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On the reorganisation of the joint-stock companies “Būtingės nafta”, “Mažeikių nafta”, and “Naftotiekis”

Case No. 29/98-16/99-3/2000

 

 

THE CONSTITUTIONAL COURT OF

THE REPUBLIC OF LITHUANIA

 

R U L I N G

 

On the compliance of the Republic of Lithuania’s Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, Paragraph 3 of Article 5 of the Republic of Lithuania’s Law on Tax Administration with the Constitution of the Republic of Lithuania and on the compliance of the Resolution of the Seimas of the Republic of Lithuania “On the Recognition of a Strategic Investor” with the Constitution of the Republic of Lithuania and the Republic of Lithuania’s Law on the Basics of National Security

 

Vilnius, 18 October 2000

 

The Constitutional Court of the Republic of Lithuania, composed of the Justices of the Constitutional Court: Egidijus Jarašiūnas, Egidijus Kūris, Zigmas Levickis, Augustinas Normantas, Vladas Pavilonis, Jonas Prapiestis, Vytautas Sinkevičius, and Teodora Staugaitienė

The court reporter—Daiva Pitrėnaitė

Seimas member Vytenis Povilas Andriukaitis and the advocate Gediminas Bulotas, acting as the representatives of the petitioners—groups of members of the Seimas of the Republic of Lithuania

Darius Karvelis, a consultant to the Law Department of the Office of the Seimas, acting as the representative of the Seimas of the Republic of Lithuania, the party concerned

The Constitutional Court of the Republic of Lithuania, pursuant to Paragraph 1 of Article 102 of the Constitution of the Republic of Lithuania and Paragraph 1 of Article 1 of the Law on the Constitutional Court of the Republic of Lithuania, on 19 September 2000, in its public hearing, considered case No. 29/98-16/99-3/2000 subsequent to the petitions submitted to the Constitutional Court by the petitioners—groups of members of the Seimas of the Republic of Lithuania—requesting an investigation into whether the norms of the Republic of Lithuania’s Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, the Republic of Lithuania’s Law “On Supplementing and Amending Article 5 of the Law on Tax Administration” and the Republic of Lithuania’s Law “On Supplementing Article 12 of the Law on Foreign Capital Investment in the Republic of Lithuania” were in conformity with the Constitution of the Republic of Lithuania and, whether the norms of the Resolution of the Seimas of the Republic of Lithuania “On the Recognition of a Strategic Investor” was in compliance with the Constitution of the Republic of Lithuania and the Republic of Lithuania’s Law on the Basics of National Security.

The Constitutional Court

has established:

I

1. On 29 September 1998, the Seimas of the Republic of Lithuania adopted the Republic of Lithuania’s Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” (Official Gazette Valstybės žinios, 1998, No. 90-2482), the Republic of Lithuania’s Law “On Supplementing and Amending Article 5 of the Law on Tax Administration” (Official Gazette Valstybės žinios, 1998, No. 90-2483), the Republic of Lithuania’s Law “On Supplementing Article 12 of the Law on Foreign Capital Investment in the Republic of Lithuania” (Official Gazette Valstybės žinios, 1998, No. 90-2484) and the Resolution “On the Recognition of a Strategic Investor” (Official Gazette Valstybės žinios, 1998, No. 90-2485).

In its petition of 9 November 1998, a group of Seimas members requests an investigation into whether:

1) Articles 2, 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, Paragraph 1 of Article 1 of the Law “On Supplementing and Amending Article 5 of the Law on Tax Administration” and Article 1 of the Law “On Supplementing Article 12 of the Law on Foreign Capital Investment in the Republic of Lithuania” as to the content of the norms established therein are in compliance with the norms pertaining to a democratic state and the separation of powers as established in Article 1 and Paragraph 1 of Article 5 of the Constitution and the principle of a state under the rule of law entrenched in the Constitution;

2) in the light of the procedure of their adoption, the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, the Law “On Supplementing and Amending Article 5 of the Law on Tax Administration” and the Law “On Supplementing Article 12 of the Law on Foreign Capital Investment in the Republic of Lithuania” are in compliance with the procedure established in Paragraph 1 of Article 69 of the Constitution;

3) Paragraph 1 of Article 1 of the Law “On Supplementing and Amending Article 5 of the Law on Tax Administration” and Article 1 of the Law on Foreign Capital Investment in the Republic of Lithuania are in compliance with Item 15 of Article 67 and Paragraph 1 of Article 128 of the Constitution;

4) Paragraphs 1 and 7 of Article 2 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” according to the content of the norms established therein are in compliance with Paragraph 1 of Article 23, Paragraphs 1 and 4 of Article 46 of the Constitution and whether Article 4 of the said law according to the content of the norms established therein is in compliance with Paragraph 1 of Article 23, Paragraph 1 of Article 29 and Paragraphs 1 and 4 of Article 46 of the Constitution;

5) Paragraph 1 of Article 1 of the Seimas Resolution “On the Recognition of a Strategic Investor” of 29 September 1998, according to the content of the norms established therein is in compliance with Paragraph 4 of Article 46 of the Constitution and the norms established in Paragraph 2 of Chapter 4 entitled “Economic Policy” of the annex to the Law on the Basics of National Security.

The petition is grounded on the following reasoning.

Traditionally, the object of the exclusive competence of the Parliament is to approve taxes and basic financial liabilities of the state. Delegation of this competence to the Government or any other state institution is not provided for in the Constitution. Paragraph 1 of Article 1 of the Law “On Supplementing and Amending Article 5 of the Law on Tax Administration” and Article 1 of the Law “On Supplementing Article 12 of the Law on Foreign Capital Investment in the Republic of Lithuania” provide for the right of the Government to arbitrarily exempt certain entities of economy from payment of new or changed taxes for the term of not three but ten years. By means of these legal provisions, the opportunity is created to adopt a basic financial liability of the state not by means of an act of the Seimas but that of the Government. The said laws violate the powers of the Seimas. Therefore, the impugned legal norms conflict with Item 15 of Article 67, Paragraph 1 of Article 128 of the Constitution and the principle of the separation of the branches of state power.

In the opinion of the petitioner, Paragraph 1 of Article 69 of the Constitution sets the requirements for the procedure of adoption of laws. The petitioner maintains that the said laws were adopted under procedure of urgency. The Constitution stipulates that procedure of urgency must be regulated by law. This procedure is defined in the Statute of the Seimas of the Republic of Lithuania only, which, under a formal meaning, is not a law. The Seimas had no right to deliberate upon these laws conforming to procedure of urgency, therefore, it violated Paragraph 1 of Article 69 of the Constitution.

The petitioner notes that the Seimas, by regulating the activities of an individual economic entity by Article 2 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, assumed a basic competence of the executive and thus overstepped its constitutional powers and violated the principle of the separation of powers established in the norms of Article 1 and Paragraph 1 of Article 5 of the Constitution.

According to the petitioner, the requirements set down in Paragraphs 1 and 7 of Article 2 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” regarding reorganisation of independent economic entities infringe the rights of the said entities to inviolability of property, therefore, the impugned norms of this law conflict with Paragraph 1 of Article 23 of the Constitution. They also infringe the rights of enterprises and their shareholders and hinder fair competition, therefore, they are in conflict with the norms of Paragraphs 1 and 4 of Article 46 of the Constitution.

In the opinion of the petitioner, the norm of Paragraph 1 of Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” providing that a certain portion of shares of the enterprise may not belong to its shareholders, while the right is granted to the state and the strategic investor to disregard this limitation, violates the principle of the equality of all persons before the law and freedom of fair competition, therefore, this norm of the law conflicts with Paragraph 1 of Article 29 and Paragraphs 1 and 4 of Article 46 of the Constitution.

The petitioner points out that the norm of Paragraph 2 of Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” restricts the right of some shareholders to dispose of their property freely as the state and the strategic investor enjoy priority in acquisition of the shares sold by the shareholders. Thus, the impugned norm violates the principle of inviolability of property and conflicts with Article 23 of the Constitution.

The petitioner maintains that, by means of the norm of Paragraph 1 of Article 1 of the impugned Seimas resolution, the inequality of economic entities before the law is established and advantages in economic competition for certain entities are created. The petitioner is of the opinion that freedom of fair competition and the prohibition on monopolising the production are thus violated, therefore, Paragraph 1 of Article 1 of the impugned Seimas resolution is in conflict with Paragraph 4 of Article 46 of the Constitution.

The petitioner points out that the provision of Paragraph 2 of Article 1 of the impugned Seimas resolution by which an opportunity to the strategic investor is granted to acquire a certain portion of shares of the reorganised enterprise denies the possibility for the state to retain a deciding vote, therefore, the norms of the impugned Seimas resolution conflict with the norm set down in the Law on the Basics of National Security that in enterprises of strategic importance for national security the controlling decision power must be retained by the state.

2. On 3 June 1999, the Seimas adopted the Law “On Amending and Supplementing Article 3 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” (Official Gazette Valstybės žinios, 1999, No. 50-1606).

On 22 June 1999, a group of Seimas members applied to the Constitutional Court with the petition requesting an investigation into whether:

1) the Law “On Amending and Supplementing Article 3 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” passed on 3 June 1999 by the Seimas, regarding the procedure of its adoption, was in compliance with the procedure established in Article 69 of the Constitution;

2) Article 1 of the Law “On Amending and Supplementing Article 3 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” was in compliance with the principles of a just society and state under the rule of law established in the Preamble to the Constitution, as well as Articles 1, 67 and Paragraph 3 of Article 69 of the Constitution;

3) Article 1 of the Law “On Amending and Supplementing Article 3 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” was in compliance with Paragraphs 3, 4 and 5 of Article 46 of the Constitution.

The request of the petitioner is based on the following arguments.

If the Law on the Basics of National Security is considered a constitutional law, then its norms may only be changed by three-fifths majority vote of all Seimas members, while the Law “On Amending and Supplementing Article 3 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” was adopted by simple majority vote. By this law a new norm is created, permitting the strategic foreign investor to become a monopoly, as in case the foreign economic entity acquires 66 percent of the shares of the enterprise, the State of Lithuania will lose a deciding vote. This norm conflicts with the norm of the Law on the Basics of National Security that in enterprises of strategic importance for national security the controlling decision power must be retained by the state. Thus, the procedure of the adoption of the law conflicts with Article 69 of the Constitution.

In the opinion of the petitioner, by means of Article 1 of the Law “On Amending and Supplementing Article 3 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” new norms are created, therefore, in case the Law on the Basics of National Security is a constitutional law, the principle of coordination of legal acts is violated. The fact whether a law is a constitutional law, in the case that there is not any list of constitutional laws, ought to be decided according to the importance of the law and the context of its adoption. Thus, Article 1 of the Law “On Amending and Supplementing Article 3 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” conflicts with the principles of a just society and state under the rule of law established in the Preamble to the Constitution, as well as Articles 1 and 67 of the Constitution.

The petitioner believes that after Article 1 of the Law “On Amending and Supplementing Article 3 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” has granted exceptional rights to the strategic investor, the latter gets an opportunity to control a monopoly, therefore, this norm conflicts with the norm of Paragraph 3 of Article 46 of the Constitution stipulating that the state shall regulate economic activity so that it serves the general welfare of the nation, the norm of Paragraph 4 of the same article stipulating that monopolisation of production and the market shall be prohibited and the norm of Paragraph 5 of the same article providing that the state shall defend the interests of the consumers.

3. On 5 October 1999, the Seimas passed the Law “On Amending and Supplementing Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” (Official Gazette Valstybės žinios, 1999, No. 86-2564).

On 20 December 1999, a group of Seimas members applied to the Constitutional Court with the petition requesting an investigation into whether:

1) the Law “On Amending and Supplementing Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” passed on 5 October 1999 by the Seimas, regarding the procedure of its adoption, was in compliance with the procedure established in Article 69 of the Constitution;

2) Articles 1 and 2 of the Law “On Amending and Supplementing Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” were in compliance with the principles of a just society and state under the rule of law established in the Preamble to the Constitution, as well as Articles 1, 67, Paragraph 3 of Article 69 and Paragraph 1 of Article 135 of the Constitution;

3) Articles 1 and 2 of the Law “On Amending and Supplementing Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” were in compliance with Paragraphs 3, 4 and 5 of Article 46 of the Constitution;

4) Article 2 of the Law “On Amending and Supplementing Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” was in compliance with the principle of a state under the rule of law established in the Preamble to the Constitution as well as Article 23 and Paragraphs 1 and 4 of Article 23 of the Constitution.

The request of the petitioner is based on the following arguments.

It is directly recognised in the Law “On Amending and Supplementing Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” that the joint-stock company “Mažeikių nafta” is an object of essential importance for national security of Lithuania. The basics of national security are established by the Law on the Basics of National Security which, as to its essence, must be held a constitutional law. As a new norm is created by the Law “On Amending and Supplementing Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’”, conflicting with that established in the Law on the Basics of National Security, the procedure of its adoption is not in line with the requirements for adoption of constitutional laws set down in Article 69 of the Constitution.

Paragraph 1 of Article 2 of the Law “On Amending and Supplementing Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” grants priority to the state in acquiring the shares of this enterprise sold or transferred in any other way by the shareholders. By establishing the right of priority for certain entities to acquire shares transferred by the owners the subjective rights of ownership of these owners are infringed. The principles of ownership and free economic activity of individuals will also be violated. Thus, the impugned legal norm is in conflict with Article 23 and Paragraph 1 of Article 46 of the Constitution.

Articles 1 and 2 of the Law “On Amending and Supplementing Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” conflict with Paragraphs 3, 4 and 5 of Article 46 of the Constitution. The norms of these articles grant exceptional rights to the strategic investor, therefore, they conflict with Paragraph 3 of Article 46 of the Constitution wherein a norm is established that the state shall regulate economic activity so that it serves the general welfare of the nation. By means of the impugned law the state refuses to have a decisive vote in the company “Mažeikių nafta” and loses a significant portion of its profit. Therefore, the norms of Articles 1 and 2 of the Law “On Amending and Supplementing Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” conflict with Paragraph 4 of Article 46 of the Constitution under which monopolisation of production and the market shall be prohibited. Paragraph 5 of Article 46 of the Constitution provides that the state shall defend the interests of the consumers. After a decisive vote has been granted to the strategic investor, possibilities are created to violate the interests of the consumers. The state, by refusing a decisive vote in the company “Mažeikių nafta”, violates Paragraph 5 of Article 46 of the Constitution as it will not be able to defend the interests of the consumers.

By its decision of 28 August 2000, the Constitutional Court joined the petitions of the petitioners into one case.

II

In the course of the preparation of the case for the judicial consideration, the explanation of 14 December 1999 by D. Karvelis, a consultant to the Law Department of the Office of the Seimas, was received. It is maintained therein that, while assessing the compliance of Article 1 of the Law “On Amending and Supplementing Article 3 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” with the norms of the Constitution, one has to take account of the factual circumstances of adoption of this law. Its norms created the legal pre-conditions for avoiding significant economic losses and created the conditions for privatising the oil sector. They regulate special legal relations arising in the course of the reorganisation of the joint-stock companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”. According to the object of regulation, the impugned law should be considered a special normative legal act. Adopting this law, the Seimas did not violate the provision of Paragraph 3 of Article 46 of the Constitution that “the State shall regulate economic activity so that it serves the general welfare of the Nation”: it implemented the constitutional provision that “the State shall defend the interests of the consumers”.

D. Karvelis noted that under the Statute of the Seimas, the laws pointed out in Article 150 of the Constitution, as well as amendments to the Constitution, other laws particularising the constitutional norms, which are indicated in the law on the list of constitutional laws, shall be considered constitutional laws. The Law “On Amending and Supplementing Article 3 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” does not belong to such constitutional laws. There are no grounds to consider the Law on the Basics of National Security a constitutional law having the primacy over the impugned law.

In the opinion of D. Karvelis, it is necessary to take account of the fact that in the valid laws the notion “natural monopolies” is not employed. European Union law does not prohibit the dominance of economic entities in the market. The prohibition against dominance would mean a certain limitation on the competition, and, thus, the interests of the consumers might suffer. The European Union Agreement prohibits the abuse of dominance that means the establishment of unfair prices of sale and purchase, limitation on production, the market or of technological development or their control to the disadvantage of the consumers, as well as the discrimination of entities on the basis of nationality.

III

In the course of the preparation of the case for the judicial consideration, the explanation of 29 March 1999 by V. Pakalniškis, who was then the Minister of Justice of the Republic of Lithuania, was received. It is maintained therein that the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” is a special law regulating the process of reorganisation of these enterprises, the investments and requirements to the owners of blocks of shares. The essence of the principle of the legal doctrine lex specialis derogat legi generali is that in case there is rivalry between a common and a special norm, the special norm should be applied. The aforesaid law itself defined the legal relation between it and the common laws (the Company Law, the Law on the Privatisation of State-owned and Municipal Property) by establishing that the procedure of reorganisation of the aforementioned companies is regulated by the Company Law, while their privatisation—by the Law on the Privatisation of State-owned and Municipal Property in case the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” does not provide otherwise. Special norms might be established by the Seimas only, but not by the Government. Thus, the principle of the separation of powers was not violated. V. Pakalniškis is of the opinion that the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” of 29 September 1998, the Law “On Supplementing and Amending Article 5 of the Law on Tax Administration”, the Law “On Supplementing Article 12 of the Law on Foreign Capital Investment in the Republic of Lithuania” and the Seimas Resolution “On the Recognition of a Strategic Investor” are in compliance with the Constitution.

In the course of the preparation of the case for the judicial consideration, the explanation of 26 March 1999 by V. Babilius, who was then the Minister of Economy of the Republic of Lithuania, was received. It is maintained therein that the Company Law provides for the possibility of reorganisation of joint-stock companies by way of merger, i.e. certain companies are joined to a company which continues its activities. The shareholders may adopt a decision to reorganise the company by not less than a two-thirds majority vote. Before the reorganisation the Government held the controlling block of shares of the aforementioned enterprises and adopted a decision, by legally sufficient majority vote, to reorganise the said enterprises. The special law on reorganisation of the said enterprises, if compared with the valid Company Law, does not provide for additional restriction or limitation on the exercise of ownership and non-ownership rights of the shareholders. The norm of Paragraph 2 of Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, providing for priority of the state in acquisition of the shares of the company “Mažeikių nafta” sold or otherwise transferred by the shareholders, does not infringe the right to inviolability of property as it merely establishes a certain procedure of disposal of property. In the opinion of V. Babilius, the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” of 29 September 1998 is in compliance with the Constitution.

In the course of the preparation of the case for the judicial consideration, the explanation of 21 March 2000 by the member of the Seimas S. Malkevičius was received. It is maintained therein that in the context of the case at issue the constitutional provision “property shall be inviolable” means that the norms of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” empower the state, which is the holder of the controlling block of shares, to exercise its rights of property possession, transfer, sale, granting etc. The norms of the said law are in line with system of the free market as every buyer has the right and an opportunity to choose a supplier. In the opinion of the member of the Seimas S. Malkevičius, the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” of 29 September 1998 is in compliance with the Constitution.

In the course of the preparation of the case for the judicial consideration, the explanation of 15 March 2000 by V. Milaknis, Minister of the Economy of the Republic of Lithuania, was received. It is maintained therein that the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” is in compliance with Article 69 of the Constitution, according to the procedure of its adoption. The strategic interests and security of the state are secured by special laws irrespective of the form of ownership of economic entities. V. Milaknis is of the opinion that the norms of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” is in compliance with the Preamble to the Constitution and Articles 1 and 67 of the Constitution. The statement of the petitioners that the strategic investor has been given a decisive vote is untrue as the state still holds 59.3 percent of shares. The norm of Paragraph 1 of Article 2 of the impugned law does not infringe the right of the shareholders of the reorganised enterprise to dispose of their shares. In case the Government refuses to acquire the shares sold, the shareholders may sell them to a person they choose for the price announced earlier. According to V. Milaknis, the impugned law is in compliance with Paragraph 1 of Article 46 of the Constitution.

In the course of the preparation of the case for the judicial consideration, the explanation of 16 March 2000 by G. Balčiūnas, Minister of Justice of the Republic of Lithuania, was received. It is maintained therein that the petitioner groundlessly considers the Law on the Basics of National Security a constitutional law. It is only the Seimas that decides matters of coordination of laws. The Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” was adopted lawfully as the common constitutional rules of adoption of laws were being followed. Thus, the procedure of the adoption of the said law and its Articles 1 and 2 are in compliance with the Constitution.

In the course of the preparation of the case for the judicial consideration, the explanation of 15 March 2000 by V. Vadapalas, Director General of the Department of European Law under the Government of the Republic of Lithuania, was received. It is maintained therein that it is provided in Paragraph 6 of Article 1 of the Law “On Amending and Supplementing Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” that upon acquisition of shares by the strategic investor, and upon conclusion of agreements by the joint-stock company “Mažeikių nafta” on the acquisition of the right of control in the joint-stock company “Klaipėdos nafta”, the provisions of Chapter 3 of the Republic of Lithuania’s Law on Competition shall not be applied. In itself, the dominance of an economic entity in the market does not mean abuse. The European Court of Justice has noted that the fact that an enterprise holds a dominant position does not mean a violation but it only means that regardless of the reasons of dominance a respective enterprise must abstain from conduct which might distort competition in the overall market. In another case the said court noted that actions undermining the competitive structure of the market may be held abuse stemming from the dominant position in the market and, therefore, had to be prohibited.

IV

At the Constitutional Court hearing the representatives of the petitioners the member of the Seimas V. P. Andriukaitis and the advocate G. Bulotas presented additional arguments substantiating the requests of the petitioners.

At the Constitutional Court hearing the representative of the party concerned virtually reiterated the arguments set forth in his written explanation.

A specialist, Dr. J. Kugelevičius, an expert of the Institute of Lithuanian Energetics, spoke at the Constitutional Court hearing.

The Constitutional Court

holds that:

I

1. On 29 September 1998, the Seimas adopted the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, the Law “On Supplementing and Amending Article 5 of the Law on Tax Administration”, the Law “On Supplementing Article 12 of the Law on Foreign Capital Investment in the Republic of Lithuania” and the Resolution “On the Recognition of a Strategic Investor”.

The Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” provides for the procedure of reorganisation of the joint-stock companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, the conditions and procedure of investments into the company continuing its activities after the reorganisation and it sets requirements for the owners of blocks of shares. The other aforesaid laws and the Seimas resolution are linked with the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”.

On 9 November 1998, a group of Seimas members applied to the Constitutional Court with the petition requesting an investigation into whether the norms of the aforementioned legal acts were in compliance with the Constitution as to their content, whether the said laws were in conformity with the Constitution as to the procedure of their adoption, as well as whether the Seimas resolution was in compliance with the Constitution and the Law on the Basics of National Security.

2. By means of the Law “On Amending and Supplementing Article 3 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” passed on 3 June 1999, Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” was amended.

On 22 June 1999, a group of Seimas members applied to the Constitutional Court with the petition requesting an investigation into whether the said law as to its content and procedure of adoption was in compliance with the Constitution.

3. Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” were amended by the Law “On Amending and Supplementing Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” of 5 October 1999.

On 20 December 1999, a group of Seimas members applied to the Constitutional Court with the petition requesting an investigation into whether the said law as to its content and procedure of adoption was in compliance with the Constitution.

4. Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” was amended by the Law “On Amending and Supplementing Article 3 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” of 3 June 1999, while Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” were amended by the Law “On Amending and Supplementing Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” of 5 October 1999. The petitioners request the Constitutional Court to investigate the compliance of the norms of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” in its initial wording and in its subsequent wordings with the Constitution.

The Constitutional Court will investigate the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” in its wording of 5 October 1999 while taking account of the same law in its previous wordings.

5. Article 5 of the Law on Tax Administration was amended and supplemented by means of the Law “On Supplementing and Amending Article 5 of the Law on Tax Administration” of 29 September 1998. Taking account of the arguments presented by the petitioner, the Constitutional Court will investigate whether the provision of Paragraph 3 of Article 5 of the Law on Tax Administration, which is impugned by the petitioners, providing that the Government is entitled to prolong the term of not increase of taxes to the strategic investor for up to 10 years, is in compliance with the Constitution.

6. By Article 16 of the Republic of Lithuania’s Law on Investment passed on 7 July 1999 the Law on Foreign Capital Investment in the Republic of Lithuania was recognised as null and void. The petitioners applied to the Constitutional Court concerning the compliance of the provisions of Paragraph 4 of Article 12 of the latter law. Under Paragraph 4 of Article 69 of the Law on the Constitutional Court, the annulment of an impugned legal act shall be grounds to adopt a decision to dismiss the initiated legal proceedings. Concerning this part of the case, the initiated legal proceedings should be dismissed.

Alongside, the Constitutional Court notes that as for the challenged provision of Paragraph 4 of Article 12 of the Law on Foreign Capital Investment in the Republic of Lithuania providing that the Government is entitled to prolong the term of not increase of taxes to the strategic investor for up to 10 years, an analogous provision has been set forth in Paragraph 3 of Article 5 of the Law on Tax Administration. The Constitutional Court will investigate the compliance of this norm with the Constitution in the present case.

7. Under the Constitution, the Constitutional Court shall decide whether laws (parts thereof) of the Republic of Lithuania as well as resolutions (parts thereof) of the Seimas are in conformity with the Constitution and the laws.

The Constitutional Court is not empowered to investigate and shall not investigate in this case any agreements or transactions signed by the Government with the strategic investor, which are linked with the impugned laws and the impugned Seimas resolution, nor shall it consider their preparation and conclusion nor their implementation.

8. In the requests of the petitioners doubts are raised whether the said laws are in conformity with the Constitution as regards the procedure of their adoption and their content.

First of all, the Constitutional Court will investigate whether the laws pointed out by the petitioners are in compliance with Article 69 of the Constitution which establishes the procedure of adoption of laws, including constitutional laws.

II

On the compliance of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” of 29 September 1998, the Law “On Amending and Supplementing Article 3 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” of 3 June 1999, the Law “On Amending and Supplementing Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” of 5 October 1999 and the Law “On Supplementing and Amending Article 5 of the Law on Tax Administration” of 29 September 1998 with Article 69 of the Constitution.

1. In the opinion of the petitioners, the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” and the Law “On Supplementing and Amending Article 5 of the Law on Tax Administration”, both of which were passed on 29 September 1998, according to the procedure of their adoption conflict with the requirements set in Paragraph 1 of Article 69 of the Constitution as they were deliberated under the procedure of urgency provided for in the Statute of the Seimas but not in the law.

Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” of 29 September 1998 were amended and supplemented by the Law “On Amending and Supplementing Article 3 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” of 3 June 1999 and the Law “On Amending and Supplementing Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” of 5 October 1999 the norms whereof, according to the petitioners, establish a different regulation than is provided for in the Law on the Basics of National Security, which should be considered a constitutional law. As the norms of a constitutional law may be amended only by at least a three-fifths majority vote of all the Seimas members, while the aforesaid laws were adopted by simple majority vote, the petitioner doubts whether the procedure of adoption of the said laws is in conformity with the requirements set in Article 69 of the Constitution.

2. Article 69 of the Constitution provides:

Laws shall be enacted in the Seimas in accordance with the procedure established by law.

Laws shall be deemed adopted if the majority of the Seimas members participating in the sitting vote in favour thereof.

Constitutional laws of the Republic of Lithuania shall be deemed adopted if more than half of all the members of the Seimas vote in the affirmative. Constitutional laws shall be amended by at least a three-fifths majority vote of all the Seimas members. The Seimas shall establish a list of constitutional laws by three-fifths majority vote of the Seimas members.

Provisions of the laws of the Republic of Lithuania may also be adopted by referendum.”

The fundamental rules of legislation are set in this article of the Constitution. Deciding whether in the course of the adoption of the impugned laws there were violations of the Constitution, one should take into consideration the fact that under Article 76 of the Constitution, the structure and procedure of activities of the Seimas shall be determined by the Statute of the Seimas which shall have the power of law. The determination of the procedure of activities of the Seimas includes the regulation of the procedure of legislation. Part V of the Statute of the Seimas entitled “Legislative Procedure” provides for registration of draft laws and other draft acts of the Seimas, their presentation at Seimas sittings, their deliberation in the main committee and at Seimas sittings, consideration of a draft law under procedure of urgency and that of special urgency, adoption of the law at Seimas sittings etc. Thus, without violating the Constitution, the Seimas is entitled to establish a corresponding legislative procedure as well as consideration of draft laws under procedure of urgency by the Statute of the Seimas which has the power of law. In its ruling of 8 November 1993, the Constitutional Court held: “The duty of the Seimas to act in accordance with the procedure of law enactment established by the Statute of the Seimas not only may be but, in fact, must be interpreted as a constitutional duty because it is conditioned by the provision established in Paragraph 1 of Article 69 of the Constitution.”

Taking account of the reasoning set forth, it should be concluded that the Seimas, while adopting laws, may consider them under procedure of urgency provided in the Statute of the Seimas. Therefore, there are not any legal grounds to assert that the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” of 29 September 1998, the Law “On Amending and Supplementing Article 3 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” of 3 June 1999, the Law “On Amending and Supplementing Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” of 5 October 1999, and the Law “On Supplementing and Amending Article 5 of the Law on Tax Administration” of 29 September 1998, as regards the procedure of their adoption, conflict with Paragraph 1 of Article 69 of the Constitution.

3. The petitioners substantiate their statement by the fact that the laws by which Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” were amended and supplemented conflict with Article 69 of the Constitution as regards the procedure of their adoption, on the fact that the regulation established in the norms of the said laws is different from that established in the Law on the Basics of National Security, which is considered a constitutional law by the petitioners.

The procedure of adoption of constitutional laws is set in Paragraph 3 of Article 69 of the Constitution. As mentioned before, these laws are deemed adopted if more than half of all the members of the Seimas vote in the affirmative, while they are amended by at least a three-fifths majority vote of all the Seimas members. The Seimas shall establish a list of constitutional laws by three-fifths majority vote of the Seimas members.

In its ruling of 8 November 1993, the Constitutional Court held that only after approval of a list of constitutional laws under this procedure the laws entered on the said list shall be constitutional laws and the rule of their adoption and amendment by qualified majority vote as established in the Constitution may be applied to these laws only. Thus, in case a law is not entered on the list of constitutional laws, the procedure of adoption of constitutional laws defined in Paragraph 3 of Article 69 of the Constitution may not be applicable to the adoption of such a law.

The Law on the Basics of National Security has not been included into the list of constitutional laws, thus, it is not a constitutional law. Alongside, it needs to be noted that this law does not regulate relations pertaining to legislature either, therefore, it does not condition peculiarities of adoption of the impugned laws.

Taking account of the reasoning set forth, it should be concluded that the Law “On Amending and Supplementing Article 3 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” of 3 June 1999 and the Law “On Amending and Supplementing Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” of 5 October 1999, as to the procedure of their adoption, are in compliance with Paragraph 3 of Article 69 of the Constitution.

III

On the compliance of Article 2 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” with the principle of a state under the rule of law established in the Preamble to the Constitution, Article 1 and Paragraph 1 of Article 5 of the Constitution, and on the compliance of Paragraphs 1 and 7 of Article 2 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” with Paragraph 1 of Article 23 and Paragraphs 1 and 4 of Article 46 of the Constitution.

1. Article 2 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” provides:

1. The joint-stock companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’ shall be reorganised by way of merger, i.e. by joining the joint-stock companies ‘Būtingės nafta’ and ‘Naftotiekis’ to the joint-stock company ‘Mažeikių nafta’, the former two ceasing their activities as legal persons.

2. The governing board of every reorganised company shall draw up an extensive evaluation of the plan of reorganisation and shall present it to the general meeting of the shareholders. After the Government has approved the reorganisation plan, the general meetings of the shareholders of the joint-stock companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’ may, by at least a two-thirds majority vote, adopt a decision to reorganise the company and approve this plan and the prepared Articles of Association of the company which will be operating after the reorganisation.

3. The approved reorganisation plan and the minutes of the general meeting of the shareholders must be handed over to the supervisor of the register of enterprises within 5 working days from the day of the meeting which has approved the reorganisation plan.

4. The reorganisation of the joint-stock companies shall be announced publicly twice with an interval of not less than 14 days between the announcements.

5. The liabilities of the reorganised joint-stock companies ‘Būtingės nafta’ and ‘Naftotiekis’ shall be transferred to the joint-stock company ‘Mažeikių nafta’ which will continue its activities. Every reorganised company must provide additional guarantees as regards fulfilment of their liabilities to every creditor who requests so. In cases when the reorganised companies lack sufficient financial and material resources to provide the additional guarantees, the Government must provide the creditors with the State guarantees under procedure provided by law.

6. The requirements of Paragraphs 9, 10, 11, 13 and 14 of Article 10 of the Company Law shall not be applicable to the reorganisation of the joint-stock companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’.

7. In the reorganisation plan of the joint-stock companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’ it shall be provided that the shares of the oil products sales network (petrol stations) as well as those of the companies established on the basis of Plinkškiai hotel-recreational centre belonging to the joint-stock company ‘Mažeikių nafta’, as well as those of the company established on the basis of the shop making wooden articles, belonging to the joint-stock company ‘Naftotiekis’, shall be transferred respectively to the shareholders of the joint-stock companies ‘Mažeikių nafta’ and ‘Naftotiekis’ in proportion to the number of shares belonging to them, by respectively reducing the authorised capitals of the joint-stock companies ‘Mažeikių nafta’ and ‘Naftotiekis’. In the course of the reorganisation, mistakes that were made in the formation (concerning the use of State budget appropriations for construction of dwelling-houses in the Vsevolozhsk district of the Leningrad region of the Russian Federation for settling the families moving from Mažeikiai) and increase (transfer of the reservoirs of fuel stocks of the State to the joint-stock company ‘Mažeikių nafta’) of the authorised capital of the joint-stock company ‘Mažeikių nafta’ must be rectified. Decisions concerning reduction of the authorised capital shall be adopted by the general meetings of the shareholders of the joint-stock companies ‘Mažeikių nafta’ and ‘Naftotiekis’ where the issue regarding the reorganisation of the said enterprises will be decided. The reduction of the authorised capital of the joint-stock companies “Mažeikių nafta” and “Naftotiekis” shall be announced publicly twice with an interval of not less than 14 days between the announcements. Due to the reduction of the authorised capital of the joint-stock companies “Mažeikių nafta” and “Naftotiekis”, the amendments to the Articles of Association of the said companies shall not be specially recorded in the register of enterprises.

8. The guarantees of the State for the banks as regards the credits given to the joint-stock companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’ are also valid for the liabilities taken by the joint-stock company ‘Mažeikių nafta’ which will continue its activities after the reorganisation.”

2. The petitioners maintain that the norms of Article 2 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” violate the principle of a state under the rule of law established in the Preamble to the Constitution, the provision of Article 1 of the Constitution stipulating that Lithuania shall be a democratic state, as well as the principle of the separation of powers entrenched in Paragraph 1 of Article 5 of the Constitution, and that Paragraphs 1 and 7 of Article 2 of the said law violate Paragraph 1 of Article 23 and Paragraphs 1 and 4 of Article 46 of the Constitution.

3. In the Preamble to the Constitution the striving for an open, just, and harmonious civil society and state under the rule of law is entrenched.

In its ruling of 23 February 2000, the Constitutional Court held: “<…> the constitutional principle of a state under the rule of law is a universal one upon which the whole Lithuanian legal system as well as the Constitution of the Republic of Lithuania itself are based and <…> the content of the principle of a state under the rule of law can be detected in various provisions of the Constitution and should be construed inseparably from the striving for an open, just, and harmonious civil society and state under the rule of law declared in the Preamble of the Constitution. Along with the other requirements, the principle of a state under the rule of law consolidated in the Constitution also pre-supposes the fact that human rights and freedoms must be ensured, that all state institutions exercising state authority, as well as other state institutions, must act on the grounds of law and in compliance with law, that the Constitution has the supreme juridical power and that the laws, government resolutions and other legal acts must be in conformity with the Constitution.”

The Seimas, as well as the other participants of legislation must coordinate all drafted and adopted legal acts with the Constitution. This is one of the most important means of securing the constitutional order and one of the fundamental requirements for a state under the rule of law.

4. Article 1 of the Constitution provides: “The State of Lithuania shall be an independent and democratic republic.”

The Constitutional Court in the said ruling of 23 February 2000 noted that “in this article of the Constitution the fundamental principles of the Lithuanian State are established: the Lithuanian State is free and independent; the republic is the form of governance of the Lithuanian State; the state authority must be organised in a democratic way, and there must be a democratic political regime in this country”.

The provisions of Article 1 of the Constitution, as well as the principle of a state under the rule of law established in the Preamble to the Constitution, determines the main principles of the organisation and activities of the state authority of the State of Lithuania.

5. Paragraph 1 of Article 5 of the Constitution provides that in Lithuania, the powers of the State shall be exercised by the Seimas, the President of the Republic and the Government, and the Judiciary.

By this norm, a more detailed content of which is revealed in the other articles of the Constitution, the principle of the separation of powers has been established. This is a fundamental principle of the organisation and activities of a democratic and law-governed state. In its rulings, the Constitutional Court has noted many a time that this principle means that the legislative, executive and judicial powers must be separated, sufficiently independent, and that there must be a balance between them. Every power is exercised through its institutions which are granted the competence corresponding to their purpose.

6. In the opinion of the petitioners, the provision of Paragraph 6 of Article 2 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” that certain requirements of Paragraphs 9, 10, 11, 13 and 14 of Article 10 of the Company Law shall not be applicable to the reorganisation of the joint-stock companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” violates the principle of a state under the rule of law entrenched in the Preamble to the Constitution, which requires that legal acts be coordinated. According to the petitioners, a special law must extend and construe the norms of a common law but it may never provide for a different regulation.

7. In Paragraphs 9, 10, 11, 13 and 14 of Article 10 of the Company Law pointed out by the petitioner the relations of reorganisation of a joint-stock company (i.e. transformation of the company as a legal person without the liquidation procedure) are regulated, as, for example, as to how and when the reorganisation of the company is announced and informed about, the manner of adoption of the decision to reorganise the company and approve the plan of its reorganisation and its Articles of Association, the manner of reorganisation of the company against which bankruptcy proceedings have been instituted or with respect to which extrajudicial bankruptcy procedure is applied, the manner of registration of the Articles of Association of the companies which continue their activities after the reorganisation etc.

In the norms of Article 10 of the Company Law relations of reorganisation of joint-stock companies and close corporations are regulated, while the procedure of reorganisation of the joint-stock companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” is provided in impugned Article 2 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”. It is pointed out in Paragraph 6 of Article 2 of this law that the requirements set in Paragraphs 9, 10, 11, 13 and 14 of Article 10 of the Company Law shall not be applicable to the reorganisation of the joint-stock companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”.

It needs to be noted that the state, while taking account of the content of the economic activity, as well as its peculiarities, may regulate social relations in this area in a differentiated manner, or establish certain conditions for a certain type of activity. It is important that by means of such regulation the principles and norms of the Constitution be not violated. Therefore, the singling out of respective economic entities and peculiarities of regulation of their activities in themselves do not violate the principle of a state under the rule of law. The circumstance that the norms of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” contain a provision by which the norms the Company Law are not be applicable to the reorganisation of the said companies in itself does not mean that thereby coordination of the system of legal acts and the principle of a state under the rule of law entrenched in the Constitution are denied.

8. In the opinion of the petitioners, the Seimas, after it had regulated the activity of one economic entity in Article 2 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, exercised competence characteristic of the executive, therefore, by means of such regulation, the principle of the separation of powers established in Paragraph 1 of Article 5 of the Constitution as well as the provision of Article 1 of the Constitution that the State of Lithuania shall be an independent and democratic republic are violated, because the separation of powers is characteristic of a democratic state.

Under Item 2 of Article 67 of the Constitution, the Seimas shall enact laws. By means of the impugned norms of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” a group of relations is regulated, which is linked with the reorganisation of the joint-stock companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” and the activities of the company that will operate after the reorganisation. The legislature may, without violating the competence of the other state institutions, which is established in the Constitution, regulate relations of varied nature by law. The relations regulated by the impugned article of the law are not classed as the exclusive competence of the Government by the Constitution, therefore, there are no legal grounds to assert that the legislature, while adopting the impugned article of the law, interfered with the competence of the Government established in the Constitution and violated the constitutional principle of the separation of powers and the provision of Article 1 of the Constitution that the State of Lithuania shall be an independent and democratic republic.

9. Taking account of the aforementioned arguments, it should be concluded that Article 2 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” is in compliance with Article 1 and Paragraph 1 of Article 5 of the Constitution, as well as the principle of a state under the rule of law established in the Preamble to the Constitution.

10. Paragraph 1 of Article 2 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” provides that the joint-stock companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” shall be reorganised by way of merger, i.e. by joining the other said joint-stock companies to the joint-stock company “Mažeikių nafta”. Paragraph 7 of Article 2 of this law points out that in the reorganisation plan of the said joint-stock companies it shall be provided that the shares of the oil products sales network (petrol stations) as well as those of the companies established on the basis of Plinkškiai hotel-recreational centre belonging to the joint-stock company “Mažeikių nafta”, as well as those of the company established on the basis of the shop making wooden articles, belonging to the joint-stock company “Naftotiekis”, shall be transferred respectively to the shareholders of the joint-stock companies “Mažeikių nafta” and “Naftotiekis” in proportion to the number of shares belonging to them, by respectively reducing the authorised capitals of the joint-stock companies “Mažeikių nafta” and “Naftotiekis”. The impugned Paragraph 7 of Article 2 also provides that in the course of the reorganisation mistakes that were made in the formation of the authorised capital of the joint-stock company “Mažeikių nafta” must be rectified. Decisions concerning reduction of the authorised capital shall be adopted by the general meetings of the shareholders of the joint-stock companies “Mažeikių nafta” and “Naftotiekis” where the issue regarding the reorganisation of the said enterprises will be decided.

In the opinion of the petitioners, after it had been indicated by law as to how the joint-stock companies had to be reorganised, the rights of the said companies as economic entities as well as those of their shareholders were infringed. By means of such regulation, the inviolability of property guaranteed in Paragraph 1 of Article 23 of the Constitution is denied, freedom of economic activity and the initiative secured by Paragraph 1 of Article 46 of the Constitution as well as freedom of fair competition entrenched in Paragraph 4 of Article 46 of the Constitution are limited.

11. Paragraph 1 of Article 23 of the Constitution provides that property shall be inviolable. Paragraph 1 of Article 46 of the Constitution provides that Lithuania’s economy shall be based on the right to private ownership, freedom of individual economic activity, and initiative. Paragraph 4 of Article 46 of the Constitution prescribes: “The law shall prohibit monopolisation of production and the market, and shall protect freedom of fair competition.”

While assessing the compliance of Paragraphs 1 and 7 of Article 2 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” with Paragraph 1 of Article 23 of the Constitution, it should be noted that it is provided in Paragraph 2 of Article 2 of the said law that, after the Government has approved the reorganisation plan, the general meetings of the shareholders of the joint-stock companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” may, by at least a two-thirds majority vote, adopt a decision to reorganise the company and approve this plan and the prepared Articles of Association of the company which will be operating after the reorganisation. The impugned Paragraph 7 of Article 2 of the law points out that decisions concerning reduction of the authorised capital are adopted by the general meetings of the shareholders. Thus, under the law, the final decision on the reorganisation of the joint-stock companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” is adopted by the shareholders. By the established legal regulation the ownership rights of the shareholders are not infringed. While taking account of this, it should be concluded that the impugned norms of Paragraphs 1 and 7 of Article 2 of the said law are in compliance with Paragraph 1 of Article 23 of the Constitution.

The purpose of the impugned norms of Paragraphs 1 and 7 of Article 2 of the said law is only regulation of questions linked with the reorganisation of the aforementioned companies. Paragraph 1 of Article 2 of the said law provides for a manner of the reorganisation of respective companies, while Paragraph 7 of the same article stipulates that in the reorganisation plan of these companies reduction of the authorised capital must be provided. In both cases decisions are adopted by the general meetings of the shareholders. The provision of Paragraph 1 of Article 46 of the Constitution that Lithuania’s economy shall be based on the right to private ownership, freedom of individual economic activity, and initiative is not denied by means of such legal regulation. The relations regulated in Paragraphs 1 and 7 of Article 2 of the Law are not directly linked with competition relations, therefore, the provisions of Paragraph 4 of Article 46 of the Constitution are not violated.

Taking account of the above arguments, the conclusion should be drawn that Paragraphs 1 and 7 of Article 2 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” are in compliance with Paragraph 1 of Article 23 and Paragraphs 1 and 4 of Article 46 of the Constitution.

IV

On the compliance of Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” with the principle of a state under the rule of law established in the Constitution, Article 1, Article 4, Paragraph 1 of Article 5, Paragraphs 3, 4 and 5 of Article 46, Article 67, Paragraph 1 of Article 128 and Paragraph 1 of Article 135 of the Constitution.

1. Article 3 entitled “Procedure and Ways of the Investment” of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” adopted on 29 September 1998 consisted of two paragraphs. It was provided in Paragraph 1 of this article that the strategic investor, recognised as such upon the recommendation of the Government and by means of a decision of the Seimas, shall be granted the right to acquire shares of the new issue of the joint-stock company “Mažeikių nafta” which continues its activities after the reorganisation, the total nominal value whereof does not exceed 33 percent of the authorised capital of this company. In such a case the authorised capital of the joint-stock company “Mažeikių nafta” is increased without application of the provisions of Paragraph 4 of Article 43 of the Company Law and Article 18 of the Law on the Privatisation of State-owned and Municipal Property. It was provided in Paragraph 2 of the said article that after the strategic investor has acquired the new issue of shares of the joint-stock company “Mažeikių nafta”, the state-owned shares of the joint-stock company “Mažeikių nafta” shall be privatised only under the procedure established in the Law on the Privatisation of State-owned and Municipal Property. After the privatisation the state must, by right of ownership, have in possession a block of shares of the joint-stock company “Mažeikių nafta” granting more than 25 percent of votes in the general meeting of the shareholders.

The wording of Article 3 amended by the Law “On Amending and Supplementing Article 3 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” of 3 June 1999 was set forth as follows:

1. The strategic investor, recognised as such upon the recommendation of the Government and by means of a decision of the Seimas, shall be granted the right:

1) to acquire newly issued shares of the joint-stock company ‘Mažeikių nafta’ which continues its activity after the reorganisation upon the increase of the authorised capital of this company; the general nominal value of these shares must not exceed 33 percent of the authorised capital of the said company;

2) within a 5-year period at any time from the acquisition of the shares pointed out in Item 1 of Paragraph 1 of this Article by the strategic investor, to acquire newly issued shares of the joint-stock company ‘Mažeikių nafta’ upon the increase of the authorised capital of this company, the nominal value of which together with those pointed out in Item 1 of Paragraph 1 of this Article does not exceed 49.5 percent of the authorised capital of the joint-stock company ‘Mažeikių nafta’;

3) to purchase from the State, after the strategic investor has acquired the shares pointed out in Item 2 of this Article, the shares belonging to the State by right of ownership the nominal value of which does not exceed 16.5 percent of the authorised capital of the joint-stock company ‘Mažeikių nafta’ which is registered at that time, and it shall be established that the strategic investor may purchase these shares in portions under the procedure established by the Government of the Republic of Lithuania. The strategic investor shall be entitled to make use of this right for 7 years from the moment of the acquisition of the shares pointed out in Item 1 of Paragraph 1 of this Article.

2. In the course of the acquisition of the shares by the strategic investor under Items 1 and 2 of Paragraph 1 of this Article, the authorised capital of the joint-stock company ‘Mažeikių nafta’ shall be increased without application of the provisions of Paragraph 4 of Article 43 of the Company Law and Article 18 of the Law on the Privatisation of State-owned and Municipal Property. In the course of the sale of the shares, belonging to the State by right of ownership, of the joint stock-company ‘Mažeikių nafta’ which are pointed out in Item 3 of Paragraph 1 of this Article to the strategic investor, the provisions of the Law on the Privatisation of State-owned and Municipal Property and those of Paragraph 2 of Article 8 and Article 10 of the Law on Public Trading in Securities shall not be applied. The rest of the shares of the joint-stock company ‘Mažeikių nafta’ which belong to the State by right of ownership shall be privatised only under the procedure established by the Law on the Privatisation of State-owned and Municipal Property. After the privatisation, the State must retain in its ownership a block of shares of the joint-stock company ‘Mažeikių nafta’ granting more than 25 percent of votes in the general meeting of the shareholders. If the Seimas adopts a decision to privatise still a greater portion of the shares of the joint-stock company ‘Mažeikių nafta’, the strategic interests of the state will be secured by law.

3. After the strategic investor has acquired the shares under Item 1 of Paragraph 1 of this Article, state institutions will not be permitted to present additional requirements, as regards the period prior to the acquisition of the shares by the strategic investor, to the joint-stock company ‘Mažeikių nafta’ concerning the activities or failure of the joint-stock company ‘Mažeikių nafta’ continuing its activities after the reorganisation. The Government of the Republic of Lithuania, in the agreement with the strategic investor, has the right to assume liabilities in the name of the State to recover the losses to the strategic investor, which may be incurred within 1 year from the acquisition of the shares pointed out in Item 1 of Paragraph 1 of this Article due to demands of other persons for the joint-stock company ‘Mažeikių nafta’ continuing its activities after the reorganisation concerning its activities or failure in the period prior to the acquisition of the shares by the strategic investor.

4. The notice about the first meeting of shareholders of the joint-stock company ‘Mažeikių nafta’, which will take place after the strategic investor has acquired the shares pointed out in Item 1 of Paragraph 1 of this Article, shall be publicly announced no later than 10 days prior to the day of the meeting, while the announced draft agenda of the meeting shall not be further specified. In this case the provisions of Paragraph 6 of Article 21 and Paragraphs 1 and 3 of Article 22 of the Company Law shall not be applicable.”

By means of Article 1 of the 5 October 1999 Law “On Amending and Supplementing Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’”, Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” was amended and supplemented once again. Items 2 and 3 of Paragraph 1 of the said article were set forth as follows:

2) after he has requested so, within a 5-year period at any time from his acquisition of the shares pointed out in Item 1 of Paragraph 1 of this Article, to acquire newly issued shares of the joint-stock company ‘Mažeikių nafta’ upon the increase of the authorised capital of this company, the nominal value of which together with those pointed out in Item 1 of Paragraph 1 of this Article does not exceed 49.5 percent of the authorised capital of the joint-stock company ‘Mažeikių nafta’;

3) to purchase from the State, after the strategic investor has acquired the shares pointed out in Item 2 of this Article, the shares belonging to the State by right of ownership the nominal value of which does not exceed 16.5 percent of the authorised capital of the joint-stock company ‘Mažeikių nafta’ which is registered at that time. The strategic investor may purchase these shares in portions under the procedure established by the Government of the Republic of Lithuania. The strategic investor shall be entitled to make use of this right on request at any time within 7 years from the moment of the acquisition of the shares pointed out in Item 1 of Paragraph 1 of this Article. The Government of the Republic of Lithuania in its agreements with the strategic investor may stipulate that part of the shares pointed out in this Item may be transferred to the crude oil suppliers of the joint-stock company ‘Mažeikių nafta’ and/or financial institutions.”

In addition, the impugned Article 3 of the law was supplemented with new Paragraph 2, wherein it was established:

2. In the case that at any time until the acquisition of the shares by the strategic investor under Item 2 of Paragraph 1 of this Article the authorised capital of the joint-stock company is increased by means of additional contributions of other persons but not the strategic investor and in case the strategic investor requests so, the Government of the Republic of Lithuania will transfer him gratis a corresponding portion of shares of the joint-stock company ‘Mažeikių nafta’, which belong to the State by right of ownership, so that the nominal value of the shares of the joint-stock company ‘Mažeikių nafta’, which belong to the said company by right of ownership, would correspond to the same portion in terms of percentage of the authorised capital of this company which was possessed by the strategic investor prior to the increase of the authorised capital by means of the additional contributions. In the course of the transfer of shares of the joint-stock company ‘Mažeikių nafta’ in pursuance of the requirements of this Paragraph, the provisions of the Law on the Privatisation of State-owned and Municipal Property shall not be applicable. In the course of the acquisition of shares of the joint-stock company ‘Mažeikių nafta’ by the financial institutions pointed out in the concluded agreement between the Government of the Republic of Lithuania and the strategic investor, the authorised capital of the said company shall be increased without application of the norms of Paragraph 4 of Article 43 of the Company Law and those of the Law on the Privatisation of State-owned and Municipal Property.”

It was decided to consider former Paragraphs 2, 3 and 4 of Article 3 respectively Paragraphs 3, 4 and 5. Paragraphs 3 and 4 of Article 3 of the impugned law were also amended and set forth as follows:

3. In the course of the acquisition of the shares by the strategic investor under Items 1 and 2 of Paragraph 1 of this Article, the authorised capital of the joint-stock company ‘Mažeikių nafta’ shall be increased without application of the provisions of Paragraph 4 of Article 43 of the Company Law and Article 18 of the Law on the Privatisation of State-owned and Municipal Property. In the course of the sale of the shares, belonging to the State by right of ownership, of the joint stock-company ‘Mažeikių nafta’ which are pointed out in Item 3 of Paragraph 1 of this Article to the strategic investor or crude oil suppliers of the joint-stock company ‘Mažeikių nafta’ and/or financial institutions, the provisions of the Law on the Privatisation of State-owned and Municipal Property and those of Paragraph 2 of Article 8 and Article 10 of the Law on Public Trading in Securities shall not be applied. With the exception of the cases provided for in Paragraph 2 of Article 3 and Paragraph 3 of Article 4 of this Law, the rest of the shares of the joint-stock company ‘Mažeikių nafta’ which belong to the State by right of ownership shall be privatised only under the procedure established by the Law on the Privatisation of State-owned and Municipal Property.

4. After the strategic investor has acquired the shares under Item 1 of Paragraph 1 of this Article, state and municipal institutions will not be permitted to present additional requirements, as regards the period prior to the acquisition of the shares by the strategic investor, either to the joint-stock company ‘Mažeikių nafta’ or its subsidiaries concerning the activities or failure of the joint-stock company ‘Mažeikių nafta’ or its subsidiaries or other events. The Government of the Republic of Lithuania, in the agreements with the strategic investor and/or the joint-stock company ‘Mažeikių nafta’, has the right to assume basic property liabilities in the name of the State, including recovery of losses. Such losses include or may be incurred due to that fact that the Government of the Republic of Lithuania may not carry out its agreement obligations because of changes in the laws of the Republic of Lithuania and because of the fact that the information, statements and/or confirmations pointed out in the agreements concluded by the Government of the Republic of Lithuania and annexes thereto (including the presented information revealing documents of the joint-stock company ‘Mažeikių nafta’) were false or inexact.”

In addition, the said article was supplemented with new Paragraphs 6 and 7:

6. In the course of the acquisition of the shares by the strategic investor under the provisions of this Article, as well as in the course of conclusion of agreements by the joint-stock company ‘Mažeikių nafta’ on acquisition of the right of control in the joint-stock company ‘Klaipėdos nafta’, the provisions of Chapter 3 of the Law on Competition shall not be applicable. The provisions of Paragraphs 3 and 4 of Article 30 and Paragraph 6 of Article 45 of the Company Law shall not be applicable to the joint-stock company ‘Mažeikių nafta’.

7. In the agreements with the strategic investor and the joint-stock company ‘Mažeikių nafta’, the Government of the Republic of Lithuania shall be granted the right independently to establish the method and procedure under which the joint-stock company ‘Mažeikių nafta’ would compensate the strategic investor a possible decrease of value of the said company. The compensation sum of the joint-stock company ‘Mažeikių nafta’ to the strategic investor may not exceed US$75 million.”

Thus, by means of the laws of 9 June 1999 and of 5 October 1999, the rights of the strategic investor were particularised and expanded.

2. Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, after the aforementioned amendments and supplements have been made, provides:

1. The strategic investor, recognised as such upon the recommendation of the Government and by means of a decision of the Seimas, shall be granted the right:

1) to acquire newly issued shares of the joint-stock company ‘Mažeikių nafta’ which continues its activity after the reorganisation upon the increase of the authorised capital of this company; the general nominal value of these shares must not exceed 33 percent of the authorised capital of the said company;

2) after he has requested so, within a 5-year period at any time from his acquisition of the shares pointed out in Item 1 of Paragraph 1 of this Article, to acquire newly issued shares of the joint-stock company ‘Mažeikių nafta’ upon the increase of the authorised capital of this company, the nominal value of which together with those pointed out in Item 1 of Paragraph 1 of this Article does not exceed 49.5 percent of the authorised capital of the joint-stock company ‘Mažeikių nafta’;

3) to purchase from the State, after the strategic investor has acquired the shares pointed out in Item 2 of this Article, the shares belonging to the State by right of ownership the nominal value of which does not exceed 16.5 percent of the authorised capital of the joint-stock company ‘Mažeikių nafta’ which is registered at that time. The strategic investor may purchase these shares in portions under the procedure established by the Government of the Republic of Lithuania. The strategic investor shall be entitled to make use of this right on request at any time within 7 years from the moment of the acquisition of the shares pointed out in Item 1 of Paragraph 1 of this Article. The Government of the Republic of Lithuania in its agreements with the strategic investor may stipulate that part of the shares pointed out in this Item may be transferred to the crude oil suppliers of the joint-stock company ‘Mažeikių nafta’ and/or financial institutions.

2. In case that at any time until the acquisition of the shares by the strategic investor under Item 2 of Paragraph 1 of this Article the authorised capital of the joint-stock company is increased by means of additional contributions of other persons but not the strategic investor and in case the strategic investor requests so, the Government of the Republic of Lithuania will transfer him gratis a corresponding portion of shares of the joint-stock company ‘Mažeikių nafta’, which belong to the State by right of ownership, so that the nominal value of the shares of the joint-stock company ‘Mažeikių nafta’, which belong to him by right of ownership, would correspond to the same portion in terms of percentage of the authorised capital of this company which was possessed by the strategic investor prior to the increase of the authorised capital by means of the additional contributions. In the course of the transfer of shares of the joint-stock company ‘Mažeikių nafta’ in pursuance of the requirements of this Paragraph, the provisions of the Law on the Privatisation of State-owned and Municipal Property shall not be applicable. In the course of the acquisition of shares of the joint-stock company ‘Mažeikių nafta’ by the financial institutions pointed out in the concluded agreement between the Government of the Republic of Lithuania and the strategic investor, the authorised capital of the said company shall be increased without application of the norms of Paragraph 4 of Article 43 of the Company Law and those of the Law on the Privatisation of State-owned and Municipal Property.

3. In the course of the acquisition of the shares by the strategic investor under Items 1 and 2 of Paragraph 1 of this Article, the authorised capital of the joint-stock company ‘Mažeikių nafta’ shall be increased without application of the provisions of Paragraph 4 of Article 43 of the Company Law and Article 18 of the Law on the Privatisation of State-owned and Municipal Property. In the course of the sale of the shares, belonging to the State by right of ownership, of the joint stock-company ‘Mažeikių nafta’ which are pointed out in Item 3 of Paragraph 1 of this Article to the strategic investor or crude oil suppliers of the joint-stock company ‘Mažeikių nafta’ and/or financial institutions, the provisions of the Law on the Privatisation of State-owned and Municipal Property and those of Paragraph 2 of Article 8 and Article 10 of the Law on Public Trading in Securities shall not be applied. With the exception of the cases provided for in Paragraph 2 of Article 3 and Paragraph 3 of Article 4 of this Law, the rest of the shares of the joint-stock company ‘Mažeikių nafta’ which belong to the State by right of ownership shall be privatised only under the procedure established by the Law on the Privatisation of State-owned and Municipal Property.

4. After the strategic investor has acquired the shares under Item 1 of Paragraph 1 of this Article, state and municipal institutions will not be permitted to present additional requirements, as regards the period prior to the acquisition of the shares by the strategic investor, either to the joint-stock company ‘Mažeikių nafta’ or its subsidiaries concerning the activities or failure of the joint-stock company ‘Mažeikių nafta’ or its subsidiaries or other events. The Government of the Republic of Lithuania, in the agreements with the strategic investor and/or the joint-stock company ‘Mažeikių nafta’, has the right to assume basic property liabilities in the name of the State, including recovery of losses. Such losses include or may be incurred due to that fact that the Government of the Republic of Lithuania may not carry out its agreement obligations because of changes in the laws of the Republic of Lithuania and because of the fact that the information, statements and/or confirmations pointed out in the agreements concluded by the Government of the Republic of Lithuania and annexes thereto (including the presented information revealing documents of the joint-stock company ‘Mažeikių nafta’) were false or inexact.

5. The notice about the first meeting of shareholders of the joint-stock company ‘Mažeikių nafta’, which will take place after the strategic investor has acquired the shares pointed out in Item 1 of Paragraph 1 of this Article, shall be publicly announced no later than 10 days prior to the day of the meeting, while the announced draft agenda of the meeting shall not be further specified. In this case the provisions of Paragraph 6 of Article 21 and Paragraphs 1 and 3 of Article 22 of the Company Law shall not be applicable.

6. In the course of the acquisition of the shares by the strategic investor under the provisions of this Article, as well as in the course of conclusion of agreements by the joint-stock company ‘Mažeikių nafta’ on acquisition of the right of control in the joint-stock company ‘Klaipėdos nafta’, the provisions of Chapter 3 of the Law on Competition shall not be applicable. The provisions of Paragraphs 3 and 4 of Article 30 and Paragraph 6 of Article 45 of the Company Law shall not be applicable to the joint-stock company ‘Mažeikių nafta’.

7. In the agreements with the strategic investor and the joint-stock company ‘Mažeikių nafta’, the Government of the Republic of Lithuania shall be granted the right independently to establish the method and procedure under which the joint-stock company ‘Mažeikių nafta’ would compensate the strategic investor a possible decrease of value of the said company. The compensation sum of the joint-stock company ‘Mažeikių nafta’ to the strategic investor may not exceed US$75 million.”

3. The petitioners maintain that the norms of Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” violate the principle of a just society and state under the rule of law established in the Preamble to the Constitution, as well as Article 1 of the Constitution, Paragraphs 3, 4 and 5 of Article 46 of the Constitution, Article 67 and Paragraph 1 of Article 135 of the Constitution.

While assuming that the Law on the Basics of National Security is a constitutional law, the petitioners doubt whether the norms of Article 3 of the impugned law, establishing a different legal regulation, if compared with the constitutional law, are in compliance with the principle of a just society and state under the rule of law established in the Preamble to the Constitution, Article 1 of the Constitution which prescribes that the State of Lithuania shall be an independent and democratic republic (since a democratic republic is one under the rule of law), and the final competence of the Seimas established in Article 67 of the Constitution. The petitioners point out that the Law on the Basics of National Security particularises and interprets the norms of Chapter III of the Constitution, especially its Article 135. Therefore, the petitioners doubt whether the impugned legal norms are in compliance with Paragraph 1 of Article 135 of the Constitution providing that in conducting foreign policy, the Republic of Lithuania shall pursue the universally recognised principles and norms of international law, shall strive to safeguard national security and independence as well as the basic rights, freedoms and welfare of its citizens, and shall take part in the creation of sound international order based on law and justice.

In addition, the petitioners presume that the Seimas, while regulating activities of individual economic entities, takes upon itself the competence characteristic of the executive and thus violates the principle of the separation of powers entrenched in Paragraph 1 of Article 5 of the Constitution, the provision of Article 1 of the Constitution that Lithuania shall be a democratic state in which the separation of powers must be secured, and the principle of a state under the rule of law consolidated in the Preamble to the Constitution.

The petitioners also point out that Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” provides that the norms of common laws shall not be applicable to respective relations, and that only the impugned law must be followed. Therefore, upon establishment of exceptions to common legal regulation, the principle of a state under the rule of law established in the Preamble to the Constitution and the provision of Article 1 of the Constitution that Lithuania shall be a democratic republic are violated.

4. The request of the petitioners is based on the assumption that the Law on the Basics of the National Security is a constitutional law. The Constitutional Court has already held in the present ruling that the Law on the Basics of the National Security is not a constitutional law, therefore, it is impossible to draw the conclusion that the impugned Article 3 of the law, from the aspect pointed out by the petitioner, conflicts with the principle of a state under the rule of law established in the Preamble to the Constitution, Article 1, Article 67 and Paragraph 1 of Article 135 of the Constitution.

5. In the present ruling, the Constitutional Court, while analysing the compliance of Article 2 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” with the Constitution, has held that the singling out of respective economic entities and differentiated legal regulation of their reorganisation in themselves do not violate the principle of a state under the rule of law.

It needs to be noted that the legislature, while regulating the relations of reorganisation of the joint-stock companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, did not interfere with the powers of the other state institutions established in the Constitution nor did he take over the competence of the executive, established in the Constitution.

Taking account of the fact that by the impugned legal regulation the competence of the executive has not been interfered with, one may draw the conclusion that the impugned Article 3 of the law is in compliance with the principle of a state under the rule of law entrenched in the Constitution, as well as Article 1 and Paragraph 1 of Article 5 of the Constitution.

6. Paragraph 4 of Article 3 of the law provides that after the strategic investor has acquired the shares under Item 1 of Paragraph 1 of this Article, state and municipal institutions will not be permitted to present additional requirements, as regards the period prior to the acquisition of the shares by the strategic investor, either to the joint-stock company “Mažeikių nafta” or its subsidiaries concerning the activities or failure of the joint-stock company “Mažeikių nafta” or its subsidiaries or other events. The Government of the Republic of Lithuania, in the agreements with the strategic investor and/or the joint-stock company “Mažeikių nafta”, has the right to assume basic property liabilities in the name of the state, including recovery of losses.

7. Paragraph 1 of Article 128 of the Constitution provides that decisions concerning state loans and other basic property liabilities of the state shall be adopted by the Seimas on the recommendation of the Government. This means that, under the Constitution, decisions concerning basic property liabilities may be adopted by the Seimas only, and only when there is a recommendation of the Government. In its rulings of 3 June 1999 and of 21 December 1999, the Constitutional Court held: “In cases when the powers of a concrete branch of power are directly established in the Constitution, then no institution may take over these powers, while an institution whose powers are defined by the Constitution may neither transfer nor waive these powers. Such powers may neither be changed nor limited by law.”

As mentioned before, it is provided in Paragraph 4 of Article 3 of the impugned law that the Government, in the agreements with the strategic investor and the joint-stock “Mažeikių nafta”, has the right to assume basic property liabilities in the name of the state, including recovery of losses. This means that the Government was transferred the powers regarding adoption of decisions concerning basic property liabilities of the state by the Seimas, which are established by the Constitution to the latter.

Thus, in this case the Seimas transferred the powers to the Government, which are established to the Seimas by the Constitution, and thereby it violated Paragraph 1 of Article 128 of the Constitution, as well as the principle of the separation of powers entrenched in Paragraph 1 of Article 5 of the Constitution.

8. As mentioned before, it is provided in Paragraph 4 of Article 3 of the impugned law that the Government, in the agreements with the strategic investor and/or the joint-stock company “Mažeikių nafta”, has the right to assume basic property liabilities in the name of the state, including recovery of losses. Under the said law, such losses include the losses incurred due to that fact that the Republic of Lithuania may not carry out its agreement obligations because of changes in the laws of the Republic of Lithuania and because of the fact that the information, statements and/or confirmations pointed out in the agreements concluded by the Government and annexes thereto (including the presented information revealing documents of the joint-stock company “Mažeikių nafta”) were false or inexact.

The aforesaid provisions of the law concerning obligations to cover losses also pre-suppose the fact that the Government has the right, in the name of the state, to obligate itself to cover losses to the strategic investor and the joint-stock company “Mažeikių nafta” even in such cases when the strategic investor and/or the joint-stock company “Mažeikių nafta” are responsible for the losses. Under the law, these losses must be covered from the state budget. Such legal regulation is not in line with the provision of Paragraph 3 of Article 46 of the Constitution that the state shall regulate economic activity so that it serves the general welfare of the nation, as well as with the constitutional principle of a state under the rule of law.

Taking account of the reasoning set forth, it should be concluded that the provision of Paragraph 4 of Article 3 of the impugned law that the Government, in the agreements with the strategic investor and the joint-stock company “Mažeikių nafta”, has the right to assume basic property liabilities in the name of the state, including recovery of losses, to the extent that that the right of the Government is established to obligate itself to cover losses to the strategic investor and the joint-stock company “Mažeikių nafta” even in such cases when the strategic investor and/or the joint-stock company “Mažeikių nafta” are responsible for the losses conflicts with Paragraph 3 of Article 46 of the Constitution and the principle of a state under the rule of law entrenched in the Constitution.

9. As mentioned before, Paragraph 4 of Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” provides that the Government has the right to assume obligations to cover losses to the strategic investor and/or the joint-stock company “Mažeikių nafta”, which may be incurred due to that fact that the Republic of Lithuania may not carry out its agreement obligations because of changes in the laws of the Republic of Lithuania.

It needs to be noted that the provision of the law under which the state will be liable to cover the losses due to changes of the laws of the Republic of Lithuania also means that even in cases when norms of the Constitution are attempted to be enforced or values entrenched in the Constitution to be protected by law, the state would be liable to cover losses to the strategic investor and/or the joint-stock company “Mažeikių nafta” incurred due to this. Thus, under the impugned norm of the law the enforcement of the Constitution is impeded. The Constitutional Court notes that enforcement of the Constitution may not be hindered by any conditions.

Taking account of the reasoning set forth, the conclusion should be drawn that the impugned provision of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” that the Government, in the agreements with the strategic investor and/or the joint-stock “Mažeikių nafta”, has the right to assume basic property liabilities in the name of the state, including recovery of losses, to the extent that the Government has the right to obligate itself to cover losses even in such cases when such losses are incurred due to adoption of the laws enforcing norms of the Constitution and/or protecting the values established in the constitution conflicts with Article 4 of the Constitution and the principle of a state under the rule of law entrenched in the Constitution.

10. It is provided in Paragraph 2 of Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” that in the course of the transfer of shares of the joint-stock company “Mažeikių nafta” in pursuance of the requirements of Paragraph 2 of Article 3 of the said law, the provisions of the Law on the Privatisation of State-owned and Municipal Property shall not be applicable. In addition, in the course of the acquisition of shares of the joint-stock company “Mažeikių nafta” by the financial institutions pointed out in the concluded agreement between the Government and the strategic investor, the authorised capital of the said company shall be increased without application of the norms of Paragraph 4 of Article 43 of the Company Law and those of the Law on the Privatisation of State-owned and Municipal Property.

It is provided in Paragraph 3 of Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” that in respective cases in the course of the acquisition of the shares by the strategic investor, the authorised capital of the joint-stock company “Mažeikių nafta” shall be increased without application of the provisions of Paragraph 4 of Article 43 of the Company Law and Article 18 of the Law on the Privatisation of State-owned and Municipal Property. In the course of the sale of the shares, belonging to the state by right of ownership, of the joint stock-company “Mažeikių nafta” which are pointed out in Item 3 of Paragraph 1 of Article 3 of the impugned law to the strategic investor or crude oil suppliers of the company ‘Mažeikių nafta’ and/or financial institutions, the provisions of the Law on the Privatisation of State-owned and Municipal Property and those of Paragraph 2 of Article 8 and Article 10 of the Law on Public Trading in Securities shall not be applied.

It is provided in Paragraph 5 of Article 3 of the impugned law that the notice about the first meeting of shareholders of the joint-stock company “Mažeikių nafta”, which will take place after the strategic investor has acquired the shares pointed out in Item 1 of Paragraph 1 of the said article shall be publicly announced no later than 10 days prior to the day of the meeting, while the announced draft agenda of the meeting shall not be further specified. In this case the provisions of Paragraph 6 of Article 21 and Paragraphs 1 and 3 of Article 22 of the Company Law shall not be applicable. Paragraph 6 of Article 3 of the impugned law provides that in the course of the acquisition of the shares by the strategic investor under the provisions of the said article, as well as in the course of conclusion of agreements by the joint-stock company “Mažeikių nafta” on acquisition of the right of control in the joint-stock company “Klaipėdos nafta”, the provisions of Chapter 3 of the Law on Competition shall not be applicable. The provisions of Paragraphs 3 and 4 of Article 30 and Paragraph 6 of Article 45 of the Company Law shall not be applicable to the joint-stock company “Mažeikių nafta”.

It is evident that, in Paragraphs 2, 3, 5 and 6 of Article 3 of the impugned law, a differentiated regulation of the legal relations regarding the reorganisation of the economic entities pointed out in the law and that of the functioning of the company continuing its activities after the reorganisation is provided for. The Constitutional Court, on the grounds of the reasoning which it has set forth in this Ruling while analysing Article 2 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, draws the conclusion that the provisions of Paragraphs 2, 3, 5 and 6 of Article 3, which establish differentiated legal regulation, in themselves do not conflict with the principle of a state under the rule of law established in the Constitution, as well as Article 1 of the Constitution.

11. In the opinion of the petitioners, after the strategic investor had been granted the exceptional rights established in Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, which permit the strategic investor to have a monopoly under its control, the norm of Paragraph 3 of Article 46 of the Constitution by which the state shall regulate economic activity so that it serves the general welfare of the nation is violated. After the state has refused the right of a decisive vote, the strategic investor will have the joint-stock company “Mažeikių nafta” occupying an exceptional place in the oil sector under its control. The petitioners also maintain that thereby Paragraph 4 of Article 46 of the Constitution prohibiting monopolisation of production and the market is violated. The state, after it has refused the right of a decisive vote in the joint-stock company “Mažeikių nafta”, will not be able to defend the interests of the consumers. By means of such regulation Paragraph 5 of Article 46 of the Constitution is violated.

12. Paragraphs 3, 4 and 5 of Article 46 of the Constitution provide:

The State shall regulate economic activity so that it serves the general welfare of the Nation.

The law shall prohibit monopolisation of production and the market, and shall protect freedom of fair competition.

The State shall defend the interests of the consumers.”

In the course of the construction of the content of Paragraphs 3, 4 and 5 of Article 46 of the Constitution, the attention should be paid to the fact that Lithuania’s economy is based on the right to private ownership, freedom of individual economic activity, and initiative. The state supports economic efforts which are useful to the community. Alongside, it needs to be noted that freedom of individual economic activity is not absolute. The state regulates economic activity by coordinating the interests of individuals and society.

The Constitutional Court, while interpreting Paragraph 3 of Article 46 of the Constitution in its ruling of 6 October 1999, noted that in the constitutional provision “the State shall regulate economic activity so that it serves the general welfare of the nation” the constitutional principle is established which sets the guidelines and ways for as well as limits on the regulation of economic activity. It is possible to judge as regards the general welfare of the nation according to the social development of the nation and the opportunities of self-expression of individuals. The content of the notion “general welfare of the nation” should be disclosed in every particular case, while taking account of economic, social and other important factors.

While construing Paragraph 4 of Article 46 of the Constitution, it should be noted that the provision “the law shall prohibit monopolisation of production and the market” means that it is not permitted to introduce a monopoly, i.e., it is not permitted to grant exceptional rights to an economic entity to operate in a certain sector of economy lest this sector should become monopolised. The prohibition on monopolising production and the market, however, does not mean that under certain circumstances it is prohibited to state in a law the existence of a monopoly in a particular sector of economy or to reflect factual monopolistic relations and regulate them in a respective manner.

Paragraph 5 of Article 46 of the Constitution provides for a duty of the state to protect interests of the consumers. This constitutional provision pre-supposes the fact that various measures of protection of consumers’ interests must be established by legal norms, as well as that state institutions must supervise how economic entities conform to the established requirements etc.

13. While assessing the norms of Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” which establish the rights of the strategic investor, the Constitutional Court notes that the norms of Article 46 of the Constitution are interrelated and supplementing each other. Not a single right consolidated in this article of the Constitution is an absolute one. The right of the state to regulate economic activity established in Paragraph 3 of Article 46 of the Constitution creates the constitutional preconditions for passing laws that react to a certain situation of the national economy as well as the diversity and changes of economic and social life.

The impugned norms of Article 3 of the law regulate relations linked with reorganisation of one sector of the national economy in the course of which privatisation of items of economy becomes of great importance. The objective of the legal regulation is to create the conditions for rearranging the sector of economy by privatising its items, attracting investments, etc.

The peculiarities of the development of this country, the conditions of state-owned enterprises, the situation in the national economy and other factors exert influence on the choice of methods of privatisation. Implementing the economic reform, the state may establish differentiated legal regulation by not violating constitutional principles and requirements of constitutional norms. Therefore, it is impossible to hold that the norms of the law which establish differentiated legal situation of certain entities in themselves violate Paragraph 3 of Article 46 of the Constitution. After these circumstances have been taken into consideration, there exist no grounds to recognise the impugned Article 3 of the law from the aspect pointed out by the petitioners as one violating Paragraph 3 of Article 46 of the Constitution.

14. Under Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, the strategic investor, recognised as such upon the recommendation of the Government and by means of a decision of the Seimas, shall be granted the right to acquire newly issued shares of the joint-stock company “Mažeikių nafta” which continues its activity after the reorganisation upon the increase of the authorised capital of this company provided the general nominal value of these shares does not exceed 33 percent of the authorised capital of the said company. After the strategic investor has requested so, within a 5-year period at any time from his acquisition of the shares pointed out in Item 1 of Paragraph 1 of this article, he has the right to acquire newly issued shares of the joint-stock company “Mažeikių nafta” upon the increase of the authorised capital of this company the nominal value of which together with those pointed out in Item 1 of Paragraph 1 of this article does not exceed 49.5 percent of the authorised capital of the joint-stock company “Mažeikių nafta”. Besides, it is provided in the impugned article of this law that, after the strategic investor has acquired the shares pointed out in Item 2 of this article, he has the right to purchase from the state the shares belonging to the state by right of ownership the nominal value of which does not exceed 16.5 percent of the authorised capital of the joint-stock company “Mažeikių nafta” which is registered at that time. The strategic investor may purchase these shares in portions under the procedure established by the Government of the Republic of Lithuania. In the said article of the law other relations of acquisition of the shares are also regulated.

In the course of the investigation into whether by the said legal regulation a monopoly is created it should be noted that, until the reorganisation, in all the three joint-stock companies subject to reorganisation the greater portion of the shares belonged to the state. In addition, it had the right of a decisive vote in these enterprises. Therefore, in this case the legal regulation concerning the transfer of shares to other entities should not be regarded as one creating a monopoly. Thus, there are not any legal grounds to regard the impugned norms set down in Article 3 of the law as creating a monopoly in a certain sector of economy.

15. Under Paragraph 5 of Article 46 of the Constitution, the state shall defend the interests of the consumers. Assessing the compliance of the impugned norms of Article 3 of the law with Paragraph 5 of Article 46 of the Constitution, it needs to be noted that that virtually by the established legal regulation the norms of the laws or other legal acts of the Republic of Lithuania wherein the common guarantees of the protection of the consumers’ rights are consolidated are neither abolished nor amended.

The duty of the state to defend the interests of the consumers arises out of Paragraph 5 of Article 46 of the Constitution. Taking account of the fact that in the area of economic relations regulated by the impugned law that the production and the market are virtually concentrated, as well as the fact that certain exceptions regarding application of the Law on Competition are provided for in Paragraph 6 of Article 3 of this law, institutions of state authority have a duty to establish an additional legal regulation which would secure the protection of the interests of the consumers. It needs to be noted that the institutions of state authority have not carried out this duty neither prior to the reorganisation of respective companies nor after the adoption of the impugned law. Such a situation should be deemed a gap of the legal regulation. State institutions must eliminate this gap. Thus, the legal regulation consolidated in the impugned law in respect of the consumers is inconsistent and incomplete, however, in this case there are not any sufficient legal grounds to regard this as violation of Paragraph 5 of Article 46 of the Constitution.

V

On the compliance of Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” with the principle of a state under the rule of law entrenched in the Constitution, Article 1, Article 23, Paragraph 1 of Article 29, Paragraphs 1, 3, 4 and 5 of Article 46, Articles 67 and 135 of the Constitution.

1. It was established in Article 4, entitled “Requirements for the Holders of Blocks of Shares”, of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” passed on 29 September 1998:

1. No shareholder of the joint-stock company “Mažeikių nafta”, save the State and the strategic investor together with the entities under the control of the strategic investor, the notion whereof is defined in the Law on Public Trading in Securities, has the right to hold in possession a block of shares granting more than 24 percent of votes.

2. The State shall have the priority in acquisition of the shares sold or transferred otherwise belonging to the other shareholders holding not less than one percent of shares of the joint-stock company ‘Mažeikių nafta’ which continues its activities after the reorganisation. The Government shall have the right to establish the same right of priority to the strategic investor as well.”

2. The Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” in its initial wording was amended by Article 2 of the Law “On Amending and Supplementing Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” of 5 October 1999. By means of the said article, Paragraph 2 of Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” was supplemented and set down as follows:

2. The State shall have priority in acquisition of the shares sold or transferred otherwise belonging to the other shareholders holding not less than one percent of shares of the joint-stock company ‘Mažeikių nafta’ which continues its activities after the reorganisation. The Government shall have the right to establish the same right of priority to the strategic investor as well. The period during which the State has the right of priority to acquire shares of the joint-stock company ‘Mažeikių nafta’ from the strategic investor and the procedure of implementation of this right shall be established in the agreement between the Government of the strategic investor. Under the procedure set down in the agreement with the Government, the strategic investor shall have the right to transfer the shares of the joint-stock company ‘Mažeikių nafta’ which belong to the strategic investor by right of ownership to the enterprises all the shares and/or capital whereof, either directly or indirectly, belong to the strategic investor.”

In addition, Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” was supplemented with Paragraph 3 wherein it was established:

3. In the case that the strategic investor has not sold or transferred otherwise the shares of the joint-stock company ‘Mažeikių nafta’ acquired under Item 1 of Paragraph 1 of Article 3 of this Law (save transfer of the shares to the enterprises all the shares and/or capital whereof, either directly or indirectly, belong to the strategic investor) and a decision has been adopted to privatise, sell or transfer otherwise a certain portion of state-owned shares so that after such privatisation, sale or transfer the nominal value of the shares belonging to the State by right of ownership of the joint-stock company ‘Mažeikių nafta’ would comprise less than 18 percent of the authorised capital of this company, while the strategic investor shall have the right of priority to acquire all or part of the state-owned shares privatised or otherwise transferred without application of the Law on the Privatisation of State-owned and Municipal Property. This provision of priority shall also be applicable in cases when the total value of the state-owned shares of the joint-stock company ‘Mažeikių nafta’ further decreases due to subsequent transfers of the state-owned shares.”

3. After the supplements, Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” provides:

1. No shareholder of the joint-stock company “Mažeikių nafta”, save the State and the strategic investor together with the entities under its control the notion whereof is defined in the Law on Public Trading in Securities, has the right to hold in possession a block of shares granting more than 24 percent of votes.

2. The State shall have priority in acquisition of the shares sold or transferred otherwise belonging to the other shareholders holding not less than one percent of shares of the joint-stock company ‘Mažeikių nafta’ which continues its activities after the reorganisation. The Government shall have the right to establish the same right of priority to the strategic investor as well. The period during which the State has the right of priority to acquire shares of the joint-stock company ‘Mažeikių nafta’ from the strategic investor and the procedure of implementation of this right shall be established in the agreement between the Government of the strategic investor. Under the procedure set down in the agreement with the Government, the strategic investor shall have the right to transfer the shares of the joint-stock company ‘Mažeikių nafta’ which belong to the strategic investor by right of ownership to the enterprises all the shares and/or capital whereof, either directly or indirectly, belong to the strategic investor.

3. In the case that the strategic investor has not sold or transferred otherwise the shares of the joint-stock company ‘Mažeikių nafta’ acquired under Item 1 of Paragraph 1 of Article 3 of this Law (save transfer of the shares to the enterprises all the shares and/or capital whereof, either directly or indirectly, belong to the strategic investor) and a decision has been adopted to privatise, sell or transfer otherwise a certain portion of state-owned shares so that after such privatisation, sale or transfer the nominal value of the shares belonging to the State by right of ownership of the joint-stock company ‘Mažeikių nafta’ would comprise less than 18 percent of the authorised capital of this company, while the strategic investor shall have the right of priority to acquire all or part of the state-owned shares privatised or transferred otherwise without application of the Law on the Privatisation of State-owned and Municipal Property. This provision of priority shall also be applicable in cases when the total value of the state-owned shares of the joint-stock company ‘Mažeikių nafta’ further decreases due to subsequent transfers of the state-owned shares.”

4. The petitioners maintain that the norms of Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” violate the principle of a just society and state under the rule of law entrenched in the Preamble to the Constitution, Articles 1 and 23, Paragraph 1 of Article 29, Paragraphs 1, 3, 4 and 5 of Article 46, Article 67 and Paragraph 1 of Article 135 of the Constitution.

5. The petitioners, assuming that the Law on the Basics of National Security is a constitutional law, have doubts concerning the compliance of Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” with the principle of a just society and state under the rule of law entrenched in the Preamble to the Constitution, as well as Articles 1, 67 and Paragraph 1 of Article 135 of the Constitution.

The Constitutional Court has already held in this Ruling that the Law on the Basics of National Security is not a constitutional law, therefore, there are not any legal grounds to assert that the impugned norms of Article 4 of the law violate the principle of a state under the rule of law entrenched in the Preamble to the Constitution, Articles 1 and 67 as well as Paragraph 1 of Article 135 of the Constitution.

6. The petitioners maintain that the norms of Paragraph 1 of Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” limit the right of the shareholders of the joint-stock company “Mažeikių nafta”, with the exception of the state and the strategic investor, to hold a block of shares of this company granting more than 24 percent of votes. By means of such regulation the principle of the equality of all persons before the law, established in Paragraph 1 of Article 29 of the Constitution, as well as freedom of fair competition entrenched in Paragraph 4 of Article 46 of the Constitution, is violated.

According to the petitioners, by the norms of Paragraph 2 of Article 4 of the law the rights of the shareholders who hold by right of ownership more than 1 percent of shares of the joint-stock company “Mažeikių nafta” continuing its activities after the reorganisation to freely dispose of their property, i.e. shares, are infringed, as it is established that either the state or the strategic investor has the right of priority in acquisition of these shares. Such legal regulation violates the principle of inviolability of property established in Article 23 of the Constitution and the provision of Paragraph 1 of Article 46 of the Constitution providing that Lithuania’s economy shall be based on the right to private ownership, freedom of individual economic activity, and initiative. According to the petitioners, Paragraph 3 of Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” provides, in case there are certain conditions, for the right of priority of the strategic investor to acquire the shares sold or transferred otherwise by the state and the possibility of not following the requirements established in the other laws. Such legal regulation violates freedom of fair competition entrenched in Paragraph 4 of Article 46 of the Constitution and the principle of a state under the rule of law, declared in the Preamble to the Constitution.

7. The Constitution is an integral legal act the principles and norms whereof constitute a harmonious system. Therefore, while assessing whether the impugned norms of the law are in conformity with the provisions of Articles 29 and 23 of the Constitution, one has to take into consideration the fact that in this case these constitutional provisions are linked with the right of the state to regulate economic activity so that it would serve the general welfare of the nation. The legislature, while taking account of the importance and character of the regulated economic relations, may regulate this activity in a differentiated manner or establish certain conditions for it. Such conditions may be set for the reorganisation of enterprises operating in a specific sector of economy, terms and procedure of investments into such enterprises, and requirements for the holders of blocks of shares.

8. Paragraph 1 of Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” provides that no shareholder of the joint-stock company “Mažeikių nafta”, save the state and the strategic investor together with the entities under the control of the strategic investor the notion whereof is defined in the Law on Public Trading in Securities, has the right to hold in possession a block of the shares granting more than 24 percent of votes.

While assessing whether the impugned norms are in conformity with Articles 23 and 29 and Paragraphs 1 and 4 of Article 46 of the Constitution, one has to take account of the purpose of the law, the character of the regulated relations and the aspiration of the state to respectively regulate the economy of this country. As mentioned in this Ruling, the singling out of individual economic entities and differentiated regulation of their situation should be linked with the aims raised by the state in the sphere of economy.

The impugned norms of Paragraph 1 of Article 4 set requirements for the holders of blocks of shares of the stock-joint company “Mažeikių nafta” which continues its activities after the reorganisation, i.e., requirements as to the size of a block of shares that they may hold. Therefore, there are not any legal grounds to assert that legal regulation violates the guarantees established in Article 23 of the Constitution, the equality of persons before the law established in Article 29 of the Constitution and freedom of fair competition consolidated in Paragraph 4 of Article 46 of the Constitution.

9. Paragraph 2 of Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” provides that the state shall have priority in acquisition of the shares sold or transferred otherwise belonging to the other shareholders holding not less than one percent of shares of the joint-stock company “Mažeikių nafta” which continues its activities after the reorganisation. The Government shall have the right to establish the same right of priority to the strategic investor as well. Paragraph 3 of the same article provides that in the case that “the strategic investor has not sold or transferred otherwise the shares of the joint-stock company ‘Mažeikių nafta’ acquired under Item 1 of Paragraph 1 of Article 3 of this Law (save transfer of the shares to the enterprises all the shares and/or capital whereof, either directly or indirectly, belong to the strategic investor) and a decision has been adopted to privatise, sell or transfer otherwise a certain portion of state-owned shares so that after such privatisation, sale or transfer the nominal value of the shares belonging to the State by right of ownership of the joint-stock company ‘Mažeikių nafta’ would comprise less than 18 percent of the authorised capital of this company, while the strategic investor shall have the right of priority to acquire all or part of the state-owned shares privatised or otherwise transferred without application of the Law on the Privatisation of State-owned and Municipal Property”.

The establishment of the right of priority under certain conditions for respective entities in itself does not deny the principles of the right of ownership established in Article 23 of the Constitution, nor those of the equality of all persons before the law, the court and other state institutions, nor the requirements of Paragraphs 1 and 4 of Article 46 of the Constitution. The circumstance that the norms of Paragraphs 2 and 3 of Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” provide for a different legal regulation from that provided in other laws may not serve as the grounds for drawing the conclusion that the principle of a state under the rule of law established in the Constitution is violated.

Paragraph 2 of Article 4 of the law provides for the right of priority of the state as well as that, on a decision of the Government, of the strategic investor to acquire the shares sold or transferred otherwise. When one considers sale of shares, the legislature, while taking account of the purposes of the legal regulation as well as other circumstances, may establish entities which have the right of priority to acquire the shares sold. In this case, the right of ownership established in Article 23 of the Constitution is not violated as the shareholder who sells the shares is paid the market price. However, shares may be transferred not only by means of sale but other ways as well, e.g., by giving them as a present. It needs to be noted that neither the Constitution nor universally recognised international legal norms deny the opportunity to set certain limits on the exercise of the rights of ownership, however, by means of such limitations the essence of the right of ownership may not be denied. Meanwhile, under the impugned norm of the law the right of a person to give his shares as a present or transfer them otherwise is groundlessly restricted.

Taking account of the reasoning set forth, it should be concluded that the provision of Paragraph 2 of Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” that the state, and, by the decision of the Government, the strategic investor shall have priority in acquisition of the shares sold or transferred otherwise belonging to the other shareholders holding not less than one percent of shares of the joint-stock company “Mažeikių nafta” which continues its activities after the reorganisation to the extent that the right of the shareholders to transfer their shares otherwise is limited conflicts with Article 23 of the Constitution.

VI

On the compliance of Paragraph 3 of Article 5 of the Law on Tax Administration with the principle of a state under the rule of law entrenched in the Constitution, Article 1, Paragraph 1 of Article 5, Item 15 of Article 67, Paragraph 3 of Article 127 and Paragraph 1 of Article 128 of the Constitution.

1. Paragraph 3 of Article 5 of the Law on Tax Administration provides: “In cases when under the procedure established by the Republic of Lithuania’s Law on Investment in an investment agreement of the Government of the Republic of Lithuania concluded with a respective strategic investor the said strategic investor obligates himself to invest, in the course of 3 years (36 calendar months) from the day of the conclusion of the agreement, not less than 200 million litas into an economic entity registered in the Republic of Lithuania register of enterprises, at the request of the strategic investor in the investment agreement it may be established that in respect with the said economic entity the rates of direct taxes (taxes listed in Paragraph 1 of this Article except value-added and excise taxes) established on that day in valid tax laws shall not be increased from the day after the investment provided for in the investment agreement has reached 200 million litas. The Government of the Republic of Lithuania shall have the right to prolong the term of not increase of taxes for strategic investors for up to 10 years.”

2. In the opinion of the petitioner, the impugned norm of Paragraph 3 of Article 5 of the Law on Tax Administration conflicts with the principle of a state under the rule of law entrenched in the Preamble to the Constitution, Article 1, Paragraph 1 of Article 5, Item 15 of Article 67 and Paragraph 1 of Article 128 of the Constitution.

The petitioner bases his allegation that the impugned norm of Paragraph 3 of Article 5 of the Law on Tax Administration conflicts with the aforesaid articles of the Constitution on the fact that that by this norm the Government has been delegated the competence of the Seimas to approve taxes and assume basic property liabilities. It is from this aspect that the Constitutional Court will consider the impugned norms of Article 5 of the Law on Tax Administration.

3. Under Item 15 of Article 67 of the Constitution, the Seimas shall establish state taxes and other obligatory payments. Paragraph 3 of Article 127 of the Constitution provides that taxes, other budgetary payments, and dues shall be established by means of laws of the Republic of Lithuania. The Government of the Republic of Lithuania shall implement laws and resolutions of the Seimas concerning the implementation of laws, as well as the decrees of the President of the Republic (Item 2 of Article 94 of the Constitution) and discharge other duties prescribed to the Government by the Constitution and other laws (Item 7 of Article 94 of the Constitution).

Tax relations are liability legal relations between the state and the taxpayer. Taxes are established by law. It is only in the norms of legal acts of such type that the object of a tax, entities of tax relations, their rights and duties, sizes of taxes, term of payment, exceptions and deductions may be established. By substatutory acts the procedure of enforcement of such laws may be regulated and particular norms of tax laws may be implemented.

4. As mentioned before, it is provided in Paragraph 3 of Article 5 of the Law on Tax Administration that the Government shall have the right to prolong the term of not increase of taxes to a strategic investor for up to 10 years.

Under Paragraph 3 of Article 127 of the Constitution, taxes, other budgetary payments, and dues shall be established by means of laws of the Republic of Lithuania. Item 15 of Article 67 of the Constitution provides that the Seimas shall establish state taxes and other obligatory payments. Thus, only a law may provide for the term of payment, exceptions and deductions. As mentioned in this Ruling, the Constitutional Court has noted that in cases when concrete powers are established for one or another state institution, then this institution may not transfer these powers to another institution, while the other state institution may not take over these powers. Under Paragraph 3 of Article 5 of the impugned Law on Tax Administration, the Government has been granted the right to prolong the term of not increase of taxes for a strategic investor for up to 10 years, i.e. the Seimas transferred the powers to the Government which are directly established for the Seimas in the Constitution.

It is provided for in Paragraph 1 of Article 128 of the Constitution that decisions concerning State loans and other basic property liabilities of the state shall be adopted by the Seimas on the recommendation of the Government. Taking account of the fact that the said article of the Constitution does not regulate tax relations, it should be concluded that the impugned provision of Paragraph 3 of Article 5 of the Law on Tax Administration is in compliance with Paragraph 1 of Article 128 of the Constitution.

Taking account of the reasoning set forth, it should be concluded that the provision of Paragraph 3 of Article 5 of the Law on Tax Administration by which the right is granted to the Government to prolong the term of not increase of taxes for a strategic investor for up to 10 years conflicts with Item 15 of Article 67, Paragraph 3 of Article 127 of the Constitution, as well as Paragraph 1 of Article 5 of the Constitution and the principle of a state under the rule of law entrenched in the Constitution.

VII

On the compliance of Paragraph 1 of Article 1 of the Seimas Resolution “On the Recognition of a Strategic Investor” of 29 September 1998 with Paragraph 4 of Article 46 of the Constitution, as well as on the compliance of Item 1 of Paragraph 2 of Article 1 of the said resolution with the Law on the Basics of National Security.

1. In the opinion of the petitioners, the compliance of Paragraph 1 of Article 1 of the Seimas Resolution “On the Recognition of a Strategic Investor” of 29 September 1998 with the Constitution should be assessed in connection with the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”. By granting the status of a strategic investor to a concrete entity, one establishes advantages in the competition of economic activity, while an actual opportunity for a strategic investor to monopolise production is created. Thus, Paragraph 1 of Article 1 of the impugned law violates the freedom of fair competition and the prohibition on monopolising production as established in Paragraph 4 of Article 46 of the Constitution.

In addition, according to the petitioners, the provision of Item 1 of Paragraph 2 of the impugned Seimas resolution, by which the agreement between the Government and the strategic investor is approved so that the strategic investor might acquire 33 percent of shares of the authorised capital of the company, as in such a case the state will lose a decisive vote in adopting positive decisions, violates the provision of the section entitled “Economic Policy” of Chapter 4 of the Law on the Basics of National Security stipulating that in enterprises of strategic importance for national security the controlling decision power must be retained by the state.

2. Paragraph 1 of Article 1 of the Seimas resolution recognises the United States of America company “Williams International Company” a strategic investor and grants it the right to acquire a portion of shares of the joint-stock company “Mažeikių nafta” which continues its activity after the reorganisation.

The petitioner links the alleged non-compliance of the resolution with the Constitution to the fact that the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” allegedly conflicts with Paragraph 4 of Article 46 of the Constitution.

The Constitutional Court has held in this Ruling that the impugned norms of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” are in conformity with Paragraph 4 of Article 46 of the Constitution, therefore, in this case it is impossible to draw the conclusion that from the aspect pointed out by the petitioner Paragraph 1 of Article 1 of the Seimas resolution which is being linked with the aforementioned law conflicts with Paragraph 4 of Article 46 of the Constitution.

3. The section “Economic Policy” of Chapter 4 entitled “Principal Provisions of Lithuania’s Domestic Policy to Ensure Security” of the annex to the Law on the Basics of National Security establishes the fundamentals of ensuring security in the economy of this country.

4. The Constitutional Court notes that the Seimas resolution impugned by the petitioner is directly linked not with the Law on the Basics of National Security but the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”. The latter law provides for the procedure of reorganisation of the joint-stock companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, the conditions and procedure of investments into the company which continues its activity after the reorganisation, as well as requirements for the holders of blocks of shares.

The provisions of the section “Economic Policy” of Chapter 4 of the Law on the Basics of National Security establish the basics of ensuring security but they do not regulate the reorganisation of the joint-stock companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”.

The impugned Seimas resolution is designed for the enforcement of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” and is not linked with the Law on the Basics of National Security. Therefore, it should be concluded that the norms of Item 1 of Paragraph 2 of Article 1 of the impugned Seimas resolution are in compliance with the Law on the Basics of National Security.

5. The Seimas adopted both the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” and the Resolution “On the Recognition of a Strategic Investor” on 29 September 1998. The said law went into effect on 14 October 1998. Thus, the Government had exercised its powers established in this law concerning presentation a proposal to the Seimas as to the recognition of the strategic investor before the said law went into effect. In this case, the Seimas had adopted the resolution concerning recognition of a particular entity as a strategic investor before the said law came into force. Thus, the law had been applied before it went into effect.

The Constitutional Court notes that such practice of adoption of a substatutory act, i.e. a Seimas resolution, is a vicious one, as the Seimas resolution regarding the application of the law was adopted regardless of the fact that the law had not gone into effect yet.

Although the impugned Seimas resolution had been adopted before the law came into force, however, the said resolution went into effect after the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” of 29 September 1998 had come into force. After these circumstances have been taken account of, there remain no legal grounds to assert that the impugned Seimas resolution as to the procedure of its adoption conflicts with the Constitution.

6. A concrete entity is recognised a strategic investor in Paragraph 1 of Article 1 of the Seimas Resolution “On the Recognition of a Strategic Investor”. It was established in Paragraph 2 of Article 1 of the resolution as to what provisions of the agreement between the Government and the strategic investor “Williams International Company” are approved by the Seimas. Taking into consideration this fact, it should be concluded that the Seimas resolution was adopted in order to carry out the agreement reached in principle.

It needs to be noted that that such practice of legislation when legal norms following which agreements ought to be concluded are not set but, rather, agreements are reached first, and legal norms are determined later, reflecting the agreement, is a vicious one as it denies one of the most important principles of adoption of laws and other legal acts, meaning that legal acts must establish rules of conduct, which must be followed by entities in the future only. However, the aforementioned vicious character of the adoption of the impugned Seimas resolution, while one takes account of the fact that the impugned Seimas resolution went into effect only after the law had come into force, may not be held sufficient grounds to recognise that this Seimas resolution is in conflict with the Constitution.

7. Taking account of the reasoning set forth, the conclusion should be drawn that Paragraph 1 of Article 1 of the Seimas Resolution “On the Recognition of a Strategic Investor” of 29 September 1998 is in compliance with Paragraph 4 of Article 46 of the Constitution. Item 1 of Paragraph 2 of Article 1 of the said resolution is compliance with the Law on the Basics of National Security.

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

ruling:

1. To recognise that Article 2 of the Republic of Lithuania’s Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” is in compliance with the Constitution of the Republic of Lithuania.

2. To recognise that the provision of Paragraph 4 of Article 3 of the Republic of Lithuania’s Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” that the Government of the Republic of Lithuania, in the agreements with the strategic investor and/or the joint-stock “Mažeikių nafta”, has the right to assume basic property liabilities in the name of the state for the strategic investor and/or the joint-stock company “Mažeikių nafta” conflicts with Paragraph 1 of Article 5 and Paragraph 1 of Article 128 of the Constitution of the Republic of Lithuania.

3. To recognise that the provision of Paragraph 4 of Article 3 of the Republic of Lithuania’s Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” that the Government of the Republic of Lithuania, in the agreements with the strategic investor and the joint-stock company “Mažeikių nafta”, has the right to assume basic property liabilities in the name of the state, including recovery of losses, to the extent that that the right of the Government of the Republic of Lithuania is established to obligate itself to cover losses to the strategic investor and the joint-stock company “Mažeikių nafta” even in such a case when the strategic investor and/or the joint-stock company “Mažeikių nafta” are responsible for the losses conflicts with Paragraph 3 of Article 46 of the Constitution of the Republic of Lithuania and the principle of a state under the rule of law entrenched in the Constitution of the Republic of Lithuania.

4. To recognise that the provision of Paragraph 4 of Article 3 of the Republic of Lithuania’s Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” that the Government of the Republic of Lithuania, in the agreements with the strategic investor and/or the joint-stock “Mažeikių nafta”, has the right to assume basic property liabilities in the name of the state, including recovery of losses, to the extent that the Government of the Republic of Lithuania has the right to obligate itself to cover losses even in such a case when such losses are incurred due to adoption of the laws enforcing norms of the Constitution of the Republic of Lithuania and/or protecting the values established in the Constitution conflicts with Article 4 of the Constitution of the Republic of Lithuania and the principle of a state under the rule of law entrenched in the Constitution of the Republic of Lithuania.

5. To recognise that the provision of Paragraph 2 of Article 4 of the Republic of Lithuania’s Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” that the state, and, upon the decision of the Government of the Republic of Lithuania, the strategic investor shall have priority in acquisition of the shares sold or transferred otherwise belonging to the other shareholders holding not less than one percent of shares of the joint-stock company “Mažeikių nafta” which continues its activities after the reorganisation to the extent that the right of the shareholders to transfer their shares otherwise is limited conflicts with Article 23 of the Constitution of the Republic of Lithuania.

6. To recognise that the provision “the Government shall have the right to prolong the term of not increase of taxes for strategic investors for up to 10 years” of Paragraph 3 of Article 5 of the Republic of Lithuania’s Law on Tax Administration conflicts with Paragraph 1 of Article 5, Item 15 of Article 67, Paragraph 3 of Article 127 of the Constitution of the Republic of Lithuania, as well as the principle of a state under the rule of law entrenched in the Constitution of the Republic of Lithuania.

7. To recognise that the Republic of Lithuania’s Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” of 29 September 1998, the Republic of Lithuania’s Law “On Amending and Supplementing Article 3 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” of 3 June 1999, the Republic of Lithuania’s Law “On Amending and Supplementing Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies ‘Būtingės nafta’, ‘Mažeikių nafta’ and ‘Naftotiekis’” of 5 October 1999, and the Republic of Lithuania’s Law “On Supplementing and Amending Article 5 of the Law on Tax Administration” of 29 September 1998 as to the procedure of their adoption are in compliance with the Constitution of the Republic of Lithuania.

8. To recognise that Paragraph 1 of Article 1 of the Resolution of the Seimas of the Republic of Lithuania “On the Recognition of a Strategic Investor” of 29 September 1998 is in compliance with the Constitution of the Republic of Lithuania.

9. To recognise that Item 1 of Paragraph 2 of Article 1 of the Resolution of the Seimas of the Republic of Lithuania “On the Recognition of a Strategic Investor” of 29 September 1998 is in compliance with the Law on the Basics of National Security.

10. To dismiss the initiated legal proceedings concerning the compliance of the Republic of Lithuania’s Law “On Supplementing Article 12 of the Law on Foreign Capital Investment in the Republic of Lithuania” with the Constitution of the Republic of Lithuania.

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     Egidijus Kūris     Zigmas Levickis

 

Augustinas Normantas      Vladas Pavilonis      Jonas Prapiestis

 

Vytautas Sinkevičius     Teodora Staugaitienė