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On licences to trade in non-prepacked petroleum products

Case No. 64/06

THE CONSTITUTIONAL COURT OF THE REPUBLIC OF LITHUANIA

RULING

ON THE COMPLIANCE OF THE PROVISION “THE VALIDITY OF THE LICENCE SHALL BE ABOLISHED IF <…> 42.10. A COURT RULING TO INSTITUTE THE BANKRUPTCY CASE AGAINST THE ENTERPRISE COMES INTO EFFECT <…>” OF ITEM 42 (WORDING OF 31 JANUARY 2006) OF THE RULES FOR LICENSING TRADE IN UNPREPACKED PETROLEUM PRODUCTS AS APPROVED BY THE RESOLUTION OF THE GOVERNMENT OF THE REPUBLIC OF LITHUANIA (NO. 113) “ON LICENSING TRADE IN UNPREPACKED PETROLEUM PRODUCTS” OF 28 JANUARY 2003 WITH THE CONSTITUTION OF THE REPUBLIC OF LITHUANIA AND THE PROVISION OF PARAGRAPH 7 (WORDING OF 12 MARCH 2001) OF ARTICLE 10 OF THE REPUBLIC OF LITHUANIA’S ENTERPRISE BANKRUPTCY LAW

8 October 2009
Vilnius

 

The Constitutional Court of the Republic of Lithuania, composed of the Justices of the Constitutional Court: Armanas Abramavičius, Toma Birmontienė, Pranas Kuconis, Kęstutis Lapinskas, Zenonas Namavičius, Ramutė Ruškytė, Egidijus Šileikis, Algirdas Taminskas, and Romualdas Kęstutis Urbaitis

The court reporter—Daiva Pitrėnaitė

Inga Ignatavičiūtė, Deputy Head of the Legal Division of the Ministry of Energy of the Republic of Lithuania, and Gintautas Danaitis, Chief Specialist of the Division for Energy Resources, Electricity and Heat of the Ministry of Energy of the Republic of Lithuania, acting as the representatives of the Government of the Republic of Lithuania, the party concerned

The Constitutional Court of the Republic of Lithuania, pursuant to Articles 102 and 105 of the Constitution of the Republic of Lithuania and Article 1 of the Law on the Constitutional Court of the Republic of Lithuania, in its public hearing, on 29 September 2009, considered case No. 64/06 subsequent to the petition of the Vilnius Regional Administrative Court, the petitioner, requesting an investigation into whether the provision “The validity of the licence shall be abolished if <…> 42.10. a court ruling to institute the bankruptcy case against the enterprise comes into effect <…>” of Item 42 (wording of 31 January 2006) of the Rules for Licensing Trade in Unprepacked Petroleum Products as approved by the Resolution of the Government of the Republic of Lithuania (No. 113) “On Licensing Trade in Unprepacked Petroleum Products” of 28 January 2003 is not in conflict with Paragraphs 1, 2, and 3 of Article 46 of the Constitution of the Republic of Lithuania, with the constitutional principles of justice and a state under the rule of law, and with Item 5 (wording of 20 March of 2001) of Paragraph 7 of Article 10 of the Republic of Lithuania’s Enterprise Bankruptcy Law.

The Constitutional Court

has established:

I

The Vilnius Regional Administrative Court, the petitioner, considered an administrative case. By its ruling, the said court suspended the consideration of the case and applied to the Constitutional Court with the petition requesting an investigation into whether the provision “The validity of the licence shall be abolished if <…> 42.10. a court ruling to institute the bankruptcy case against the enterprise comes into effect <…>” of Item 42 (wording of 31 January 2006) of the Rules for Licensing Trade in Unprepacked Petroleum Products as approved by the Government Resolution (No. 113) “On Licensing Trade in Unprepacked Petroleum Products” of 28 January 2003 is not in conflict with Paragraphs 1, 2, and 3 of Article 46 of the Constitution, with the constitutional principles of justice and a state under the rule of law, and with Item 5 (wording of 20 March of 2001) of Paragraph 7 of Article 10 of the Enterprise Bankruptcy Law.

II

The petition of the Vilnius Regional Court, the petitioner, is substantiated by the following arguments.

1. Item 4 of Paragraph 2 of Article 5 (wording of 15 November 2005) of the Republic of Lithuania Energy Law commissioned the Government to establish the procedure for licensing trade in unprepacked petroleum products, which are one of energy resources. This law does not regulate the procedure for abolishing the validity of the licences.

2. Chapter IX titled “Suspension of the Validity of Licences and Abolishment Thereof” of the Rules for Licensing Trade in Unprepacked Petroleum Products (wording of 1 March 2004) (hereinafter also referred to as the Rules) as approved by the Government Resolution (No. 113) “On Licensing Trade in Unprepacked Petroleum Products” of 28 January 2003 establishes the procedure for suspension of the validity of the licences and abolishment thereof. Taking account of the legal regulation entrenched in Items 39–41 and 4.42 of the Rules, the petitioner draws the conclusion that when measures are applied to holders of licences for trading in unprepacked petroleum products for violation of the Rules, there is a general provision that these measures are applied according to the “degree principle”, i.e. from the mildest till the strictest (warning about a possible suspension of the validity of the licence or abolishment thereof, suspension of the validity of the licence, abolishment of the validity of the licence).

Item 42.10 (wording of 31 January 2006) of the Rules provides that the validity of the licence shall be abolished if a court ruling to institute the bankruptcy case against the enterprise comes into effect or the meeting of creditors adopts a decision to carry out the bankruptcy procedures by following the extrajudicial procedure. Under the legal regulation entrenched by this provision of the substatutory legal act, the fact of the entry into effect of a court ruling to institute a bankruptcy case against the enterprise is the grounds for abolishing the validity of the licence for trading in unprepacked petroleum products without taking account of any other circumstances.

3. The issues of the activity and property management of an enterprise which has acquired the status of an enterprise in bankruptcy are regulated by means of a special legal act—the Enterprise Bankruptcy Law, which grants the right to such enterprise to engage in economic-commercial activity by applying the limitations established in this law (Items 5 and 6 of Paragraph 7 of Article 10 of the Enterprise Bankruptcy Law). This law does not provide that after a court ruling to institute a bankruptcy case against the enterprise becomes effective, the validity of the licences to engage in a corresponding economic-commercial activity, which were issued to the enterprise, must be abolished.

4. The fact of entry into effect of a court ruling to institute a bankruptcy case against an enterprise does not mean that the bankruptcy procedure carried out while following the judicial procedure will end by recognising the enterprise bankrupt and liquidation thereof due to bankruptcy.

The petitioner doubts whether the legal regulation established in Item 42.10 (wording of 31 January 2006) of the Rules approved by means of a substatutory legal act—a government resolution, by applying which the validity of the licence is abolished if the court ruling to institute a bankruptcy case against the enterprise becomes effective is not in conflict with Paragraphs 1, 2, and 3 of Article 46 of the Constitution, with the constitutional principles of justice and a state under the rule of law, and with the provision of Item 5 of Paragraph 7 of Article 10 of the Enterprise Bankruptcy Law whereby after the court decision to institute a bankruptcy case becomes effective the enterprise shall be entitled to engage in economic-commercial activities, provided it reduces creditor losses incurred by reason of bankruptcy.

The petitioner makes reference to the provision of the official constitutional doctrine formulated in the Constitutional Court’s rulings of 6 October 1999 and 26 January 2004 whereby the economic freedom of a person is not absolute. The petitioner notes that the provisions of Paragraphs 1, 2 and 3 of Article 46 of the Constitution entrench the principle establishing the objectives of and limitations on the regulation of economic activity.

III

1. By the 8 January 2007 ordinance (No. 7) of the Prime Minister, Lina Lukoševičiūtė, Head of the Legal Division of the Legal and Personnel Department of the Ministry of Economy, and Birutė Sakalauskaitė, Senior Specialist of the Petroleum Division of the Energy Resources Department of the Ministry of Economy, were appointed to represent the Government, the party concerned.

2. In the course of the preparation of the case for the Constitutional Court’s hearing written explanations were received from L. Lukoševičiūtė and B. Sakalauskaitė wherein it is maintained that the provision of Item 42.10 (wording of 31 January 2006) of the Rules is not in conflict with Paragraphs 1, 2, and 3 of Article 46 of the Constitution, with the constitutional principles of justice and a state under the rule of law, and with Item 5 of Paragraph 7 of Article 10 of the Enterprise Bankruptcy Law.

2.1. The position of L. Lukoševičiūtė and B. Sakalauskaitė, the representatives of the Government, the party concerned, is substantiated by the following arguments.

2.1.1. The provision of Item 42.10 of the Rules should be construed in a systemic manner, i.e., while taking account of other provisions of the Rules. This provision does not deprive one of the right to engage in economic-commercial activity, since: 1) while following the said provision, upon abolishment of the validity of the corresponding licence, one is not deprived of the right to engage in the economic-commercial activity which is different from the one specified in the said licence; 2) the impugned provision as well as other provisions of the Rules do not prevent from issuing a new licence.

2.1.2. The regulation of the peculiarities of a licensed activity is not the purpose of the Enterprise Bankruptcy Law. The Law on Energy is a special law which regulates activity in the energy sphere. Item 4 of Paragraph 2 of Article 5 of the Law on energy provides that when carrying out state management of the energy sector, the Government or its authorised institutions shall establish the procedure for licensing trade in unprepacked petroleum products. Thus, the special law provides that the trade in unprepacked petroleum products is a licensed activity and that the procedure for licensing this trade is approved by the Government or its authorised institutions, therefore, in the opinion of the representatives of the party concerned, the provision of Item 42.10 of the Rules is not in conflict with legal acts of higher legal force.

2.1.3. The trade in unprepacked petroleum products is an activity subject to licensing, therefore, a special state regulation regime is applied to trading in such products. The representatives of the party concerned invoke the provision of the official constitutional doctrine formulated in the Constitutional Court whereby the economic freedom of a person is not absolute.

2.1.4. According to Paragraph 1 of Article 2 of the Enterprise Bankruptcy Law, bankruptcy means the state of an insolvent enterprise. The representatives of the party concerned maintain that bankruptcy of an enterprise is often inseparably associated with debts to the state budget. Item 25 of the Rules entrench the duties of the holder of the licence, including the duty of the holder of the licence to follow the requirements of the legal acts which regulate accountability and payment of taxes. Item 42.10 of the Rules establishes the sanction for failure to follow the conditions of the licensed activity, i.e. for violation of Item 25 of the Rules—failure to observe the legal acts wherein the requirements for accountability and payment of taxes are established. The conditions of the licensed activity help protect the rights of other persons and the legitimate interests of the state. Therefore, Item 42.10 of the Rules contains the provision that the licensed activity of the enterprise which hold the licence to trade in unprepacked petroleum products, but which is unable to properly implement its financial obligations to the state budget, is terminated.

2.1.5. In the Rules the sanctions, while taking account of the extent of the financial obligations, are differentiated—it is provided for therein that the validity of the licence may be suspended or abolished. One of the cases of suspension of the validity of the licence is when the holder of the licence has to pay the tax arrears to the state budget of the Republic of Lithuania, municipal budgets or funds, the taxes paid whereto is administered by the State Tax Inspectorate (save the cases where the payment of the taxes, default interest and fines is postponed under procedure established by means of legal acts of the Republic of Lithuania or where there is a tax payment dispute regarding the said payment of the taxes, default interest and fines), and is in debt to the budget of the State Social Insurance Fund (Item 39.2 of the Rules). In cases where the debt obligations of the enterprise determine the state of its insolvency, the enterprise is unable to properly carry out its financial obligations to the state budget, therefore, in pursuance of Item 42.10 of the Rules, the validity of the licence is abolished.

3. On 15 September 2009, the 15 September 2009 ordinance (No. 395) of the Prime Minister was received at the Constitutional Court; under the said ordinance, I. Ignatavičiūtė, Deputy Head of the Legal Division of the Ministry of Energy, and G. Danaitis, Chief Specialist of the Division for Energy Resources, Electricity and Heat of the Ministry of Energy, were commissioned to represent the Government in this constitutional justice case. This ordinance recognised the 8 January 2007 ordinance (No. 7) of the Prime Minister (regarding the commissioning of L. Lukoševičiūtė, Head of the Legal Division of the Legal and Personnel Department of the Ministry of Economy, and B. Sakalauskaitė, Senior Specialist of the Petroleum Division of the Energy Resources Department of the Ministry of Economy, to represent the Government) as no longer valid.

4. In the course of the preparation of the case for the Constitutional Court’s hearing, written explanations were received from I. Ignatavičiūtė and G. Danaitis, which virtually assented to the arguments set forth in the written explanations of L. Lukoševičiūtė and B. Sakalauskaitė, and which presented additional arguments.

4.1. Article 2.78 of the Civil Code of the Republic of Lithuania defines the content of the rules for licensing a corresponding activity, which are approved by the Government. Item 11 of Paragraph 2 of this article provides that the rules for licensing a corresponding activity, which are approved by the Government, shall indicate procedure and cases for the suspension and revocation of a licence. In the opinion of the representatives of the party concerned, the licensing rules which are approved by the Government, must indicate all provisions which are listed in Paragraph 2 of Article 2.78 of the Civil Code, and, in addition, under Paragraph 3 of the same article, other requirements and a different procedure may also be provided. Thus, should the licensing rules not regulate the legal relations established in Article 2.78 of the Civil Code, such licensing rules would not be in line with the requirements of the Civil Code.

4.2. The revocation of a licence is applied: first, as a state reaction to illegal behaviour of the economic subject that is engaged in a corresponding type of licensed activity; second, in other cases which are not related with corresponding violations of law. As regards the first aspect (case), the representatives of the party concerned, while invoking the jurisprudence of the Constitutional Court and the case-law of other courts of the Republic of Lithuania, point out that, under the Constitution, it is allowed to impose economic sanctions on economic subjects only by means of a law. As regards the second aspect (other cases), the position of the representatives of the party concerned is as follows: if the cases of the revocation of the licence are not linked with violations of legal acts committed by the economic subjects, such revocation of the licence should not be regarded as an economic sanction and these cases must be established in the licensing rules approved by the Government while following Item 11 of Article 2.78 of the Civil Code.

According to the representatives of the party concerned, the state of an insolvent company (bankruptcy) cannot be regarded as a violation of imperative legal norms committed by the economic subject. Therefore, the revocation of the licence of the enterprise against which there is an instituted bankruptcy case should not be regarded as a sanction. The removal of an insolvent enterprise from the market should be regarded as a preventive measure applied in order that no damage would be inflicted upon the values (other economic subjects or consumers) protected and defended by law.

In addition, the representatives of the party concerned note that the Rules provide for solvency requirements to the economic subject which seeks to acquire the licences established in the Rules (Item 7 of the Rules). Taking account of this, the Rules respectively contain the provisions which ensure that the economic subjects which have already received licences would meet the solvency requirements (Item 42.10 of the Rules), otherwise, the principle of equality might be violated (those subjects that try to enter the market would face strict solvency requirements, while the economic subjects which are already in the market might be allowed to meet these requirements).

4.3. As regards the exceptional character of the economic activity, the representatives of the party concerned note that petroleum products are classed as special products; special state legal regulation is applied to the trade in such products, to other activities related with such products and to the use thereof: a special excise taxation procedure established by law is applied to petroleum products; Article 3 of the Republic of Lithuania’s Law on State Stocks of Petroleum Products and Crude Oil provides that state stocks of crude oil and petroleum products shall be accumulated by enterprises producing petroleum products, enterprises importing petroleum products and enterprises delivering to the country petroleum products and state enterprises assigned by the Government or an institution authorised by it; strict requirements of environmental protection are raised to petroleum products.

4.4. The representatives of the party concerned note that the Ministry of Energy, upon conducting the review of the compliance of the provisions of legal acts (including the Law on Energy) with Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market, established that some provisions of the Law on Energy regarding the procedure for issuance of licences (as well as permits and certificates) are not in line with imperative requirements of the said directive. The directive will come into force on 28 December 2009, therefore, at present, the corresponding draft law on amending the Law on Energy is being prepared.

IV

At the Constitutional Court’s hearing, I. Ignatavičiūtė and G. Danaitis, the representatives of the Government, the party concerned, virtually reiterated the arguments set forth in their written explanations, as well as gave answers to questions and submitted additional explanations.

The Constitutional Court

holds that:

I

1. The Vilnius Regional Administrative Court, the petitioner, requests an investigation into whether the provision “The validity of the licence shall be abolished if <…> 42.10. a court ruling to institute the bankruptcy case against the enterprise comes into effect <…>” of Item 42 (wording of 31 January 2006) of the Rules for Licensing Trade in Unprepacked Petroleum Products as approved by the Resolution of the Government of the Republic of Lithuania (No. 113) “On Licensing Trade in Unprepacked Petroleum Products” of 28 January 2003 is not in conflict with Paragraphs 1, 2, and 3 of Article 46 of the Constitution, with the constitutional principles of justice and a state under the rule of law, and with Item 5 (wording of 20 March of 2001) of Paragraph 7 of Article 10 of the Enterprise Bankruptcy Law.

2. It is clear from the arguments of the petition that the petitioner impugns the said legal regulation, inter alia, in the aspect of the compliance thereof with the provision “After the court decision to institute bankruptcy proceedings becomes effective <…> 5) the enterprise shall be entitled to engage in economic-commercial activities, provided it reduces creditor losses incurred by reason of bankruptcy <…>” of Paragraph 7 of Article 10 of the Enterprise Bankruptcy Law.

3. It needs to be noted that the legal regulation impugned by the petitioner has undergone changes. On 27 August 2008, the Government adopted the Resolution (No. 823) “On Amending the Resolution of the Government of the Republic of Lithuania (No. 113) ‘On Licensing Trade in Unprepacked Petroleum Products’ of 28 January 2003”, which came into force on 5 September 2008. This resolution amended, inter alia, the provision of Item 42 of the Rules, which is impugned in the constitutional justice case at issue. It was set forth as follows: “The validity of the licence shall be abolished if <…> 42.10. the enterprise was liquidated due to bankruptcy <…>;”.

While the provision “The validity of the licence shall be abolished if <…> 42.10. a court ruling to institute the bankruptcy case against the enterprise comes into effect <…>” of Item 42 (wording of 31 January 2006) of the Rules is compared with the provision “The validity of the licence shall be abolished if <…> 42.10. the enterprise was liquidated due to bankruptcy <…>” of Item 42 (wording of 27 August 2008) of the Rules, it becomes clear that the legal regulation impugned by the petitioner ceased to exist.

Under Paragraph 4 of Article 69 of the Law on the Constitutional Court, the annulment of the impugned legal act shall be grounds for adopting the decision to dismiss the instituted legal proceedings. The Constitutional Court has held that the same can also be said about the situations, where the impugned legal act (part thereof) was not repealed, however, the legal regulation established in it was changed (the Constitutional Court’s ruling of 4 March 2003, its decisions of 14 March 2006 (cases Nos. 3/05 and 14/03), its rulings of 30 March 2006, 14 April 2006 and 21 September 2006, its decision of 28 May 2007, as well as its ruling of 22 June 2009).

However, as it was held in the jurisprudence of the Constitutional Court more than once, when a court investigating a case applies to the Constitutional Court after it has doubts concerning the compliance of a law or other legal act applicable in the case with the Constitution (other legal act of higher legal force), the Constitutional Court has the duty to investigate the request of the court regardless of the fact whether the impugned law or other legal act is valid or not.

4. Thus, in the constitutional justice case at issue, the Constitutional Court will investigate whether the provision “The validity of the licence shall be abolished if <…> 42.10. a court ruling to institute the bankruptcy case against the enterprise comes into effect <…>” of Item 42 (wording of 31 January 2006) of the Rules for Licensing Trade in Unprepacked Petroleum Products as approved by the Government Resolution (No. 113) “On Licensing Trade in Unprepacked Petroleum Products” of 28 January 2003 was not in conflict with Paragraphs 1, 2, and 3 of Article 46 of the Constitution, with the constitutional principles of justice and a state under the rule of law, and with the provision “After the court decision to institute bankruptcy proceedings becomes effective <…> 5) the enterprise shall be entitled to engage in economic-commercial activities, provided it reduces creditor losses incurred by reason of bankruptcy <…>” of Paragraph 7 (wording of 20 March 2001) of Article 10 of the Enterprise Bankruptcy Law.

5. In this context it needs to be noted that the legal regulation entrenched in the provision “The validity of the licence shall be abolished if <…> 42.10. the enterprise was liquidated due to bankruptcy <…>” of Item 42 (wording of 27 August 2008) of the Rules is not a matter of investigation in the constitutional justice case at issue.

II

1. On 28 January 2003, the Government adopted the Resolution (No. 113) “On Licensing Trade in Unprepacked Petroleum Products” which came into force on 1 February 2003. By this resolution the Government, while following Item 4 of Paragraph 2 of Article 5 of the Law on Energy, approved the Rules for Licensing Trade in Unprepacked Petroleum Products. Item 42 of the Rules established the grounds for the abolishment of the validity of the licence. The Rules did not contain a provision whereby the abolishment of the validity of the licence would be linked with the bankruptcy of the enterprise.

2. On 1 March 2004, the Government adopted the Resolution (No. 232) “On Amending the Resolution of the Government of the Republic of Lithuania (No. 113) ‘On Licensing Trade in Unprepacked Petroleum Products’ of 28 January 2003”, which came into force on 5 March 2004. Item 1 of this resolution amended said government resolution No. 133 of 28 January 2003 and the Rules approved by it and set forth both latter acts in their new wording, however, the grounds for the revocation of the licence (Item 42 of the Rules) were not changed in the aspect that the revocation of the licence was continued not to be linked with bankruptcy of the enterprise.

3. On 31 January 2006, the Government adopted the Resolution (No. 94) “On Amending the Resolution of the Government of the Republic of Lithuania (No. 113) ‘On Licensing Trade in Unprepacked Petroleum Products’ of 28 January 2003” which came into force on 5 February 2006. By Item 1.3.19 of this resolution the Rules for Licensing Trade in Unprepacked Petroleum Products (wording of 1 March 2004 with subsequent amendments and supplements) were supplemented with this provision: “The validity of the licence shall be abolished if <…> 42.10. a court ruling to institute the bankruptcy case against the enterprise comes into effect or the meeting of creditors adopts a decision to carry out the bankruptcy procedures by following the extrajudicial procedure;”.

Thus, this legal regulation established the grounds for the abolishment of the validity of a licence to engage in wholesale or retail trade in petroleum products, which is impugned by the petitioner in the constitutional justice case at issue.

4. As mentioned before, on 27 August 2008, the Government adopted the Resolution (No. 823) “On Amending the Resolution of the Government of the Republic of Lithuania (No. 113) ‘On Licensing Trade in Unprepacked Petroleum Products’ of 28 January 2003”, which came into force on 5 September 2008. This resolution amended, inter alia, the provision of Item 42 of the Rules, which is impugned in the constitutional justice case at issue. It was set forth as follows: “The validity of the licence shall be abolished if <…> 42.10. the enterprise was liquidated due to bankruptcy <…>;”.

5. As mentioned before, while the provision “The validity of the licence shall be abolished if <…> 42.10. a court ruling to institute the bankruptcy case against the enterprise comes into effect <…>” of Item 42 (wording of 31 January 2006) of the Rules is compared with the provision “The validity of the licence shall be abolished if <…> 42.10. the enterprise was liquidated due to bankruptcy <…>” of Item 42 (wording of 27 August 2008) of the Rules, it becomes clear that the legal regulation impugned by the petitioner ceased to exist. Under the legal regulation established at present, the validity of a licence to engage in wholesale or retail trade in petroleum products may be abolished not at the time when the procedure of bankruptcy of the enterprise is begun, but when the said procedure is completed by liquidating the enterprise.

6. In the context of the constitutional justice case at issue, the following provisions of the Rules (wording of 1 march 2004 with subsequent amendments and supplements) should be mentioned:

– “The following types of licences shall be established: <…> 3.5. to engage in retail trade in unprepacked engine petrol, diesel oil (diesel fuel), liquefied gas intended for vehicles, and biodiesel oil; <…> “ (Item 3 (wording of 1 March 2004));

– “The licences to engage in retail trade in unprepacked engine petrol, diesel oil (diesel fuel), liquefied gas intended for vehicles, biodiesel oil <…> shall be issued by the director of the municipal administration <…> (Item 6 (wordings of 1 March 2004 and 31 January 2006));

– “The institution which issues licences must establish whether the enterprise which intends to acquire a licence is in arrears to the to the state budget of the Republic of Lithuania, municipal budgets or funds, the taxes paid whereto is administered by the State Tax Inspectorate, and to the budget of the State Social Insurance Fund, and whether there are not any remarks and reports submitted in writing by controlling state institutions of supervision and of law and order regarding the activity of the enterprise (Item 7 (wordings of 1 March 2004 and 27 August 2008);

– “Licences to engage in wholesale and retail trade in unprepacked petroleum products shall be issued for indefinite time” (Item 13 (wording of 1 March 2004));

– “Licences are not issued if: <…> 22.5. there are reports submitted in writing by controlling state institutions of supervision and of law and order about violations of the conditions of the activities and the said violations have not been removed; 22.6. the enterprise is in arrears to the state budget of the Republic of Lithuania, municipal budgets or funds, the taxes paid whereto is administered by the State Tax Inspectorate (save the cases where the payment of the taxes, default interest and fines is postponed under procedure established by means of legal acts of the Republic of Lithuania or there is a tax payment dispute regarding the said payment of the taxes, default interest and fines), and is in debt to the budget of the State Social Insurance Fund; <…>” (Item 22 (wording of 1 March 2004));

– “The validity of the licence is abolished if: <…> 42.4. the enterprise with regard to which the validity of the licence is suspended does not remove, within the established time, the specified violations of the licensed activity; 42.5. the enterprise with regard to which the validity of the licence is suspended, conducts the activity specified in the licence (Item 42 (wording of 1 March 2004));

– “The validity of the licence shall be suspended and abolished by the institution that issued the licence (Item 44 (wording of 1 March 2004).

7. Summing up the discussed provisions of the Rules, in the context of the legal regulation impugned by the petitioner, it should be noted that:

the Rules are designated for regulating licensing the wholesale and retail trade in unprepacked petroleum products in the Republic of Lithuania;

the corresponding requirements are established to the subjects that intend to engage in retail trade in unprepacked engine petrol, diesel oil (diesel fuel), liquefied gas intended for vehicles, and biodiesel oil: it is necessary to receive a licence for such activity; the issuance and validity of the licence are bound by established corresponding conditions (inter alia, not to be in arrears to the state budget of the Republic of Lithuania and municipal budgets);

licences are issued for indefinite time;

the provision “The validity of the licence shall be abolished if <…> 42.10. a court ruling to institute the bankruptcy case against the enterprise comes into effect <…>” of Item 42 (wording of 31 January 2006) of the Rules established the legal regulation whereby the abolishment of the validity of the licence was provided for in all situations after a court ruling to institute the bankruptcy case against the enterprise comes into effect. No exceptions to this rule were provided.

8. As mentioned before, the petitioner impugns the compliance of Item 42 (wording of 31 January 2006) of the Rules, inter alia, with the provision “After the court decision to institute bankruptcy proceedings becomes effective <…> 5) the enterprise shall be entitled to engage in economic-commercial activities, provided it reduces creditor losses incurred by reason of bankruptcy <…>” of Paragraph 7 (wording of 20 March 2001) of Article 10 of the Enterprise Bankruptcy Law.

9. On 20 March 2001, the Seimas adopted the Enterprise Bankruptcy Law, which came into force on 1 July 2001 (Paragraph 1 of Article 37). This law, in the aspect of which the above legal regulation is impugned by the petitioner in the constitutional justice case at issue, was and is designed for the regulation of enterprise bankruptcy proceedings (Paragraph 1 of Article 1).

9.1. Article 2 (wording of 20 March 2001) of the Enterprise Bankruptcy Law provides:

“‘Bankruptcy’ means the state of an insolvent enterprise where bankruptcy proceedings have been instituted in court or the creditors are performing extrajudicial bankruptcy procedures in the enterprise” (Paragraph 1); “‘Bankruptcy process’ means the sum total of judicial or extrajudicial enterprise bankruptcy procedures” (Paragraph 2); “‘Bankruptcy proceedings’ means a civil case opened in a court over disputes arising from legal relations connected with bankruptcy” (Paragraph 3); “‘Enterprise in bankruptcy’ means an enterprise against which bankruptcy proceedings have been instituted or in respect of which extrajudicial bankruptcy procedures are applied” (Paragraph 4); “‘Insolvency of an enterprise’ means the state of an enterprise when it fails to settle with the creditor/creditors <…>” (Paragraph 8).

Paragraph 7 (wording of 20 March 2001) of Article 10 (“Instituting Bankruptcy Proceedings in Court”) of the Enterprise Bankruptcy Law provides:

7. After the court ruling to institute bankruptcy proceedings becomes effective:

1) the enterprise managing bodies must transfer to the administrator the assets of the enterprise according to the financial accounts drawn up on the basis of the data as of the day of institution of the enterprise bankruptcy proceedings and all pertinent documents within the time limits set by the court. In the cases where the assets of the enterprise are not separated from the assets of the enterprise owner or those of the members of the enterprise, the owner/owners must within the said time period submit to the administrator the list of all available assets, including the assets which are the object of joint ownership;

2) the enterprise managing bodies shall lose their powers, while the enterprise administrator shall upon a 15-day written advance notice terminate employment contracts with the members of the enterprise board and the head of the administration. The said individuals shall not be entitled to severance pay or compensation, except for monetary compensation for the unused holidays. Upon the court order, the above persons and the chief financier (accountant) must present, in the course of the bankruptcy process, all information required for the bankruptcy process;

3) discharge of financial obligations not met prior to the institution of bankruptcy proceedings, including payment of interest, default interest, taxes and other mandatory payments, also recovery of debts from the enterprise through court or without suit shall be prohibited. Computation of default interest and interest on all obligations of the enterprise, including on default in payments related to employment relationship, shall be suspended. It is not permitted to impose a mandatory hypothec;

4) if the administrator does not notify the interested parties within 30 days from the effective date of the court order to initiate bankruptcy proceedings that he will not implement the unexpired contracts entered into by the enterprise, the said contracts (including contracts of lease, loan for use agreements), except for employment contracts and contracts from which claims of the enterprise in bankruptcy arise, shall be deemed to have expired, and claims arising by reason thereof shall be met in the manner specified by Article 35 of this Law;

5) the enterprise shall be entitled to engage in economic-commercial activities, provided it reduces creditor losses incurred by reason of bankruptcy, and shall also have the right to use the income received from the above activities to cover expenses related to the activities. Where taxable objects provided for by tax laws and laws on other mandatory payments are created by the enterprise’s economic-commercial activities, the enterprise shall pay taxes and other mandatory payments in compliance with laws. Where claims relating to undischarged obligations and commitments emerge as a result of the above economic-commercial activities, they shall be met in accordance with the procedure specified by Article 35 of this Law;

6) upon a motion by the creditors the court may impose restrictions on the enterprise’s economic-commercial activities and disposal of its assets, which may be sold, leased, or pledged, also used as a collateral or a guarantee for the discharge of other subjects’ obligations, or may be otherwise transferred (conveyed) only by leave of the court;

7) the enterprise shall acquire the status of the enterprise in bankruptcy.”

Article 10 (wording of 20 March 2001) of the Enterprise Bankruptcy Law has been amended and supplemented more than once, however, Item 5 (wording of 20 March 2001) of Paragraph 7 of this article, in the aspect of which the aforementioned legal regulation is impugned by the petitioner in the constitutional justice case at issue, has not been amended or supplemented.

9.3. In this context, the following provisions of the Enterprise Bankruptcy Law (wording of 20 March 2001) should be mentioned:

a bankruptcy case shall be discontinued when: 1) all creditors waive their claims and the court adopts a ruling to accept the waivers; 2) the enterprise in bankruptcy effects settlement with all the creditors/creditor and the administrator files documents in proof thereof with the court; 3) a composition with the creditors is reached and approved by the court (Article 27);

having investigated the bankruptcy case and declared the enterprise bankrupt, the court shall issue an order to put the enterprise into liquidation as a result of bankruptcy (Article 30).

10. Summing up the discussed provisions of the Enterprise Bankruptcy Law (wording of 20 March 2001) in the context of the constitutional justice case at issue, it should be noted that:

the Enterprise Bankruptcy Law regulates the relations which are related, inter alia, with the protection of the rights and interests of creditors of an insolvent enterprise. This law does not regulate expressis verbis the issues of the abolishment of the validity of licences of an enterprise in bankruptcy (or of an enterprise which was liquidated due to bankruptcy);

after a court ruling to institute a bankruptcy case against an enterprise become effective, essential limitations are imposed on the activities of the enterprise which acquired the status of an enterprise in bankruptcy (e.g. the powers of the governing bodies thereof cease), and preconditions are created for the court to adopt a ruling to liquidate the enterprise after the court has considered the bankruptcy case (where the case has not been dismissed) and recognised the enterprise bankrupt;

the provision “After the court decision to institute bankruptcy proceedings becomes effective <…> 5) the enterprise shall be entitled to engage in economic-commercial activities, provided it reduces creditor losses incurred by reason of bankruptcy <…>” of Paragraph 7 (wording of 20 March 2001) of Article 10 of the Enterprise Bankruptcy Law establishes the legal regulation whereby the enterprise which acquired the status of an enterprise in bankruptcy has the right to engage in economic-commercial activity only under the exceptional condition, i.e., if the losses of the creditors incurred because of the bankruptcy are diminished.

11. As mentioned before, by its Resolution (No. 113) “On Licensing Trade in Unprepacked Petroleum Products” of 28 January 2003, the Government, approved the Rules for Licensing Trade in Unprepacked Petroleum Products.

12. On 16 May 2002, the Seimas adopted the Law on Energy which came into force (save Paragraphs 2, 3 and 4 of Article 20 thereof) on 1 July 2002 (Article 29).

13. In the context of the constitutional justice case at issue, it needs to be noted that the following provisions were entrenched in the Law on Energy:

– “The Law on Energy regulates general activities of the energy sector, the basic principles of development and management of the energy sector, energy and energy resources efficiency. Peculiarities of activities of individual energy systems and of relations between enterprises energy of the energy sector and consumers shall be established by other laws” (Article 1);

– “‘Energy systems’ means areas of the energy sector directly connected with any type of energy resources or energy: electricity, heat, nuclear energy, natural gas, solid fuel, oil, petroleum products, renewable energy resources” (Paragraph 4 of Article 2);

– “When carrying out State management of the energy sector, the Government or its authorised institution shall: <…> approve the rules for licensing activities in the energy sector; <…> establish the procedure for licensing trade in unprepacked petroleum products <…>” (Paragraph 2 of Article 5);

– “Within its territory a municipality shall: <…> grant, according to the nomenclature approved by the Government, licences for retail trade in unprepacked petroleum products” (Article 8);

– “Licences or permits may be established for energy activities. The types of licensed activities shall be determined by means of the laws on energy systems and other laws. The list of activities subject to licensing shall be approved by the Government <…>” (Paragraph 1 of Article 16).

14. Summing up the discussed provisions of the Law on Energy (wording of 16 May 2002) in the context of the constitutional justice case at issue, it should be noted that:

the Law on Energy (wording of 16 May 2002) is designed for the regulation of general activity of the energy sector. This law consolidates, inter alia, certain provisions related with licensing unprepacked petroleum products, i.e. it prescribes that the procedure for licensing the trade in unprepacked petroleum products is established by the Government or an institution authorised by it;

the Law on Energy (wording of 16 May 2002) did not establish the grounds (cases) of the abolishment of the validity of licences to engage in trade in unprepacked petroleum products;

the Law on Energy (wording of 16 May 2002) prescribed that the types of the licensed activity are established by law on energy systems and other laws. In this context it needs to be noted that there have not been any laws on energy systems and any other laws adopted, which, by establishing the types of the licensed activity, would have established the grounds of the abolishment of the validity of licences to engage in trade in unprepacked petroleum products.

15. The Law on Energy (wording of 16 May 2002) has been amended and supplemented more than once, however, the said provisions thereof, save Paragraph 1 of Article 16, have not been amended and/or supplemented.

It needs to be noted that, under Paragraph 1 (wording of 24 June 2003) of Article 16 of the Law on Energy, “Licences, authorisations or certificates of attestation for energy activities shall be prescribed by this Law and other laws. The types of licensed activities shall be determined by means of the laws on energy systems and other laws”. Under Paragraph 1 (wording of 6 November 2008) of Article 16 of the same law, “The types of licensed activities, issuance of licences for energy related activity, amendment, suspension of the validity and abolishment of the validity of the said licences shall be determined by means of the laws on energy systems and other laws <…>”.

It also needs to be noted that, as regards the said provision “<…> issuance of licences for energy related activity, amendment, suspension of the validity and abolishment of the validity of the said licences shall be determined by means of the laws on energy systems and other laws” of Paragraph 1 (wording of 6 November 2008) of Article 16 of the Law on Energy, there have not been any laws adopted, which would regulate the grounds of the abolishment of the validity of licences to trade in unprepacked petroleum products.

16. In the context of the constitutional justice case at issue also some provisions of the Civil Code should be mentioned, as, for instance:

– “Legal capacity of legal persons may not be imposed limitations in any other manner except as by express provision and procedure of law” (Paragraph 1 of Article 2.75 “Restrictions on the Legal Capacity of Legal Persons”);

– “In cases provided by law legal persons may be engaged in a certain type of activities only after a licence has been granted in accordance with the procedure established by law” (Paragraph 1 of Article 2.77 “Licensing the Activities of Legal Persons’).

It also needs to be mentioned that Article 2.78 “Licensing Rules” (wording of 18 July 2000) of the Civil Code provides:

1. The Government approves licensing rules for every licensed sphere of activities provided by law except as otherwise provided by other laws.

2. Licensing rules shall indicate the following:

1) licensed activities;

2) licensing institution and its authority;

3) documents for the issuance of a licence;

4) procedure and term for the investigation of documents;

5) types of licences, conditions of their issuance, re-issuance of a licence;

6) forms of licences;

7) procedure for the registration of issued licences;

8) cases of refusal to issue a licence;

9) conditions of licensed activities;

10) procedure for the supervision of the observance of the conditions of a licence;

11) procedure and cases for the abolishment and withdrawal of a licence.

3. Licensing rules may provide for other requirements and a different procedure.”

17. Summing up the aforesaid provisions of the Civil Code in the context of the constitutional justice case at issue, it needs to be noted that Paragraph 1 of Article 1.9 “Principles of Interpretation of the Civil Code Provisions” of the Civil Code provides: “In order to ensure the integrity of the present Code and the conformity of its separate structural parts, the provisions of this Code in the process of their application shall be interpreted by taking into account the structure and system of this Code.”

Thus, the suspension and abolishment of the validity of a licence means a limitation on the legal capacity of legal persons. It has been mentioned that, under Paragraph 1 of Article 2.75 of the Civil Code, the grounds of limitations on the legal capacity of legal persons may be established only by means of laws.

In this context it also needs to be noted that in its ruling of 21 January 2008, the Constitutional Court, upon the investigation of a constitutional justice case on the abolishment of the validity of licences to engage in wholesale and retail trade in alcohol products, held that the provisions of Article 2.78 of the CC could not be construed as, purportedly, permitting the Government to establish, in its acts, completely new grounds of the abolishment of the validity of licences, which are not established in laws.

III

1. As mentioned before, in the constitutional justice case at issue, the Vilnius Regional Administrative Court, the petitioner, impugns the compliance of the legal regulation established in a substatutory legal act, inter alia, with Paragraphs 1, 2 and 3 of Article 46 of the Constitution, and with the constitutional principles of justice and a state under the rule of law.

2. The Constitutional Court has held more than once (inter alia, in its rulings of 13 May 2005, 27 March 2009 and 29 April 2009) that the principles enshrined in Article 46 of the Constitution constitute a whole, which is the constitutional basis of the economy of this country, therefore, the provisions of all paragraphs of this article are interrelated and supplement each other; there is a balance between these principles, each of them is interpreted without denying the other principles, and that if a legal norm which is in a certain paragraph of this article is violated, the legal norms laid down in the other paragraphs of this article are violated as well, or preconditions are created for their violation.

2.1. Paragraph 1 of Article 46 of the Constitution provides that Lithuania’s economy shall be based on the right of private ownership, freedom of individual economic activity and initiative. The Constitutional Court has held more than once that the freedom of individual economic activity and initiative is the whole complex of legal opportunities which creates preconditions for an individual independently to adopt decisions necessary for his economic activity and which implies, inter alia, the freedom of conclusion of contracts, freedom of fair competition, opportunities to restructure economic subjects without restrictions, to change the character of their activity, not to obstruct establishment of new economic subjects or liquidate the existing ones when one reacts to changes in the market; it is inseparable from an opportunity of a person, who is willing to engage in an economic activity or, conversely, who is willing to drop it, to get into the market without artificial barriers and to abandon it without artificial barriers.

The Constitutional Court has also held more than once that freedom of economic activity is not absolute, the person makes use of it only by following certain obligatory requirements and limitations. On the other hand, under the Constitution, the state is not allowed to interfere with the economic activity of persons without limitations, therefore, it is impermissible by means of established limitations to deny such essential provisions of freedom of economic activity as the equality of rights of subjects of economic activity, fair competition etc.

2.2. Paragraph 2 of Article 46 of the Constitution provides that the state shall support economic efforts and initiative that are useful to society. As the Constitutional Court has held more than once this provision implies the duty of state and municipal institutions and that of officials by their decisions not to hinder the expression and development of initiative of persons provided this initiative is not harmful to society.

2.3. Paragraph 3 of Article 46 of the Constitution provides that the state shall regulate economic activity so that it serves the general welfare of the Nation.

The Constitutional Court has held the following: the formula “the State shall regulate economic activity” of Paragraph 3 of Article 46 of the Constitution means not the right of the state to administer all or certain economic activity at its discretion, but its right to establish the legal regulation of economic activity, inter alia, to establish limitations (prohibitions) on and conditions for economic activity and to regulate relevant procedures in legal acts.

As a rule, the regulation of economic activity is linked with the establishment of conditions for economic activity, the regulation of certain procedures, the control over economic activity, and with certain limitations and prohibitions on such activity (the Constitutional Court’s rulings of 13 May 2005, 5 March 2008, 30 June 2008, and 29 April 2009).

In its rulings, the Constitutional Court has held more than once that, according to the Constitution, it is permitted to limit the human rights and freedoms, including freedom of economic activity, in case the following conditions are observed: this is done by law; the limitations are necessary in a democratic society in order to protect the rights and freedoms of other persons and the values entrenched in the Constitution as well as the constitutionally important objectives; the limitations do not deny the nature and essence of the rights and freedoms; the constitutional principle of proportionality is followed (inter alia, the Constitutional Court’s rulings of 14 March 2002, 31 May 2006, 4 December 2008, 29 April 2009).

The Constitutional Court has held more than once that, while regulating economic activity, the state has to follow the principle of coordination of interests of the person and society and has to guarantee the interests of both the private person (a subject of economic activity) and society; by means of regulation of economic activity the state must seek the welfare of not individual persons but precisely the general welfare of the Nation; the general welfare of the Nation cannot be opposed to the welfare, rights and legitimate interests of the economic subject (whose economic activity is regulated) itself as well as those of other persons who have established and are running the said economic subject or are otherwise related to the said subject; in addition, one is not permitted to ground or to justify, by invoking the general welfare of the Nation, any regulation by which the rights and legitimate interests of a certain economic subject are limited more than necessary to secure the public interest, and whereby unfavourable and unequal economic conditions are established for economic subjects, their initiative is restricted and opportunities for its manifestation are not created.

3. The Constitutional Court has also held in its acts more than once that the principle of a state under the rule of law entrenched in the Constitution implies the hierarchy of legal acts as well, inter alia, the fact that substatutory legal acts may not be in conflict with laws, constitutional laws and the Constitution, that substatutory legal acts must be adopted on the basis of laws, that a substatutory legal act is an act of application of norms of the law, irrespective of whether the act is of one-off (ad hoc) application, or permanent validity. The Constitutional Court has also held that if the legal regulation established in the Government resolutions competed with the legal regulation established in the laws or were not grounded on the laws, not only the constitutional principle of a state under the rule of law and Item 2 of Article 94 of the Constitution would be violated but also Paragraph 2 of Article 5 of the Constitution, in which it is prescribed that the scope of power shall be limited by the Constitution; the constitutional principle of the separation of powers could also be violated (the Constitutional Court’s rulings of 31 May 2006, 13 August 2007 and 29 April 2009).

4. The constitutional principle of a state under the rule of law is inseparable from the principle of justice, and vice versa (the Constitutional Court’s rulings of 17 March 2003, 17 November 2003, 3 December 2003, and 24 December 2008). The constitutional principles of a state under the rule of law and justice also imply that the measures of limitations (prohibitions) on economic activity must be in line with legitimate and generally important objectives sought, they may not restrict the freedom of economic activity and initiative more than necessary to achieve these objectives; there must be a fair balance (proportionality) between the objective sought and the measures chosen to achieve this objective.

IV

On the compliance of the provision “The validity of the licence shall be abolished if <…> 42.10. a court ruling to institute the bankruptcy case against the enterprise comes into effect <…>” of Item 42 (wording of 31 January 2006) of the Rules for Licensing Trade in Unprepacked Petroleum Products as approved by the Government Resolution (No. 113) “On Licensing Trade in Unprepacked Petroleum Products” of 28 January 2003 with Paragraphs 1, 2, and 3 of Article 46 of the Constitution, with the constitutional principles of justice and a state under the rule of law, and with the provision “After the court decision to institute bankruptcy proceedings becomes effective <…> 5) the enterprise shall be entitled to engage in economic-commercial activities, provided it reduces creditor losses incurred by reason of bankruptcy <…>” of Paragraph 7 (wording of 20 March 2001) of Article 10 of the Enterprise Bankruptcy Law.

1. As mentioned before, in the constitutional justice case at issue the Vilnius Regional Administrative Court, the petitioner, requests an investigation into the compliance of the provision “The validity of the licence shall be abolished if <…> 42.10. a court ruling to institute the bankruptcy case against the enterprise comes into effect <…>” of Item 42 (wording of 31 January 2006) of the Rules, inter alia, with the provision “After the court decision to institute bankruptcy proceedings becomes effective <…> 5) the enterprise shall be entitled to engage in economic-commercial activities, provided it reduces creditor losses incurred by reason of bankruptcy <…>” of Paragraph 7 (wording of 20 March 2001) of Article 10 of the Enterprise Bankruptcy Law.

2. As mentioned before, the provision “After the court decision to institute bankruptcy proceedings becomes effective <…> 5) the enterprise shall be entitled to engage in economic-commercial activities, provided it reduces creditor losses incurred by reason of bankruptcy <…>” of Paragraph 7 (wording of 20 March 2001) of Article 10 of the Enterprise Bankruptcy Law establishes the legal regulation whereby the enterprise which acquired the status of an enterprise in bankruptcy has the right to engage in economic-commercial activity only under the exceptional condition, i.e., if the losses of the creditors incurred because of the bankruptcy are diminished.

It was also mentioned that the provision “The validity of the licence shall be abolished if <…> 42.10. a court ruling to institute the bankruptcy case against the enterprise comes into effect <…>” of Item 42 (wording of 31 January 2006) of the Rules established the legal regulation whereby the abolishment of the validity of the licence was provided for in all situations after a court ruling to institute the bankruptcy case against the enterprise comes into effect. No exceptions to this rule were provided.

Thus, the impugned legal regulation meant that, contrary to what was provided for in the said provision of Paragraph 7 (wording of 20 March 2001) of Article 10 of the Enterprise Bankruptcy Law, an enterprise which acquired the status of an enterprise in bankruptcy, which had a licence to engage in trade in unprepacked petroleum products, upon the revocation of such a licence, lost the right to engage in such licensed activity even in the case where this activity diminished the losses incurred by the creditors because of the bankruptcy.

Thus, the legal regulation established in the provision “The validity of the licence shall be abolished if <…> 42.10. a court ruling to institute the bankruptcy case against the enterprise comes into effect <…>” of Item 42 (wording of 31 January 2006) of the Rules impose limitations upon the economic activity of an enterprise which acquired the status of an enterprise in bankruptcy, which had a licence to engage in trade in unprepacked petroleum products, more than such activity was limited by the provision “After the court decision to institute bankruptcy proceedings becomes effective <…> 5) the enterprise shall be entitled to engage in economic-commercial activities, provided it reduces creditor losses incurred by reason of bankruptcy <…>” of Paragraph 7 (wording of 20 March 2001) of Article 10 of the Enterprise Bankruptcy Law.

Taking account of the arguments set forth, the conclusion should be drawn that the provision “The validity of the licence shall be abolished if <…> 42.10. a court ruling to institute the bankruptcy case against the enterprise comes into effect <…>” of Item 42 (wording of 31 January 2006) of the Rules for Licensing Trade in Unprepacked Petroleum Products as approved by the Government Resolution (No. 113) “On Licensing Trade in Unprepacked Petroleum Products” of 28 January 2003 was in conflict with the provision “After the court decision to institute bankruptcy proceedings becomes effective <…> 5) the enterprise shall be entitled to engage in economic-commercial activities, provided it reduces creditor losses incurred by reason of bankruptcy <…>” of Paragraph 7 (wording of 20 March 2001) of Article 10 of the Enterprise Bankruptcy Law.

3. As mentioned before, the Vilnius Regional Administrative Court, the petitioner, requests an investigation into the compliance of the impugned provision “The validity of the licence shall be abolished if <…> 42.10. a court ruling to institute the bankruptcy case against the enterprise comes into effect <…>” of Item 42 (wording of 31 January 2006) of the Rules with, inter alia, Paragraphs 1, 2, and 3 of Article 46 of the Constitution, and with the constitutional principles of justice and a state under the rule of law.

4. While deciding whether the provision “The validity of the licence shall be abolished if <…> 42.10. a court ruling to institute the bankruptcy case against the enterprise comes into effect <…>” of Item 42 (wording of 31 January 2006) of the Rules for Licensing Trade in Unprepacked Petroleum Products as approved by the Government Resolution (No. 113) “On Licensing Trade in Unprepacked Petroleum Products” of 28 January 2003 was not in conflict, inter alia, with Paragraphs 1, 2, and 3 of Article 46 of the Constitution, and with the constitutional principles of justice and a state under the rule of law, it should be noted that, as mentioned before, the Constitutional Court has held:

the principle of a state under the rule of law entrenched in the Constitution implies the hierarchy of legal acts as well, inter alia, the fact that substatutory legal acts may not be in conflict with laws, constitutional laws and the Constitution, that substatutory legal acts must be adopted on the basis of laws, that a substatutory legal act is an act of application of norms of the law, irrespective of whether the act is of one-off (ad hoc) application, or permanent validity;

if the legal regulation established in the Government resolutions competed with the legal regulation established in the laws or were not grounded on the laws, not only the constitutional principle of a state under the rule of law and Item 2 of Article 94 of the Constitution would be violated but also Paragraph 2 of Article 5 of the Constitution, in which it is prescribed that the scope of power shall be limited by the Constitution; the constitutional principle of the separation of powers could also be violated;

it is permitted to limit the human rights and freedoms, including freedom of economic activity, in case the following conditions are observed: this is done by law; the limitations are necessary in a democratic society in order to protect the rights and freedoms of other persons and the values entrenched in the Constitution as well as the constitutionally important objectives; the limitations do not deny the nature and essence of the rights and freedoms; the constitutional principle of proportionality is followed.

5. It needs to be noted that the impugned provision of Item 42 (wording of 31 January 2006) of the Rules whereby the validity of the licence shall be abolished if a court ruling to institute the bankruptcy case against the enterprise comes into effect means a limitation upon the commercial activity of the enterprise, since the enterprise loses its right to engage in the licensed activity. As mentioned before, the Constitutional Court has held that freedom of economic activity of a person may be limited only by means of a law, but not by means of a substatutory act.

5.1. In this context it needs to be noted that, as mentioned before, regardless of the provision “<…> The types of licensed activities shall be determined by means of the laws on energy systems and other laws. <…>” of Paragraph 1 (wording of 16 May 2002) of Article 16 of the Law on Energy, there have not been any laws on energy systems and any other laws adopted, which, by establishing the types of the licensed activity, would have established the grounds of the abolishment of the validity of licences to engage in trade in unprepacked petroleum products.

It needs to be noted that the laws which were valid at the time of adoption of the Law on Energy (wording of 16 May 2002) and its entry into force did not establish any grounds (inter alia, the ground impugned in the constitutional justice case at issue) for the abolishment of the validity of licences to engage in trade in unprepacked petroleum products, either.

5.2. It also needs to be noted that, as mentioned before, under Paragraph 1 of Article 1.9, Paragraph 1 of Article 2.75, Paragraph 1 of Article 2.77, and Paragraphs 1 and 2 of Article 2.78 of the Civil Code, the suspension and revocation of the licence means a limitation on the legal capacity of legal persons. It has been mentioned that, under Paragraph 1 of Article 2.75 of the Civil Code, the grounds for a limitation on the legal capacity of legal persons must be established by means of laws.

As mentioned before, the Constitutional Court has held that the Constitutional Court has held that the provisions of Article 2.78 of the Civil Code could not be construed as, purportedly, permitting the Government to establish, in its acts, completely new grounds of the abolishment of the validity of licences, which are not established in laws (wording of 21 January 2008).

5.3. Thus, neither the Law on Energy (wording of 16 May 2002), nor the laws on energy systems and other laws, nor the Civil Code established the grounds for the revocation of the licence, which was entrenched by the impugned legal regulation. This ground was established only by means of a substatutory legal act—the government resolution.

In the constitutional justice case at issue it has been held that the provision “The validity of the licence shall be abolished if <…> 42.10. a court ruling to institute the bankruptcy case against the enterprise comes into effect <…>” of Item 42 (wording of 31 January 2006) of the Rules for Licensing Trade in Unprepacked Petroleum Products as approved by the Government Resolution (No. 113) “On Licensing Trade in Unprepacked Petroleum Products” of 28 January 2003 was in conflict with the provision “After the court decision to institute bankruptcy proceedings becomes effective <…> 5) the enterprise shall be entitled to engage in economic-commercial activities, provided it reduces creditor losses incurred by reason of bankruptcy <…>” of Paragraph 7 (wording of 20 March 2001) of Article 10 of the Enterprise Bankruptcy Law.

6. Thus, the legal regulation established in the impugned provision of Item 42 (wording of 31 January 2006) of the Rules was grounded on the law.

Therefore, the legal regulation entrenched in the provision of Item 42 (wording of 31 January 2006) of the Rules, which is impugned in the constitutional justice case at issue, was not in line with the requirement (arising from Paragraphs 1, 2, and 3 of Article 46 of the Constitution) that the economic activity may be limited only by means of a law, the requirement (arising from Item 2 of Article 92 of the Constitution and the constitutional principles of a state under the rule of law and justice) that a substatutory legal act may not be in conflict with a law, and with the imperative (arising from Paragraph 2 of Article 5 of the Constitution) that the scope of power shall be limited by the Constitution.

Taking account of the arguments set forth, the conclusion should be drawn that the provision “The validity of the licence shall be abolished if <…> 42.10. a court ruling to institute the bankruptcy case against the enterprise comes into effect <…>” of Item 42 (wording of 31 January 2006) of the Rules for Licensing Trade in Unprepacked Petroleum Products as approved by the Government Resolution (No. 113) “On Licensing Trade in Unprepacked Petroleum Products” of 28 January 2003 was in conflict with Paragraph 2 of Article 5, Paragraphs 1, 2, and 3 of Article 46, Item 2 of Article 94 of the Constitution, and with the constitutional principles of justice and a state under the rule of law.

Conforming to Articles 102 and 105 of the Constitution of the Republic of Lithuania and Articles 1, 53, 54, 55 and 56 of the Law on the Constitutional Court of the Republic of Lithuania, the Constitutional Court of the Republic of Lithuania gives the following

ruling:

1. To recognise that the provision “The validity of the licence shall be abolished if <…> 42.10. a court ruling to institute the bankruptcy case against the enterprise comes into effect <…>” of Item 42 (wording of 31 January 2006; Official Gazette Valstybės žinios, 2006, No. 14-477) of the Rules for Licensing Trade in Unprepacked Petroleum Products as approved by the Resolution of the Government of the Republic of Lithuania (No. 113) “On Licensing Trade in Unprepacked Petroleum Products” of 28 January 2003 was in conflict with the provision “After the court decision to institute bankruptcy proceedings becomes effective <…> 5) the enterprise shall be entitled to engage in economic-commercial activities, provided it reduces creditor losses incurred by reason of bankruptcy <…>” of Paragraph 7 (wording of 20 March 2001) of Article 10 of the Republic of Lithuania’s Enterprise Bankruptcy Law.

2. To recognise that the provision “The validity of the licence shall be abolished if <…> 42.10. a court ruling to institute the bankruptcy case against the enterprise comes into effect <…>” of Item 42 (wording of 31 January 2006; Official Gazette Valstybės žinios, 2006, No. 14-477) of the Rules for Licensing Trade in Unprepacked Petroleum Products as approved by the Resolution of the Government of the Republic of Lithuania (No. 113) “On Licensing Trade in Unprepacked Petroleum Products” of 28 January 2003 was in conflict with Paragraph 2 of Article 5, Paragraphs 1, 2, and 3 of Article 46, Item 2 of Article 94 of the Constitution of the Republic of Lithuania, and with the constitutional principles of justice and a state under the rule of law.

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: Armanas Abramavičius
                                                                     Toma Birmontienė
                                                                     Pranas Kuconis
                                                                     Kęstutis Lapinskas
                                                                     Zenonas Namavičius
                                                                     Ramutė Ruškytė
                                                                     Egidijus Šileikis
                                                                     Algirdas Taminskas
                                                                     Romualdas Kęstutis Urbaitis