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On competition in the sphere of waste management services

Case No. 44/2011

 

 

THE CONSTITUTIONAL COURT OF THE REPUBLIC OF LITHUANIA

IN THE NAME OF THE REPUBLIC OF LITHUANIA

 

RULING

ON THE COMPLIANCE OF PARAGRAPH 4 OF ARTICLE 30 OF THE REPUBLIC OF LITHUANIA’S LAW ON WASTE MANAGEMENT (WORDING OF 1 JULY 2002) WITH THE CONSTITUTION OF THE REPUBLIC OF LITHUANIA

 

5 March 2015, No. KT9-N5/2015

Vilnius

 

The Constitutional Court of the Republic of Lithuania, composed of the Justices of the Constitutional Court: Elvyra Baltutytė, Vytautas Greičius, Danutė Jočienė, Pranas Kuconis, Gediminas Mesonis, Vytas Milius, Egidijus Šileikis, Algirdas Taminskas, and Dainius Žalimas

The court reporter—Daiva Pitrėnaitė

The Constitutional Court of the Republic of Lithuania, pursuant to Articles 102 and 105 of the Constitution of the Republic of Lithuania and Articles 1 and 531 of the Law on the Constitutional Court of the Republic of Lithuania, at the Court’s hearing, on 5 February 2015, considered, under written procedure, constitutional justice case No. 44/2011 subsequent to petition No. 1B-55/2011 of the Supreme Administrative Court of Lithuania, the petitioner, requesting an investigation into whether the provision “Municipalities may assign (as a mandatory task) the exploitation of the municipal waste management system to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality” of Paragraph 4 of Article 30 of the Republic of Lithuania’s Law on Waste Management (wording of 1 July 2002) was in conflict with Paragraph 1 of Article 29 and Paragraphs 1, 3, and 4 of Article 46 of the Constitution of the Republic of Lithuania.

The Constitutional Court

has established:

I

1. The Supreme Administrative Court of Lithuania, the petitioner, was considering an administrative case concerning the lawfulness of the Resolution (No. 2S-27) “On the Compliance of the Decisions Adopted by the Municipalities on the Delegation of Functions to Regional Waste Management Centres with the Requirements of Article 4 of the Republic of Lithuania’s Law on Competition” of the Competition Council of the Republic of Lithuania of 24 December 2008. By this resolution, the Competition Council recognised that the provisions of certain decisions adopted by the municipalities of Klaipėda, Šiauliai, and Telšiai Counties and/or the provisions of the contracts concluded on the basis of the said decisions, insofar as these provisions concerned the assignment of the functions of municipal waste recovery and disposal to certain regional waste management centres, without offering other economic subjects uniform competitive conditions for providing the same services, were in conflict with the requirements of Article 4 of the Republic of Lithuania’s Law on Competition.

The petitioner applied to the Constitutional Court on the grounds of doubts regarding the compliance of the provision “Municipalities may assign (as a mandatory task) the exploitation of the municipal waste management system to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality” of Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002) with the Constitution.

2. The petition of the Supreme Administrative Court of Lithuania, the petitioner, is substantiated by the following arguments.

2.1. The impugned Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002) provided for two ways of organising a municipal waste management system: municipalities could assign (as a mandatory task) the exploitation of the municipal waste management system to a company established by a certain municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality; municipalities could also hold a tender to select the operators (waste managers) of services in the area of the exploitation and development of the municipal waste management system; and in cases where waste holders were charged a local levy for the collection and management of municipal waste, municipalities were required to organise a public call for tenders for awarding contracts for the provision of services in the area of municipal waste management (exploitation and development of the municipal waste management system). In the jurisprudence of the Supreme Administrative Court of Lithuania, it is noted that these alternatives were independent; therefore, the requirement that a public call for tenders be organised where a local levy was charged did not have to be applied in cases where a municipality would choose to assign (as a mandatory task) the performance of the functions in question to a company established by that municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality. Thus, under Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002), municipalities could grant the special (exclusive) rights to provide municipal waste recovery and/or disposal services to one subject without any tendering procedure.

2.2. The analysis of the content of Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002), in addition to a systemic interpretation of the whole Law on Waste Management, as well as, among other things, the meaning of the notions “waste management”, “municipal waste management system”, and “waste manager”, as used in the law in question, lead to the reasoning that Paragraph 4 of Article 30 of the Law on Waste Management was designated to regulate economic activity, i.e. such activity when waste management services are provided for a payment. The impugned legal regulation consolidated the possibility of granting one economic subject the exceptional (exclusive) right to carry out a particular economic activity in a certain waste management market; this means that municipalities were given the opportunity, in principle, to eliminate all competition in the waste management system. Without a tender or any other competitive procedure, a municipality could choose to whom it would grant (assign) the right to carry out the economic activity of waste management, inter alia, waste recovery and disposal, and, thus, to monopolise the particular market. Such a legal regulation, failing to consolidate any safeguards to ensure fair competition (for example, the requirement that a call for tenders or any other procedure ensuring competition must be organised), laid down preconditions for the groundless granting of privileges to one economic subject, as well as for discrimination against other potential participants in a certain municipal waste management market. Upon the consolidation of the possibility for the companies, establishments, or organisations established by a municipality to be assigned by the municipalities to carry out the economic activity of waste management without any competition with private subjects, the said companies were given much more favourable conditions to carry out the economic activity in question compared to private economic subjects, although there were no such differences among the companies, establishments, or organisations established by municipalities, on the one hand, and private companies, on the other, that could justify such an exceptional legal status granted to the companies, establishments, or organisations established by municipalities. Such a legal regulation denied the equality of the rights of economic subjects and fair competition among them, limited freedom and initiative of economic activity, implied the unjustifiable establishment of a monopoly, and, thus, could not serve the general welfare of the nation as a constitutional value.

II

In the course of the preparation of the case for the Constitutional Court’s hearing, written explanations were received from Darius Karvelis, an adviser at the Office of the Seimas Committee on Environment Protection, acting as the representative of the Seimas of the Republic of Lithuania, the party concerned. In the explanations, Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002) is argued to have been not in conflict with the Constitution. The position of the representative of the Seimas is substantiated by the following arguments.

Under Item 20 of Article 7 of the Republic of Lithuania’s Law on Local Self-Government (wording of 12 October 2000), the development of municipal waste management systems, the organisation of the collection and reprocessing of secondary raw materials, and the establishment and exploitation of landfills were included among the functions delegated to municipalities by the state (i.e., limited independent functions). Under Paragraph 2 of Article 5 of the same law, municipal functions, according to the nature of activity, were divided into public administration and the provision of public services; public services were to be provided by service providers established by municipalities, or other legal and natural persons under contracts concluded with municipalities. Thus, municipalities were not authorised to provide by themselves any public services (including supervision over the municipal waste management system), and these functions had to be delegated to other subjects specified by the law. In addition, a municipality had to delegate the exploitation (operation) of the municipal waste management system to be carried out (through organisational, technical, and legal means) by a company established by that municipality or several municipalities, so that the municipality could implement its functions rather than engage in economic activity and receive revenue.

III

1. In the course of the preparation of the case for the Constitutional Court’s hearing, written opinions were received from Šarūnas Keserauskas, the Chair of the Competition Council of the Republic of Lithuania, Rimantas Čepas, the Deputy Director of the Association of Local Authorities in Lithuania, Deividas Kriaučiūnas, the Director General of the European Law Department under the Ministry of Justice of the Republic of Lithuania, and Almantas Petkus, a Vice Minister of Environment of the Republic of Lithuania.

2. In the course of the preparation of the case for the Constitutional Court’s hearing, explanations were provided by the following specialists: Vilma Karosienė, the Director of the Waste Department of the Ministry of Environment of the Republic of Lithuania, Laura Zukė, the Head of the Waste Management Division of the same department, and Reda Skirkevičiūtė, the Head of the Law Application Division of the Law and Personnel Department of the Ministry of Environment.

The Constitutional Court

holds that:

I

1. The petitioner requests an investigation into whether the provision “Municipalities may assign (as a mandatory task) the exploitation of the municipal waste management system to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality” of Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002) was in conflict with Paragraph 1 of Article 29 and Paragraphs 1, 3, and 4 of Article 46 of the Constitution.

2. It has been mentioned that the petitioner was considering the administrative case where it had to assess the lawfulness of the resolution adopted by the Competition Council. By the resolution in question, the Competition Council recognised that the provisions of certain decisions adopted by several municipalities and/or the provisions of the contracts concluded on the basis of the said decisions, insofar as these provisions concerned the assignment of the functions of municipal waste recovery and disposal to certain regional waste management centres, were in conflict with the requirements of Article 4 of the Law on Competition.

The impugned provision of Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002) was set forth as follows:

Municipalities may assign (as a mandatory task) the exploitation of the municipal waste management system to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality. Municipalities may also hold a tender to select the operators (waste managers) of services in the area of the exploitation and development of the municipal waste management system, or, in cases where municipalities decide that waste holders are to be charged a local levy for the collection and management of municipal waste, they must organise a public call for tenders for the provision of services in the area of municipal waste management (the exploitation and development of municipal waste management system).”

Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002) makes it clear that the exploitation of the municipal waste management system comprised, inter alia, municipal waste management, which, under Paragraph 10 of Article 2 “The Main Notions of This Law” of the Law on Waste Management (wording of 1 July 2002), included waste collection, transportation, recovery, and disposal, as well as supervision over waste management activity and over closed waste disposal sites. In Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002), the notions “operators of services in the area of the exploitation and development of the municipal waste management system” and “waste managers” were used synonymously.

3. Thus, although the petitioner requests an investigation into the constitutionality of the entire provision “Municipalities may assign (as a mandatory task) the exploitation of the municipal waste management system to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality” of Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002), from the petition and the material of the administrative case concerned, it is clear that the petitioner has had doubts regarding the compliance of the said provision with the Constitution insofar as, under the legal regulation laid down in this provision, municipalities could assign (as a mandatory task) the performance of the activity of municipal waste recovery and disposal to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality.

In view of this, in the constitutional justice case at issue, the Constitutional Court will investigate whether the provision “Municipalities may assign (as a mandatory task) the exploitation of the municipal waste management system to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality” of Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002), insofar as under the legal regulation laid down in this provision, municipalities could assign (as a mandatory task) the performance of the activity of municipal waste recovery and disposal to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality, was in conflict with Paragraph 1 of Article 29 and Paragraphs 1, 3, and 4 of Article 46 of the Constitution.

II

1. On 16 June 1998, the Seimas adopted the Law on Waste Management, which came into force (with certain exceptions) on 1 July 1998. This law laid down the general requirements for the prevention, record-keeping, collection, sorting, storing, transportation, recovery, and disposal of waste in order to avoid a negative impact of waste on the environment and human health, as well as established the functions of state authority institutions and other legal and natural persons in the area of waste management (Paragraph 1 of Article 1).

Article 4 “The Organisation of Waste Management” of the Law on Waste Management prescribed that municipal waste management, including collecting waste from residents, was to be organised by municipalities (Paragraph 3), as well as that enterprises collecting, sorting, transporting, storing, recovering, and disposing waste must register themselves according to the procedure set by the Government or an institution authorised by the Government (5 Paragraph).

It should be noted that this law did not contain any provisions regulating the procedure for selecting municipal waste managers.

2. On 1 July 2002, the Seimas adopted the Republic of Lithuania’s Law Amending the Law on Waste Management, which came into force (with certain exceptions) on 1 January 2003 and set forth the Law on Waste Management in its new wording.

2.1. Article 30 “The Organisation of Municipal Waste Management Systems” of the Law on Waste Management (wording of 1 July 2002), the provisions of Paragraph 4 of which laid down the legal regulation impugned by the petitioner, prescribed:

1. Municipalities shall organise municipal waste management systems necessary for the management of waste generated in their territories. These systems may cover the management of all waste with the exception of waste generated by enterprises whose permits for the use of natural resources set such waste management requirements that cannot be fulfilled in the municipal waste management systems organised by municipalities.

2. Municipal waste management systems must be organised in such a way that would encourage waste recovery and recycling.

3. Municipal waste management systems must be organised in such a way that would provide cities, towns, and villages with the following:

1) a means of collecting and transporting waste;

2) a means of sorting waste at places of waste accumulation. The means of sorting must ensure that secondary raw materials are collected in a way convenient for persons;

3) a means of collecting separately different flows of municipal waste—household waste generated from construction and demolition, bulky waste (furniture, home appliances, etc.), used tyres;

4) a means of collecting separately household-generated hazardous waste.

4. Municipalities may assign (as a mandatory task) the exploitation of the municipal waste management system to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality. Municipalities may also hold a tender to select the operators (waste managers) of services in the area of the exploitation and development of the municipal waste management system, or, in cases where municipalities decide that waste holders are to be charged a local levy for the collection and management of municipal waste, they must organise a public call for tenders for the provision of services in the area of municipal waste management (the exploitation and development of the municipal waste management system).

5. Enterprises engaged in collecting municipal waste, including collecting secondary raw materials, may carry out this activity in the territory of particular municipalities only in cases where they have concluded contracts with those municipalities.”

2.2. The impugned provision “Municipalities may assign (as a mandatory task) the exploitation of the municipal waste management system to a company established by a certain municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality” of Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002) should be construed in conjunction with other provisions of the Law on Waste Management (wording of 1 July 2002).

2.2.1. As mentioned before, Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002) makes it clear that the exploitation of a municipal waste management system comprised, inter alia, municipal waste management, which, under Paragraph 10 of Article 2 of the Law on Waste Management (wording of 1 July 2002), included the collection, transportation, recovery, and disposal of waste, as well as supervision over waste management activity and closed waste disposal sites; in Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002), the notions “operators of services in the area of the exploitation and development of a municipal waste management system” and “waste managers” were used synonymously.

It should be noted that, under Paragraph 12 of Article 2 of the Law on Waste Management (wording of 1 July 2002), a “waste manager” was defined as “an enterprise or other legal entity engaged in waste management in accordance with the requirements of this Law and other legal acts”, i.e. as a subject carrying out any activity in the area of waste management, inter alia, waste recovery and disposal.

2.2.2. In this context, it should be noted that, under Paragraph 16 of Article 2 of the Law on Waste Management (wording of 1 July 2002), a “municipal waste management system” was defined as “the whole of the organisational, technical, and legal measures related to the implementation of the functions of municipalities in the area of waste management”, and Paragraph 1 of Article 30 of this law prescribed that “Municipalities shall organise municipal waste management systems necessary for the management of waste generated in their territories”.

While construing the impugned provision of Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002) in conjunction with the aforementioned provisions of Paragraph 16 of Article 2 and Paragraph 1 of Article 30, it should be noted that, under the impugned provision, municipalities could assign, as a mandatory task, the exploitation of the municipal waste management system to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality. In view of the aforementioned definition of waste management under Paragraph 10 of Article 2 of the Law on Waste Management (wording of 1 July 2002), such an assignment by a municipality could involve carrying out the activity of municipal waste recovery and disposal.

2.2.3. The impugned provision “Municipalities may assign (as a mandatory task) the exploitation of the municipal waste management system to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality” of Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002) is linked to another provision of the same paragraph: “Municipalities may also hold a tender to select the operators (waste managers) of services in the area of the exploitation and development of the municipal waste management system, or, in cases where municipalities decide that waste holders are to be charged a local levy for the collection and management of municipal waste, they must organise a public call for tenders for the provision of services in the area of municipal waste management (the exploitation and development of the municipal waste management system).”

The legal regulation laid down in Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002) makes it clear that this paragraph, inter alia, provided for two means of selecting municipal waste managers: the assignment of the performance of waste management activity (as a mandatory task) to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality, as well as a tender for waste managers. In view of the fact that, as mentioned before, under Paragraph 10 of Article 2 of the Law on Waste Management (wording of 1 July 2002), waste management included, inter alia, the activity of the collection, transportation, recovery, and disposal of waste, it should be noted that the aforementioned two means of selecting municipal waste managers—assignment and a tender—could be applied in selecting, inter alia, subjects for carrying out the activity of municipal waste recovery and disposal.

Thus, in interpreting the impugned provision of Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002) in conjunction with other provisions of the same law from the aspect relevant to the constitutional justice case at issue, it should be noted that the impugned provision provided for one of the means to be used by municipalities for selecting municipal waste managers for carrying out the activity of municipal waste recovery and disposal, i.e. the assignment of the performance of the activity of municipal waste recovery and disposal (as a mandatory task) to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality.

3. The impugned provision “Municipalities may assign (as a mandatory task) the exploitation of the municipal waste management system to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality” of Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002) should also be construed in the context of other Republic of Lithuania’s laws relevant to the constitutional justice case at issue.

3.1. Under the Law on Local Self-Government (wording of 12 October 2000), the development of municipal waste management systems, the organisation of the collection and reprocessing of secondary raw materials, and the establishment and exploitation of landfills were included among the functions delegated to municipalities by the state (i.e., limited independent functions) (Item 20 of Article 7). After, on 15 September 2008, the Seimas adopted the Republic of Lithuania’s Law Amending the Law on Local Self-Government, which set forth the Law on Local Self-Government (wording of 12 October 2000) in a new wording, the function in question was included among the independent functions of municipalities (functions established (assigned) to municipalities by the Constitution and laws) (Item 31 of Paragraph 1 of Article 6 of the Law on Local Self-Government (wording of 15 September 2008)).

In this context, it should be noted that, under the Law on Local Self-Government (wordings of 12 October 2000 and 15 September 2008), the functions of municipalities are defined as, inter alia, functions assigned under laws to municipalities in the area of public administration and the provision of public services (Paragraph 8 of Article 3). Thus, the development of municipal waste management systems, as well as the establishment and exploitation of landfills, as a function assigned to municipalities under the Law on Local Self-Government, also includes the organisation of municipal waste management systems, inter alia, the provision of public services in the area of waste management (inter alia, waste recovery and disposal).

3.1.1. Under the Law on Local Self-Government (wordings of 12 October 2000 and 15 September 2008), a municipality is responsible for the provision of public services to residents (Paragraph 1 of Article 10 and Paragraph 1 of Article 8, respectively); a municipality must ensure that all residents of the municipality could make use of public services and that such services are rendered continuously (Paragraph 7 of Article 10 and Paragraph 3 of Article 8, respectively); a municipality sets up new providers of public services only in cases where other available providers do not render public services or cannot render economical and good quality public services to residents (Paragraph 5 of Article 10 and Paragraph 2 of Article 9, respectively). It should be mentioned that Paragraph 2 of Article 5 of the Law on Local Self-Government (wording of 12 October 2000) prescribed that public services were to be rendered by service providers established by municipalities, or by other natural or legal persons on the basis of the concluded contracts; this provision was subsequently supplemented with the requirement that other natural or legal persons be selected through public procedures (Paragraph 2 (wording of 28 January 2003) of Article 5 of the Law on Local Self-Government (wording of 12 October 2000)). The provision that public services are rendered by service providers established by municipalities, or by other natural or legal persons on the basis of the contracts concluded according to public procedures is similarly consolidated in Paragraph 2 of Article 5 of the Law on Local Self-Government (wording of 15 September 2008).

3.1.2. It should be noted that the Law on Local Self-Government (wordings of 12 October 2000 and 15 September 2008) consolidates, as one of the principles of local self-government, the principle of the lawfulness of municipal activities and decisions adopted by municipal institutions, according to which “activities of municipal institutions and other municipal public administration entities, as well as decisions taken on all the issues related to their activities, must meet the requirements of laws and other legal acts” (Item 8 of Article 4 and Item 6 of Article 4, respectively).

3.1.3. In summing up the legal regulation laid down in the Law on Local Self-Government (wordings of 12 October 2000 and 15 September 2008) from the aspect relevant to the constitutional justice case at issue, it should be noted that:

municipalities are responsible, inter alia, for the uninterrupted provision of good quality and accessible public services in the area of waste management (inter alia, waste recovery and disposal);

public services in the area of waste management (inter alia, waste recovery and disposal) must be rendered by available (established by municipalities, or other) service providers; new providers of these services may be established by municipalities only in cases where there are no other providers of these services, or the available providers cannot render these services to residents economically and in good quality;

when adopting decisions in the course of implementing their functions, inter alia, in the area of municipal waste management (inter alia, waste recovery and disposal), municipalities must pay heed to the principle of lawfulness, i.e. they must observe the requirements of law and other legal acts; these requirements must also be observed by municipalities, inter alia, in cases where they select providers of public services in the area of waste recovery and disposal.

3.2. In this context, consideration should be given to the Republic of Lithuania’s Law on Competition, adopted on 23 March 1999. The purpose of this law is to protect freedom of fair competition in the Republic of Lithuania (Paragraph 1 of Article 1).

3.2.1. Article 4 “The Duty of State and Local Self-Government Institutions to Ensure Freedom of Fair Competition” of the Law on Competition (wording of 23 March 1999) prescribed that, when carrying out the assigned tasks related to the regulation of economic activity in the Republic of Lithuania, state and local self-government institutions must ensure freedom of fair competition (Paragraph 1); these institutions were prohibited from adopting any such legal acts or other decisions that grant privileges to or discriminate against individual economic subjects or their groups, or any such legal acts or other decisions that create or may create differences in the conditions of competition among competing economic subjects in a certain market, except where differences in competition conditions are unavoidable in order to comply with the requirements of the laws of the Republic of Lithuania (Paragraph 2).

It should be mentioned that Article 4 of the Law on Competition was amended by Article 3 of the Republic of Lithuania’s Law Amending and Supplementing Articles 1, 3, 4, 10, 13, 14, 19, 20, 23, 24, 26, 28, 29, 30, 31, 40, 41, 42, 43, 44, and 49, as well as the Annex, of the Law on Competition, adopted by the Seimas on 9 April 2009, by replacing the notion “state and local self-government institutions” with the notion “public administration subjects”; however, the content of the duty to ensure freedom of fair competition remained unchanged. The same duty of public administration subjects (inter alia, municipal institutions) is consolidated in Article 4 of the Law on Competition of the new wording, as set forth by the Republic of Lithuania’s Law Amending the Law on Competition, which was adopted by the Seimas on 22 March 2012.

3.2.2. As mentioned before, the impugned provision of Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002) provided for one of the means used by municipalities for the selection of municipal waste managers for carrying out the activity of municipal waste recovery and disposal, i.e. the assignment of the performance of the activity of municipal waste recovery and disposal (as a mandatory task) to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality.

While interpreting this provision in conjunction with the legal regulation laid down in Article 4 of the Law on Competition (wordings of 23 March 1999 and 22 March 2012), it should be noted that, when adopting decisions on assigning (as a mandatory task) the performance of the activity of municipal waste recovery and disposal to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality, municipalities were under the duty to assess the impact of these decisions on fair competition and, inter alia, avoid taking decisions that grant privileges to or discriminate against individual economic subjects or their groups, or decisions that create or may create differences in the conditions of competition among competing economic subjects in a certain market.

4. In summing up, from the aspect relevant to the constitutional justice case at issue, the impugned legal regulation, as established in the provision “Municipalities may assign (as a mandatory task) the exploitation of the municipal waste management system to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality” of Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002), and as construed in conjunction with other related provisions of the Law on Waste Management (wording of 1 July 2002), the Law on Local Self-Government (wordings of 12 October 2000 and 15 September 2008), and the Law on Competition (wordings of 23 March 1999 and 22 March 2012), it should be noted that:

the impugned provision of Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002) provided for one of the means used by municipalities for the selection of municipal waste managers for the provision of services in the area of municipal waste recovery and disposal, i.e. the assignment of the performance of the activity of municipal waste recovery and disposal (as a mandatory task) to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality; the other means established for the selection of the providers of these services was a call for tenders;

when deciding on a means of selecting the providers of services in the area of municipal waste recovery and disposal, municipalities were under the duty to comply with the requirements established by laws and other legal acts, inter alia, to ensure freedom of fair competition, as well as the uninterrupted continuity of the provision of good quality and accessible public services in the area of waste recovery and disposal;

the assignment of the performance of the activity of municipal waste recovery and disposal (as a mandatory task) to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality, was permissible only in cases where such an assignment did not result in the granting of any privileges to the said company, establishment, enterprise, or organisation, or in any discrimination against other economic subjects operating in that market, and ensured the continuity, good quality, and accessibility of public services in the area of waste recovery and disposal.

5. On 19 April 2012, the Seimas adopted the Republic of Lithuania’s Law Amending and Supplementing Articles 2, 4, 25, 27, 28, 30, 31, and 35 of the Law on Waste Management and Supplementing the Law with Articles 301 and 302, which came into force (save for the exceptions specified in Article 11 of this law) on 31 December 2012.

Article 6 of this law amended Article 30 of the Law on Waste Management (wording of 1 July 2002), the provision of Paragraph 4 of which is impugned by the petitioner; the legal regulation establishing the procedure for selecting waste managers for the provision of the service of municipal waste management was laid down in Paragraph 11 of Article 30 “The Organisation of Municipal Waste Management Systems and the Ensuring of Their Functioning” (wording of 19 April 2012) of the Law on Waste Management (wording of 1 July 2002): “a municipality or, upon assignment by the municipality, the administrator of the municipal waste management system, in accordance with the procedure provided for under laws or other legal acts, shall select waste managers who provide the service of municipal waste management”.

Having, from the aspect impugned by the petitioner, compared the legal regulation laid down in Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002) with the legal regulation laid down in Paragraph 11 of Article 30 (wording of 19 April 2012) of the Law on Waste Management (wording of 1 July 2002), it should be noted that Paragraph 11 of Article 30 (wording of 19 April 2012) of the Law on Waste Management (wording of 1 July 2002) no longer contains any expressis verbis means established for municipalities for selecting waste managers who can provide the service in question; the latter paragraph consolidates the blanket norm under which a municipality or, upon assignment by the municipality, the administrator of the municipal waste management system, in accordance with the procedure provided for under laws or other legal acts, selects waste managers who provide the service of municipal waste management.

It should also be noted that the legal regulation established in Paragraph 11 of Article 30 (wording of 19 April 2012) of the Law on Waste Management (wording of 1 July 2002) is not a matter for an investigation in the constitutional justice case at issue.

III

1. Under Article 2 of the Constitutional Act “On Membership of the Republic of Lithuania in the European Union”, the norms of European Union law are a constituent part of the legal system of the Republic of Lithuania.

Consideration should be given to the following European Union legal provisions that consolidate the rules on competition and are relevant to the constitutional justice case at issue.

2. Paragraph 3 of Article 3 of the Treaty on the European Union (hereinafter referred to as the EU Treaty) stipulates: “The Union shall establish an internal market. It shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment. It shall promote scientific and technological advance.” Under Protocol No. 27 on the Internal Market and Competition, annexed to the EU Treaty and the Treaty on the Functioning of the European Union (hereinafter referred to as the TFEU), the internal market includes a system ensuring that competition is not distorted. Thus, the protection of competition is inseparable from the aims of the European Union.

3. The principal rules on competition in the European Union are consolidated in the TFEU, inter alia, Articles 101–109 thereof (for example, the rules related to agreements prohibited among undertakings, abuse by undertakings of their dominant position or of aid provided by the state).

3.1. Under Paragraph 1 of Article 106 of the TFEU, in the case of public undertakings and undertakings to which Member States grant special or exclusive rights, Member States are prohibited from enacting or maintaining in force any measure contrary to the rules contained in the Treaties, in particular to those rules that are provided for in Article 18 (prohibiting discrimination on the grounds of nationality) and Articles 101 to 109 (consolidating the rules on competition).

Paragraph 2 of Article 106 of the TFEU prescribes that undertakings entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly are subject to the rules contained in the Treaties, in particular to the rules on competition, insofar as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them.

The provisions of Article 106 of the TFEU are related to Article 14 of the TFEU, under which, without prejudice to Article 4 of the EU Treaty or to Articles 93, 106, and 107 of the TFEU, and given the place occupied by services of general economic interest in the shared values of the Union as well as their role in promoting social and territorial cohesion, the Union and the Member States, each within their respective powers and within the scope of the application of the Treaties, take care that such services operate on the basis of principles and conditions, particularly economic and financial conditions, that enable them to fulfil their missions.

3.2. In this context, it should be mentioned that, under Protocol No. 26 on Services of General Interest, annexed to the EU Treaty and the TFEU, the shared values of the Union in respect of services of general economic interest include in particular: the essential role and the wide discretion of national, regional and local authorities in providing, commissioning and organising services of general economic interest as closely as possible to the needs of the users; the diversity between various services of general economic interest and the differences in the needs and preferences of users that may result from different geographical, social, or cultural situations; a high level of quality, safety and affordability, equal treatment, and the promotion of universal access and of user rights (Article 1).

It also needs to be mentioned that, under Paragraph 70 of the statement part of Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market, services may be considered to be services of general economic interest only if they are provided in application of a special task in the public interest entrusted to the provider by the Member State concerned; this assignment should be made by way of one or more acts, the form of which is determined by the Member State concerned, and should specify the precise nature of the special task. Under Article 17 of this directive, services of general economic interest include the treatment of waste.

4. In this constitutional justice case, consideration should also be given to the relevant jurisprudence of the Court of Justice of the European Union in connection with the application of the rules on competition in the area of services of general economic interest.

4.1. The Court of Justice of the European Union has held that the management of particular waste may properly be considered to be capable of forming the subject of a service of general economic interest (the judgment of 23 May 2000 in case C-209/98 Entreprenørforeningens Affalds/Miljøsektion (FFAD) v. Københavns Kommune).

In the jurisprudence of the Court of Justice of the European Union, the provision of Paragraph 2 of Article 106 of the TFEU is interpreted as allowing Member States to confer, on undertakings to which they entrust the operation of services of general economic interest, exclusive rights that may hinder the application of the rules of the Treaty on competition insofar as a restriction on competition, or even the exclusion of all competition, by other economic operators is necessary to ensure the performance of the particular tasks assigned to the undertakings holding the exclusive rights (the judgment of 19 May 1993 in case C-320/91 Criminal Proceedings v. Paul Corbeau (Paragraph 14), the judgment of 1 July 2008 in case C-49/07 Motosykletistiki Omospondia Ellados NPID (MOTOE) v. Elliniko Dimosio (Paragraph 44)). Therefore, the question that must be considered is the extent to which a restriction on competition, or even the exclusion of all competition, by other economic operators is necessary to allow the holder of the exclusive right to perform its task of general interest and, in particular, to have the benefit of economically acceptable conditions (the judgment of 19 May 1993 in case C-320/91 Criminal Proceedings v. Paul Corbeau (Paragraph 16)). In order that the conditions for the application of Paragraph 2 of Article 106 of the TFEU be fulfilled, it is not necessary that the financial balance or economic viability of the undertaking entrusted with the operation of a service of general economic interest should be threatened; it is sufficient that, in the absence of the exclusive rights at issue, it would not be possible for the undertaking to perform the particular tasks entrusted to it, defined by reference to the obligations and constraints to which it is subject, or that maintenance of those rights is necessary to enable the holder thereof to perform tasks of general economic interest that have been assigned to it under economically acceptable conditions (the judgment of 3 March 2011 in case C-437/09 AG2R Prévoyance v. Beaudout Père et Fils SARL (Paragraph 76)).

4.2. It should be mentioned that the Court of Justice of the European Union has held on more than one occasion that contracting authorities must, among other things, observe the provisions of the primary law of the European Union (inter alia, Articles 43 and 49 of the former Treaty establishing the European Community) regarding the prohibition on restrictions on freedom of establishment and restrictions on freedom to provide services, as well as regarding equal treatment and non-discrimination on the grounds of nationality, and the duty of transparency stemming therefrom. The application of these rules, and also of the general principles of which they are the specific expression, is, however, excluded if the local body, which is the contracting authority, exercises over the contracting entity control similar to that which the authority exercises over its own departments and if, at the same time, that entity carries out the essential part of its activities with the controlling authority or authorities (the judgment of 10 September 2009 in case C-573/07 Sea Srl v. Comune di Ponte Nossa).

The two aforementioned conditions must be interpreted strictly, and the burden of proving the existence of exceptional circumstances justifying the derogation to those rules lies on the person seeking to rely on those circumstances (the judgment of 6 April 2006 in case C-410/04 Associazione Nazionale Autotrasporto Viaggiatori (ANAV) v. Comune di Bari and AMTAB Servizio SpA (Paragraph 26) and the judgment of 13 October 2005 in case C-458/03 Parking Brixen GmbH v. Gemeinde Brixen and Stadtwerke Brixen AG (Paragraph 63)). This exception to the application of the rules of EU law where the “similar control” conditions are fulfilled is applicable to a service concession as well as to a public service contract (the judgment of 29 November 2012 in joint cases C-182/11 and C-183/11 Econord SpA v. Comune di Cagno and Comune di Varese and Comune di Solbiate and Comune di Varese (Paragraph 26)).

5. In summing up the legal regulation of the European Union from the aspect relevant to the constitutional justice at issue, it should be noted that:

enterprises entrusted with the operation of services of general economic interest are subject to the rules on competition insofar as the application of these rules does not obstruct, in law or in fact, the performance of the particular tasks assigned to them;

services of general economic interest can include the management of waste;

in cases where Member States categorise services of waste management as services of general economic interest, the respective institutions of those Members States have wide discretion in organising the provision of these services in order to ensure, inter alia, a high level of quality, safety, and accessibility of these services;

Member States are allowed to grant exclusive rights to enterprises entrusted with the operation of services of general economic interest only in those cases where, upon granting such rights, a restriction on competition, or even the exclusion of all competition, is necessary to ensure the provision of these services under economically acceptable conditions;

any exceptions to the principles of competition, as well as to freedom of establishment and freedom to provide services, inter alia, if they are to be applied to the provision of services of general economic interest and the conclusion of contracts between state institutions and entities controlled by them, must be interpreted strictly.

In this context, it should be noted that European Union law does not preclude Member States from establishing more stringent rules from the point of view of competition law to ensure greater protection from actions contrary to competition.

6. In the context of the constitutional justice case at issue, reference should also be made to the jurisprudence of the European Court of Human Rights (hereinafter referred to as the ECtHR), which, as held by the Constitutional Court on more than one occasion, is important for the construction and application of Lithuanian law. In its judgment of 10 January 2012 in the case Di Sarno and Others v. Italy (petition No. 30765/08), the ECtHR held that the collection, treatment, and disposal of waste are dangerous activities; that being so, the state is under a positive obligation to take reasonable and adequate steps to protect the right of the people concerned, as consolidated in Article 8 of the Convention for the Protection of Human Rights and Fundamental Freedoms (hereinafter referred to as the Convention), to respect for their homes and their private life and, more generally, the right to live in a safe and healthy environment. In the same judgment, the ECtHR also noted that the fact that the Italian authorities handed over the management of a certain public service in the area of waste treatment and disposal to third parties did not relieve them of the duty of care incumbent on them under Article 8 of the Convention. This judgment of the ECtHR makes it clear that, regardless of the broad margin of appreciation left to the state in the regulation of waste management, under Article 8 of the Convention, the state is obliged to fulfil its positive duty to appropriately regulate and organise the activities in question in order to protect human health and welfare.

IV

1. In the constitutional justice case at issue, the petitioner impugns the compliance of the provision “Municipalities may assign (as a mandatory task) the exploitation of the municipal waste management system to a company established by a municipality or to a waste management establishment, enterprise, or organisation established by more than one municipality” of Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002) with Paragraph 1 of Article 29 and Paragraphs 1, 3, and 4 of Article 46 of the Constitution.

2. Article 46 of the Constitution prescribes:

The economy of Lithuania shall be based on the right of private ownership, freedom of individual economic activity, and economic initiative.

The State shall support economic efforts and initiative that are useful to society.

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

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

The State shall defend the interests of the consumer.”

As the Constitutional Court has held on more than one occasion, the principles consolidated in Article 46 of the Constitution make up the whole—the constitutional basis for the economy of this country; therefore, the provisions of all the paragraphs of this article are interrelated and supplement each other; the balance is maintained among the principles consolidated therein; each of these principles should be construed without denying the other principles, and, if a legal norm in one of the paragraphs of this article is violated, the legal norms laid down in the other paragraphs of this article are violated as well, or preconditions are created for their violation. The Constitutional Court’s acts (inter alia, the Constitutional Court’s rulings of 5 March 2008, 29 April 2009, 29 September 2010, 6 January 2011, and 15 January 2015) set out the broad official constitutional doctrine disclosing the content of the provisions of Article 46 of the Constitution.

2.1. The Constitutional Court has noted that freedom of individual economic activity and economic initiative imply, inter alia, freedom of the conclusion of contracts, freedom of fair competition, the equality of the rights of economic subjects, etc.; freedom of individual economic activity and economic initiative are inseparable from the possibilities for a person, who is willing to engage in an economic activity or, conversely, who is willing to give it up, to enter the market and abandon it without any artificial barriers (the Constitutional Court’s rulings of 31 May 2006, 2 March 2009, 29 April 2009, and 15 January 2015).

2.2. The Constitutional Court has also held on more than one occasion that freedom of economic activity is not absolute; a person may exercise this freedom in accordance with certain mandatory requirements and limitations; it is impermissible, by means of any established limitations, to deny the essential provisions of freedom of economic activity, such as the equality of the rights of economic subjects, fair competition, etc.; the state, when regulating economic activity, must follow the principle of the reconciliation of the interests of the person and society, must ensure the interests of both a private person (a subject of economic activity) and society, and must seek not the welfare of individual persons, but precisely the general welfare of the nation, which can be opposed to the welfare, rights, and legitimate interests of neither the economic subject whose activity falls under the regulation, nor the persons that have established, have control over, or are otherwise connected with the said economic subject; the fact that economic activity serves the general welfare of the nation may not substantiate or justify any regulation by which the rights and legitimate interests of a certain economic subject would be limited more than necessary for ensuring the public interest, or by which unfavourable and unequal conditions for conducting economic activity would be created for economic subjects, the initiative of economic subjects would be limited, or no opportunities would be created for such an initiative (inter alia, the Constitutional Court’s rulings of 9 April 2002, 2 March 2009, 29 September 2010, and 15 January 2015).

2.3. In the regulation of economic activity, the protection of fair competition is the main method to ensure harmony between the interests of the person and society, as well as to create the self-regulation of economy as a system, which promotes the optimal distribution of economic resources and their efficient use, economic growth, and the improvement of the welfare of consumers; the provision that the law protects freedom of fair competition means the obligation for the legislature to establish, by law, such a legal regulation that prevents the monopolisation of production and the market, ensures freedom of fair competition, and provides for the means and measures for its protection; the constitutional guarantee of the protection of fair competition implies the prohibition directed at state authorities and municipal institutions regulating economic activity against adopting decisions that distort or can distort fair competition, and obliges state authority and municipal institutions to ensure freedom of fair competition by legal means (the Constitutional Court’s rulings of 5 March 2008, 2 March 2009, 29 April 2009, and 15 January 2015).

2.4. Under the Constitution, the state, when regulating economic activity, must pay heed to the constitutional requirement for the equality of the rights of economic subjects, which is directly linked to the principle of the equality of the rights of all persons, as consolidated in Article 29 of the Constitution; otherwise the regulation of economic activity could not be regarded as serving the general welfare of the nation (the Constitutional Court’s rulings of 13 May 2005, 31 May 2006, 2 March 2009, 24 May 2013, and 15 January 2015).

3. The content of the provisions of Article 46 of the Constitution should be construed in a systemic manner in the context of the whole body of constitutional regulation; the constitutional values upon which the national economy is founded are tightly linked to other constitutional values (the Constitutional Court’s ruling of 13 May 2005). The provision of Paragraph 3 of Article 46 of the Constitution, according to which the state regulates economic activity so that it serves the general welfare of the nation, should be construed, inter alia, in conjunction with Paragraph 1 of Article 53 of the Constitution, which prescribes that the state takes care of the health of people, as well as with Paragraph 3 of Article 53 of the Constitution, under which the state and each person must protect the environment from harmful influences. In this context, consideration should also be given to Article 54 of the Constitution, stipulating that: “The State shall take care of the protection of the natural environment, wildlife and plants, individual objects of nature, and areas of particular value, and shall supervise the sustainable use of natural resources, as well as their restoration and increase” (Paragraph 1); “The destruction of land and subsurface, the pollution of water and air, radioactive impact on the environment, as well as the depletion of wildlife and plants, shall be prohibited by law” (Paragraph 2).

In its rulings, the Constitutional Court has held on more than one occasion that environmental protection is the concern and obligation of the state and every resident, and that both public and private interests must be devoted to improve the quality of the environment (the Constitutional Court’s rulings of 13 May 2005, 22 June 2009, and 31 January 2011).

Thus, under the Constitution, inter alia, the principle that the state takes care of the health of people, as well as the imperatives of the protection of the natural environment and the protection of the environment against harmful impacts, the ensuring of waste management should be considered a public interest, as well as the duty of the state and municipalities. It should be noted that, as held by the Constitutional Court, the public interest is dynamic and subject to change (the Constitutional Court’s rulings of 8 July 2005, 21 September 2006, 15 May 2007, and 6 January 2011); due to this, the state may and, in certain cases, must change (expand, narrow, or otherwise correct) the regulation of economic activity (the Constitutional Court’s rulings of 30 June 2008 and 6 January 2011).

4. In the context of the constitutional justice case at issue, it should be noted that the legislature, when regulating economic activity in the area of waste management, may and, in certain cases, must delegate some of the functions of the organisation of this activity to municipalities.

Under the Constitution, the functions of municipalities may be established only by means of a law; none of the functions assigned to municipalities means absolute independence of municipalities in a particular area (the Constitutional Court’s rulings of 24 December 2002, 8 July 2005, 5 March 2008, and 15 January 2015); while performing the functions assigned to them, municipalities must heed the Constitution and laws (the Constitutional Court’s rulings of 5 March 2008 and 15 January 2015).

In this context, regard should also be paid to Paragraph 2 of Article 120 of the Constitution, which provides that municipalities act freely and independently within their competence defined by the Constitution and laws. Thus, under the Constitution, municipalities, while acting freely and independently within their competence defined by the laws regulating economic activity (inter alia, waste management), are bound by the principles forming the constitutional basis of the economy of this country, as well as by other constitutional imperatives.

5. It has been mentioned that the principles consolidated in Article 46 of the Constitution make up the whole—the constitutional basis for the economy of this country; the constitutional values upon which the national economy is founded are tightly linked to other constitutional values. In view of this fact, it should be noted that the duty, consolidated in Paragraph 3 of Article 46 of the Constitution, that the state must regulate economic activity so that it serves the general welfare of the nation implies the requirement that the legislature, in regulating economic activity (inter alia, in the area of waste management), must reconcile different constitutional values, inter alia, those protected under Articles 29, 46, 53, and 54 of the Constitution: freedom of individual economic activity and economic initiative, freedom of fair competition, the protection of consumer interests, the equality of the rights of economic subjects, and the protection of human health and the environment.

In the context of the constitutional justice case at issue, it should be noted that the legislature, in cases where it regulates the relations connected with waste management and delegates certain functions to municipalities in the area of the organisation of waste management, under Paragraph 3 of Article 46 of the Constitution, is obliged to regulate this activity in such a way that it serves the general welfare of the nation: inter alia, the legislature must pay heed to the imperatives stemming from Article 46 of the Constitution, inter alia, the requirements, consolidated therein, for ensuring freedom of individual economic activity and economic initiative and protecting fair competition and consumer rights, also the imperative consolidated in Article 29 of the Constitution for the equality of the rights of persons, as well as the imperatives consolidated in Articles 53 and 54 of the Constitution for the protection of human health and the environment. Having regard to these constitutional imperatives, the legislature must lay down such a legal regulation governing the organisation of waste management under which, in the area at issue, municipalities would ensure freedom of fair competition (inter alia, that the market in waste management is not monopolised and the equality of the rights of participants in this market is not denied), as well as the protection of consumer rights, human health, and the environment (inter alia, the accessibility as well as the uninterrupted provision and good quality of waste management services).

V

On the compliance of the provision of Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002) with Paragraph 1 of Article 29 and Paragraphs 1, 3, and 4 of Article 46 of the Constitution

1. In the constitutional justice case at issue, the Constitutional Court is investigating whether the provision “Municipalities may assign (as a mandatory task) the exploitation of the municipal waste management system to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality” of Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002), insofar as under the legal regulation laid down in this provision, municipalities could assign (as a mandatory task) the performance of the activity of municipal waste recovery and disposal to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality, was in conflict with Paragraph 1 of Article 29 and Paragraphs 1, 3, and 4 of Article 46 of the Constitution.

As mentioned before, the doubts of the petitioner regarding the constitutionality of the impugned provision are substantiated by the fact that the provision in question consolidated the possibility for municipalities to grant one economic subject the exceptional (exclusive) rights to carry out the particular economic activity in the respective waste management market, as well as the possibility of excluding, in principle, all competition in the respective waste management system by unreasonably conferring privileges on one economic subject, while discriminating against other potential participants in the concrete municipal waste management market. According to the petitioner, such a legal regulation denied the equality of the rights of economic subjects and fair competition among them, limited freedom of economic activity and economic initiative, implied the unjustifiable establishment of a monopoly, and, thus, could not serve the general welfare of the nation as a constitutional value.

2. In this ruling, the following has been mentioned:

the principles consolidated in Article 46 of the Constitution make up the whole—the constitutional basis for the economy of this country; the constitutional values upon which the national economy is founded are tightly linked to other constitutional values;

the duty, consolidated in Paragraph 3 of Article 46 of the Constitution, for the state to regulate economic activity so that it serves the general welfare of the nation implies the requirement that the legislature, in regulating economic activity (inter alia, in the area of waste management), must reconcile different constitutional values, inter alia, those protected under Articles 29, 46, 53, and 54 of the Constitution: freedom of individual economic activity and economic initiative, freedom of fair competition, the protection of consumer interests, the equality of the rights of economic subjects, and the protection of human health and the environment;

the legislature, in cases where it regulates relations connected with waste management and delegates certain functions of the organisation of waste management to municipalities, under Paragraph 3 of Article 46 of the Constitution, is obliged to regulate this activity in such a way that it serves the general welfare of the nation: inter alia, the legislature must pay heed to the imperatives stemming from Article 46 of the Constitution, inter alia, the requirements, consolidated therein, for ensuring freedom of individual economic activity and economic initiative and protecting fair competition and consumer rights, also the imperative consolidated in Article 29 of the Constitution for the equality of the rights of persons, as well as the imperatives consolidated in Articles 53 and 54 of the Constitution for the protection of human health and the environment; having regard to these constitutional imperatives, the legislature must lay down such a legal regulation governing the organisation of waste management under which, in the area at issue, municipalities would ensure freedom of fair competition (inter alia, that the market in waste management is not monopolised and the equality of the rights of participants in this market is not denied), as well as the protection of consumer rights, human health, and the environment (inter alia, the accessibility as well as the uninterrupted provision and good quality of waste management services).

3. While interpreting the impugned provision “Municipalities may assign (as a mandatory task) the exploitation of the municipal waste management system to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality” of Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002) in conjunction with other related provisions of the Law on Waste Management (wording of 1 July 2002), the Law on Local Self-Government (wordings of 12 October 2000 and 15 September 2008), and the Law on Competition (wordings of 23 March 1999 and 22 March 2012), it has been mentioned that:

the impugned provision of Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002) provided for one of the means that could be used by municipalities for the selection of municipal waste managers providing services in the area of municipal waste recovery and disposal, i.e. the assignment of the performance of the said activity (as a mandatory task) to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality; the other means established for the selection of providers of these services was a call for tenders;

when deciding on a means of selecting the providers of services in the area of municipal waste recovery and disposal, municipalities were under the duty to comply with the requirements established by laws and other legal acts, inter alia, to ensure freedom of fair competition, as well as the uninterrupted provision, good quality, and accessibility of public services in the area of waste recovery and disposal;

the assignment of the performance of municipal waste recovery and disposal (as a mandatory task) to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality, was permissible only in cases where such an assignment did not result in the granting of any privileges to the said company, establishment, enterprise, or organisation, or in any discrimination against other economic subjects operating in that market, and ensured the uninterrupted provision of good quality and accessible public services in the area of waste recovery and disposal.

4. Thus, if understood in this way, the legal regulation laid down in the impugned provision of Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002) meant that the assignment of the performance of the activity of municipal waste recovery and disposal (as a mandatory task) to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality, was permissible only in exceptional cases, i.e. where the other established means (a call for tenders for the award of contracts to provide these services) could not ensure the uninterrupted provision, good quality, and accessibility of public services in the area of waste recovery and disposal.

Consequently, there is no ground for stating that the legal regulation laid down in the impugned provision of Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002) created preconditions for violating freedom of fair competition, distorting or monopolising the market in municipal waste management, or discriminating against participants in this market; the legal regulation at issue should be judged as reconciling such constitutional values as freedom of individual economic activity and economic initiative, freedom of fair competition, the protection of consumer interests, the equality of the rights of economic subjects, the protection of human health and the environment, i.e. the constitutional values protected under Articles 29, 46, 53, and 54 of the Constitution.

5. It has been mentioned that, under the Constitution, municipalities, while acting freely and independently within their competence defined by the laws regulating economic activity (inter alia, waste management), are bound by the principles forming the constitutional basis of the economy of this country, as well as by other constitutional imperatives. This means that, in the area of waste management, municipalities must pay heed to the requirement, as implied by the constitutional imperative of fair competition, that waste managers must be selected by means of a tender according to their capability to provide uninterrupted, good quality, and accessible services. It is possible to waive this requirement only on objectively justified grounds; such grounds should not include the mere fact that there is an economic subject established by a municipality and operating in the area of waste management.

6. In the light of the aforementioned arguments, the conclusion should be drawn that the provision “Municipalities may assign (as a mandatory task) the exploitation of the municipal waste management system to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality” of Paragraph 4 of Article 30 of the Law on Waste Management (wording of 1 July 2002), insofar as under the legal regulation laid down in this provision, municipalities could assign (as a mandatory task) the performance of the activity of municipal waste recovery and disposal to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality, was not in conflict with Paragraph 1 of Article 29 and Paragraphs 1, 3, and 4 of Article 46 of the Constitution.

Conforming to Articles 102 and 105 of the Constitution of the Republic of Lithuania and Articles 1, 53, 531, 54, 55, and 56 of the Law on the Constitutional Court of the Republic of Lithuania, the Constitutional Court of the Republic of Lithuania gives the following

ruling:

To recognise that the provision “Municipalities may assign (as a mandatory task) the exploitation of the municipal waste management system to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality” of Paragraph 4 of Article 30 of the Republic of Lithuania’s Law on Waste Management (wording of 1 July 2002; Official Gazette Valstybės žinios, 2002, No. 72-3016), insofar as under the legal regulation laid down in this provision, municipalities could assign (as a mandatory task) the performance of the activity of municipal waste recovery and disposal to a company established by a municipality, or to a waste management establishment, enterprise, or organisation established by more than one municipality, was not in conflict with the Constitution of the Republic of Lithuania.

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

Justices of the Constitutional Court:             Elvyra Baltutytė

                                                                    Vytautas Greičius

                                                                    Danutė Jočienė

                                                                    Pranas Kuconis

                                                                    Gediminas Mesonis

                                                                    Vytas Milius

                                                                    Egidijus Šileikis

                                                                    Algirdas Taminskas

                                                                    Dainius Žalimas