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On the reduction of the amounts of cumulative contributions accumulated in pension funds

Case No. 39/2009-40/2009-46/2009-48/2009-51/2009-10/2010-23/2010-137/2010-7/2011-38/2011

 THE CONSTITUTIONAL COURT OF THE REPUBLIC OF LITHUANIA

 RULING

ON THE COMPLIANCE OF THE PROVISIONS OF THE REPUBLIC OF LITHUANIA LAW ON REFORM OF THE PENSION SYSTEM, AS WELL AS ON THE COMPLIANCE OF THE PROVISIONS OF THE LAWS AMENDING AND SUPPLEMENTING THIS LAW, WITH THE CONSTITUTION OF THE REPUBLIC OF LITHUANIA

 29 June 2012

Vilnius

 

The Constitutional Court of the Republic of Lithuania, composed of the Justices of the Constitutional Court Egidijus Bieliūnas, Toma Birmontienė, Pranas Kuconis, Gediminas Mesonis, Ramutė Ruškytė, Egidijus Šileikis, Algirdas Taminskas, Romualdas Kęstutis Urbaitis, and Dainius Žalimas,

with the secretary—Daiva Pitrėnaitė,

pursuant to Articles 102 and 105 of the Constitution of the Republic of Lithuania and Article 1 of the Law on the Constitutional Court of the Republic of Lithuania, on 18 June 2012, in a public Court hearing heard constitutional justice case No. 39/2009-40/2009-46/2009-48/2009-51/2009-10/2010-23/2010-137/20100-7/2011-38/2011 subsequent to petitions (by the Constitutional Court decision of 9 May 2012, they were joined into one case) of the Vilnius Regional Administrative Court, the petitioner, requesting to investigate whether:

– the Republic of Lithuania Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System adopted on 15 January 2009, in view of the procedure of its entry into force, is not in conflict with Paragraph 2 of Article 7, Paragraph 1 of Article 70 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law (petitions Nos. 1B-49/2009, 1B-53/2009, 1B-58/2009, 1B-60/2009, 1B-65/2009, 1B-10/2010, 1B-26/2010, 1B-147/2010, 1B-7/2011);

– the Republic of Lithuania Law on Amending Article 4 of the Law on Reform of the Pension System adopted on 17 February 2009, in view of the procedure of its entry into force, is not in conflict with Paragraph 2 of Article 7, Paragraph 1 of Article 70 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law (petitions Nos. 1B-53/2009, 1B-147/2010);

– Paragraph 1 (wording of 15 January 2009) of Article 4 of the Republic of Lithuania Law on Reform of the Pension System, insofar as the amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him was reduced in 2009 and 2010, was not in conflict with Paragraph 2 of Article 23 of the Constitution of the Republic of Lithuania, the provision “The State shall guarantee to citizens the right to receive old age <…> pensions” of Article 52 thereof and the constitutional principle of a state under the rule of law (petitions Nos. 1B-58/2009, 1B-65/2009, 1B-26/2010);

– Paragraph 1 (wordings of 15 January 2009 and 28 April 2009) of Article 4 of the Republic of Lithuania Law on Reform of the Pension System, insofar as the amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him was reduced in 2009 and 2010, was not in conflict with Articles 23, 29, 52 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law (petitions Nos. 1B-49/2009, 1B-53/2009, 1B-60/2009, 1B-10/2010);

– Paragraph 1 (wordings of 15 January 2009, 28 April 2009 and 30 June 2010) of Article 4 of the Republic of Lithuania Law on Reform of the Pension System, insofar as the amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him was reduced in 2009 and 2010, was not in conflict with Articles 23, 29, 52 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law (petition No. 1B-147/2010);

– Paragraph 1 (wordings of 15 January 2009, 28 April 2009 and 30 June 2010) of Article 4 of the Republic of Lithuania Law on Reform of the Pension System, insofar as the amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him was reduced as from 2009, was not in conflict with Paragraph 2 of Article 23 of the Constitution of the Republic of Lithuania, the provision “The State shall guarantee to citizens the right to receive old age <…> pensions” of Article 52 thereof and the constitutional principle of a state under the rule of law (petition No. 1B-7/2011);

– Paragraph 1 (wording of 30 June 2010) of Article 4 of the Republic of Lithuania Law on Reform of the Pension System, insofar as it established, as from 1 January 2011, with regard to the persons who became participants of the pension accumulation system as from 1 July 2009, the reduced amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him, was not in conflict with Articles 23, 29, 52 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law (petition No. 1B-46/2011);

– Paragraph 3 (wordings of 15 January 2009 and 17 February 2009) of Article 4 of the Republic of Lithuania Law on Reform of the Pension System was/is not in conflict with Articles 23, 29, 52 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law (petitions Nos. 1B-53/2009, 1B-147/2010);

– Paragraph 4 (wording of 15 January 2009) of Article 4 of the Republic of Lithuania Law on Reform of the Pension System is not in conflict with Articles 23, 29, 52 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law (petition No. 1B-147/2010);

– the Republic of Lithuania Law on Reform of the Pension System (wording of 3 December 2002 with the amendments and/or supplements of 15 January 2009, 17 February 2009, 28 April 2009 and 30 June 2010) insofar as it does not provide for a mechanism for compensation of the reduced pension contributions was/is not in conflict with Articles 23, 52 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law (petition No. 1B-147/2010);

– the Republic of Lithuania Law on Reform of the Pension System (wording of 3 December 2002 with the amendment of 30 June 2010) insofar as it does not provide for a mechanism for compensation of the reduced pension contributions for the persons who became participants of the pension accumulation system from 1 July 2009 till 13 July 2010, is not in conflict with Articles 23, 52 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law (petition No. 1B-46/2011);

– Paragraph 11 (wordings of 18 December 2008, 28 April 2009) of Article 3 of the Republic of Lithuania Law on Approving the Indicators of the 2009 Budget of the State Social Insurance Fund was not in conflict with Articles 23, 29, 52 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law (petitions Nos. 1B-49/2009, 1B-53/2009, 1B-60/2009, 1B-147/2010);

– Paragraph 2 (wording of 18 December 2008) of Article 6 of the Republic of Lithuania Law on Approving the Indicators of the 2009 Budget of the State Social Insurance Fund was not in conflict with Articles 23, 29, 52 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law (petitions No. 1B-53/2009, 1B-147/2010);

– Paragraph 11 of Article 3 of the Republic of Lithuania Law on Approving the Indicators of the 2010 Budget of the State Social Insurance Fund was not in conflict with Articles 23, 29, 52 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law (petition No. 1B-147/2010);

– Paragraph 13 of Article 3 of the Republic of Lithuania Law on Approving the Indicators of the 2011 Budget of the State Social Insurance Fund was not in conflict with Articles 23, 29, 52 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law (petition No. 1B-46/2011);

The Constitutional Court

has established:

I

  1. The petitions Nos. 1B-24/2008, 1B-34/2008, 1B-9/2010 and 1B-47/2010 of the Vilnius Regional Administrative Court, the petitioner are substantiated by the following arguments.

1.1. Under the legal regulation established in the Law on Reform of the Pension System (hereinafter also referred to as the Law), the residents, who resolved to accumulate a part of the state social pension insurance contribution in pension funds managed by pension accumulation companies, conclude agreements on the accumulation of pension contributions in the person’s pension account opened in a pension accumulation company. While concluding such agreements prior to the entry into force of the impugned amendments to the Law, both the participants of the pension accumulation system (hereinafter also referred to as the participants) and pension accumulation companies essentially had a reason to expect that the contributions of the amount established by Paragraph 1 of Article 4 of the Law valid precisely at the time in question would be transferred to participants’ personal pension accounts in pension accumulation companies and they thus were able to plan the amount of their right of ownership. The amount of the transferred contributions established in the Law was one of the essential factors in creating pension accumulation companies and planning their activity, as well as in making a resolve by natural persons to become participants of pension funds and to accumulate the pension contributions established in the Law in pension accumulation companies. Therefore, both the participants and pension accumulation companies had the legitimate expectations that the obligation undertaken by the state to transfer the contributions in the amount established in the Law would be carried out or, upon changing the legal regulation, the losses in these contributions incurred by them would be justly compensated. By means of the impugned amendments to the Law the state essentially limited the possibility of persons to plan their own income and that of members of their families, unilaterally deviated from the obligations undertaken by it by not providing for an adequate mechanism for compensation of the loss of contributions, and thus groundlessly limited the rights of ownership of the participants of the pension accumulation system and pension accumulation companies. The amount of the cumulative pension contribution transferred to a pension accumulation company is inseparably linked with the acquisition and realisation of a participant’s right of ownership. Therefore, in the opinion of the petitioner, the reduction of this amount for the persons who became participants of the pension accumulation system prior to the entry into force of the corresponding amendments to this Law is to be regarded as an impermissible intervention by the state on the property of these persons.

1.2. According to the petitioner, the Laws on Amending and Supplementing Article 4 of the Law on Reform of the Pension System adopted on 15 January 2009 and 17 February 2009 entrenched their retroactive power, i.e. the norms established therein are applied to the legal relations that began prior to the entry into force of a respective law. The legislator, having established the retroactive validity of laws with regard to the subjects of pension accumulation agreements concluded previously, essentially limited the right of ownership of these subjects, violated their legitimate expectations and deviated from the legal norms and principles proclaimed in the Constitution.

  1. The petitions Nos. 1B-58/2009, 1B-65/2009, 1B-26/2010, 1B-147/2010 and 1B-7/2011 of the Vilnius Regional Administrative Court, the petitioner are substantiated by the following arguments.

2.1. According to the petitioner, after the amount of the contributions transferred to pension funds had been reduced without the will and consent of the persons who had concluded pension accumulation agreements, the legitimate expectations of such persons that the amount of the contributions to pension funds would not be reduced were violated, therefore, the petitioner doubts as to the compliance of Paragraph 1 (wordings of 15 January 2009, 28 April 2009 and 30 June 2010) of Article 4 of the Law with the constitutional principle of a state under the rule of law.

2.2. The legislatively entrenched legal regulation whereby the amount of the contribution to pension funds was reduced in 2009 and 2010 also meant not only that the persons who had concluded pension accumulation agreements in pension funds before 1 January 2009 lost, without their will and consent, the right to accumulate 2.5 percent of their income in pension funds in 2009, whereas later—3.5 percent of their income on which state social insurance contributions are calculated (hereinafter also referred to as the income), even though, previously, under the Law, they used to have the right and had acquired the legitimate expectations to do so, but it also meant that their right to receive the old-age pension of the amount depending upon the provisions of the Law that had been valid before was denied. Due to these arguments the petitioner doubts as to the compliance of Paragraph 1 (wordings of 15 January 2009, 28 April 2009 and 30 June 2010) Article 4 of the Law, insofar as the amount of the cumulative pension contribution was reduced down to 3 percent in 2009, whereas later—down to 2 percent of the income, with the provision “The State shall guarantee to citizens the right to receive old age <…> pensions” of Article 52 the Constitution.

2.3. According to the petitioner, the Constitutional Court has held more than once that the right to an old-age pension is related to the right of ownership. The same position is also upheld in the jurisprudence of the European Court of Human Rights. Therefore, the petitioner faced doubts regarding the compliance of the said legal regulation with Paragraph 2 of Article 23 of the Constitution as well.

2.4. The Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System was adopted on 15 January 2009, was published in the official gazette “Valstybės žinios” on 17 January 2009, but came into force on 1 January 2009. In the opinion of the petitioner, the fact that the validity of the law is retroactive is in conflict with Paragraph 2 of Article 7 of the Constitution wherein it is established that only laws which are published shall be valid, as well as with Paragraph 1 of Article 70 of the Constitution whereby the laws adopted by the Seimas shall come into force after they are signed and officially promulgated by the President of the Republic, unless the laws themselves establish a later date for their coming into force.

  1. Petition No. 1B-147/2010 of the Vilnius Regional Administrative Court, the petitioner, is substantiated also by the following arguments.

3.1. According to the petitioner, the persons who concluded agreements on accumulation of pensions in pension funds, however, who receive income from sports activities or from performing activities, farmers and their partners (later—self-employed persons), as they are defined in the Republic of Lithuania Law on State Social Insurance, under Paragraph 3 (wordings of 15 January 2009 and 17 February 2009) of Article 4 of the Law, which established for such persons, for 2009, the cumulative pension contribution in the amount of 1 percent of their income, whilst that in the amount of 2 percent of their income—for 2010, also the persons insured by state budget funds, for whom, under Paragraph 4 (wording of 15 January 2009) of the same article, cumulative pension contributions are not calculated and paid, without their will and consent lost the right to accumulate part of their income in pension accumulation funds in 2009 and 2010, even though, previously, under the Law, they used to have such a right and had acquired the legitimate expectations to do so. Therefore, the petitioner doubts as regards the compliance of the said provisions of the Law with the provision of Article 52 of the Constitution that the state shall guarantee to citizens the right to receive old-age pensions.

3.2. The Law on Amending Article 4 of the Law on Reform of the Pension System was adopted on 17 February 2009, was published in the official gazette “Valstybės žinios” on 5 March 2009 and began to applied as from 1 January 2009. In the opinion of the petitioner, such a procedure of entry into force of this law is in conflict with Paragraph 2 of Article 7 and Paragraph 1 of Article 70 of the Constitution.

  1. Petition No. 1B-46/2011 of the Vilnius Regional Administrative Court, the petitioner, is substantiated by the following arguments.

4.1. After when, on 30 June 2010, the Seimas had amended Paragraph 1 (wording of 28 April 2009) of Article 4 of the Law and had abolished its provision “With regard to the persons who became participants of the pension accumulation system, the amount of the pension contribution as from 1 January 2011 shall be 5.5 percent of the income of participants on which state social insurance contributions are calculated”, without the will and consent of these persons and the Association of Participants of Pension Funds, Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law established the reduced amount (2 percent of the income) of the pension contribution transferred to pension funds, therefore, the said persons lost the right that they used to have under the Law to accumulate 5.5 percent of their income, on which state social insurance contributions are calculated, in pension funds as from 1 January 2011, and the legitimate expectations acquired by these persons to do so were violated, thus, the constitutional principle of a state under the rule of law was violated. In the opinion of the petitioner, their right to receive the old-age pension of the amount determined by the previously valid provisions of the Law was also denied, therefore, it has doubts as regards the compliance of this legal regulation with the provision “The State shall guarantee to citizens the right to receive old age <…> pensions” of Article 52 the Constitution.

4.2. The Constitutional Court has held more than once that the right to an old-age pension is related to the right of ownership. The same position is also upheld in the jurisprudence of the European Court of Human Rights. Therefore, the petitioner faced doubts regarding the compliance of the said provision with Paragraph 2 of Article 23 of the Constitution as well.

4.3. In the opinion of the petitioner, the legislator, having reduced, by means of the legal regulation established in Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law and Paragraph 13 of Article 3 of the Law on Approving the Indicators of the 2011 Budget of the State Social Insurance Fund, the amount of cumulative pension contributions of persons participating in the pension accumulation system and having restricted their rights of ownership—by seizing or reducing part of their property—discriminated these persons from the point of view of the social situation (in comparison with the persons who do not accumulate the pension in pension funds, whose property was not reduced and the rights of ownership were not restricted) and violated the principle of equality of all persons before the law entrenched in Article 29 of the Constitution, since there are not any differences of such character and extent between the aforesaid groups of persons so that their different treatment could be objectively justified.

4.4. The legislator, by reducing the contributions to pension funds by impugned provisions of the laws, groundlessly violated the constitutional rights and legitimate expectations of the persons participating in the pension accumulation system, it groundlessly granted privileges at their expense to persons receiving state social insurance old-age pensions and to persons who have the insured income, but who do not participate in the pension accumulation system. Due to this, the reduction of cumulative pension contributions is not in line with the principles of proportionality and solidarity.

4.5. According to the petitioner, the persons who have resolved to accumulate a part of their state social insurance contribution in private pension accumulation companies, have the right and legitimate expectations to demand that the obligation undertaken by the state to transfer the contributions of the amount established in the Law be carried out or, upon changing the legal regulation, that all incurred losses be justly compensated to them. However, the legislator has not established in the Law a mechanism for compensating the losses incurred by persons participating in the pension accumulation system due to the reduction of cumulative pension contributions, therefore, not only legitimate expectations of these persons, but also inviolability of ownership (the state has seized property for which no compensation was provided for) and the right to a pension were violated.

II

In the course of the preparation of the case for the Constitutional Court hearing written explanations were received from the representative of the Seimas of the Republic of Lithuania, the party concerned, who was Rimantas Jonas Dagys, Chairman of the Seimas Committee on Social Affairs and Labour, wherein it is maintained that from the impugned aspects the Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System adopted on 15 January 2009, the Law on Amending Article 4 of the Law on Reform of the Pension System adopted on 17 February 2009, Paragraph 1 (wordings of 15 January 2009 and 28 April 2009) and Paragraph 3 (wordings of 15 January 2009 and 17 February 2009) of Article 4 of the Law on Reform of the Pension System, Paragraph 11 (wordings of 18 December 2008 and 28 April 2009) of Article 3 and Paragraph 2 (wording of 18 December 2008) of Article 6 of the Law on Approving the Indicators of the 2009 Budget of the State Social Insurance Fund were/are not in conflict with the Constitution.

  1. The parties to pension accumulation agreements may not change the amounts of cumulative pension contributions to the pension fund selected by a participant of the pension accumulation system. It is the legislator that can do so by provisions of the Law on Approving the Indicators of the 2009 Budget of the State Social Insurance Fund. The fact that Paragraph 1 (wording of 3 December 2003) of Article 4 of the Law established, as from 1 January 2007, the 5.5-percent income amount of the cumulative pension contribution of does not mean that the legislator was not allowed to change it. The reduction of the amounts of these contributions was determined by the economic crisis of the state during which all together must share the existing hardships, it is impossible to avoid unpopular political decisions that must be taken, which are directly influenced by the economic processes taking place in the world.
  2. Not all state social insurance contributions calculated by the insurers and transferred to the budget of the State Social Insurance Fund (hereinafter also referred to as the SSIF) become property of participants of the pension accumulation system, but only the cumulative pension contributions calculated and transferred to the corresponding pension funds managed by pension accumulations companies. The payable cumulative pension contributions (a part of state social insurance contributions) are not property of a participant of the pension accumulation system, the change in the amount of the contributions does not exert any influence on the overall amount of state social insurance contributions (while one part thereof is getting smaller, the other part thereof proportionately increases) and does not restrict the right of ownership of either a participant of the pension accumulation system, or the companies administering pension funds.
  3. As a rule, under the constitutional principle lex retro non agit, laws do not have the retroactive power save certain exceptions when the legislator may establish the retrospective validity of a law. This right has not been granted to the legislator directly, but it is not directly prohibited, either.

Under the Constitution, the Seimas is bound by the laws that it has adopted. The Republic of Lithuania Law on Composition of the Budget of the State Social Insurance Fund provides that the rates of state social insurance contributions shall be approved for each budget year by the Law on Approving the Indicators of the Budget of the State Social Insurance Fund (Paragraph 17 of Article 2), which shall start on the 1st of January and shall end on the 31st of December (Paragraph 2 of Article 2). It implies that the rates of state social insurance contributions established by the Law on Approving the Indicators of the Budget of the State Social Insurance Fund become effective from the beginning of the budget year. On 18 December 2008, the Seimas adopted the Law on Approving the Indicators of the 2009 Budget of the State Social Insurance Fund which came into force on 30 December 2008 and which approved the rate in the amount of 3 percent of the part of the state social insurance contribution of the insured persons participating in the pension accumulation. The said part is transferred to pension accumulation companies. Therefore, the provisions of the said law and the procedure for approving the SSIF budget indicators established in the Law on Composition of the Budget of the State Social Insurance Fund are to be linked (they were co-ordinated) with the entry into force of the Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System (adopted after the adoption and entry into force of the aforesaid law) and the application of the legal norms related to changing the rates of cumulative pension contributions, which are entrenched in the same law.


III

In the course of the preparation of the case for the Constitutional Court hearing written explanations were received from Audronė Morkūnienė, Vice-minister of Social Security and Labour of the Republic of Lithuania, Ingrida Šimonytė, Minister of Finance of the Republic of Lithuania, Vilius Šapoka, Chairman of the Securities Commission of the Republic of Lithuania, and Mindaugas Šalčius, Chairman of the Insurance Supervisory Commission of the Republic of Lithuania.

In the course of the preparation of the case for the Constitutional Court hearing explanations were submitted by the specialists—Audrius Bitinas, Vice-minister of Social Security and Labour of the Republic of Lithuania, and Inga Buškutė, Head of the Social Insurance and Funded Pensions Division of the Social Insurance and Pensions Department of the Ministry of Social Security and Labour.

The Constitutional Court

holds that:

I

  1. The Vilnius Regional Administrative Court, the petitioner, requests (petition No. 1B-147/2010) investigation into the compliance of the Law (wording of 3 December 2002 with the amendments and/or supplements of 15 January 2009, 17 February 2009, 28 April 2009, and 30 June 2010), insofar as it does not provide for a mechanism for compensation of the reduced pension contributions, with Articles 23, 52 of the Constitution and the constitutional principle of a state under the rule of law, however, from the arguments set forth in the petition it is clear that it doubts the compliance of Paragraph 1 (wordings of 15 January 2009, 28 April 2009 and 30 June 2010), Paragraph 3 (wordings of 15 January 2009 and 17 February 2009), and Paragraph 4 (wording of 15 January 2009) of Article 4 of the Law, insofar as they do not establish a mechanism for compensation of the reduced pension contributions, with the Constitution.

The petitioner also requests (petition No. 1B-46/2011) investigation into the compliance of the Law (wording of 3 December 2002 with the amendment of 30 June 2010), insofar as it does not provide for a mechanism for compensation of the reduced pension contributions for the persons who became participants of the pension accumulation system from 1 July 2009 till 13 July 2010, with Articles 23 and 52 of the Constitution and the constitutional principle of a state under the rule of law, however, from the arguments set forth in the petition it is clear that it doubts the compliance of Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law insofar as it does not establish a mechanism for compensation of the reduced pension contributions for the persons who became participants of the pension accumulation system from 1 July 2009 till 13 July 2010, with the Constitution.

  1. Even though the petitioner requests (petitions Nos. 1B-49/2009, 1B-53/2009, 1B-60/2009, 1B-10/2010, 1B-147/2010) investigation into the compliance of Paragraph 1 (wordings of 15 January 2009 and 28 April 2009), insofar as it established the reduced amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him, the compliance of Paragraph 3 (wordings of 15 January 2009 and 17 February 2009) and Paragraph 4 (wording of 15 January 2009) of Article 4 of the Law with inter alia Article 29 of the Constitution, the petitions do not single out the arguments regarding the compliance of this legal regulation with Article 29 of the Constitution and from this aspect the doubts of the petitioner are identical to its doubts regarding the compliance of this legal regulation with Article 23 of the Constitution. Thus, the Constitutional Court will inter alia investigate whether Paragraph 1 (wordings of 15 January 2009 and 28 April 2009), insofar as it established the reduced amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him, Paragraph 3 (wordings of 15 January 2009 and 17 February 2009) and Paragraph 4 (wording of 15 January 2009) of Article 4 of the Law were not in conflict with Articles 23, 52 of the Constitution and the constitutional principle of a state under the rule of law.
  2. It has been mentioned that the petitioner requests (petition No. 1B-46/2011) investigation into the compliance of Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law:

– insofar as it established, as from 1 January 2011, with regard to the persons who became participants of the pension accumulation system as from 1 July 2009, the reduced amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him with Articles 23, 29, 52 of the Constitution and the constitutional principle of a state under the rule of law;

– insofar as it did not establish a mechanism for compensation of the reduced pension contributions for the persons who became participants of the pension accumulation system from 1 July 2009 till 13 July 2010 with Articles 23, 52 of the Constitution and the constitutional principle of a state under the rule of law .

It needs to be noted that the petitions (Nos. 1B-147/2010, 1B-7/2011) of the petitioner requesting to investigate whether Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law, insofar as it established the reduced amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him, but did not establish a mechanism for compensation of the reduced pension contributions, is not in conflict with the Constitution, in the impugned aspects also covers the petition No. 1B-46/2011 of the petitioner. Thus, the Constitutional Court will inter alia investigate whether Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law, insofar as it established the reduced amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him, without establishing a mechanism for compensation of the reduced pension contributions, is not in conflict with Articles 23, 29, 52 of the Constitution and the constitutional principle of a state under the rule of law.

  1. The petitioner also requests investigation into whether the Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System adopted on 15 January 2009, in view of the procedure of its entry into force established in Article 2 of this law (petitions Nos. 1B-49/2009, 1B-53/2009, 1B-58/2009, 1B-60/2009, 1B-65/2009, 1B-10/2010, 1B-26/2010, 1B-147/2010, 1B-7/2011) and the Law on Amending Article 4 of the Law on Reform of the Pension System adopted on 17 February 2009, in view of the procedure of its entry into force established in Article 2 of this law (petitions Nos. 1B-53/2009, 1B-147/2010) are not in conflict with Paragraph 2 of Article 7, Paragraph 1 of Article 70 of the Constitution and the constitutional principle of a state under the rule of law. Thus, one is to draw a conclusion that the petitioner doubts the compliance of not all provisions of these laws, but only the compliance of Article 2 of the Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System adopted on 15 January 2009 and Article 2 of the Law on Amending Article 4 of the Law on Reform of the Pension System adopted on 17 February 2009 with the Constitution.
  2. It has been mentioned that in the constitutional justice case at issue one impugns the compliance of the provisions of inter alia Paragraph 11 (wordings of 18 December 2008 and 28 April 2009) (petitions Nos. 1B-49/2009, 1B-53/2009, 1B-60/2009, 1B-147/2010) of Article 3 and Paragraph 2 (wording of 18 December 2008) (petitions Nos. 1B-53/2009, 1B-147/2010) of Article 6 of the Law on Approving the Indicators of the 2009 Budget of the State Social Insurance Fund, Paragraph 11 (petition No. 1B-147/2010) of Article 3 of the Law on Approving the Indicators of the 2010 Budget of the State Social Insurance Fund and Paragraph 13 (petition No. 1B-46/2011) of Article 3 of the Law on Approving the Indicators of the 2011 Budget of the State Social Insurance Fund with the Constitution.

It needs to be noted that every Law on Approving the Indicators of the Budget of the State Social Insurance Fund is a law valid and applied on a time-limited basis. The Law on Composition of the Budget of the State Social Insurance Fund (wording of 14 November 2008) inter alia provides that the SSIF budget shall be approved for the respective budget year by adopting a law on approving the indicators of this budget (Paragraph 1 of Article 10), whereas the execution of the annual SSIF budget ends on the 31st of December (Paragraph 1 of Article 14).

5.1. In its decision of 13 November 2007, the Constitutional Court held that the application of a court to the Constitutional Court with a petition requesting to investigate the compliance of a legal act with a legal act of higher power, inter alia with the Constitution, and the investigation of that compliance are not an end in itself, and the purpose of the application (as a constitutional institute) of a court to the Constitutional Court is to ensure administration of justice. In the same decision it was also held that even in the situations when the Constitutional Court is applied to by courts which, in the course of administration of justice, face doubts regarding the compliance of a legal act of lower power with legal acts of higher power, inter alia (and, first of all) with the Constitution, the Constitutional Court does not have to consider the case when a respective legal act is not only invalid (since the compliance of invalid legal acts with legal acts of higher power may be investigated and, normally, is investigated), but also may not be applied at all (i.e. it may not be applied not only in the case considered by the respective court that applied to the Constitutional Court with a respective petition). In addition, this circumstance should always be assessed when a law on the state budget and on municipal budgets or any other act intended for a specific budget period is impugned.

Moreover, in the said Constitutional Court decision it was held that every law on the state budget and on municipal budgets is a law of time-limited validity and time-limited application; the financing of administrators of appropriations from the funds of the state budget and of municipal budgets of respective years is completed when a respective budget year ends, i.e. on the 31st of December of that year; after this date the law on the state budget and on municipal budgets may not be applied at all, inter alia—it needs to be particularly emphasised—after the said date the transfer of appropriations of the previous budget year to any administrator of appropriations is impossible in such a way as if it was made in the previous budget year, since a new budget year has started; therefore, even if it was established that the impugned legal regulation was in conflict with the Constitution, no intervention of the subjects of law-making (respectively, the Seimas and the Government) into that legal regulation is possible, since the respective legal acts were intended for the regulation of the relations which are over, thus, they no longer exist; such an intervention would be meaningless and irrational, since, it would mean that respective subjects of law-making undertake the regulation of the past, consequently, that they attempt to change the past.

It needs to be noted that the aforementioned provisions of the official constitutional doctrine are to be applied mutatis mutandis also in the case at issue.

5.2. In this context it needs to be emphasised that even if, as assumed by the petitioner, it was established in this constitutional justice case that the impugned provisions of the Laws on Approving the Indicators of the 2009, 2010 and 2011 Budget of the State Social Insurance Fund were in conflict with the Constitution, no intervention of the legislator into the respective legal regulation would be possible, since the said laws were intended for the regulation of the relations which are over, thus, they no longer exist. Thus, the investigation into the said legal regulation would be an end in itself and it would not be such investigation that could determine settlement of corresponding disputes in the court and administration of justice in corresponding cases.

5.3. It needs to be noted that in the case at issue one also impugns the provisions of the Law whereby the amount of cumulative pension contributions were established at the same time, for the same persons and of the same amount as established by the impugned provisions of the Laws on Approving the Indicators of the 2009, 2010 and 2011 Budget of the State Social Insurance Fund. Therefore, it needs to be held that after the Constitutional Court has investigated the compliance of the impugned provisions of the Law with the Constitution, the Vilnius Regional Administrative Court, the petitioner, which is deciding corresponding disputes regarding the reduction of the amounts of cumulative pension contributions, will be able to administer justice—to decide the cases irrespective of the fact whether the provisions of the Laws on Approving the Indicators of the 2009, 2010 and 2011 Budget of the State Social Insurance Fund were recognised as conflicting with the Constitution or not.

Taking account of the arguments set forth and the aforesaid provisions of the official constitutional doctrine, it needs to be held that in this part of the constitutional justice case at issue the matter of consideration is absent.

5.4. Paragraph 2 of Article 80 (which regulates refusal of the Constitutional Court to examine an inquiry) of the Law on the Constitutional Court provides that, if in the course of the consideration of the inquiry the matter under consideration ceases to exist, the Constitutional Court shall dismiss the instituted legal proceedings on the grounds thereof.

This provision of the Law on the Constitutional Court is applicable mutatis mutandis to the consideration of requests to investigate the compliance of a legal act with the Constitution (with the other legal act of a higher legal power) and adoption of respective decisions (inter alia Constitutional Court rulings of 21 September 2006 and 20 March 2008).

Under Paragraph 3 of Article 69 of the Law on the Constitutional Court, in the event that the grounds for refusal to consider a petition have been established after the commencement of the investigation of the case during the hearing of the Constitutional Court, a decision to dismiss the case shall be adopted.

5.5. Taking account of the arguments set forth, this part of the constitutional justice case regarding the compliance of Paragraph 11 (wordings of 18 December 2008 and 28 April 2009) of Article 3 and Paragraph 2 (wording of 18 December 2008) of Article 6 of the Law on Approving the Indicators of the 2009 Budget of the State Social Insurance Fund, Paragraph 11 of Article 3 of the Law on Approving the Indicators of the 2010 Budget of the State Social Insurance Fund and Paragraph 13 of Article 3 of the Law on Approving the Indicators of the 2011 Budget of the State Social Insurance Fund with Articles 23, 29, 52 of the Constitution and the constitutional principle of a state under the rule of law is to be dismissed.

  1. Thus in the constitutional justice case at issue the Constitutional Court will investigate whether:

– Article 2 of the Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System adopted on 15 January 2009 is not in conflict with Paragraph 2 of Article 7, Paragraph 1 of Article 70 of the Constitution and the constitutional principle of a state under the rule of law;

– Article 2 of the Law on Amending Article 4 of the Law on Reform of the Pension System adopted on 17 February 2009 is not in conflict with Paragraph 2 of Article 7, Paragraph 1 of Article 70 of the Constitution and the constitutional principle of a state under the rule of law;

– Paragraph 1 (wordings of 15 January 2009 and 28 April 2009) of Article 4 of the Law on Reform of the Pension System, insofar as it established the reduced amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him, but did not establish a mechanism for compensation of the reduced pension contributions, was not in conflict with Articles 23, 52 of the Constitution and the constitutional principle of a state under the rule of law;

– Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law on Reform of the Pension System, insofar as it established the reduced amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him, but did not establish a mechanism for compensation of the reduced pension contributions, was not in conflict with Articles 23, 29, 52 of the Constitution and the constitutional principle of a state under the rule of law;

– Paragraph 3 (wordings of 15 January 2009 and 17 February 2009) of Article 4 of the Law on Reform of the Pension System was/is not in conflict with Articles 23, 52 of the Constitution and the constitutional principle of a state under the rule of law;

– Paragraph 4 (wording of 15 January 2009) of Article 4 of the Law on Reform of the Pension System is not in conflict with Articles 23, 52 of the Constitution and the constitutional principle of a state under the rule of law.

II

  1. It has been mentioned that the petitioner impugns the compliance of the provisions of the Law on Reform of the Pension System and some laws on amending and/or supplementing this law, which are related with the establishment of reduced cumulative pension contributions for 2009–2011, with the Constitution.
  2. On 3 December 2002, the Seimas adopted the Law on Reform of the Pension System which came into force on 1 January 2003. This law established a possibility for the residents of the Republic of Lithuania who are insured by state social insurance to accumulate, as from 1 January 2004, a part of contribution of this insurance in the chosen pension accumulation companies and the right to receive, from the funds accumulated in them (from the cumulative pension assets), under the conditions established by laws, certain pension payments together with a proportionately smaller state social insurance old-age pension, when account is taken of the part of the state social insurance contribution designated for accumulation of pensions.

Article 1 of the Law prescribes that the accumulation of a part of the state social insurance contribution is intended to ensure the additional income of residents of the Republic of Lithuania during their retirement. From the explanatory note to the draft of this law it is also obvious that the purpose of the Law is to provide the people of working age with more possibilities to take care of a better protection during their retirement, to receive a bigger pension and to guarantee a steady socially acceptable compromise between social solidarity and individual interests.

2.1. It needs to be mentioned that, under the Law, the persons insured on a compulsory basis by the state social pension insurance to receive the main and a supplementary part of a pension, with the exception of persons who have attained the age of the old-age pension, could become participants of the pension accumulation system until 1 January 2010, i.e. they could choose to accumulate the pension contribution in a pension accumulation company and to conclude an agreement on pension accumulation with the pension accumulation company (Paragraph 2 (wording of 4 July 2003) of Article 2 and Paragraph 1 (wordings of 4 July 2003 and 1 June 2004) of Article 3).

On 12 November 2009, the Seimas adopted the Republic of Lithuania Law on Amending Articles 2 and 3 of the Law on Reform of the Pension System which came into force on 1 January 2010. Article 1 and Paragraph 1 of Article 2 of the said law correspondingly amended Paragraph 2 (wording of 4 July 2003) of Article 2 and Paragraph 1 (wording of 1 June 2004) of Article 3 of the Law, in which it was prescribed that the persons receiving the insured income on which compulsory state social pension insurance contributions are payable to receive the main and a supplementary part of a pension, with the exception of the persons who have attained the age of the old-age pension, also the persons who, under the Law of the Republic of Lithuania on Preservation and Transfer of the Pension Rights of Officials of the Institutions of the European Communities and of Members of the European Parliament, have chosen to transfer their rights to the State Social Insurance Fund and a pension fund operating under the Republic of Lithuania Law on the Accumulation of Pensions, shall have the right to become participants of accumulation of pensions.

2.2. Paragraph 1 (wording of 3 December 2002) of Article 4 of the Law prescribed:

“1. The amount of the pension contribution in 2004 shall be 2.5 percent, in 2005—3.5 percent, in 2006—4.5 percent, and as from 2007—5.5 percent of the income of participants on which state social insurance contributions are calculated.”

Thus, the initial 2.5 percent income amount of the pension contribution was established in 2004 for all the participants of the pension accumulation system, which was increased by adding 1 percent of the income until the amount of this contribution reached 5.5 percent of the income in 2007.

2.3. It needs to be noted that the 5.5 percent income amount of the cumulative pension contribution entrenched as from 2007 is to be assessed as the one established without providing a concrete time limit. It also needs to be noted that it is obvious from the explanatory note to the draft Law (wording of 3 December 2002) that a smaller cumulative pension contribution than of the amount of 5 percent of the income would not guarantee the proper investment return for participants of the pension accumulation system and would only have a small impact in reforming the existing pension system.

  1. On 18 December 2008, the Seimas adopted the Republic of Lithuania Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System which, under Article 2 thereof, had to come into force on 1 January 2009. By Article 1 of the said law, as specified in the explanatory note to the draft of this law, the Seimas, while seeking to balance the budget of the SSIF, decided to amend Paragraph 1 of Article 4 (wording of 3 December 2002) of the Law, as well as to supplement this article with Paragraphs 3 and 4 and to establish the following in those paragraphs:

“1. The amount of the pension contribution in 2004 shall be 2.5 percent, in 2005—3.5 percent, in 2006—4.5 percent, in 2007 and 2008—5.5 percent, in 2009 and 2010—3 percent, and from 2011—5.5 percent of the income of participants on which state social insurance contributions are calculated”;

“3. The amount of a pension contribution in respect of the income of the persons who received income from sports activities, the persons who received income from performing activities and the persons who received income under an author’s agreement as well as farmers and their partners, as they are defined by the Law on State Social Insurance, where compulsory state pension social insurance contributions at a reduced rate were payable in 2009 and 2010 on such income in accordance with the procedure laid down by the Republic of Lithuania Law on State Social Insurance, shall be 1 percent in 2009 and 2 percent in 2010.

  1. Pension contributions for the persons covered by insurance from funds of the State budget shall not be calculated.”

By the Decree of the President of the Republic “On Referring the Republic of Lithuania Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System, Which was Adopted by the Seimas of the Republic of Lithuania, Back to the Seimas of the Republic of Lithuania for Reconsideration” of 29 December 2008, this law was referred back to the Seimas for reconsideration.

After the repeat consideration, on 15 January 2009, the Seimas adopted the Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System, Article 2 whereof prescribed that it would come into force on 1 January 2009, even though it was officially published in the official gazette “Valstybės žinios” on 17 January 2009. Article 1 of this law amended Article 4 (wording of 3 December 2002) of the Law and supplemented this article with Paragraphs 3 and 4.

Paragraphs 1, 3 and 4 of Article 4 (wording of 15 January 2009) of the Law prescribed:

“1. The amount of the pension contribution in 2004 shall be 2.5 percent, in 2005—3.5 percent, in 2006—4.5 percent, in 2007 and 2008—5.5 percent, in 2009 and 2010—3 percent, and from 2011—5.5 percent of the income of participants on which state social insurance contributions are calculated”;

“3. The amount of a pension contribution in respect of the income of the persons who received income from sports activities, the persons who received income from performing activities and the persons who received income under authors’ agreements as well as farmers and their partners, as they are defined by the Law of the Republic of Lithuania on State Social Insurance, where compulsory state pension social insurance contributions at a reduced rate were payable in 2009 and 2010 on such income in accordance with the procedure laid down by the Law of the Republic of Lithuania on State Social Insurance Law, shall be 1 percent in 2009 and 2 percent in 2010.

  1. Pension contributions for the persons covered by insurance from funds of the State budget shall not be calculated and paid.”
  2. Thus, Paragraph 1 (wording of 15 January 2009) of Article 4 of the Law established the reduced 3-percent income amount of the cumulative pension contribution (smaller by 2.5 percent of the income than the one established prior to 2009).

It needs to be noted that it is obvious from the explanatory note to the draft Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System which was adopted on 15 January 2009 that the necessity to reduce the amount of the cumulative pension contribution was determined by the severe economic and financial situation of the state, also that, while approving the impugned legal regulation, one sought to ensure in the period of economic crisis that the state social insurance payments would be paid in time to the groups of residents in situations of extreme hardship who receive payments from the budget of the SSIF.

4.1. On 28 April 2009, the Seimas adopted the Republic of Lithuania Law on Amending Article 4 of the Law on Reform of the Pension System which came into force on 1 July 2009 and whose Article 1 amended Paragraph 1 (wording of 15 January 2009) of Article 4 of the Law and prescribed therein:

“1. The amount of the pension contribution in 2004 shall be 2.5 percent, in 2005—3.5 percent, in 2006—4.5 percent, in 2007 and 2008—5.5 percent, from 1 January 2009 till 30 June 2009—3 percent, from 1 July 2009 till 31 December 2009 and in 2010—2 percent of the income of participants on which state social insurance contributions are calculated. For the persons who became participants of the pension accumulation system till (and including) 30 June 2009, the amount of the pension contribution in 2011 shall be 5.5 percent, in 2012, 2013 and 2014—6 percent and from 1 January 2015—5.5 percent of the income of participants on which state social insurance contributions are calculated. For the persons who became participants of the pension accumulation system as from 1 July 2009, the amount of the pension contribution from 1 January 2011 shall be 5.5 percent of the income of participants on which state social insurance contributions are calculated.”

4.2. On 30 June 2010, the Seimas adopted the Republic of Lithuania Law on Amending Article 4 of the Law on Reform of the Pension System which came into force on 13 July 2010 and whose Article 1 amended Paragraph 1 (wording of 28 April 2009) of Article 4 of the Law and prescribed therein:

“1. The amount of the pension contribution in 2004 shall be 2.5 percent, in 2005—3.5 percent, in 2006—4.5 percent, in 2007 and 2008—5.5 percent, from 1 January 2009 to 30 June 2009—3 percent, and from 1 July 2009—2 percent of the income of participants on which state social insurance contributions are calculated.”

Article 2 of the Law on Amending Article 4 of the Law on Reform of the Pension System which was adopted on 30 June 2010 prescribes: “The Government of the Republic of Lithuania, having stated that the extreme situation in the state is over, shall provide the Seimas of the Republic of Lithuania with the draft laws on increasing the rate of the cumulative pension contribution.”

4.3. While summarising the aforementioned impugned legal regulation enshrined in Paragraph 1 (wording of 15 January 2009, 28 April 2009 and 30 June 2010) of Article 4 of the Law and the legal regulation related to it, one is to note that:

– for 2009–2012 the following reduced amounts of cumulative pension contributions were established: from 1 January 2009—3 percent, from 1 July 2009—2 percent of the income;

– Paragraph 1 (wording of 28 April 2009) of Article 4 of the Law also prescribed that as from 1 January 2011 the amount of the cumulative pension contribution would be 5.5 percent (as it had to be transferred under Paragraph 1 (wording of 3 December 2002) of Article 4 of the Law), whereas for the persons who became participants of the pension accumulation system prior to 1 July 2009, it would be 6 percent of the income in 2012, 2013 and 2014 ; upon the adoption of the Law on Amending Article 4 of the Law on Reform of the Pension System on 30 June 2010, these provisions became no longer valid;

– Article 2 of the Law on Amending Article 4 of the Law on Reform of the Pension System which was adopted on 30 June 2010 established the duty of the Government, upon stating that the extreme situation in the state is over, to provide the Seimas with the draft laws on increasing the rate of the cumulative pension contribution.

4.4. It needs to be mentioned that, on 20 December 2011, the Seimas adopted the Republic of Lithuania Law on Amending Article 4 of the Law on Reform of the Pension System which came into force on 28 December 2011. Article 1 of this law amended Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law and prescribed therein:

“1. The amount of the pension contribution in 2004 shall be 2.5 percent, in 2005—3.5 percent, in 2006—4.5 percent, in 2007 and 2008—5.5 percent, from 1 January 2009 to 30 June 2009—3 percent, from 1 July 2009 to 31 December 2011—2 percent, in 2012—1.5 percent and in 2013—2.5 percent of the income of participants on which state social insurance contributions are calculated.”

Paragraph 1 (wording of 20 December 2011) of Article 4 of the Law has not been subsequently amended and/or supplemented.

It needs to be noted that the compliance of Paragraph 1 (wording of 20 December 2011) of Article 4 of the Law with the Constitution is not impugned in this case.

  1. It has been mentioned that Paragraph 3 (wording of 15 January 2009) of Article 4 of the Law established the 1-percent income amount of the cumulative pension contribution for 2009, whilst the 2-percent income amount of the said contribution—for 2010, for the persons who received income from sports activities, from performing activities and under authors’ agreements, as well as farmers and their partners, as they are defined by the Law on State Social Insurance (i.e. the economic amount of the agricultural holding is equal to 4 units of European size or bigger; hereinafter referred to as farmers and their partners).

In this context it needs to be mentioned that the persons to whom the aforementioned amount of the cumulative pension contribution was established in Paragraph 3 (wording of 15 January 2009) of Article 4 of the Law, under Item 1 of Paragraph 1 and Paragraphs 3 and 5 of Article 4 (wording of 19 December 2008) of the Law on State Social Insurance and Items 1, 2 and 8 of Paragraph 1 of Article 2 and Paragraph 4 of Article 6 of the Republic of Lithuania Law on State Social Insurance Pensions (wording of 18 December 2008) started to be insured on a compulsory basis by the state social pension insurance to receive the main and a supplementary part of a pension only as from 1 January 2009. Thus, under Paragraph 2 (wording of 4 July 2003) of Article 2 and Paragraph 1 (wording of 1 June 2004) of the Law and Paragraph 8 (wording of 19 December 2008) of Article 4 of the Law on State Social Insurance, in which it is established that the persons who are insured on a compulsory basis by the state social pension insurance to receive the main and a supplementary part of a pension, with the exception of persons who have attained the age of the old-age pension, were entitled to become participants of the pension accumulation system, however, these persons could actually become participants of the pension accumulation system only as from 1 January 2009.

5.1. On 17 February 2009, the Seimas adopted the Law on Amending Article 4 of the Law on Reform of the Pension System, Article 2 whereof prescribed that the provisions of this law would be applicable as from 1 January 2009, even though it was officially published in the official gazette “Valstybės žinios” on 5 March 2009. Article 1 of this Law amended Paragraph 3 (wording of 15 January 2009) of Article 4 of the Law, and prescribed therein:

“3. The amount of a pension contribution in respect of the income of the persons who received income from sports activities, the persons who received income from performing activities and the persons who received income under authors’ agreements as well as self-employed persons, as they are defined by the Republic of Lithuania Law on State Social Insurance, where compulsory state pension social insurance contributions at a reduced rate were payable in 2009 and 2010 on such income in accordance with the procedure laid down by the Republic of Lithuania Law on State Social Insurance, shall be 1 percent in 2009 and 2 percent in 2010.”

It needs to be noted that the amount of the cumulative pension contribution (1 percent in 2009 and 2 percent in 2010) established in Paragraph 3 (wording of 17 February 2009) of Article 4 of the Law is applied not to “farmers and their partners”, but to “self-employed persons” as they are defined in the Law on State Social Security, i.e. the circle of persons to whom the said cumulative pension contributions were established was expanded.

It needs to be mentioned that, as from 1 January 2009, in Paragraph 8 (wording of 19 December 2008) of Article 2 “The Main Notions of this Law” of the Law on State Social Insurance, farmers and their partners are named as self-employed persons.

In Paragraph 3 (wording of 17 February 2009) of Article 4 of the Law the aforementioned amount of the cumulative pension contribution was established also for other self-employed persons—owners of individual enterprises, members of general partnerships and members of limited partnerships as well as the persons who are engaged in individual activities as defined by the Republic of Lithuania Law on Personal Income Tax (advocates, assistant advocates, notaries, bailiffs and other persons), with the exception of the individual activities exercised under a business certificate—who:

– in case the annual sum of their income prior to 1 January 2009 was smaller than 12 minimal monthly salaries, began to be insured on a compulsory basis by the state social pensions insurance to receive the main and a supplementary part of a pension and were eligible to become participants of the pension accumulation system only as from 1 January 2009 (Paragraph 8 (wordings of 19 December 2008 and 17 February 2009) of Article 2, Paragraph 3 (wordings of 19 December 2008 and 17 February 2009) of Article 4 and Paragraph 8 (wording of 19 December 2008) of Article 4 of the Law on State Social Insurance);

– in case the annual sum of their income prior to 1 January 2009 was equal to 12 minimal monthly salaries or bigger, were eligible to become participants of the pension accumulation system prior to 1 January 2009 (Paragraph 8 (wording of 4 November 2004) of Article 2, Paragraph 3 (wording of 20 December 2007) of Article 4 and Paragraph 7 (wording of 4 November 2004) of Article 4 of the Law on State Social Insurance).

5.2. It needs to be mentioned that in Items 1–3 (wording of 18 December 2008) of Paragraph 1 of Article 6 of the Law on the Approval of the Indicators of the 2009 Budget of the State Social Insurance Fund one approved, for 2009, the state social insurance contributions of the reduced rate for the persons who received income from sports activities, from performing activities and under authors’ agreements as well as farmers and their partners who began to be insured on a compulsory basis by the state social pensions insurance to receive the main and a supplementary part of a pension, whereas, Item 4 (wording of 17 February 2009) of Paragraph 1 of this article established, for 2009, a reduced 10-percent rate (but not the 28.5-percent rate as established in Paragraph 8 of Article 3 “Rates of the State Social Insurance Contributions in 2009” of that law) of the state social insurance contribution “for self-employed persons who, under the procedure established in the Republic of Lithuania Law on State Social Insurance, are insured on a compulsory basis by the state social pension insurance and by the sickness and maternity social insurance to receive maternity, paternity and maternity (paternity) social insurance benefits, with the exception of the persons specified in Item 3 of this Article.”

Thus, upon the establishment, in Article 6 of the Law on Approving the Indicators of the 2009 Budget of the State Social Insurance Fund, for 2009, of the state social insurance contributions of reduced rate for the persons who received income from sports activities, from performing activities and under authors’ agreements as well as farmers and their partners (Items 1–3 (wording of 18 December 2008) of Paragraph 1), and self-employed persons (Item 4 (wording of 17 February 2009) of Paragraph 1), at the same time also the reduced rate of the amount of the cumulative pension contribution established in Paragraph 3 (wording of 17 February 2009) of Article 4 of the Law was approved.

5.3. Paragraph 3 (wording of 17 February 2009) of Article 4 of the Law has not been subsequently amended and/or supplemented.

  1. It has been mentioned that Paragraph 4 (wording of 15 January 2009) of Article 4 of the Law prescribes that cumulative pension contributions are not calculated and paid for the persons covered by insurance from funds of the state budget.

Paragraph 4 (wording of 15 January 2009) of Article 4 of the Law has not been subsequently amended and/or supplemented.

  1. The impugned legal regulation whereby one entrenched the reduced cumulative pension contributions is to be construed in the context of also other provisions of the Law and other laws which enshrine the nature of these contributions, the conditions and procedure of their calculation, payment thereof, accumulation and organisation of the payment of pension payments.

7.1. In this context it needs to be noted that the Law inter alia prescribes that:

– “cumulative pension contribution” shall mean a part of the state social pension insurance contribution as specified by this Law, whereby one proportionately reduces the amount of the state social insurance old-age pensions and which is accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him (Paragraph 5 (wording of 3 December 2002) of Article 2 and Paragraph 1 (wording of 4 July 2003) of Article 6);

– in a personal account of the participant, the units of account due to him are entered on behalf of the participant (Paragraph 10 (wording of 3 December 2002) of Article 2);

– “pension assets” shall mean the sum of the assets acquired in exchange for funds of the cumulative pension contributions (including the temporarily uninvested part of these funds) and investment income (costs) received from these assets (funds) (Paragraph 11 (wording of 3 December 2002) of Article 2) from which pension payments are paid (Paragraph 2 (wording of 3 December 2002) of Article 5) and which shall be inherited in accordance with the procedure laid down by the Civil Code of the Republic of Lithuania (Paragraph 3 (wording of 4 July 2003) of Article 5).

Thus, under the Law, cumulative pension contributions are parts of the state social pension insurance contributions, while taking account of which one proportionately reduces the amount of the state social insurance old-age pensions, which are accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him.

7.2. It needs to be noted that the conditions and procedure for the accumulation of a part of the state social insurance contribution and organisation of the payment of pension payments are established in the Republic of Lithuania Law on the Accumulation of Pensions (Article 1) which was adopted by the Seimas on 4 July 2003 and which came into force on 30 July 2003. This law (with subsequent amendments and/or supplements thereof) inter alia prescribed:

– “pension fund” shall mean the pensions assets belonging to the natural persons who participate in the accumulation of pensions under the Law on Reform of the Pension System by the right of common shared ownership, where their management has been transferred to a pension accumulation company and they are invested according to the rules of that pension fund (Paragraph 10 (wordings of 1 June 2004 and 17 November 2011) of Article 3 “Main Notions of this Law”);

– a pension fund participant shall have the right inter alia to receive the pension benefits specified by this law taking account of the amount of the pension assets accumulated on his behalf, as well as to leave, in his will, a part of the pension assets belonging to him (Items 4 and 6 of Paragraph 1 (wordings of 4 July 2003 and 17 November 2011) of Article 5 “Rights of a Pension Fund Participant”;

– a person’s (a participant’s of the pension accumulation system) share in the common property—the pension assets making up a pension fund—shall be determined according to the number of the units of account in his pension account; it shall be inherited (Paragraph 1 (wordings of 4 July 2003 and 17 November 2011) and Paragraph 4 (wordings of 4 July 2003, 1 June 2004, 25 March 2010 and 17 November 2011) of Article 9 “Pension Assets”);

– cumulative pension contributions are constituent parts of the state social insurance contributions which are held by the SSIF Board in trust in a commercial bank and which are transferred to the pension funds under the procedure established by the Government or an institution authorised by it, within 60 (as from 1 January 2011—within 30) calendar days of the day until which insurers must, in accordance with the procedure laid down by the Government, submit to establishments of the SSIF information about the amounts of insured income and social insurance contributions calculated for every insured person (Article 10 “Conditions of and Time Limits for the Payment of Pension Contributions” (wordings of 4 July 2003, 1 June 2004, 12 December 2006, 25 March 2010 and 17 November 2011).

In this context it also needs to be mentioned that Item 25.5 of the Republic of Lithuania Regulations on the Register of Persons Insured by the State Social Insurance and Receivers of Payments of the State Social Insurance approved by Resolution of the Government of the Republic of Lithuania No. 435 “On Establishing the Republic of Lithuania Register of Persons Insured by the State Social Insurance and Receivers of Payments of the State Social Insurance” of 25 April 2007 prescribes that the insurer provides the SSIF with the following data:

– on the sums of the insured income calculated for the insured person during a calendar quarter and payments of the state social insurance contributions—every quarter but not later than until 15th day of the first month of the following quarter (wording of 7 May 2008);

– on the sums of the insured income calculated for the insured person during the calendar month and payments of the state social insurance contributions—every month but not later than until 15th day of the following calendar month (wordings of 28 October 2009 and 10 February 2010).

Thus, under the aforesaid legal regulation, the SSIF board, within 60 calendar days (as from 1 January 2011—within 30 days) of the day of the receipt of information on the sums of the insured income calculated for every insured person and payments of the social insurance contributions which is submitted to the SSIF establishments every quarter (as from 6 November 2009—every month), transfers the cumulative pension contributions (parts of the state social pension insurance contributions) to the corresponding pension fund. The pension assets comprising this fund, belongs, as common shared ownership, to every participant of the pension accumulation system, whereas the share of the participant is established according to the number of accounting units included in this person’s account.

7.3. It needs to be mentioned that, under Paragraph 5 (wording of 3 December 2002) of Article 2 and Paragraph 1 (wording of 4 July 2003) of Article 6 of the Law, as well as Paragraph 5 (wording of 4 November 2004) of Article 2 of the Law on State Social Insurance and Article 10 (wordings of 4 July 2003, 1 June 2004, 12 December 2006, 25 March 2010 and 17 November 2011) of the Law on Accumulation of Pensions, cumulative pension contributions are the parts of the state social pension insurance contributions which are transferred by the SSIF board to the corresponding pension fund.

It has been mentioned that, under Paragraph 1 (wording of 4 July 2003) of Article 6 of the Law, when the amount of the cumulative pension contribution is reduced, the part of the state social pension insurance contribution designated for the old-age pension proportionately increases. Consequently, when the rate of the cumulative pension contribution—a part of the state social pension insurance contribution—is changed (reduced), at the same time another part of the state social pension insurance contribution proportionately increases, whereas the total amount of the contribution of the state social pension insurance, i.e. the financial obligation for the state, does not change.

7.4. Thus, under the aforementioned legal regulation, the part of the paid state social pension insurance contribution calculated according to the insured income of this person and transferred to the participant’s personal pension account in a pension accumulation company—a cumulative pension contribution, as well as the property acquired for it and the yield (input) received from it, i.e. the total sum thereof, on which the amount of a future pension’s payment depends, is property of a participant of the pension accumulation system.

It also needs to be noted that neither the Law on Reform of the Pension System, nor any other law obliges the pension accumulation companies to guarantee a certain amount of the future payment of cumulative pensions—it depends on the amount of the accumulated funds and the financial results of the investment activity.


III

  1. In the constitutional justice case at issue it is requested to investigate the compliance of the provisions of the Law on Reform of the Pension System related with the reduction of cumulative pension contributions with Articles 23, 29, 52 of the Constitution and the constitutional principle of a state under the rule of law, as well as the compliance of some provisions of the laws on amending and/or supplementing this law with Paragraph 2 of Article 7, Paragraph 1 of Article 70 of the Constitution and the constitutional principle of a state under the rule of law.
  2. Under the Constitution, only laws which are published shall be valid (Paragraph 2 of Article 7); the laws adopted by the Seimas shall come into force after they are signed and officially promulgated by the President of the Republic, unless the laws themselves establish a later date for their coming into force (Paragraph 1 of Article 70).

The Constitutional Court has held more than once that the constitutional principle of a state under the rule of law presupposes various requirements for the legislator and other law-making subjects, inter alia the fact that the power of legal acts is prospective, the retroactive validity of legal acts is not allowed (lex retro non agit), unless the situation of a subject of legal relations could be alleviated without prejudice to other subjects of legal relations (lex benignior retro agit) (inter alia Constitutional Court ruling of 25 October 2011); by amendments to the legal regulation the legitimate interests and legitimate expectations of a person may not be violated, since persons who have acquired certain rights according to the law, have the right to reasonably expect that these rights will be maintained and implemented for the established time period (inter alia Constitutional Court ruling of 2 September 2009).

It needs to be noted that it was held in the Constitutional Court rulings of 29 November 2007 and 25 October 2011 that it is not permitted that a legal regulation be established that would interfere with the legal relations that are already over; such regulation, which could change the legal norms after the regulated relations have already ended, would create preconditions for denying legitimate expectations of persons, legal certainty and legal security, as well as the constitutional principle of justice.

It also needs to be noted that a prohibition to establish a date of the entry into force of a legal act that is earlier than the date of publishing of this legal act arises from the principles of legal certainty, legal security and legitimate expectations.

  1. A person’s constitutional right to receive an old-age pension in cases provided for in laws is one of the most important social rights. The social orientation of the State of Lithuania entrenched in the Constitution obligates the state to pay heed to pensionary guarantees and other guarantees of social (material) character arising inter alia from Article 52 of the Constitution.

Article 52 of the Constitution sets the bases of pensionary maintenance and social assistance. The Constitutional Court has held that the content of the legal regulation of the relations of social security, social maintenance, and social assistance is determined by various factors, inter alia by resources of the state and society and by material and financial possibilities; the legislator, while paying heed to the Constitution, enjoys broad discretion in this area, inter alia the discretion to choose a system of pensions (inter alia Constitutional Court ruling of 26 September 2007 and decision of 20 April 2010).

Under Article 52 of the Constitution, while implementing the constitutional principle of public solidarity and by helping a person to protect himself from possible social risks and at the same time creating preconditions for every member of the society to take care of his own welfare (and not only to trust in the state social security), the legislator must establish the old-age and disability pensions as well as social assistance in the event of unemployment, sickness, widowhood, and loss of the breadwinner by the law (inter alia Constitutional Court rulings of 23 April 2002 and 2 September 2009, decision of 20 April 2010, ruling of 6 February 2012).

  1. In the context of the case at issue it needs to be noted that, while making use of the discretion to choose a system of pensions, the legislator may establish various models of the system of old-age pensions guaranteed in Article 52 of the Constitution, inter alia those based upon collection of the funds necessary to pay old-age pensions from the income of working persons at that time, or based upon accumulation of funds designated for future old-age pensions in special pension funds, as well as based upon combination of these models. While establishing a model of the system of old-age pensions by law, the legislator must heed the requirements arising from Article 52 of the Constitution, the constitutional imperative of social harmony, the principles of justice, reasonableness and proportionality.

Having chosen such a model of the system of old-age pensions, where the funds (or part thereof) designated for old-age pensions are accumulated in special pension funds administered by state or private subjects, the legislator must also heed the provisions of Paragraphs 2 and 3 of Article 46 of the Constitution that the state shall support economic efforts and initiative that are useful to society and shall regulate economic activity so that it serves the general welfare of the Nation. As it has been held by the Constitutional Court more than once, 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 (an entity of economic activity) and society; 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 on this activity (inter alia Constitutional Court rulings of 13 May 2005, 6 January 2011 and 21 June 2011).

In this context it needs to be noted that in case the legislator, while carrying out the constitutional obligation to guarantee a person’s right to an old-age pension, provides that an old-age pension (or part thereof) is accumulated in special funds administered by state or private subjects, a duty arises for it from the imperatives entrenched in Articles 46 and 52 of the Constitution to regulate the economic activity of these subjects so that the interests of a person (an entity of economic activity) and the society would be co-ordinated: inter alia one must establish the licencing and control of this activity, limitations upon administering the funds (inter alia investing thereof) transferred to pension funds, conditions for paying pension payments and other necessary conditions of the economic activity of economic entities administering pension funds.

  1. The Constitutional Court has held more than once that the right to demand that the pensionary maintenance payments, which are established in the Constitution and laws that are not in conflict with the Constitution, be paid stems from Article 52 of the Constitution, whereas under Article 23 thereof the proprietary aspects of this right are defended; the persons who have been granted and paid a pension established by the Constitution or the law, under Article 23 of the Constitution have the right to demand that the payments be paid further to them in the amounts which were granted and paid previously (inter alia Constitutional Court ruling of 4 July 2003, decision of 20 April 2010, ruling of 6 February 2012); the constitutional concept of the right to a pension as a periodic monetary payment may not be identified with the concept of the right of ownership in the ordinary law, inter alia civil law (Constitutional Court ruling of 6 February 2012).

In the context of the case at issue it needs to be noted that even though the funds designated for old-age pensions and accumulated in pension funds may not be identified with the cumulative pension itself (with payable payments), whose amount depends upon the results of the economic activity (inter alia investing) of the economic entities administering the pension funds, the right of the person to the funds already accumulated in these funds is to be related with protection of the rights of ownership under Article 23 of the Constitution.

  1. The Constitutional Court has noted that the requirements arising from the constitutional principles of a state under the rule of law, equality of rights, justice, proportionality, protection of legitimate expectations, legal certainty, legal security and social solidarity, as well as other constitutional imperatives, must be heeded also when there is an extreme situation in the state (economic crisis etc.) due to which the economic and financial situation in the state, despite various other measures which are applied for overcoming the economic crisis, has changed to the extent that inter alia the accumulation of the funds necessary for the payment of pensions is not secured and due to this the legal regulation is corrected also by reducing the pensions that were awarded and paid (Constitutional Court decision of 20 April 2010, ruling of 6 February 2012).

The Constitutional Court has also held that the social solidarity principle entrenched in the Constitution implies that the burden of fulfilment of certain obligations to certain extent should be distributed also among members of society, however, such distribution should be constitutionally reasoned, it cannot be disproportionate, it cannot deny the social orientation of the state and the obligations to the state, which arise from the Constitution (Constitutional Court rulings of 7 June 2007, 26 September 2007, decision of 20 April 2010, rulings of 29 June 2010, 6 February 2012).

In the context of the case at issue it needs to be noted that the legislator, having established that that a part of the funds designated for old-age pensions is transferred to special pension funds in order to accumulate future old-age pensions, in case of necessity (for example, during an economic crisis, etc.), when the economic and financial situation of the state becomes changed so that inter alia collecting of the funds necessary to pay old-age pensions is not ensured from the income of the persons working at that time, enjoys the powers inter alia to decide to temporarily reduce the part of the funds collected from the said income, transferred to special pension funds and designated for accumulation of future old-age pensions, however, while doing so, the legislator must follow the imperatives arising from the Constitution, inter alia the requirements of justice, reasonableness, proportionality and equality of rights.

  1. It needs to be noted that, as it has been held by the Constitutional Court more than once, the constitutional principle of equality of persons before the law, which means the innate right of the person to be treated equally with the others and obliges to assess the homogenous facts in the same manner and prohibits to arbitrarily assess the facts, which are the same in essence, in a different manner and it does not permit to discriminate persons and to grant them privileges, would be violated if certain persons or groups thereof were treated in a different manner, even though there are not any differences in their character and extent between these groups that such uneven treatment could be objectively justified (inter alia Constitutional Court ruling of 27 February 2012).
  2. It also needs to be noted that, as the Constitutional Court noted more than once, the constitutional principle of proportionality means that the measures provided for in the law must be in line with the legitimate objectives which are important to society, that these measures must be necessary to reach the said objectives and may not restrict the rights and freedoms of a person clearly more than necessary in order to reach these objectives.

Thus, when there is an especially difficult economic and financial situation in the state and in order to secure vitally important interests of society and the state and to protect other constitutional values, in cases there occurs a necessity to reduce the part of the funds which is transferred to special pension funds and which is designated for accumulation of an old-age pension (or part thereof), the legislator may establish only such extent of reduction that is necessary in order to reach the aforesaid objectives and that such extent of reduction would not deny the essence of the cumulative pension.

  1. As mentioned before, the persons who acquired certain rights according to the law have the right to reasonably expect that these rights will be maintained and implemented for the established period of time. The Constitutional Court has also held more than once that legal certainty, legal security and the protection of legitimate expectations are inseparable elements of the principle of a state under the rule of law; the constitutional principles of the protection of legitimate expectations, legal certainty and legal security imply the obligation of the state to secure the certainty and stability of the legal regulation, to protect the rights of persons, to respect the legitimate interests and legitimate expectations; these principles inter alia imply that the state must fulfil all its undertaken obligations to the person; if the protection of legitimate expectations, legal certainty, and legal security were not ensured, the trust of the person in the state and law would not be secured (inter alia Constitutional Court ruling of 6 February 2012).

In the jurisprudence of the Constitutional Court it has also been noted that the state must also observe the constitutional principles of the protection of legitimate expectations and legal certainty in the relations of pensionary maintenance, therefore, the amendments of the established legal regulation deteriorating the pensionary maintenance are possible only when there appears an extraordinary situation in the state (economic crisis, natural disaster etc.) when there is objective lack of funds for the fulfilment of the state functions and satisfying of public interests, as well as the payment of pensions; such amendments must be necessary for the protection of other constitutional values and they can be done by law only, without violating the Constitution (Constitutional Court rulings of 23 April 2002, 4 July 2003 and 3 December 2003).

  1. It needs to be noted that the amount of the funds, which are transferred to special pension funds and which are designated for accumulation of an old-age pension (or part thereof), is one of the preconditions to achieve good results of the economic activity (inter alia investment) of the economic entities administering these funds, therefore, if the legislator, in case of necessity (for example, upon occurrence of an economic crisis), decides to reduce this amount, it not only may not deny the essence of the cumulative pension, but also must seek to achieve the situation where the persons that have accumulated this pension would not sustain big losses, whereas in case such losses are unavoidable, the legislator must, while taking into account inter alia the financial and economic possibilities of the state, establish just compensation for such losses; various ways of such compensation may be chosen.
  2. The Constitutional Court has held that the system of pensionary maintenance established by law may be subject to reorganisation (inter alia Constitutional Court ruling of 4 July 2003, decision of 20 April 2010, ruling of 14 December 2010). While reorganising this system, the Constitution must be observed in every case; the system of pensions may be reorganised only by law, only guaranteeing the old-age and disability pensions provided for by the Constitution, as well as observing undertaken obligations by the state, which are not in conflict with the Constitution, to pay corresponding payments to persons who meet the requirements established by the law (inter alia Constitutional Court rulings of 4 July 2003, 3 December 2003, 24 December 2008, decision of 20 April 2010). The Constitutional Court has also noted that, if in the course of reorganisation of the system of social guarantees or the structure of individual social guarantees the extent of social guarantees is reduced, let alone certain social guarantees disappear, a mechanism of just compensation of incurred losses should be established to the individuals to whom those social guarantees were reasonably established (inter alia Constitutional Court rulings of 22 November 2007 and 2 September 2009).

In the Constitutional Court decision of 20 April 2010 it was held that even when due to special circumstances (economic crisis etc.) there is an extremely difficult economic and financial situation in the state, the legislator, if it decides to reorganise the pensionary system so that the pensions established by the laws but not directly specified in Article 52 of the Constitution would be eliminated, or the legal regulation of these pensions would be amended in essence, must establish a fair mechanism for compensation of the losses incurred to the persons who had been granted and paid such pensions.

In the context of the case at issue it needs to be noted that the legislator, upon occurrence of an especially difficult economic and financial situation in the state due to special circumstances (an economic crisis etc.), in case it decides to reorganise the system of old-age pensions so that the legal regulation on collecting of the funds designated for such pensions and on payment of pensions would undergo essential changes, inter alia in a way where the funds designated for the old-age pension or a part thereof would no longer be accumulated in special pension funds, must seek to achieve a situation where the participants of the pension system would not sustain losses. If, in the course of restructuring the system of old-age pensions the losses sustained by its participants, especially when such losses are essential, were unavoidable, the legislator should establish just compensation for those loses.

IV

On the compliance of Article 2 of the Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System adopted on 15 January 2009 and Article 2 of the Law on Amending Article 4 of the Law on Reform of the Pension System adopted on 17 February 2009 with Paragraph 2 of Article 7, Paragraph 1 of Article 70 of the Constitution and the constitutional principle of a state under the rule of law, as well as on the compliance of Paragraph 1 (wording of 15 January 2009), Paragraph 3 (wordings of 15 January 2009 and 17 February 2009) and Paragraph 4 (wording of 15 January 2009) of Article 4 of the Law on Reform of the Pension System with Articles 23, 52 of the Constitution and the constitutional principle of a state under the rule of law.

  1. It has been mentioned that in the constitutional justice case at issue the Constitutional Court will investigate whether inter alia Article 2 of the Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System adopted on 15 January 2009 and Article 2 of the Law on Amending Article 4 of the Law on Reform of the Pension System adopted on 17 February 2009 are not in conflict with Paragraph 2 of Article 7, Paragraph 1 of Article 70 of the Constitution and the constitutional principle of a state under the rule of law.

The petitioner substantiates its doubts regarding the compliance of the provisions of the said laws with the Constitution by the fact that after those provisions established the retroactive validity of the norms established in those laws with respect to the legal relations that came into being prior to the official publishing of the respective law, the right of ownership of the persons who had concluded pension accumulation agreements along with their legitimate expectations were violated and one deviated from the provisions of Paragraph 2 of Article 7 and Paragraph 1 of Article 70 of the Constitution.

  1. It has been mentioned that, on 15 January 2009, the Seimas adopted the Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System by Article 1 whereof it amended Paragraph 1 of Article 4 (wording of 3 December 2002) of the Law and supplemented this article with Paragraphs 3 and 4 which prescribed:

“1. The amount of the pension contribution in 2004 shall be 2.5 percent, in 2005—3.5 percent, in 2006—4.5 percent, in 2007 and 2008—5.5 percent, in 2009 and 2010—3 percent, and from 2011—5.5 percent of the income of participants on which state social insurance contributions are calculated”;

“3. The amount of a pension contribution in respect of the income of the persons who received income from sports activities, the persons who received income from performing activities and the persons who received income under authors’ agreements as well as farmers and their partners, as they are defined by the Law of the Republic of Lithuania on State Social Insurance, where compulsory state pension social insurance contributions at a reduced rate were payable in 2009 and 2010 on such income in accordance with the procedure laid down by the Law of the Republic of Lithuania on State Social Insurance Law, shall be 1 percent in 2009 and 2 percent in 2010.

  1. Pension contributions for the persons covered by insurance from funds of the State budget shall not be calculated and paid.”

It needs to be noted that, as mentioned before, the following provisions were entrenched by Article 1 of the Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System adopted on 15 January 2009:

– the established amount of the cumulative pension contribution for 2009 and 2010 was 3 percent of the income (Paragraph 1 (wording of 15 January 2009) of Article 4 of the Law), i.e. smaller by 2.5 percent of the income than the amount of 5.5 percent of these contributions, while the latter amount was established in Paragraph 1 (wording of 3 December 2002) of Article 4 of the Law on a non-time-limited basis as from 2007;

– for 2009, the 1-percent income amount of the cumulative pension contribution, whilst for 2010—the 2-percent income amount of the said contribution were established for the persons who received income from sports activities, from performing activities and under authors’ agreements, as well as for farmers and their partners, i.e. for the persons who were eligible to become participants of the pension accumulation system only as from 1 January 2009 (Paragraph 3 (wording of 15 January 2009) of Article 4 of the Law);

– cumulative pension contributions for the persons covered by insurance from funds of the state budget are not calculated and paid (Paragraph 4 (wording of 15 January 2009) of Article 4 of the Law).

Thus, Paragraph 1 of Article 4 (wording of 15 January 2009) of the Law established a reduced amount of the cumulative pension contribution, Paragraph 3 of the same article established the amount of cumulative pension contributions for 2009 and 2010 for the persons who were eligible to become participants of the pension accumulation system only as from 1 January 2009, whereas Paragraph 4 thereof established that pension contributions for the persons covered by insurance from funds of the state budget are not calculated and paid.

It also needs to be noted that the Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System adopted on 15 January 2009 did not establish any compensation for the reduced cumulative pension contributions or for those no longer paid for certain persons.

  1. It has been mentioned that Article 2 of the Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System adopted on 15 January 2009 prescribes: “This Law shall come into force on 1 January 2009”, however, it was officially published in the official gazette “Valstybės žinios” on 17 January 2009. Thus, Article 2 of this law established the retroactive validity thereof.
  2. While assessing the compliance of Article 2 of the Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System adopted on 15 January 2009, wherein the retroactive validity of this law is established, with Paragraph 2 of Article 7 of the Constitution, whereby only laws which are published shall be valid, with Paragraph 1 of Article 70 thereof, whereby the laws adopted by the Seimas shall come into force after they are signed and officially promulgated by the President of the Republic, unless the laws themselves establish a later date for their coming into force, and with the constitutional principle of a state under the rule of law, whereby the power of legal acts is prospective and their retroactive validity is not allowed (lex retro non agit), unless the situation of a subject of legal relations could be alleviated without prejudice to other subjects of legal relations (lex benignior retro agit), it is important to assess whether the legislator was allowed, without violating provisions of the Constitution, to establish by this law that the cumulative pension contributions are reduced or that they are no longer paid to certain persons.

4.1. It needs to be noted that in the constitutional justice case at issue the Constitutional Court will also investigate whether:

– Paragraph 1 (wording of 15 January 2009) of Article 4 of the Law on Reform of the Pension System, insofar as it established the reduced amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him, but did not establish a mechanism for compensation of the reduced cumulative pension contributions, was not in conflict with Articles 23, 52 of the Constitution and the constitutional principle of a state under the rule of law;

– Paragraph 3 (wording of 15 January 2009) of Article 4 of the Law on Reform of the Pension System was not in conflict with Articles 23, 52 of the Constitution and the constitutional principle of a state under the rule of law;

– Paragraph 4 (wording of 15 January 2009) of Article 4 of the Law on Reform of the Pension System is not in conflict with Articles 23, 52 of the Constitution and the constitutional principle of a state under the rule of law.

4.2. The petitioner substantiates its doubts as regards the compliance of the impugned legal regulation with the Constitution by the fact that both the participants and the pension accumulation companies, while concluding agreements on pension contribution accumulation in a person’s pension account before the entry into force of the impugned law, essentially had the ground to expect that the contributions of the amount established in the Law then in force would be transferred to the participants’ pension accounts in the pension accumulation companies, they could predict the amount of their right of ownership, and they thus had legitimate expectations that the commitment undertaken by the state to transfer cumulative pension contributions of the established amount would be carried out, or that, upon changing the legal regulation, the sustained losses would be justly compensated to them.

According to the petitioner, after the amount of the contribution transferred to pension funds had been reduced by law, the rights of ownership of the participants of the pension accumulation system and the pension accumulation companies were unreasonably limited, their legitimate expectations were violated as regards the cumulative pension contributions of the amount established in the Law that used to be before the said reduction, or as regards just compensation of the sustained losses due to the changed legal regulation, also the right of the participants of the pension accumulation system to receive the old-age pension of the expected amount was denied.

  1. While deciding whether Paragraph 1 (wording of 15 January 2009) of Article 4 of the Law, insofar as it established the reduced amount of a part of the state social pension insurance contribution accumulated in a participant's personal pension account opened in a pension accumulation company selected by him, but did not establish a mechanism for compensation of the reduced cumulative pension contributions, Paragraph 3 thereof which provides the amount of the cumulative pensions for the persons who were eligible to become participants of the pension accumulation system only as from 1 January 2009, Paragraph 4 thereof which provides that cumulative pension contributions for the persons covered by insurance from funds of the state budget shall not be calculated and paid, were/are not in conflict with Articles 23, 52 of the Constitution and the constitutional principle of a state under the rule of law, one is to take into account the fact that, as mentioned before:

– the purpose of the Law is to provide the people of working age with more possibilities to take care of a better protection during their retirement, to receive a bigger pension and to guarantee a steady socially acceptable compromise between social solidarity and individual interests;

– the necessity to reduce the amount of the cumulative pension contribution was determined by the severe economic and financial situation of the state, also that, while approving the impugned legal regulation, one sought to ensure in the period of economic crisis that the state social insurance payments would be paid in time to the groups of residents in situations of extreme hardship who receive payments from the budget of the SSIF;

– the cumulative pension contribution is a part of the state social pension insurance contribution, i.e. a financial obligation for the state; when the amount of the said contribution is reduced, the part of the state social pension insurance contribution designated for the old-age pension proportionately increases, therefore, the general amount of the contribution of the state social pension insurance, i.e. the financial obligation for the state, does not change;

– the sum of the assets acquired in exchange for funds of the cumulative pension contributions (including the temporarily uninvested part of these funds) and investment income (costs) received from these assets (funds) belongs to every participant of the pension accumulation system by right of common shared ownership and is inherited;

– the amount of a future cumulative pension is determined by the amount of the funds accumulated from the cumulative pension contributions and the financial results of their investment; thus, the amount of those cumulative pension contributions is not a single factor determining the amount of a future cumulative pension.

5.1. It has been mentioned that the legislator, while regulating the relations of social security, enjoys broad discretion in this area, inter alia the discretion to choose a system of pensions; a law may inter alia establish such a model of the system of old-age pensions guaranteed by Article 52 of the Constitution, where collecting of the funds necessary to pay old-age pensions from the income of working persons at that time is combined with accumulation of funds designated for future old-age pensions in special pension funds.

Thus, the legislator, while implementing the powers arising inter alia from Article 52 of the Constitution, in the Law on Reform of the Pension System established a cumulative part of an old-age pension, where the funds designated for it are accumulated (inter alia by investing them) in special pension funds administered by private economic entities.

5.2. It has been mentioned that the right to demand that the pensionary maintenance payments, which are established in the Constitution and laws which are not in conflict with the Constitution, be paid stems from Article 52 of the Constitution, whereas under Article 23 thereof the proprietary aspects of this right are defended.

It has been mentioned that, after the legislator has chosen such a model of the system of old-age pensions, where the funds (part thereof) designated for old-age pensions are accumulated in special pension funds, the accumulated funds may not be identified with the cumulative pension itself (with payable payments), whose amount depends also upon the results of the economic activity (inter alia investing) of the economic entities administering the pension funds; only the right of the person to the funds already accumulated in these funds is to be related with protection of the rights of ownership under Article 23 of the Constitution.

5.2.1. The legislator, while establishing the reduced amount of cumulative pension contributions in Paragraph 1 (wording of 15 January 2009) of Article 4 of the Law, whereas in Paragraph 4 (wording of 15 January 2009) of the same article—the fact that cumulative pension contributions for the persons covered by insurance from funds of the state budget shall not be calculated and paid, did not reduce either the cumulative pension contributions that had already been calculated and paid (transferred), or the sum of the assets acquired in exchange for funds of the cumulative pension contributions (including the temporarily uninvested part of these funds) and investment income (costs) received from these assets (funds) (the said sum of the assets belongs to every participant of the pension accumulation system by right of common shared ownership and is inherited)—the legislator only amended (reduced) the amount of future contributions of cumulative pensions, therefore, it did not violate the imperatives of protection of the right of ownership arising from Article 23 of the Constitution.

Thus, it needs to be held that the legal regulation entrenched in Paragraphs 1, 4 (wording of 15 January 2009) of Article 4 of the Law did not violate the imperatives of protection of the right of ownership arising from Article 23 of the Constitution.

5.2.2. It has been mentioned that Paragraph 3 (wording of 15 January 2009) of Article 4 of the Law established the 1-percent income amount of the cumulative pension contribution for 2009, whilst the 2-percent income amount of the said contribution—for 2010, for the persons who received income from sports activities, from performing activities and under authors’ agreements, as well as farmers and their partners, i.e. those eligible to become participants of the pension accumulation system only as from 1 January 2009, therefore, in such a situation it was impossible that the property of these persons could be diminished.

Thus, it needs to be held that the legal regulation entrenched in Paragraph 3 (wording of 15 January 2009) of Article 4 of the Law did not violate the imperatives of protection of the right of ownership arising from Article 23 of the Constitution.

5.2.3. As mentioned before, the petitioner doubts inter alia as to the fact whether, after the Law had reduced the amount of the contribution transferred to pension funds, the rights of ownership of pension accumulation companies were not unreasonably limited and whether their legitimate expectations were not violated as regards the cumulative pension contributions of the amount established in the Law that used to be before the said reduction.

It has also been mentioned that, having established that the funds (or part thereof) designated for old-age pensions are accumulated in special pension funds administered by state or private economic entities, the legislator must also heed the provisions of Paragraphs 2 and 3 of Article 46 of the Constitution that the state shall support economic efforts and initiative that are useful to society and shall regulate economic activity so that it serves the general welfare of the Nation; 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 (an entity of economic activity) and society.

It has also been mentioned that, in case the legislator, while carrying out the constitutional obligation to guarantee a person’s right to an old-age pension, provides that an old-age pension (or part thereof) is accumulated in special funds administered by state or private subjects, a duty arises for it from the imperatives entrenched in Articles 46 and 52 of the Constitution to regulate the economic activity of these subjects so that the interests of a person (an entity of economic activity) and the society would be co-ordinated: inter alia one must establish the licencing and control of this activity, limitations upon administering the funds (inter alia investing thereof) transferred to pension funds, conditions for paying pension payments and other necessary conditions of the economic activity of economic entities administering pension funds.

As mentioned before, the legislator, while establishing in Paragraphs 1, 3 and 4 (wording of 15 January 2009) of Article 4 of the Law the reduced amount of cumulative pension contributions and the fact that cumulative pension contributions for the persons covered by insurance from funds of the state budget shall not be calculated and paid, did not reduce either the cumulative pension contributions that had already been calculated and paid (transferred), or the sum of the assets acquired in exchange for funds of these contributions (including the temporarily uninvested part of these funds) and investment income (costs) received from these assets (funds)—the legislator only amended (reduced) the amount of future contributions of cumulative pensions, therefore, it did not violate the imperatives of protection of the right of ownership arising from Article 23 of the Constitution.

It also needs to be noted that upon the reduction of the amount of cumulative pension contributions the companies lost not the part of the non-transferred cumulative pension contribution, but only certain income related with administration of those funds. It also needs to be noted that the amount of cumulative pension contributions is changeable and cannot be precisely established in advance, i.e. until the day of reception of the insured income by participants of the pension accumulation system, since that amount depends on the amount of the insured income received by the participants, which, however, can change at any time. Thus, pension accumulation companies may not have a legitimate expectation that cumulative pension contributions of a certain amount calculated in advance will be transferred to pension accumulation funds.

Thus, it needs to be held that the impugned legal regulation established in Paragraphs 1, 3 and 4 (wording of 15 January 2009) of Article 4 of the Law did not violate the rights of ownership and legitimate expectations of pension accumulated companies protected by Article 23 of the Constitution.

5.3. It has been mentioned that the legislator, having established that that a part of the funds designated for old-age pensions is transferred to special pension funds in order to accumulate future old-age pensions, in case of necessity (for example, during an economic crisis, etc.), when the economic and financial situation of the state becomes changed so that inter alia collecting of the funds necessary to pay old-age pensions is not ensured from the income of the persons working at that time, enjoys the powers inter alia to decide to temporarily reduce the part (transferred to special pension funds and designated for accumulation of future old-age pensions) of the funds collected from the said income, however, while doing so, the legislator must follow the imperatives arising from the Constitution, inter alia the principles of justice, reasonableness, proportionality, equality of rights, protection of legitimate expectations, legal certainty, legal security, and social solidarity, it must not deny the essence of such cumulative pension itself, and must not establish such a scale of the reduction that is not necessary in order to achieve the aforementioned objectives.

It has also been mentioned that the legal regulation entrenched in Paragraphs 1, 3 and 4 (wording of 15 January 2009) of Article 4 of the Law was determined by the occurred economic crisis, when the economic and financial situation of the state, irrespective of the application of various other measures for overcoming the economic crisis, changed so that inter alia collecting of the funds necessary to pay old-age pensions from the income of working persons at that time was not ensured.

5.4. It has been mentioned that the amount of the funds, which are transferred to special pension funds and which are designated for accumulation of an old-age pension (or a part thereof), is one of the preconditions to achieve good results of the economic activity (inter alia investment) of the economic entities administering these funds, therefore, if the legislator, in case of necessity (for example, upon occurrence of an economic crisis), decides to reduce this amount, the legislator not only may not deny the essence of the cumulative pension, but it also must seek to achieve the situation where the persons that have accumulated this pension would not sustain big losses, whereas in case such losses are unavoidable, the legislator must, while taking into account inter alia the financial and economic possibilities of the state, establish just compensation for such losses; various ways of such compensation may be chosen.

5.4.1. While assessing whether, upon occurrence of the economic crisis, upon establishing a reduced amount of cumulative pension contributions in Paragraph 1 (wording of 15 January 2009) of Article 4 of the Law a mechanism for compensation of the reduced cumulative pension contributions should have been established, one is to note that the reduction of the amount of those contributions from 5.5 percent to 3 percent of the income (while taking account of the fact that at the beginning of reform of the pension system, in 2004, even a smaller amount of these contributions, i.e. 2.5 percent of the income, was established) may not be assessed as such reduction of the contributions whereby the essence of the cumulative pension itself would be denied.

5.4.2. While assessing whether, upon establishing in Paragraph 4 (wording of 15 January 2009) of Article 4 of the Law that cumulative pension contributions for the persons covered by insurance from funds of the state budget shall not be calculated and paid, a mechanism for compensating cumulative pension contributions no longer paid for such persons should have been established, one is to note that by the part of the cumulative pension contributions no longer paid for such persons their state social insurance old-age pension is proportionately increased. It also needs to be noted that, as mentioned before, the sum of the assets acquired in exchange for funds of the cumulative pension contributions (including the temporarily uninvested part of these funds) and investment income (costs) received from these assets (funds) belongs to every participant of the pension accumulation system by right of common shared ownership and is inherited, therefore, after the legislator had decided that the cumulative pension contributions for such persons are not calculated and paid, the funds accumulated in private pension funds remained as ownership of the said persons. Thus, the right of the persons insured by funds of the state budget to an old-age pension is not denied, since the state continues to insure them by its own funds and guarantees them a state social insurance old-age pension.

5.4.3. It has been mentioned that Paragraph 3 (wording of 15 January 2009) of Article 4 of the Law established the 1-percent income amount of the cumulative pension contribution for 2009, whilst the 2-percent income amount of the said contribution—for 2010, for the of the persons specified in this paragraph, who were eligible to become participants of the pension accumulation system only as from 1 January 2009, therefore, in such a situation the cumulative pension contributions were not reduced. Consequently, these persons had not acquired the legitimate expectations that the cumulative pension contributions of a different amount would be paid for them, the imperatives of social security arising from Article 52 of the Constitution were not violated and the legislator does not have a duty to establish a mechanism for compensating such contributions.

5.4.4. Thus, it needs to be held that the fact that Paragraphs 1, 3 and 4 (wording of 15 January 2009) of Article 4 of the Law did not establish a mechanism for compensating the cumulative pension contributions no longer paid for the persons insured by funds of the state budget did not violate the imperatives arising from Article 52 of the Constitution and the constitutional principle of a state under the rule of law.

  1. Taking account of the arguments set forth, one is to draw a conclusion that Paragraph 1 (wording of 15 January 2009) of Article 4 of the Law on Reform of the Pension System, insofar as it established the reduced amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him, Paragraph 3 (wording of 15 January 2009) and Paragraph 4 (wording of 15 January 2009) of the same article were/are not in conflict with Articles 23, 52 of the Constitution and the constitutional principle of a state under the rule of law.
  2. While deciding whether Article 2 of the Law on Amending Article 4 of the Law on Reform of the Pension System adopted on 15 January 2009, in which the retroactive validity of this law is established, is not in conflict with the Constitution, one is to take account of the fact that, as mentioned before:

– the state social pension insurance contribution is a financial obligation for the state, whereas the cumulative pension contribution is a part of the latter; when the amount of the cumulative pension contribution is reduced, the part of the state social pension insurance contribution designated for the old-age pension proportionately increases (also, the state social insurance old-age pension also proportionately increases), whereas the total amount of the contribution of the state social pension insurance, i.e. the financial obligation for the state, does not change; however, a smaller cumulative pension is accumulated upon reduction of the amount of the cumulative pension contribution transferred to private pension funds, where that amount is one of the preconditions to achieve good results of the economic activity (inter alia investment) of the economic entities administering these funds—those results exert influence on the amount of a future cumulative pension;

– cumulative pension contributions (parts of state social insurance contributions) were transferred (paid) to pension funds every quarter, within 60 calendar days of the day of submission of information under established procedure (not later than until 15th day of the first month of the following quarter) to the SSIF board on the calculation of the sums of the insured income and social insurance contributions received by participants of accumulation of pensions during the previous quarter; thus, the approval of the impugned legal regulation was related to the calculation and payment of the quarterly contributions, i.e. the contributions of the period that had already begun—the 2009 quarter of January–March, and to the establishment (amendment) of the amount of those contributions.

7.1. It has been mentioned that the constitutional principle of a state under the rule of law presupposes inter alia the fact that the power of the legal acts is prospective, while retroactive validity of laws and other legal acts is not permitted (lex retro non agit), unless the situation of a subject of legal relations could be alleviated without prejudice to other subjects of legal relations (lex benignior retro agit); the prohibition to establish a date of the entry into force of a legal act that is earlier than the date of publishing of this legal act arises from the principles of legal certainty, legal security and legitimate expectations.

7.2. It needs to be noted that the impugned legal regulation consolidated in Paragraphs 1, 4 (wording of 15 January 2009) of Article 4 of the Law, whereby the amount of the cumulative pension contribution transferred to pension funds was changed (reduced), where such an amount is also one of the preconditions to achieve good results (exerting influence on the amount of a future cumulative pension) of the economic activity (inter alia investment) of the economic entities administering these funds, also whereby the state does not transfer any funds to pension funds for certain persons, is to be assessed as not favourable to participants of the pension accumulation system and pension accumulation companies, and although in view of its content the said legal regulation was/is not in conflict with the Constitution, it does not mean that it was allowed to establish its retroactive validity.

It also needs to be noted that although the impugned legal regulation consolidated in Paragraph 3 (wording of 15 January 2009) of Article 4 of the Law, whereby an amount of cumulative pension contributions for a new group of persons was established, in view of its content was not in conflict with the Constitution, it does not mean that it was allowed to establish its retroactive validity.

It has been mentioned that the Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System, Article 2 whereof prescribed that it would come into force on 1 January 2009, was adopted on 15 January 2009 and was officially published in the official gazette “Valstybės žinios” on 17 January 2009. Consequently, this legal regulation intervened in the legal relations related to the calculation and payment of the contribution of the period that had already begun, i.e. the 2009 quarter of January–March, and the said law established the retroactive validity of the said legal regulation.

  1. Thus, it needs to be held that the legislator, having established, by legal regulation consolidated in Article 2 of the Law on Amending Article 4 of the Law on Reform of the Pension System adopted on 15 January 2009, the retroactive validity the said law, violated the imperatives arising from Paragraph 2 of Article 7 and Paragraph 1 of Article 70 of the Constitution, as well as the constitutional principle of a state under the rule of law.

Taking account of the arguments set forth, one is to draw a conclusion that Article 2 of the Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System adopted on 15 January 2009 is in conflict with Paragraph 2 of Article 7, Paragraph 1 of Article 70 of the Constitution and the constitutional principle of a state under the rule of law.

  1. It has been mentioned that, on 17 February 2009, the Seimas adopted the Law on Amending Article 4 of the Law on Reform of the Pension System by Article 1 whereof it amended Paragraph 3 (wording of 15 January 2009) of Article 4 of the Law and prescribed the following therein:

“3. The amount of a pension contribution in respect of the income of the persons who received income from sports activities, the persons who received income from performing activities and the persons who received income under authors’ agreements as well as self-employed persons, as they are defined by the Republic of Lithuania Law on State Social Insurance, where compulsory state pension social insurance contributions at a reduced rate were payable in 2009 and 2010 on such income in accordance with the procedure laid down by the Republic of Lithuania Law on State Social Insurance, shall be 1 percent in 2009 and 2 percent in 2010.”

Article 2 of the said law provides that “the provisions of this Law shall be applicable as from 1 January 2009”, however, it was officially published in the official gazette “Valstybės žinios” on 5 March 2009.

  1. It needs to be noted that the following provisions of the Law were entrenched by Article 1 of the Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System adopted on 17 February 2009: the 1-percent income amount of the cumulative pension contribution established for 2009 and the 2-percent income amount of the said contribution established for 2010 are applied not to “famers and their partners” (as it had been established in Paragraph 3 (wording of 15 January 2009) of Article 4 of the Law), but to “self-employed persons” as they are defined in the Law on State Social Insurance (Paragraph 3 (wording of 17 February 2009) of Article 4 of the Law).

10.1. It needs to be noted that in Paragraph 3 (wording of 17 February 2009) of Article 4 of the Law the aforementioned amount of the cumulative pension contribution was established also for other self-employed persons for 2009–2010:

– for the persons who received income from sports activities, from performing activities and under authors’ agreements, as well as for farmers and their partners (named as self-employed persons as from 1 January 2009); Paragraph 3 (wording of 15 January 2009) of Article 4 of the Law also established, with regard to those persons, the 1-percent income amount of the cumulative pension contribution for 2009, whilst the 2 percent income amount of the said contribution—for 2010; thus, the legal regulation consolidated with regard to those persons in Paragraph 3 (wording of 17 February 2009) of Article 4 of the Law remained identical to that established in Paragraph 3 (wording of 15 January 2009) of the same article;

– for the self-employed persons—owners of individual enterprises, members of general partnerships and members of limited partnerships, the persons who were engaged in individual activities as defined in the Law on Personal Income Tax (advocates, assistant advocates, notaries, bailiffs, the persons holding business certificates and other persons), who, as mentioned before, in case the annual sum of their income until 1 January 2009 was smaller than 12 minimal monthly salaries, were eligible to become participants of the pension accumulation system only as from 1 January 2009;

– for the self-employed persons—owners of individual enterprises, members of general partnerships and members of limited partnerships, the persons who were engaged in individual activities as defined in the Law on Personal Income Tax (advocates, assistant advocates, notaries, bailiffs, the persons holding business certificates and other persons), who, as mentioned before, in case the annual sum of their income until 1 January 2009 was equal to 12 minimal monthly salaries or bigger, were eligible to become participants of the pension accumulation system prior to 1 January 2009.

10.2. Thus, after Article 1 of the Law on Amending Article 4 of the Law on Reform of the Pension System adopted on 17 February 2009 had amended Paragraph 3 (wording of 15 January 2009) of Article 4 of the Law, the said amount of cumulative pension contributions was established with regard to three different groups of persons, whereas Article 2 of the said law entrenched the retroactive validity thereof.

  1. While investigating the compliance of Article 2 of the Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System adopted on 17 February 2009 with Paragraph 2 of Article 7 and Paragraph 1 of Article 70 of the Constitution and with the constitutional principle of a state under the rule of law, whereby the power of legal acts is prospective and their retroactive validity is not allowed (lex retro non agit), unless the situation of a subject of legal relations could be alleviated without prejudice to other subjects of legal relations (lex benignior retro agit), it is important to elucidate whether the legislator was allowed, without violating provisions of the Constitution, to consolidate the legal regulation whereby Paragraph 3 (wording of 17 February 2009) of Article 4 of the Law established, for 2009, the amount of the cumulative pension contribution of 1 percent of the income on which state social insurance contributions are calculated, whilst the 2-percent of the said income—for 2010.

11.1. It needs to be noted that in the case at issue it is also investigated whether Paragraph 3 (wording of 17 February 2009) of Article 4 of the Law on Reform of the Pension System is not in conflict with Articles 23, 52 of the Constitution and the constitutional principle of a state under the rule of law.

11.2. The arguments of the petitioner regarding the compliance of Paragraph 3 (wording of 17 February 2009) of Article 4 of the Law with the Constitution are essentially analogous to its arguments regarding the compliance of Paragraph 3 (wording of 15 January 2009) of the same article with the Constitution.

  1. While deciding whether Paragraph 3 (wording of 17 February 2009) of Article 4 of the Law is not in conflict with the Constitution, it needs to be noted that, as mentioned before, the legal regulation consolidated therein with regard to the persons who received income from sports activities, from performing activities and under authors’ agreements, as well as farmers and their partners (named as self-employed persons as from 1 January 2009), who were eligible to become participants of the pension accumulation system only as from 1 January 2009, remained identical to that established in Paragraph 3 (wording of 15 January 2009) of the same article.

Thus, having held that Paragraph 3 (wording of 15 January 2009) of Article 4 of the Law is not in conflict with Articles 23, 52 of the Constitution and the constitutional principle of a state under the rule of law, on the grounds of the same arguments one is to hold that Paragraph 3 (wording of 17 February 2009) of Article 4 of the Law, insofar as it established, for 2009, the 1-percent income amount of the cumulative pension contribution, whilst the 2-percent income amount of the said contribution—for 2010, for the persons who received income from sports activities, from performing activities and under authors’ agreements, as well as farmers and their partners (named as self-employed persons as from 1 January 2009), i.e. the persons who were eligible to become participants of the pension accumulation system only as from 1 January 2009, is not in conflict with Articles 23, 52 of the Constitution and the constitutional principle of a state under the rule of law.

  1. As mentioned before, after Paragraph 3 (wording of 17 February 2009) of Article 4 of the Law widened the circle of persons with regard to whom the aforesaid amount of the cumulative pension contribution was established for 2009–2010, aside from farmers and their partners, one also attributed other self-employed persons—owners of individual enterprises, members of general partnerships and members of limited partnerships, the persons who were engaged in individual activities as defined in the Law on Personal Income Tax (advocates, assistant advocates, notaries, bailiffs, the persons holding business certificates and other persons)—to the aforementioned persons, provided that the annual sum of their income prior to 1 January 2009 was smaller than 12 minimal monthly salaries; all these persons started to be insured by compulsory state social pension insurance to receive the main and supplementary parts of a pension only as from 1 January 2009 and they were eligible to become participants of the pension accumulation system only as from that date.

Thus, upon adoption of the Law on Amending Article 4 of the Law on Reform of the Pension System on 17 February 2009, also with regard to the other self-employed persons who were eligible to become participants of the pension accumulation system only as from 1 January 2009 the 1-percent income amount of the cumulative pension contribution for 2009, whilst the 2-percent income amount of the said contribution for 2010, were established.

13.1. While deciding whether Paragraph 3 (wording of 17 February 2009) of Article 4 of the Law, insofar as it established the 1-percent income amount of the cumulative pension contribution for 2009, whilst the 2-percent income amount of the said contribution—for 2010, for the self-employed persons who were eligible to become participants of the pension accumulation system only as from 1 January 2009, is not in conflict with the Constitution, it needs to be noted that the 1-percent income amount of the cumulative pension contribution for 2009, whilst the 2-percent income amount of the said contribution for 2010, as established for those persons may not be assessed as reduction of cumulative pension contributions. Thus, those persons had not acquired any legitimate expectations that cumulative pension contributions of a different amount would be transferred to their pension accounts in pension accumulation companies, therefore, the imperatives of protection of ownership arising from Article 23 of the Constitution and the imperatives of social security arising from Article 52 thereof were not violated.

13.2. Thus, having held that Paragraph 3 (wording of 15 January 2009) of Article 4 of the Law, as well as Paragraph 3 (wording of 17 February 2009) of the same article, insofar as they established the 1-percent income amount of the cumulative pension contribution for 2009, whilst the 2-percent income amount of the said contribution for 2010, for the persons who received income from sports activities, from performing activities and under authors’ agreements, as well as farmers and their partners (named as self-employed persons as from 1 January 2009), i.e. the persons who were eligible to become participants of the pension accumulation system only as from 1 January 2009, is not in conflict with Articles 23, 52 of the Constitution and the constitutional principle of a state under the rule of law, on the grounds of analogous arguments one is to hold that Paragraph 3 (wording of 17 February 2009) of the Law, insofar as it established the 1-percent income amount of the cumulative pension contribution for 2009, whilst the 2-percent income amount of the said contribution for 2010, for the other self-employed persons who were eligible to become participants of the pension accumulation system only as from 1 January 2009, is not in conflict with Articles 23, 52 of the Constitution and the constitutional principle of a state under the rule of law.

  1. While deciding whether Paragraph 3 (wording of 17 February 2009) of Article 4 of the Law, insofar as it established, for 2009–2010, with regard to the self-employed persons who concluded agreements on pension accumulation prior to 1 January 2009, the reduced amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him, is not in conflict with Articles 23, 52 of the Constitution and the constitutional principle of a state under the rule of law, it needs to be noted that, as mentioned before, with regard to such persons the impugned legal regulation reduced the amount of cumulative pension contributions from 5.5 percent (for 2007–2008) of their income to 1 percent of their income for 2009 and to 2 percent of their income—for 2010.

It has also been mentioned that, under Item 4 (wording of 17 February 2009) of Paragraph 1 of Article 6 of the Law on Approving the Indicators of the 2009 Budget of the State Social Insurance Fund, for 2009, with respect to those self-employed persons (as well as with respect to the persons who received income from sport activities, from performing activities and under authors’ agreements, as well as farmers and their partners (Items 1–3 (wording of 18 December 2009) of Paragraph 1 of Article 6)) the reduced rate of state social insurance contributions were approved. Thus, such reduction of the amount of cumulative pension contributions with respect to those persons was related to the reduction of the amount of state social insurance contributions for them. Therefore, the legislator was also allowed to establish that, upon reduction of the overall amount of state social insurance contributions, the part of those contributions that had to be transferred to private pension funds would correspondingly be reduced.

Thus, it needs to be held that the legal regulation consolidated in Paragraph 3 (wording of 17 February 2009) of Article 4 of the Law, whereby, upon reduction of the overall amount of state social insurance contributions, a reduced amount of the cumulative pension contribution was established with respect to the self-employed persons who concluded agreements on pension accumulation prior to 1 January 2009, the right of those persons to an old-age pension was not denied and the imperatives of social security arising from Article 52 of the Constitution, the imperatives of protection of ownership arising from Article 23 thereof, as well as the constitutional principle of a state under the rule of law, were not violated.

  1. Taking account of the arguments set forth, one is to draw a conclusion that Paragraph 3 (wording of 17 February 2009) of Article 4 of the Law on Reform of the Pension System is not in conflict with Articles 23, 52 of the Constitution and the constitutional principle of a state under the rule of law.
  2. While deciding whether Article 2 of the Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System adopted on 17 February 2009 is not in conflict with Paragraph 2 of Article 7, Paragraph 1 of Article 70 of the Constitution and the constitutional principle of a state under the rule of law, it needs to be noted that from the aspect impugned in the case at issue the legal regulation consolidated therein is analogous to the legal regulation established in Article 2 of the Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System adopted on 15 January 2009.

Thus, having held that Article 2 of the Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System adopted on 15 January 2009 is in conflict with Paragraph 2 of Article 7, Paragraph 1 of Article 70 of the Constitution and the constitutional principle of a state under the rule of law, on the grounds of analogous arguments it needs to be held that Article 2 of the Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System adopted on 17 February 2009 is in conflict with Paragraph 2 of Article 7, Paragraph 1 of Article 70 of the Constitution and the constitutional principle of a state under the rule of law.

  1. Having held that Article 2 of the Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System adopted on 15 January 2009, which established the retroactive activity of the impugned provisions consolidated in Paragraphs 1, 3 and 4 (wording of 15 January 2009) of Article 4 of the Law, also that Article 2 of the Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System adopted on 17 February 2009, which established the retroactive validity of the impugned provision consolidated in Paragraph 3 (wording of 17 February 2009) of Article 4 of the Law, are in conflict with the Constitution, it needs to be held that the Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System adopted on 15 January 2009 and the Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System adopted on 17 February 2009 came into force under procedure established in Paragraph 2 of Article 7 and Paragraph 1 of Article 70 of the Constitution and in Paragraph 1 of Article 5 of the Republic of Lithuania Law on Procedure of Publication and Coming into Force of Laws and Other Legal Acts (wording of 10 December 2002), i.e. from the official publishing of those laws in the official gazette “Valstybės žinios”.

V

On the compliance of Paragraph 1 (wording of 28 April 2009) of Article 4 of the Law on Reform of the Pension System with Articles 23, 52 of the Constitution and the constitutional principle of a state under the rule of law.

  1. It has been mentioned that in the constitutional justice case at issue the Constitutional Court will inter alia investigate whether Paragraph 1 (wording of 28 April 2009) of Article 4 of the Law, insofar as it established the reduced amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him, without establishing a mechanism for compensation of the reduced pension contributions, is not in conflict with Articles 23, 52 of the Constitution and the constitutional principle of a state under the rule of law.

The arguments of the petitioner regarding the compliance of Paragraph 1 (wording of 28 April 2009) of Article 4 of the Law with the Constitution are, in the impugned aspect, essentially analogous to its arguments regarding the compliance of Paragraph 1 (wording of 15 January 2009) of this article with the Constitution.

  1. It has been mentioned that, on 28 April 2009, the Seimas adopted the Law on Amending Article 4 of the Law on Reform of the Pension System (which was published in the official gazette “Valstybės žinios” on 12 May 2009), Article 2 whereof established 1 July 2009 as the date of its coming into force; Article 1 of this law amended Paragraph 1 (wording of 15 January 2009) of Article 4 of the Law.

It needs to be noted that the purpose of the Law on Amending Article 4 of the Law on Reform of the Pension System which was adopted on 28 April 2009, was, as it is obvious from the explanatory note to its draft, to reduce the expenses of the SSIF budget in the period of the economic crisis and when the economic and financial situation of the state, irrespective of application of various other measures to overcome the economic crisis, changed so that inter alia one did not ensure the collecting of the funds necessary for payment of the pensions.

It has been mentioned that Paragraph 1 (wording of 28 April 2009) of Article 4 of the Law prescribed:

“1. The amount of the pension contribution in 2004 shall be 2.5 percent, in 2005—3.5 percent, in 2006—4.5 percent, in 2007 and 2008—5.5 percent, from 1 January 2009 till 30 June 2009—3 percent, from 1 July 2009 till 31 December 2009 and in 2010—2 percent of the income of participants on which state social insurance contributions are calculated. For the persons who became participants of the pension accumulation system till (and including) 30 June 2009, the amount of the pension contribution in 2011 shall be 5.5 percent, in 2012, 2013 and 2014—6 percent and from 1 January 2015—5.5 percent of the income of participants on which state social insurance contributions are calculated. For the persons who became participants of the pension accumulation system as from 1 July 2009, the amount of the pension contribution from 1 January 2011 shall be 5.5 percent of the income of participants on which state social insurance contributions are calculated.”

2.1. Thus, upon the Seimas’ adoption of the Law on Amending Article 4 of the Law on Reform of the Pension System on 28 April 2009, one amended the amount of the cumulative pension contributions which had been established in Paragraph 1 (wording of 15 January 2009) of Article 4 of the Law—from 1 July 2009 till 1 January 2011, instead of 3 percent, the amount of the cumulative pension contribution of 2 percent of the income was established, i.e. already by 3.5 percent smaller than it had to be under Paragraph 1 (wording of 3 December 2002) of Article 4 of the Law. The legal regulation enshrined in Paragraph 1 (15 January 2009) of Article 4 of the Law, under which the 3-percent income amount of this contribution was established from 1 January 2009 till 1 July 2009, remained unchanged.

2.2. Having held that the legal regulation enshrined in Paragraph 1 (wording of 15 January 2009) of Article 4 of the Law, under which inter alia for the years 2009 and 2010 one established the 3-percent income amount of this contribution, was not in conflict with Articles 23, 52 of the Constitution and with the constitutional principle of a state under the rule of law, while referring to the analogous arguments, one is to hold that Paragraph 1 (wording of 28 April 2009) of Article 4 of the Law, insofar as it established the 3-percent income amount of the cumulative pension contribution, is not in conflict with Articles 23, 52 of the Constitution and the constitutional principle of a state under the rule of law.

2.3. It needs to be noted that in Paragraph 1 (wording of 28 April 2009) of Article 4 of the Law, for all the participants of the pension accumulation system to whom the legal regulation enshrined in this paragraph is applied, one established an equal amount of the cumulative pension contribution: from 1 July 2009 till 1 January 20110—the reduced amount of 2 percent of the income and as from 1 January 2011—5.5 percent of the income (i.e. the amount established in Paragraph 1 (wording of 3 December 2002) of Article 4 of the Law prior to the reduction of these contributions).

2.4. It also needs to be noted that Paragraph 1 (wording of 28 April 2009) of Article 4 of the Law established a different amount of the reduced cumulative pension contributions for 2012–2014:

– for the persons who became participants of the pension accumulation system prior to 1 July 2009, one established the amount of the cumulative pension contribution of 6 percent from the income, i.e. 0.5 percent bigger than the one existing in 2007–2008;

– for the persons who became participants of the pension accumulation system as from 1 July 2009, one established the amount of the cumulative pension contribution of 5.5 percent from the income.

  1. While deciding whether Paragraph 1 (wording of 28 April 2009) of Article 4 of the Law, insofar as it established the reduced 2-percent income amount of the cumulative pension contributions without establishing a mechanism for compensation of the reduced pension contributions, is not in conflict with the Constitution, one is to note that, as mentioned before, the cumulative pension contribution is a part of the state social pension insurance contribution, i.e. a financial obligation for the state. Upon reduction of its amount, the part of contribution designated for the state social insurance old-age pension proportionately increases, thus, the total amount of the contribution of the state social pension insurance, i.e. a financial obligation for the state, does not change; the amount of a future cumulative pension is determined by the amount of the funds accumulated from cumulative pension contributions and the financial results of their investment; thus, the amount of cumulative pension contributions is not the only factor upon which the amount of a future cumulative pension depends.
  2. It has been mentioned that the right of the person to the funds that are already accumulated in the pension funds is to be related to the protection of the rights of ownership, the proprietary aspects of this right are defended under Article 23 of the Constitution. It has also been mentioned that when it is necessary (for example, upon occurrence of an economic crisis, etc.) the economic and financial situation of the state changes so that inter alia one does not ensure the collection of the funds necessary to pay old-age pensions from the income of the working persons at that time, the legislator has the powers inter alia to decide to temporarily reduce the part of the funds collected from that income which is transferred to the special pension funds and designated for accumulation of future old-age pensions, however, while doing that it must heed the imperatives arising from the Constitution, inter alia the requirements of justice, reasonableness, proportionality and equality of rights.

4.1. It needs to be noted that, while establishing a reduced part of the cumulative pension contributions in Paragraph 1 (wording of 28 April 2009) of Article 4 of the Law, the legislator did not reduce the already calculated and paid (transferred) cumulative pension contributions, the property acquired for the funds of the cumulative pension contributions (including the part of these funds which was temporarily not invested) and the sum of the yield (input) received from the funds of that property (funds) which belongs, as a common shared ownership, to every participant of the pension accumulation system, and is inherited—it only amended (reduced) the amount of future cumulative pension contributions, therefore, it did not violate the imperatives of the protection of the right of ownership arising from Article 23 of the Constitution.

4.2. It also needs to be noted that, as mentioned before, upon reduction of the amount of the cumulative pension contributions, the pension accumulation companies lost not the non-transferred part of the cumulative pension contribution, but only certain income linked to the administration of these funds. It has also been mentioned that the amount of the cumulative pension contributions is variable; it may not be established in advance, i.e. prior to the day of reception of the insured income by the participants of pension accumulation, as it depends on the amount of the insured income received by the participants of pension accumulation which may change at any time. Thus, as mentioned before, pension accumulation companies may not have legitimate expectations that certain cumulative pension contributions of a certain amount calculated in advance will be transferred to pension accumulation funds.

4.3. Thus, it needs to be held that the legal regulation consolidated in Paragraph 1 (wording of 28 April 2009) of Article 4 of the Law, under which one reduced the amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him, did not violate the imperatives of the protection of the right of ownership arising from Article 23 of the Constitution.

  1. While assessing whether, upon occurrence of the economic crisis and upon establishment of the reduced 2-percent income amount of the cumulative pension contributions in Paragraph 1 (wording of 28 April 2009) of Article 4 of the Law, the compensation for the reduced cumulative pension contributions should have been established, one is to note that, as mentioned before, the persons who have acquired certain rights according to the law, have the right to reasonably expect that these rights will be maintained and implemented for the established time period; if the legislator, in case of necessity (for example, upon occurrence of an economic crisis), decides to reduce the part of the funds collected from the income of working persons, which are transferred to special pension funds and which are designated for accumulation of a future old-age pension, the legislator not only is not allowed to deny the essence of the cumulative pension, but it also must seek to achieve the situation where the persons that have accumulated this pension would not sustain big losses, whereas in case such losses are unavoidable, the legislator must, while taking into account inter alia the financial and economic possibilities of the state, establish just compensation for such losses; various ways of such compensation may be chosen.

5.1. It needs to be noted that the consolidation of the 2-percent income amount of the cumulative pension contributions established in Paragraph 1 (wording of 28 April 2009) of Article 4 of the Law for the period of time from 1 July 2009 till 1 January 2011 (i.e. the amount already smaller by 3.5 percent of the income than the amount supposed to be transferred, according to Paragraph 1 (wording of 3 December 2002) of Article 4 of the Law, as from 2007, and even smaller than the initial amount of these contributions—2.5 percent of the income established in this paragraph in 2004) is to be assessed as an essential reduction of those contributions for the persons who became participants of the pension accumulation system prior to 1 July 2009 (as mentioned before, it is clear from the explanatory note to the draft Law (wording of 3 December 2002) that a smaller cumulative pension contribution than that of the amount of 5 percent of the income would not guarantee the proper investment return for participants of the pension accumulation system and would only have a small impact in reforming the existing pension system).

5.2. It has been mentioned that Paragraph 1 (wording of 28 April 2009) of Article 4 of the Law prescribed that for the persons who became participants of the pension accumulation system prior to 1 July 2009, for 2012, 2013 and 2014 the increased amount of the cumulative pension contribution was established—6 percent of the income, i.e. by 0.5 percent of the income bigger than the one existing for 2007–2008.

Thus, such legal regulation enshrined in Paragraph 1 (wording of 28 April 2009) of Article 4 of the Law, whereby with regard to the persons who became participants of the pension accumulation system prior to the reduction of the cumulative pension contributions, the amount of the cumulative pension contributions established for 2012–2014, which was by 0.5 percent of the income bigger than the amount of those contributions established before the reduction, is to be assessed as compensation of the reduced cumulative pension contributions that complies with the imperatives arising from Article 52 of the Constitution and the constitutional principle of a state under the rule of law.

5.3. It needs to be noted that the legal regulation enshrined in Paragraph 1 (wording of 28 April 2009) of Article 4 of the Law, whereby with regard to the persons who became participants of the pension accumulation system as from 1 July 2009 the amount of the cumulative pension contribution of 5.5 percent of the income was established as from 1 January 2011, is to be assessed as complying with the imperatives arising from Article 52 of the Constitution and the constitutional principle of a state under the rule of law, since for these persons the amount of the cumulative pension contributions was not reduced.

5.4. It has been mentioned that the petitioner impugns the legal regulation enshrined in Paragraph 1 (wording of 28 April 2009) of Article 4 of the Law also in the aspect that, according to it, by reducing, by means of a law, the amount of the cumulative pension contribution, one violated the legitimate expectations of persons and denied the right of the participants of the pension accumulation system to receive an old-age pension of a certain expected amount.

It needs to be noted that, as mentioned before, the amount of a cumulative pension is determined by the amount of the funds accumulated from cumulative pension contributions and the financial results of their investment; thus, the amount of cumulative pension contributions is not the only factor upon which the amount of a future cumulative pension depends. Thus, there is no ground to state that the impugned legal regulation violated the legitimate expectations of the parties concerned to receive a pension of a certain expected amount in the future.

  1. Thus, it needs to be held that by consolidating the reduced amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him in Paragraph 1 (wording of 28 April 2009) of Article 4 of the Law and having provided for compensation of the reduced cumulative pension contributions, one did not violate the imperatives arising from Article 52 of the Constitution and the constitutional principle of a state under the rule of law.
  2. Taking account of the arguments set forth, one is to draw a conclusion that Paragraph 1 (wording of 28 April 2009) of Article 4 of the Law on Reform of the Pension System, insofar as it established the reduced amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him, was not in conflict with Articles 23, 52 of the Constitution and the constitutional principle of a state under the rule of law.

VI

On the compliance of Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law on Reform of the Pension System with Articles 23, 29, 52 of the Constitution and the constitutional principle of a state under the rule of law.

  1. It has been mentioned that in the constitutional justice case at issue the Constitutional Court will inter alia investigate whether Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law, insofar as it established the reduced amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him, without establishing a mechanism for compensation of the reduced pension contributions, in not in conflict with Articles 23, 29, 52 of the Constitution and the constitutional principle of a state under the rule of law.
  2. The arguments of the petitioner regarding the compliance of Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law with Articles 23, 52 of the Constitution and the constitutional principle of a state under the rule of law are, in the impugned aspect, essentially analogous to its arguments regarding the compliance of Paragraph 1 (wordings of 15 January 2009 and 28 April 2009) of this article with the Constitution.

According to the petitioner, after Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law had established, as from 1 January 2011, the reduced amount of the cumulative pension contribution for the persons who became participants of the pension accumulation system as from 1 July 2009, the legitimate expectations acquired by them to accumulate 5.5 percent of their income in pension funds as from 1 January 2001 and their right to receive the old-age pension of the amount provided for in the previously valid provisions of the Law were denied; in addition, the legislator, by reducing the cumulative pension contributions, violated the principle of equality of all persons consolidated in Article 29 of the Constitution, since it groundlessly granted privileges at the expense of the participants of the pension accumulation system to persons receiving state social insurance pensions and to persons who have the insured income, but do not participate in the pension accumulation system.

  1. It has been mentioned that, on 30 June 2010, the Seimas adopted the Law on Amending Article 4 of the Law on Reform of the Pension System which came into force on 13 July 2010 and whose Article 1 amended Paragraph 1 (wording of 28 April 2009) of Article 4 of the Law.

It needs to be noted that the purpose of the Law on Amending Article 4 of the Law on Reform of the Pension System adopted on 30 June 2010, was, as it is obvious from inter alia the explanatory note to its draft, to reduce the expenses of the SSIF budget in the period of the economic crisis and when the economic and financial situation of the state, irrespective of application of various other measures to overcome the economic crisis, changed so that inter alia one did not ensure the collection of the funds necessary for payment of pensions.

Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law prescribed:

“1. The amount of the pension contribution in 2004 shall be 2.5 percent, in 2005—3.5 percent, in 2006—4.5 percent, in 2007 and 2008—5.5 percent, from 1 January 2009 to 30 June 2009—3 percent, and from 1 July 2009—2 percent of the income of participants on which state social insurance contributions are calculated.”

It has also been mentioned that Article 2 of Law on Amending Article 4 of the Law on Reform of the Pension System which was adopted on 30 June 2010 prescribes: “The Government of the Republic of Lithuania, having stated that the extreme situation in the state is over, shall provide the Seimas of the Republic of Lithuania with the draft laws on increasing the rate of the cumulative pension contribution.”

3.1. It also needs to be noted that Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law retained the 2-percent income amount of the cumulative pension contribution established in the same paragraph (wording of 28 April 2009) as from 1 July 2009, but, unlike the previous legal regulation, it did not specify a concrete time period until which this reduced amount of the contributions would be applied.

While taking account of the fact that Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law established, as from 1 July 2009, the same 2-percent income amount of the cumulative pension contribution as it had been established previously in the same paragraph (wording of 28 April 2009), also while taking account of the arguments set forth in Item 4 of Chapter V of the reasoning part of this ruling of the Constitutional Court, one is to hold that the legal regulation consolidated in Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law, whereby the reduced 2-percent income amount of the cumulative pension contribution was established, did not violate the imperatives of protection of the right of ownership arising from Article 23 of the Constitution.

3.2. It also needs to be noted that Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law, if compared with the legal regulation previously consolidated in the same paragraph (wording of 28 April 2009), no longer contains the provisions that used to establish:

– the 5.5-percent income amount of the cumulative pension contribution for the persons who became participants of the pension accumulation system as from 1 January 2011;

– the 5.5-percent income amount of the cumulative pension contribution for 2011, 6 percent—for 2012–2014, and 5.5 percent—as from 2015 for the persons who became participants of the pension accumulation system prior to 1 July 2009.

However, as mentioned before, Article 2 of Law on Amending Article 4 of the Law on Reform of the Pension System which was adopted on 30 June 2010 consolidated the duty of the Government, upon stating that the extreme situation in the state is over, to provide the Seimas with the draft laws on increasing the rate of the cumulative pension contribution.

  1. While deciding whether Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law, insofar as it established the reduced amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him, but did not establish a mechanism for compensation of the reduced cumulative pension contributions, is not in conflict with Article 52 of the Constitution and the constitutional principle of a state under the rule of law, one is to note that, as mentioned before, Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law established, as from 1 July 2009, the 2-percent income amount of the cumulative pension contribution for all participants of the pension accumulation system. The said amount:

– is to be assessed, while taking account of the arguments set forth in Item 5.1 of Chapter V of the reasoning part this ruling of the Constitutional Court, as an essential reduction of those contributions with regard to the persons who became participants of the pension accumulation system prior to 1 July 2009;

– is not to be assessed as reduction of those contributions with regard to the persons who became participants of the pension accumulation system as from 1 July 2009; however, while taking account of the fact that this paragraph no longer contains the provision that inter alia the 5.5-percent income amount of the cumulative pension contribution is applied to those persons as from 1 January 2011, the said persons, before the entry into force of the Law on Amending Article 4 of the Law on Reform of the Pension System adopted on 30 June 2010, i.e. prior to 13 July 2010, even though the amount of the aforementioned contributions had not been reduced with regard to them, could reasonably expect that the amounts of those contributions would be increased as from 1 January 2011.

4.1. While assessing whether the essential reduction of cumulative pension contributions with regard to the persons who became participants of the pension accumulation system prior to 1 July 2009 was provided in Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law without establishing compensation for the reduced contributions, one is to note that Article 2 of the Law on Amending Article 4 of the Law on Reform of the Pension System adopted on 30 June 2010 consolidated the duty of the Government, upon stating that the extreme situation in the state is over, to provide the Seimas with the draft laws on increasing the rate of the cumulative pension contribution.

It has been mentioned that the amount of the funds, which are transferred to special pension funds and which are designated for accumulation of an old-age pension (or a part thereof), is one of the preconditions to achieve good results of the economic activity (inter alia investment) of the economic entities administering these funds, therefore, if the legislator, in case of necessity (for example, upon occurrence of an economic crisis), decides to reduce this amount, the legislator not only may not deny the essence of the cumulative pension, but it also must seek to achieve the situation where the persons that have accumulated this pension would not sustain big losses, whereas in case such losses are unavoidable, the legislator must, while taking into account inter alia the financial and economic possibilities of the state, establish just compensation for such losses; various ways of such compensation may be chosen.

Thus, while assessing the legal regulation consolidated in Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law with regard to the persons who became participants of the pension accumulation system prior to 1 July 2009 together with the legal regulation consolidated in Article 2 of the Law on Amending Article 4 of the Law on Reform of the Pension System adopted on 30 June 2010, one is to hold that the legislator, having provided that the rate of the cumulative pension contribution would be increased after there has been a statement that the extreme situation in the state is over, created a precondition for compensation of the reduced cumulative pension contributions.

4.2. It needs to be noted that, as mentioned before, the legal regulation established in Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law did not reduce the amount of the cumulative pension contribution for the persons who became participants of the pension accumulation system as from 1 July 2009.

  1. It has been mentioned that the protection of legitimate expectations, legal certainty and legal security are inseparable elements of the principle of a state under the rule of law; the constitutional principles of the protection of legitimate expectations, legal certainty and legal security imply the obligation of the state to secure the certainty and stability of the legal regulation, to protect the rights of persons, to respect the legitimate interests and legitimate expectations; these principles inter alia imply that the state must fulfil all its undertaken obligations to the person; if the protection of legitimate expectations of persons, legal certainty and legal security is not ensured, the trust of the person in the state and law is not secured.

5.1. It has also been mentioned that Paragraph 1 (wording of 28 April 2009) of Article 4 of the Law established that, as from 1 January 2011, the 5.5-percent income amount of the cumulative pension contribution would be applied to the persons who became participants of the pension accumulation system as from 1 July 2009, thus, due to this legal regulation the legitimate expectations arose on the part of those persons that the amount of those contributions would be increased.

5.2. While assessing the compliance of Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law, insofar as with regard to the persons who became participants of the pension accumulation system from 1 July 2009 till 13 July 2010 as well as with regard of the other participants of the pension accumulation system to whom the legal regulation consolidated in this paragraph is applied, it established the 2-percent income amount of the cumulative pension contribution as from 1 July 2009 and no longer provided that, as from 1 January 2011, the 5.5-percent income amount of the cumulative pension contribution would be applied to the said persons, with the Constitution, one is to note that although due to the legal regulation consolidated in Paragraph 1 (wording of 28 April 2009) of Article 4 of the Law the legitimate expectations arose on the part of those persons that, as from 1 January 2011, the 5.5-percent income amount of the cumulative pension contribution would be applied, however, the failure of the implementation of these expectations due to the economic crisis, when the economic and financial situation of the state, irrespective of the application of various other measures for overcoming the economic crisis, changed so that inter alia collecting of the funds necessary to pay old-age pensions was not ensured, is constitutionally justifiable.

It also needs to be noted that the provision of Article 2 of the Law on Amending Article 4 of the Law on Reform of the Pension System adopted on 30 June 2010 that the Government, having stated that the extreme situation in the state is over, shall provide the Seimas with the draft laws on increasing the rate of the cumulative pension contribution, when construed as the obligation of the legislator to increase the amount of the cumulative pension contributions for all participants of the pension accumulation system and as a precondition for compensating the reduced cumulative pension contributions, is to be assessed as proper ensuring of protection of the legitimate expectations of the parties concerned.

Thus, it needs to be held that the legal regulation consolidated in Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law, which established, as from 1 July 2009, the 2-percent income amount of the cumulative pension contribution for the persons who became participants of the pension accumulation system from 1 July 2009 till 13 July 2010 and no longer provided that, as from 1 January 2011, the 5.5-percent income amount of the cumulative pension contribution would be applied to the said persons, did not violate the imperative of legitimate expectations arising from the constitutional principle of a state under the rule of law.

  1. It has been mentioned that, subsequent to the petitioner’s petition No. 1B-46/2011, in the constitutional justice case at issue the Constitutional Court will also investigate whether Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law, insofar as it established the reduced amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him, was not in conflict with Article 29 of the Constitution.

In the opinion of the petitioner, the legislator, by reducing the cumulative pension contributions by means of the legal regulation consolidated in Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law, violated the principle of equality of all persons, since it groundlessly granted privileges at the expense of the participants of the pension accumulation system to persons receiving state social insurance pensions and to persons who have the insured income, but do not participate in the pension accumulation system.

6.1. It has been mentioned that a law may inter alia establish such a model of the system of old-age pensions, where collecting of the funds necessary to pay old-age pensions from the income of working persons at that time is combined with accumulation of the funds designated for future old-age pensions in special pension funds.

It has also been mentioned that the legislator, having established that that a part of the funds designated for old-age pensions is transferred to special pension funds in order to accumulate future old-age pensions, and, in case of necessity (for example, during an economic crisis, etc.), when the economic and financial situation of the state becomes changed so that inter alia collecting of the funds necessary to pay old-age pensions is not ensured from the income of the persons working at that time, while reducing the part (transferred to special pension funds and designated for accumulation of future old-age pensions) of the funds collected from the said income, must follow the imperatives arising from the Constitution, inter alia the principle of equality of persons, which, as mentioned before, would be violated if certain persons or groups thereof were treated in a different manner, even though there are not any differences in the character and extent between these groups that such uneven treatment could be objectively justified.

6.2. It has been mentioned that the cumulative pension contribution is a part of the state social pension insurance contribution, i.e. a financial obligation for the state; when the amount of the cumulative pension contribution is reduced, the part of the state social pension insurance contribution designated for the old-age pension proportionately increases and the total amount of the contribution of the state social pension insurance, i.e. the financial obligation for the state, does not change.

6.3. It needs to be noted that there is an essential difference between the participants of the pension accumulation system and the persons receiving state social insurance pensions, since the first group pay state social insurance contributions and will receive both state social insurance pensions and cumulative pensions, whereas the second group have already been awarded and are paid state social insurance old-age pensions. Thus, those different groups of persons may be treated differently and the different legal regulation established for them is objectively justified.

It also needs to be noted that there is also an essential difference between the participants of the pension accumulation system and the persons who pay state social insurance pension contributions but do not participate in the pension accumulation system, because only the participants of the pension accumulation system have concluded agreements with pension accumulation companies on accumulation and investment of a part of the state social insurance pension contribution. Thus, after the legislator decided to reduce the amount of cumulative pension contributions, it was possible to reduce that amount only for the persons participating in the pension accumulation system. Thus, those different groups of persons may be treated differently as well and the different legal regulation established for them is objectively justified.

It also needs to be noted that, when the amount of the cumulative pension contribution is reduced, the part of the state social pension insurance contribution designated for the old-age pension proportionately increases. In addition, after the amount of the cumulative pension contribution, i.e. a part of the state social insurance pension contribution (a financial obligation for the state), had been reduced, the total amount of the contribution of the state social pension insurance (a financial obligation for the state) remained the same for all persons who have the insured income and pay state social insurance pension contributions, i.e. for both the participants of the pension accumulation system and the persons who do not participate in this system. Thus, from the aspect of the payable amount of the state social insurance pension contribution, those persons are treated evenly.

6.4. Thus, it needs to be held that by the legal regulation consolidated in Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law, under which one reduced the amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him, one did not violate the principle of equality of rights of persons arising from Article 29 of the Constitution.

  1. Taking account of the arguments set forth, one is to draw a conclusion that Paragraph 1 (wording of 30 June 2010) of Article 4 of the Law on Reform of the Pension System, insofar as it established the reduced amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him, was not in conflict with Articles 23, 29, 52 of the Constitution and the constitutional principle of a state under the rule of law.

Conforming to Articles 102 and 105 of the Constitution of the Republic of Lithuania and Articles 1, 53, 54, 55, 56, 69 and 80 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 Article 2 of the Republic of Lithuania Law on Amending and Supplementing Article 4 of the Law on Reform of the Pension System adopted on 15 January 2009 (Official Gazette Valstybės žinios, 2009, No. 6-160) is in conflict with Paragraph 2 of Article 7, Paragraph 1 of Article 70 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law.
  2. To recognise that Article 2 of the Republic of Lithuania Law on Amending Article 4 of the Law on Reform of the Pension System adopted on 17 February 2009 (Official Gazette Valstybės žinios, 2009, No. 25-971) is in conflict with Paragraph 2 of Article 7, Paragraph 1 of Article 70 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law.
  3. To recognise that Paragraph 1 (wording of 15 January 2009; Official Gazette Valstybės žinios, 2009, No. 6-160) of Article 4 of the Republic of Lithuania Law on Reform of the Pension System, insofar as it established the reduced amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him, was not in conflict with the Constitution of the Republic of Lithuania.
  4. To recognise that Paragraph 1 (wording of 28 April 2009; Official Gazette Valstybės žinios, 2009, No. 54-2136) of Article 4 of the Republic of Lithuania Law on Reform of the Pension System, insofar as it established the reduced amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him, was not in conflict with the Constitution of the Republic of Lithuania.
  5. To recognise that Paragraph 1 (wording of 30 June 2010; Official Gazette Valstybės žinios, 2010, No. 82-4308) of Article 4 of the Republic of Lithuania Law on Reform of the Pension System, insofar as it established the reduced amount of a part of the state social pension insurance contribution accumulated in a participant’s personal pension account opened in a pension accumulation company selected by him, was not in conflict with the Constitution of the Republic of Lithuania.
  6. To recognise that Paragraph 3 (wording of 15 January 2009; Official Gazette Valstybės žinios, 2009, No. 6-160) of Article 4 of the Republic of Lithuania Law on Reform of the Pension System was not in conflict with the Constitution of the Republic of Lithuania.
  7. To recognise that Paragraph 3 (wording of 17 February 2009; Official Gazette Valstybės žinios, 2009, No. 25-971) of Article 4 of the Republic of Lithuania Law on Reform of the Pension System is not in conflict with the Constitution of the Republic of Lithuania.
  8. To recognise that Paragraph 4 (wording of 15 January 2009; Official Gazette Valstybės žinios, 2009, No. 6-160) of Article 4 of the Republic of Lithuania Law on Reform of the Pension System is not in conflict with the Constitution of the Republic of Lithuania.
  9. To dismiss the part of the case regarding:

– the compliance of Paragraph 11 (wordings of 18 December 2008 and 28 April 2009; Official Gazette Valstybės žinios, 2008, No. 149-5998; Official Gazette Valstybės žinios, 2009, No. 54-2133) of Article 3 and Paragraph 2 (wording of 18 December 2008; Official Gazette Valstybės žinios, 2008, No. 149-5998) of Article 6 of the Republic of Lithuania Law on Approving the Indicators of the 2009 Budget of the State Social Insurance Fund, with Articles 23, 29, 52 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law;

– the compliance of Paragraph 11 (Official Gazette Valstybės žinios, 2009, No. 151-6783) of Article 3 of the Republic of Lithuania Law on Approving the Indicators of the 2010 Budget of the State Social Insurance Fund with Articles 23, 29, 52 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law;

– the compliance of Paragraph 13 (Official Gazette Valstybės žinios, 2010, No. 153-7782) of Article 3 of the Republic of Lithuania Law on Approving the Indicators of the 2011 Budget of the State Social Insurance Fund with Articles 23, 29, 52 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law.

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

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

Justices of the Constitutional Court:                         Egidijus Bieliūnas

                                                                                             Toma Birmontienė

                                                                                             Pranas Kuconis

                                                                                             Gediminas Mesonis

                                                                                             Ramutė Ruškytė

                                                                                             Egidijus Šileikis

                                                                                             Algirdas Taminskas

                                                                                             Romualdas Kęstutis Urbaitis

                                                                                             Dainius Žalimas