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On the capitalisation of credits of some enterprises of the Ministry of Agriculture

Case No. 10/95

THE CONSTITUTIONAL COURT OF
THE REPUBLIC OF LITHUANIA

 R U L I N G

On the compliance of the Resolution of the Government of the Republic of Lithuania (No. 1164) “On the Capitalisation of the Credits of Some Enterprises of the Ministry of Agriculture” of 30 August 1995 with the Constitution of the Republic of Lithuania, as well as with Article 13 of the Republic of Lithuania’s Law on Budgeting, Article 9 of the Republic of Lithuania’s Law on State Regulation of Economic Relations in Agriculture, and Paragraph 1 of Article 43 of the Republic of Lithuania’s Company Law

 28 February 1996, Vilnius

The Constitutional Court of the Republic of Lithuania, composed of the Justices of the Constitutional Court: Algirdas Gailiūnas, Kęstutis Lapinskas, Zigmas Levickis, Vladas Pavilonis, Pranas Vytautas Rasimavičius, Stasys Stačiokas, Teodora Staugaitienė, Stasys Šedbaras, and Juozas Žilys

The court reporter—Daiva Pitrėnaitė

Seimas members Andrius Kubilius and Vidmantas Žiemelis, acting as the representatives of a group of members of the Seimas of the Republic of Lithuania, the petitioner

Jonas Panamariovas and Vytautas Poliūnas, secretaries of the Ministry of Agriculture, and Irena Paulauskienė, the Head of the Staff Division of the Ministry of Agriculture, acting as the representatives of the Government of the Republic of Lithuania, the party concerned

The Constitutional Court of the Republic of Lithuania, pursuant to Paragraph 1 of Article 102 of the Constitution of the Republic of Lithuania and Paragraph 1 of Article 1 of the Law on the Constitutional Court of the Republic of Lithuania, in its public hearing, on 1 February 1996, heard case No. 10/95 subsequent to the petition submitted to the Court by a group of members of the Seimas of the Republic of Lithuania requesting an investigation into whether the Resolution of the Government of the Republic of Lithuania (No. 1164) “On the Capitalisation of the Credits of Some Enterprises of the Ministry of Agriculture” of 30 August 1995 is in compliance with the Constitution of the Republic of Lithuania, as well as with Article 13 of the Republic of Lithuania’s Law on Budgeting, Article 9 of the Republic of Lithuania’s Law on State Regulation of Economic Relations in Agriculture, and Paragraph 1 of Article 43 of the Republic of Lithuania’s Company Law.

The Constitutional Court

has established:

I

On 30 August 1995, the Government of the Republic of Lithuania adopted its Resolution (No. 1164) “On the Capitalisation of the Credits of Some Enterprises of the Ministry of Agriculture” (Official Gazette Valstybės žinios, 1995, No. 73-1713; hereinafter referred to as the impugned government resolution), Item 1 whereof permitted the Ministry of Agriculture to utilise 16,914,100 Lt from the Agriculture Support Fund of the Government of the Republic of Lithuania in order to repay the debt of the enterprises indicated in the supplement to the said resolution for the Lithuanian Bank of Agriculture by including the said funds into the state capital share.

The Government established in Item 2 of this resolution that the Bank of Agriculture shall cover the debt of the enterprises indicated in the supplement to the resolution with the funds of the said fund pointed out in Item 1 only in the case that these enterprises pursuant to the procedure established by the Company Law increase their authorised capital. In Item 3 of the resolution, the Ministry of Agriculture is commissioned to subscribe for the shares which belong to the state in the enterprises indicated in the supplement to the resolution, and to represent the state in these enterprises.

The petitioner requests an investigation into whether the impugned government resolution is in compliance with Article 29 of the Constitution of the Republic of Lithuania, as well as with Article 13 of the Republic of Lithuania’s Law on Budgeting, Article 9 of the Republic of Lithuania’s Law on State Regulation of Economic Relations in Agriculture, and Paragraph 1 of Article 43 of the Republic of Lithuania’s Company Law.

II

The petitioner grounds his request on the following arguments.

  1. The Ministry of Agriculture is permitted by the impugned government resolution to repay free of charge and irretrievably the 16,914,100 Lt expenses of the enterprises enumerated in the supplement to the resolution, and which function on the basis of private enterprise; i.e. the Ministry is permitted to cover the debts of the aforesaid enterprises for the Bank of Agriculture by utilising the funds of the Agriculture Support Fund. These funds are paid to the enterprises on the basis of individual selection, and not pursuant to certain rules which should be applied to all to every enterprise processing agricultural goods. The aforementioned enterprises, or companies, after the impugned government resolution had been adopted, acquired the right to never repay private expenses and debts. Besides, the shareholders of these enterprises were granted an undeserved right to get dividends, whereas the officials are indirectly pardoned from material responsibility and from that of every other kind for accomplished embezzlement which caused the said debts.
  2. Following the impugned government resolution, a part of the funds of the state budget which reside in the Agriculture Support Fund is being utilised by violating Article 13 of the Republic of Lithuania’s Law on Budgeting, as well as Article 9 of the Republic of Lithuania’s Law on State Regulation of Economic Relations in Agriculture, i.e. the said funds are not being utilised for the purpose which the aforesaid laws impose on state funds. In the opinion of the petitioner, the cover of the debts of individual enterprises is not provided for neither in Article 13 of the Republic of Lithuania’s Law on Budgeting which regulates allocations of the appropriations of the state budget funds for certain needs of the state, nor in Article 9 of the Republic of Lithuania’s Law on State Regulation of Economic Relations in Agriculture which establishes the application of the targeted financing of agricultural entities and partners of the agriculture market.
  3. The petitioner argues that the enterprises enumerated in the supplement of the impugned government resolution are not obliged to repay the state the acquired funds. They are instructed to increase their authorised capital (the state capital share) with the sum of the acquired funds. The debts of the said enterprises, however, to cover which state funds are allocated, in fact do not increase the authorised capital, as these funds pursuant to the impugned government resolution must be transferred to the Bank of Agriculture. In the opinion of the petitioner, the said funds cannot be considered additional contributions to the authorised capital, therefore, Paragraph 1 of Article 43 of the Company Law which establishes that it is additional contributions of its shareholders and of other persons by which a company may increase its authorised capital is thereby violated.

III

When preparing the case for the court hearing, Jonas Panamariovas and Vytautas Poliūnas, secretaries of the Ministry of Agriculture, and Irena Paulauskienė, the Head of the Staff Division of the Ministry of Agriculture, representatives of the party concerned, indicated that certain enterprises which process goods of agriculture received a number of credits from the Bank of Agriculture but on the grounds of various reasons could not settle their accounts with farmers and repay credits to the bank in time. Taking into account this fact, and in order to create better conditions for the said enterprises to settle their accounts with producers of agricultural goods, the impugned government resolution was adopted. The said resolution does not violate the equality of persons, and privileges are not granted to individual persons. Therefore, in the opinion of the representatives of the party concerned, the impugned government resolution is legal and in compliance with the Constitution.

The representatives of the party concerned maintain that the financial position of the Bank of Agriculture needed support, the amount of problem loans which had been granted on the grounds of the decisions of the Government needed to be reduced, and conditions for the enterprises to settle their accounts with producers of agricultural goods for the sold goods had to be created.

Paragraph 2 of Article 46 of the Constitution consolidates that the State shall support economic efforts and initiative which are useful to the community. According to Item 5 of Article 13 of the Law on Budgeting, appropriations from the State budget shall be made for the regulation of national economy. In the opinion of the representatives of the party concerned, the notion of “economy” includes agriculture—the priority branch of the national economy—as well. Item 13 of Article 13 of the Law on Budgeting permits the allocation of the funds from the State budget for the implementation of not only the measures provided for, but for other measures pursuant to the laws of the Republic of Lithuania as well. Such is the Republic of Lithuania’s Law on State Regulation of Economic Relations in Agriculture. The norm of Paragraph 2 of Article 9 has provided for the opportunity for the Government to establish priorities, procedure and conditions of targeted financing, as well as other types of targeted financing.

Item 2.2 of the Government Resolution (No. 421) “On Forming and Utilising the 1995 Agriculture Support Fund of the Republic of Lithuania” of 24 March 1995 consolidates an opportunity to utilise the funds of the said fund for other needs established by the Government as well. Thereby the Government made use of the right which it had been granted by law and permitted nine enterprises to cover their debts for the Bank of Agriculture from the funds of the Agriculture Support Fund. Thereby it was attempted to create better conditions for them to settle their accounts with producers of agricultural goods. By the impugned government resolution, the Ministry of Agriculture was commissioned to subscribe for the shares which belong to the state of the enterprises enumerated in the supplement to the resolution, as well as to represent the state in these enterprises.

The representatives of the party concerned explained that the enterprises enumerated in the supplement of the impugned government resolution had been chosen taking account of their future perspective, as well as the following social and economic criteria: new technologies introduced, strategic location of the enterprises, producing capacity and the interests of producers of agricultural goods.

The cover of the granted credits may not be used to cover the losses of the aforementioned enterprises, as merely settlements are being regulated and conditions are created to pay the farmers for their goods but never the expenses made are covered. The cover of the debts of the said enterprises for the Bank of Agriculture cannot be treated as embezzlement of state funds. The state funds are not lost by capitalising debts of enterprises because the state will further manage, utilise and dispose of the property—shares—which belongs to it. When considering the structure of the authorised capital, one can argue that the state influence on the management of the enterprises through the block of shares will increase along with the increase of the state capital share.

IV

Andrius Kubilius and Vidmantas Žiemelis, the representatives of the petitioner, in the court hearing confirmed the request of a group of the Seimas members and explained that the impugned resolution violated essential principles of free market based on fair competition. They maintained that the impugned resolution violated Paragraph 4 of Article 46 of the Constitution as well in which it is established that the law shall prohibit monopolisation of production and the market, and shall protect freedom of fair competition. The increase of the state share in the authorised capital of joint-stock companies is regulated by Paragraph 2 of Article 128 of the Constitution, whereas the transfer of the state capital into joint-stock companies should be regulated by law. In the opinion of the representatives of the petitioner, constitutional provisions that the state shall support economic efforts which are useful to the community may be implemented only under the conditions mentioned in Paragraph 4 of Article 46 of the Constitution, i.e. when the state guarantees freedom of fair competition.

Andrius Kubilius, a representative of the petitioner, explained that the contents of targeted financing as the category of economics may be understood only in the context of Article 9 of the Republic of Lithuania’s Law on State Regulation of Economic Relations in Agriculture. This Article permits the estimation of the disposition of the state to create extraordinary financing conditions for individual branches of agriculture. This Article, however, does not mention whether the Government is entitled to pick up one or nine enterprises out of all enterprises or economic entities.

V

Jonas Panamariovas, a representative of the party concerned, in the public hearing explained that the Office of the Prosecutor General of the Republic of Lithuania checked the actions of the state officials who initiated, prepared, adopted and implemented the impugned government resolution, and found no corpus delicti.

There exist more than 70% of shares which belong to the state in the nine enterprises enumerated in the supplement of the impugned government resolution. The said enterprises function at a loss and the shareholders were not paid the 1995 dividends whereas after their debts for the bank had been capitalised the coefficients of financial solvency of some of the enterprises improved.

Vytautas Poliūnas, a representative of the party concerned, explained also that the Agriculture Support Fund is formed from the funds assigned to the Programme of Promoting National Agriculture which are foreseen in the budget of the state. This fund may be disposed of by the Government, the Council of Buying up and Regulating Agricultural Goods, and County Commissions for Easy-Term Loans. The funds of the aforementioned fund were designed to meet the needs of agriculture, therefore, the impugned government resolution does not contradict Article 13 of the Law on Budgeting.

The Constitutional Court

holds that:

  1. On the compliance of the Government Resolution (No. 1164) “On the Capitalisation of the Credits of Some Enterprises of the Ministry of Agriculture” of 30 August 1995 with the Constitution.

Paragraph 1 of Article 29 of the Constitution provides: “All persons shall be equal before the law, the court, and other State institutions and officials.”

In the opinion of the petitioner, the impugned government resolution contradicts Paragraph 1 of Article 29 of the Constitution because the said resolution permits the Ministry of Agriculture to cover the debts of certain enterprises for the Bank of Agriculture. The petitioner alleges that the Government, when covering the debts of only nine enterprises by the impugned resolution, violated the constitutional principle of the equality of persons.

The principle that all persons shall be equal before the law, the court, and other state institutions and officials is one of the primary principles which in its own turn is closely linked with the remaining constitutional principles and provisions. When interpreting the contents of the provision of Paragraph 1 of Article 29 of the Constitution, it is impossible not to consider the provision of Paragraph 3 of Article 46 of the Constitution which stipulates that the state shall regulate economic activity so that it serves the general welfare of the nation. The aforementioned provisions by determining each other form constitutional pre-conditions for passing laws which respond to the conditions of national economy, the diversity and change of economic and social life.

Thus, in itself, the constitutional principle of the equality of persons does not deny the fact that the law may establish different legal regulation concerning certain categories of persons who are in different situations. This should also be applied to legal persons, and not only to natural persons as the former are, as a rule, associations of natural persons.

One has to take it into account that the legislature may, when fulfilling its powers and passing laws, also formulate principles which serve as a basis for a particular law. These principles may not, however, be identified with the constitutional ones. The reciprocal interaction of the aforesaid principles has essential theoretical, as well as practical, significance for legal regulation. The principles established in laws may be altered by the means of law and, which is most important, they may never violate constitutional principles.

Assessing whether an established different legal regulation is a grounded one, particular legal circumstances must be taken into account. First of all differences of legal situation of subjects and objects to which different legal regulation is applied must be considered; secondly, one has to take into account the conformity of legal acts to their hierarchy, scope of regulation, etc.; thirdly, one must assess whether the legal norms that establish special conditions answer the purpose and aim of the legal act. The validity of individual legal norms may be convincing only in the case that all aforementioned circumstances were taken into account. Should at least one condition be ignored, doubts might arise concerning the compliance of a special legal norm with constitutional provisions.

In the impugned government resolution, the aim of different regulation is indicated - to create better conditions for enterprises which process the production of agriculture to settle their accounts with producers of agricultural goods. The representatives of the party concerned indicated criteria according to which the said enterprises had been chosen: they did not return credits to the Bank of Agriculture, and, furthermore, an attempt is being made to preserve new technologies, as well as producing capacities introduced, and their strategic location.

The presented arguments allow stating that the constitutional principle of the equality of persons when the cover of the debts of only some enterprises was established was not violated.

The petitioner also alleges that the Government by permitting, by means of the impugned resolution, the use of the funds of the state budget in order to cover the debts of certain enterprises and by acquiring additional portion of shares of those enterprises created conditions for the said enterprises not to pay private expenses and debts. The shareholders of these enterprises were granted an undeserved right to get dividends whereas the officials of these enterprises are indirectly pardoned from material responsibility and from that of every other kind for accomplished embezzlement. Therefore, the situation of the shareholders and officials of the said enterprises becomes a privileged one and this contradicts Paragraph 1 of Article 29 of the Constitution.

This allegation of the petitioner is not supported with legal arguments. The impugned government resolution does not regulate the questions of dividend payment to the shareholders. The amount of dividends and their payments depend upon the results of the economic activity of the enterprise, and not upon the amount of the authorised capital. Neither does this resolution regulate the questions of responsibility of persons who are responsible for economic and financial activity of the enterprises. All this is regulated in the Company Law, as well as in other laws. If a breach of the law were established, then a question of responsibility of individual persons would arise. This is the problem of the application of legal norms, and not that of the compliance of the impugned government resolution with the Constitution.

Taking into account all the arguments set forth, the conclusion is to be drawn that the provision of the impugned government resolution to cover the debts of only some enterprises is in compliance with the principle of the equality of persons which is established in the Constitution.

  1. On the compliance of the Government Resolution (No. 1164) “On the Capitalisation of the Credits of Some Enterprises of the Ministry of Agriculture” of 30 August 1995 with Article 13 of the Law on Budgeting, Article 9 of the Law on State Regulation of Economic Relations in Agriculture, and Paragraph 1 of Article 43 of the Company Law.
  2. The petitioner argues that the impugned government resolution contradicts Article 13 of the Law on Budgeting as the utilising a part of the funds from the state budget residing in the Agriculture Support Fund does not answer its purpose—an individual debt of the enterprise is covered by utilising the funds of the state budget.

The state budget is a centralised fund of financial reserve in which a certain portion of national income is accumulated and redistributed. It is annually approved of by the Seimas.

Article 13 of the Law on Budgeting establishes that appropriations from the state budget shall be made for the following national needs: education, culture, health care and sport; social welfare and social relief; science; environmental protection; regulation of economic development; national defence; maintenance of institutions of state authority, governance and of law enforcement; subsidies to regional and town budgets; public order and protection of society; development of the Republic’s foreign relations; the expenses of coping with the state debt; to increase the working cash balance of the state budget. In addition to the enumerated needs it is indicated that appropriations from the state budget shall be made for implementation of other measures pursuant to the laws of the Republic of Lithuania. In addition to other spheres of social life this law indicates that appropriations shall be made for “regulation of economic development” (Item 5), as well as for “implementation of other measures pursuant to the laws of the Republic of Lithuania” (Item 13).

Thus, the legislature set forth very widely the “national needs” as established in this Article of the said law, and he foresaw an opportunity to make appropriations pursuant to other laws as well. In the context of the case under investigation such is the Law on State Regulation of Economic Relations in Agriculture. According to the doctrine of law, in case there exist an inconsistency between general and special legal norms, then special legal norms should be applied. Therefore, when deciding in this case whether the impugned government resolution is in compliance with the laws, one must base himself on the Law on State Regulation of Economic Relations in Agriculture, and not on the Law on Budgeting.

  1. The petitioner argues that the impugned government resolution contradicts Article 9 of the Law on State Regulation of Economic Relations in Agriculture because the said law does not provide for any opportunity to cover particular debts of individual enterprises. The petitioner indicates that Article 9 of the said law prescribes only the application of the targeted financing of agricultural entities and partners of the agriculture market.

In order to establish whether the impugned government resolution is in compliance with Article 9 of the said law, not only the contents of this Article, but that of other Articles of this law, as well as that of other legal norms and their reciprocal interaction must be assessed.

Article 1 of the Law on State Regulation of Economic Relations in Agriculture points out the aim of this law: to standardise economic relations of agricultural entities with the state institutions, as well as with partners of the agriculture market; to establish the main measures of state regulation of the said relations; to create prerequisites of the implementation of the state agrarian policy and to sustain the balance in the agriculture market.

When interpreting the contents of the norms of this law, Article 4 is significant in which it is established that “The state shall support, primarily on the basis of targeted programmes, major producers of market agricultural goods, the progress in science of agriculture, as well as in agricultural technology, the preservation and improvement of land and other natural resources, the implementation of bioorganic farming, the establishment of specialised market farms, and it shall protect the equality of entities of the agriculture in the market.”

The Constitutional Court deems that the priorities and aims as set down in this law determine the interpretation of the contents and the meaning of particular norms of this law.

Paragraph 1 of Article 5 of the Law on State Regulation of Economic Relations in Agriculture establishes the main measures of state regulation of agriculture: quotas of buying up agricultural goods are guaranteed; the portion of the state food provision reserve is either replenished or sold out; the investments into agriculture are supported; the production of agricultural goods, as well as import and export of foodstuffs, are regulated; the quality of the goods is controlled; the activity of economic entities which dominate the market is limited; the production of certain agricultural goods is either stimulated or limited; the interests of the branch of agriculture are protected by means of international treaties.

To summarise the measures indicated, it should be concluded that in this situation the law speaks about quotas, the state food provision, import and export, the quality of goods, the limitation on the activity of economic entities, as well as that on the production of goods, and the protection of interests by means of international treaties. Among other measures, it is directly indicated that the investments into agriculture are supported.

Even though the ways of support of investments into agriculture are not defined in the said law, investments in law, however, are always linked to the utilisation of corresponding funds in pursuit of income. The state support of investments into agriculture is implemented by establishing reduced tax rates (Article 10), and by granting credits (Article 8). In the latter Article it is foreseen that credits on easy terms shall be granted by the competition procedure through either the co-operatives of credits for agriculture, or commercial banks. Besides, it was provided that the state shall grant non-interest bearing loans from its own reserve in order to form a system of the co-operative credit and provide co-operatives of credit with tax deduction.

Paragraph 2 of Article 5 of the Law on State Regulation of Economic Relations in Agriculture establishes that the Government “may as well apply other means to regulate agriculture.” In the context of the case under investigation it is important to assess the character of the other means which could be applied by the Government in order to regulate agriculture apart from those particularly mentioned in this Article. On the basis of the systematic analysis of the contents of Article 5 of the said law, the Constitutional Court draws the conclusion that the Government, even though it can apply other means to regulate agriculture as well, may not to utilise the state financial reserve for the purposes which are incompatible with the general meaning of the measures foreseen in this law.

Article 9 of the Law on State Regulation of Economic Relations in Agriculture provides for the “targeted financing” of agricultural entities. In law financing, hence targeted one as well, is understood, as a rule, as the appropriation of financial funds on free-of-charge and irretrievable grounds. The legislature, by defining the directions of targeted financing in this Article, took into consideration the priorities of the production of agricultural goods, as well as other circumstances which are important to the activity of agricultural entities and partners of the agriculture market.

In the 1995 state budget corresponding appropriations were allocated to finance the Programme of National Agriculture Activity in order to implement the measures provided for in the Law on State Regulation of Economic Relations in Agriculture. By its Resolution “On Forming and Utilising the 1995 Agriculture Support Fund of the Republic of Lithuania” of 24 March 1995, the Government formed the 1995 Agriculture Support Fund. This fund is formed from: the 1995 budget funds assigned to finance the Programme of National Agriculture Activity; the 1994 state budget funds assigned to finance the Programme of National Agriculture Activity and in fact transferred to the Agriculture Support Fund for the purpose of granting loans on easy terms; loans on easy terms which are being returned and which were granted to agricultural entities from the 1993 Spring Sowing Fund; loans on easy terms which are being returned and which economic entities were granted pursuant to particular resolutions of the Government. It may be held that the main resource of the Agriculture Support Fund is funds of the state budget.

The Agriculture Support Fund is utilised for: granting credits on easy terms for producers of agricultural goods, as well as for legal and natural persons who are able to purchase material resources in centralised manner and sell them to producers of agricultural goods in favourable terms; promoting co-operation in agriculture; supporting agricultural companies which suffered from fires; stimulation of co-operative agricultural trade; other needs as established by the Government (Item 2.2. of government resolution No. 421 of 24 March 1995). Thus, the funds of this fund are assigned and utilised in order to grant credits for and finance agricultural entities and partners of the agriculture market.

Thus, “other needs as established by the Government” pointed out in the Government Resolution “On Forming and Utilising the 1995 Agriculture Support Fund of the Republic of Lithuania”, must conform to the aims and priorities of supporting agriculture as laid down in the Law on State Regulation of Economic Relations in Agriculture.

The Constitutional Court also notes that the legislature, when establishing the measures of state regulation by the Law on State Regulation of Economic Relations in Agriculture (Article 5), as well as the targeted financing (Article 9), did not define in detail by means of what particular legal forms the Government may utilise state funds, thus, the funds of the Agriculture Support Fund as well. In Paragraph 1 of Article 5 of the said law the measures of the state regulation are enumerated, and in Paragraph 2 of this law it is stipulated: “The Government of Lithuania may as well apply other means to regulate agriculture.” Article 9 of the said law enumerates priorities of the targeted financing, as well as points out that the Government may establish another targeted financing. Therefore, because of the vagueness of the notions used in this law premises arise to interpret the contents of the norms of the said law in various manner, as well as to ambiguously understand the limits of legal regulation.

The Ministry of Agriculture was permitted by the impugned government resolution to utilise the funds of the Agriculture Support Fund in order to cover the debts of certain enterprises for the Bank of Agriculture, as well as to acquire shares belonging to the state for the amount of those funds in the enterprises which will correspondingly increase their authorised capital. This is defined as the “capitalisation of credits”. Such a form of utilising state funds is not established in the Law on State Regulation of Economic Relations in Agriculture. It is only the legislature that may establish the form of utilisation of the state funds, as Paragraph 2 of Article 128 of the Constitution stipulates: “Procedures concerning the management, utilisation, and disposal of State property shall be established by law.”

Taking into consideration the arguments set forth, the conclusion is to be drawn that the Government Resolution “On the Capitalisation of the Credits of Some Enterprises of the Ministry of Agriculture” of 30 August 1995 contradicts the Law on State Regulation of Economic Relations in Agriculture.

  1. Paragraph 1 of Article 43 of the Company Law provides: “A company may increase its authorised capital by additional contributions of its shareholders and of other persons only by issuing new shares.”

In the opinion of the petitioner, the impugned government resolution contradicts the aforesaid norm of the law, as after the debts of enterprises for the Bank of Agriculture had been covered with the state funds, their authorised capital may not be increased because the said funds remain with the bank. The enterprises thereby are forced to increase their authorised capital without additional contributions.

When deciding whether the impugned government resolution is in compliance with Paragraph 1 of Article 43 of the Company Law, it is necessary to take into account the contents of the provisions of this resolution, as well as to the fact that they inseparably interact with each other. The whole complex of these provisions consolidate a new form of utilisation of the state funds which in the impugned government resolution is named as the capitalisation of credits.

The Constitutional Court has judged in this ruling that the capitalisation of the credits contradicts the Law on State Regulation of Economic Relations in Agriculture, therefore, the question concerning the compliance of the impugned government resolution with Paragraph 1 of Article 43 of the Company Law is not to be decided.

Conforming to Article 102 of the Constitution of the Republic of Lithuania and Articles 53, 54, 55 and 56 of the Law on the Constitutional Court of the Republic of Lithuania, the Constitutional Court of the Republic of Lithuania gives the following

ruling:

  1. To recognise that the provision of the Resolution of the Government of the Republic of Lithuania (No. 1164) “On the Capitalisation of the Credits of Some Enterprises of the Ministry of Agriculture” of 30 August 1995 to cover the debts of only certain enterprises does not contradict the principle of the equality of persons which is consolidated in the Constitution of the Republic of Lithuania.
  2. To recognise that the Resolution of the Government of the Republic of Lithuania (No. 1164) “On the Capitalisation of the Credits of Some Enterprises of the Ministry of Agriculture” of 30 August 1995 contradicts the Law on State Regulation of Economic Relations in Agriculture.

This ruling of the Constitutional Court is final and not subject to appeal.

The ruling is pronounced in the name of the Republic of Lithuania.

Justices of the Constitutional Court:

 Algirdas Gailiūnas                           Kęstutis Lapinskas                           Zigmas Levickis

 Vladas Pavilonis                              Pranas Vytautas Rasimavičius         Stasys Stačiokas

 Teodora Staugaitienė                       Stasys Šedbaras                               Juozas Žilys