Energy Control Commission (hereinafterthe Commission) The
Government or an institution authorised by it shall establish the
licensing rules.
4. Licences shall not be required of gas owners to transport
gas by transit across the State territory and for the supply of
gas used as raw material".
5. The Natural Gas Law (wording of 10 October 2000)
established such legal regulation, under which enterprises
seeking to engage themselves in transmission, distribution,
storage or supply of natural gas had to get a licence; thus, in
essence, the system of permits in order to engage in energy
activity which existed until coming into effect of this law,
persisted.
6. The Natural Gas Law (wording of 10 October 2000) was
amended and supplemented by the Republic of Lithuania Law on
Amending and Supplementing Articles 2, 5, 8, 12, 15, 20, 21, 22
and 23 of the Natural Gas Law which was adopted by the Seimas on
19 June 2001 and which came into force on 1 July 2001, by the
Republic of Lithuania Law on Amending and Supplementing Article 5
of the Natural Gas Law which was adopted on 4 June 2002 and which
came into force on 21 June 2002, and by the Republic of Lithuania
Law on Amending Article 20 of the Natural Gas Law which was
adopted on 28 January 2003 and which came into force on 19
February 2003, however, Paragraph 2 (wording of 10 October 2000)
of Article 5 of the Natural Gas Law which is disputed in this
constitutional justice case, was not amended or supplemented.
7. The legal regulation enshrined in Paragraph 2 (wording of
10 October 2000) of Article 5 of the Natural Gas Law is to be
construed in the context of other provisions of the Natural Gas
Law (wording of 10 October 2000) and the provisions of the Law on
Energy (wording of 16 May 2002).
7.1. In the constitutional justice case at issue the
following provisions of the Natural Gas Law (wording of 10
October 2000) are to be noted:
- "System means a main pipeline owned by the gas enterprise
and/or operated by the gas enterprise and/or distribution
network, and/or liquefied natural gas facilities, including other
facilities of this and related enterprises, necessary for
providing access to transmission and distribution" (Paragraph 15
of Article 2);
- "Transmission means the transport of gas through a high-
pressure pipeline network and into storage facilities" (Paragraph
3 of Article 2);
- "Distribution means the transport of gas through the
distributing pipeline network, with view to its delivery to
customers" (Paragraph 5 of Article 2);
- "Storage means the stocking of gas in a facility and
keeping it in a gas storage facility" (Paragraph 9 of Article 2);
- "The systems of transmission and distribution, gas storage
facilities and liquefied gas facilities must meet the
requirements of planning, construction and operation in order to
ensure the compatibility and secure operation of systems, gas
storage facilities, and facilities. <...>" (Paragraph 1 of
Article 4);
- "The gas transmission, distribution and storage
enterprises must operate and develop the gas systems in a way
that they would operate safely and efficiently and with due
regard to assurance of environmental protection" (Paragraph 1 of
Article 9); "The transmission, distribution and storage
enterprises shall be prohibited from discriminating between
system users, and classes of system customers in favour of other
customers or the enterprises linked with these enterprises"
(Paragraph 2 of Article 9); "Should the gas enterprises interrupt
their operation or/and a threat arise against the safe gas
supplying of customers, the Government shall have the right to
adopt a decision regarding assumption of the management of the
enterprise or purchase of the assets thereof" (Paragraph 3 of
Article 9);
- "Gas transmission systems, storage structures and
facilities and terminals shall be established based upon the
provisions of the National Energy Strategy and Government
programme, after preparing corresponding drafts of development.
The Government or an institution authorised by it, shall adopt
decisions regarding the construction, enhancement of the main gas
pipeline or/and equipping of a storage facility, which are
necessary to ensure the safety of the gas supplying. <...>"
(Paragraph 1 of Article 15); "A licence for constructing a main
gas pipeline, which cuts across the border of the Republic of
Lithuania, may only be issued with the approval of the Government
of Lithuania. Licences for the construction of transmission and
distribution systems shall not be issued, if the existing
capabilities fail to be used" (Paragraph 2 of Article 15); "Gas
enterprises shall enable access to their systems for the systems
of other gas enterprises and customers, if the productivity of
the system is sufficient and the technical conditions have been
met, and also, if the accessing will not interfere with the
implementation by the gas enterprises of the obligations set by
this Law. Should the productivity of the system prove to be
insufficient to satisfy the gas needs of the future customer, the
gas enterprise must enhance its productivity, if the technical
opportunities are there. The gas enterprises which are provided
access and the customers shall cover the costs of access and, if
necessary, shall also cover the costs of enhancement of the
productivity of the system. Upon co-ordinating with the
Commission, the amount of the valuations of accessing shall be
set by the transmission and distribution enterprises, which they
access" (Paragraph 3 of Article 15).
7.2. The Law on Energy (wording of 16 May 2002) shall
regulate general energy activities, the basic principles of
energy development and management, energy and energy resources
efficiency (Paragraph 1 of Article 1), while peculiarities of
activities of individual energy systems and of relations between
energy enterprises and consumers shall be established by other
laws, whose provisions which regulate energy activities shall be
applicable to the extent they are not contrary to this law
(Paragraphs 1 and 2 of Article 1).
7.2.1. In the context of the constitutional justice case at
issue, the following provisions of the Law on Energy (wording of
16 May 2002) are to be noted:
- "For the purposes of this Law, natural gas shall also be
treated as energy" (Paragraph 3 of Article 2);
- "Energy facilities means <...>; natural gas systems;
natural gas storage facilities; liquefied natural gas import,
export terminals and storage facilities; <...>" (Paragraph 12 of
Article 2);
- "Energy facilities of national importance means <...>;
main gas pipelines; natural gas storage facilities with a
capacity of 25,000,000 m-3 or more; liquefied natural gas import
terminals and storage facilities; <...>" (Paragraph 13 of Article
2);
- "When carrying out State management of the energy sector,
the Government or its authorised institution shall: <...> (3)
approve the rules for licensing activities in the energy sector;
<...>" (Item 3 of Paragraph 2 of Article 5);
- "Energy facilities shall be constructed in accordance with
the procedure laid down in the Law on Construction, Law on
Territorial Planning, Law on Environmental Protection and other
legal acts. <...>" (Paragraph 1 of Article 11); "<...> The energy
enterprises engaged in energy transmission, distribution shall
develop energy transmission, distribution facilities within the
territory of their operation" (Paragraph 2 of Article 11);
- "Energy enterprises shall carry out their activities in
such a manner as to ensure safe, efficient and environment
friendly energy production, supply, transmission, distribution up
to the connection point of the supplied energy metering equipment
to the customer's system, not exceeding the set State-regulated
prices. <...>" (Paragraph 1 of Article 12); "Within the territory
of their operation the energy enterprises shall connect,
according to the established procedure, the energy generating
and/or consuming equipment of the energy generators, customers to
the operating energy transmission or distribution networks. The
connection costs shall be covered by the appropriate generators
or customers according to the set tariffs. The connection work
shall be carried out under a mandatory contract between the
energy enterprise and energy generator or customer" (Paragraph 3
of Article 12); "The energy enterprises which own or in any other
lawful way control energy transmission or distribution networks
and systems shall provide transmission or distribution services
to a third party under objective, non-discriminatory conditions,
taking account of the technical possibilities of the networks and
systems" (Paragraph 4 of Article 12);
- "The territory of activities of energy transmission,
distribution enterprises shall be defined in the licences"
(Paragraph 1 of Article 13).
- "Activities in the energy sector shall be subject to
licences or authorisations. The types of licences activities
shall be set out in the laws on the energy sector and other laws.
A list of activities subject to licensing shall be approved by
the Government" (Paragraph 1 of Article 16); "Activities in the
energy sector without a licence or an authorisation where these
are required shall be unlawful" (Paragraph 2 of Article 16).
7.2.2. The Law on Energy (wording of 16 May 2002) was
amended and supplemented by the Republic of Lithuania Law on
Amending and Supplementing Articles 6, 12, 16, 17 and 18 of the
Law on Energy which was adopted by the Seimas on 24 June 2003 and
which came into force on 10 July 2003, the Republic of Lithuania
Law on Amending Articles 1, 5 and 20 of the Law on Energy and on
Supplementing the Law with an Annex which was adopted on 15
November 2005 and which came into force on 1 January 2006, by the
Republic of Lithuania Law on Amending and Supplementing Articles
5, 19 and 20 of the Law on Energy which was adopted on 3 May 2007
and which came into force on 19 May 2007, by the Republic of
Lithuania Law on Amending and Supplementing Articles 2, 4, 6, 16,
17, 21, 27 and 28 of the Law on Energy and on Supplementing the
Law with Article 7-1 which was adopted on 6 November 2008 and
which came into force on 1 January 2009 (save the exceptions
specified in the law), and by the Republic of Lithuania Law on
Amending Articles 4, 6, 7, 8, 10, 17, 18, 24 and 25 of the Law on
Energy which was adopted on 12 January 2009 and which came into
force on 1 February 2009.
It needs to be noted that upon the amendments and
supplements of the Law on Energy (wording of 16 May 2002), the
former Item 12 (wording of 16 May 2002) of Paragraph 2 of Article
5 of this law became Item 13 (wording of 15 November 2005), and
laterItem 14 (wording of 3 May 2007); Article 16 (wording of 24
June 2003) inter alia established that for energy (inter alia
natural gas) activity, in addition to the licences or
authorisations, one may establish, by means of laws, also
certificates of attestation, as well as that enterprises which
exploit energy (inter alia natural gas activity) facilities,
shall be subject to attestation; in addition, in Paragraph 3
(wording of 15 November 2005) of Article 1 it is specified that
the provisions of this law are harmonised with the legal acts of
the European Union which are specified in the annex to this law
(wordings of 15 November 2005 and 3 May 2007). Having assessed
the legal regulation established by the said amendments and
supplements of the Law on Energy (wording of 16 May 2002), it
needs to be noted that there have not been any essential changes
in the provisions of this law (Article 1, Paragraphs 3, 12, 13,
19 of Article 2, Paragraph 2 of Article 5 and Articles 11, 12, 13
and 16 of the Law on Energy) related with the disputed legal
regulation established in Paragraph 2 (wording of 10 October
2000) of Article 5 of the Natural Gas Law.
8. While summing up the specified provisions of the Natural
Gas Law (wording of 10 October 2000) and the Law on Energy
(wording of 16 May 2002), one is to draw the following
conclusions linked to the disputed legal regulation:
- transportation of natural gas through the main pipeline to
consumers and to the storage places (transmission),
transportation of gas through the distribution networks in order
to deliver it to consumers (distribution) and storing and keeping
of gas in gas storage facilities (storage) were/are a licensed
economic activity; without a licence, such kinds of activity
were/are prohibited;
- the National Control Commission for Prices and Energy
could issue the licences to transmit, distribute and store gas
only inter alia to those enterprises which either, under the
right of ownership, had the gas systems necessary for the
implementation of the corresponding activity (main pipelines,
distribution networks, gas storage facilities, etc.) or possessed
the said systems in other legal ways;
- in the licences, one specifies the territory of activity,
in which gas enterprises could/can transmit and distribute
natural gas; in this territory, only the enterprise to which the
licence was issued could/can engage in the corresponding
activity;
- in the territory of activity which is specified in the
licence, the gas enterprises which transmit and distribute gas,
had/have to develop the facilities of gas transmission and
distribution; gas enterprises had/have to connect the systems of
other gas enterprises to their systems; if the capacity of the
system is not sufficient in order to satisfy the future gas needs
of the consumer, the gas enterprise had/have to increase the
capacity provided that there are technical possibilities;
- gas systems are built under procedure established by laws
and other legal acts; the licences for installation of gas
transmission and distribution systems are not issued if the
existing capabilities are not used;
- gas enterprises which have the right to engage in gas
transmission, distribution and storage activity, had/have to
exploit gas systems so that they would operate safely and
efficiently and that environmental protection would be ensured.
9. It has been mentioned that the Supreme Administrative
Court of Lithuania, the petitioner, inter alia requests to
investigate the compliance of Paragraph 2 (wording of 10 October
2000) of Article 5 of the Natural Gas Law with Articles 46 and 54
of the Constitution.
10. The Constitutional Court has held more than once that
the principles enshrined in Article 46 of the Constitution
constitute a whole, which is the constitutional basis of the
economy of this country; the provisions of all paragraphs of this
article are interrelated and supplement each other, there is a
balance between these principles, each of them is interpreted
without denying the other principles; and that a legal norm which
is in a certain paragraph of this article is violated, the legal
norms laid down in the other paragraphs of this article are
violated as well, or preconditions are created for their
violation.
10.1. Paragraph 1 of Article 46 of the Constitution provides
that Lithuania's economy shall be based on the right of private
ownership, freedom of individual economic activity and
initiative. The Constitutional Court has held more than once that
the freedom of individual economic activity and initiative is the
whole complex of legal opportunities which creates preconditions
for an individual independently to adopt decisions necessary for
his economic activity and which implies inter alia freedom of
conclusion of contracts, freedom of fair competition,
opportunities to restructure economic entities without
restrictions, to change the character of their activity, not to
obstruct establishment of new economic entities or liquidate the
existing ones when one reacts to changes in the market; it 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.
The Constitutional Court has also held more than once that
freedom of economic activity is not absolute, the person makes
use of it only by following certain obligatory requirements and
limitations. On the other hand, under the Constitution, the state
is not allowed to interfere with the economic activity of persons
without limitations, therefore, it is impermissible by means of
established limitations to deny such essential provisions of
freedom of economic activity as equality of rights of entities of
economic activity, fair competition etc. (Constitutional Court
rulings of 20 April 1995, 13 May 2005, 31 May 2006 and 2 March
2009).
10.2. Paragraph 2 of Article 46 of the Constitution provides
that the state shall support economic efforts and initiative that
are useful to society. This provision, as the Constitutional
Court has held more than once, implies the duty of the state and
municipal institutions and officials by no decisions or actions
to hinder the expression and development of the initiative of
persons, if it is not harmful to society. At the same time, this
provision constitutes constitutional legal preconditions for a
possible differentiated legal regulation of economic activity,
the main criterion whereof is the common welfare of the Nation.
In itself, the differentiated legal regulation, when it is
applied to certain groups of persons which are distinguished by
the same signs, and in case it strives for positive and socially
significant goals, or if the establishment of certain limitations
or conditions is linked with peculiarities of regulated social
relations, is not regarded as discrimination (Constitutional
Court rulings of 11 November 1998, 13 May 2005 and 31 May 2006).
10.3. 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.
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
(Constitutional Court rulings of 13 May 2005 and 4 December
2008).
The Constitutional Court has held more than once that, while
regulating economic activity, the state has to follow the
principle of coordination of interests of the person and society
and has to guarantee the interests of both the private person (a
subject of economic activity) and society; by means of regulation
of economic activity the state must seek the welfare of not
individual persons but precisely the general welfare of the
Nation; the general welfare of the Nation cannot be opposed to
the welfare, rights and legitimate interests of the economic
entity (whose economic activity is regulated) itself as well as
those of other persons who have established and are running the
said economic entity or are otherwise related to the said entity;
in addition, one is not permitted to ground or to justify, by
invoking the general welfare of the Nation, any regulation by
which the rights and legitimate interests of a certain economic
entity are limited more than necessary, and whereby unfavourable
and unequal economic conditions are established to economic
entities, their initiative is restricted and opportunities for
its manifestation are not created.
As a rule, regulation of economic activity is linked with
establishment of conditions for economic activity, regulation of
certain procedures, control of economic activity, as well as with
certain limitations and prohibitions of this activity
(Constitutional Court rulings of 13 May 2005, 5 March 2008 and 30
June 2008). In its rulings the Constitutional Court has held more
than once that according to the Constitution, it is permitted to
restrict the human rights and freedoms, including freedom of
economic activity, in case the following conditions are observed:
this is done by law; the restrictions are necessary in a
democratic society in order to protect the rights and freedoms of
other persons and the values entrenched in the Constitution as
well as the constitutionally important objectives; the
restrictions do not deny the nature and essence of the rights and
freedoms; the constitutional principle of proportionality is
followed.
10.4. Paragraph 4 of Article 46 of the Constitution provides
that the law shall prohibit monopolisation of production and the
market and shall protect freedom of fair competition.
The Constitutional Court has held more than once that the
provision "the law shall prohibit monopolisation of production
and the market" means that 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, the prohibition of monopolisation of 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, i.e. to
create legal preconditions in order to apply corresponding
requirements to a monopolist (including inter alia 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 control implemented by the state institutions on
how the economic entities follow the established requirements)
while protecting the rights and legitimate interests of other
economic entities and consumers.
The Constitutional Court has held also more than once that
protection of fair competition is the main way to ensure the
harmony between the interests of a person and the interests of
the state while regulating economic activity, to create self-
regulation of economy as a system which would encourage
distribution of economic resources in an optimal manner, using
them efficiently, increasing economic growth and improving the
welfare of consumers. The constitutional guarantee of protection
of fair competition obliges the institutions of the state power
and municipal institutions to ensure freedom of fair competition
by legal means; such meansprohibition of such agreements among
economic entities, whereby one seeks to limit competition and
which limit or may limit competition, prohibition of abusing the
dominant position, control of market concentration and
corresponding prohibitions of concentration, prohibition of
unfair competition, control of the observance of the rules of
protection of fair competition which are established in the laws
and responsibility for violations thereof (Constitutional Court
rulings of 6 October 1999, 9 April 2002, 17 March 2003, 26
January 2004 and 2 March 2009).
10.5. Paragraph 5 of Article 46 of the Constitution provides
that the state shall defend the interests of the consumer. The
Constitutional Court has held more than once that this provision
implies that 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 such measures, and if the production and the market
are virtually concentrated in the area of certain economic
relations, a duty falls on the institutions of the state power to
establish an additional legal regulation which would ensure the
protection of the interests of consumers.
11. The state must regulate the economic activity so that it
would inter alia ensure also the public interest established in
Article 54 of the Constitutionthe protection of the natural
environment and individual objects of nature as well as areas of
particular value, and the rational use, restoration and
augmentation of natural resources to guarantee which is a
constitutional duty of the state (Constitutional Court rulings of
13 May 2005 and 14 March 2006).
12. While deciding whether Paragraph 2 (wording of 10
October 2000) of Article 5 of the Natural Gas Law was not in
conflict with Article 46 of the Constitution, it needs to be
noted that, as it has been held in this ruling, the licences to
transmit, distribute and store gas could be issued only inter
alia to those enterprises which either had, under the right of
ownership, the gas systems necessary for the implementation of
the corresponding activity (main pipelines, distribution
networks, gas storage facilities, etc.) or possessed the said
systems in other legal ways; and only the enterprises to which
the corresponding licences were issued could engage in the gas
transmission and distribution activity in the concrete territory.
Therefore, by the disputed legal regulation, the right to engage
in the economic activitygas transmission, distribution and
storagewas related with certain conditions, inter alia
possession of the corresponding gas systems or legal use thereof
and holding of the licence to engage in the concrete kind of
activity.
In this ruling it has been mentioned that, under the Natural
Gas Law (wording of 10 October 2000), in the territory of
activity which is specified in the licence, the gas enterprises
which transmit and distribute gas, had/have to develop the
facilities of gas transmission and distribution; the licences for
installation of gas transmission and distribution systems were
not issued if the existing capabilities were not used; gas
enterprises had/have to connect the systems of other gas
enterprises to their systems; if the capacity of the system was
not sufficient in order to satisfy the future gas needs of the
consumer, the gas enterprise had to increase the capacity
provided that there are technical possibilities; gas systems were
built under procedure established by laws and other legal acts.
In this ruling it has also been mentioned that, under the
Constitution, the state has the right to establish the legal
regulation of economic activity, inter alia the conditions,
limitations (prohibitions) of economic activity, regulation of
procedures in legal acts, however, while establishing such
restrictions, it may not deny such essential provisions of
freedom of economic activity as equality of rights of entities of
economic activity, fair competition etc.; 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; while regulating economic activity, the state
has to follow the principle of coordination of interests of the
person and society and has to guarantee the interests of both the
private person (a subject of economic activity) and interests of
society, and to seek not the welfare of individual persons but
precisely for the general welfare of the Nation.
It needs to be noted that the legal regulation established
in Paragraph 2 (wording of 10 October 2000) of Article 5 of the
Natural Gas Law was applied to all the enterprises seeking to get
the licence to engage in natural gas transmission, distribution
and storage activity in a certain territory, therefore, by means
of such legal regulation one did not deny the equal rights of
economic entities. It also needs to be noted that the requirement
for the enterprises, which seek to get the licence to engage in
gas transmission, distribution and storage activity, to have gas
systems under the ownership right or use them in any other legal
ways was natural and necessary for the licensed natural gas
transmission, distribution and storage activities, which, without
these systems, are impossible at all. Therefore, there are not
enough legal grounds to state that by the legal regulation
established in Paragraph 2 (wording of 10 October 2000) of
Article 5 of the Natural Gas Law one denied the freedom of fair
competition, the possibility for the person willing to engage in
the said economic activity to enter into the market, or that one
deviated from the constitutional principle of proportionality.
It also needs to be noted that, in itself, the establishment
of certain conditions of the said economic activitygas
transmission, distribution and storagemay not be assessed as
creation of preconditions to monopolise the market. The
conditionto have the gas systems under the ownership right or
use them in any other legal waysestablished in Paragraph 2
(wording of 10 October 2000) of Article 5 of the Natural Gas Law
in order to get the licence was not an end in itself. By means of
such legal regulation one sought to ensure proper execution of
the specific kind of economic activitynatural gas transmission,
distribution and storageto ensure security, reliability and
continuity of natural gas supply to its consumers, therefore, to
ensure the interests of gas consumers equally. Therefore, there
are not enough legal grounds to state also that by the disputed
legal regulation established in Paragraph 2 (wording of 10
October 2000) of Article 5 of the Natural Gas Law, one deviated
from the prohibition to monopolise production and the market
which stems from Article 46 of the Constitution, that one
disregarded the constitutional imperative to regulate economic
activity so that it would serve the general welfare of the Nation
and that one created preconditions to violate the interests of
consumers.
Taking account of the arguments set forth, one is to draw a
conclusion that the legal regulation established in Paragraph 2
(wording of 10 October 2000) of Article 5 of the Natural Gas Law,
which is disputed in this constitutional justice case, did not
violate the imperatives which stem from Article 46 of the
Constitution.
13. While deciding whether Paragraph 2 (wording of 10
October 2000) of Article 5 of the Natural Gas Law was not in
conflict with Article 54 of the Constitution, it needs to be
noted that, as it has been mentioned in this constitutional
justice case, while regulating economic activity, the state must
guarantee the public interest which stems from Article 54 of the
Constitutionthe protection of the natural environment and
individual objects of nature as well as areas of particular
value, and to ensure the rational use, restoration and
augmentation of natural resources.
Meanwhile, Paragraph 2 (wording of 10 October 2000) of
Article 5 of the Natural Gas Law established the requirement for
the enterprises to which the licences for transmission,
distribution and storage of natural gas were issued to have the
gas systems under the ownership right or use them in any other
legal ways. Therefore, Paragraph 2 (wording of 10 October 2000)
of Article 5 of the Natural Gas Law regulated the relations of
different nature than those which are regulated in Article 54 of
the Constitution. On the other hand, Paragraph 1 (wording of 10
October 2000) of Article 9 of the Natural Gas Law established the
requirement for the enterprises which had the right to engage in
gas transmission, distribution and storage activities, to exploit
the gas systems so that they would operate safely and efficiently
and that environmental protection would be ensured.
Thus, there are no grounds to state that by the legal
regulation established in Paragraph 2 (wording of 10 October
2000) of Article 5 of the Natural Gas Law one deviated from the
imperatives of protection of natural environment established in
Article 54 of the Constitution.
14. Taking account of the arguments set forth, one is to
draw a conclusion that Paragraph 2 (wording of 10 October 2000)
of Article 5 of the Natural Gas Law was not in conflict with
Articles 46 and 54 of the Constitution.
III
On the compliance of the provision "licences to transmit,
distribute and store gas shall be issued only to enterprises
which have the gas systems under the ownership right or use them
in any other legal ways" of Item 10 of the Rules of Licensing the
Transmission, Distribution, Storage and Supply of Natural Gas as
approved by Government Resolution No. 743 "On the Approval of the
Rules of Licensing the Transmission, Distribution, Storage and
Supply of Natural Gas" of 19 June 2001 with Articles 46 and 54 of
the Constitution.
1. In this constitutional justice case one disputes inter
alia the compliance of the provision of Item 10 of the Rules of
Licensing the Transmission, Distribution, Storage and Supply of
Natural Gas as approved by Government Resolution No. 743 "On the
Approval of the Rules of Licensing the Transmission,
Distribution, Storage and Supply of Natural Gas" of 19 June 2001
with the Constitution.
2. On 19 June 2001, the Government adopted Resolution No.
743 "On the Approval of the Rules of Licensing the Transmission,
Distribution, Storage and Supply of Natural Gas" which came into
force on 23 June 2001. Item 1 of this resolution approved the
Rules of Licensing the Transmission, Distribution, Storage and
Supply of Natural Gas which, under Item 3 of the resolution, came
into force on 1 July 2001.
3. Item 10 of the Rules established the following:
"Licences to transmit, distribute and store gas shall be
issued only to enterprises which have the gas systems under the
ownership right or use them in any other legal ways.
The licences to supply gas may be issued to the enterprises
whose authorised capital is not smaller than 10 percent of their
annual amount of the gas supplied by the said enterprises, which
is expressed in the price of its purchase. In addition, the
enterprises which wish to get the licences to supply gas must
assure the amounts of the supplied gas with an insurance company
operating in the Republic of Lithuania."
4. On 10 August 2002, the Government adopted Resolution No.
1256 "On Amending Government Resolution No. 743 'On the Approval
of the Rules of Licensing the Transmission, Distribution, Storage
and Supply of Natural Gas' of 19 June 2001" which came into force
on 15 August 2002. Item 1 of this resolution amended the second
paragraph (wording of 19 June 2001) of Item 10 of the Rules and
set it forth as follows: "The licences to transmit, distribute,
store and supply gas shall be issued to the enterprises the
authorised capital of which is one million Litas or more."
5. On 14 May 2003, the Government adopted Resolution No. 593
"On Amending Government Resolution No. 743 'On the Approval of
the Rules of Licensing the Transmission, Distribution, Storage
and Supply of Natural Gas' of 19 June 2001" which came into force
on 16 May 2003. Item 7 of this resolution supplemented Item 10
(wording of 10 August 2002) of the Rules with this paragraph:
"The Commission shall ground its decision to issue or change
the licence on the basis of the received documents specified in
Item 16 of these Rules. According to the data specified in the
documents, one must assess the technological, financial and
management abilities of the enterprise which would permit
engaging into the licensed activity. The Commission shall
establish the procedure for assessment of these abilities."
6. While amending and supplementing Item 10 of the Rules by
the said Government resolutions, the provision "licences to
transmit, distribute and store gas shall be issued only to
enterprises which have the gas systems under the ownership right
or use them in any other legal ways" of this item which is
disputed in this constitutional justice case, has not been
amended or supplemented.
7. It needs to be mentioned that on 5 December 2007, the
Government adopted Resolution No. 1304 "On the Approval of the
Rules of Licensing the Transmission, Distribution, Storage,
Liquefaction and Supply of Natural Gas" which came into force on
16 December 2007. Item 1 of this resolution approved the Rules of
Licensing the Transmission, Distribution, Storage, Liquefaction
and Supply of Natural Gas and Item 3 thereof recognised the Rules
of Licensing the Transmission, Distribution, Storage and Supply
of Natural Gas (wording of 19 June 2001 with subsequent
amendments and supplements) approved by Government Resolution No.
743 "On the Approval of the Rules of Licensing the Transmission,
Distribution, Storage and Supply of Natural Gas" of 19 June 2001
as no longer valid.
8. It has been mentioned that Paragraph 2 (wording of 10
October 2000) of Article 5 of the Natural Gas Law established the
following: "Licences to transmit, distribute and store gas shall
be issued only to enterprises which have the gas systems under
the ownership right or use them in any other legal ways."
9. It has also been mentioned that Item 10 of the Rules
inter alia established the following: "Licences to transmit,
distribute and store gas shall be issued only to enterprises
which have the gas systems under the ownership right or use them
in any other legal ways." Therefore, the provision of Item 10 of
the Rules which is disputed in this constitutional justice case
established the legal regulation analogous to the one established
in disputed Paragraph 2 (wording of 10 October 2000) of Article 5
of the Natural Gas Law.
10. In this Constitutional Court ruling it has been held
that Paragraph 2 (wording of 10 October 2000) of Article 5 of the
Natural Gas Law was not in conflict with Articles 46 and 54 of
the Constitution.
11. Having held that Paragraph 2 (wording of 10 October
2000) of Article 5 of the Natural Gas Law was not in conflict
with Articles 46 and 54 of the Constitution, it also needs to be
held that the provision "Licences to transmit, distribute and
store gas shall be issued only to enterprises which have the gas
systems under the ownership right or use them in any other legal
ways" of Item 10 of the Rules of Licensing the Transmission,
Distribution, Storage and Supply of Natural Gas as approved by
Government Resolution No. 743 "On the Approval of the Rules of
Licensing the Transmission, Distribution, Storage and Supply of
Natural Gas" of 19 June 2001 was not in conflict with Articles 46
and 54 of the Constitution, either.
IV
On the compliance of the provision "The enterprise which is
engaged in gas supply, must: <...> 37.9. Establish for free
customers the price of gas supply which would not exceed the
price cap of gas supply established by the Commission" of Item 37
(wording of 23 December 2002) of the Rules of Licensing the
Transmission, Distribution, Storage and Supply of Natural Gas as
approved by Government Resolution No. 743 "On the Approval of the
Rules of Licensing the Transmission, Distribution, Storage and
Supply of Natural Gas" of 19 June 2001 with Article 5, Paragraph
1 of Article 7, Paragraphs 1 and 2 of Article 23, Paragraphs 1
and 4 of Article 46, Item 2 of Article 94 of the Constitution,
with the constitutional principle of a state under the rule of
law, as well as with Paragraph 1 (wording of 16 May 2002) of
Article 15 of the Law on Energy, Paragraph 1 (wording of 10
October 2000) of Article 14 of the Natural Gas Law, Paragraph 2
(wording of 18 July 2000) of Article 1.2, Paragraph 3 (wording of
18 July 2000) of Article 1.3, Article 2.80 (wording of 18 July
2000) and Article 2.80 of the Civil Code, and Article 4 (wording
of 23 March 1999) of the Law on Competition.
1. On 23 December 2002, the Government adopted Resolution
No. 2091 "On Supplementing Resolution of the Government of the
Republic of Lithuania No. 743 'On the Approval of the Rules of
Licensing the Transmission, Distribution, Storage and Supply of
Natural Gas' of 19 June 2001" which came into force on 28
December 2002. This resolution supplemented Item 37 of the Rules
with inter alia the provision: "37.9. Establish for free
customers the price of gas supply which would not exceed the
price cap of gas supply established by the Commission."
2. On 15 July 2003, the Government adopted Resolution No.
908 "On Amending Resolution of the Government of the Republic of
Lithuania No. 743 'On the Approval of the Rules of Licensing the
Transmission, Distribution, Storage and Supply of Natural Gas' of
19 June 2001" which came into force on 19 July 2003. By this
resolution, Item 37.9 of the Rules was recognised as no longer
valid.
3. It needs to be held that the provision "the enterprise
which is engaged in gas supply, must: <...> 37.9. Establish for
free customers the price of gas supply which would not exceed the
price cap of gas supply established by the Commission" of Item 37
(wording of 23 December 2002) of the Rules which is disputed in
this constitutional justice case established the legal regulation
whereby as from 28 December 2002 gas supplying enterprises were
obliged to establish for free customers the price of gas supply
which would not exceed the price cap of gas supply established by
the Commission. Therefore, by this Government resolution, it was
established that prices of gas supply for free customers are
regulated.
4. It has been mentioned that the Vilnius Regional
Administrative Court, the petitioner, requests to investigate the
compliance of the provision "the enterprise which is engaged in
gas supply, must: <...> 37.9. Establish for free customers the
price of gas supply which would not exceed the price cap of gas
supply established by the Commission" of Item 37 (wording of 23
December 2002) of the Rules of Licensing the Transmission,
Distribution, Storage and Supply of Natural Gas as approved by
Government Resolution No. 743 "On the Approval of the Rules of
Licensing the Transmission, Distribution, Storage and Supply of
Natural Gas" of 19 June 2001 with Article 5, Paragraph 1 of
Article 7, Paragraphs 1 and 2 of Article 23, Paragraphs 1 and 4
of Article 46, Item 2 of Article 94 of the Constitution, with the
constitutional principle of a state under the rule of law, as
well as with Paragraph 1 (wording of 16 May 2002) of Article 15
of the Law on Energy, Paragraph 1 (wording of 10 October 2000) of
Article 14 of the Natural Gas Law, Paragraph 2 (wording of 18
July 2000) of Article 1.2, Paragraph 3 (wording of 18 July 2000)
of Article 1.3, Article 2.80 (wording of 18 July 2000) and
Article 2.80 of the Civil Code, and Article 4 (wording of 23
March 1999) of the Law on Competition.
5. It needs to be noted that Government Resolution No. 743
of 19 June 2001 which approved the Rules of Licensing the
Transmission, Distribution, Storage and Supply of Natural Gas was
adopted following inter alia Article 5 of the Natural Gas Law
(wording of 10 October 2000). It has been mentioned that Article
3 of this law inter alia established the following: "The
Government or an institution authorised by it shall establish the
licensing rules." Therefore, Government Resolution No. 743 of 19
June 2001 was designed for the implementation of the Natural Gas
Law, thus, while deciding whether the provision of Item 37
(wording of 23 December 2002) of the Rules approved by this
resolution which is disputed in this constitutional justice case,
was not in conflict with the Constitution, first of all it is
necessary to elucidate whether this provision was not in conflict
with the Natural Gas Law.
6. In this ruling, it has been held that the Law on Energy
(wording of 16 May 2002) shall regulate general questions of
energy activities, while peculiarities of activities of
individual energy systems and of relations between energy
enterprises and consumers shall be established by other laws,
whose provisions which regulate energy activities shall be
applicable to the extent they are not contrary to this law
(Paragraphs 1 and 2 of Article 1 of the Law on Energy). In this
context, it needs to be noted that one of such laws regulating
the peculiarities of energy activity in the natural gas sector
was/is the Natural Gas Law.
6.1. Under Paragraph 1 (wording of 16 May 2002) of Article
15 of the Law on Energy, prices in the energy sector shall be
contract and state regulated prices; prices shall be regulated by
setting prices for services or energy, establishing their price
caps or the procedure of regulation; the nomenclature and
principles of regulation of state regulated prices shall be laid
down in the laws of appropriate energy systems. In the context of
the constitutional justice case at issue, it needs to be noted
that the nomenclature of state regulated prices and principles of
regulation in the natural gas sector were/are established in the
Natural Gas Law.
6.2. Article 14 (wording of 10 October 2000) of the Natural
Gas Law inter alia established the following:
"1. The following prices shall be regulated in the gas
sector:
1) transmission prices;
2) distribution prices;
3) storage prices;
4) gas prices for regulated customers.
2. The Commission shall establish the price caps for gas
transmission, distribution and storage for a three-year term.
3. The Commission shall establish the price caps for gas for
the regulated customers for a three-year term.
4. The gas enterprises shall annually establish the prices
for gas transmission, distribution and storage which would not
exceed the established price caps.
5. Every six months, the gas enterprise shall establish the
gas prices for the regulated customers which would not exceed the
price caps. <...>"
In this context it needs to be noted that, under Article 2
of the Natural Gas Law (wording of 10 October 2000), customer
means any legal or natural person or enterprise not having the
rights of a legal person, which purchases gas (Paragraph 22);
free customer means a consumer having the freedom of choice in
selecting a supplier (Paragraph 24); regulated customer means a
consumer, who has no right to select a supplier (Paragraph 25);
supply means delivery and/or sale of gas to consumers (Paragraph
7).
6.3. It needs to be noted that the Natural Gas Law is lex
specialis with regard to the Law on Energy. The essence of the
principle lex specialis derogat legi generali is that in case
there is rivalry between a common and a special norm, the special
norm is to be applied (Constitutional Court rulings of 18 October
2000 and 7 January 2008).
Because of the fact that the Natural Gas Law is lex
specialis with regard to the Law on Energy and namely Paragraph 1
(wording of 10 October 2000) of Article 14 of the Natural Gas Law
established the nomenclature of the regulated prices in the gas
sector, it needs to be held that until Paragraph 1 (wording of 10
October 2000) of Article 14 of the Natural Gas law was amended,
one could regulate only the prices for gas transmission,
distribution and storage and the gas prices for regulated
customers, while other prices, inter alia the prices of gas
supply for free customers were contractual (they could not be
regulated).
7. While deciding whether the provision "the enterprise
which is engaged in gas supply, must: <...> 37.9. Establish for
free customers the price of gas supply which would not exceed the
price cap of gas supply established by the Commission" of Item 37
(wording of 23 December 2002) of the Rules was not in conflict
with Paragraph 1 (wording of 10 October 2000) of Article 14 of
the Natural Gas Law, it needs to be noted that, as it has been
held in this ruling, the disputed provision established the legal
regulation whereby as from 28 December 2002 gas supplying
enterprises were obliged to establish for free customers the
price of gas supply which would not exceed the price cap of gas
supply established by the Commission, i.e. by this Government
resolution it was established that prices of gas supply for free
customers are regulated. In this ruling it has also been held
that, under Paragraph 1 (wording of 10 October 2000) of Article
14 of the Natural Gas Law, one could regulate only the prices for
gas transmission, distribution and storage and the gas prices for
regulated customers, while other prices, inter alia the prices of
gas supply for free customers were contractual (they could not be
regulated). Thus, by the legal regulation established in the
provision "the enterprise which is engaged in gas supply, must:
<...> 37.9. Establish for free customers the price of gas supply
which would not exceed the price cap of gas supply established by
the Commission" of Item 37 (wording of 23 December 2002) of the
Rules one provided for something that was not provided by the
legal regulation established in Paragraph 1 (wording of 10
October 2000) of Article 14 of the Natural Gas Law. Therefore,
the legal regulation established in the said provision of Item
37.9 of the Rules competed with the one established in Paragraph
1 (wording of 10 October 2000) of Article 14 of the Natural Gas
Law.
It also needs to be noted that the legal regulation
established in the disputed provision of Item 37.9 of the Rules
could not be grounded on Item 8 (wording of 16 May 2002) of
Paragraph 2 of Article 5 of the Law on Energy in which it is
established that the Government or the institutions authorised by
it, while implementing the state management of energy, shall have
the right, in cases established by laws, to attribute the public-
interest-related obligations to the enterprises engaged in energy
activity, because, as it has been mentioned in this ruling, the
Natural Gas Law is lex specialis with regard to the Law on Energy
and namely this law (i.e. the Natural Gas Law) established the
nomenclature of the regulated prices in the gas sector. In
addition, under Paragraph 19 (wording of 16 May 2002) of Article
2 of the Law on Energy, the public-interest-related obligations
means imposition in the cases prescribed by law, upon the
decision of the Government or its authorised institution, of
obligations relating to security of energy supply, while the
Natural Gas Law (wording of 10 October 2000) did not establish
that the Government or its authorised institutions, while
implementing the state management of energy, have the right to
attribute any public-interest-related obligations linked to the
regulation of prices for free customers to the enterprises
engaged in energy activity.
It also needs to be noted that the material of this
constitutional justice case does not provide the legal ground to
state that the Government, when adopting, on 23 December 2002,
Resolution No. 2091 and supplementing Item 37 "The enterprise
which is engaged in gas supply, must" of the Rules by the
provision "37.9. Establish for free customers the price of gas
supply which would not exceed the price cap of gas supply
established by the Commission" implemented Article 8 (wording of
26 July 1990) of the Law on Prices, under which the Government
may suspend or restrict price and tariff increases for a period
not exceeding 6 months, if the dynamics of market prices and
tariffs cause or are likely to cause a disturbance in the
functioning of economy, which affects the interests of the
economy of the state and its residents.
8. Taking account of the arguments set forth, one is to draw
a conclusion that the provision "the enterprise which is engaged
in gas supply, must: <...> 37.9. Establish for free customers the
price of gas supply which would not exceed the price cap of gas
supply established by the Commission" of Item 37 (wording of 23
December 2002) of the Rules of Licensing the Transmission,
Distribution, Storage and Supply of Natural Gas as approved by
Government Resolution No. 743 "On the Approval of the Rules of
Licensing the Transmission, Distribution, Storage and Supply of
Natural Gas" of 19 June 2001 was in conflict with Paragraph 1
(wording of 10 October 2000) of Article 14 of the Natural Gas
Law.
9. Having held that the provision "the enterprise which is
engaged in gas supply, must: <...> 37.9. Establish for free
customers the price of gas supply which would not exceed the
price cap of gas supply established by the Commission" of Item 37
(wording of 23 December 2002) of the Rules was in conflict with
Paragraph 1 (wording of 10 October 2000) of Article 14 of the
Natural Gas Law, the Constitutional Court will no longer
investigate whether this provision was not in conflict with
Paragraph 1 (wording of 16 May 2002) of Article 15 of the Law on
Energy, Paragraph 2 (wording of 18 July 2000) of Article 1.2,
Paragraph 3 (wording of 18 July 2000) of Article 1.3, and Article
2.80 (wording of 18 July 2000) of the Civil Code, and Article 4
(wording of 23 March 1999) of the Law on Competition.
10. The Constitutional Court has held more than once that,
under the Constitution, the Government, while adopting legal
acts, must follow the valid laws and, while enforcing certain
laws, it may not violate other laws; the legal acts adopted by
the Government, which are substatutory legal acts, may not
contain any legal regulation competing with that established in
laws. The Constitutional Court has also held that the duty of the
Government to adopt substatutory acts which are necessary so as
to implement laws stems directly from the Constitution, while in
case of a commissioning by the Seimas to do so, it also stems
from the laws and Seimas resolutions concerning implementation of
laws; it is important that the Government adopt substatutory
legal acts without exceeding its powers, and that these
substatutory legal acts be in conformity with the Constitution
and laws (Constitutional Court rulings of 18 December 2001, 5
March 2004, 31 May 2006 and 13 August 2007).
The Constitutional Court has also held in its acts more than
once that the principle of a state under the rule of law
entrenched in the Constitution implies the hierarchy of legal
acts as well, inter alia the fact that substatutory legal acts
may not be in conflict with laws, constitutional laws and the
Constitution, that substatutory legal acts must be adopted on the
basis of laws, that a substatutory legal act is an act of
application of norms of the law, irrespective of whether the act
is of one-time (ad hoc) application, or permanent validity. The
Constitutional Court has also held that if the legal regulation
established in the Government resolutions competed with the legal
regulation established in the laws or were not grounded on the
laws, not only the constitutional principle of a state under the
rule of law and Item 2 of Article 94 of the Constitution would be
violated but also Paragraph 2 of Article 5 of the Constitution,
in which it is established that the scope of power shall be
limited by the Constitution; the constitutional principle of
separation of powers could also be violated (Constitutional Court
rulings of 31 May 2006 and 13 August 2007).
11. It has been held in this ruling that the provision "The
enterprise which is engaged in gas supply, must: <...> 37.9.
Establish for free customers the price of gas supply which would
not exceed the price cap of gas supply established by the
Commission" of Item 37 (wording of 23 December 2002) of the Rules
of Licensing the Transmission, Distribution, Storage and Supply
of Natural Gas as approved by Government Resolution No. 743 "On
the Approval of the Rules of Licensing the Transmission,
Distribution, Storage and Supply of Natural Gas" of 19 June 2001
was in conflict with Paragraph 1 (wording of 10 October 2000) of
Article 14 of the Natural Gas Law.
Having held that, it also needs to be held that the
provision "the enterprise which is engaged in gas supply, must:
<...> 37.9. Establish for free customers the price of gas supply
which would not exceed the price cap of gas supply established by
the Commission" of Item 37 (wording of 23 December 2002) of the
Rules of Licensing the Transmission, Distribution, Storage and
Supply of Natural Gas as approved by Government Resolution No.
743 "On the Approval of the Rules of Licensing the Transmission,
Distribution, Storage and Supply of Natural Gas" of 19 June 2001
was in conflict with Paragraph 2 of Article 5 and Item 2 of
Article 94 of the Constitution and with the constitutional
principle of a state under the rule of law.
12. Having held that the provision "the enterprise which is
engaged in gas supply, must: <...> 37.9. Establish for free
customers the price of gas supply which would not exceed the
price cap of gas supply established by the Commission" of Item 37
(wording of 23 December 2002) of the Rules of Licensing the
Transmission, Distribution, Storage and Supply of Natural Gas as
approved by Government Resolution No. 743 "On the Approval of the
Rules of Licensing the Transmission, Distribution, Storage and
Supply of Natural Gas" of 19 June 2001 was in conflict with
Paragraph 2 of Article 5 and Item 2 of Article 94 of the
Constitution and with the constitutional principle of a state
under the rule of law, the Constitutional Court will no longer
investigate whether this provision was not in conflict with
Paragraph 1 of Article 7, Paragraphs 1 and 2 of Article 23 and
Paragraphs 1 and 4 of Article 46 of the Constitution.
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:
1. To recognise that Paragraph 2 (wording of 10 October
2000, Official Gazette Valstybės žinios, 2000, No. 89-2743) of
Article 5 of the Republic of Lithuania Natural Gas Law was not in
conflict with the Constitution of the Republic of Lithuania.
2. To recognise that the provision "licences to transmit,
distribute and store gas shall be issued only to enterprises
which have the gas systems under the ownership right or use them
in any other legal ways" of Item 10 (Official Gazette Valstybės
žinios, 2001, No. 53-1878) of the Rules of Licensing the
Transmission, Distribution, Storage and Supply of Natural Gas as
approved by Resolution of the Government of the Republic of
Lithuania No. 743 "On the Approval of the Rules of Licensing the
Transmission, Distribution, Storage and Supply of Natural Gas" of
19 June 2001 was not in conflict with the Constitution of the
Republic of Lithuania.
3. To recognise that the provision "the enterprise which is
engaged in gas supply, must: <...> 37.9. Establish for free
customers the price of gas supply which would not exceed the
price cap of gas supply established by the Commission" of Item 37
(wording of 23 December 2002; Official Gazette Valstybės žinios,
2002, No. 124-5665) of the Rules of Licensing the Transmission,
Distribution, Storage and Supply of Natural Gas as approved by
Resolution of the Government of the Republic of Lithuania No. 743
"On the Approval of the Rules of Licensing the Transmission,
Distribution, Storage and Supply of Natural Gas" of 19 June 2001
was in conflict with Paragraph 2 of Article 5 and Item 2 of
Article 94 of the Constitution of the Republic of Lithuania, with
the constitutional principle of a state under the rule of law and
with Paragraph 1 (wording of 10 October 2000) of Article 14 of
the Republic of Lithuania Natural Gas 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
Egidijus Šileikis
Romualdas Kęstutis Urbaitis