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On the State Social Insurance Fund Budget

Case No. 9/97

 

 

THE CONSTITUTIONAL COURT OF

THE REPUBLIC OF LITHUANIA

 

R U L I N G

 

On the compliance of Subitem 11 of Item 19 of the Regulations for Forming and Implementing the State Social Insurance Fund Budget approved by the 20 February 1995 resolution (No. 266) of the Government of the Republic of Lithuania with Article 1 of the Republic of Lithuania’s Law on State Social Insurance

 

Vilnius, 18 December 1997

The Constitutional Court of the Republic of Lithuania, composed of the Justices of the Constitutional Court: Egidijus Jarašiūnas, Kęstutis Lapinskas, Zigmas Levickis, Augustinas Normantas, Vladas Pavilonis, Jonas Prapiestis, Pranas Vytautas Rasimavičius, Teodora Staugaitienė, and Juozas Žilys

The court reporter—Daiva Pitrėnaitė

The Constitutional Court of the Republic of Lithuania, pursuant to Paragraph 1 of Article 102 of the Constitution of the Republic of Lithuania and Paragraph 1 of Article 1 of the Law on the Constitutional Court of the Republic of Lithuania, on 4 December 1997, in its public hearing, considered case No. 9/97 subsequent to the petition submitted to the Court by the Klaipėda City Local Court, the petitioner, requesting an investigation into whether Subitem 11 of Item 19 of the Regulations for Forming and Implementing the State Social Insurance Fund Budget approved by the 20 February 1995 resolution (No. 266) of the Government of the Republic of Lithuania was in compliance with Article 1 of the Republic of Lithuania’s Law on State Social Insurance.

The Constitutional Court

has established:

I

On 10 March 1977, the Klaipėda City Local Court, the petitioner, was considering a civil case pursuant to a complaint of the private company “The Sprut Trade House” concerning an obligation by the Klaipėda Division of the Board of the State Social Insurance Fund charging the aforesaid company to remit 47,865 Lt into the account of the said board. By its ruling, the said court suspended the consideration of the case and applied to the Constitutional Court with a petition requesting an investigation into whether Item 19.4 of the Regulations for Forming and Implementing the State Social Insurance Fund Budget approved by the 20 February 1995 resolution (No. 266) of the Government of the Republic of Lithuania (Official Gazette Valstybės žinios, 1995, No. 17-397), as well as construction No. 06-223 of 21 April 1994 by the Board of the State Social Insurance Fund, was in compliance with Article 1 of the Republic of Lithuania’s Law on State Social Insurance.

The Constitutional Court, taking account of the content of the impugned norm, specifies that the Klaipėda City Local Court, the petitioner, actually requests a decision on the compliance of Subitem 11 of Item 19 of the Regulations for Forming and Implementing the State Social Insurance Fund Budget, but not that of Item 19.4 of the said regulations, with Article 1 of the Law on State Social Insurance.

II

In its ruling, the petitioner pointed out that, on 2 October 1996, the Klaipėda Division of the Board of the State Social Insurance Fund checked how the private company “The Sprut Trade House” had paid state social insurance payments from 1 September 1994 to 1 July 1996, and drew up a statement by which the aforementioned company was obligated to remit 15,955 Lt of additionally calculated state social insurance payments, as well as a fine comprising 31,970 Lt, which totalled 47,865 Lt, because of J. Orlov and A. Kobčenka, i.e. persons working in the said company.

When the case was being considered in the local court, it was explained that the employees of the Klaipėda Division of the Board of the State Social Insurance Fund, when drawing up the statement, wrongfully applied Article 18 of the Law on the Legal Status of Foreigners in the Republic of Lithuania by which foreigners permanently residing in the Republic of Lithuania shall enjoy the same rights to social security as citizens of the Republic of Lithuania, as well as Article 1 of the Law on State Social Insurance wherein it is established that measures of state social insurance are to be applied to insured residents of the Republic. J. Orlov, who worked at the private company “The Sprut Trade House”, is a citizen of the Ukraine and permanently resides there, while A. Kobčenka is a citizen of Russian Federation and permanently resides there.

In its ruling, the petitioner also indicated that while following construction No. 06-223 of 21 April 1994 by the Board of the State Social Insurance Fund, as well as Subitem 11 of Item 19 of the Regulations for Forming and Implementing the State Social Insurance Fund Budget, state social insurance payments shall be calculated under common procedure from remuneration for work paid to residents of foreign countries who work at enterprises which are on the territory of the Republic of Lithuania. The petitioner doubted if these norms were in compliance with Article 1 of the Republic of Lithuania’s Law on State Social Insurance.

III

In the course of the preparation of the case for the Constitutional Court hearing, an explanation of V. Kunca, Director of the Board of the State Social Insurance Fund, was received. Therein it is pointed out that under Article 1 of the Law on State Social Insurance, the notion “insured residents of the Republic” is applied to all persons who work at enterprises of Lithuania irrespective of these conditions: whether they reside in Lithuania permanently or temporarily, and whether they are citizens of the Republic of Lithuania or not. Neither the aforesaid law, nor Subitem 11 of Item 19 of the Regulations for Forming and Implementing the State Social Insurance Fund Budget, contains the notion “permanently residing”.

Article 4 of the Law on State Social Insurance enumerates persons for whom state social insurance is obligatory. Among such persons the said article mentions persons working under employment contract. Obligatory state social insurance payments are not calculated from foreigners who work in Lithuania providing an agreement is made with the Board of the State Social Insurance Fund on social insurance for the foreigner working temporarily in Lithuania. The agreement is made within 2–3 days since the day when all required documents are filed. Providing a foreigner working at a Lithuanian enterprise does not make the said agreement or avoids making it, the state social insurance payments are calculated under common procedure.

The explanation points out that the Board of the State Social Insurance Fund may refuse to make an agreement in the case that the international treaties provide otherwise, or not all documents provided for under the provisional procedure for making social insurance agreements with citizens of foreign countries who work in Lithuania as approved by the 7 July 1997 order (No. 375) of the Board of the State Social Insurance Fund have been filed.

Foreigners working at Lithuanian enterprises are not required to make the aforesaid agreement only in such a case when there exist international treaties which have been signed and gone into effect and which regulate social insurance issues in a different way. The fact that a person does not reside permanently in Lithuania may not serve as the grounds for not paying compulsory state social insurance payments or not making the agreement with the said board as the payment of these payments is linked with the work and remuneration for it but never with a residential place.

The explanation also indicates that on approving the new wording Regulations for Forming and Implementing the State Social Insurance Fund Budget approved by government resolution No. 266 of 20 February 1995, construction No. 06-223 by the Board of the State Social Insurance Fund became null and void. Constructions have been prepared for the application of certain items of the aforesaid regulations. Subitem 11 of Item 19 has not been construed as its content regarding the implementation is clear.

The Constitutional Court

holds that:

1.1. Article 52 of the Constitution stipulates: “The State shall guarantee the right of citizens to old age and disability pension, as well as to social assistance in the event of unemployment, sickness, widowhood, loss of breadwinner, and other cases provided by law.” Thus, the Constitution consolidates the obligation of the state to take care of its citizens who due to the reasons provided for by law are incapable of subsisting on work or other income or are insufficiently provided with.

International legal acts also protect the right to pensionary maintenance and social support. Article 9 of the 1966 International Covenant on Economic, Social and Cultural Rights prescribes: “The State Parties to the present Covenant recognise the right of everyone to social security including social insurance.” This international document was ratified by the Republic of Lithuania in 1992.

Fundamental provisions of social maintenance were also consolidated in another international legal act—the 1961 European Social Charter—which was signed by Lithuania on 8 September 1997. Article 12 of the said charter stipulates:

With a view to ensuring the effective exercise of the right to social security, the Contracting Parties undertake:

<...> (4) to take steps, by the conclusion of appropriate bilateral and multilateral agreements, or by other means, and subject to the conditions laid down in such agreements, in order to ensure:

(a) equal treatment with their own nationals of the nationals of other Contracting Parties in respect of social security rights, including the retention of benefits arising out of social security legislation, whatever movements the persons protected may undertake between the territories of the Contracting Parties;

(b) the granting, maintenance and resumption of social security rights by such means as the accumulation of insurance or employment periods completed under the legislation of each of the Contracting Parties.”

1.2. Paragraph 3 of Article 138 of the Constitution provides: “International treaties which are ratified by the Seimas of the Republic of Lithuania shall be constituent part of the legal system of the Republic of Lithuania.” This means that the International Covenant on Economic, Social and Cultural Rights has the force of law in the Republic of Lithuania. The Constitutional Court formulated the fundamental principles of co-ordination of Lithuanian law with international law in its Conclusion “On the Compliance of Articles 4, 5, 9, 14 as well as Article 2 of Protocol No. 4 of the Convention for the Protection of Human Rights and Fundamental Freedoms with the Constitution of the Republic of Lithuania”. The Constitutional Court held that in Lithuania the system of the parallel adjustment of international and domestic law is applied which is based on the rule that international treaties are transformed in the legal system of a state (i.e. they are incorporated into it).

Implementing the norms of constitutional and international law, the state established the right to get social support for not only its citizens but also other persons who legally both reside and work in the Republic of Lithuania providing they are or have been covered by compulsory state social insurance. Such persons, as well as citizens of the Republic of Lithuania, are paid pensions, unemployment grants, sickness allowances, allowances for the loss of breadwinner, as well as compensations to cover expenditures for treatment and prophylaxis under the procedure established by means of legal acts.

One should note that the right of permanently and legally residing foreigners in Lithuania to social maintenance was consolidated in the laws of the Republic of Lithuania adopted as far back as 1991. For instance, Article 2 of the Law on the Principles of State Social Security System of 21 May 1991 provides that foreign citizens permanently residing in Lithuania and stateless persons shall enjoy equal social maintenance rights, provided that the laws of the Republic of Lithuania and international treaties do not state otherwise. Article 18 of the Law on the Legal Status of Foreigners in the Republic of Lithuania of 4 September 1991 contains an analogous provision: “Foreigners permanently residing in the Republic of Lithuania shall enjoy the same rights to social maintenance as citizens of the Republic of Lithuania.” This principle was also being followed when later legal acts were adopted by which particular issues of social maintenance were regulated. For example, Article 1 of the Law on State Social Insurance Pensions of 18 July 1994 provides that foreign citizens permanently residing in Lithuania and stateless persons shall have the same right to state social insurance pensions under this Law if the laws of the Republic of Lithuania or international treaties do not provide other conditions of pensionary maintenance for these persons.

The provisions of the laws of the Republic of Lithuania on social maintenance for foreigners are in line with the regulations established in bilateral treaties. For instance, Article 13 of the Treaty between the Government of the Republic of Lithuania and the Government of the Ukraine on Mutual Employment of Citizens of 28 March 1995 provides that the employees must be insured by social insurance under the laws of the state giving a job provided the international treaties, to which the contracting parties are attached, do not state otherwise. Article 15 of the aforesaid treaty indicates that in the event of injury, vocational disease or any other harm to one’s health due to the fault of the employer and which are linked with accomplishment of work duties of the employee, privileges shall be given to the employees and they be paid compensations which are provided for by laws for the citizens of the state giving a job provided the international treaties, to which the contracting parties are attached, do not state otherwise. In the event of acute illness or accident on the territory of the state giving a job medical help shall be rendered to the employees under the same conditions as for the citizens of that state.

The Government of the Republic of Lithuania has made similar covenants and treaties with other states, too, for instance, Estonia, Latvia, Belarus, and Poland.

1.3. Along with the foreigners who legally reside permanently in the Republic of Lithuania and legally work at the enterprises, offices and organisations (hereinafter in the ruling referred to as enterprises) on its territory and who are insured under state social insurance and on these grounds receive state social support, there are foreigners, too, who have come to Lithuania for a temporary job. These persons who permanently reside abroad may work in Lithuanian enterprises for the time period provided for in the contract and must have a special permit for such work. When taking a job, they must observe the legal acts of the Republic of Lithuania and the procedure established by treaties between particular states. Otherwise, the work performed by these persons is considered illegal.

Social insurance for residents of foreign countries who without violating the established procedure get a temporary job in Lithuanian enterprises has certain peculiarities. Domestic legal acts of the Republic of Lithuania take into consideration the fact that these persons, as a rule, have been insured in their respective states. Therefore, Subitem 11 of Item 19 of the Regulations for Forming and Implementing the State Social Insurance Fund Budget approved by government resolution No. 266 of 20 February 1995 provides that the payments of compulsory state social insurance shall not be calculated on the remuneration for work paid to residents of foreign countries who work in Lithuanian enterprises but retain social maintenance of their respective countries and who have made corresponding agreements with the Board of the State Social Insurance Fund.

In the case that a foreigner who legally and temporarily works in Lithuania is not socially maintained in the state where he permanently resides he must be insured under compulsory social insurance in Lithuania provided that the laws of the Republic of Lithuania and international treaties do not state otherwise.

2.1. Article 1 of the Law on State Social Insurance provides that the measures of state social insurance shall be applied to insured residents of Lithuania. The petitioner doubts whether Subitem 11 of Item 19 of the Regulations for Forming and Implementing the State Social Insurance Fund Budget is in compliance with this norm. Under the said subitem, state social insurance payments shall be calculated on the earnings paid to residents of foreign countries who work in the enterprises which are on the territory of Lithuania under common procedure provided particular agreements made with the Board of State Social Insurance do not state otherwise. Thus, the petitioner doubts whether foreigners working at Lithuanian enterprises must be insured under compulsory social insurance in Lithuania.

Article 1 of the Law on State Social Insurance provides that state social insurance shall be the system of socio-economic means established by the state, which shall provide insured residents of Lithuania, as well as their family members in cases established by law, with finances and services necessary for living if, for reasons established by law, they are unable to subsist on their earned income or other income, or for valid reasons established by law, they have additional expenditures.

The means and services of state social insurance are rendered to insured residents of Lithuania (as well as, in the cases provided for by law, to their family members). Under Article 4 of the said law, state social insurance shall be obligatory for:

(1) persons working under employment contract, as well as those working on the basis of membership in elected institutions, economic partnerships, agricultural enterprises or co-operative organisations, and who receive remuneration for their work;

(2) owners of private enterprises and self-employed persons who are placed on the same footing as the former under procedure established by the Government;

(3) farmers and their family members of age working on the farm.

Thus, compulsory payment of state social insurance payments is either linked with work under contract and remuneration for it, or with the income which is received by the owners of private enterprises, persons placed on the same footing as the latter, as well as farmers and their family members of age working on the farm.

2.2. Employment contracts must also be made with foreigners who do not have the permit for permanent living in Lithuania but who wish to get a job in this country. Paragraph 3 of Article 4 of the Law on Employment Contract provides that citizens of foreign states and stateless persons who have come to Lithuania under established procedure for temporary living to get a job shall be entitled to be employed under this law, as well as other laws. The procedure of their employment is determined by international treaties and the Government of the Republic of Lithuania. Thus, state social insurance may also be compulsory for residents of foreign countries who legally and temporarily reside and work in Lithuania provided this has been established in the legal acts of the Republic of Lithuania, and interstate and intergovernmental treaties do not state otherwise.

2.3. Article 2 of the Law on State Social Insurance provides that state social insurance shall be regulated by this and other Republic of Lithuania social maintenance laws, as well as the Law on State Social Insurance Pensions, as well as the acts approved by the Government: the Rules for Allocation and Payment of State Social Insurance Pensions, the Rules for State Social Insurance Allowances, the Rules of State Social Insurance Offices, the Regulations for Voluntary State Social Pension Insurance, and the Regulations for Forming and Implementing the State Social Insurance Budget.

The Government in the Regulations for Forming and Implementing the State Social Insurance Fund Budget as approved by its resolution No. 266 of 20 February 1995 determined the procedure for forming, approval, implementation, account and accountability of the aforesaid budget, as well as the situations when insurance payers are entitled not to pay social insurance payments. Subitem 11 of Item 19 of the Regulations provides that compulsory state social insurance payments shall not be calculated on the remuneration for work paid to residents of foreign countries working at Lithuanian enterprises, who retain social maintenance in their respective countries and who have made corresponding agreements with the Board of the State Social Insurance Fund.

Under the requirements established in the Republic of Lithuania, the social insurance question of a foreigner temporarily working in Lithuania shall be decided when the following documents are filed:

(1) a request of the enterprise to exempt it from social insurance payments for the said person;

(2) copies of the employment contract or licence, or copies of the documents by which the foreigner has been appointed to hold a respective position (for example, a copy of the minutes of the shareholders’ meeting, etc.);

(3) a certificate-confirmation from social insurance offices of the foreign country which confirms that the foreigner is being insured at the office which operates at his permanent residential place and that the said person has paid the necessary social insurance payments (the time period until when these payments have been paid must be indicated therein);

(4) a copy of the register certificate of the enterprise-insurance payer at subdivisions of the Board of the State Social Insurance Fund.

Provided the foreigner cannot for certain reasons present a certificate from the social insurance office of the foreign country but he possesses other documents (for instance, the insurance card) which, in his opinion, prove that he is still socially maintained in his country he may also present a confirmation from the diplomatic representatives (consulate, embassy) of his country that the aforesaid documents really prove his social maintenance in his country. The certificate from the social insurance office or the confirmation from the diplomatic representatives must be legalised or drawn up and confirmed by the competent office of one of the contracting parties (in the case that the treaties on the legal assistance between the Republic of Lithuania and the said foreign country are in force).

In the event when a foreigner has been employed legally, and he has been socially insured in his respective country, and the agreement has been made with the Board the State Social Insurance Fund, the enterprise is exempted from the duty to pay social insurance payments. Such a foreigner is not held as an insured person under Article 1 of the Law on State Social Insurance. In addition, double payment of social insurance taxes is evaded by such legal regulation of social insurance.

In the case that a foreigner is not socially maintained in his country or he does not present the proofs required in Lithuania, he is covered by insurance under common procedure in the same way as all other residents of Lithuania who work at enterprises of this country are insured (provided an international treaty of the Republic of Lithuania does not state otherwise). This is in line with Item 1 of Paragraph 2 of Article 4 of the Law on State Social Insurance establishing that obligatory state social insurance is, as a rule, applied to persons working under employment contract, as well as this is in conformity to international obligations of the Republic of Lithuania to recognise anyone’s right to social maintenance and social insurance. If one did not observe the established employment procedure and the necessary proofs of insurance in one’s respective country were not presented, a situation might occur that a person would remain not insured at all, therefore, in the case of the event insured against he might remain without respective assistance.

Taking account of the reasoning and arguments set forth, the conclusion should be drawn that Subitem 11 of Item 19 of the Regulations for Forming and Implementing the State Social Insurance Fund Budget approved by government resolution No. 266 of 20 February 1995 is in compliance with Article 1 of the Law on State Social Insurance.

3. The Klaipėda City Local Court, the petitioner, also requested an investigation into whether construction No. 06-223 of 21 April 1994 by the Board of the State Social Insurance Fund was in compliance with Article 1 of the Law on State Social Insurance.

Paragraph 1 of Article 102 of the Constitution, as well as Article 1 of the Law on the Constitutional Court, provides that the Constitutional Court shall decide whether the laws and other legal acts adopted by the Seimas are in conformity with the Constitution and legal acts adopted by the President of the Republic and the Government do not violate the Constitution or laws. Thus, the Constitutional Court does not decide the questions of the lawfulness of legal acts adopted by ministries or other governance institutions (Paragraph 1 of Article 63 of the Law on the Constitutional Court). Paragraph 5 of Article 11 of the Code of Civil Proceedings prescribes that after a court of general jurisdiction has established that a legal act which is not under the jurisdiction of the Constitutional Court contradicts laws, the said court must not follow the said act when adopting its decision.

In view of the foregoing, the legal proceedings in the case as to construction No. 06-223 of 21 April 1994 by the Board of the State Social Insurance Fund must be dismissed.

Conforming to Article 102 of the Constitution of the Republic of Lithuania and Articles 53, 54, 55, 56 and Paragraph 3 of Article 69 of the Law on the Constitutional Court of the Republic of Lithuania, the Constitutional Court of the Republic of Lithuania gives the following

ruling:

1. To recognise that Subitem 11 of Item 19 of the Regulations for Forming and Implementing the State Social Insurance Fund Budget approved by the 20 February 1995 resolution (No. 266) of the Government of the Republic of Lithuania is in compliance with Article 1 of the Republic of Lithuania’s Law on State Social Insurance.

2. To dismiss the legal proceedings in the case as to Construction No. 06-223 of 21 April 1994 by the Board of the State Social Insurance Fund.

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

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

Justices of the Constitutional Court:

 

Egidijus Jarašiūnas      Kęstutis Lapinskas     Zigmas Levickis

 

Augustinas Normantas      Vladas Pavilonis      Jonas Prapiestis

 

Pranas Vytautas Rasimavičius      Teodora Staugaitienė      Juozas Žilys