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On the Law on the Reorganisation of the Joint-stock Company “Mažeikių nafta”

Case No. 20/02

 

THE CONSTITUTIONAL COURT OF THE REPUBLIC OF LITHUANIA

RULING

ON THE COMPLIANCE OF PARAGRAPH 2 (WORDING OF 4 JUNE 2002) OF ARTICLE 4 OF THE REPUBLIC OF LITHUANIA’S LAW ON THE REORGANISATION OF THE JOINT-STOCK COMPANIES “BŪTINGĖS NAFTA”, “MAŽEIKIŲ NAFTA” AND “NAFTOTIEKIS” WITH THE CONSTITUTION OF THE REPUBLIC OF LITHUANIA AND ON THE PETITION OF THE MAŽEIKIAI DISTRICT LOCAL COURT, THE PETITIONER, REQUESTING AN INVESTIGATION INTO WHETHER PARAGRAPH 8 (WORDING OF 4 JUNE 2002) OF ARTICLE 3 OF THE REPUBLIC OF LITHUANIA’S LAW ON THE REORGANISATION OF THE JOINT-STOCK COMPANIES “BŪTINGĖS NAFTA”, “MAŽEIKIŲ NAFTA” AND “NAFTOTIEKIS” IS NOT IN CONFLICT WITH THE CONSTITUTION OF THE REPUBLIC OF LITHUANIA

 

12 December 2005

Vilnius

 

The Constitutional Court of the Republic of Lithuania, composed of the Justices of the Constitutional Court: Armanas Abramavičius, Toma Birmontienė, Egidijus Kūris, Kęstutis Lapinskas, Zenonas Namavičius, Ramutė Ruškytė, Vytautas Sinkevičius, Stasys Stačiokas, and Romualdas Kęstutis Urbaitis

The court reporter—Daiva Pitrėnaitė

Judge Kęstutis Stulginskis, acting as the representative of the Mažeikiai District Local Court, the petitioner

Gediminas Sagatys, senior advisor of the Law Department of the Office of the Seimas of the Republic of Lithuania, 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 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 10 November 2005, considered case No. 20/02 subsequent to the petition of the Mažeikiai District Local Court, the petitioner, requesting an investigation into whether Paragraph 8 (wording of 4 June 2002) of Article 3 of the Republic of Lithuania’s Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, following which “after not having submitted the obligatory offer to buy up the rest of the shares, a general meeting of the shareholders of the joint-stock company ‘Mažeikių nafta’ was convened on 19 June 2002” and the provision of Paragraph 2 (wording of 4 June 2002) of Article 4 thereof on the non-application of Article 19 of the Republic of Lithuania’s Law on Securities Exchange are not in conflict with the Preamble to the Constitution of the Republic of Lithuania and with Articles 1, 23, 29 and 46 thereof.

The Constitutional Court

has established:

I

The Mažeikiai District Local Court, the petitioner, considered a civil case. By its ruling, the court suspended the consideration of the case and applied to the Constitutional Court with the petition requesting an investigation into whether Paragraph 8 (wording of 4 June 2002; Official Gazette Valstybės žinios, 2002, No. 56-2231) of Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” (hereinafter also referred to as the Law), following which after not having submitted the obligatory offer to buy up the rest of the shares, a general meeting of the shareholders of the joint-stock company “Mažeikių nafta” was convened on 19 June 2002 and the provision of Paragraph 2 (wording of 4 June 2002; Official Gazette Valstybės žinios, 2002, No. 56-2231) of Article 4 on the non-application of Article 19 of the Law on Securities Exchange are not in conflict with the Preamble to the Constitution and with Articles 1, 23, 29 and 46 thereof.

II

1. In Paragraph 8 (wording of 4 June 2002) of Article 3 of the Law it is established:

The announcement on the first meeting of the shareholders of the joint-stock company ‘Mažeikių nafta’ that will take place after the financial institution indicated in the agreement between the Government of the Republic of Lithuania and the strategic investor, and/or any other person indicated by the financial advisor of the joint-stock company ‘Mažeikių nafta’, including the crude oil supplier under a long-term crude oil supply contract (and/or a person that is under its control or other person suggested by the crude oil supplier, which is indicated by the financial advisor of the joint-stock company ‘Mažeikių nafta’) has acquired the new issued shares of the joint-stock company ‘Mažeikių nafta’ indicated in Paragraph 2 of this Article, is publicly announced not later than 10 days prior to the day of the meeting, and the announced agenda of the meeting is not subject to revision. In this case the provisions of Paragraphs 2 and 3 of Article 27, Paragraphs 1 and 4 of Article 28 and Paragraphs 2 and 3 of Article 30 of the Law on Companies are not applied.”

2. In Paragraph 2 (wording of 4 June 2002) of Article 4 of the Law it is established:

In the agreements between the Government and the strategic investor, a party of which may also be the person who will acquire the shares of the joint-stock company ‘Mažeikių nafta’ according to Paragraph 2 of Article 3 of this Law, such procedure may be established under which the parties of such agreements and/or the successors to their rights under the laws and/or agreements, including any and all the subsequent successors to the rights, will transfer the shares of the joint-stock company ‘Mažeikių nafta’ which belong to them by right of ownership or will acquire them, will acquire newly issued shares of the joint-stock company ‘Mažeikių nafta’ or will implement their right of priority to acquire the shares of the joint-stock company ‘Mažeikių nafta’ that belong to the state by right of ownership. While concluding these agreements and implementing their provisions, the Law on the Privatisation of State-owned and Municipal Property and the provisions of Article 19 of the Law on the Securities Exchange shall not be applied.”

III

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

1. In the opinion of the petitioner, the legal regulation established in Paragraph 8 (wording of 4 June 2002) of Article 3 and in Paragraph 2 (wording of 4 June 2002) of Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” is virtually designated to the implementation of private interests of individual persons, and general norms that are valid to all other persons, which are established in other laws (inter alia, the Law on the Securities Market), are not applied. After the aforementioned exceptions of the general legal regulation had been established, the objective of an open, just, harmonious civil society and state under the rule of law which is declared in the Preamble to the Constitution, as well as the provision of Article 1, under which the State of Lithuania is a democratic republic, and the principle of equality of all persons before the law consolidated in Paragraph 1 of Article 29, were violated.

2. According to Paragraph 2 (wording of 4 June 2002) of Article 4 of the Law, the small shareholders of the joint-stock company “Mažeikių nafta” were deprived of the right to sell their shares to the big shareholders who act in cooperation, which the legislature consolidated by the obligatory offer to buy up the rest of securities of accountable issuer in Article 19 of the Law on Securities Exchange; that is what every person legitimately and reasonably expects, when they acquire shares from public trading. Thus, according to the petitioner, by the said exceptional legal regulation Article 23 of the Constitution was violated, under which the principles of inviolability of property and just compensation for seizure of property for the needs of society are entrenched.

3. In 2001 the authorised capital of the joint-stock company “Mažeikių nafta” was reduced (on the exceptional basis), therefore, the value of the shares of the small shareholders decreased. After Paragraph 2 of Article 4 of the Law was amended on 4 June 2002, the shares belonging to the small shareholders became absolutely worthless. According to the petitioner, the small shareholders may neither manage (implementing their property and non-property rights), nor sell them to the strategic investor, because they were not provided with the obligatory offer to purchase the rest of the shares. Thus, by the impugned provisions the state, without use to society and without having justly compensated the small shareholders, absolutely depreciated their property and deprived them of their essential rights provided by the shares.

Moreover, by regulating economic activity, the state has to coordinate the interests of the person and society: what is needed for a strategic investor, may not always be just and legitimate with regard to other owners and the public interest. Meanwhile, the impugned exceptional legal regulation groundlessly granted big privileges to one or several persons. In this way the provision of Paragraph 1 of Article 46 of the Constitution under which Lithuania’s economy shall be based on the right of private ownership and individual freedom of economic activity and initiative, the provision of Paragraph 3, under which the state shall regulate economic activity so that it serves the general welfare of the Nation, and the prohibition on monopolising the market and restrict the freedom of fair competition, consolidated in Paragraph 4 thereof, were violated.

IV

In the course of the preparation of the case for the Constitutional Court’s hearing, written explanations from Saulius Švedas, senior advisor of the Law Department of the Office of the Seimas, the party concerned, were received where it was stated that the impugned provisions of the Law are not in conflict with the Constitution. The position of the party concerned is grounded on the following arguments.

1. The impugned provisions were consolidated regarding the existing extremely difficult financial situation of the joint-stock company “Mažeikių nafta” and its exceptional significance to the Lithuanian economy. One was seeking to create favourable conditions for investments into this enterprise and in that way to strengthen its financial potential and defend the interests of the consumers, whom it mostly supplies with petroleum products. Thus, the legislature, consolidating the impugned legal regulation in the Law, implemented the provisions of Article 46 of the Constitution that the state shall regulate economic activity so that it serves the general welfare of the Nation and that the state shall defend the interests of the consumer.

2. According to the representative of the party concerned, the petitioner did not present any arguments which would confirm the statement that, allegedly, the impugned provisions are in conflict with Paragraph 1 of Article 46 of the Constitution.

3. While deciding whether the impugned provisions of the Law are not in conflict with the constitutional principle of a state under the rule of law and Article 1 of the Constitution, one should take into account the Constitutional Court’s ruling of 18 October 2000, adopted in the case in which it investigated whether the provisions of Paragraphs 3 and 5 of Article 3 of the Law (wording of 5 October 1999), analogous to those established in this case were not in conflict with the Constitution; in that ruling, the Constitutional Court stated that “the provisions of Paragraphs 2, 3, 5 and 6 of Article 3 of the Law, which established differentiated legal regulation, in themselves do not conflict with a principle of a state under the rule of law, established in the Constitution, as well as Article 1 of the Constitution”.

4. The provision of Paragraph 8 (wording of 4 June 2002) of Article 3 of the Law on the non-application of certain articles of the Republic of Lithuania’s Law on Companies was designated to all the shareholders of the joint-stock company “Mažeikių nafta”, thus, it is impossible to state that the principle of equality of all persons before the law, entrenched in Paragraph 1 of Article 29 of the Constitution, was violated. The significance of the joint-stock company “Mažeikių nafta” to the Lithuanian economy is exceptional and the financial situation of this enterprise was such so that it was necessary to create favourable conditions for attracting investments into the company as soon as possible, thus, certain rights of the shareholders had to be limited in the interest of the society to preserve the stability of oil economy, and alongside, of all Lithuanian economy. However, the small shareholders were not deprived of the right of participation in general meetings of the shareholders and by voting to express their opinion there on the issues discussed. Moreover, the aforementioned provisions of the Law on Companies had to be non-applicable only to one general meeting of the shareholders of this joint-stock company.

5. There are no data confirming that the shares of the joint-stock company “Mažeikių nafta” were totally depreciated during the time from consolidating the impugned provisions in the Law till the ruling of the Mažeikiai District Local Court was made. While providing the conditions for the strategic investor to come into the joint-stock company “Mažeikių nafta”, the legislature also created preconditions for the prices of the shares of the joint-stock company “Mažeikių nafta” to rise. Thus, the impugned provisions are not in conflict with Article 23 of the Constitution.

V

In the course of the preparation of the case for the Constitutional Court’s hearing, written explanations from V. Uspaskich, Minister of Economy of the Republic of Lithuania, P. Koverovas, State Secretary of the Ministry of Justice of the Republic of Lithuania, D. Kriaučiūnas, Director General of the European Law Department under the Government of the Republic of Lithuania, V. Poderis, Chairperson of the Lithuanian Securities Commission, as well as a letter from A. Malikėnas, acting Director General of the state enterprise “State Property Fund”, were received.

VI

1. At the hearing of the Constitutional Court, the representative of the petitioner, the Mažeikiai District Local Court, who was the judge K. Stulginskas, additionally explained the position of the petitioner in the following aspects: (1) there were some doubts on the compliance of the impugned provisions of the Law with the Preamble to the Constitution, but only to the extent that the Preamble declares the striving for an open, just, harmonious civil society and state under the rule of law, i.e. it is doubted whether the impugned provisions of the Law are not in conflict with the constitutional principle of a state under the rule of law; (2) one doubted the compliance of Paragraph 8 (wording of 4 June 2002) of Article 3 of the Law with the Constitution in the aspect that after not having submitted the obligatory offer to buy up the rest of the shares, a general meeting of the shareholders of the joint-stock company “Mažeikių nafta” was convened on 19 June 2002.

2. At the hearing of the Constitutional Court, the representative of the Seimas, the party concerned, who was G. Sagatys, assented to the written explanations of the representative of the party concerned S. Švedas.

G. Sagatys also stated that the rights of the small shareholders are not their innate rights, but guarantees of activity. The obligatory official offer to buy up the rest of the shares is also not one more right of the shareholder, but a protective measure of their rights. By following its economic priorities and upon political resolve, the state can provide the shareholders with such guarantees or it can decide not to do so. In this aspect, the impugned provisions were consolidated in the Law while regarding the economic logic, i.e. taking into account the situation in which the Government had been while searching for a strategic investor to the joint-stock company “Mažeikių nafta”.

3. At the hearing of the Constitutional Court the explanations of the specialists V. Poderis, Chairperson of the Lithuanian Securities Commission and S. Spėčius, the advisor of the Prime Minister of the Republic of Lithuania, were submitted.

The Constitutional Court

holds that:

I

On the compliance of Paragraph 2 (wording of 4 June 2002) of Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” with Articles 1, 23, 29 and 46 of the Constitution and with the constitutional principle of a state under the rule of law.

1. The petitioner had doubts on whether, inter alia, the provision “on the non-application of Article 19 of the Law on Securities Exchange” of Paragraph 2 (wording of 4 June 2002) of Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” is not in conflict with Articles 1, 23, 29 and 46 of the Constitution and with the constitutional principle of a state under the rule of law.

2. On 4 June 2002, the Seimas adopted 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”, which became effective on 7 June 2002.

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” changed Paragraph 2 (wording of 2 August 2001) of Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”. Paragraph 2 (wording of 4 June 2002) of Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” provides:

In the agreements between the Government and the strategic investor, a party of which may also be the person who will acquire the shares of the joint-stock company ‘Mažeikių nafta’ according to Paragraph 2 of Article 3 of this Law, such procedure may be established under which the parties of such agreements and/or the successors to their rights under the laws and/or agreements, including any and all the subsequent successors to the rights, will transfer the shares of the joint-stock company ‘Mažeikių nafta’ which belong to them by right of ownership or will acquire them, will acquire newly issued shares of the joint-stock company ‘Mažeikių nafta’ or will implement their right of priority to acquire the shares of the joint-stock company ‘Mažeikių nafta’ that belong to the state by right of ownership. While concluding these agreements and implementing their provisions, the Law on the Privatisation of State-owned and Municipal Property and the provisions of Article 19 of the Law on the Securities Exchange shall not be applied.”

3. From the arguments of the petition of the petitioner, it is clear that it had doubts on whether Paragraph 2 (wording of 4 June 2002) of Article 4 of the Law is not in conflict with the Constitution to the extent that it is prescribed that the provisions of Article 19 of the Law on the Securities Exchange shall not be applied while concluding and implementing the agreements, indicated in this paragraph, i.e. the agreements:

the parties of which are the Government and the strategic investor (into the joint-stock company “Mažeikių nafta”; hereinafter also referred to as the strategic investor) and a party of which may also be the person who will acquire the shares of the joint-stock company “Mažeikių nafta” according to Paragraph 2 of Article 3 of this Law, as well as the successors to the rights provided for in the laws and/or agreements;

by which the parties and/or the successors to the rights provided for in the laws and/or agreements, not excluding any subsequent successor to the rights, under the established procedure in these agreements transfer the shares of the joint-stock company “Mažeikių nafta” which belong to the parties by right of ownership, acquire the shares of this company which belong to the parties by right of ownership, and/or the successors to their rights provided for in the laws and/or agreements, not excluding any subsequent successor to the rights, acquire newly issued shares of the joint-stock company and/or make use of their right of priority to acquire the shares of the joint-stock company “Mažeikių nafta” that belong to the state by right of ownership.

4. While deciding whether Paragraph 2 (wording of 4 June 2002) of Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” to the extent indicated is not in conflict with the Constitution, it should be noted that the provisions of this paragraph should be construed while relating them with other provisions of the Law, as well as the provisions of some other laws; moreover, the legal regulation entrenched in the Law has been changing all the time.

5. On 2 July 1997, the Seimas adopted the Republic of Lithuania’s Law on Loans from Foreign Banks to Finance the Project of Būtingė Oil Terminal, by which it was decided to take foreign loans from foreign banks (confirmed by the Government) and/or to provide these banks with the state guarantees on the granted loans to the joint-stock company “Būtingės nafta” to finance the project of Būtingė oil terminal (Article 1). This law became effective on 16 July 1997.

Its provisions were changed by the Law on Amending and Supplementing the Republic of Lithuania’s Law on Loans from Foreign Banks to Finance the Project of Būtingė Oil Terminal, which was adopted on 28 April 1998 (which became effective on 13 May 1998).

On the same day, i.e. 28 April 1998, the Seimas adopted the Law on the Investments into the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” and the Requirements for the Owners of the Blocks of Shares, which established the conditions of investing into each of these enterprises in particular. It became effective on 13 May 1998. This law has not made sure that investments were made into these companies in a proper manner, nor did it help to attract a strategic investor to any of these joint-stock companies.

6. On 29 September 1998, the Seimas adopted the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” that became effective on 14 October 1998.

In Article 1 of the Law (wording of 29 September 1998) the purpose of this Law and its relation with other laws, regulating the same relationships, was established: the Law determines the reorganisation procedure of the joint-stock companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, the conditions and procedure of the investments into the company continuing its activity after the reorganisation, and the requirements for the owners of blocks of shares (Paragraph 1); the reorganisation procedure of the joint-stock companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” and the activity and management of the company which would continue its activity after the reorganisation are regulated by the Law on Companies, while the privatisation—by the Republic of Lithuania’s Law on the Privatisation of State-owned and Municipal Property, where the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” does not provide otherwise (Paragraph 2). It should be noted that the joint-stock companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” had to be reorganised by merger of the companies by incorporating the joint-stock companies “Būtingės nafta” and “Naftotiekis”, which had to terminate their activities as legal persons, into continuing its activity joint-stock company “Mažeikių nafta”; the requirements of Paragraphs 9, 10, 11, 13 and 14 (Paragraph 6 of Article 2) of Article 10 of the Law on Companies had to be not applied to the said reorganisation (Paragraph 1 of Article 2).

When the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” became effective, the Law on the Investments into the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” and the Requirements for the Owners of the Blocks of Shares became no longer valid.

7. In the context of the constitutional justice case at issue, it should be mentioned that, according to Article 3 (wording of 29 September) of the Law, on presentation by the Government and by the decision of the Seimas the confirmed strategic investor was granted the right to acquire newly issued shares of the joint-stock company “Mažeikių nafta”, which continued its activity after the reorganisation, the total nominal value of which did not exceed 33 percent of the company’s authorised capital—in this case the authorised capital of the joint-stock company “Mažeikių nafta” was increased without applying the provisions of Paragraph 4 of Article 43 of the Law on Companies and of Article 18 of the Law on the Privatisation of State-owned and Municipal Property (Paragraph 1); after the strategic investor had acquired the new issue of shares of the joint-stock company “Mažeikių nafta”, the shares of the joint-stock company “Mažeikių nafta” that belonged to the state by ownership right had to be privatised only according to the procedure indicated in the Law on the Privatisation of State-owned and Municipal Property (Paragraph 2); after the privatisation the block of shares of the joint-stock company “Mažeikių nafta”, entitling to more than 25 percent of votes in the general meeting of shareholders had to belong to the state by ownership right (Paragraph 2).

It should also be mentioned that, according to Article 4 (wording of 29 September 1998) of the Law, a block of shares of this joint-stock company, entitling to more than 24 percent of votes could not belong to each shareholder of the joint-stock company “Mažeikių nafta”, except the state and the strategic investor, together with its controlled subjects, the notion of which is determined under the then Republic of Lithuania’s Law on Public Trading in Securities (Paragraph 1); the state had the right of priority to acquire the shares of the joint-stock company “Mažeikių nafta” from the shareholders, to whom after the reorganisation of the said joint-stock company belonged not less than 1 percent of the shares by ownership right and who sold or in other way transferred the shares of this joint-stock company, and the Government had the right to establish such right of priority also to the strategic investor (Paragraph 2). Paragraph 2 (wording of 29 September 1998) of Article 4 of the Law to the extent that the right of shareholders to transfer their shares otherwise is restricted, by the Constitutional Court’s ruling of 18 October 2000 was ruled to be in conflict with Article 23 of the Constitution.

8. It should be held that, at the time when the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” was adopted and became effective, in Lithuania the economic system reform was taking place, also including, inter alia, the privatisation of the companies which belonged to the state by right of ownership (totally or in part). This privatisation of companies was regulated by the Law on the Privatisation of State-owned and Municipal Property providing for the possibility of privatising the said companies also according to other laws (Article 2); such laws could be designed for regulating the privatisation of certain companies (even single companies)—in this regard differentiated legal regulation could be established in these laws.

In this context, it should be noted that, as the Constitutional Court has held, peculiarities of the development of this country, conditions of state-owned enterprises, the situation in the national economy and other factors influence on the choice of methods of privatisation. Implementing the economic reform, the state may establish differentiated legal regulation, by not violating the constitutional principles and requirements of constitutional norms (the Constitutional Court’s ruling of 18 October 2000).

9. It should also be held that in the joint-stock company “Mažeikių nafta” which continued its activity after the reorganisation a certain, relatively small, part of the shares already belonged not to the state but to other shareholders, who acquired the shares of the corresponding companies according to the laws regulating the privatisation of companies.

10. In Articles 3 and 4 (wording of 29 September 1998) the notion of a strategic investor is used.

In this context, it should be held that the notion of a strategic investor has been (is) used in various laws—those being in effect before adoption and entry into effect of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, and others, adopted and becoming effective soon after this law had become effective (i.e. the Law on the Investments into the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” and the Requirements for the Owners of the Blocks of Shares, the Law on the Privatisation of State-owned and Municipal Property, the Republic of Lithuania’s Law on Foreign Capital Investment in the Republic of Lithuania, the Republic of Lithuania’s Law on Investment, the Republic of Lithuania’s Law on Tax Administration, the Republic of Lithuania’s Law on the Rehabilitation and Restructuring of the Capital of Companies, the Republic of Lithuania’s Law on Public Procurement, etc.).

While construing the legal status of the strategic investor into the joint-stock company “Mažeikių nafta”, inter alia, in the context of overall (i.e. established in various laws) legal regulation consolidating the institute of a strategic investor, it should be noted that, on the one hand, the strategic investor into the joint-stock company “Mažeikių nafta”, as well as the strategic investor into any other enterprise, essentially differs from other subjects, who have invested and will invest into a corresponding enterprise; on the other hand, the strategic investor into the joint-stock company “Mažeikių nafta” has certain peculiarities that are not typical to strategic investors into other enterprises.

In this context, it should be mentioned that, according to Paragraph 9 (still set forth in the wording of 4 November 1997) of Article 1 of the Law on the Privatisation of State-owned and Municipal Property which became effective on 1 December 1997 (thus, before the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” was adopted and became effective), the “Strategic Investor” is a potential buyer (legal person or a group of legal persons) recognised by a resolution of the Government, who acquires the block of shares that belongs to the state or municipality by right of ownership, and fulfils the established contractual obligations, and according to Paragraph 1 (wording of 29 September 1998) of Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, the strategic investor to the joint-stock company “Mažeikių nafta” could be recognised not by a resolution of the Government but by a decision of the Seimas adopted upon presentation by the Government.

It should also be noted that, according to the Section “Economic Policy” of Paragraph 4 of Part I of the appendix to the Law on the Basics of National Security (wording of 19 December 1996), the Seimas establishes by law the enterprises and facilities (including those to be founded) that are of strategic importance to national security; the law also establishes which of these must belong to the state by ownership right and where (and under what conditions) private national and foreign capital conforming with the criteria of the European and Transatlantic integration are allowed, provided that the controlling decision power is retained by the state. According to the Section “Long-range National Programmes of Enhancing National Security” of Paragraph 11 of Part II of the same appendix, one of the principle state long-range programmes of enhancing national security is the programme on stability and integration of the energy supply systems into European energy supply systems. However, at the time when the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” was adopted and became effective, there was no law in which the strategic significance to national security of the joint-stock companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” or the company continuing its activity after the reorganisation of the said joint-stock companies was stated, because of which the participation of the foreign capital that meets the European and Transatlantic integration criteria in them should be related to appropriate conditions.

Thus, the strategic investor of the joint-stock company “Mažeikių nafta” provided by the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” by its legal status differs from strategic investors to other companies. Its legal status is special: it is related with the fact that it is invested into a concrete reorganised object, the joint-stock company “Mažeikių nafta”, also with that that a particular subject becomes a strategic investor in a special way—he is recognised a strategic investor by the Seimas upon presentation by the Government.

It should be mentioned that according to Paragraph 1 of Article 1 of the Seimas Resolution (No. VIII-869) “On the Recognition of the Strategic Investor” of 29 September 1998 (which became effective on 15 October 1998), the United States of America’s company Williams International Company was recognised the strategic investor into the joint-stock company “Mažeikių nafta”, it was granted the right to acquire the shares of the joint-stock company “Mažeikių nafta”, which continued its activity after reorganisation. This Paragraph of the Resolution of the Seimas was ruled to be not in conflict with the Constitution by the Constitutional Court’s ruling of 18 October 2000.

11. It was held that in the Law on the Privatisation of State-owned and Municipal Property that regulated the privatisation of the enterprises which belonged to the state (totally or in part) by right of ownership a possibility was provided for privatising the said enterprises also according to other laws, which could be designed for regulating the privatisation of certain enterprises (even single enterprises) and in this regard for establishing differentiated legal regulation.

11.1. It should be held that the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, according to which in the established cases the provisions of certain articles (their paragraphs) were not to be applied, was a law consolidating the differentiated legal regulation. A mere fact that the Law consolidated the appropriate differentiated legal regulation does not mean in itself that it is in conflict with the Constitution (the Constitutional Court’s ruling of 18 October 2000).

11.2. It should also be held that the legal regulation established in the Law was differentiated only in certain respects: it was prescribed that only certain articles (their paragraphs) of the Law on the Joint-stock Companies and of the Law on the Privatisation of State-owned and Municipal Property (paragraphs thereof) were not to be applied, and one expressis verbis defined the cases when the provisions of these articles (paragraphs thereof) were not to be applied.

11.3. Moreover, the above-mentioned differentiated legal regulation was temporary in the regard that after the strategic investor will have acquired the issue of shares of the joint-stock company “Mažeikių nafta” continuing its activity after the reorganisation (newly issued shares, the total nominal value of which does not exceed 33 percent of the joint-stock company’s authorised capital), the shares that belong to the state by right of ownership could be privatised (leaving for the state the block of shares, entitling to more than 25 percent of votes in the general meeting of shareholders, and to no other subject except the state and the strategic investor, together with its controlled subjects, allowing the acquisition of the block of shares entitling to more than 24 percent of votes in the general meeting of shareholders) only according to the Law on the Privatisation of State-owned and Municipal Property.

12. In the context of the constitutional justice case at issue, it should be held that in the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” (wording of 29 September 1998):

the following special requirements for the owners of the blocks of shares of the joint-stock company “Mažeikių nafta” continuing its activity after the reorganisation were established: (1) while increasing the authorised capital of this joint-stock company, the strategic investor (which, as said, was recognised the United States of America’s company Williams International Company) could acquire the newly issued shares whose total nominal value does not exceed 33 percent of the joint-stock company’s authorised capital; (2) the block of shares, entitling to more than 25 percent of votes in the general meeting of shareholders, had to belong to the state by right of ownership; (3) every other shareholder of the joint-stock company “Mažeikių nafta”, save the state and the strategic investor, together with its controlled subjects, could not hold the block of shares entitling to more than 24 percent of votes in the general meeting of shareholders;

a different procedure (in respect of other enterprises) for increasing the authorised capital (by additional contributions) of the joint-stock company “Mažeikių nafta” continuing its activity after the reorganisation was established: the authorised capital had to be increased without applying certain provisions of the Law on Companies regulating the authorised capital increase of joint-stock companies, as well as certain provisions of the Law on the Privatisation of State-owned and Municipal Property regulating the disposal of shares of the joint-stock company, which by right of ownership belong to the state, to other persons and the transfer of the state control to other persons in the enterprise by that time controlled by the state.

13. At the time when the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” was adopted and became effective, the Law on Public Trading in Securities was in force, in Article 10 of which (wording of 19 March 1998) it was established:

in Paragraph 1: persons, who intend to acquire a block of securities of the issuer, may do so by means of the official offer; the official offer means the procedure of stating that a natural or legal person is willing to acquire a part or all the securities of the issuer; official offers are executed through the Securities Exchange;

in Paragraph 2: official offers to acquire the securities of the accountable issuer may be obligatory or voluntary; if a person, acting either alone or together with other persons, acquires more than 50 percent of the votes at the general meeting of shareholders of the issuer who has issued securities into public trading, they must submit an official offer to buy up the remaining shares of the issuer, confirming the right to acquire the securities granting the right to vote, at the price stated in the offer; this price shall be registered with the Securities Commission, and it must not be less than the weighted average of the prices of shares that the offeror had acquired over 12 months before exceeding the 50 percent limit.

in Paragraph 3: the person, acting either alone or together with other persons from the moment of exceeding the 50 percent of votes limit specified in Paragraph 2 of this Article till the official offer is registered with the Securities Commission is deprived of all rights to vote in the general meetings of shareholders of the issuer; the person, acting independently or in a concert with other persons regain their right to vote on the day when the official offer is registered with the Securities Commission or a securities transfer transaction is concluded that would decrease the number of the votes possessed at least to the 50 percent limit specified in Paragraph 2 of this Article;

in Paragraph 4: the official offers are registered with and their submission and implementation rules are established by the Securities Commission, by taking into account the size of the issuers and the securities that they issued into public trading; the Securities Commission has the right to establish exceptions, when after having exceeded the 50 percent limit specified in Paragraph 2 of this Article the obligatory official offer is not to be made.

It should be held that the provision of Paragraph 4 (wording of 19 March 1998) of Article 10 of the then Law on Public Trading in Securities, under which the Securities Commission has the right to establish exceptions when after having exceeded the 50 percent limit specified in Paragraph 2 of this Article the obligatory official offer is not to be made, as well as other provisions of this Article, in the constitutional justice case at issue are not investigated in the aspect of their compliance with the Constitution.

14. In the context of the constitutional justice case at issue, it should be emphasised that the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” (wording of 29 September 1998) in general did not regulate the relations, related to the official offer (inter alia, obligatory one) to acquire the securities of the issuer (hereinafter also referred to as the official offer, obligatory official offer), established in Article 10 (wording of 19 March 1998) of the Law on Public Trading in Securities.

15. On 3 June 1999 the Seimas adopted 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” that became effective on 9 June 1999.

16. On the same day, i.e. 3 June 1999 the Seimas adopted the Law on Amending the Republic of Lithuania’s Law on Loans from Foreign Banks to Finance the Project of Būtingė Oil Terminal, by which the Law on Loans from Foreign Banks to Finance the Project of Būtingė Oil Terminal, adopted on 2 July 1997 (with subsequent amendments) was amended. The title of the Law on Loans from Foreign Banks to Finance the Project of Būtingė Oil Terminal was also changed: since then it has been called the Republic of Lithuania’s Law on Loans from Foreign Banks to Finance the Project of the Reconstruction of the Mažeikiai Oil Refining Factory of the Joint-stock Company “Mažeikių nafta” and of the Construction of Būtingė Oil Terminal and to Complement Current Assets of the Joint-stock Company “Mažeikių nafta”.

The provisions of the aforementioned law were amended by the Republic of Lithuania’s Law on Amending and Supplementing Articles 1 and 2 of the Law on Loans from Foreign Banks to Finance the Project of the Reconstruction of the Mažeikiai Oil Refining Factory of the Joint-stock Company “Mažeikių nafta” and of the Construction of Būtingė Oil Terminal and to Complement Current Assets of the Joint-stock Company “Mažeikių nafta” which was adopted on 5 October 1999 and became effective on 15 October 1999.

Later the said law was once again amended and set forth in the new wording by the Republic of Lithuania’s Law on Amending the Law on Loans from Foreign Banks to Finance the Project of the Reconstruction of the Mažeikiai Oil Refining Factory of the Joint-stock Company “Mažeikių nafta” and of the Construction of Būtingė Oil Terminal and to Complement Current Assets of the Joint-stock Company “Mažeikių nafta” which was adopted on 29 April 2003 and became effective on 15 May 2003: since then it has been called the Republic of Lithuania’s Law on Taking Loans from the Creditors in Order to Finance the Joint-stock Company “Mažeikių nafta” and on Granting State Guarantees to the Creditors.

17. Article 3 (wording of 29 September 1998) of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” was amended and supplemented by 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”; this Article (wording of 3 June 1999) was set forth as follows:

1. The strategic investor, recognised as such upon the recommendation of the Government and by 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 prescribed 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 Local Government 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 Local Government 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 Local Government 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.”

18. It should be held that after having set forth Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” in its wording of 3 June 1999, the following certain legal regulation novels were entrenched, inter alia, in the law:

the previously established requirements for one of the owners of the blocks of shares, the strategic investor of the joint-stock company “Mažeikių nafta” which continues its activity after the reorganisation (which, as mentioned before, was recognised the United States of America’s company Williams International Company) were changed without changing them for other owners of the blocks of shares (the block of shares entitling to more than 25 percent of votes in the general meeting of shareholders had to belong to the state by right of ownership, and a block of shares entitling to not more than 24 percent of votes in the general meeting of shareholders had to belong to any other shareholder of the joint-stock company “Mažeikių nafta” except the state and the strategic investor together with its controlled subjects), additionally, the newly established requirements for the strategic investor as the owner of the block of shares depended on whether the authorised capital of this joint-stock company would be increased and whether the strategic investor (i.e. Williams International Company) would try to acquire even more shares of the joint-stock company “Mažeikių nafta”: (1) as previously, by increasing the authorised capital of this joint-stock company the strategic investor could acquire the newly issued shares whose total nominal value does not exceed 33 percent of its authorised capital; (2) by increasing the authorised capital once more at any time within 5 years after the strategic investor has acquired the shares of the joint-stock company “Mažeikių nafta”, newly issued after the authorised capital of this joint-stock company is increased for the first time under this law, the strategic investor could acquire the newly issued shares whose total nominal value together with the shares acquired during the said first increase of the authorised capital does not exceed 49.5 percent of the authorised capital; (3) the strategic investor who acquired the shares comprising 49.5 percent of the authorised capital of the joint-stock company “Mažeikių nafta”, within 7 years after the strategic investor has acquired the shares of the joint-stock company “Mažeikių nafta”, newly issued after the authorised capital of this joint-stock company is increased for the first time under this law, could purchase (at once or in portions) the shares that by right of ownership belonged to the state and whose total nominal value does not exceed 16.5 percent of the then registered authorised capital of the joint-stock company “Mažeikių nafta”; (4) it was committed to establish by law the securing of the strategic interests of the state in case if it was decided to reduce the block of shares which belongs to the state by right of ownership and which would entitle to not more than 25 percent of votes in the general meeting of shareholders;

if the strategic investor made use of the said possibility of purchasing (at once or in portions) the shares which by right of ownership belong to the state and whose total nominal value would not exceed 16.5 percent of the then registered authorised capital of the joint-stock company “Mažeikių nafta” (theretofore, increasing the authorised capital of this joint-stock company according to the Law, respectively increased its block of shares to 49.5 percent of the authorised capital), it would be done without applying inter alia, Article 10 (wording of 19 March 1998) of the Law on Public Trading in Securities, i.e. even though the strategic investor exceeded the 50 percent limit indicated in this Article, it would not be obliged to submit an official offer to acquire the securities of the issuer; in addition, Paragraph 2 (where it is prescribed that if the securities which are registered with the Securities Commission when intending to issue them to public trading are included into the official or current list of the securities to be traded of the Stock Exchange registered in the Republic of Lithuania, their sale and purchase transactions of the secondary trading are concluded only with the Stock Exchange)—respective transactions would be concluded not with the Stock Exchange, especially when according to Paragraph 3 (wording of 19 March 1998) of Article 8 (wording of 19 March 1998) of the Law on Public Trading in Securities, the provisions of Paragraph 2 of this article are not applied if other laws establish a different procedure of public trading in securities.

It should be emphasised that by the provision stating that when acquiring the shares of the joint-stock company “Mažeikių nafta” the 50 percent limit of votes in the general meeting of shareholders is exceeded, the official offer to acquire the shares of this joint-stock company which belong to other shareholders does not have to be submitted (differently than in such cases required according to the then Law on Public Trading in Securities) was for the first time established exactly in Article 3 (wording of 3 June 1999) of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”; it should also be noted that the said official offer does not have to be submitted only under all the conditions provided for in this Article: (1) 7 years may not pass since the strategic investor has acquired the shares of the joint-stock company “Mažeikių nafta”, newly issued after the authorised capital of this joint-stock company was under this Law increased for the first time; (2) under the procedure established by the Law the strategic investor had to acquire the shares of the joint-stock company “Mažeikių nafta” whose total nominal value comprised 49.5 percent of the authorised capital of the joint-stock company “Mažeikių nafta”; (3) the acquired shares had to belong to the state by right of ownership and the strategic investor could only acquire them from the state; (4) the total nominal value of the acquired shares could not exceed 16.5 percent of the then registered authorised capital of the joint-stock company “Mažeikių nafta”.

19. On 5 October 1999, the Seimas adopted 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” that became effective on 15 October 1999.

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” amended and (respectively) supplemented Articles (and their Paragraphs (Items)) 3 (wording of 3 June 1999) and 4 (wording of 29 September 1998) of the Law on the Reorganisation of the Joint-stock Companies "Būtingės nafta", "Mažeikių nafta" and "Naftotiekis".

19.1. Article 3 (wording of 5 October 1999) of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” was set forth as follows:

1. The strategic investor, recognised as such upon the recommendation of the Government and by 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 it has requested so, within a 5-year period at any time from its 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 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 it 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 it by right of ownership, would correspond to the same portion in percentage terms 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 Local Government 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 Local Government 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 Local Government 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 Local Government 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 Local Government Property.

4. After the strategic investor has acquired the shares under Item 1 of Paragraph 1 of this Article, state and local government 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 the 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.”

It should be noted that, under the Constitutional Court’s ruling of 18 October 2000, the provision of Paragraph 4 of Article 3 (wording of 5 October 1999) of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis" stating (1) that in its agreements with the strategic investor and the joint-stock company “Mažeikių nafta” the Government has the right to assume basic property liabilities in the name of the state before the strategic investor and/or the joint-stock company “Mažeikių nafta”, including recovery of losses was ruled to be in conflict with Paragraph 1 of Article 5 and Paragraph 1 of Article 128 of the Constitution; (2) that in its agreements with the strategic investor and the joint-stock company “Mažeikių nafta” the Government has the right to assume basic property liabilities in the name of the state before the strategic investor and/or the joint-stock company “Mažeikių nafta”, including recovery of losses to the extent that it establishes the right of the Government to assume liabilities to also recover losses occurring because of the fault of the strategic investor and the joint-stock company “Mažeikių nafta” was ruled to be in conflict with Paragraph 3 of Article 46 of the Constitution, with the constitutional principle of a state under the rule of law; (3) that in its agreements with the strategic investor and the joint-stock company “Mažeikių nafta” the Government has the right to assume basic property liabilities in the name of the state before the strategic investor and/or the joint-stock company “Mažeikių nafta”, including recovery of losses to the extent that it establishes the right of the Government to assume liabilities to also recover losses only in the event that they occur after having adopted the laws by which the norms are implemented and/or the values consolidated in the Constitution are protected, was ruled to be in conflict with Article 4 of the Constitution and with the constitutional principle of a state under the rule of law.

It should also be noted that, under the Constitutional Court’s ruling of 17 October 2003, the provision “after the strategic investor acquires the shares under Item 1 of Paragraph 1 of this Article neither State nor municipal institutions will be permitted to raise additional claims to the joint-stock company ‘Mažeikių nafta’ and its subsidiaries concerning activity or failure to act of the joint-stock company ‘Mažeikių nafta’ or its subsidiaries or as regards other events, all of which took place prior to the acquisition of the shares by the strategic investor” of Paragraph 4 (wording of 5 October 1999) of Article 3 (wording of 5 October 1999) of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” (1) was ruled to be in conflict with Paragraphs 3, 4 and 5 of Article 46 of the Constitution and with the constitutional principle of a state under the rule of law; (2) to the extent that it prescribed that the municipal institutions will not be permitted to raise additional claims specified in this provision was ruled to be in conflict with Paragraph 2 of Article 120 and Article 122 of the Constitution.

19.2. Article 4 (wording of 5 October 1999) of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” was set forth as follows:

1. A block of shares of the joint-stock company “Mažeikių nafta”, entitling to more than 24 percent of votes cannot belong to every shareholder of this joint-stock company, except the state and the strategic investor, together with its controlled subjects, the notion of which is determined in the Republic of Lithuania’s Law on Public Trading in Securities.

2. The state shall have the right of priority in acquisition of the shares sold or transferred otherwise, which belong to the other shareholders holding not less than 1 percent of the shares of the joint-stock company ‘Mažeikių nafta’ which continues its activity 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 the shares of the joint-stock company ‘Mažeikių nafta’ from the strategic investor and for the procedure of implementation of such a right is established in the agreement between the Government and the strategic investor. Under the procedure established in the agreement with the Government the strategic investor has the right to transfer the shares of the joint-stock company ‘Mažeikių nafta’ which belong to it by right of ownership to the enterprises whose all the shares and/or capital (either directly or indirectly) belong to the strategic investor by right of ownership.

3. In the case that the strategic investor has not sold or transferred otherwise the shares of the joint-stock company that it had acquired under Item 1 of Paragraph 1 of Article 3 of this Law (save transfer of the shares to the enterprises whose all the shares and/or capital (directly or indirectly) belong to the strategic investor by right of ownership) and it is decided to privatise, sell or in any other way transfer the number of shares which by right of ownership belong to the state so that after such privatisation, selling or transfer the total nominal value of the shares that by right of ownership belong to the state would comprise less than 18 percent of the authorised capital of this company, the strategic investor will have the right of priority to acquire all or part of the shares sold or in other way transferred by the state without applying the Law on the Privatisation of State-owned and Municipal Property. This provision of priority is also applied in such a case when the total nominal value of the shares that by right of ownership belong to the state continues to decrease due to subsequent transfers of the shares that belong to the state.”

It should be mentioned that Paragraph 2 of Article 4 (wording of 5 October 1999) of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” to the extent that it restricts the right of the shareholders to transfer shares, by the Constitutional Court’s ruling of 18 October 2000 was ruled to be in conflict with Article 23 of the Constitution.

20. It should be held that having set forth Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” in the wording of 5 October 1999, certain novels of legal regulation were consolidated in the Law, inter alia:

the previously established requirements for one of the owners of the blocks of shares, strategic investor of the joint-stock company “Mažeikių nafta” which continues its activity after the reorganisation (which, as mentioned before, was recognised the United States of America’s company Williams International Company) were particularised, however, these particularised requirements for the strategic investor as the owner of the block of shares, as before, depended on whether the authorised capital of this joint-stock company would be increased and whether the strategic investor (i.e. Williams International Company) would seek to acquire more shares of the joint-stock company “Mažeikių nafta”: (1) as before, by increasing the authorised capital of the joint-stock company “Mažeikių nafta” the strategic investor could acquire the newly issued shares, whose total nominal value does not exceed 33 percent of its authorised capital; (2) as before, by increasing the authorised capital once more at any time within 5 years after the strategic investor has acquired the shares of the joint-stock company “Mažeikių nafta”, newly issued after the authorised capital of this joint-stock company is increased for the first time under this law, the strategic investor could acquire the newly issued shares whose total nominal value together with the shares acquired during the said first increase of the authorised capital does not exceed 49.5 percent of the authorised capital; however, it was particularised that it is done on demand by the strategic investor (therefore, not by other investors, inter alia, not by the state) declared at any time within the established 5-year term; (3) as before, the strategic investor who had acquired the shares comprising 49.5 percent of the authorised capital of the joint-stock company “Mažeikių nafta”, within the 7-year term after it had acquired the shares of the joint-stock company “Mažeikių nafta”, newly issued after the authorised capital of this joint-stock company had been increased for the first time under this law, could purchase (at once or in portions) the shares that by right of ownership belonged to the state and whose total nominal value did not exceed 16.5 percent of the then registered authorised capital of the joint-stock company “Mažeikių nafta”; however, it was particularised that it is done on demand by the strategic investor (therefore, not by other investors, inter alia, not by the state) declared at any time within the established 7-year term;

no requirement was left that the block of shares entitling to more than 25 percent of votes in the general meeting of shareholders would belong to the state by right of ownership (moreover, no legal regulation novels that could be interpreted as implementing the earlier provision, i.e. that declared in Paragraph 2 (wording of 3 June 1999) of Article 3 of the Law stating that when the block of shares of the joint-stock company “Mažeikių nafta” which belongs to the state by right of ownership is decreased so that it would entitle to not more than 25 percent of votes in the general meeting of shareholders, the securing of the strategic interests of the state will be established by law);

certain potential owners of the blocks of shares of the joint-stock company “Mažeikių nafta“ were established, which were not expressis verbis mentioned in the provisions of the Law of previous wordings, and a way was established by which these subjects can acquire the shares of this joint-stock company: (1) in the agreements between the Government and the strategic investor one could provide that a part of the shares that belong to the state by right of ownership would be transferred to the oil suppliers of the joint-stock company “Mažeikių nafta” and/or financial institutions; (2) in the agreements between the Government and the strategic investor a procedure could be established under which the strategic investor has the right to transfer the shares of the joint-stock company “Mažeikių nafta” which belong to it by right of ownership to the enterprises whose all the shares and/or capital belong (directly or indirectly) to the strategic investor by right of ownership—the said provision should be regarded as obliging the Government under no circumstances to conclude with the strategic investor any such agreements, which would not secure the interests of Lithuania when privatising the joint-stock company “Mažeikių nafta” which continues its activity after the reorganisation of the joint-stock companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” and, inter alia, proper investment into joint-stock company (e.g. such agreements under which after transferring the shares of the joint-stock company “Mažeikių nafta” that belong to the strategic investor by right of ownership to the enterprises whose all the shares and/or capital belong to it by right of ownership, could avoid such liabilities that arise for it, as the strategic investor, from the legal acts of the Republic of Lithuania and such agreements, according to which the aforementioned enterprises whose all shares and/or capital belong to the strategic investor by right of ownership, could transfer the shares of the joint-stock company “Mažeikių nafta” acquired under this provision of Paragraph 2 of Article 4 (wording of 5 October 1999) of this Law to other persons without the will of the competent institutions of the Republic of Lithuania, etc.);

the legal regulation was prescribed that the fact of whether new owners of blocks of shares would appear in the course of privatising, selling or transferring otherwise the shares of the joint-stock company “Mažeikių nafta” that by right of ownership belong to the state, and of what size these blocks of shares would be, partially depended on the will of the strategic investor: in such case, when the strategic investor has not sold or transferred otherwise the shares of the joint-stock company “Mažeikių nafta”, whose total nominal value does not exceed 33 percent of the authorised capital of this joint-stock company and which were acquired after the authorised capital was increased for the first time under this law (except transferring of the shares to the enterprises, whose all the shares and/or capital by right of ownership belong to the strategic investor), and it is decided to privatise, sell or transfer otherwise such a number of the shares which by right of ownership belong to the state, so that after such privatisation, sale or transfer of the total nominal value of the shares of the joint-stock company “Mažeikių nafta” that by right of ownership belong to the state would comprise less than 18 percent of the authorised capital of this company, also in such case when the total nominal value of the shares of the joint-stock company “Mažeikių nafta” that belong to the state continues to decrease due to subsequent transfers of shares of this joint-stock company that belong to the state, the strategic investor had the right of priority to acquire all the shares or part of them sold or transferred otherwise by the state without applying the Law on the Privatisation of State-owned and Municipal Property (thus, not in the ways and under the procedure that were then established or could be established in the future by the Law on the Privatisation of State-owned and Municipal Property);

the equalisation (presumed losses compensation) mechanism of the part of the authorised capital that belongs to the strategic investor was consolidated—the obligation of the state to ensure that on the strategic investor’s demand, the part of the authorised capital of the joint-stock company “Mažeikių nafta” that belongs to it, acquired after the authorised capital of the company increased for the first time was under this law, would remain unchanged: if at any time before the strategic investor will acquire the newly issued shares whose total nominal value together with those acquired during the said first increase of the authorised capital did not exceed 49.5 percent of the authorised capital of this joint-stock company, its authorised capital would be increased by additional contributions of not the strategic investor but other persons and if the strategic investor requested, the Government would and without applying the provisions of the Law on the Privatisation of State-owned and Municipal Property (and in case the newly issued shares are acquired by the financial institutions specified in the concluded agreement between the Government and the strategic investor—without applying certain provisions of the Law on Companies) transfer gratis to the strategic investor such a number of shares of the joint-stock company “Mažeikių nafta” which by right of ownership belong to the state that the total nominal value of the shares held by the strategic investor by right of ownership would correspond the same percentage of the authorised capital of this company that the strategic investor held before the authorised capital was increased by additional contributions;

the list of cases when while acquiring the shares of the joint-stock company “Mažeikių nafta” the official offer to acquire the shares of this joint-stock company which belong to other shareholders (otherwise than it was required under the then Law on Public Trading in Securities) was not obligatory was extended: in addition, the provision previously consolidated in the Law under which the said official offer did not have to be submitted when the strategic investor makes use of the possibility entrenched in the Law to purchase (at once or in portions) the shares which by right of ownership belong to the state and whose total nominal value does not exceed 16.5 percent of the then registered authorised capital of the joint-stock company “Mažeikių nafta” (which has previously increased its block of shares to 49.5 percent of the authorised capital by increasing the authorised capital of this joint-stock company under the Law) and when acquiring these shares the 50 percent votes limit in the general meeting of shareholders is exceeded; it was also consolidated that the official offer was not obligatory also when a part of the shares that by right of ownership belonged to the state has been acquired by any crude oil supplier to the joint-stock company “Mažeikių nafta” and/or financial institution (which, as mentioned before, were named in the Law as possible owners of blocks of shares of the joint-stock company “Mažeikių nafta”); in the second case, as well as in the first, the requirement to conclude proper transactions only at the Stock Exchange consolidated in the then Law on Public Trading in Securities would not be applied—such transactions would be concluded not with the Stock Exchange.

In this context, it should be emphasised that the non-application clause of the obligatory official offer (to acquire the securities of the issuer) did not include cases when the strategic investor could make use of the right of priority to acquire all or part of the shares of the joint-stock company “Mažeikių nafta” that were decided to privatise, sell or transfer otherwise, which was entrenched in the Law: (1) it was mentioned that in the case when the strategic investor has not sold or transferred otherwise the shares of the joint-stock company “Mažeikių nafta” whose total nominal value does not exceed 33 percent of the authorised capital of this joint-stock company and which were acquired after its authorised capital was increased for the first time under this Law (except transferring of the shares to the enterprises, whose all the shares and/or capital belong to the strategic investor by right of ownership) and when it is decided to privatise, sell or transfer otherwise such a number of shares which by right of ownership belong to the state, so that after such privatisation, sale or transfer of the total nominal value of the shares of the joint-stock company “Mažeikių nafta” that by right of ownership belong to the state would comprise less than 18 percent of the authorised capital of this company; (2) in the case where the total nominal value of the shares of the joint-stock company “Mažeikių nafta” that belong to the state continues to decrease due to subsequent transfers of shares of this joint-stock company that belong to the state, the strategic investor had the right of priority to acquire all the shares or part of them sold or transferred otherwise by the state (without applying the Law on the Privatisation of State-owned and Municipal Property). In the said cases it was mandatory to submit the official offer (to acquire the securities of the issuer).

21. Summing up the legal regulation consolidated in the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, adopted by the Seimas on 29 September 1998 and in the laws amending and supplementing it—the Law on Amending and Supplementing Article 3 of the Republic of Lithuania’s Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” adopted by the Seimas on 3 June 1999 and the Law on Amending and Supplementing Articles 3 and 4 of the Republic of Lithuania’s Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” adopted by the Seimas on 5 October 1999—it should be held that by adopting these laws new provisions for the privatisation and management of the joint-stock company “Mažeikių nafta” were entrenched every time which basically differ from the general provisions regulating the privatisation and management of enterprises, entrenched in other laws, i.e. in this respect more and more legal regulation exceptions were established, where certain provisions of other laws were not to be applied for the privatisation and management of the joint-stock company “Mažeikių nafta”. It is especially to be noted that by the aforementioned laws providing for the non-application of certain provisions of other laws in privatisation and management of the joint-stock company “Mažeikių nafta” which continued its activity after the reorganisation, while regulating the privatisation and management relations of this joint-stock company, inter alia, the interrelations of the strategic investor, the state and other shareholders, the obligations of the state to the strategic investor into the joint-stock company “Mažeikių nafta” were constantly being increased (which, as mentioned before, was recognised the United States of America’s company Williams International Company) and an exceptional situation of the strategic investor in comparison with other shareholders of this joint-stock company was consolidated.

It was mentioned that (as held by the Constitutional Court in its ruling of 18 October 2000) peculiarities of the development of this country, conditions of the state-owned enterprises, the situation in the national economy and other factors exert influence on the choice of methods of privatisation, also that implementing the economic reform the state may establish the differentiated legal regulation by not violating constitutional principles and norms. It was also mentioned that the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, under which in the provided cases certain provisions of articles (paragraphs thereof) of other laws did not have to be applied, was exactly the law entrenching an appropriate differentiated legal regulation and (as held by the Constitutional Court in its ruling of 18 October 2000) that only the fact that this law consolidated a differentiated legal regulation, in itself did not mean that it was in conflict with the Constitution. These provisions are also applicable mutatis mutandis to the laws that amended and/or supplemented the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” adopted by the Seimas on 29 September 1998, namely to the Law on Amending and Supplementing Article 3 of the Republic of Lithuania’s Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” adopted by the Seimas on 3 June 1999 and the Law on Amending and Supplementing Articles 3 and 4 of the Republic of Lithuania’s Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” adopted by the Seimas on 5 October 1999.

On the other hand, as mentioned before, by implementing the economic reform and establishing the differentiated legal regulation, the state cannot violate the principles and norms of the Constitution. This requirement also has to be respected when entrenching into laws new provisions meant for privatisation and management of the joint-stock company “Mažeikių nafta”—more and more legal regulation exceptions when certain provisions of other laws are not applied for the privatisation and management of the joint-stock company “Mažeikių nafta”, inter alia, increasing the obligations of the state to the strategic investor into the joint-stock company “Mažeikių nafta” and consolidating an exceptional situation of the strategic investor in comparison with other shareholders of this joint-stock company.

In its ruling of 18 October 2000, the Constitutional Court (while construing the provisions of the Seimas Resolution (No. VIII-869) “On the Recognition of the Strategic Investor” of 29 September 1999) stated 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 subjects in the future only”. This description fully applies to certain common exceptions to the legal regulation established in the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, adopted by the Seimas on 29 September 1998 and in the laws amending and supplementing it—the Law on Amending and Supplementing Article 3 of the Republic of Lithuania’s Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” adopted by the Seimas on 3 June 1999 and the Law on Amending and Supplementing Articles 3 and 4 of the Republic of Lithuania’s Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” adopted by the Seimas on 5 October 1999, when certain provisions of other laws are not applied for the privatisation and management of the joint-stock company “Mažeikių nafta” and, in certain cases, exceptional in comparison with other shareholders of this joint-stock company, for consolidating the situation of the strategic investor in the aforementioned laws.

It should also be held that by deciding upon the petition of the petitioner whether Paragraph 2 (wording of 4 June 2002) of Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” is not in conflict with the Constitution to the extent that it prescribes that the provisions of Article 19 of the Law on Public Trading in Securities are not applied while concluding and implementing the agreements specified in this paragraph; the aforesaid exceptions of the general legal regulation established in the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, adopted by the Seimas on 29 September 1998 and in the laws amending and supplementing it—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” adopted by the Seimas on 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” adopted by the Seimas on 5 October 1999 where certain provisions of other laws are not applied to the privatisation and management of the joint-stock company “Mažeikių nafta”, and consolidation of the exceptional, in comparison with other shareholders of this joint-stock company, situation of the strategic investor in the said laws are investigated only to the extent (differently from what it was in such cases required under the then Law on Public Trading in Securities) that it was prescribed that it was not mandatory to submit an official offer in order to acquire the shares of the joint-stock company “Mažeikių nafta” that belong to other shareholders. However, in itself this investigation does not imply an investigation into the said provisions (not effective at this time) in the aspect of their compliance with the Constitution.

22. After the Seimas adopted 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” on 5 October 1999, the Government adopted the following resolutions by which one attempted to implement the provisions of the Law concerning conclusion of agreements with the strategic investor into the joint-stock company “Mažeikių nafta” and investments into this joint-stock company as well as to implement the state obligations to the strategic investor: the Resolution (No. 1154) “On Conclusion of Agreements with Williams International Company” of 19 October 1999, the Resolution (No. 1192) “On the Confirmation of the Procedure of the Sale of Shares of the Joint-stock Company ‘Mažeikių nafta’” of 27 October 1997 (by Item 1 whereof the Procedure of the Sale of Shares of the Joint-stock Company “Mažeikių nafta” was confirmed, which regulated the sale of the shares of the joint-stock company “Mažeikių nafta” that belonged to the state by right of ownership, whose total nominal value did not exceed 16.5 percent of the then registered authorised capital of this joint-stock company, to the strategic investor recognised by means of a Seimas resolution (as mentioned before, the United States of America’s company Williams International Company was recognised the strategic investor) and to oil suppliers to the joint-stock company “Mažeikių nafta” and/or financial institutions), the Resolution (No. 1194) “On Representing the State at the Joint-stock Company ‘Mažeikių nafta’” of 27 October 1999, the Resolution (No. 1195) “On Execution of Public Purchases” of 27 October 1999 (by Item 1 whereof it agreed that that the joint-stock company “Mažeikių nafta” execute all purchases, which, under the Republic of Lithuania’s Law on Public Purchases, require consent by the Government, from a single source, or otherwise as established in the Rules for Purchases Carried Out by the Joint-stock Company ‘Mažeikių nafta’ confirmed by the Board of the Joint-stock Company ‘Mažeikių nafta’ and without violating the Law on Public Purchases), the Resolution (No. 1198) “On Confirming the United States of America’s company Williams International Company as the Creditor” of 27 October 1999, the Resolution (No. 1200) “On Granting a Loan to the Joint-stock Company ‘Mažeikių nafta’ and on a Partial Amendment of Certain Resolutions of the Government of the Republic of Lithuania Related to Loans to the Joint-stock Company ‘Mažeikių nafta’” of 27 October 1999, the Resolution (No. 1203) “On Candidates to Members of the Supervision Council and Those of the Board of the Joint-stock Company ‘Mažeikių nafta’” of 28 October 1999, the Resolution (No. 1206) “On Consent to Carry Out the Public Purchase from a Single Source” of 28 October 1999, the Resolution (No. 1207) “On Draft Assenting Agreements with the United States of America’s Company Williams International Company and on Granting Respective Powers” of 28 October 1999, the Resolution (No. 1208) “On a Partial Amendment of the Resolution of the Government of the Republic of Lithuania (No. 1154) ‘On the Conclusion of Agreements with Williams International Company’ of 19 October 1999” of 29 October 1999.

It needs to be emphasised that the content of legal regulation established in laws cannot be construed on how it used to be interpreted by the Government or other institutions when they, within their competence, issued substatutory legal acts by which one sought to implement the provisions of corresponding laws.

Thus, the investigation into the compliance of the clause on the non-application of the obligatory official offer (to acquire securities of the issuer) that was consolidated in the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” (with subsequent supplements and amendments) which was adopted by the Seimas on 29 September 1998, with the Constitution cannot be grounded on how the Government (inter alia, when it was issuing the substatutory legal acts) or other institutions interpreted the clause prior to the signing of corresponding agreements with the United States of America’s company Williams International Company and/or after these agreements were signed.

23. The legal grounds to discharge the functions of the strategic investor to the joint-stock company “Mažeikių nafta” appeared to the United States of America’s company Williams International Company after this company (together with the Government and the joint-stock company “Mažeikių nafta”), on 29 October 1999, signed the agreements on subscription to the shares, on the investments and other agreements the drafts of which had been approved of by the Government (by means of a corresponding resolution).

24. While executing the aforesaid agreements and implementing the state obligations to the strategic investor, the Government adopted the following resolutions (not all of which were published in the official gazette Valstybės žinios): the Resolution (No. 1311) “On a Partial Amendment of the Resolution of the Government of the Republic of Lithuania (No. 286) ‘On Confirming the Distribution of the 1999 State Investments Provided for in the 1999–2001 State Investments Programme, Which are Financed from the Funds of the State Budget of the Republic of Lithuania, the Privatisation Fund and Loans Received in the Name of the State’ of 17 March 1999” of 29 November 1999, the Resolution (No. 1375) “On Transfer of Funds into the Privatisation Fund Account” of 8 December 1999, the Resolution (No. 1384) “On a Partial Amendment of the Resolution of the Government of the Republic of Lithuania (No. 844) ‘On Confirming the Estimate of Funds of the Privatisation Funds for the Second Half of 1999’ of 22 July 1999” of 10 December 1999, the Resolution (No. 1404) “On Granting a Loan to the Joint-stock Company ‘Mažeikių nafta’” of 15 December 1999, the Resolution (No. 227) “On Granting a Loan to the Joint-stock Company ‘Mažeikių nafta’” of 28 February 2000, the Resolution (No. 232) “On Granting State Guarantees to Creditors of the Joint-stock Company ‘Ventus nafta’” of 29 February 2000, and the Resolution (No. 251) “On Transfer of the Shares of the Joint-stock Company ‘Mažeikių nafta’ which Belong to the State by Right of Ownership into a Special Account” of 3 March 2000.

As mentioned before, the content of legal regulation established in laws cannot be construed on how it used to be interpreted by the Government when it, within its competence, issued substatutory legal acts by which one sought to implement the provisions of corresponding laws.

25. It should also be mentioned that it was established in Paragraph 4 of Article 3 (wordings of 23 April 1996 and 11 July 2000) of the Law on Public Trading in Securities that the provisions of this law shall not apply to the secondary securities offering, carried out outside the securities exchange when privatising property under the Law on the Privatisation of State-owned and Municipal Property. Thus, the provisions of Article 10 (wording of 19 March 1998) of the Law on Public Trading in Securities regarding the official offer to acquire securities of the issuer were also not to be applied to the secondary securities offering, carried out outside the securities exchange when privatising property under the Law on the Privatisation of State-owned and Municipal Property.

It should also be noted that, under Item 2 of Paragraph 2 of Article 3 (wordings of 23 April 1996 and 11 July 2000) of the Law on Public Trading in Securities, the provisions of this law shall not apply to securities which are issued into circulation under the law providing the non-application of this law.

It should be held that until Article 3 of the Law on Public Trading in Securities was in force in the aforementioned wordings, the said legal situation did not exist, nor was there any such legal situation where the strategic investor (the United States of America’s company Williams International Company) as a shareholder of the joint-stock company “Mažeikių nafta” overstepped the 50 percent limit consolidated in Article 10 (wording of 19 March 1998) of the Law on Public Trading in Securities and it did not have to present an official offer to acquire the shares of the joint-stock company “Mažeikių nafta” which belonged to other shareholders, since the strategic investor had acquired the shares of the joint-stock company “Mažeikių nafta” under the 29 September 1998 Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” (with subsequent supplements and amendments), but not under Law on the Privatisation of State-owned and Municipal Property.

26. On 17 May 2001, the Seimas adopted the Law on Amending and Supplementing Articles 3 and 10 of the Law on Public Trading in Securities.

26.1. By Article 2 of the Law on Amending and Supplementing Articles 3 and 10 of the Law on Public Trading in Securities, Paragraph 4 (wording of 19 March 1998) of Article 10 of the Law on Public Trading in Securities was amended and it was established, inter alia, that the Securities Commission has the right to adopt legal acts concerning the granting of the general exception, when the 50 percent limit specified in Paragraph 2 of this article is exceeded and the obligatory official offer is not submitted.

Thus, after the said amendment had been made, the corresponding legal regulation was particularised in the respect that it was expressis verbis established in the Law on Public Trading in Securities that the exceptions when the obligatory official offer is not submitted (after the specified 50 percent limit is exceeded) can be applied only following legal acts of the Securities Commission, which establish general rules of granting such exceptions; thus, such exceptions could not be established ad hoc.

26.2. By Article 1 of the Law on Amending and Supplementing Articles 3 and 10 of the Law on Public Trading in Securities, Paragraph 4 of Article 3 (wording of 11 July 2000) of the Law on Public Trading in Securities was amended and supplemented. Paragraph 4 of Article 3 (wording of 17 May 2001) of the Law on Public Trading in Securities was set forth as follows:

The provisions of Article 8 of this Law shall not be applied to the secondary securities offering carried out outside the securities exchange when privatising property under the laws regulating privatisation. The requirement to submit an obligatory official offer established in this Law shall be applied only in case the corresponding amount of shares is acquired in the course of property privatisation.”

Thus, after the said amendment and supplement had been made, the Law on Public Trading in Securities established a narrower field than that of the institute of the non-application of the official obligatory offer (after exceeding the 50 percent limit established in the said law).

27. On 14 June 2001, the United States of America’s company Williams International Company, the strategic investor to the joint-stock company “Mažeikių nafta” signed a cooperation agreement (with annexes) with the Russian Federation’s company OAO Yukos Oil Corporation whereby it was agreed, inter alia, that OAO Yukos Oil Corporation would acquire two separate issues of shares of the joint-stock company “Mažeikių nafta” before it decreased the authorised capital of the latter joint-stock enterprise (explanatory note to the Republic of Lithuania draft Law on Amending Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, signed by the acting Minister of Economy).

On 26 June 2001, the Government adopted the Resolution (No. 777) “On the Cooperation Agreement Between the United States of America’s Company Williams International Company and the Russian Federation’s Company OAO Yukos Oil Corporation”. By Item 1 of this resolution the Government virtually approved of the conditions and provisions of the said agreement between the United States of America’s company Williams International Company and the Russian Federation’s company OAO Yukos Oil Corporation, alongside, it made certain reservations and remarks, inter alia, that the conditions of the cooperation agreement and its annexes could not have been implemented then, unless corresponding amendments of laws of the Republic of Lithuania had not been made, and that the Government would make reasonable efforts to initiate and implement the amendments of corresponding laws.

By its Resolution (No. 938) “On Supplementing the Resolution of the Government of the Republic of Lithuania (No. 777) ‘On the Cooperation Agreement Between the United States of America’s Company Williams International Company and the Russian Federation’s Company OAO Yukos Oil Corporation’ of 26 June 2001” of 27 July 2001, the Government supplemented the said Government, inter alia, with the provision (with new Item 2.3) stating that “the advisor of the joint-stock company ‘Mažeikių nafta’ on financial issues must submit a written confirmation to the Government of the Republic of Lithuania that it is expedient to sell the portion of the newly issued shares of the joint-stock company ‘Mažeikių nafta’, which is equal to 10.1 percent of the shares of the enterprise, to the Russian Federation’s Company OAO Yukos Oil Corporation, and that it is necessary to do so in order to receive the long-term financing of the financial plan”.

In this context, it needs to be noted that under the Constitution the Government shall execute laws and resolutions of the Seimas concerning the implementation of laws (Item 2 of Article 94 of the Constitution). It should also be mentioned that, at the time of adoption of the Government Resolution (No. 777) “On the Cooperation Agreement Between the United States of America’s Company Williams International Company and the Russian Federation’s Company OAO Yukos Oil Corporation” of 26 June 2001 and the Government Resolution (No. 938) “On Supplementing the Resolution of the Government of the Republic of Lithuania (No. 777) ‘On the Cooperation Agreement Between the United States of America’s Company Williams International Company and the Russian Federation’s Company OAO Yukos Oil Corporation’ of 26 June 2001” of 27 July 2001, the Seimas Resolution (No. VIII-869) “On the Recognition of the Strategic Investor” of 29 September 1998 was in force, under Article 2 whereof it was suggested that the Government provide in the final agreements on the investments into the complex of oil enterprises concluded with the strategic investor, inter alia, that at least one enterprise of a European Union country would have an opportunity to be a shareholder of the joint-stock company “Mažeikių nafta” (Item 6).

Approval (to any extent) of a contract concluded by other subjects (in this case, between a United States of America’s company and a Russian Federation’s company), which, as is held by the Government itself, is not in compliance with laws of the Republic of Lithuania, should be deemed incorrect. However, in themselves the Government Resolution (No. 777) “On the Cooperation Agreement Between the United States of America’s Company Williams International Company and the Russian Federation’s Company OAO Yukos Oil Corporation” of 26 June 2001 and the Government Resolution (No. 938) “On Supplementing the Resolution of the Government of the Republic of Lithuania (No. 777) ‘On the Cooperation Agreement Between the United States of America’s Company Williams International Company and the Russian Federation’s Company OAO Yukos Oil Corporation’ of 26 June 2001” of 27 July 2001 did not create any legal effects and, in itself, their incorrectness alone does not provide with sufficient grounds to hold that these government resolutions are in conflict with the Constitution.

The compliance of the said government resolutions with the Constitution in other aspects is not a matter of investigation in the constitutional justice case at issue.

It should also be mentioned that the Government Resolution (No. 777) “On the Cooperation Agreement Between the United States of America’s Company Williams International Company and the Russian Federation’s Company OAO Yukos Oil Corporation” of 26 June 2001 and the Government Resolution (No. 938) “On Supplementing the Resolution of the Government of the Republic of Lithuania (No. 777) ‘On the Cooperation Agreement Between the United States of America’s Company Williams International Company and the Russian Federation’s Company OAO Yukos Oil Corporation’ of 26 June 2001” of 27 July 2001 have not been published in the official gazette Valstybės žinios. At the time of the adoption of these government resolutions, Article 3 (wording of 18 May 1999) the Republic of Lithuania’s Law “On Procedure of Publication and Coming Into Force of Republic of Lithuania’s Laws and Other Legal Acts” contained a provision whereby government resolutions in which legal norms are not established, amended or acknowledged as no longer valid may, in the estimation of the persons who have signed them, remain unpublished officially, and Paragraph 2 (wording of 18 May 1999) of Article 8 of the same law contained a provision whereby the resolutions of the Government of the Republic of Lithuania by which legal norms are not established, amended or acknowledged as no longer valid may come into force without their official publication; these provisions of the Law “On Procedure of Publication and Coming Into Force of Republic of Lithuania’s Laws and Other Legal Acts” were ruled to be in conflict with the principle of a state under the rule of law by the Constitutional Court’s ruling of 29 November 2001.

28. On 2 August 2001, the Seimas adopted the Republic of Lithuania’s Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, which came into force on 4 August 2001.

By 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”, Article 3 (wording of 5 October 1999) (Paragraphs 2 and 3 thereof) of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” was amended, while by Article 2, Paragraph 1 of Article 4 (wording of 5 October 1999) of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” was recognised as no longer valid.

28.1. Article 3 (wording of 2 August 2001) of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” was set forth as follows:

1. The strategic investor, recognised as such upon the recommendation of the Government and by 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 it has requested so, within a 5-year period at any time from its 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. If, at any time until the strategic investor acquires the shares under Item 2 of Paragraph 1 of this Article, the authorised capital of the joint-stock company ‘Mažeikių nafta’ is increased by additional contributions by issuing new shares of the joint-stock company ‘Mažeikių nafta’, comprising from 10.09 percent to 10.11 percent of the authorised capital of this joint-stock company (after the issuance of these shares), which will be acquired by the financial institution specified in the agreement concluded between the Government of the Republic of Lithuania and the strategic investor and/or any other person indicated by the financial advisor to the joint-stock company ‘Mažeikių nafta’, including the crude oil supplier under a long-term crude oil supply agreement (and/or a person, who is under control of the latter, or another person, who is indicated by the financial advisor of the joint-stock company ‘Mažeikių nafta’) and, if the strategic investor requests so, the Government of the Republic of Lithuania will transfer gratis the number of shares of the joint-stock company ‘Mažeikių nafta’ that belong to the state by right of ownership to the strategic investor so that the nominal value of the shares held by the strategic investor by right of ownership would correspond to the percentage share of the authorised capital of this company, which the strategic investor had held until the increase of the authorised capital by the additional contributions. When the shares of the joint-stock company ‘Mažeikių nafta’ are transferred subsequent to the requirements of this Paragraph, the provisions of the Law on the Privatisation of State-owned and Municipal Property shall not be applied. If the general meeting of shareholders of the joint-stock company ‘Mažeikių nafta’ adopts a decision to reduce the authorised capital and the person who may be the financial institution specified in the agreement concluded between the Government of the Republic of Lithuania and the strategic investor and/or any other person indicated by the financial advisor to the joint-stock company ‘Mažeikių nafta’, including the crude oil supplier under a long-term crude oil supply agreement (and/or a person, who is under control of the latter, or another person, who is indicated by the financial advisor of the joint-stock company ‘Mažeikių nafta’), had expressed their intent, prior to the adoption of the aforesaid decision by the general meeting of shareholders of the joint-stock company ‘Mažeikių nafta’ to reduce the authorised capital, to invest into the joint-stock company ‘Mažeikių nafta’ by way of acquisition of newly issued shares of the joint-stock company ‘Mažeikių nafta’ comprising from 10.09 percent to 10.11 percent of the authorised capital of this enterprise (after the reduction of the authorised capital and the issuance of these shares), and after that (the same person) intends immediately to invest into the joint-stock company ‘Mažeikių nafta’ by way of acquisition of newly issued shares of the joint-stock company ‘Mažeikių nafta’ comprising from 18.62 percent to 18.64 percent of the authorised capital of this enterprise (after the issuance of these shares), all the resolutions of the general meeting of the shareholders of the joint-stock company ‘Mažeikių nafta’ concerning the reduction of the authorised capital of the joint-stock company ‘Mažeikių nafta’ and/or the two increases of the authorised capital specified in this Paragraph may be adopted at the same general meeting of the shareholders of the joint-stock company ‘Mažeikių nafta’ without applying the provisions of Paragraph 3 of Article 51 and Paragraph 4 of Article 54 of the Law on Companies. When the persons specified in this Paragraph acquire the newly issued shares of the joint-stock company ‘Mažeikių nafta’, the authorised capital of this company is increased without applying the Law on the Privatisation of State-owned and Municipal Property. The issues of the structure of shareholders, management of and supply of energy resources to the joint-stock company ‘Mažeikių nafta’ are decided without applying the limitations established in subchapter “Economic Policy” of Chapter 4 of Part 1 of the Annex “The Basics of National Security” to the Law on the Basics of National Security.

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 Article 18 of the Law on the Privatisation of State-owned and Local Government 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 Local Government 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 2 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 Local Government Property.

4. After the strategic investor has acquired the shares under Item 1 of Paragraph 1 of this Article, state and local government 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 the 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.”

Attention should be paid to the fact that Paragraph 4 of Article 3 (wording of 2 August 2001) of the Law was set forth in the same fashion as its previous wording of 5 October 1999. It has been mentioned that by the Constitutional Court’s ruling of 17 March 2003 the provision “after the strategic investor acquires the shares under Item 1 of Paragraph 1 of this Article, neither State nor municipal institutions will be permitted to raise additional claims to the joint-stock company ‘Mažeikių nafta’ or its subsidiaries concerning activity or failure to act of the joint-stock company ‘Mažeikių nafta’ or its subsidiaries or as regards other events, all of which took place prior to the acquisition of the shares by the strategic investor” of Paragraph 4 (wording of 5 October 1999) of Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” (1) was recognised to be in conflict with Paragraphs 3, 4 and 5 of Article 46 of the Constitution; (2) to the extent that it is prescribed that municipal institutions will not be permitted to raise the additional claims indicated in this provision was recognised to be in conflict with Paragraph 2 of Article 120 and Article 122 of the Constitution.

28.2. Article 4 (wording of 2 August 2001) of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” was set forth as follows:

1. 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. The period during which the State has the right to acquire shares of the joint-stock company ‘Mažeikių nafta’ from the strategic investor and the procedure for implementation of such right is established in the agreement between the Government and the strategic investor. Under the procedure established in the agreement with the Government, the strategic investor has the right to transfer the shares of the joint-stock company ‘Mažeikių nafta’ that belong to it by right of ownership to enterprises whose all the shares and/or capital, either directly or indirectly, belong to the strategic investor by right of ownership.

2. 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 whose all the shares and/or capital (either directly or indirectly) belong to the strategic investor by right of ownership) and a decision has been adopted to privatise, sell or transfer otherwise a certain portion of the shares belonging to the State by right of ownership so that after such privatisation, sale or transfer of the total 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, the strategic investor shall have the right of priority to acquire all or part of the shares sold or otherwise transferred by the State 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.”

29. It should also be held that some of the provisions of Paragraph 2 (wording of 2 August 2001) of Article 3 of the Law were formulated not clearly, controversially and in an ambiguous manner, thus, the entire legal regulation established in the said paragraph is not sufficiently clear as well. For instance, it is not quite clear as to when and how the intent must be expressed to invest into the joint-stock company “Mažeikių nafta” by way of acquisition of newly issued shares of the joint-stock company “Mažeikių nafta” comprising from 10.09 percent to 10.11 percent of the authorised capital of this enterprise (after the reduction of the authorised capital and the issuance of these shares), as well as that to immediately invest into the joint-stock company “Mažeikių nafta” by way of acquisition of newly issued shares of the joint-stock company “Mažeikių nafta” comprising from 18.62 percent to 18.64 percent of the authorised capital of this enterprise (after the issuance of these shares); nor is it clear what is meant by the words “after that” employed to describe the second of these intents; it is not sufficiently clear what investment should be regarded as immediate; nor is it clear whether if one decided to adopt resolutions concerning the reduction of the authorised capital of the joint-stock company “Mažeikių nafta” and/or the two increases of the authorised capital not at the same general meeting of the shareholders of the joint-stock company “Mažeikių nafta” (since the adoption of these resolutions in the same general meeting of shareholders is stipulated as probable, but not as compulsory), would corresponding requirements of corresponding articles (parts thereof) of the Law on Companies be applicable; etc. The content of the legal regulation established in Paragraph 2 (wording of 2 August 2001) of Article 3 of the Law becomes clear in part only when the provisions of this paragraph are construed in the context of other provisions of the Law, when one takes account of the intentions of the legislature recorded in the travaux préparatoires.

30. It should be held that after Paragraphs 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” had been set forth in its wording of 2 August 2001, certain novels in the legal regulation of the law were consolidated (although certain provisions were formulated deficiently), inter alia:

the requirement that the block of shares granting more than 24 percent of votes in the general meeting of shareholders may not belong to any other shareholder, save the state and the strategic investor together with the subjects that are controlled by the latter, was withdrawn;

a possibility was established for the financial institution specified in the agreement concluded between the Government and the strategic investor and/or any other person indicated by the financial advisor to the joint-stock company “Mažeikių nafta”, including the crude oil supplier under a long-term crude oil supply agreement (and/or a person, who is under control of the latter, or another person, who is indicated by the financial advisor of the joint-stock company ‘Mažeikių nafta’), twice to acquire the newly issued shares of this joint-stock company: (1) first, the shares may be acquired by way of increasing the authorised capital of the joint-stock company “Mažeikių nafta”: the said financial institution or the other person indicated by the financial advisor of the joint-stock company “Mažeikių nafta” may acquire the newly issued shares of this joint-stock company, which comprise from 10.09 percent to 10.11 percent of the authorised capital (after the decrease of the authorised capital and the issuance of these shares); (2) second, the shares can be acquired by again increasing the authorised capital of the joint-stock company “Mažeikių nafta”: the same person may acquire the new shares comprising from 18.62 till 18.64 percent of the authorised capital (after the issuance of these shares) of this company;

one established the legal regulation whereby the authorised capital of the joint-stock company “Mažeikių nafta” could be increased by issuing new shares of the joint-stock company “Mažeikių nafta” comprising from 10.09 till 10.11 percent of its authorised capital (after the issuance of these shares) only after reduction of the authorised capital of the joint-stock company “Mažeikių nafta”;

it was prescribed that the resolutions of the general meeting of shareholders of the joint-stock company “Mažeikių nafta” concerning reduction of the authorised capital of this joint-stock company and/or the aforesaid two increases of the authorised capital of the same joint-stock company by issuing new shares of the joint-stock company “Mažeikių nafta” may be adopted at the same general meeting of shareholders of this joint-stock company without applying certain articles (parts thereof) of the Law on Companies;

it was prescribed that the issues of the structure of shareholders, management of and supply of energy resources to the joint-stock company “Mažeikių nafta” are decided without applying the limitations established in the Law on the Basics of National Security (subchapter “Economic Policy” of Chapter 4 of Part 1 of the Annex “The Basics of National Security” thereto) to one investor to dominate in one or several sectors of economy, which are strategically important to national security, inter alia, in the energy sector, to transfer energy resources supply to the control of subjects of the countries from which these resources are supplied, etc.;

the earlier mechanism (established in the Law) of equalising the part of the authorised capital belonging to the strategic investor (that of compensation of presumed losses) was particularised in the aspect that it was stipulated that the part of the authorised capital belonging to the strategic investor would be equalised in the case when the authorised capital of the joint-stock company “Mažeikių nafta” is increased by additional contributions by issuing new shares of the joint-stock company “Mažeikių nafta” comprising from 10.09 till 10.11 percent of the authorised capital of this company (after the issuance of these shares), which would be acquired by the financial institution specified in the agreement concluded between the Government of the Republic of Lithuania and the strategic investor and/or any other person indicated by the financial advisor to the joint-stock company ‘Mažeikių nafta’, including the crude oil supplier under a long-term crude oil supply agreement (and/or a person, who is under control of the latter, or another person, who is indicated by the financial advisor of the joint-stock company “Mažeikių nafta”).

31. At the discussed time period government resolutions were adopted, whereby it was sought to implement the Law (with the amendments made until and on 2 August 2001), inter alia, the Resolution (No. 964) “On Granting Powers to Vote in the General Meeting of Shareholders of the Joint-stock Company ‘Mažeikių nafta’” of 6 August 2001 and the Resolution (No. 1172) “On a Partial Amendment of the Resolution of the Government of the Republic of Lithuania (No. 1194) ‘On Representing the State at the Joint-stock Company “Mažeikių nafta”’ of 27 October 1999” of 26 September 2001.

One must separately mention the Government Resolution (No. 1367) “On the Purchase of Legal Services from a Single Source” of 16 November 2001, whereby it was decided, inter alia, to agree that the Ministry of Economy execute the public purchase from a single source, i.e. that it purchase legal services from one law office (specified in the resolution) related to the legal assessment of final agreements among the Government, the United States of America’s company Williams International Company, the Russian open joint-stock company Yukos Oil Corporation and the joint-stock company “Mažeikių nafta”, which are mentioned in the cooperation agreement between the United States of America’s company Williams International Company and the Russian open joint-stock company Yukos Oil Corporation that was signed on 14 June 2001, so that the maximum protection of state rights and interests could be ensured with regard to the agreement liabilities assumed by the Government and the requirements of legal acts of the Republic of Lithuania. As regards this, reasons were given that “an urgent need arose for the legal services the legal assessment of final agreements among the Government, the United States of America’s company Williams International Company, the Russian open joint-stock company Yukos Oil Corporation and the joint-stock company ‘Mažeikių nafta’, which are mentioned in the cooperation agreement between the United States of America’s company Williams International Company and the Russian open joint-stock company Yukos Oil Corporation that was signed on 14 June 2001, and it was impossible to predict it in advance”.

In this context, it should be noted that it is clear from the Government Resolution (No. 1367) “On the Purchase of Legal Services from a Single Source” of 16 November 2001 that in the said cooperation agreement concluded between two private legal persons one of which was a United States of America’s company and the other was a Russian Federation’s company, it was decided that the Government, an institution of the executive of the Republic of Lithuania, would sign certain agreements; as mentioned before, the Government, approved of such an agreement between two private legal persons by its Resolution (No. 777) “On the Cooperation Agreement Between the United States of America’s Company Williams International Company and the Russian Federation’s Company OAO Yukos Oil Corporation” of 26 June 2001, 12 days after the conclusion of the aforementioned cooperation agreement. Meanwhile, it is asserted in the Government Resolution (No. 1367) “On the Purchase of Legal Services from a Single Source” of 16 November 2001 that the need for the legal services related to legal assessment of corresponding agreements is “urgent”, however, that was after the Government had approved of the agreement between private legal persons, by which, as mentioned before, it had been decided that the Government would sign those agreements (whose legal assessment, according to the Government itself, became necessary).

32. On 17 December 2001, the Seimas adopted the Republic of Lithuania’s Law on Amending the Law on Public Trading in Securities by Article 1 whereof the Law on Public Trading in Securities (wording of 16 January 1996 with subsequent amendments and supplements) was set forth in a new wording and, in addition, the title of the law was changed as well: this law was titled the Republic of Lithuania’s Law on the Securities Market. The Law on the Securities Market (save certain exceptions) went into effect on 1 April 2002.

It needs to be noted that the institute of obligatory official offer was consolidated both in the Law on the Securities Market (wording of 17 December 2001) and in the Law on Public Trading in Securities (wording of 16 January 1996 with subsequent amendments and supplements) which had been valid until the former became effective.

For instance, it was established in Article 19 of the Law on the Securities Market (wording of 17 December 2001):

if a person, acting either independently or together with other persons, acquires more than 40 percent of votes at the meeting of an accountable issuer, they must, within 30 days, transfer the securities that exceed this limit or to submit an official offer to buy up the remaining securities of the accountable issuer, which grant the right to vote, and the securities confirming the right to acquire the securities granting the right to vote (Paragraph 1);

the price of the obligatory offer must be not less than the maximum price for securities acquired by the offeror during 12 months until exceeding the limit specified in Paragraph 1 of this article; every shareholder of the issuer has the right to apply to court with a demand that the person who has presented the obligatory official offer increase the price of the obligatory official offer so that it would not violate the requirements of fairness; in such a case Articles 2.118, 2.119 and 2.127-2.130 of the Civil Code of the Republic of Lithuania are applied mutatis mutandis (Paragraph 2);

a person, acting independently, or persons who act jointly, from the moment of overstepping the limit of votes specified in Paragraph 1 of this article lose all votes in the general meeting of shareholders; the right to vote is acquired again on the day when the obligatory official offer is registered with the Securities Commission or the number of votes held decreases at least until the limit specified in Paragraph 1 of this article due to a transaction of transfer of securities or other reasons (Paragraph 3);

the Securities Commission has the right to establish general exceptions to the duty to announce the obligatory official offer, if in such a case the requirement to submit the obligatory official offer was not fair, reasonable or not in line with the market interests (Paragraph 4).

33. If one compares the institute of obligatory official offer consolidated in Article 19 of the Law on the Securities Market (wording of 17 December 2001) with the institute of obligatory official offer consolidated in Article 10 (wording of 17 May 2001) of the Law on Public Trading in Securities, it is clear, among other things, that, and also while deciding whether Paragraph 2 (wording of 4 June 2002) of Article 4 of the Law is not in conflict with the Constitution to the extent that the provisions of Article 19 of the Law on the Securities Market are not applied in the course of concluding and implementing the agreements specified in this paragraph, it should be noted that:

the duty to submit the obligatory official offer under the conditions established in the Law on the Securities Market to buy up the remaining securities of the accountable issuer, which grant the right to vote, and the securities confirming the right to acquire the securities granting the right to vote, was an alternative one: the subject of this duty could choose and execute not this, but another (alternative) duty—to transfer the securities exceeding the limit established in this law;

under the Law on the Securities Market, differently from the Law on Public Trading in Securities which was effective prior to the latter, the said alternative duty to submit the obligatory official offer to buy up the remaining securities of the accountable issuer, which grant the right to vote, and the securities confirming the right to acquire the securities granting the right to vote, would appear if the person, acting either independently or together with other persons, acquired more than 40 percent of votes at the meeting of an accountable issuer, but not more than 50 percent of votes at the meeting of the issuer that had issued securities into public trading;

the Law on the Securities Market established the right of the Securities Commission to establish general exceptions to the duty to announce the obligatory official offer, if in such a case the requirement to submit the obligatory official offer was not fair, reasonable or not in line with the market interests, meanwhile, the Law on Public Trading in Securities, which was effective prior to the entry into effect of the former law, did not specify any criteria under which the Securities Commission had the right to establish general exceptions to the duty to announce the obligatory official offer.

34. After the Seimas adopted Law on Amending the Law on Public Trading in Securities on 17 December 2001 (whereby, as mentioned before, the Law on Public Trading in Securities (including its title) (wording of 16 January 1996 with subsequent amendments and supplements), which had been effective until the entry into effect of the aforesaid law, was amended and set forth in a new wording), on the same day (17 December 2001) Paragraph 3 (wording of 2 August 2001) of Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” was correspondingly amended: it was amended by Article 1 of the Republic of Lithuania’s Law on Amending Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” (which went into effect on 1 April 2002).

It was established in Paragraph 3 (wording of 17 December 2001) of Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”:

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 Article 18 of the Law on the Privatisation of State-owned and Local Government 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 the requirements of the Law on the Securities Market to submit the obligatory official offer and to conclude transactions of sale and purchase of securities at the securities exchange shall not be applied. With the exception of the cases provided for in Paragraph 2 of Article 3 and Paragraph 2 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 Local Government Property.”

If one compares the legal regulation established in Paragraph 3 (wording of 17 December 2001) of Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” with the previous legal regulation established in this paragraph (wording 2 August 2001), it is clear that the provision on the non-application of the obligatory official offer remained virtually the same: when corresponding shares of the joint-stock company “Mažeikių nafta” that belong to the state by right of ownership and are sold to the strategic investor or the suppliers of crude oil to the joint-stock company ‘Mažeikių nafta’ and/or the financial institutions, the requirements to submit the obligatory official offer and to conclude transactions of sale and purchase of securities at the securities exchange are not applied.

35. During the discussed period, other government resolutions were adopted as well whereby one was seeking to further implement the provisions of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” (with the amendments and supplements made until and on 17 December 2001), and the Government Resolution (No. 778) “On Granting Powers” of 29 May 2002 was among them, whereby, inter alia, the Vice-minister of Economy was empowered to initial the draft Investment Agreement, the draft Agreement on Yukos General Notions and Their Interpretation, the draft Amended and New Wording Shareholders Agreement and annexes to these agreements, while the Ministry of Economy was empowered to submit these draft agreements together with the initialled letter to the Seimas.

One must separately mention the Government Resolution (No. 576) “On the Allocation of Funds” of 25 April 2002 whereby it was decided to allocate LTL 950 thousand to the Ministry of Economy so that legal services could be bought from one law office (specified in the resolution) related to the legal assessment of final agreements among the Government, the United States of America’s company Williams International Company, the Russian open joint-stock company Yukos Oil Corporation and the joint-stock company “Mažeikių nafta”, which are mentioned in the cooperation agreement between the United States of America’s company Williams International Company and the Russian open joint-stock company Yukos Oil Corporation that was signed on 14 June 2001, and other related prepared legal documents. This government resolution is linked with the Government Resolution (No. 1367) “On the Purchase of Legal Services from a Single Source” of 16 November 2001 whereby, as mentioned before, it was, inter alia, decided to agree that the Ministry of Economy execute the public purchase from a single source, i.e. that it purchase legal services from the said law office related to the legal assessment of final agreements among the Government, the United States of America’s company Williams International Company, the Russian open joint-stock company Yukos Oil Corporation and the joint-stock company “Mažeikių nafta”, which are mentioned in the cooperation agreement between the United States of America’s company Williams International Company and the Russian open joint-stock company Yukos Oil Corporation that was signed on 14 June 2001 by giving reasons that such legal assessment became “urgent”.

It needs to be noted that it is clear from the Government Resolution (No. 576) “On the Allocation of Funds” of 25 April 2002 and the Government Resolution (No. 1367) “On the Purchase of Legal Services from a Single Source” of 16 November 2001 that it was decided in the aforesaid cooperation agreement concluded between two private legal persons one of which was a United States of America’s company and the other was a Russian Federation’s company, that the Government, an institution of the executive of the Republic of Lithuania, would sign certain agreements; as mentioned before, the Government, approved of such an agreement between two private legal persons by its Resolution (No. 777) “On the Cooperation Agreement Between the United States of America’s Company Williams International Company and the Russian Federation’s Company OAO Yukos Oil Corporation” of 26 June 2001, 12 days after the conclusion of the aforementioned cooperation agreement. On 25 April 2002, i.e. noticeably later, by its Resolution (No. 576) “On the Allocation of Funds”, the Government recognised that the final agreements among the Government, the United States of America’s company Williams International Company, the Russian open joint-stock company Yukos Oil Corporation and the joint-stock company “Mažeikių nafta”, which are mentioned in the cooperation agreement between the United States of America’s company Williams International Company and the Russian open joint-stock company Yukos Oil Corporation that was signed on 14 June 2001 and other prepared legal documents which were related thereto had to be legally assessed and allocated for this purpose LTL 950 thousand from the Government reserve.

36. On 4 June 2002, the Seimas adopted 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” which went into effect on 7 June 2002.

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” amended (correspondingly) Articles 3 (wording of 17 December 2001) and 4 (wording of 2 August 2001) (paragraphs (items) thereof.

36.1. Article 3 (wording of 4 June 2002) 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 set forth as follows:

1. The strategic investor, recognised as such upon the recommendation of the Government and by 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 it demands at any time within 5 years after it has acquired the shares specified in Item 1 of Paragraph 1 of this Article, to acquire, by increasing the authorised capital of the joint-stock company ‘Mažeikių nafta’, the newly issued shares whose total nominal value, when it is counted after such increase of the authorised capital, comprises not more than 15.4 percent of the then registered 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. If, at any time until the strategic investor acquires the shares under Item 2 of Paragraph 1 of this Article, the authorised capital of the joint-stock company ‘Mažeikių nafta’ is increased by additional contributions by issuing new shares of the joint-stock company ‘Mažeikių nafta’, comprising from 10.09 percent to 10.11 percent of the authorised capital of this joint-stock company (after the issuance of these shares), which will be acquired by the financial institution specified in the agreement concluded between the Government of the Republic of Lithuania and the strategic investor and/or any other person indicated by the financial advisor to the joint-stock company ‘Mažeikių nafta’, including the crude oil supplier under a long-term crude oil supply agreement (and/or a person, who is under control of the latter, or another person, who is indicated by the financial advisor of the joint-stock company ‘Mažeikių nafta’), in cases and under procedure established in the agreement concluded between the Government of the Republic of Lithuania and the strategic investor, the Government of the Republic of Lithuania will transfer gratis the number of shares of the joint-stock company ‘Mažeikių nafta’ that belong to the state by right of ownership to the strategic investor so that the nominal value of the shares held by the strategic investor by right of ownership would correspond to the percentage share of the authorised capital of this company, which the strategic investor had held until the increase of the authorised capital by the additional contributions. When the shares of the joint-stock company ‘Mažeikių nafta’ are transferred subsequent to the requirements of this Paragraph, the provisions of the Law on the Privatisation of State-owned and Municipal Property shall not be applied. If the general meeting of shareholders of the joint-stock company ‘Mažeikių nafta’ adopts a decision to reduce the authorised capital and the person who may be the financial institution specified in the agreement concluded between the Government of the Republic of Lithuania and the strategic investor and/or any other person indicated by the financial advisor to the joint-stock company ‘Mažeikių nafta’, including the crude oil supplier under a long-term crude oil supply agreement (and/or a person, who is under control of the latter, or another person, who is indicated by the financial advisor of the joint-stock company ‘Mažeikių nafta’), had expressed their intent, prior to the adoption of the aforesaid decision by the general meeting of shareholders of the joint-stock company ‘Mažeikių nafta’ to reduce the authorised capital, to invest into the joint-stock company ‘Mažeikių nafta’ by way of acquisition of newly issued shares of the joint-stock company ‘Mažeikių nafta’ comprising from 10.09 percent to 10.11 percent of the authorised capital of this enterprise (after the reduction of the authorised capital and the issuance of these shares), and after that (the same person) intends immediately to invest into the joint-stock company ‘Mažeikių nafta’ by way of acquisition of newly issued shares of the joint-stock company ‘Mažeikių nafta’ comprising from 18.62 percent to 18.64 percent of the authorised capital of this enterprise (after the issuance of these shares), all the resolutions of the general meeting of the shareholders of the joint-stock company ‘Mažeikių nafta’ concerning the reduction of the authorised capital of the joint-stock company ‘Mažeikių nafta’ and/or the two increases of the authorised capital specified in this Paragraph may be adopted at the same general meeting of the shareholders of the joint-stock company ‘Mažeikių nafta’ without applying the provisions of Paragraph 3 of Article 51 and Paragraph 4 of Article 54 of the Law on Companies. When the persons specified in this Paragraph acquire the newly issued shares of the joint-stock company ‘Mažeikių nafta’, the authorised capital of this company is increased without applying the Law on the Privatisation of State-owned and Municipal Property. The issues of the structure of shareholders, management of and supply of energy resources to the joint-stock company ‘Mažeikių nafta’ are decided without applying the limitations established in subchapter ‘Economic Policy’ of Chapter 4 of Part 1 of the Annex ‘The Basics of National Security’ to the Law on the Basics of National Security.

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 Article 18 of the Law on the Privatisation of State-owned and Local Government 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 the requirements of the Law on the Securities Market to submit the obligatory official offer and to conclude transactions of sale and purchase of securities at the securities exchange shall not be applied. With the exception of the cases provided for in Paragraph 2 of Article 3 and Paragraph 2 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 Local Government Property.

4. After the strategic investor has acquired the shares under Item 1 of Paragraph 1 of this Article, state and local government 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 the 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 4 and 5 of Article 39 and Paragraph 7 of Article 54 of the Company Law shall not be applicable to the joint-stock company ‘Mažeikių nafta’. Until 1 January 2004 the joint-stock company ‘Mažeikių nafta’ has the right to acquire its own shares without applying the provisions of Item 12 of Paragraph 2 of Article 24, the second sentence of Paragraph 1 and Paragraphs 2, 3, 4, and 9 of Article 55 of the Company Law.

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.

8. The announcement on the first meeting of the shareholders of the joint-stock company ‘Mažeikių nafta’ that will take place after the financial institution indicated in the agreement between the Government of the Republic of Lithuania and the strategic investor, and/or any other person indicated by the financial advisor of the joint-stock company ‘Mažeikių nafta’, including the crude oil supplier under a long-term crude oil supply contract (and/or a person who is under its control or other person suggested by the crude oil supplier, which is indicated by the financial advisor of the joint-stock company ‘Mažeikių nafta’) has acquired the new issued shares of the joint-stock company ‘Mažeikių nafta’ indicated in Paragraph 2 of this Article, is publicly announced not later than 10 days prior to the day of the meeting, and the announced agenda of the meeting is not subject to revision. In this case the provisions of Paragraphs 2 and 3 of Article 27, Paragraphs 1 and 4 of Article 28 and Paragraphs 2 and 3 of Article 30 of the Law on Companies are not applied.”

36.2. Paragraph 2 of Article 4 (wording of 4 June 2002) of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” was set forth as follows:

1. 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. The period during which the State has the right to acquire shares of the joint-stock company ‘Mažeikių nafta’ from the strategic investor and the procedure for implementation of such right is established in the agreement between the Government and the strategic investor. Under the procedure established in the agreement with the Government, the strategic investor has the right to transfer the shares of the joint-stock company ‘Mažeikių nafta’ that belong to it by right of ownership to enterprises, whose all the shares and/or capital, either directly or indirectly, belong to the strategic investor by right of ownership.

2. In the agreements between the Government and the strategic investor, a party of which may also be the person who will acquire the shares of the joint-stock company ‘Mažeikių nafta’ according to Paragraph 2 of Article 3 of this Law, such procedure may be established under which the parties of such agreements and/or the successors to their rights under the laws and/or agreements, including any and all the subsequent successors to the rights, will transfer the shares of the joint-stock company ‘Mažeikių nafta’ which belong to them by right of ownership or will acquire them, will acquire newly issued shares of the joint-stock company ‘Mažeikių nafta’ or will implement their right of priority to acquire the shares of the joint-stock company ‘Mažeikių nafta’ that belong to the state by right of ownership. While concluding these agreements and implementing their provisions, the Law on the Privatisation of State-owned and Municipal Property and the provisions of Article 19 of the Law on the Securities Exchange shall not be applied.”

37. It must be held that after Articles 3 and 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” had been set forth in the wording of 4 June 2002, certain novels of legal regulation were consolidated in the Law, inter alia:

it was prescribed that by additionally increasing the authorised capital of the joint-stock company “Mažeikių nafta” at any time within 5 years after the strategic investor has acquired 33 percent of the shares of the joint-stock company “Mažeikių nafta” which were newly issued by increasing, on the grounds of the Law, the authorised capital of the said joint-stock company for the first time, the strategic investor could acquire the newly issued shares whose total nominal value after the increase of the authorised capital comprised not more than 15.4 percent of the then registered authorised capital of the joint-stock company “Mažeikių nafta” (meanwhile, under the previous legal regulation, during the said period the strategic investor could acquire the newly issued shares whose total nominal value did not exceed 16.5 percent of the authorised capital of the joint-stock company “Mažeikių nafta”);

the mechanism of equalising the part of the authorised capital that belongs to the strategic investor (the mechanism of compensation of presumed losses) which had been established in the Law before was particularised in the aspect that it was consolidated that the part of the authorised capital belonging to the strategic investor is equalised only in cases and under the procedure which are established in the agreement concluded between the strategic investor and the Government;

it was consolidated that a procedure can be established in the agreements between the strategic investor and the Government (a party to which can be a financial institution specified in the agreement concluded between the strategic investor and the Government and/or any other person indicated by the financial advisor to the joint-stock company “Mažeikių nafta”, including the crude oil supplier under a long-term crude oil supply agreement (and/or a person, who is under control of the latter, or another person, who is indicated by the financial advisor of the joint-stock company “Mažeikių nafta”)) whereby the parties to such agreements and/or successors to their rights according to laws and/or the agreements, including any and all subsequent successors of the rights, would either transfer the shares of the joint-stock company “Mažeikių nafta” belonging to them by right of ownership or would acquire them, would acquire the newly issued shares of the joint-stock company “Mažeikių nafta” or would implement the right of priority to acquire the shares of the joint-stock company “Mažeikių nafta” which belong to the state by right of ownership;

it was consolidated that in the course of concluding and implementing the said agreements between the Government and the strategic investor (a party to which can be a financial institution specified in the agreement concluded between the strategic investor and the Government and/or any other person indicated by the financial advisor to the joint-stock company “Mažeikių nafta”, including the crude oil supplier under a long-term crude oil supply agreement (and/or a person, who is under control of the latter, or another person, who is indicated by the financial advisor of the joint-stock company “Mažeikių nafta”)) under which the parties to such agreements and/or successors to their rights according to laws and/or the agreements, including any and all subsequent successors of the rights, would either transfer the shares of the joint-stock company “Mažeikių nafta” belonging to them by right of ownership or would acquire them, also would acquire the newly issued shares of the joint-stock company “Mažeikių nafta” or would implement the right of priority to acquire the shares of the joint-stock company “Mažeikių nafta” which belong to the state by right of ownership, inter alia, the provisions of the Law on the Securities Market concerning the submission of the obligatory official offer are not applied.

38. On the same day (4 June 2002) when 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 adopted, the Seimas adopted the Republic of Lithuania’s Law on Assuming State Basic Property Liabilities Related to Investments into the Joint-stock Company “Mažeikių nafta”, which went into effect on 7 June 2002.

By this law, the state assumed all basic property liabilities under the Yukos investment agreement and related agreements between the Government and Williams International Company, OAO Yukos Oil Corporation, Yukos Finance B.V. and the joint-stock company “Mažeikių nafta”. It was stipulated that the said agreements are concluded following Paragraph 2 of Article 3 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 Assuming State Basic Property Liabilities Related to Investments into the Joint-stock Company “Mažeikių nafta”) and that the state basic property liabilities are established in the initialled Yukos investment agreement and related agreements. It was consolidated in Paragraph 3 of Article 2 of the said law that the strategic investor was Yukos and it was particularised that this strategic investor was OAO Yukos Oil Corporation, Yukos Finance B.V. and other subjects who either controlled or were under control of OAO Yukos Oil Corporation, which were defined in the Yukos investment agreement.

It needs to be noted that from the legal regulation established in the Law on Assuming State Basic Property Liabilities Related to Investments into the Joint-stock Company “Mažeikių nafta” itself, it is impossible to notice what basic property liabilities are assumed in the name of the state, since references are made to the agreements between the Government and Williams International Company, OAO Yukos Oil Corporation, Yukos Finance B.V. and the joint-stock company “Mažeikių nafta”, while these agreements are defined in the manner that it is not clear whether at the time of the adoption of the law they were concluded (initialled), or whether they were going to be concluded (initialled). In addition, the said agreements were not and are not public. Thus, by formally declaring and legislatively consolidating that the state assumes all basic property liabilities under certain initialled agreements, the Seimas in fact gave complete freedom to the Government (persons authorised by it) to assume in the name of the state all these liabilities that are not publicly announced.

Paragraph 1 of Article 128 of the Constitution provides that decisions concerning the State loan and other basic property liabilities of the State shall be adopted by the Seimas upon the motion of the Government. The Seimas, when it transfers the powers on state basic liabilities to the Government, which are assigned to the Seimas by the Constitution, violates the constitutional principle of the separation of powers (the Constitutional Court’s ruling of 18 October 2000).

Paragraph 2 of Article 7 of the Constitution prescribes that only laws which are published shall be valid. Law may not by not public (the Constitutional Court’s ruling of 29 November 2001).

In this context it must be recalled that, as mentioned before, the provision of Paragraph 4 of Article 3 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 for the strategic investor and/or the joint-stock company “Mažeikių nafta” was ruled to be in conflict with Paragraph 1 of Article 5 and Paragraph 1 of Article 128 of the Constitution.

39. On 13 June 2002, the Government adopted the Resolution (No. 888) “On the Drafts of Approval Agreements with the United States Company Williams International Company, the Russian Federation’s Open Joint-stock Company Yukos Oil Corporation, the Netherlands Limited Liability Company Yukos Finance B.V. and the joint-stock company ‘Mažeikių nafta’ and the Agreement on Settlement with the United States Company Williams International Company and the joint-stock company ‘Mažeikių nafta’ and on Granting Corresponding Powers”. By this resolution, the Government, inter alia, approved of drafts of various agreements on investments into the joint-stock “Mažeikių nafta”, management of this joint-stock company and drafts of other agreements on the rights of the strategic investor.

40. The agreements (the Investment Agreement and the related agreements) on investments into the joint-stock “Mažeikių nafta” were signed on behalf of the Government with the Netherlands limited liability company Yukos Finance B.V. on 18 June 2002. These agreements were concluded among the Russian Federation’s OAO Yukos Oil Corporation, the Netherlands limited liability company Yukos Finance B.V., the United States company Williams International Company, the joint-stock company “Mažeikių nafta”, and the Government (Article 2 of the Law on Acquisition and Disposal of Shares of the Joint-stock Company “Mažeikių nafta” which was adopted by the Seimas on 20 October 2005).

As mentioned before, by the Government Resolution (No. 576) “On the Allocation of Funds” of 25 April 2002 whereby it was decided to allocate LTL 950 thousand to the Ministry of Economy so that legal services could be bought from one law office (specified in the resolution) related to the legal assessment of final agreements among the Government, the United States of America’s company Williams International Company, the Russian open joint-stock company Yukos Oil Corporation and the joint-stock company “Mažeikių nafta”, which are mentioned in the cooperation agreement between the United States of America’s company Williams International Company and the Russian open joint-stock company Yukos Oil Corporation that was signed on 14 June 2001, and other related prepared legal documents. Thus, one should presume that in the course of the adoption of the Government Resolution (No. 888) “On the Drafts of Approval Agreements with the United States Company Williams International Company, the Russian Federation’s Open Joint-stock Company Yukos Oil Corporation, the Netherlands Limited Liability Company Yukos Finance B.V. and the joint-stock company ‘Mažeikių nafta’ and the Agreement on Settlement with the United States Company Williams International Company and the joint-stock company ‘Mažeikių nafta’ and on Granting Corresponding Powers” of 13 June 2002 whereby the Government, inter alia, approved of drafts of various agreements on investments into the joint-stock “Mažeikių nafta”, management of this joint-stock company and drafts of other agreements on the rights of the strategic investor and while signing the agreements on investments into the joint-stock “Mažeikių nafta” on behalf of the Government with the Netherlands limited liability company Yukos Finance B.V. on 18 June 2002, one had to receive corresponding legal assessment.

In this context, it should be mentioned that the Government Resolution (No. 576) “On the Allocation of Funds” of 25 April 2002 was amended and set forth its new wording by the Government Resolution (No. 1765) “On Amending the Resolution of the Government of the Republic of Lithuania (No. 576) ‘On the Allocation of Funds’ of 25 April 2002” of 11 November 2002, however, in the Government Resolution (No. 576) “On the Allocation of Funds” of 25 April 2002 in its new wording (11 November 2002), the same task was specified as well, i.e. to legally assess the final agreements among the Government, the United States of America’s company Williams International Company, the Russian open joint-stock company Yukos Oil Corporation and the joint-stock company “Mažeikių nafta”, which are mentioned in the cooperation agreement between the United States of America’s company Williams International Company and the Russian open joint-stock company Yukos Oil Corporation that was signed on 14 June 2001, and other related prepared legal documents.

41. On 12 September 2002, the Seimas adopted the Republic of Lithuania’s Law on the Amendment of Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” which went into effect on 18 September 2002. By Article 1 of the Law on the Amendment of Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” Paragraph 1 of Article 3 (wording of 4 June 2002) of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” was amended: the notion of the strategic investor was modified by stipulating that the investor who takes over the rights and duties of the strategic investor under corresponding agreements, after the Seimas, upon the presentation by the Government, confirms it as a strategic investor, is a strategic investor.

42. At the period in question the Government adopted also more resolutions which further sought to implement the provisions of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” (with the amendments and supplements made until and on 12 September 2002); among them was the Resolution (No. 1442) “On the Acquisition of Shares of the Joint-stock Company ‘Mažeikių nafta’ and on Granting Powers” of 16 September 2002 (whereby, inter alia, it was decided not to acquire the shares of the joint-stock company “Mažeikių nafta” from Williams International Company which were held by the latter and which the Government was offered to acquire on the grounds and under the procedure of the provisions of the 18 June 2002 Investment Agreement among the Russian Federation’s open joint-stock company Yukos Oil Corporation, the Netherlands limited liability company Yukos Finance B.V., the United States of America’s company Williams International Company, the joint-stock company “Mažeikių nafta”, and the Government of the Republic of Lithuania and whereby the Ministry of Economy was commissioned to conduct negotiations (together with the Ministry of Finance) with the Russian open joint-stock company Yukos Oil Corporation and the Netherlands limited liability company Yukos Finance B.V., while the Minister of Economy was empowered to initial a corresponding protocol of intent (without specifying the issues to be dealt with by this protocol) and the Resolution (No. 1443) “On Confirming the Netherlands Limited Liability Company Yukos Finance B.V. as the Creditor” of 16 September 2002.

43. On 17 September 2002, the Seimas adopted the Resolution (No. IX-1075) “On Confirming the Netherlands Limited Liability Company Yukos Finance B.V. as the Creditor” by Article 1 whereof the Netherlands limited liability company Yukos Finance B.V. (which, as mentioned before, had already been recognised a strategic investor by the Law on Assuming State Basic Property Liabilities Related to Investments into the Joint-stock Company “Mažeikių nafta” which was defined in the Yukos Investment Agreement, while this agreement, by the way, had not yet been signed on the day of the adoption of the said law) was confirmed as “the investor taking over the rights and duties of the United States of America’s company Williams International Company under corresponding 29 October 1999 and 18 June 2002 agreements on the investments into the joint-stock company ‘Mažeikių nafta’”. It was also established in the said resolution of the Seimas that Article 1 thereof is valid and is also applied to the companies which either control the Netherlands limited liability company Yukos Finance B.V. or are under control of the latter if and until the Netherlands limited liability company Yukos Finance B.V. is controlled by the Russian Federation’s open joint-stock company Yukos Oil Corporation, and provided the Netherlands limited liability company Yukos Finance B.V. transferred its rights and duties under the agreements specified in Article 1 of the said Seimas resolution to a company which either controls the said company or is under its control, then said Article 1 would be applied to the companies controlling the Netherlands limited liability company Yukos Finance B.V. or which are under control of the latter insofar as the companies which have taken over corresponding rights and duties are controlled by the Russian Federation’s open joint-stock company Yukos Oil Corporation. The said Seimas resolution also prescribed that it shall become effective after the entry into effect of the Law on the Amendment of Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” (No. IX-1073), which, as mentioned before, went into effect on 18 September 2002.

It needs to be noted that the Seimas Resolution (No. IX-1075) “On Confirming the Netherlands Limited Liability Company Yukos Finance B.V. as the Creditor” of 17 September 2007 had been adopted before the Law on the Amendment of Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” was officially published, thus, before the latter went into effect, since, as mentioned before, this law became effective on 18 September 2002; it was the provisions of this law that were being implemented by the said Seimas resolution.

44. While seeking to implement the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” (with the amendments and supplements made until and on 4 June 2002), the Law on Assuming State Basic Property Liabilities Related to Investments into the Joint-stock Company “Mažeikių nafta” (wording of 4 June 2002) and the Seimas Resolution (No. IX-1075) “On Confirming the Netherlands Limited Liability Company Yukos Finance B.V. as the Creditor” of 17 September 2007 and to fulfil the state liabilities related to the investments into the joint-stock company “Mažeikių nafta”, also while further regulating the relations linked with the activity of the joint-stock company “Mažeikių nafta” and the implementation of the agreements related to the investments into the said company, the Government adopted certain resolutions, out of which one should mention, inter alia, the Resolution (No. 1468) “On the Consent to Transfer Rights and Duties Subsequent to the Agreement” of 18 September 2002 (whereby it was decided to agree that all the rights and duties of the United States Company Williams International Company under the agreements specified in this resolution be transferred to the Netherlands Limited Liability Company Yukos Finance B.V.), the Resolution (No. 1763) “On the Approval of the Protocol of Intent and on Granting Powers” of 11 November 2002 (whereby the Government approved of the protocol of intent initialled by the Minister of Economy, which provided for negotiations on terms of certain agreements concluded in relation with the investments into the joint-stock company “Mažeikių nafta” and granted the powers to the Minister of Economy to sign, on behalf of the Government, to sign a corresponding protocol of intent), the Resolution (No. 464) “On the Approval of Changes in the Preliminary Plan of Financing the Joint-stock Company ‘Mažeikių nafta’” of 14 April 2003, the Resolution (No. 688) “On Transfer of the Rights and Duties Subsequent to the State Guaranteed Loan Agreements of the Joint-stock company ‘Mažeikių nafta’” of 29 May 2003, the Resolution (No. 871) “On the Approval of Draft Amendments to the Agreements with the Russian Federation’s Open Joint-stock Company Yukos Oil Corporation, the Netherlands Limited Liability Company Yukos Finance B.V. and the Joint-stock Company ‘Mažeikių nafta’ and on Granting Powers” of 2 July 2003, the Resolution (No. 1249) “On the Letter of Project Assent to the Russian Federation’s Open Joint-stock Company Yukos Oil Corporation, the Netherlands Limited Liability Company Yukos Finance B.V. and the Joint-stock Company ‘Mažeikių nafta’” of 9 October 2003, the Resolution (No. 1180) “On the Assent to Management Plans of the Joint-stock Company ‘Mažeikių nafta’” of 2 December 2004, and the Resolution (No. 1548) “On the Letter of Project Assent to the Netherlands Limited Liability Company Yukos Finance B.V.” of 2 December 2004.

45. As mentioned before, at the time when the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” was adopted and became effective, there was no law in which the strategic significance to national security of the joint-stock companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” or the company, continuing its activity after the reorganisation of the said joint-stock companies, was stated, because of which the participation of the foreign capital that meets the European and Transatlantic integration criteria in them should be related to appropriate conditions.

Such legal regulation was consolidated in the law at the time when the privatisation (selling shares) of the joint-stock company “Mažeikių nafta” had been taking place for a number of years, which had been based on different (differentiated) legal regulation from the legal regulation regarding other enterprises: corresponding transactions had been made (inter alia, those on investments into this enterprise), certain state basic property liabilities had been assumed, etc.—this regulation was established by the Republic of Lithuania’s Law on Enterprises and Facilities Which are Strategically Important to National Security and Other Enterprises Significant to Ensuring National Security which was adopted by the Seimas on 10 October 2002 (which went into effect on 30 October 2002) by Item 1 of Paragraph 1 of Article 4 whereof the joint-stock company “Mažeikių nafta” was recognised “an enterprise significant in ensuring national security”, but not “an enterprise strategically important to national security”. Later, when amendments and/or supplements were made to the said law (articles (parts) thereof), the provisions on categorising the joint-stock company “Mažeikių nafta” as belonging to “enterprises significant in ensuring national security” were not changed.

46. On 20 October 2005, the Seimas adopted the Law on Amending Articles 1 and 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” which went into effect on 5 November 2005.

46.1. By Article 1 of the Law on Amending Articles 1 and 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” Paragraph 2 (wording of 29 September 1998) of Article 1 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” was amended.

Paragraph 2 (wording of 20 October 2005) of Article 1 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” provides:

The procedure of the reorganisation of joint-stock companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” and the activity of the company which continues its activities after the reorganisation shall be regulated by the Law on Companies, while their privatisation—by the Law on the Privatisation of State-owned and Municipal Property if this Law or other laws do not provide otherwise.”

46.2. By Article 21 of the Law on Amending Articles 1 and 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” Paragraph 3 (wording of 17 December 2001) of Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” was amended.

Paragraph 3 (wording of 20 October 2005) of Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” provides:

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 Article 18 of the Law on the Privatisation of State-owned and Local Government 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 the requirements of the Law on the Securities Market to submit the obligatory official offer and to conclude transactions of sale and purchase of securities at the securities exchange shall not be applied. With the exception of the cases provided for in Paragraph 2 of Article 3 and Paragraph 2 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 Local Government Property if other laws do not provide otherwise.”

47. On the same day, i.e. on 20 October 2005, the Seimas adopted the Law on Acquisition and Disposal of Shares of the Joint-stock Company “Mažeikių nafta” which went into effect on 5 November 2005.

It was, inter alia, established therein:

the purpose of this law is to create legal pre-conditions for securing the public interest of the Republic of Lithuania in national security in the strategically important sector of economic activity in which the joint-stock company “Mažeikių nafta” conducts its activities, for promoting reliable foreign investments, which contain no threats to national security, into this company, for ensuring a long-term opportunity to the Republic of Lithuania to import and refine oil on its territory, also for seeking to ensure an effective management of the joint-stock company “Mažeikių nafta” and its results (Article 1);

if the Netherlands limited liability company Yukos Finance B.V sells the block of shares of the joint-stock company “Mažeikių nafta” possessed by it, whose nominal value at the time of the entry into effect of this Law comprises 53.7 percent of the authorised capital of the company, the Government, taking account of the purposes established in Article 1 of this Law, following the provisions of the 18 June 2002 Investment Agreement concluded among the Russian Federation’s OAO Yukos Oil Corporation, the Netherlands limited liability company Yukos Finance B.V., the United States company Williams International Company, the joint-stock company “Mažeikių nafta”, and the Government of the Republic of Lithuania or according to a different procedure coordinated between the Government of the Republic of Lithuania and the Netherlands company Yukos International U.K. B.V., has the right to acquire under the name of the state the block of shares of the joint-stock company “Mažeikių nafta” sold by the Netherlands company Yukos International U.K. B.V. and the rights and duties possessed by the Netherlands company Yukos International U.K. B.V. within the said Investment Agreement and related agreements; the rights of priority of the Government to acquire the shares of the joint-stock company “Mažeikių nafta” sold by the Netherlands company Yukos International U.K. B.V. which are established in the Investment Agreement and the rights and duties of the Government under other concluded agreements or those that will be concluded in the future regarding acquisition of shares of the joint-stock company “Mažeikių nafta” may be transferred according to the procedure established in laws of the Republic of Lithuania and the said agreements; while taking account of the purposes established in Article 1 of this Law, the Government or an institution authorised by it shall, by way of negotiations with one or several bidders, choose the successor to the rights and duties, establish the terms of the transfer transaction and conclude an agreement on transfer of the rights and duties (Article 2);

the shares of the joint-stock company “Mažeikių nafta” sold to the Netherlands company Yukos International U.K. B.V. and the shares transferred under other agreements or those on the acquisition of shares of the joint-stock company “Mažeikių nafta” that will be concluded in the future, if they are acquired by the state by right of ownership, and other shares of the joint-stock company “Mažeikių nafta” that belong to the state by right of ownership may, by government resolution, be sold without applying the Law on the Privatisation of State-owned and Municipal Property; after the shares are sold by means of the specified manner, the state must “keep as ownership” not less than the block of shares comprising 10 percent of the authorised capital of the said company at the time of the entry into effect of this law and must have an opportunity to exert influence on essential management decisions in this company; the requirements of the Law on the Securities Market to submit an official offer and to conclude transactions of sale and purchase of securities at the securities exchange are not applied (Article 3).

48. After the Law on Amending Articles 1 and 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” and the Law on Acquisition and Disposal of Shares of the Joint-stock Company “Mažeikių nafta”, which were adopted on 20 October 2005, came into effect, the overall regulation of the relations linked with disposal of the shares of the joint-stock company “Mažeikių nafta” (inter alia, their transfer to the strategic investor or other investor who will takes over the rights and duties of the strategic investor under corresponding agreements, when the Seimas, on the submission of the Government, confirms it as a strategic investor) was changed in essence.

48.1. Until then the legal regulation established in the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, if compared with the general legal regulation applicable to other enterprises, had been treated as special (differentiated) one; such differentiation of legal regulation was based on the exceptional significance of the joint-stock company “Mažeikių nafta” to the Lithuanian economy and the necessity to create favourable conditions as soon as possible in order to attract investments into it; in addition, as mentioned before, the legal regulation established in the Law was differentiated only in certain respects and was temporary in the respect that after the strategic investor had acquired the issue of shares of the joint-stock company “Mažeikių nafta” continuing its activity after the reorganisation, further privatisation of this company should have been conducted according to the Law on the Privatisation of State-owned and Municipal Property, while this joint-stock company should have been managed according to the laws which consolidate general legal regulation. Although, by the amendments and supplements to the Law made after 1999 the beginning of the application of general legal regulation was postponed, the temporary character of the said differentiated legal regulation was not essentially denied.

In the context of the constitutional justice case at issue, it should be emphasised that the same can be said also as regards the exceptional provisions established in the Law concerning the non-application of the requirements of the Law on the Securities Market to submit an official offer and to conclude transactions of sale and purchase of securities at the securities exchange.

48.2. After the Law on Amending Articles 1 and 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” and the Law on Acquisition and Disposal of Shares of the Joint-stock Company “Mažeikių nafta”, which were adopted on 20 October 2005, came into effect, the legal regulation of the relations consolidated in the Law on Acquisition and Disposal of Shares of the Joint-stock Company “Mažeikių nafta” which are related with acquisition and disposal of shares of the joint-stock company “Mažeikių nafta” is special (exceptional) if compared with the legal regulation of the same relations consolidated in the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” which, as it has been mentioned, is special (exceptional) legal regulation itself if compared with the general legal regulation established in other laws (inter alia, regulating privatisation of enterprises, the activities and management of joint-stock companies, the protection of property and non-property rights of shareholders etc.).

In addition, after the Law on Amending Articles 1 and 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” and the Law on Acquisition and Disposal of Shares of the Joint-stock Company “Mažeikių nafta”, which were adopted on 20 October 2005, came into effect, the exceptionality of the legal regulation previously established in the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” virtually lost its temporary character.

It needs to be emphasised that the same can be said also about the provisions consolidated not only in the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” but also in the Law on Acquisition and Disposal of Shares of the Joint-stock Company “Mažeikių nafta” related with the non-application of the requirements of the Law on the Securities Market to submit an official offer and to conclude transactions of sale and purchase of securities at the securities exchange.

49. In summary, it should be held that the regulation (by means of laws and other legal acts) of the relations linked with the reorganisation of joint-stock companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” and the activity and management of the joint-stock company “Mažeikių nafta” continuing its activity after the reorganisation has been and is grounded on the expediency considerations in the first place, i.e. by the object of securing the creation of the legal environment favourable as much as possible to the joint-stock company “Mažeikių nafta” (which, as mentioned before, is exceptionally significant to the Lithuanian economy and which has been recognised an enterprise important to national security by law), to create favourable conditions for attracting investments into this joint-stock company, for guaranteeing the continuity of its activity, its effectiveness, etc.

Alongside, it needs to be noted that when the said legal relations (inter alia, the relations linked with disposal of shares of the joint-stock company “Mažeikių nafta”) have been regulated by legal acts since 1998, the expediency considerations would frequently overshadow the legal ones, including the imperatives arising from the Constitution. Doubtlessly there are grounds permitting one to hold that when the said relations were being regulated by legal acts, the Constitution neither was nor is sufficiently paid heed to; this is also evident from the Constitutional Court’s rulings whereby certain provisions of laws were ruled to be in conflict with the Constitution, as well as from the fact that legal acts contain provisions which are analogous to those ruled to be in conflict with the Constitution or by which the official constitutional doctrine consolidated in the jurisprudence of the Constitutional Court is clearly disregarded. The same can be said about the succession of adoption of corresponding legal acts, the speed of their drafting, consideration (including the assessment of these drafts made by state institutions) and adoption (inter alia, their adoption by special urgency procedure), especially when one bears in mind the ex post facto assessment of the novels in the legal regulation (in addition, by inviting private persons to help, and not assigning state institutions, which enjoy the corresponding powers, to do that), the reasoning of the legal regulation established therein, and the deficiency (vagueness, ambiguity, inconsistency etc.) of the formulations employed therein. One is especially to emphasise that one can also notice the legal regulation where state legal acts, inter alia, laws and government resolutions, establish not new legal regulation, but, in a blanket manner, without specifying nothing or almost nothing in particular, approve of certain agreements already concluded with private legal persons or even agreements concluded between private legal persons themselves (without participation of institutions of the State of Lithuania) on the grounds other than laws of the Republic of Lithuania, but, on the contrary, presuming amendment of laws of the Republic of Lithuania. One can also notice the legal regulation where state legal acts, inter alia, laws and government resolutions, officially approve agreements, whose content is not known to the public, although sometimes it is such agreements whereby basic property liabilities are assumed on behalf of the state.

This means that the overall legal regulation of the aforesaid relations lacks constitutional grounds.

On the other hand, it is possible to state the existence of the anti-constitutionality of certain norms of laws and other legal acts only in corresponding cases of constitutional justice.

In the constitutional justice case at issue the other provisions, which are not pointed out by the petitioner, are not a matter of investigation in the aspect of their compliance with the Constitution.

50. It has been mentioned that the petitioner had doubts on the compliance of Paragraph 2 (wording of 4 June 2002) of Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” with the Constitution (Articles 1, 23, 29 and 46 and the constitutional principle of a state under the rule of law) to the extent that it provides that provisions of Article 19 of the Law on Securities Exchange are not applied in the course of conclusion and implementation of the agreements specified in this paragraph.

51. As mentioned before, the article of the Law on the Securities Market (wording of 17 December 2001) consolidated the institute of obligatory official offer, inter alia: if a person, acting either independently or together with other persons, acquires more than 40 percent of votes at the meeting of an accountable issuer, they must, within 30 days, transfer the securities that exceed this limit or to submit an official offer to buy up the remaining securities of the accountable issuer, which grant the right to vote, and the securities confirming the right to acquire the securities granting the right to vote (Paragraph 1); the price of the obligatory offer must be not less than the maximum price for securities acquired by the offeror during 12 months until exceeding the limit specified in Paragraph 1 of this article; every shareholder of the issuer has the right to apply to court with a demand that the person who has presented the obligatory official offer increase the price of the obligatory official offer so that it would not violate the requirements of fairness (Paragraph 2).

52. It is generally recognised that the obligatory official offer is one of the measures of protection of the rights of ownership of small shareholders. The purpose of this institute is to protect the rights of small shareholders, first of all rights of ownership, in cases when a certain subject (shareholder) either alone or together with other subjects acquires the portion of the joint-stock company which enables it (either alone or together with other subjects) to control the activity of the joint-stock company in question and due to this the opportunities of small shareholders to influence the activity of this joint-stock company decrease, thus, the value of shares belonging to them may decrease as well.

The essence of the obligatory official offer is that the subject who has acquired (either alone or together with other subjects) the portion of shares of a joint-stock company that enables it to control the activity of the company must submit the obligatory official offer to buy up the shares belonging to the small shareholders, while the latter must be given an opportunity to sell their shares for not any but a fair price. The fair price is generally considered the biggest price which was given for the shares during a certain period established in the law until the submission of the obligatory official offer (as a rule, it is the average price within a certain period). The said rule of the fair price, as the institute of obligatory official offer in general, permits the small shareholders to choose whether to sell their shares and withdraw from the company after a certain subject (shareholder) either alone or together with other subjects acquires the portion of the joint-stock company which enables it (either alone or together with other subjects) to control the activity of the joint-stock company in question, or to remain small shareholders.

53. The institute of obligatory official offer, as a measure of the protection of the rights of small shareholders, is widespread in a number states in Europe and all over the world. This institute has been consolidated in legal acts the European Union as well, as, for instance, in Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids.

54. In this ruling of the Constitutional Court it has been stated that the Law according to which in the established cases the provisions of certain articles (their paragraphs) were not to be applied, was a law consolidating the differentiated legal regulation, and that a mere fact that the Law consolidated the appropriate differentiated legal regulation does not mean in itself that it is in conflict with the Constitution. It was also held that implementing the economic reform and establishing the differentiated legal regulation the state may not violate the principles and norms of the Constitution.

54.1. It should be noted that establishment of the exceptions of certain general regulation may be constitutionally justifiable, if one seeks to ensure the constitutionally grounded universally important interest, the values protected and defended by the Constitution and only inasmuch as it is sought. The said exceptions have to be proportional to the constitutionally grounded objective sought and not to restrict the rights of subjects more than it is necessary to ensure the constitutionally grounded universally significant interest.

54.2. While construing these constitutional imperatives in the context of protection of the ownership rights entrenched in Article 23 of the Constitution, it should be noted that the legislature, consolidating such exceptions of the general legal regulation that in certain cases certain provisions of laws protecting ownership rights of persons are not applicable and because of the non-application of such provisions damage to the ownership rights of the person can be made, has a duty also to establish such legal regulation that would allow ensuring the protection of the ownership rights of the person by other means. Otherwise, the provisions of Article 23 of the Constitution that guarantee the protection of the ownership rights by law would be disregarded.

54.3. In this context, it should be noted that if an institute of obligatory official offer as one of the protective means of the ownership rights of the shareholders is entrenched in the laws, then by establishing in certain laws that such obligatory official offer is not to be submitted (even though some subject (shareholder) either alone or together with other subjects, acquires such a number of shares of the joint-stock company so that they (either alone or together with other subjects) can control the activity of that joint-stock company), it is also necessary to establish by law such legal regulation that would allow ensuring the protection of the rights of the small shareholders, first of all the ownership rights, by other means. If such legal regulation, which could compensate possible losses, is not established, the provisions of Article 23 of the Constitution that guarantee the legal protection of the ownership rights would be disregarded and the preconditions for violating the rights of the small shareholders could be made.

It should be noted that the legislature enjoys broad discretion to choose the aforementioned legal regulation that would compensate possible losses, it can establish, inter alia, a reasonable, grounded period within which the possible losses are estimated (calculated) (if they really occur and if it happens exactly due to the non-submission of the obligatory official offer under the law), it may also choose various ways of compensation of the said losses, etc.

55. When deciding, whether Paragraph 2 (wording of 4 June 2002) of Article 4 of the Law is not in conflict with the Constitution to the extent that it prescribes that the provisions of Article 19 of the Law on Securities Market are not applicable while concluding and implementing the agreements specified in this paragraph, it should be noted that after the exception of the said general legal regulation was established and consolidated in the Law on Securities Market, no compensating legal regulation was established that would allow ensuring the protection of the rights of the small shareholders, first of all their rights of ownership, by other means.

This alone is sufficient grounds to state that to the extent that it prescribes that the provisions of Article 19 of the Law on Securities Market are not applicable while concluding and implementing the agreements specified in this paragraph and that there are no other provisions which would consolidate other protective means of the ownership rights of the small shareholders, Paragraph 2 (wording of 4 June 2002) of Article 4 of the Law is in conflict with the provision of Paragraph 2 of Article 23 of the Constitution that ownership rights are protected by law and with the constitutional principle of a state under the rule of law.

56. Taking account of the arguments set forth, the conclusion should be drawn that Paragraph 2 (wording of 4 June 2002) of Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” to the extent that it does not establish any other means to protect the ownership rights of the small shareholders which would compensate the losses that they can have due to the fact that the provisions of Article 19 of the Law on Securities Market are not applicable while concluding and implementing the agreements specified in this paragraph, is in conflict with Paragraph 2 of Article 23 of the Constitution and the constitutional principle of a state under the rule of law.

57. Having held that Paragraph 2 (wording of 4 June 2002) of Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” to the extent that it does not establish any other means to protect the ownership rights of the small shareholders which would compensate the losses that they can have due to the fact that the provisions of Article 19 of the Law on Securities Market are not applicable while concluding and implementing the agreements specified in this paragraph, is in conflict with Paragraph 2 of Article 23 of the Constitution and the constitutional principle of a state under the rule of law, in this case of constitutional justice the Constitutional Court will not investigate whether this paragraph (to the indicated extent) is not in conflict with Articles 1, 29 and 46 of the Constitution.

58. Having held this, it should also be held that the legislature, while paying heed to the rights of the small shareholders as well as the constitutionally defended (public) interest of all society, according to the Constitution has the duty to establish such legal regulation by law that in case that within the reasonable and grounded period the small shareholders of the joint-stock company “Mažeikių nafta“ really experienced losses and if these losses were experienced precisely due to the non-submission of the obligatory official offer under Paragraph 2 (wording of 4 June 2002) of Article 4 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, the aforementioned losses would be estimated (calculated) and compensated.

It should be noted that, while paying heed to the rights of the small shareholders as well as the constitutionally defended (public) interest of all society, the mere fact that Paragraph 2 (wording of 4 June 2002) of Article 4 of the Law to the extent that one did not establish other means to protect the ownership rights of the small shareholders which would compensate the losses that they can have due to the fact that the provisions of Article 19 of the Law on Securities Market are not applicable while concluding and implementing the agreements specified in this paragraph is ruled by this ruling of the Constitutional Court to be in conflict with the Constitution, in itself cannot be the basis for questioning the legal actions or decisions done while implementing the provisions of the Law after corresponding amendments and supplements were made to the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” on 4 June 2002.

II

On the petition of the Mažeikiai District Local Court, the petitioner, requesting an investigation into whether Paragraph 8 (wording of 4 June 2002) of Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” is not in conflict with Articles 1, 23, 29 and 46 of the Constitution and the constitutional principle of a state under the rule of law.

1. The petitioner had doubts on whether, inter alia, Paragraph 8 (wording of 4 June 2002) of Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, according to which after the obligatory official offer to buy up the rest of the shares was not submitted, a general meeting of the shareholders of the joint-stock company “Mažeikių nafta” was convened on 19 June 2002, is not in conflict with Articles 1, 23, 29 and 46 of the Constitution and with the constitutional principle of a state under the rule of law.

2. It was mentioned that in Paragraph 8 (wording of 4 June 2002) of Article 3 of the Law it was established:

The announcement on the first meeting of the shareholders of the joint-stock company ‘Mažeikių nafta’ that will take place after the financial institution indicated in the agreement between the Government of the Republic of Lithuania and the strategic investor, and/or any other person indicated by the financial advisor of the joint-stock company ‘Mažeikių nafta’, including the crude oil supplier under a long-term crude oil supply contract (and/or a person that is under its control or other person suggested by the crude oil supplier, which is indicated by the financial advisor of the joint-stock company ‘Mažeikių nafta’) has acquired the new issued shares of the joint-stock company ‘Mažeikių nafta’ indicated in Paragraph 2 of this Article, is publicly announced not later than 10 days prior to the day of the meeting, and the announced agenda of the meeting is not subject to revision. In this case the provisions of Paragraphs 2 and 3 of Article 27, Paragraphs 1 and 4 of Article 28 and Paragraphs 2 and 3 of Article 30 of the Law on Companies are not applied.”

3. The petitioner grounds its doubts on the compliance of Paragraph 8 (wording of 4 June 2002) of Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” with Articles 1, 23, 29 and 46 of the Constitution and the constitutional principle of a state under the rule of law on the fact that the legal regulation established in Paragraph 8 (wording of 4 June 2002) of Article 3 of the Law as well as in Paragraph 2 (wording of 4 June 2002) of Article 4, in the opinion of the petitioner, is generally meant to implement private interests of individual persons, and the general norms valid for all other persons which are consolidated in other laws, are not applicable; that the small shareholders can no longer possess the shares of the joint-stock company “Mažeikių nafta” that belong to them, nor sell them to the strategic investor, because they were not provided with the obligatory official offer to buy up the rest of the shares; that by means of the impugned provisions the state, without use to society and justly compensating the small shareholders, totally devalued their property and deprived them of their essential rights which are provided by the shares, etc.

4. It was mentioned that in Paragraph 8 (wording of 4 June 2002) of Article 3 of the Law it is consolidated that “the provisions of Paragraphs 2 and 3 of Article 27, Paragraphs 1 and 4 of Article 28 and Paragraphs 2 and 3 of Article 30 of the Law on Companies are not applied”.

At the time when the provision” the provisions of Paragraphs 2 and 3 of Article 27, Paragraphs 1 and 4 of Article 28 and Paragraphs 2 and 3 of Article 30 of the Law on Companies are not applied” was entrenched in Paragraph 8 (wording of 4 June 2002) of Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, the Law on Companies (wording of 13 July 2000) was in force.

In Paragraph 2 of Article 27 of the Law on Companies (wording of 13 July 2000) it was established:

The agenda of the general meeting of the shareholders may be supplemented upon the proposal to include new issues, put forward by the Supervision Council, the Board (if the Board is not formed—the head of the Administration), the institution holding special shares or shareholders with not less than 1/10 of all votes. The proposal to supplement the agenda may be submitted not later than 15 days before the general meeting. The company management bodies and persons specified in this paragraph may also submit new drafts of resolutions, propose additional candidates to the company management bodies, the firm of auditors. The Articles may also provide for less votes entitling the shareholders to supplement the agenda of the general meeting, propose new draft resolutions, additional candidates to the members of company management bodies elected by the general meeting of the shareholders, the firm of auditors.”

According to Paragraph 3 of Article 27 of the Law on Companies (wording of 13 July 2000), if the agenda of the meeting referred to in the notice on the calling of the meeting has been changed, the shareholders must be notified of the changes in the agenda in the same manner in which the notice of the general meeting of the shareholders is given no later than 10 days before the meeting.

In Paragraph 1 of Article 28 of the Law on Companies (wording of 13 July 2000) it was established:

The management body of the company or the institution which passed a decision to convene the general meeting of the shareholders shall present to the head of the administration information and documents required for giving a notice of the general meeting of the shareholders. The head of the administration must publish the notice of the general meeting of the shareholders in the periodical publications specified in the articles of association or hand in the notice to every shareholder against by their signature or send the notice by registered mail no later than 30 days before the day of the meeting. The general meeting of the shareholders may be convened without observing the above time limits if all voting shareholders or their proxies give their written consent thereto. The shareholders of private limited liability companies shall in all cases be delivered the notices upon their signed acknowledgement of the delivery or by means of a registered letter. The head of the administration shall inform the shareholders at the opening of the meeting of the documents proving that the shareholders have been given notice of the general meeting of the shareholders. The documents must be attached to the minutes of the general meeting of the shareholders.”

In Paragraph 4 of Article 28 of the Law on Companies (wording of 13 July 2000) it was established:

At least 30 days before the general meeting of the shareholders the shareholders must be granted access to the documents available to the company, relating to the agenda of the meeting, including drafts of the resolutions, as well as the application filed with the Board (or the head of the administration) by the persons who initiated the convening of the general meeting of the shareholders. If the shareholder so desires in writing, the head of the administration shall within 3 days from the receipt of the written request deliver to them upon their signed acknowledgement all draft resolutions of the meeting or shall send them the above drafts by means of a registered letter. A notice must be given with the drafts of the resolutions indicating on whose initiative they have been included. Where the person who initiated the draft resolution has submitted explanations of the draft resolution, these must be attached to the draft resolutions.”

According to Paragraph 2 of Article 30 of the Law on Companies (wording of 13 July 2000), all draft resolutions and candidates to the members of the company’s management bodies elected by the general meeting of the shareholders, the candidate firms from which the firm of auditors has to be approved, which have been put forward by the persons on whose initiative the meeting has been convened and the company’s management bodies or persons specified in Paragraph 2 of Article 27 of this Law must be entered in the general ballot not later than 15 days before the general meeting of the shareholders.

In Paragraph 3 of Article 30 of the Law on Companies (wording of 13 July 2000) it was prescribed that the company must not earlier than 15 days and not later than 10 days before the general meeting of the shareholders send the general ballots by registered mail or hand them in personally against signature to the shareholders entitled to vote should the shareholders so request in writing.

5. It should be noted that in the specified provisions of the Law on Companies very diverse, different in their legal contents rights of the shareholders of the joint-stock companies are entrenched.

It should be held that in the petition of the petitioner no concrete legal arguments are provided that would allow the identification of which of the rights of the shareholders (in this case—of the small shareholders of the joint-stock company “Mažeikių nafta“) entrenched in the impugned Paragraph 8 (wording of 4 June 2002) of Article 3 of the Law, in the opinion of the petitioner, were violated or are violated due to the fact that according to this paragraph, ”the provisions of Paragraphs 2 and 3 of Article 27, Paragraphs 1 and 4 of Article 28 and Paragraphs 2 and 3 of Article 30 of the Law on Companies are not applied”, and in case they were violated or are violated, then in what way.

6. In addition, as in the Constitutional Court’s hearing the representative of the petitioner additionally explained, there were doubts on the compliance of Paragraph 8 (wording of 4 June 2002) of Article 3 of the Law with the Constitution in the aspect, that after the obligatory official offer to buy up the rest of the shares was not submitted, a general meeting of the shareholders of the joint-stock company “Mažeikių nafta” was convened on 19 June 2002.

7. It should be noted that one can find the provisions regarding the institute of the obligatory official offer to buy up the rest of the shares in none of the articles (paragraphs thereof) of the Law on Companies to which the reference is made in Paragraph 8 (wording of 4 June 2002) of Article 3 of the Law, i.e. not in Paragraphs 2 and 3 of Article 27, or in Paragraphs 1 and 4 of Article 28, or in Paragraphs 2 and 3 of Article 30. In the said paragraphs the ownership relationships of shareholders are not regulated, either.

It should be held that in the petition of the petitioner no concrete legal arguments are provided that would allow the identification of which of the rights of the shareholders (in this case—of the small shareholders of the joint-stock company “Mažeikių nafta“) entrenched in Paragraphs 2 and 3 of Article 27, Paragraphs 1 and 4 of Article 28 and Paragraphs 2 and 3 of Article 30, to which reference is made in the impugned Paragraph 8 (wording of 4 June 2002) of Article 3 of the Law, were violated or are violated due to the fact that according to this Paragraph, “the provisions of Paragraphs 2 and 3 of Article 27, Paragraphs 1 and 4 of Article 28 and Paragraphs 2 and 3 of Article 30 of the Law on Companies are not applied”, and in case they were violated or are violated, then in what way.

8. According to Item 8 of Paragraph 1 of Article 66 of the Law on the Constitutional Court, a petition requesting an investigation into the compliance of a legal act with the Constitution must contain the position of the petitioner concerning the compliance of an appropriate act with the Constitution and legal support of such position containing references to laws. When construing this item of the Law on the Constitutional Court, in its decision of 16 April 2004, the Constitutional Court has stated that “the position of the petitioner concerning the compliance of a legal act (part thereof) with the Constitution according to the content of the norms and/or the scope of regulation must be indicated clearly, unambiguously, the petition must contain the arguments and reasoning grounding the doubt of the petitioner that the legal act (part thereof) is in conflict with the Constitution. Thus, the petition requesting an investigation into the compliance of a legal act (part thereof) with the Constitution according to the content of norms and/or the scope of regulation must clearly indicate concrete articles (parts thereof), items of the legal act the compliance of which with the Constitution is doubtful from the petitioner’s viewpoint, also concrete provisions—norms and/or principles—of the Constitution, to which, in the opinion of the petitioner, contradict the concretely indicated articles or items of the impugned legal act. The petition requesting an investigation into the compliance of a legal act (part thereof) with the Constitution according to the content of norms and/or the scope of regulation must also clearly indicate the legal arguments grounding the doubt of the petitioner as regards every concretely indicated article (part thereof) or item of the impugned legal act, the compliance of which with the concretely indicated provision of the Constitution is doubtful to the petitioner. Otherwise, the petition requesting an investigation into the compliance of a legal act (part thereof) with the Constitution according to the content of norms and/or the scope of regulation must be considered to be not in line with the requirements of Article 66 of the Law on the Constitutional Court”.

In Article 67 of the Law on the Constitutional Court it is established what has to be indicated in the petition requesting an investigation into the compliance of the law or other legal act with the Constitution when courts apply to the Constitutional Court with such a petition. According to Item 5 of Paragraph 2 of Article 67 of the Law on the Constitutional Court, in the ruling of the court by the means of which the court applies to the Constitutional Court requesting an investigation into whether the legal act is not in conflict with the Constitution, the legal arguments presenting the opinion of the court on the conflict of a law or other legal act with the Constitution must be submitted.

It should be emphasised that the construed of Item 8 of Paragraph 1 of Article 66 of the Law on the Constitutional Court presented in the Constitutional Court’s decision of April 16 2004 should also be applied mutatis mutandis to Item 5 of Paragraph 2 of Article 67 of this Law. In the context of the constitutional justice case at issue, it should be emphasised that the requirement to indicate the legal arguments presenting the opinion of the court on the conflict of a law or other legal act with the Constitution arising from Item 5 of Paragraph 2 of Article 67 of the Law on the Constitutional Court, means that the courts that apply to the Constitutional Court with the petition requesting an investigation into whether the law or other legal act (part thereof) is not in conflict with the Constitution, while arguing their opinion presented in the petition that the law or other legal act (part thereof) is in conflict with the Constitution, may not confine themselves to general reasoning or statements that the law or other legal act (part thereof), in their opinion, is in conflict with the Constitution, but must clearly indicate which impugned articles (paragraphs, items thereof) and to what extent, in their opinion, are in conflict with the Constitution, and to reason their position on the compliance of every impugned provision of the legal act (part thereof) with the Constitution with clearly formulated legal arguments.

Otherwise, the petition of the court requesting an investigation into the compliance of the law or other legal act (part thereof) with the Constitution should be regarded as not meeting the requirements of Article 67 of the Law on the Constitutional Court.

9. According to Article 70 of the Law on the Constitutional Court, in case that a petition or attachments thereto fail to comply with, inter alia, the requirements set forth in Article 67, the petition must be returned to the petitioner. The return of a petition shall not take away the right to apply to the Constitutional Court according to the common procedure after removal of the deficiencies thereof.

10. Taking account of the arguments set forth, it should be held that the part of the case on Paragraph 8 (wording of 4 June 2002) of Article 3 of the Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, according to which after the obligatory official offer to buy up the rest of the shares was not submitted, a general meeting of the shareholders of the joint-stock company “Mažeikių nafta” was convened on 19 June 2002 in the aspect of its compliance with the Constitution must be dismissed and the petition to that extent must be returned to the petitioner.

Conforming to Articles 102 and 105 of the Constitution of the Republic of Lithuania and Articles 1, 53, 54, 55, 56, 67 and 70 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 Paragraph 2 (wording of 4 June 2002) of Article 2 of Article 4 of the of the Republic of Lithuania’s Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis” to the extent that it does not establish any other means to protect the ownership rights of the small shareholders which would compensate the losses that they can have due to the fact that the provisions of Article 19 of the of the Republic of Lithuania’s Law on Securities Market are not applicable while concluding and implementing the agreements specified in this paragraph is in conflict with Paragraph 2 of Article 23 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law.

2. To dismiss the part of the case on Paragraph 8 (wording of 4 June 2002) of Article 3 of the of the Republic of Lithuania’s Law on the Reorganisation of the Joint-stock Companies “Būtingės nafta”, “Mažeikių nafta” and “Naftotiekis”, according to which, “after the obligatory official offer to buy up the rest of the shares was not submitted, a general meeting of the shareholders of the joint-stock company ‘Mažeikių nafta’ was convened on 19 June 2002” in the aspect of its compliance with the Constitution of the Republic of Lithuania and to that extent to return the petition to the petitioner.

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

                                                                           Egidijus Kūris

                                                                           Kęstutis Lapinskas

                                                                           Zenonas Namavičius

                                                                           Ramutė Ruškytė

                                                                           Vytautas Sinkevičius

                                                                           Stasys Stačiokas

                                                                           Romualdas Kęstutis Urbaitis