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On quota white sugar export

Case No. 42/03

 

THE CONSTITUTIONAL COURT OF THE REPUBLIC OF LITHUANIA

RULING

ON THE COMPLIANCE OF ITEMS 2.3 AND 2.4 OF THE RESOLUTION OF THE GOVERNMENT OF THE REPUBLIC OF LITHUANIA (NO. 1170) “ON MEASURES FOR REGULATING THE SUGAR MARKET OF 26 SEPTEMBER 2001 AND ITEM 2 OF THE RESOLUTION OF THE GOVERNMENT OF THE REPUBLIC OF LITHUANIA (NO. 879) “ON AMENDING THE RESOLUTION OF THE GOVERNMENT OF THE REPUBLIC OF LITHUANIA (NO. 284) ‘ON THE ESTABLISHMENT OF WHITE SUGAR PRODUCTION QUOTA’ OF 12 MARCH 2001” OF 12 JUNE 2002 WITH THE CONSTITUTION OF THE REPUBLIC OF LITHUANIA AND WITH PARAGRAPH 1 (WORDING OF 18 MAY 2000) AND PARAGRAPH 2 (WORDING OF 8 JULY 1999) OF ARTICLE 4 OF THE REPUBLIC OF LITHUANIA’S LAW ON SUGAR

31 May 2006

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

Regina Ramutytė, Head of the Processed Products Division of the Common Market Organisation Department of the Ministry of Agriculture of the Republic of Lithuania, acting as the representative of the Government of the Republic of Lithuania, the party concerned

The Constitutional Court of the Republic of Lithuania, pursuant to Articles 102 and 105 of the Constitution of the Republic of Lithuania and Article 1 of the Law on the Constitutional Court of the Republic of Lithuania, in its public hearing, on 17 May 2006, considered case No. 42/03 subsequent to the petition of the Vilnius Regional Administrative Court, the petitioner, requesting an investigation into whether Items 2.3 and 2.4 of the Resolution of the Government of Lithuania (No. 1170) “On Measures for Regulating the Sugar Market” of 26 September 2001 and Item 2.1 of the Resolution of the Government of the Republic of Lithuania (No. 879) “On Amending the Resolution of the Government of Lithuania (No. 284) ‘On the Establishment of White Sugar Production Quota’ of 12 March 2001” of 12 June 2002 are not in conflict with Paragraph 2 of Article 5, Paragraph 1 of Article 46 and Item 2 of Article 94 of the Constitution of the Republic of Lithuania, the constitutional principle of a state under the rule of law, with Paragraphs 1 and 2 of Article 4 of the Republic of Lithuania’s Law on Sugar and with Item 4 of Paragraph 1 of Article 7 and Item 1 of Paragraph 1 of Article 8 of the Republic of Lithuania’s Law on Agricultural and Rural Development.

The Constitutional Court

has established:

I

The Vilnius Regional Administrative Court, the petitioner, considered an administrative 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 Items 2.3 and 2.4 of the Government Resolution (No. 1170) “On Measures for Regulating the Sugar Market” of 26 September 2001 (hereinafter also referred to as the government resolution of 26 September 2001) and Item 2.1 of the Government Resolution (No. 879) “On Amending the Resolution of the Government of Lithuania (No. 284) ‘On the Establishment of White Sugar Production Quota’ of 12 March 2001” of 12 June 2002 (hereinafter also referred to as the government resolution of 12 June 2002) are not in conflict with Paragraph 2 of Article 5, Paragraph 1 of Article 46 and Item 2 of Article 94 of the Constitution, with the constitutional principle of a state under the rule of law, with Paragraphs 1 and 2 of Article 4 of the Law on Sugar and with Item 4 of Paragraph 1 of Article 7 and Item 1 of Paragraph 1 of Article 8 of the Law on Agricultural and Rural Development.

II

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

The principle of legal security, as an element of the constitutional principle of a state under the rule of law, implies the duty of the state to guarantee the certainty and stability of legal regulation, as well as to protect the rights of legal subjects and acquired rights and also to respect legitimate interests and expectations. The impugned articles of the government resolutions of 26 September 2001 and of 12 June 2002 established a duty for sugar manufacturers to carry out the export tasks for quota sugar and they established sanctions for failure to carry out these tasks, however, it is permitted to establish this only by means of a law. The said government resolutions cannot compete with the Law on Sugar, the provision of which set forth in Paragraph 2 of Article 4 providing that the Government or an institution authorised by it may apply also “other regulatory measures of the sugar market” does not include the right to establish obligatory export tasks for quota sugar. In addition, the legislature linked the establishment of the regulatory measures of the sugar market with the protection of the interests of sugar beet growers, sugar manufacturers and users. However, the establishment of evidently loss-making export task is not based on the protection of the interests of sugar manufacturers, especially as upon the establishment of this duty for them the compensation for the damages inflicted was not provided for. Thus, in the opinion of the petitioner, Paragraph 2 of Article 5, Paragraph 1 of Article 46 and Item 2 of Article 94 of the Constitution, the constitutional principle of a state under the rule of law, Paragraphs 1 and 2 of Article 4 of the Law on Sugar, Item 1 of Paragraph 1 of Article 8 of the Law on Agricultural and Rural Development, according to which the Ministry of Agriculture allocates sugar processing quotas to agricultural subjects, as well as Item 4 of Paragraph 1 of Article 7, according to which the Government or an institution authorised by it shall, in the manner prescribed by this Law and other laws, promote export and establish the export and import procedure, were violated.

III

In the course of the preparation of the case for the Constitutional Court’s hearing, written explanations were received from R. Ramutytė, I. Kubišinas, Chief Specialist of the Processed Products Division of the Common Market Organisation Department of the Ministry of Agriculture as well as A. Kazlauskienė, Head of the Law Division of the Law Department of the same ministry, who were the representatives of the Government, the party concerned. In the opinion of the representatives of the party concerned, the impugned provisions of the said government resolutions are not in conflict with the Constitution. Their position is based on the following arguments.

1. The government resolutions of 26 September 2001 and of 12 June 2002 were adopted by following Paragraph 2 of Article 4 of the Law on Sugar, under which the Government or an institution authorised by it may apply not only the measures enumerated in Paragraph 1 of Article 4 of this law, but also other regulatory measures of the sugar market, while protecting the interests of sugar beet growers, sugar manufacturers and users. The establishment of the obligatory amount of export quota white sugar for the sugar manufacturers, which is proportionate to the manufacture quota for white sugar allocated to the manufacturers, is one of such other regulatory measures of the sugar market. The obligatory export of excess of the accumulated sugar is in compliance with the condition set forth in Paragraph 2 of Article 4 of the Law on Sugar, which is to protect the interests of sugar beet growers, sugar manufacturers and users. Such obligations were non-discriminatory to sugar manufacturers.

2. The Law on Agricultural and Rural Development came into force on 1 January 2003. At the time when the government resolutions of 26 September 2001 and of 12 June 2002 were adopted, the Republic of Lithuania’s Law on State Regulation of Economic Relations in Agriculture was in force, under Item 4 of Paragraph 1 of Article 5 whereof the regulation of export and import of products of agriculture and foodstuffs was one of state measures for regulating economic relations in agriculture.

IV

In the course of the preparation of the case for the court hearing, written explanations were received from J. Lionginas, Chairperson of the Committee on Budget and Finance of the Seimas of the Republic of Lithuania, V. Navickas, Chairperson of the Committee on Economics of the Seimas of the Republic of Lithuania, J. Jagminas, Chairperson of the Committee on Rural Affairs of the Seimas of the Republic of Lithuania, A. Butkevičius, Minister of Finance of the Republic of Lithuania, K. D. Prunskienė, Minister of Agriculture of the Republic of Lithuania, A. Z. Kaminskas, Government Chancellor, P. Koverovas, State Secretary of the Ministry of Justice of the Republic of Lithuania, G. Miškinis, State Secretary of the Ministry of Economy of the Republic of Lithuania, D. Kriaučiūnas, Director General of the European Law Department under the Ministry of Justice, S. Silickas, Deputy Director and the acting Director of the National Paying Agency under the Ministry of Agriculture, K. Virketis, Director of the Legal Department of the Office of the Seimas, R. Stanikūnas, Director of the Competition Council of the Republic of Lithuania, Prof. V. Pakalniškis, Head of the Civil and Commercial Law Department of the Faculty of Law of Mykolas Romeris University, Dr. E. Grakauskas, a lecturer of the Department of Constitutional and Administrative Law of the Faculty of Law of Vilnius University, and G. Radzevičius, Director of the Lithuanian Institute of Agrarian Economics.

V

At the Constitutional Court's hearing, the representative of the Government, the party concerned, R. Ramutytė virtually reiterated the arguments set down in her written explanations.

The Constitutional Court

holds that:

I

1. The petitioner requests an investigation into whether Items 2.3 and 2.4 of the Government Resolution (No. 1170) “On Measures for Regulating the Sugar Market” of 26 September 2001 and Item 2.1 of the Government Resolution (No. 879) “On Amending the Resolution of the Government of Lithuania (No. 284) ‘On the Establishment of White Sugar Production Quota’ of 12 March 2001” of 12 June 2002 are not in conflict with Paragraph 2 of Article 5, Paragraph 1 of Article 46 and Item 2 of Article 94 of the Constitution, with the constitutional principle of a state under the rule of law, with Paragraphs 1 and 2 of Article 4 of the Law on Sugar and with Item 4 of Paragraph 1 of Article 7 and Item 1 of Paragraph 1 of Article 8 of the Law on Agricultural and Rural Development.

2. The Government adopted the Resolution No. (1170) “On Measures for Regulating the Sugar Market” on 26 September 2001. It came into force on 29 September 2001.

3. It is set forth in Item 2.3 of the government resolution of 26 September 2001 that, upon an assessment, according to the procedure established by the Ministry of Agriculture, of the general sugar consumption in this country, every sugar manufacturer is obliged to export an amount of quota white sugar proportional to the allocated quota of white sugar manufacturing. It is set forth in Item 2.4 that if a sugar manufacturer fails to execute the provision established in Item 2.3, the white sugar quota for the next year shall be reduced in the amount that was not exported, and the said quota is distributed among other sugar manufacturers.

4. On 21 December 2002, the Government adopted the Resolution (No. 2079) “On Granting the Powers in the Implementation of the Law of the Republic of Lithuania on Agriculture and Rural Development”, whereby some items of the Government Resolution (No. 1170) “On Measures for Regulating the Sugar Market” of 26 September 2001 were recognised as no longer valid. Items 2.3 and 2.4 of the government resolution of 26 September 2001 were not amended and/or supplemented.

5. On 12 June 2002, the Government adopted the Resolution (No. 879) “On Amending the Resolution of the Government of Lithuania (No. 284) ‘On the Establishment of White Sugar Production Quota’ of 12 March 2001”. The said government resolution came into force on June 20 2002 and it was not amended and/or supplemented.

6. Item 2 of the government resolution of 12 June 2002, inter alia, provides:

To oblige the Ministry of Agriculture:

2.1. taking into account the sugar balance of nine months of 2002, by 20 October 2002, to prepare and confirm the procedure and tasks for export of the white sugar manufactured from sugar beets of the 2002 harvest, <...>.“

7. It is evident from the case material that the Constitutional Court has been requested to investigate whether 2.3 and 2.4 of the Government Resolution (No. 1170) “On Measures for Regulating the Sugar Market” of 26 September 2001 and the provision “To oblige the Ministry of agriculture: 2.1. taking into account the sugar balance of nine months of 2002, by 20 October 2002, to prepare and confirm the procedure and tasks for export of the white sugar manufactured from sugar beets of the 2002 harvest” of Item 2 of the Government Resolution (No. 879) “On Amending the Resolution of the Government of Lithuania (No. 284) ‘On the Establishment of White Sugar Production Quota’ of 12 March 2001 are not in conflict with Paragraph 2 of Article 5, Paragraph 1 of Article 46 and Item 2 of Article 94 of the Constitution, with the constitutional principle of a state under the rule of law and with Item 4 of Paragraph 1 of Article 7, Item 1 of Paragraph 1 of Article 8 of the Law on Agricultural and Rural Development as well as whether the said items (provisions thereof) of the government resolutions of 26 September 2001 and 12 June 2002 were not in conflict with Paragraph 1 (wording of 18 May 2000) of Article 4 and Paragraph 2 (wording of 8 May 1999) of Article 4 of the Law on Sugar (which is no longer valid).

II

1. The petitioner impugns, inter alia, the compliance of the provisions of the government resolutions of 26 September 2001 and of 12 June 2002 with Paragraph 2 of Article 5, Paragraph 1 of Article 46 and Item 2 of Article 94 of the Constitution, and with the constitutional principle of a state under the rule of law.

2. It is established in Paragraph 1 of Article 46 of the Constitution, that Lithuania’s economy shall be based on the right of private ownership, freedom of individual economic activity and initiative. All these three values, the right of private ownership, freedom of individual economic activity and initiative, define the foundation of the national economy (the Constitutional Court’s rulings of March 2002 and of 13 May 2005). Paragraph 1 of Article 46 should be construed by taking account, inter alia, of Paragraph 2 of this article, under which the state shall support economic efforts and initiative that are useful to society, and Paragraph 3 of the same article, under which the state shall regulate economic activity so that it serves the general welfare of the Nation.

2.1. The freedom of individual economic activity and initiative is the whole complex of legal opportunities which creates preconditions for an individual independently to adopt decisions necessary for his economic activity (the Constitutional Court’s ruling of 13 May 2005). The freedom of individual economic activity and initiative implies, inter alia, freedom of conclusion of contracts, freedom of fair competition, opportunities to restructure economic subjects without restrictions, to change the character of their activity, not to obstruct establishment of new economic subjects or liquidate the existing ones when one reacts to changes in the market; it is inseparable from an opportunity of a person, who is willing to engage in an economic activity or, conversely, who is willing to drop it, to get into the market without artificial barriers and to abandon it without artificial barriers (the Constitutional Court’s ruling of 13 May 2005). However, freedom of economic activity is not absolute, the person makes use of it only by following certain obligatory requirements and limitations (the Constitutional Court’s rulings of 20 April 1995, 18 October 2002, 14 March 2002, 9 April 2002 and 13 May 2005). On the other hand, it is impermissible by means of established limitations to deny such essential provisions of freedom of economic activity as equality of rights of subjects of economic activity, fair competition etc.; under the Constitution, the state may not unrestrictedly interfere with the economic activity of a person (the Constitutional Court’s rulings of 20 April 1995 and 13 May 2005).

2.2. When construing Paragraph 1 of Article 46 of the Constitution, which entrenches the freedom of economic activity of a person, in the context of Paragraphs 2 and 3 of this article, it should be held that the state obligation to support economic efforts and initiative which are useful to society is one of the main rules regulating the economy of this country (the Constitutional Court’s rulings of 27 October 1998 and 13 May 2005). The provision that the state shall support economic efforts and initiative that are useful to society constitutes constitutional legal preconditions, inter alia, for differentiated legal regulation of economic activity, the main criterion whereof is the common welfare of the Nation, it also implies the duty of the state and municipal institutions and officials by no decisions or actions to hinder the expression and development of the initiative or economic efforts of persons, if this initiative or economic efforts are not harmful to society, even if their benefit to society is not evident. It should be mentioned that, as held many a time in the acts of the Constitutional Court, in the provision “the State shall regulate economic activity so that it serves the general welfare of the Nation” (Paragraph 3 of Article 46 of the Constitution) the constitutional principle, which defines the goals, directions, means and boundaries for regulating economic activity, is entrenched; while regulating economic activity, the state has to follow the principle of coordination of interests of the person and society and has to guarantee the interests of both the private person (a subject of economic activity) and interests of society (the Constitutional Court’s rulings of 18 October 2000, 9 April 2002, 17 April 2003, 26 January 2004, and 13 May 2005). As a rule, the regulation of economic activity is linked with the establishment of conditions for economic activity, the regulation of certain procedures, control over economic activity, as well as with certain limitations and prohibitions on this activity; when a person participates in an economic activity, special limitations (inter alia, limitations on the right of ownership) which are established by law can be applied to him (the Constitutional Court’s ruling of 13 May 2005). However, in its rulings the Constitutional Court has held more than once that under the Constitution it is permitted to limit the rights and freedoms of the person, as well as the freedom of economic activity, if the following conditions are followed: this is done by means of legislation; the limitations are necessary in a democratic society in order to protect the rights and freedoms of other persons and values entrenched in the Constitution, as well as constitutionally important objectives; the limitations do not deny the nature and essence of the rights and freedoms; the constitutional principle of proportionality is followed.

2.3. The Constitutional Court has held that the right of the state to regulate economic activity which is consolidated in Paragraph 3 of Article 46 of the Constitution creates constitutional preconditions to pass laws by which one reacts to a situation of national economy, the variety of and changes in the economic and social life (the Constitutional Court’s rulings of 28 February 1996, 15 March 1996, 18 October 2000, and 13 May 2005). Legal regulation of economic activity is not an end in itself, it is a means of social engineering and a way to seek welfare of the Nation through law, it is a direction of legal regulation of economic activity (the Constitutional Court’s ruling of 13 May 2005). The common welfare of the Nation is a rather general and broad criterion in application of which one may follow, inter alia, the arguments of expediency. In this context it needs to be mentioned that (as stated by the Constitutional Court): the welfare of the Nation is reflected by consumption of material goods; however, the notion “general welfare of the Nation” should not be comprehended in the material (financial) sense and should be construed not only by taking account of satisfaction of material needs of the individual, but also of other criteria—social development of the Nation, opportunities of self-expression of the human being etc.; the content of the notion “general welfare of the Nation” is disclosed in each concrete case by taking account of economic, social and other important factors; by means of regulation of economic activity the state must seek the welfare of not individual persons but precisely the general welfare of the Nation; the general welfare of the Nation cannot be opposed to the welfare, rights and legitimate interests of the economic subject itself, i.e. the subject the activity of which is regulated, as well as those of other persons who have established and are running the said economic subject or are otherwise related to the said subject; it is not permitted either to ground or to justify, by invoking the general welfare of the Nation indicated in Paragraph 3 of Article 46 of the Constitution, any regulation by which, in order to ensure the public interest and to protect constitutional values, the rights and legitimate interests of a certain economic subject are limited more than necessary; the legal regulation where a certain economic activity is unduly limited or prohibited due to the fact that, from the standpoint of the legislature, it, purportedly, is not useful, although not harmful, to society, cannot be justified by the fact that the economic activity must serve the welfare of the Nation, either; the legislature and other institutions of lawmaking are constitutionally obligated to ensure a favourable legal environment for an economic activity which, while satisfying the interests of the economic subject, would also serve the general welfare of the Nation; the state, while regulating economic activity, may not establish any such legal regulation whereby unfavourable and unequal economic conditions are established to economic subjects, whereby their initiative is restricted and opportunities for its manifestation are not created (the Constitutional Court’s rulings of 13 February 1997, 6 October 1999, 18 October 2000, 9 April 2002, 26 January 2004, and 13 May 2005).

2.4. Under the Constitution, the state, while regulating economic activity, must pay heed to the constitutional requirement of equality of rights of economic subjects, which is directly related to the principle of equal rights of all persons, and which is entrenched in Article 29 of the Constitution; otherwise, the legal regulation of economic activity would not be regarded as one serving the general welfare of the Nation (the Constitutional Court’s ruling of 13 May 2005).

On the other hand, in its rulings the Constitutional Court has also held more than once that the constitutional principle of equality of rights of persons (of economic subjects in this case) in itself does not deny an opportunity to establish diverse, differentiated legal regulation by means of legislation with respect to certain persons (economic subjects in this case) which belong to different categories, if there exist differences between these persons (economic subjects in this case) of such a character, which objectively justify such differentiated regulation. Differentiated legal regulation, when it is applied to certain groups of persons which are distinguished by the same signs, and in case it strives for positive and socially meaningful goals, or if the establishment of certain limitations or conditions is linked with peculiarities of regulated social relations, is not regarded as discrimination (the Constitutional Court’s rulings of 11 November 1998 and 13 May 2005). Differentiated establishment of legal status of individual subjects of economy with regard to nature and significance of regulated relations as well as establishment of certain conditions for economic activity is linked to the aims of the state in the area of economy and aspiration to properly organise the economy of this country (the Constitutional Court’s rulings of 18 October 2000 and 13 May 2005). Due to a specific character, variety and dynamism of economic activity, regulation of concrete relations in this area cannot be the same all the time, i.e. the ratio of prohibitions and permissions is subject to change; the legal regulation of economic activity may also be changed in order to ensure the public interest (the Constitutional Court’s ruling of 13 May 2005).

However, while changing the conditions of economic activity or discontinuing certain economic activity, the state must pay heed to the norms and principles of the Constitution, as well as the principle of the protection of legitimate expectations, which, as the Constitutional Court has held, implies a duty of the state and of other state institutions that implement state power to follow obligations undertaken by the state; this principle also means the protection of acquired rights, i.e. persons have the right to reasonably expect that the rights acquired under valid laws and other legal acts which are not in conflict with the Constitution will be retained for the established time and that it will be possible to implement these rights in reality; under the principle of legitimate expectations, it is permitted to change legal regulation only according to a prior established procedure and without violating norms and principles of the Constitution, and that it is not permitted that by amendments to the legal regulation the legitimate interests and legitimate expectations of a person be violated (the Constitutional Court’s rulings of 18 December 2001, 4 March 2003, 3 December 2003, 13 May 2005, and 23 August 2005).

2.5. It needs to be noted that when economic activity is legally regulated, one must pay heed to the constitutional principle of the separation of powers, the hierarchy of all legal acts stemming from the Constitution, which implies that the regulation, by means of legal acts of lower legal force, of the social relations, which can be regulated only by means of legal acts of higher legal force, is prohibited, also that legal acts of lower legal force cannot establish any such legal regulation which would compete with that established in legal acts of higher legal force, thus, it is impermissible to establish, by means of substatutory legal acts, any such legal regulation, which can be established only by means of a law, and it is impermissible to establish, by means of substatutory legal acts, any such legal regulation, which would compete with that established in laws and which would not be based upon the laws.

Under Item 2 of Article 94 of the Constitution, the Government shall execute the laws and resolutions of the Seimas on implementation of laws as well as decrees of the President of the Republic. While construing the aforementioned provision, the Constitutional Court has held many a time that, under the Constitution, the Government, while adopting legal acts, must follow the valid laws and, while enforcing certain laws, it may not violate other laws; the legal acts adopted by the Government may not contain any legal regulation competing with that established in laws. On the other hand, as it has been held by the Constitutional Court many a time, the duty of the Government to adopt substatutory acts which are necessary so as to implement laws stems directly from the Constitution, while in case of a commissioning by the Seimas to do so, it also stems from the laws and Seimas resolutions concerning implementation of laws (the Constitutional Court’s rulings of 30 October 2001 and 18 December 2001). However, in its substatutory legal acts the Government does not have to make reference to particular laws, Seimas resolutions or decrees of the President of the Republic, which are being followed by the Government when it adopts a corresponding substatutory legal act; it is important that the Government adopt substatutory legal acts without exceeding its powers, and that these substatutory acts be in conformity with the Constitution and laws (the Constitutional Court’s ruling of 18 December 2001). Thus, should the legal regulation established in resolutions of the Government compete with the legal regulation established in laws or should it be not based on laws, not only the constitutional principles of a state under the rule of law and the separation of powers as well as Item 2 of Article 94 of the Constitution, but also Paragraph 2 of Article 5 of the Constitution, which provides that the scope of power shall be limited by the Constitution, would be violated.

It also needs to be noted that in cases when a government resolution containing the legal regulation conflicting with a law is adopted prior to the adoption of the law, such a government resolution must be harmonised with the norms of the subsequently adopted law (the Constitutional Court’s rulings of 5 April 2000 and of 19 February).

2.6. Thus, certain relations of economic activity may be regulated only by law, whereas the others may be regulated by means of government resolutions and some of them—by means of substatutory legal acts of lower legal force. It should be noted in the context of the constitutional case at issue that, under the Constitution, the essential conditions for economic activity and prohibitions as well as limitations having an essential impact on the said activity and various sanctions for certain violations of law (inter alia, the so-called economic sanctions categorised as belonging to the institute of administrative liability, which create preconditions for making a negative impact on the economic situation of the subjects of economy which are brought to legal liability (the Constitutional Court’s ruling of 3 November 2005)) may be established only by means of a law. Thus, it is only by means of a law that it is permitted to establish the measures of economic influence, which may have an essential impact on the economic activity, and which may be applied when the established obligations are not carried out or are carried out improperly.

3. It needs to be noted that law, when it regulates social relations, defines the limits of the content of the state policy (the economic policy as well) and it establishes permissible legal measures and methods for executing the said policy. However, it also needs to be stressed that in itself this does not deny the autonomy of the political process, the formation and specificity of execution of the state policy (the economic policy as well), nor the independence of the legislative and executive powers, as state political powers, and of the institutions which are formed in a democratic way in establishment (according to their competence) of the content of the state policy (the economic policy as well) (by choosing, inter alia, its priorities), and also the legal measures and methods for executing the said policy.

Under the Constitution, the Seimas as the institution of legislative power and the Government as an institution of executive power enjoy very broad discretion to form and execute the economic policy of the state (each according to their competence) and to properly regulate economic activities by means of legal acts, by not violating the Constitution and laws, inter alia, by not exceeding the powers established in them to the said institutions of state power and by following the requirements of due process of law which stems from the Constitution and the principles of a state under the rule of law, of the separation of powers, of responsible governance, of the protection of legitimate expectations and the principles of legal clarity, legal certainty and legal security as entrenched in the Constitution. It should be noted in the context of the constitutional case at issue that the assessment of the content, measures and methods of the state economic policy (inter alia, priorities) (no matter who assesses them), also with regard to their reasonableness and expediency, even if it turns out later that there were better alternatives for choosing its economic policies (thus, also that the formerly formed and executed economic policy could be assessed negatively with regard to its reasonableness and expediency) in itself cannot be the reason to question the compliance of the legal regulation of the economic activity conforming to the economic policy (formed and executed before) with the legislation of higher legal force, inter alia, with the Constitution (also with regard to constitutional justice cases initiated at the Constitutional Court), unless the said legal regulation is clearly in conflict with the general welfare of the Nation, with the interests of society and the State of Lithuania, or unless it denies the values entrenched in and defended as well as protected by the Constitution.

Moreover, neither the fact where in legal acts differentiated legal regulation was established to a certain sector of economy, which is different from the legal regulation of other economic sectors, nor the fact whether the legal regulation of a certain economic activity is changed in reacting to changes in the market as well as the economic (as well as international) conjuncture, in itself cannot serve as such pretext, since, as mentioned before, the legal pre-conditions of differentiated legal regulation (when account is taken of the importance and nature of the regulated relations) originate from the Constitution itself (inter alia, Paragraph 2 of Article 46 of the Constitution), the differentiated establishment of the legal situation of separate economic subjects should be related with the objectives raised by the state in a certain sector of economy, the striving to arrange the economy of this country in a corresponding manner, besides, due to a specific character, variety and dynamism of economic activity, regulation of concrete relations in this area cannot be the same all the time, i.e. the ratio of prohibitions and permissions is subject to change, inter alia, while seeking to ensure the public interest.

III

1. While deciding whether the items (provisions thereof) of the government resolutions of 26 September 2001 and of 12 June 2002 impugned by the petitioner are not in conflict with the Constitution and laws, it should be held that growing and processing sugar beets—manufacture of sugar—is such area of economic activity in Lithuania which covers a large part of agriculture, the jobs created and maintained in this area have guaranteed constant income, certain welfare and level of living for a large part of people (and their family members) working in that area of agriculture for quite a while.

With regard to the scope of sugar manufacture in Lithuania, to the significance of this sector of economy for a large part of Lithuanian people working in agriculture and taking into account the seasonal prevalence and other characteristics of sugar manufacture, it needs to be held that differentiated legal regulation could be established in legislation for this sector of economic activity, which is different from legal regulation of other sectors of economy, as well as that the legal regulation of this economic activity could be changed with response to the changing market and economic conjuncture. This differentiated legal regulation can also be such so that sugar manufacturing as economic activity may be supported by the state, inter alia, by using also different means and applying different measures from those where the state supports other economic sectors (including agriculture).

2. It also needs to be noted that there are no legal preconditions for the Constitutional Court to assess the content of the state sugar policy nor to assess the measures and methods of this policy with regard to their reasonableness and expediency, inter alia, assess whether supporting (if yes, then to what extent) sugar manufacturing (growing and processing sugar beets) is useful, promising or expedient in any other regard, if yes, whether this economic activity should be supported more than any other economic (inter alia, agricultural) activity. The formation and execution of the state sugar policy as well as choosing the means for its execution is within the competence of the Seimas and the Government (which must follow, inter alia, the laws passed by the Seimas). In doing so, the Seimas and the Government must observe the Constitution and laws, inter alia, not exceed the powers established to the said institutions in the Constitution and laws, and heed the constitutional principles of a state under the rule of law, of the separation of powers, of responsible governance, of the protection of legitimate expectations and the principles of legal clarity, legal certainty and legal security.

IV

On the compliance of Items 2.3 and 2.4 of the Government Resolution (No. 1170) “On Measures for Regulating the Sugar Market”, the provision “To oblige the Ministry of Agriculture: 2.1. taking into account the sugar balance of nine months of 2002, by 20 October 2002, to prepare and confirm the procedure and tasks for export of the white sugar manufactured from sugar beets of the 2002 harvest” of Item 2 of the Government Resolution (No. 879) “On Amending the Resolution of the Government of Lithuania (No. 284) ‘On the Establishment of White Sugar Production Quota’ of 12 March 2001” of 12 June 2002 with Paragraph 1 of Article 4 (wording of 18 May 2000) and Paragraph 2 (wording of 8 July 1999) of the Law on Sugar, Item 4 of Paragraph 1 of Article 7 and Item 1 of Paragraph 1 of Article 8 of the Law on Agricultural and Rural Development.

1. It has been mentioned that Item 2.3 of the government resolution of 26 September 2001 prescribed that, upon an assessment, according to the procedure established by the Ministry of Agriculture, of the general sugar consumption in this country, every sugar manufacturer is obliged to export an amount of quota white sugar proportional to the allocated quota of white sugar manufacturing and Item 2.4 thereof prescribed that if a sugar manufacturer fails to execute the provision established in Item 2.3, the white sugar quota for the next year shall be reduced in the amount that was not exported, and the said quota is distributed among other sugar manufacturers.

2. Therefore, the impugned items of the government resolution of 26 September 2001 prescribed that: (1) every sugar manufacturer had a duty to export the portion of the quota white sugar in proportion to the white sugar production quota determined for him; (2) the amount of the quota white sugar which had to be exported by every manufacturer had to be determined upon the procedure set by the Ministry of Agriculture, after it had evaluated the general sugar consumption in this country; (3) the measure of economic influence had to be applied to the sugar manufacturer, which failed to carry out the set task of quota white sugar export—the white sugar production quota for the next year for him had to be reduced in the amount of sugar it failed to export and this part of the quota had to be re-distributed among other sugar manufacturers.

3. It has also been mentioned that Item 2 of the government resolution of 12 June 2002, inter alia, provides:

To oblige the Ministry of Agriculture:

2.1. taking into account the sugar balance of nine months of 2002, by 20 October 2002, to prepare and confirm the procedure and tasks for export of the white sugar manufactured from sugar beets of the 2002 harvest <…>”.

4. In this context it should be mentioned that on 21 October 2002, by the Order (No. 412) “On the Export of White Sugar”, the Minister of Agriculture confirmed white sugar export tasks of the white sugar produced from sugar beets of the 2002 harvest for every manufacturer of white sugar. In case of failure to comply with the tasks, the measure of economic influence established in Item 2.4 of the government resolution of 26 September 2001 had to be applied for the respective sugar manufacturer.

5. It should be noted that the legal regulation established in the impugned items (provisions thereof) of the government resolutions of 26 September 2001 and 12 June 2002 is related to the establishment of essential economic activity conditions (inter alia, with freedom to conclude contracts, disposal of property) and establishment of measures of economic influence when the set obligations are not carried out or are not properly carried out.

6. As held in this ruling of the Constitutional Court, while forming and implementing the state sugar policy, as well as choosing the measures and methods for implementing this policy, the Government must follow, inter alia, the laws. It has also been held that, under the Constitution, the essential conditions for economic activity and prohibitions as well as limitations having an essential impact on the said activity, sanctions for corresponding violations of law, measures of economic influence, which may have an essential impact on the economic activity, and which may be applied when the established obligations are not carried out or are carried out improperly may be established only by means of a law. It should be emphasised that if such matters are not established by law, the Government, according to the Constitution, may not do that by itself.

7. When the government resolutions of 26 September 2001 and 12 June 2002 were adopted and came into force (the compliance of certain items (provisions) of these resolutions with the Constitution and the laws is impugned in the constitutional justice case at issue), the relations between participants of the sugar market and state institutions were regulated by the Law on Sugar (its wording of 8 July 1999 with amendments and supplements made by the Law on Amending Articles 2, 4, 5, 6 and 7 of the Law on Sugar adopted by the Seimas on 18 May 2000), which consolidated, inter alia, the state sugar policy, defined the state regulatory measures for growing and processing sugar beets, established the sugar realisation, storage and transportation requirements, as well as regulated the relations related to growing, buying up and processing sugar beets. At that time Paragraph 1 of Article 4 of the Law on Sugar was set forth in its wording of 18 May 2000, while Paragraph 2 thereof—in its wording of 8 July 1999.

8. Paragraph 1 of Article 4 titled “State Regulatory Measures” of the Law on Sugar (wording of 18 May 2000) used to provide:

In the Republic of Lithuania sugar beet growing and processing, purchase and sale of locally-produced sugar, import and export of sugar, raw material, products to which the sugar regime is applicable shall be regulated by the State and carried out in accordance with the sugar regime approved by the Government of the Republic of Lithuania or an institution authorised by it. The regime shall comprise the following:

1) procedure of formation of the balance for sugar;

2) procedure of determining an annual amount of sugar needed by the market;

3) rules related to the establishment of sugar beet amount corresponding to a quota for white sugar production, and to the determination of minimum marginal sugar beet prices;

4) list of sugar, raw material and products to which the sugar regime is applicable, regulation and control of the import thereof;

5) control of the production and sale of sugar, routine licensing the import and export of sugar, raw material;

6) rules related to the allocation of quotas for white sugar production to sugar producers and sugar beet growers;

7) procedure of fixing a minimum State price of sugar.”

9. Paragraph 2 (wording of 8 July 1999) of Article 4 titled “State Regulatory Measures” of the Law on Sugar used to provide: “The Government of the Republic of Lithuania or an institution authorised by it may apply other regulatory measures of the sugar market, which protect the interests of sugar beet growers, sugar producers and users.”

10. The amendments and supplements of the Law on Sugar (wording of 8 July 1999 with amendments and supplements made by the Law on Amending Articles 2, 4, 5, 6 and 7 of the Law on Sugar adopted by the Seimas on 18 May 2000) were made by the Seimas by the Republic of Lithuania’s Law on Amending and Supplementing Article 5 of the Law on Sugar adopted on 10 April 2003, however, Article 4 of the Law on Sugar (wording of 18 May 2000) was not amended nor supplemented.

11. On 29 April 2004, the Seimas adopted the Republic of Lithuania’s Law on Amending the Law on Sugar, by Article 1 of which the Law on Sugar (wording of 8 July 1999 with subsequent amendments and supplements) was amended and set forth in a new wording. The Law on Sugar of the new wording came into force on 1 May 2004. Paragraph 1 of Article 5 of the Law on Sugar of in its new wording prescribed that growing, buying up and processing sugar beets, manufacturing white sugar and its sales are regulated by legal acts of the European Union and the Republic of Lithuania; the legal regulation established by Paragraph 1 (wording of 18 May 2000) and Paragraph 2 (wording of 8 July 1999) of Article 4 of the Law on Sugar was annulled.

12. On 20 January 2006, the Seimas adopted the Republic of Lithuania’s Law on Recognising the Law on Sugar and the Laws that Amended It as No Longer Valid (which came into force on 11 February 2006) by Item 5 of Article 1 of which the Law on Amending the Law on Sugar adopted by the Seimas on 29 April 2004 was recognised as no longer valid.

13. While deciding whether the impugned items (provisions thereof) of the government resolutions of 26 September 2001 and 12 June 2002 were not in conflict with Paragraph 1 (wording of 18 May 2000) and Paragraph 2 (wording of 8 July 1999) of Article 4 of the Law on Sugar, it needs to be noted that the elements of the sugar regime approved by the Government or an institution authorised by it (according to which in the Republic of Lithuania sugar beet growing and processing, purchase and sale of locally-produced sugar, import and export of sugar, raw material, the products to which the sugar regime is applicable had to be carried out) which are indicated in Paragraph 1 (wording of 18 May 2000) Article 4 (which, as mentioned above, was titled “State Regulatory Measures”) of the Law on Sugar included neither the duty of sugar manufacturers to export any portion of quota white sugar, also the amount in proportion to the white sugar production quota allocated to the respective manufacturer (which is established in Item 2.3 of the government resolution of 26 September 2001), nor any measures of economic influence, which had to be applied when the latter duty, which had not been established in the law, was not implemented (nor did it contain the measure provided for in Item 2.4 of the government resolution of 26 September 2001), nor the white sugar export tasks to sugar manufacturers established by the act of the Ministry of Agriculture (i.e. the order of the Minister of Agriculture, which is indicated in Item 2.1 of the government resolution of 12 June 2002). It should also be noted that neither did the duty of sugar manufacturers to export some portion of the quota white sugar (also the amount in proportion to the allocated white sugar production quota allocated to the respective sugar manufacturer), nor the possibility, when this duty was not carried out, to apply any measures of economic influence (also in a certain amount to reduce the white sugar production quota for the next year), nor the possibility of establishing, by means of an act of the Ministry of Agriculture (i.e. through an order of the Minister of Agriculture), white sugar export tasks to the sugar manufacturers stem from Paragraph 2 Article 4 of the Law on Sugar (wording of 8 July 1999) according to which the Government of the Republic of Lithuania or an institution authorised by it may apply other regulatory measures of the sugar market, which protect the interests of sugar beet growers, sugar producers and users, and which (in the aspect under investigation) cannot be construed in a broader sense.

14. In the context of the constitutional justice case at issue, it should also be emphasised that the state sugar policy execution measures indicated in the impugned items (provisions thereof) of the government resolutions of 26 September 2001 and 12 June 2002 were neither explicitly nor implicitly established in other articles (parts thereof) of the Law on Sugar (wording of 8 July 1999 with amendments and supplements made by the Law on Amending Articles 2, 4, 5, 6 and 7 of the Law on Sugar adopted by the Seimas on 18 May 2000) which was valid at that time, or any other laws.

15. Taking into consideration the arguments set forth, the conclusion should be drawn that Items 2.3 and 2.4 of the Government Resolution (No. 1170) “On Measures for Regulating the Sugar Market”, the provision “To oblige the Ministry of Agriculture: 2.1. taking into account the sugar balance of nine months of 2002, by 20 October 2002, to prepare and confirm the procedure and tasks for export of the white sugar manufactured from sugar beets of the 2002 harvest” of Item 2 of the Government Resolution (No. 879) “On Amending the Resolution of the Government of Lithuania (No. 284) ‘On the Establishment of White Sugar Production Quota’ of 12 March 2001” of 12 June 2002 were in conflict with Paragraph 1 (wording of 18 May 2000) and Paragraph 2 (wording of 8 July 1999) Article 4 of the Law on Sugar.

16. Having held this, in this constitutional justice case Constitutional Court will not investigate whether Items 2.3 and 2.4 of the government resolution of 26 September 2001 and the provision “To oblige the Ministry of Agriculture: 2.1. taking into account the sugar balance of nine months of 2002, by 20 October 2002, to prepare and confirm the procedure and tasks for export of the white sugar manufactured from sugar beets of the 2002 harvest” of Item 2 of the government resolution of 12 June 2002 are not in conflict with Item 4 of Paragraph 1 of Article 7 and Item 1 of Paragraph 1 of Article 8 of the Law on Agricultural and Rural Development.

V

On the compliance of Items 2.3 and 2.4 of the Government Resolution (No. 1170) “On Measures for Regulating the Sugar Market”, the provision “To oblige the Ministry of Agriculture: 2.1. taking into account the sugar balance of nine months of 2002, by 20 October 2002, to prepare and confirm the procedure and tasks for export of the white sugar manufactured from sugar beets of the 2002 harvest” of Item 2 of the Government Resolution (No. 879) “On Amending the Resolution of the Government of Lithuania (No. 284) ‘On the Establishment of White Sugar Production Quota’ of 12 March 2001” of 12 June 2002 with Paragraph 2 of Article 5, Paragraph 1 of Article 46 and Item 2 of Article 94 of the Constitution and the constitutional principle of a state under the rule of law.

1. As mentioned above, while forming and implementing the state sugar policy, as well as choosing the measures and methods for implementing this policy, the Government must follow, inter alia, the laws, that, under the Constitution, the essential conditions for economic activity and prohibitions as well as limitations having an essential impact on the said activity, the measures of economic influence, which may have an essential impact on the economic activity, and which may be applied when the established obligations are not carried out or are carried out improperly, may be established only by means of a law.

2. It has been held that the legal regulation established in impugned Items 2.3 and 2.4 of the government resolution of 26 September 2001, as well as in the impugned provision of Item 2 of the resolution of 12 June 2002, is related to the establishment of the essential conditions of economic activity and the measures of economic influence for the participants of the sugar market when the set obligations are not carried or are carried out improperly, also that this legal regulation was in conflict with Paragraph 1 (wording of 18 May 2000) and Paragraph 2 (wording of 8 July 1999) of Article 4 of the Law on Sugar.

3. Having held this, also taking into consideration the close relationship of Paragraph 1 of Article 46 of the Constitution with Paragraphs 2 and 3 of this article, it should also be held that Items 2.3 and 2.4 of the Government Resolution (No. 1170) “On Measures for Regulating the Sugar Market”, the provision “To oblige the Ministry of Agriculture: 2.1. taking into account the sugar balance of nine months of 2002, by 20 October 2002, to prepare and confirm the procedure and tasks for export of the white sugar manufactured from sugar beets of the 2002 harvest” of Item 2 of the Government Resolution (No. 879) “On Amending the Resolution of the Government of Lithuania (No. 284) ‘On the Establishment of White Sugar Production Quota’ of 12 March 2001” of 12 June 2002 are in conflict with Paragraph 2 Article 5, Paragraphs 1, 2 and 3 of Article 46, Item 2 of Article 94 of the Constitution and with the constitutional principle of a state under the rule of law.

4. Alongside, it should be also emphasised that the statement (in this ruling of the Constitutional Court) that the impugned legal regulation established in the government resolutions of 26 September 2001 and 12 June 2002 is in conflict with, inter alia, Paragraphs 1, 2 and 3 of Article 46 of the Constitution cannot be construed as meaning that the state in general cannot execute such economic policy, nor that the law in general cannot provide for any such legal regulation of the economic activity so that the manufacturing of certain production would be supported, promoted in other ways or related to other conditions, by taking into consideration, inter alia, whether this production (part thereof) is exported, nor that such legal regulation established by law in itself should or could be assessed as violating the values determining the bases of the economy of the Nation—the right of private ownership, freedom of individual economic activity and initiative (Paragraph 1 of Article 46 of the Constitution), the obligation of the state to support economic efforts and initiative that are useful to society (Paragraph 2 of Article 46 of the Constitution), and the constitutional imperative of regulation of the economic activity so that it would serve the general welfare of the Nation (Paragraph 3 of Article 46 of the Constitution).

Conforming to Articles 102 and 105 of the Constitution of the Republic of Lithuania and Articles 1, 53, 54, 55 and 56 of 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 Items 2.3 and 2.4 of the Resolution of the Government of the Republic of Lithuania (No. 1170) “On Measures for Regulating the Sugar Market” (Official Gazette Valstybės žinios, 2001, No. 83-2901), the provision “To oblige the Ministry of Agriculture: 2.1. taking into account the sugar balance of nine months of 2002, by 20 October 2002, to prepare and confirm the procedure and tasks for export of the white sugar manufactured from sugar beets of the 2002 harvest” of Item 2 of the Resolution of the Government of the Republic of Lithuania (No. 879) (Official Gazette Valstybės žinios, 2002, No. 60-2442) are in conflict with Paragraph 2 of Article 5, Paragraphs 1, 2 and 3 of Article 46, Item 2 of Article 94 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law.

2. To recognise that Items 2.3 and 2.4 of the Resolution of the Government of the Republic of Lithuania (No. 1170) “On Measures for Regulating the Sugar Market” (Official Gazette Valstybės žinios, 2001, No. 83-2901), the provision “To oblige the Ministry of Agriculture: 2.1. taking into account the sugar balance of nine months of 2002, by 20 October 2002, to prepare and confirm the procedure and tasks for export of the white sugar manufactured from sugar beets of the 2002 harvest” of Item 2 of the Resolution of the Government of the Republic of Lithuania (No. 879) “On Amending the Resolution of the Government of Lithuania (No. 284) ‘On the Establishment of White Sugar Production Quota’ of 12 March 2001” of 12 June 2002 (Official Gazette Valstybės žinios, 2002, No. 60-2442) were in conflict with Paragraph 1 (wording of 18 May 2000) and Paragraph 2 (wording of 8 July 1999) of Article 4 of the Republic of Lithuania’s Law on Sugar.

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

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

Justices of the Constitutional Court:             Armanas Abramavičius

                                                                                  Toma Birmontienė

                                                                                  Egidijus Kūris

                                                                                  Kęstutis Lapinskas

                                                                                  Zenonas Namavičius

                                                                                  Ramutė Ruškytė

                                                                                  Vytautas Sinkevičius

                                                                                  Stasys Stačiokas

                                                                                  Romualdas Kęstutis Urbaitis