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On privatisation of the 34 percent block of shares of the joint-stock company “Lietuvos dujos”

Case No. 19/2008-25/2009

 

THE CONSTITUTIONAL COURT OF THE REPUBLIC OF LITHUANIA

RULING

ON THE COMPLIANCE OF ITEMS 1 AND 2 OF RESOLUTION OF THE GOVERNMENT OF THE REPUBLIC OF LITHUANIA NO. 22 “ON ASSENTING TO A DRAFT AGREEMENT ON PURCHASE AND SALE OF 34 PERCENT OF THE SHARES (WHICH BELONG TO THE STATE BY RIGHT OF OWNERSHIP) OF THE JOINT-STOCK COMPANY ‘LIETUVOS DUJOS’, ANNEXES TO THIS AGREEMENT, AS WELL AS TO A DRAFT AGREEMENT OF SHAREHOLDERS” OF 9 JANUARY 2004, RESOLUTION OF THE GOVERNMENT OF THE REPUBLIC OF LITHUANIA NO. 292 “ON A DRAFT SUPPLEMENT TO THE LONG-TERM GAS SUPPLY AGREEMENT BETWEEN THE JOINT-STOCK COMPANY ‘LIETUVOS DUJOS’ AND THE PUBLIC JOINT-STOCK COMPANY ‘GAZPROM’” OF 18 MARCH 2004 WITH THE CONSTITUTION OF THE REPUBLIC OF LITHUANIA

 

26 February 2010

 

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

with the secretary of the hearing—Daiva Pitrėnaitė,

in the presence of the representative of a group of Members of the Seimas of the Republic of Lithuania, a petitioner, who was Jurgis Razma, a Member of the Seimas,

in the presence of the representatives of the Government of the Republic of Lithuania, the party concerned, who were Rimvydas Pilibaitis, the Deputy Head of the Legal Division of the Service of the Prime Minister, and Nemunas Biknius, Chief Specialist of the Division for Energy Resources, Electricity and Heat of the Ministry of Energy 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 18 February 2010 heard case No. 19/2008-25/2009 subsequent to:

1) the petition of a petitioner, a group of Members of the Seimas of the Republic of Lithuania, requesting to investigate, whether Items 1 and 2 of Resolution of the Government of the Republic of Lithuania No. 22 “On Assenting to a Draft Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company ‘Lietuvos dujos’, Annexes to this Agreement, as well as to a Draft Agreement of Shareholders” of 9 January 2004, as well as Resolution of the Government of the Republic of Lithuania No. 292 “On a Draft Supplement to the Long-Term Gas Supply Agreement Between the Joint-Stock Company ‘Lietuvos dujos’ and the Public Joint-Stock Company ‘Gazprom’” of 18 March 2004 are not in conflict with Article 5, Paragraphs 3 and 5 of Article 46, and Paragraph 1 of Article 128 of the Constitution of the Republic of Lithuania (petition No. 1B-19/2008);

2) the petition, which is set forth in Article 1 of Resolution of the Seimas of the Republic of Lithuania (a petitioner) No. XI-246 “On applying to the Constitutional Court of the Republic of Lithuania with a petition requesting to investigate whether Items 1 and 2 of Resolution of the Government of the Republic of Lithuania No. 22 ‘On Assenting to a Draft Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company “Lietuvos dujos”, Annexes to this Agreement, as well as to a Draft Agreement of Shareholders’ of 9 January 2004, Resolution No. 292 ‘On a Draft Supplement to the Long-Term Gas Supply Agreement Between the Joint-Stock Company “Lietuvos dujos” and the Public Joint-Stock Company “Gazprom”’ of 18 March 2004, according to the content of the norms, the extent of regulation and the procedure of adoption, are not in conflict with Article 5, the Third and Fifth Paragraphs of Article 46, the First Paragraph of Article 128 of the Constitution of the Republic of Lithuania and the principle of a state under the rule of law” of 5 May 2009, requesting to investigate whether Items 1 and 2 of Resolution of the Government of the Republic of Lithuania No. 22 “On Assenting to a Draft Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company ‘Lietuvos dujos’, Annexes to this Agreement, as well as to a Draft Agreement of Shareholders” of 9 January 2004 and Resolution of the Government of the Republic of Lithuania No. 292 “On a Draft Supplement to the Long-Term Gas Supply Agreement Between the Joint-Stock Company ‘Lietuvos dujos’ and the Public Joint-Stock Company ‘Gazprom’” of 18 March 2004, to the extent that the Government assented to the provisions of Annex H and Item 9.1 of Agreement No. 2/108 on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company “Lietuvos dujos”, which was concluded between the state enterprise State Property Fund and the Russian Federation public joint-stock company “Gazprom” on 23 January 2004, and, subsequent to these provisions, undertook obligations not to regulate the prices of natural gas and to reimburse the losses, are not in conflict, according to the content of the norms, the extent of regulation and the procedure of adoption, with Article 5, Paragraphs 3 and 5 of Article 46, and Paragraph 1 of Article 128 of the Constitution of the Republic of Lithuania and the constitutional principle of a state under the rule of law (petition No. 1B-28/2009).

By the Decision of the Constitutional Court “On joining petitions into one case” of 29 September 2009, petition No. 1B-19/2008 (case No. 19/2008) of the group of Members of the Seimas, a petitioner, and petition No. 1B-28/2009 (case No. 25/2009) of the Seimas, a petitioner, were joined into one case and it was given reference No. 19/2008-25/2009.

The Constitutional Court

has established:

I

1. The group of Members of the Seimas, a petitioner, applied to the Constitutional Court with the petition requesting to investigate as to whether Items 1 and 2 of Government Resolution No. 22 “On Assenting to a Draft Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company ‘Lietuvos dujos’, Annexes to this Agreement, as well as to a Draft Agreement of Shareholders” of 9 January 2004 (hereinafter also referred to as Government Resolution No. 22 of 9 January 2004) and Government Resolution No. 292 “On a Draft Supplement to the Long-Term Gas Supply Agreement Between the Joint-Stock Company ‘Lietuvos dujos’ and the Public Joint-Stock Company ‘Gazprom’” of 18 March 2004 (hereinafter also referred to as Government Resolution No. 292 of 18 March 2004) are not in conflict with Article 5, Paragraphs 3 and 5 of Article 46, and Paragraph 1 of Article 128 of the Constitution.

The petition of the group of Members of the Seimas, a petitioner, was received at the Constitutional Court on 8 July 2008.

2. On 5 May 2009, the Seimas, a petitioner, adopted Resolution No. XI-246 “On applying to the Constitutional Court of the Republic of Lithuania with a petition requesting to investigate whether Items 1 and 2 of Resolution of the Government of the Republic of Lithuania No. 22 ‘On Assenting to a Draft Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company “Lietuvos dujos”, Annexes to this Agreement, as well as to a Draft Agreement of Shareholders’ of 9 January 2004, Resolution No. 292 ‘On a Draft Supplement to the Long-Term Gas Supply Agreement Between the Joint-Stock Company “Lietuvos dujos” and the Public Joint-Stock Company “Gazprom”’ of 18 March 2004, according to the content of the norms, the extent of regulation and the procedure of adoption, are not in conflict with Article 5, the Third and Fifth Paragraphs of Article 46, the First Paragraph of Article 128 of the Constitution of the Republic of Lithuania and the principle of a state under the rule of law”, in Article 1 of which it set forth the petition to the Constitution Court requesting to investigate whether Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 and Government Resolution No. 292 of 18 March 2004, to the extent that the Government assented to the provisions of Annex H and Item 9.1 of Agreement No. 2/108 on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company “Lietuvos dujos” (hereinafter referred to as the Agreement on Purchase and Sale of the Shares), which was concluded between the state enterprise State Property Fund and the Russian Federation public joint-stock company “Gazprom” on 23 January 2004, and, subsequent to these provisions, undertook obligations not to regulate the prices of natural gas and to reimburse the losses, are not in conflict, according to the content of the norms, the extent of regulation and the procedure of adoption, with Article 5, Paragraphs 3 and 5 of Article 46, and Paragraph 1 of Article 128 of the Constitution and the constitutional principle of a state under the rule of law.

The petition of the Seimas, a petitioner, was received at the Constitutional Court on 13 May 2009.

3. By its Decision “On accepting the petition of the Seimas of the Republic of Lithuania, the petitioner, set forth in its Resolution No. XI-246 ‘On applying to the Constitutional Court of the Republic of Lithuania with a petition requesting to investigate whether Items 1 and 2 of Resolution of the Government of the Republic of Lithuania No. 22 “On Assenting to a Draft Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company ‘Lietuvos Dujos’, Annexes to This Agreement, as well as to a Draft Agreement of Shareholders” of 9 January 2004, Resolution No. 292 “On a Draft Supplement to the Long-Term Gas Supply Agreement Between the Joint-Stock Company ‘Lietuvos Dujos’ and the Public Joint-Stock Company ‘Gazprom’” of 18 March 2004, according to the content of the norms, the extent of regulation and the procedure of adoption, are not in conflict with Article 5, the Third and Fifth Paragraphs of Article 46, the First Paragraph of Article 128 of the Constitution of the Republic of Lithuania and the principle of a state under the rule of law’ of 5 May 2009” of 14 May 2009, the Constitutional Court decided to accept the petition set forth in the Seimas Resolution of 5 May 2009, which requests to investigate whether Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 and Government Resolution No. 292 of 18 March 2004, to the extent that the Government assented to the provisions of Annex H and Item 9.1 of Agreement No. 2/108 on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company “Lietuvos dujos”, which was concluded between the state enterprise State Property Fund and the Russian Federation public joint-stock company “Gazprom” on 23 January 2004, and, subsequent to these provisions, undertook obligations not to regulate the prices of natural gas and to reimburse the losses, are not in conflict, according to the content of the norms, the extent of regulation and the procedure of adoption, with Article 5, Paragraphs 3 and 5 of Article 46, and Paragraph 1 of Article 128 of the Constitution and the constitutional principle of a state under the rule of law.

4. The announcement of the President of the Constitutional Court regarding the acceptance of the said petition of the Seimas was officially published in the official gazette “Valstybės žinios” (Official Gazette Valstybės žinios, 2009, No. 58-2252) on 19 May 2009. From that day until publishing of a Constitutional Court ruling regarding this constitutional justice case, the validity of Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 and that of Government Resolution No. 292 of 18 March 2004 have been suspended.

II

The petition of the group of Members of the Seimas and the petition of the Seimas, the petitioners, are substantiated by the following arguments.

1. The Government, by Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 and the provisions of Government Resolution No. 292 of 18 March 2004, insofar as they assented to the commitments of Annex H to the Agreement on Purchase and Sale of the Shares not to regulate natural gas prices and insofar as the powers were granted to undertake such commitments, regulates the economic activity so that it no longer serves the general welfare of the Nation and the rights of consumers are no longer defended, but it is only the interest of the public joint-stock company “Gazprom” that are protected. Thus, by means of the disputed resolutions the Government undertook a commitment to implement its competence in the process of law-making by taking account of only the interests of the public joint-stock company “Gazprom”, even in cases when, due to this, the principles of regulation of economic activity as entrenched in Article 46 of the Constitution would be violated.

It was held in the Constitutional Court ruling of 18 October 2000 that the implementation of the Constitution may not be restricted by any conditions. The commitment to reimburse the losses to the public joint-stock company “Gazprom” (in case the Government does not fulfil its commitment not to regulate prices for natural gas) restricts the implementation of Paragraphs 3 and 5 of Article 46 of the Constitution, since the legal regulation, which is designed for the general welfare of the Nation and protection of the rights of consumers (regulation of gas prices), becomes unfavourable in the economic aspect as it can create conditions to apply financial sanctions to the State of Lithuania. Alongside, the principle entrenched in Paragraph 3 of Article 5 of the Constitution whereby state institutions shall serve the people is violated.

2. It is possible to regard the commitment, which is set forth in Item 9.1 of the Agreement on Purchase and Sale of the Shares to reimburse the losses amounting to 100 million litas to the public joint-stock company “Gazprom” in case one began to regulate the gas prices by failing to keep the commitment provided for in Annex H of the Agreement on Purchase and Sale of the Shares, as a basic property liability of the state. Such an opinion is substantiated by the fact that, under Articles 5 and 6 of the Law on State Debt, it is possible to regard property liability of the state exceeding 40 million litas as a basic property liability of the state, as well as by the fact that, in its ruling of 17 June 1997, the Constitutional Court held that a 50 million litas issue of Government loan bonds is a basic property liability of the state to repurchase the bonds by paying interest. In addition, pursuant to the Constitutional Court ruling of 18 October 2000, the commitment to reimburse losses to the strategic investor and the joint-stock company “Mažeikių nafta” is regarded as a basic property liability.

Paragraph 1 of Article 128 of the Constitution provides that decisions concerning basic property liabilities of the state shall be adopted by the Seimas on the proposal of the Government. It was held in the Constitutional Court ruling of 18 October 2000 that, under the Constitution, decisions concerning basic property liabilities may be adopted by the Seimas only, and only when there is a recommendation of the Government. Thus, the provisions of Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 and Government Resolution No. 292 of 18 March 2004, to the extent that they assented to the commitments made in Item 9.1 of the Agreement on Purchase and Sale of the Shares and granted the powers to undertake such commitments, are in conflict with the procedure of adoption of such decisions, which is provided for in Paragraph 1 of Article 128 of the Constitution. By means of the disputed legal regulation the Government took over the exceptional constitutional powers of the Seimas to adopt decisions regarding basic property liabilities of the state, therefore, such legal regulation is in conflict with Paragraph 1 of Article 128 of the Constitution also according to its content.

The petitioners, on the grounds of the official constitutional doctrine formulated by the Constitutional Court whereby the principle of separation of powers also means that in case when the powers of a concrete state institution are directly established in the Constitution, then no other institution may take over such powers, asserts that the disputed legal regulation established by the Government is clearly in conflict also with the principle of separation of powers entrenched in Paragraph 1 of Article 5 of the Constitution.

3. According to the petitioners, the principle entrenched in Paragraph 2 of Article 5 of the Constitution that scope of power is limited by the Constitution is closely related to the principle of separation of powers entrenched in Paragraph 1 of the same article and with “the principle of serving to the people”. Thus, if it were established that the provisions of Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 and Government Resolution No. 292 of 18 March 2004, to the extent that they assented to the commitments made in Item 9.1 of the Agreement on Purchase and Sale of the Shares not to regulate the gas prices and to reimburse the losses due to failure of such commitment and granted the powers to undertake such commitments, are in conflict with Paragraphs 1 and 3 of Article 5 of the Constitution, one should also hold that these provisions are in conflict with Paragraph 2 of Article 5 of the Constitution as well.

The provisions of Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 and Government Resolution No. 292 of 18 March 2004 are in conflict with Paragraph 2 of Article 5 of the Constitution also in the aspect that the principle of publicity was violated. This opinion is substantiated by the doctrine of the constitutional principle of a state under the rule of law formulated in the Constitutional Court ruling of 23 October 2002 and the doctrine of Paragraph 1 of Article 128 of the Constitution which was formulated in the Constitutional Court ruling of 17 June 1997, whereby consideration regarding a state loan and other basic property liabilities of the state in the Seimas implies a public discussion. The petitioners maintain that Government Resolution No. 22 of 9 January 2004 and Government Resolution No. 292 of 18 March 2004 lack the constitutional grounds and the grounds established by laws, and the provisions of these resolutions are not concrete, but entirely formal ones; these resolutions assented to agreements the content of which is unknown to the public, and by which basic property liabilities of the state were undertaken and restrictions of implementation of constitutional provisions were established, therefore, such legal regulation is in conflict with Paragraph 2 of Article 5 of the Constitution and the constitutional principle of a state under the rule of law.

III

1. In the course of the preparation of the case for the Constitutional Court hearing written explanations regarding the petition of the group of Members of the Seimas were received from the representatives of the Government, the party concerned, who were Neringa Pažūsienė, Director of the Law and Public Procurement Department of the Ministry of Economy, and Vladas Gagilas, Director of the Department for Energy Resources of the same ministry, and written explanations regarding the petition of the Seimas were received from the representatives of the Government, the party concerned, who were Neringa Pažūsienė, Director of the Law and Public Procurement Department of the Ministry of Economy, Nemunas Biknius, Chief Specialist of the Division for Energy Resources, Electricity and Heat of the Ministry of Energy, and Rasa Stankauskienė, a lawyer of the Legal Division of the Legal Department of the state enterprise State Property Fund, wherein it is maintained that Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 and Government Resolution No. 292 of 18 March 2004 are not in conflict with Article 5, Paragraphs 3 and 5 of Article 46, and Paragraph 1 of Article 128 of the Constitution and the constitutional principle of a state under the rule of law. The position of the representatives of the Government regarding the compliance of the disputed resolutions of the Government with the Constitution is presented while taking account of the fact that, under the Constitutional Court rulings of 18 October 2000 and 23 May 2007, the Constitutional Court does not enjoy powers to investigate treaties or other agreements concluded by the Government with a strategic investor, to present a conclusion regarding such agreements in the resolution part of its ruling, and that the Constitutional Court does not consider the drafting, signing and implementation of such agreements.

2. The position of N. Pažūsienė and V. Gagilas, the representatives of the party concerned regarding the petition of the group of Members of the Seimas, is substantiated by the following arguments.

2.1. The Government, while assenting to the draft Agreement on Purchase and Sale of the Shares and draft annexes to the said agreement by means of Items 1 and 2 of Resolution No. 22 of 9 January 2004, and while empowering the Director General of the state enterprise State Property Fund to sign this agreement and its annexes, and while assenting to the draft supplement to the Long-term Gas Supply Agreement Between the Joint-stock Company “Lietuvos dujos” and the Public Joint-stock Company “Gazprom” (hereinafter referred to as the Gas Supply Agreement) by means of Resolution No. 292 of 18 March 2004, did not create any new legal norms or those which are different from the legal norms provided for in laws, therefore, the Government, while adopting such decisions, did not violate the powers granted to it under the Constitution and laws.

2.2. Article 14 of the Republic of Lithuania Natural Gas Law (which was valid at the time of adoption of the disputed resolutions of the Government) prescribed that in the gas sector transmission prices, distribution prices, storage prices, natural gas prices for regulated customers shall be regulated; the State Prices and Energy Control Commission (hereinafter referred to as the Commission) shall set the thresholds of top prices for gas transmission, distribution and storage and the thresholds of top prices for the regulated customers. Thus, the legislator established the legal regulation whereby it commissioned the Commission, but not the Government, to regulate the thresholds of top gas prices. Therefore, the Government decision by which the regulation of natural gas prices would be established might be treated as a legal act amending the law and creating new legal norms of general character. In this way the hierarchy of legal acts entrenched in the Constitution would be violated.

2.3. The commitment, for the time of the validity of the Gas Supply Agreement, undertaken by the Government, which is established Annex H to the Agreement on Purchase and Sale of the Shares (this agreement was assented by Item 1 of disputed Government Resolution No. 22 of 9 January 2004) not to adopt, exclusively upon its own initiative, including legislative initiative, any decisions prompting the Commission or other institutions to establish natural gas prices to free customers (save the transportation prices, transmission prices, and distribution prices) is to be interpreted as abstaining by the Government in initiating amendments to the Natural Gas Law insofar as such amendments are related to the regulation of natural gas prices to free customers. Such commitment does not limit the right of the legislator to initiate draft laws and to pass laws, nor does it limit the competence of the Commission in the sphere of regulation of natural gas prices.

2.4. Paragraph 1 of Article 128 of the Constitution implies that an issue of concerning the state loan or other basic property liability of the state must always be debated in the Seimas and a decision regarding this issue must also be adopted in the Seimas. The Law on State Debt mentioned in the petition of the group of Members of the Seimas, a petitioner, is not to be applied to the commitment, which is specified in Item 9.1 of the Agreement on Purchase and Sale of the Shares, regarding reimbursement of the losses, since the provisions of Articles 6.245 and 6.251 of the Civil Code of the Republic of Lithuania are to be applied with respect to it.

3. The position of N. Pažūsienė, N. Biknius and R. Stankauskienės, the representatives of the party concerned regarding the petition of the Seimas, is substantiated by the following arguments.

3.1. Paragraph 2 of Article 128 of the Constitution provides that the procedure for the possession, use and disposal of state property shall be established by law. The provisions of Paragraph 1 of Article 7 and Item 1 of Paragraph 1 of Article 17 of the Republic of Lithuania Law on the Possession, Use and Disposal of State and Municipal Property, Item 5 of Article 22 of the Law on the Government of the Republic of Lithuania, Paragraph 2 of Article 3 and Paragraph 4 of Article 10 of the Republic of Lithuania Law on the Privatisation of State-owned and Municipal Property allow to draw a conclusion that the Government enjoyed the right granted to it by laws to assent, by means of the disputed resolutions, to the draft Agreement on Purchase and Sale of the Shares and the draft supplement to the Gas Supply Agreement and to grant the powers to the Head of state enterprise State Property Fund to sign the Agreement on Purchase and Sale of the Shares. In its ruling of 23 May 2007, the Constitutional Court also stated the existence of the right of the Government to assent or not to assent to draft privatisation transactions. Thus, disputed Government Resolution No. 22 of 9 January 2004 and disputed Government Resolution No. 292 of 18 March 2004, according to the procedure of their adoption, are not in conflict with Paragraph 2 of Article 128 and Paragraph 1 of Article 5 of the Constitution.

3.2. One of the main strategic tasks of the state in the course of privatisation of the shares of the joint-stock company “Lietuvos dujos” was securing long-term gas supply under favourable prices to the consumers of this country, while taking account to the accession of Lithuania to the European Union.

3.3. Under the legal regulation which was valid in 2003, the prices of gas supply to free customers were contractual ones, they could not regulated. The mechanism of the regulation of the prices was only established in Article 23 of the Republic of Lithuania Law on Amending the Natural Gas Law, which was adopted by the Seimas on 20 March 2007—it was established that also the supply prices to free customers shall be regulated, while thresholds of top prices shall be regulated by a decision of the State Prices and Energy Control Commission.

In the constitutional doctrine, which was formulated in the Constitutional Court rulings of 18 December 2001, 5 March 2004, 31 May 2006, and 13 August 2007, it is inter alia entrenched that, under the Constitution, the Government, while issuing legal acts, must observe the valid laws, that legal acts of the Government—sub-statutory legal acts—may not establish any such legal regulation which would compete with the legal regulation established in laws, that it is important that the Government adopt sub-statutory legal acts without exceeding its powers, and that these sub-statutory legal acts would not be in conflict with the Constitution and laws.

3.4. The assurance by the Government consolidated in Annex H of the Agreement on Purchase and Sale of the Shares in no way places limits upon the legislator, the Seimas, and upon the rights and duties of the Commission in the aspect of regulation of natural gas prices to free customers and initiation of such regulation. In addition, this assurance by the Government is not unconditional, since the Government, while observing laws, may resort to measures of legal regulation related with limiting natural gas prices if the difference (margin) between the price for acquisition (purchase) of natural gas paid by the joint-stock company “Lietuvos dujos” and the sale of the natural gas to free customers exceeds 15 percent. By this 15 percent margin one protects the public interest and the welfare of the nation, the interests of free customers are defended against unreasonable profit of the company which supplies gas.

3.5. The commitment consolidated in Annex H of the Agreement on Purchase and Sale of the Shares to reimburse the losses incurred by the purchaser due to an essential violation of the assurance submitted by the Government in Annex H of this agreement is not expressed in any concrete amount. The general liability is limited by the sum of 100 million litas, however, it does not allow to maintain unreservedly that due to the said essential violation limits one would incur losses at all, or that one would incur losses exceeding 40 million litas, i.e. the sum which, according to the petitioner, is to be regarded under the Law on State Debt as a basic property liability of the state.

According to the representatives of the party concerned, in its ruling of 18 October 2000, the Constitutional Court did not recognise the commitment to reimburse losses to the strategic investor and the joint-stock company “Mažeikių nafta” as a basic property liability. Thus, the provisions of the Agreement on Purchase and Sale of the Shares which establish commitments to reimburse the losses due to non-fulfilment of the commitment not to regulate natural gas prices are not basic property liabilities of the state.

3.6. The disputed Government resolutions did not violate the principle of publicity, since the confidentiality commitments made by parties (inter alia the Government) to civil relations in contracts is a common commercial practice.

3.7. Since, according to the representatives of the party concerned, the provisions of Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 and Government Resolution No. 292 of 18 March 2004, to the extent that they assented to the commitments made in Item 9.1 of the Agreement on Purchase and Sale of the Shares and granted the powers to undertake such commitments, are not in conflict with Paragraphs 1 and 3 of Article 5 of the Constitution, therefore, they are not in conflict with Paragraph 2 of Article 5 of the Constitution, either. In addition, since the disputed provisions of the Government are not in conflict with Article 5, Paragraphs 3 and 5 of Article 46 and Paragraph 1 of Article 128 of the Constitution, they are not in conflict with the constitutional principle of a state under the rule of law as well.

IV

1. In the course of the preparation of the case for the Constitutional Court hearing, explanations were received from Feliksas Petrauskas, Director of the State Consumer Rights Protection Authority, Danas Janulionis, Deputy Chairman of the State Prices and Energy Control Commission, and Viktoras Valentukevičius, Director General of the joint-stock company “Lietuvos dujos”.

2. In the course of the preparation of the case for the Constitutional Court hearing, alongside with a note of Olegas Romančikas, Deputy Chancellor or the Prime Minister, the documents of preparation of draft Government Resolutions No. 22 of 9 January 2004 and No. 292 of 18 March 2004 were received. In the said note it was requested, pursuant to Paragraph 8 of Article 16 of the Republic of Lithuania Law on State Secrets and Official Secrets, to secure the protection of the submitted classified information.

V

At the Constitutional Court hearing, J. Razma, the representative of the group of Members of the Seimas, a petitioner, virtually reiterated the arguments set forth in the petition of the petitioner. R. Pilibaitis and N. Biknius, the representatives of the Government, virtually reiterated the arguments set forth in their written explanations and in those of Pažūsienė, V. Gagilas and R. Stankauskienė, the former representatives of the Government, the party concerned.

The Constitutional Court

holds that:

I

1. On 9 January 2004, the Government adopted Resolution No. 22 “On Assenting to a Draft Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company ‘Lietuvos dujos’, Annexes to this Agreement, as well as to a Draft Agreement of Shareholders”, which came into force on 16 January 2004. This resolution prescribed:

Conforming to Paragraph 5 of Article 10 of the Republic of Lithuania Law on the Privatisation of State-owned and Municipal Property (Official Gazette Valstybės žinios, 1997, No. 107-2688), the Government of the Republic of Lithuania shall resolve:

1. To assent to the draft Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company ‘Lietuvos dujos’ between the state enterprise State Property Fund acting on behalf of the Government of the Republic of Lithuania, and the public joint-stock company ‘Gazprom’, to the annexes to this agreement, as well as to the draft Agreement of Shareholders among the state enterprise State Property Fund, public joint-stock company ‘Gazprom’ and ‘Ruhrgas Energie Beteiligungs AG’.

2. To empower Povilas Milašauskas, Director General of the state enterprise State Property Fund to sign, on behalf of the Government of the Republic of Lithuania, the Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company ‘Lietuvos dujos’ between the state enterprise State Property Fund acting on behalf of the Government of the Republic of Lithuania, and the public joint-stock company ‘Gazprom’, the annexes to this agreement, as well as to the Agreement of Shareholders among the state enterprise State Property Fund, public joint-stock company ‘Gazprom’ and ‘Ruhrgas Energie Beteiligungs AG’.

3. The state enterprise State Property Fund must, prior to transfer of the ownership right to the shares, submit a draft Long-Term Gas Supply Agreement Between the Joint-Stock Company ‘Lietuvos dujos’ and the Public Joint-Stock Company ‘Gazprom’ (i.e. a draft amendment and extension of validity of the now valid gas supply agreement between the joint-stock company ‘Lietuvos dujos’ and the public joint-stock company ‘Gazprom’ at least until 2014 inclusively).

4. In the long-term gas supply agreement specified in Item 3 of this Resolution the following most important conditions must be established:

4.1. The public joint-stock company ‘Gazprom’ undertakes an obligation to supply natural gas directly to the joint-stock company ‘Lietuvos dujos’ in the amounts, which would satisfy not less that 70 percent of the general needs of consumers in the Republic of Lithuania, which is stated by the joint-stock company ‘Lietuvos dujos’ (save the supply to the joint-stock company “Achema” and the closed joint-stock company ‘Kauno termofikacinė elektrinė’).

4.2. The price for natural gas must be established by the formula specified in the valid gas supply agreement concluded between the joint-stock company ‘Lietuvos dujos’ and the public joint-stock company ‘Gazprom’; this formula can be changed by agreement of the parties by taking account of the dynamism of prices for alternative fuel in the Republic of Lithuania.

4.3. Natural gas must be supplied in the amount provided for in the long-term gas supply agreement from the beginning of the nearest half-year period following the conclusion of this agreement.”

2. On 18 March 2004, the Government adopted Resolution No. 292 “On a Draft Supplement to the Long-Term Gas Supply Agreement Between the Joint-Stock Company ‘Lietuvos dujos’ and the Public Joint-Stock Company ‘Gazprom’”, which came into force on 20 March 2004. This resolution prescribed:

Pursuant to Items 3 and 4 of Resolution of the Government of the Republic of Lithuania No. 22 ‘On Assenting to a Draft Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company “Lietuvos dujos”, Annexes to this Agreement, as well as to a Draft Agreement of Shareholders’ of 9 January 2004 (Official Gazette Valstybės žinios, 2004, No. 8-185), the Government of the Republic of Lithuania shall resolve:

To assent to the provisions of the draft supplement to the Long-term Gas Supply Agreement Between the Joint-stock Company ‘Lietuvos dujos’ and the Public Joint-stock Company ‘Gazprom’, which meet the conditions established in Item 1 of the Programme for Privatisation of the 34 Percent Block of Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company ‘Lietuvos dujos’ and in Article 7.4 of the Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company ‘Lietuvos dujos’ concluded between the state enterprise State Property Fund acting and the public joint-stock company ‘Gazprom’.”

3. The group of Members of the Seimas, a petitioner, requests to investigate whether Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 and Government Resolution No. 292 of 18 March 2004 are not in conflict with Article 5, Paragraphs 3 and 5 of Article 46, Paragraph 1 of Article 128 of the Constitution and the constitutional principle of a state under the rule of law.

4. The Seimas, a petitioner, requests to investigate whether Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 and Government Resolution No. 292 of 18 March 2004 to the extent that the Government, according to the petitioner, assented to the provisions of Annex H and Item 9.1 of the Agreement on Purchase and Sale of the Shares and, subsequent to these provisions, undertook obligations not to regulate the prices of natural gas and to reimburse the losses, are not in conflict with Article 5, Paragraphs 3 and 5 of Article 46, and Paragraph 1 of Article 128 of the Constitution and the constitutional principle of a state under the rule of law.

5. It is clear from the petition of the group of Members of the Seimas, a petitioner, that the petitioner disputes the compliance of Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 and that of Government Resolution No. 292 of 18 March 2004 with the Constitution to the same extent as the Seimas, a petitioner, i.e. to the extent that the Government, according to the petitioner, assented to the provisions of Annex H and Item 9.1 of the Agreement on Purchase and Sale of the Shares and, subsequent to these provisions, undertook obligations not to regulate the prices of natural gas and to reimburse the losses.

6. It needs to be noted that by Item 1 of Government Resolution No. 22 of 9 January 2004 the Government assented not to the Agreement on Purchase and Sale of the Shares itself, but to the draft agreement and to the draft annexes thereto. Government Resolution No. 292 of 18 March 2004 assented not to the draft Agreement on Purchase and Sale of the Shares and the draft annexes thereto, but to the provisions of the draft supplement to the Long-term Gas Supply Agreement Between the Joint-stock Company “Lietuvos dujos” and the Public Joint-stock Company “Gazprom”, which meet the conditions established in Item 1 of the Programme for Privatisation of the 34 Percent Block of Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company “Lietuvos dujos” and in Article 7.4 of the Agreement on Purchase and Sale of the Shares. The petitioners do not dispute Government Resolution No. 292 of 18 March 2004 to the extent that it assented to the provisions of the draft supplement of the Gas Supply Agreement.

7. Thus, the group of Members of the Seimas and the Seimas, the petitioners, request to investigate whether Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 and Government Resolution No. 292 of 18 March 2004 to the extent that the Government, according to the petitioners, assented to the provisions of Annex H and Item 9.1 of the Agreement on Purchase and Sale of the Shares and, subsequent to these provisions, undertook obligations not to regulate the prices of natural gas and to reimburse the losses, are not in conflict with Article 5, Paragraphs 3 and 5 of Article 46, and Paragraph 1 of Article 128 of the Constitution and the constitutional principle of a state under the rule of law.

8. It needs to be noted that the request of the petitioners to investigate whether Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 and Government Resolution No. 292 of 18 March 2004 to the extent that the Government, according to the petitioners, assented to the provisions of Annex H and Item 9.1 of the Agreement on Purchase and Sale of the Shares and, subsequent to these provisions, undertook obligations not to regulate the prices of natural gas and to reimburse the losses, are not in conflict the Constitution is substantiated by the provisions of Item 9.1 of the draft Agreement on Purchase and Sale of the Shares and those of draft Annex H to the said agreement. Thus, the request of the petitioners to investigate whether Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 and Government Resolution No. 292 of 18 March 2004 are not in conflict with Article 5, Paragraphs 3 and 5 of Article 46, and Paragraph 1 of Article 128 of the Constitution and the constitutional principle of a state under the rule of law, also means a request to investigate whether the provisions of Item 9.1 of the draft Agreement on Purchase and Sale of the Shares and those of draft Annex H to the said agreement are not in conflict with the Constitution.

Under the Constitution and the Law on the Constitutional Court, the Constitutional Court shall decide whether the laws and other acts of the Seimas are not in conflict with the Constitution and whether the acts of the President of the Republic and the Government are not in conflict with the Constitution or laws.

In this context it needs to be mentioned that, while investigating whether Government Resolution No. 1698 “On the Consent to the Draft Agreement on Purchase and Sale of the Shares of the Joint-Stock Company ‘Alita’ which Belong to the State by Right of Ownership” of 24 December 2003 was not in conflict with the principle of a state under the rule of law and with Paragraph 2 (wording of 4 November 1997) of Article 3 and the provision “negotiations on how to improve the bids may be entered into with the potential buyer or potential buyers who have submitted the highest bids and whose bids do not differ from each other by more than 15 per cent” of Paragraph 1 (wording of 4 November 1997) of Article 16 (wording of 17 December 2001) of the Law on Privatisation of State-owned and Municipal Property, the Constitutional Court held that “the assent of the Government to the corresponding draft agreement is to be assessed only as a permit to conclude the transaction (the conditions of which, as it is taken for granted in the commercial practice, are not made public), and not as its conclusion, such draft agreement is not to be treated as a part of this legal act entrenching certain legal regulation, which could be of the same legal power as the other parts of this Government resolution. Therefore, the said draft agreement is not a constituent part of the Government resolution which is investigated in the constitutional justice case at issue, it is not a legal act at all, let alone a legal act with whose respect the Constitutional Court would have powers to present a certain conclusion (decision) in the resolution part of its ruling” (Constitutional Court ruling of 23 May 2007).

While one takes account of this, the draft Agreement on Purchase and Sale of the Shares and the draft annexes thereto are not legal acts, therefore, under the Constitution and the Law on the Constitutional Court, they are not the matter of investigation by the Constitutional Court. Thus, in the constitutional justice case at issue the draft Agreement on Purchase and Sale of the Shares and the draft annexes thereto will not be investigated.

Alongside, it needs to be noted that in cases when it is clearly evident from the content of a Government resolution which assented to a certain draft agreement (inter alia from the aim, object and conditions of the agreement), as well as from other circumstances under which such Government resolution was adopted, that such Government resolution is in conflict with the general welfare of the Nation, poses a threat to the independence of the State of Lithuania, territorial integrity, the constitutional order, the security of the state or other vitally important interests of the state, the Constitutional Court must state this and recognise that the Government, while assenting to the draft agreement, acted ultra vires.

9. Taking account of the arguments set forth, subsequent to the petitions of the group of Members of the Seimas and the Seimas, the petitioners, the Constitutional Court will investigate whether the following is not in conflict with Article 5, Paragraphs 3 and 5 of Article 46, and Paragraph 1 of Article 128 of the Constitution and the constitutional principle of a state under the rule of law:

Items 1 and 2 of Government Resolution No. 22 “On Assenting to a Draft Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company ‘Lietuvos dujos’, Annexes to this Agreement, as well as to a Draft Agreement of Shareholders” of 9 January 2004 to the extent that the Government assented to selling 34 percent of the shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” to the public joint-stock company “Gazprom” and empowered the Director General of the state enterprise State Property Fund to sign, on behalf of the Government, the Agreement on Purchase and Sale of the Shares and annexes to this agreement;

Government Resolution No. 292 “On a Draft Supplement to the Long-Term Gas Supply Agreement Between the Joint-Stock Company ‘Lietuvos dujos’ and the Public Joint-Stock Company ‘Gazprom’” of 18 March 2004.

II

On the compliance of Items 1 and 2 of Government Resolution No. 22 “On Assenting to a Draft Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company ‘Lietuvos dujos’, Annexes to this Agreement, as well as to a Draft Agreement of Shareholders” of 9 January 2004 and Government Resolution No. 292 “On a Draft Supplement to the Long-Term Gas Supply Agreement Between the Joint-Stock Company ‘Lietuvos dujos’ and the Public Joint-Stock Company ‘Gazprom’” of 18 March 2004 with Article 5, Paragraphs 3 and 5 of Article 46, and Paragraph 1 of Article 128 of the Constitution and the constitutional principle of a state under the rule of law.

1. It has been mentioned that by Item 1 of Resolution No. 22 of 9 January 2004 the Government inter alia assented to the draft Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company “Lietuvos dujos” between the state enterprise State Property Fund acting on behalf of the Government, and the public joint-stock company “Gazprom”, and also to the draft annexes of this agreement, while by Item 2 of the same resolution it inter alia empowered the Director General of the state enterprise State Property Fund to sign, on behalf of the Government, the Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company “Lietuvos dujos” between the state enterprise State Property Fund and the public joint-stock company “Gazprom”, and also the draft annexes to this agreement.

2. While deciding, subsequent to the petitions of the group of Members of the Seimas and the Seimas, the petitioners, whether Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 to the corresponding extent are not in conflict with the Constitution, it is first necessary to elucidate whether the Government had the powers to adopt the decisions regarding the privatisation of 34 percent of the shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” and the powers to assent to the draft Agreement on Purchase and Sale of the Shares and the draft annexes thereto; otherwise, it would be impossible to give an answer whether the Government, by assenting to the said drafts by its Resolution No. 22 of 9 January 2004, acted ultra vires.

2.1. Government Resolution No. 22 of 9 January 2004 was adopted in connection with selling 34 percent of the shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos”, i.e. in connection with privatising state-owned property. At the time of adoption of this resolution, the privatisation of state-owned and municipal property was regulated by the Law on the Privatisation of State-owned and Municipal Property (wording of 4 November 1997 with subsequent amendments and supplements).

2.2. In the context of the constitutional justice case at issue, the following provisions of the Law on the Privatisation of State-owned and Municipal Property (wording of 4 November 1997 with subsequent amendments and supplements) are to be mentioned:

– “privatisation” means transfer of state-owned and municipal property to the ownership of potential buyers under privatisation transactions concluded in accordance with the procedure established by this law (Paragraph 1 of Article 1);

– “privatisation object” means shares or other property which is owned by the state or a municipality by the right of public ownership and which is put on the list of privatisation objects by the Government (Paragraph 2 of Article 1);

– “privatisation transaction” means an arrangement entered into pursuant to this law, under which the holder of a state-owned or municipal privatisation object obligates himself to transfer the privatisation object into the ownership of the potential buyer, whereas the potential buyer commits himself to pay the amount of money agreed upon and/or fulfil other obligations established under the arrangement (Paragraph 4 of Article 1);

the Government resolutions on privatisation issues adopted on the basis of this law and other laws of the Republic of Lithuania shall be binding on state and privatisation institutions (Paragraph 2 of Article 3);

the State Property Fund (hereinafter referred to as the Property Fund) is a privatisation institution (Item 1 of Paragraph 1 of Article 3), which, while fulfilling the functions assigned to it under this law and the Law on the State Property Fund in the sphere of privatisation shall act as the holder of the privatisation object, privatising the property owned by the state (Paragraph 1 of Article 4), draft the list of privatisation objects and submit it to the Government for approval (Item 1 of Paragraph 2 of Article 4), establish the method of privatisation and terms and conditions of privatisation of a specific object (Item 2 of Paragraph 2 of Article 4), sign privatisation transactions on behalf of the Government (Item 8 of Paragraph 2 of Article 4);

Privatisation Commission is a government institution set up for the purpose of privatisation supervision and operating in accordance with this law and the regulations approved by the Government (Paragraph 1 of Article 5); the Privatisation Commission shall be accountable to the Seimas (Paragraph 2 of Article 5); the Privatisation Commission shall consist of 13 members; the Chairman of the Commission and its 6 members shall be appointed and removed from office by the Seimas on the recommendation of the Government; the remaining 6 members of the Privatisation Commission shall be appointed and removed from office by the Seimas on the recommendation of the Members of the Seimas political groups (Paragraph 3 (wording of 4 November 1999) of Article 5). The Privatisation Commission shall have the right to approve or refuse to approve draft object privatisation programmes (Item 1 of Paragraph 4 of Article 5);

the object privatisation programme is a document, which specifies (Paragraph 4 of Article 10): the name of the object and the privatisation method (Item 1); the deadline for privatisation (Item 2); short description of the privatisation object (the authorised capital or value, the nominal value of shares owned by the state or a municipality, profitability of the authorised capital, the volume of production or annual turnover, the number of employees, type of principal activity, geographical location, information on the market share of the production or services of the enterprise controlled by the state or a municipality and the rights of third persons to the enterprise) (Item 3); terms and conditions of privatisation (Item 4); the Government shall have the right to set requirements other than those laid down in Paragraph 4 of Article 10 of the Law on the Privatisation of State-owned and Municipal Property for drafting of the object privatisation programmes (including the right to establish binding terms and conditions of the object privatisation programmes and methods of privatisation), and also the right to approve or refuse to approve draft programmes of privatisation of the key objects of Lithuanian economy and draft privatisation transactions of such objects (Paragraph 5 of Article 10); the object privatisation programme must be publicly announced in the Information Bulletin of Privatisation (Item 1 of Paragraph 1 of Article 11);

the list of privatisation objects shall be approved by the Government on the recommendation of the Property Fund; the list may include shares in all enterprises owned by the state and a municipality, except for shares in joint-stock and closed joint-stock companies privatisation whereof is restricted by laws; under the Law on the Privatisation of State-owned and Municipal Property, inter alia the property owned by the Republic of Lithuania by the right of exclusive ownership may not be included in the list of privatisation objects (Paragraph 2 (wording of 5 March 2002) of Article 10).

While summing up the listed provisions of the Law on the Privatisation of State-owned and Municipal Property (wording of 4 November 1997 with subsequent amendments and supplements), it needs to be noted that they establish the powers of the Government, the Property Fund, the Privatisation Commission in privatisation of property that belongs to the state by right of ownership, inter alia the powers of the Government to approve the list of privatisation objects (this list could not include shares of the joint-stock and closed joint-stock companies the privatisation whereof is restricted by laws), to approve or refuse to approve draft programmes of privatisation of the key objects of Lithuanian economy and draft privatisation transactions of such objects.

2.3. Article 2 of the Republic of Lithuania Law “On Special-purpose Enterprises and Areas of Their Activities” (wording of 15 February 1995 which came into force on 10 March 1995) prescribed:

The enterprises entered into Appendix 2 to this Law must undergo reorganisation and become special-purpose joint-stock companies and closed joint-stock companies. <...>

The enterprises entered into Appendix 2 to this Law and reorganised into special-purpose joint-stock companies may increase their authorised capital only from their own funds under procedure established in the Law on Companies. <...>

To prohibit that the enterprises entered into Appendix 2 to this Law and reorganised into special-purpose joint-stock companies change the status of a special company or undergo reorganisation other than becoming special-purpose companies.”

Appendix 2 “The List of State Enterprises Which Must Become Special-Purpose Enterprises until 2000” to this Law inter alia prescribed: “2005952 State enterprise ‘Lietuvos dujos’.”

It needs to be mentioned that, under Paragraph 2 (wording of 19 March 1998) of Article 5 of the Republic of Lithuania Law on Companies, the shares held by a state or municipal institution in a special-purpose company must carry at least 2/3 of all the votes.

Thus, under the legal regulation established in the Law “On Special-purpose Enterprises and Areas of Their Activities“ (wording of 15 February 1995 with subsequent amendments) and Paragraph 2 (wording of 19 March 1998) of Article 5 of the Law on Companies, the shares held by a state or municipal institution in a special-purpose company had to carry at least 2/3 of all the votes, and it was prohibited to change the status of the special-purpose company. Thus, under this legal regulation, the shares held by a non-state or non-municipal institution in a special-purpose company could carry no more that 1/3 of all the votes.

2.4. On 17 October 2000, the Seimas adopted the Republic of Lithuania Law on Reorganising the Joint-stock Company “Lietuvos dujos”, which came into force on 31 October 2000. This law established the way and procedure of reorganisation of the said joint-stock company (Paragraph 1 of Article 1), inter alia it provided that during the reorganisation the special-purpose status of the joint-stock company “Lietuvos dujos” is abolished and its articles of association are amended (Article 2).

The amended articles of association of the joint-stock company “Lietuvos dujos” were registered in the state enterprise Centre of Registers on 31 December 2000.

2.5. Chapter 7.5 “Energy” of the 2001–2004 Programme of the Government of the Republic of Lithuania, which was assented to by the Seimas by Article 1 of Resolution No. IX-455 “On the Programme of the Government of the Republic of Lithuania” of 12 July 2001 (it came into force on 12 July 2001), inter alia prescribed: to restructure and reorganise the energy system, to privatise certain objects thereof; to draft and adopt the basic laws regulating energy, electricity, gas and other resources, necessary for carrying out privatisation; to carry out the privatisation and development of the gas sector by taking account of the necessity to increase competitiveness and transparency of the market, to gradually increase the opening of the markets to unregulated customers by creating opportunities to buy natural gas directly from gas enterprises without intermediaries.

2.6. It has been mentioned that, under Paragraph 2 (wording of 5 March 2002) of Article 10 of the Law on the Privatisation of State-owned and Municipal Property, the list of privatisation objects could not include shares of the joint-stock and closed joint-stock companies which belonged to the state or a municipality by right of ownership the privatisation whereof was restricted by laws and such shares could not be privatised.

At the time of the adoption of Government Resolution No. 22 of 9 January 2004 the limitations upon privatisation of enterprises were inter alia established in the Republic of Lithuania Law on Enterprises and Facilities of Strategic Importance to National Security and Other Enterprises Important to Ensuring National Security (wording of 10 October 2002), whose purpose is to specify the enterprises and facilities of strategic importance to national security, which of such enterprises and facilities must belong to the state by the right of ownership and in which, and the conditions under which, a part of the capital may be held by the private national and foreign capital meeting the criteria of European and trans-Atlantic integration provided the power of decision is retained by the state, also to specify other enterprises of importance to ensuring national security (Article 1).

Article 2 of this law established the state enterprises and the facilities belonging to the state by the right of ownership, Article 3—enterprises in which a proportion of the capital may be held by the private national and foreign capital meeting the criteria of European and trans-Atlantic integration, provided the power of decision is retained by the state and facilities, Paragraph 1 of Article 4 of this law provides: “In addition to the enterprises and facilities indicated in Articles 2 and 3 of this Law, the following enterprises shall also be of importance to ensuring national security: <...> 2) joint-stock company ‘Lietuvos dujos’ <...>”, whereas Paragraph 2 of Article 4 thereof prescribed: “With a view to ensuring national security, laws may set forth additional requirements for the operation of the enterprises indicated in Paragraph 1 of this Article.”

Thus, under this law, joint-stock company “Lietuvos dujos” was not ascribed to state enterprises (Article 2 of this law) or to enterprises in which a proportion of the capital may be held by the private national and foreign capital meeting the criteria of European and trans-Atlantic integration, provided the power of decision is retained by the state (Article 3 of this law).

It needs to be noted that, at the time of the adoption of Government Resolution No. 22 of 9 January 2004, there were not any provisions establishing limitations upon privatisation of the shares of the joint-stock company “Lietuvos dujos” in the Republic of Lithuania Law on Energy (wording of 16 May 2002 with subsequent amendments and supplements), which was designed to regulate general energy activities, the basic principles of energy development and management, energy and energy resources efficiency, in the Natural Gas Law (wording of 10 October 2000 with subsequent amendments and supplements), which was designed for the general principles of the natural gas sector and the operations of natural gas enterprises and relations with the customers (in the supply, distribution, transmission and storage of natural gas), or in any other laws.

2.7. It also needs to be mentioned that, on 10 October 2002, the Seimas adopted Resolution No. IX-1130 “On Approving the National Energy Strategy” (it came into force on 17 October 2002), whereby it approved a renewed National Energy Strategy submitted by the Government (Article 1) and recognised Seimas Resolution No. VIII-1348 “On Approving the National Energy Strategy” of 5 October 1999 as no longer valid (Article 2). Chapter II “Aims of the Energy Strategy” of the renewed National Energy Strategy, while taking account of the main factors forming the energy policy, established inter alia the following aim of the Lithuanian energy strategy: “<...> 3) to privatise the enterprises, which are subject to privatisation, in natural gas transmission and distribution and electricity sectors, to continue the privatisation of oil refining and oil transportation enterprises; <...>.”

2.8. Summing up the discussed provisions of the legal acts, in the context of the constitutional justice case at issue it needs to be noted that:

the Seimas recognised that privatisation of the natural gas transmission and distribution enterprises, which are subject to privatisation, was a strategic aim of the energy sector of Lithuania;

laws and other acts of the Seimas did not contain any prohibition to privatise the shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos”;

under the legal regulation established in laws and other acts of the Seimas, the Government enjoyed the powers to decide on sale of the shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos”.

3. While deciding, whether Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 to the corresponding extent are not in conflict with the Constitution, it is important to elucidate whether the Government, while adopting a decision to assent to the Draft Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-stock Company “Lietuvos dujos” between the state enterprise State Property Fund and the public joint-stock company “Gazprom”, was following the requirements established in laws and other acts of the Seimas.

3.1. It has been mentioned that, under Paragraph 2 (wording of 5 March 2002) of Article 10 of the Law on the Privatisation of State-owned and Municipal Property, the list of privatisation objects shall be approved by the Government on the recommendation of the Property Fund.

3.1.1. On 23 February 1998, the Government adopted Resolution No. 228 “On Approving the List of Privatisation Objects” (it came into force on 1 March 1998; hereinafter also referred to as Government Resolution No. 228 of 23 February 1998), by Item 1 whereof it approved the list of privatisation objects. Government Resolution No. 228 of 23 February 1998 was amended and supplemented more than once.

3.1.2. On 2 March 2000, the Government adopted Resolution No. 246 “On Approving the Basic Provisions of Privatisation and Reorganisation of the Joint-stock Company ‘Lietuvos dujos’” (it came into force on 9 March 2000), wherein it was prescribed:

While implementing the provisions of the National Energy Strategy, the Government of the Republic of Lithuania has resolved:

To approve the Basic Provisions of Privatisation and Reorganisation of the Joint-stock Company ‘Lietuvos dujos’ (enclosed).”

The said resolution was amended by Government Resolution No. 1194 “On Partial Amendment of Resolution of the Government of the Republic of Lithuania No. 246 ‘On Approving the Basic Provisions of Privatisation and Reorganisation of the Joint-stock Company “Lietuvos dujos”’ of 2 March 2000” of 4 October 2001.

3.1.3. On 2 May 2000, the Government adopted Resolution No. 495 “On Co-ordinating the Privatisation Process of the Joint-stock Company ‘Lietuvos dujos’” (it came into force on 2 May 2000), whereby it formed the commission for co-ordination of the privatisation process of the joint-stock company “Lietuvos dujos” (Item 1) and inter alia commissioned the commission to do the following: by way of a public tender, to choose a privatisation consultant (expert) with international experience (Item 2.1); to consider the issues and problems related to the privatisation of the shares of the enterprise (Item 2.3); to propose the following to the Property Fund: the terms and conditions of the object of privatisation (selling price, terms of payment, investment requirements, as well as requirements of development of the object, its future activity, and preservation of jobs), the time-table of drafting and execution of the privatisation of the object, the qualification criteria and conditions for potential buyers and a system of assessment of submitted proposals (Item 2.4); to consider the draft programme of the privatisation of the object, draft transaction documents and other draft documents related to the privatisation of the object and submit conclusions on these issues (Item 2.5).

3.1.4. On 26 March 2001, the Government adopted Resolution No. 325 “On Partial Amendment of Resolution of the Government of the Republic of Lithuania No. 228 ‘On Approving the List of Privatisation Objects’ of 23 February 1998” (it came into force on 30 March 2001), which in part amended the list of privatisation objects approved by Government Resolution No. 228 of 23 February 1998 (with subsequent amendments and supplements) and set it forth in a new wording. The joint-stock company “Lietuvos dujos” was also included into this list with an added note that this object may be privatised only after the Government has approved of its privatisation programme.

3.1.5. On 4 October 2001, the Government adopted Resolution No. 1194 “On Partial Amendment of Resolution of the Government of the Republic of Lithuania No. 246 ‘On Approving the Basic Provisions of Privatisation and Reorganisation of the Joint-stock Company “Lietuvos dujos” of 2 March 2000’” (it came into force on 11 October 2001), which in part amended the Basic Provisions of Privatisation and Reorganisation of the Joint-stock Company “Lietuvos dujos” approved by Government Resolution No. 246 of 2 March 2000.

Item 1 “The main aims of the privatisation and reorganisation of the joint-stock company ‘Lietuvos dujos’ (hereinafter referred to as the Company) shall be:” (wording of 4 October 2001) of the Basic Provisions of Privatisation and Reorganisation of the Joint-stock Company “Lietuvos dujos” inter alia prescribes:

1.5. in the course of the privatisation of the Company, to attract an investor meeting the European and trans-Atlantic integration criteria (hereinafter referred to as the Strategic Investor), a supplier of natural gas (hereinafter referred to as the Supplier) and other investors.”

Item 2 “The basic provisions of privatisation and reorganisation of the Company shall be:” of (wording of 4 October 2001) of the Basic Provisions of Privatisation and Reorganisation of the Joint-stock Company “Lietuvos dujos” inter alia prescribes:

2.3. The Company shall be privatised by selling part of the shares which belong to the state by right of ownership;

2.4. by way of a public tender, 34 percent of the shares of the Company shall be sold to the Strategic Investor <…>;

2.10. by way of a public tender, 34 percent of the shares of the Company shall be sold to the Supplier or a consortium, in which the right of decisive vote belongs to at least one or several participants meeting the requirements raised to the Supplier in these Provisions;

2.11. The Supplier must secure the gas supply for at least 10-year period, which would satisfy not less that 70 percent of the general needs of natural gas of this country, and indicate the price formula for the supplied natural gas; <...>.”

3.2. It has been mentioned that, under Paragraph 5 of Article 10 of the Law on the Privatisation of State-owned and Municipal Property, the Government inter alia has the right to approve or refuse to approve draft privatisation transactions of the key objects of Lithuanian economy. On 15 May 2002, the Government adopted Resolution No. 670 “On Assenting to a Draft Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company ‘Lietuvos dujos’, Annexes to this Agreement, as well as to a Draft Agreement of Shareholders” (it came into force on 18 May 2002), whereby it assented to selling of 34 percent of the shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” to the German capital enterprises “Ruhrgas AG” and “E.ON Energie AG”. On 2 December 2003, the Government adopted Resolution No. 1504 “On the Transfer of Shares of the Joint-stock Enterprise ‘Lietuvos dujos’” (it came into force on 6 December 2003), whereby it resolved to permit that “E.ON Energie AG” transfer its acquired shares of the joint-stock company “Lietuvos dujos” to “Ruhrgas Energie Beteiligungs AG”, a daughter company of “Ruhrgas AG”.

3.3. As mentioned, under Paragraph 5 of Article 10 of the Law on the Privatisation of State-owned and Municipal Property, the Government inter alia has the right to approve or refuse to approve draft programmes of privatisation of the key objects of Lithuanian economy.

3.3.1. On 7 June 2002, the Government adopted Resolution No. 846 “On Assenting to the Privatisation Programme of 34-Percent Block of Shares (Which Belong to the State by Right of Ownership) of the Joint-stock Company ‘Lietuvos dujos’ with a Provision to Sell Said Block by Means of Public Tender to Suppliers of Natural Gas” (it came into force on 13 June 2002), whereby, while following Paragraph 5 of Article 10 of the Law on the Privatisation of State-owned and Municipal Property (wording of 4 November 1997) and Government Resolution No. 443 “On Approving the Regulations for Privatisation of Shares of Enterprises Which Are Important Objects of Infrastructure or Dominant Objects in a Branch of Economy” of 14 April 1998, assented to the privatisation programme of the 34-percent block of shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” (enterprise code—2005952) with a provision to sell the said block by means of public tender to suppliers of natural gas (Item 1).

The Chapter “Terms and Conditions for Privatisation” of the privatisation programme, which was assented by the Government by the aforesaid resolution, inter alia prescribed that a potential buyer had to secure the gas supply for at least 10-year period, which would satisfy not less that 70 percent of the general needs of natural gas of this country, and propose an acceptable price formula for the supplied natural gas (Item 1).

The Government adopted this resolution after the Privatisation Commission had approved “Draft Privatisation Programme of 34-Percent Block of Shares (Which Belong to the State by Right of Ownership) of the Joint-stock Company ‘Lietuvos dujos’ (To Suppliers of Natural Gas)” on 24 May 2002 (minutes No. 22 (262) of the 24 May 2002 sitting of the Privatisation Commission). The privatisation programme was announced in the Information Bulletin of Privatisation in 2002, No. 7. It has been mentioned that, under the Law on the Privatisation of State-owned and Municipal Property, the Privatisation Commission had the right to approve or refuse to approve draft object privatisation programmes.

3.3.2. On 9 September 2002, the Government adopted Resolution No. 1416 “On Assenting to Amendments to the Privatisation Programme of 34-Percent Block of Shares (Which Belong to the State by Right of Ownership) of the Joint-stock Company ‘Lietuvos dujos’” (it came into force on 12 September 2002), whereby the Government assented to amendments to the privatisation programme of 34-percent block of shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” with a provision to sell said block by means of public tender to suppliers of natural gas, which had been assented to by Government Resolution No. 846 of 7 June 2002, where the amendments established that the deadline of acceptance of initial tender bids submitted by potential buyers shall be 26 September 2002, whereas the deadline of acceptance of final tender bids shall be 20 November 2002. Government Resolution No. 1416 of 9 September 2002 was amended by Government Resolution No. 1775 “On Amending Resolution of the Government of the Republic of Lithuania No. 1416 ‘On Assenting to Amendments to the Privatisation Programme of 34-Percent Block of Shares (Which Belong to the State by Right of Ownership) of the Joint-stock Company “Lietuvos dujos”’ of 9 September 2002” of 13 November 2002 (it came into force on 16 November 2002), wherein it was established that “the deadline of acceptance of final tender bids and the beginning of their review shall be 28 February 2003, at 14 o’clock, and by Government Resolution No. 291 “On Amending Resolution of the Government of the Republic of Lithuania No. 1416 ‘On Assenting to Amendments to the Privatisation Programme of 34-Percent Block of Shares (Which Belong to the State by Right of Ownership) of the Joint-stock Company “Lietuvos dujos”’ of 9 September 2002” of 5 March 2003 (it came into force on 8 March 2003) wherein it was established that the deadline of acceptance of final tender bids and the beginning of their review shall be 11 April 2003, at 14 o’clock.

3.4. On 9 January 2004, the Government adopted Resolution No. 22 “On Assenting to a Draft Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company ‘Lietuvos dujos’, Annexes to this Agreement, as well as to a Draft Agreement of Shareholders” by Item 1 whereof it assented to selling 34 percent of the shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” to the public joint-stock company “Gazprom”.

3.5. It has been mentioned that the Seimas recognised that privatisation of the natural gas transmission and distribution enterprises, which are subject to privatisation, was a strategic aim of the energy sector of Lithuania, that laws and other acts of the Seimas did not contain any prohibition to privatise the shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” and, under the legal regulation established in laws and other acts of the Seimas, the Government enjoyed the powers to decide on sale of the shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos”.

3.6. Thus, one is to draw a conclusion that the Government, while adopting a decision to assent to the Draft Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-stock company “Lietuvos dujos” between the state enterprise state Property Fund and the public joint-stock company “Gazprom”, was implementing the provisions of laws and corresponding resolutions of the Seimas.

4. It needs to be noted that, under the Constitution, the Government, as it has been held by the Constitutional Court more than once, is also bound by the resolutions that it adopted itself. It has been mentioned in this ruling that resolutions of the Government on privatisation issues adopted while following the Law on the Privatisation of State-owned and Municipal Property and other laws of the Republic of Lithuania, are mandatory to state and privatisation institutions, inter alia the Property Fund and the Privatisation Commission.

4.1. In this context it needs to be noted that under Item 1 of the Regulations for Privatisation of Shares of Enterprises Which Are Important Objects of Infrastructure or Dominant Objects in a Branch of Economy approved by Item 1 of Government Resolution No. 443 “On Approving the Regulations for Privatisation of Shares of Enterprises Which Are Important Objects of Infrastructure or Dominant Objects in a Branch of Economy” of 14 April 1998 (hereinafter also referred to as Government Resolution No. 443 of 14 April 1998), it is these regulations (with subsequent amendments and supplements) that have regulated the specific conditions of preparation for privatisation and carrying out the privatisation (by co-ordinating the methods of privatisation provided for in the Law on the Privatisation of State-owned and Municipal Property) of the shares (which belong to the state or a municipality by right of ownership) in enterprises which are controlled by the state or a municipality and which are important objects of infrastructure or dominant objects in a branch of economy.

Item 2 of Government Resolution No. 443 of 14 April 1998 (wording of 7 November 2001) prescribed that, while following the Regulations for Privatisation of Shares of Enterprises Which Are Important Objects of Infrastructure or Dominant Objects in a Branch of Economy approved by this resolution, inter alia the following (included into the list of privatisation objects and belonging to the state by right of ownership) shall be subject to privatisation: the shares (held by the Property Fund on trust) of joint-stock companies and closed joint-stock companies which are suggested by the Property Fund and which meet at least one of the criteria specified in Item 2.1.4 of the resolution (the authorised capital of the enterprise exceeds 50 million litas; the enterprise is dominant in the market of its main activity; the enterprise is an object of infrastructure); the shares of the enterprises the privatisation of which is decided by the Government according to the regulations approved by this resolution (Item 2.1.5). Item 2.2 of the same resolution inter alia prescribed that the tender commission formed by Government Resolution No. 495 “On Co-ordinating the Privatisation Process of the Joint-stock Company ‘Lietuvos dujos’” of 2 May 2000 discharges the functions of the tender commission established in the regulations approved by this resolution. It needs to be mentioned that representatives from various institutions, inter alia the Seimas, the Ministry of Economy, the state enterprise State Property Fund, the State Prices and Energy Control Commission, the Securities Commission, i.e. state institutions, comprised the commission for co-ordination of the privatisation process of the joint-stock company “Lietuvos dujos”, which was formed by Government Resolution No. 495 of 2 May 2000.

4.2. It has been mentioned that Government Resolution No. 846 of 7 June 2002, whereby it was assented to the privatisation programme of 34-percent block of shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” with a provision to sell the said block by means of public tender to suppliers of natural gas, was adopted while following inter alia Government Resolution No. 443 of 14 April 1998 which approved the Regulations for Privatisation of Shares of Enterprises Which Are Important Objects of Infrastructure or Dominant Objects in a Branch of Economy.

It is clear from the case material that the 34-percent block of shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” was sold to suppliers of natural gas by means of a public tender. The tender took place within the programme of privatisation of 34 percent of shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” (to suppliers of natural gas), which, as mentioned, was assented to by the Privatisation Commission and the Government within established time periods. It has been mentioned that by its resolutions, inter alia Resolution No. 1416 of 9 September 2002, Resolution No. 1775 of 13 November 2002, Resolution No. 291 of 5 March 2003, the Government changed the dates of the deadline of acceptance of initial tender bids submitted by potential buyers, the deadline of acceptance of final tender bids and of the beginning of their review. The public tender for privatisation of 34 percent of shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” was won by the public joint-stock company “Gazprom”.

In the constitutional justice case at issue there are no grounds to assert that in the course of privatising the 34-percent block of shares (which belonged to the state by right of ownership) of the joint-stock company one did not follow the requirements established in the Regulations for Privatisation of Shares of Enterprises Which Are Important Objects of Infrastructure or Dominant Objects in a Branch of Economy approved by Government Resolution No. 443 of 14 April 1998. Nor do the group of Members of the Seimas and the Seimas, the petitioners, present such information.

Thus, in the case at issue there is no information on the grounds of which it would be possible to assert that the Government, while adopting a decision to assent to the Draft Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-stock Company “Lietuvos dujos” between the state enterprise State Property Fund and the public joint-stock company “Gazprom”, and to draft annexes to the said agreement, disregarded the procedure established in its own resolutions.

5. It has been mentioned that the group of Members of the Seimas and the Seimas, the petitioners, dispute the compliance of Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 with inter alia Article 5 and Paragraph 1 of Article 128 of the Constitution.

5.1. It has been mentioned that Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 prescribed:

1. To assent to the draft Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company ‘Lietuvos dujos’ between the state enterprise State Property Fund acting on behalf of the Government of the Republic of Lithuania, and the public joint-stock company ‘Gazprom’, to the annexes to this agreement, as well as to the draft Agreement of Shareholders among the state enterprise State Property Fund, public joint-stock company ‘Gazprom’ and ‘Ruhrgas Energie Beteiligungs AG’.

2. To empower Povilas Milašauskas, Director General of the state enterprise State Property Fund to sign, on behalf of the Government of the Republic of Lithuania, the Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company ‘Lietuvos dujos’ between the state enterprise State Property Fund acting on behalf of the Government of the Republic of Lithuania, and the public joint-stock company ‘Gazprom’, the annexes to this agreement, as well as to the Agreement of Shareholders among the state enterprise State Property Fund, public joint-stock company ‘Gazprom’ and ‘Ruhrgas Energie Beteiligungs AG’.”

5.2. In its rulings the Constitutional Court has held more than once that the principle of separation of powers entrenched in Article 5 of the Constitution as well as in other articles of the Constitution in which the powers of state institutions executing state power are established inter alia means that if the powers of a particular state institution are established in the Constitution, this state institution cannot waive, nor transfer these powers to any other institution, nor can they be changed or limited by the law.

The powers of the Government as an institution of state power are established inter alia in Article 94 of the Constitution. Under Article 94 of the Constitution, the Government: shall administer the affairs of the country, protect the inviolability of the territory of the Republic of Lithuania, guarantee State security and public order (Item 1); shall execute laws and resolutions of the Seimas on the implementation of the laws as well as the decrees of the President of the Republic (Item 2); shall co-ordinate the activities of the ministries and other establishments of the Government (Item 3); shall prepare a draft State Budget and submit it to the Seimas; execute the State Budget and submit to the Seimas a report on the execution of the budget (Item 4); shall prepare draft laws and present them to the Seimas for consideration (Item 5); shall establish diplomatic ties and maintain relations with foreign states and international organisations (Item 6); shall discharge other duties prescribed to the Government by the Constitution and other laws (Item 7).

The powers of the Government are also established in Item 3 of Article 84, Paragraph 1 of Article 89, Paragraph 1 of Article 123, Paragraph 1 of Article 128, etc. of the Constitution. The powers of the Government arise from the Constitution and laws. Everything that the Government performs, while implementing the powers established for it in the Constitution and laws, is resolving of the affairs of state administration (Constitutional Court rulings of 29 November 2001 and 30 May 2003).

Paragraph 1 of Article 128 of the Constitution provides that decisions concerning the state loan and other basic property liabilities of the state shall be adopted by the Seimas on the proposal of the Government. It means that, under the Constitution, decisions concerning basic property liabilities may be adopted by the Seimas only, and only when there is a recommendation of the Government (Constitutional Court ruling of 18 October 2000). In its ruling of 17 June 1997, the Constitutional Court held that there exist two important aspects of legal regulation in the content of this constitutional norm: first of all, an imperative requirement is consolidated therein that only the Seimas may adopt decisions concerning state loans and other basic property liabilities of the state; the Government has the right to initiate discussions on such issues at the Seimas; the second aspect is the fact that deliberations upon state loans and other basic property liabilities of the state presuppose an open discussion.

Paragraph 1 of Article 128 of the Constitution is inseparable from Paragraph 2 of the same article, wherein it is prescribed that the procedure for the possession, use and disposal of state property shall be established by law. When construing that, the Constitutional Court has held more than once that the transfer of the property, which belongs by right of ownership to the state, as ownership to other subjects must be based on the law, that the laws must inter alia establish the state institutions which have the right to adopt decisions concerning the transfer of the property, which belongs by right of ownership to the state, as ownership to other subjects, and the powers of these institutions to transfer the said property, as well as the conditions and procedure of this transfer of the property. This is also applicable to the Government which does not enjoy any discretion to decide on non-application of provisions of a certain law, which regulates corresponding relations, unless non-application of a certain provision of the law is expressis verbis provided for in laws (Constitutional Court rulings of 23 May 2007 and 2 March 2009).

5.3. The petitioners substantiate their doubts, as regards the compliance of Items 1 and 2 of Government Resolution No. 22 with Article 5 and Paragraph 1 of Article 128 of the Constitution, by the fact that the Government, while assenting to the Agreement on Purchase and Sale of the Shares, assumed a basic property liability, whereas under Paragraph 1 of Article 128 of the Constitution, only the Seimas was allowed to do so on the proposal of the Government.

5.4. While deciding whether Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 to the extent that the Government assented to selling 34 percent of the shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” to the public joint-stock company “Gazprom” and empowered the Director General of the state enterprise State Property Fund to sign, on behalf of the Government, the Agreement on Purchase and Sale of the Shares and annexes to this agreement are not in conflict with Article 5 and Paragraph 1 of Article 128 of the Constitution, it needs to be noted that, as it has been held in this ruling, under the legal regulation established in laws and other acts of the Seimas, the Government enjoyed the powers to decide on sale of the shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos”. Thus, the Seimas had adopted a decision to privatise the enterprises, which are subject to privatisation, in natural gas transmission and distribution sectors, therefore, there are no legal grounds to assert that the Government was not allowed to assent to the sale of 34 percent of the shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” to the public joint-stock company “Gazprom”.

It also needs to be emphasised that Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 do not contain any provisions by which the Government assumes a basic property liability. The petitioners point out that a basic property liability of the state is established in the draft Agreement on Purchase and Sale of the Shares. It has been mentioned that the draft Agreement on Purchase and Sale of the Shares and the draft annexes thereto are not legal acts, therefore, under the Constitution and the Law on the Constitutional Court, they are not the matter of investigation by the Constitutional Court, either.

Alongside, it needs to be noted that laws do not contain any regular definition of a basic property liability of the state. In some cases the legislator relates the notion of a basic property liability of the state with the amount of adopted property liabilities. For instance, Paragraph 2 of Article 5 of the Republic of Lithuania Law on Concessions (the 24 June 2003 wording of the said law, which came into force on 1 October 2003) inter alia prescribes: “Decisions relating to concessions whereunder the Republic of Lithuania assumes basic property liabilities shall be taken by the Seimas of the Republic of Lithuania on the recommendation of the Government of the Republic of Lithuania. For the purposes of this Law any property liability (including potential civil liability arising under the concession contract) which exceeds LTL 200 million shall be deemed as a basic one”; Paragraph 9 of Article 152 of the Republic of Lithuania Law on Investment (wording of 16 June 2009, which came into force on 1 January 2010) provides: “A decision with regard to general government and private entities’ partnership under which the State assumes liabilities exceeding LTL 200 million (including the potential civil liability arising under a general government and private entities’ partnership agreement) shall be taken by the Seimas of the Republic of Lithuania on the recommendation of the Government of the Republic of Lithuania.”

It also needs to be mentioned that no law establishes as to what property liability, which could arise from agreements on privatisation of state-owned property, is to be regarded as a basic property liability of the state.

5.5. Taking account of the arguments set forth, one is to draw a conclusion that Items 1 and 2 of Government Resolution No. 22 “On Assenting to a Draft Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company ‘Lietuvos dujos’, Annexes to this Agreement, as well as to a Draft Agreement of Shareholders” of 9 January 2004 to the extent that, according to the petitioners, the Government, having assented to selling 34 percent of the shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” to the public joint-stock company “Gazprom” and having empowered the Director General of the state enterprise State Property Fund to sign, on behalf of the Government, the Agreement on Purchase and Sale of the Shares and annexes to this agreement, assumed basic property liabilities, are not in conflict with Article 5 and Paragraph 1 of Article 128 of the Constitution.

6. It has been mentioned that the group of Members of the Seimas and the Seimas dispute the compliance of Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 with inter alia Paragraphs 3 and 5 of Article 46 of the Constitution.

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

The Constitutional Court has held the following: the formula “the State shall regulate economic activity” of Paragraph 3 of Article 46 of the Constitution means not the right of the state to administer all or certain economic activity at its discretion, but its right to establish legal regulation of economic activity, inter alia establishment of limitations (prohibitions) and conditions of economic activity, regulation of procedures in legal acts (rulings of 13 May 2005, 4 December 2008, and 29 April 2009).

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

As a rule, regulation of economic activity is linked with establishment of conditions for economic activity, regulation of certain procedures, control of economic activity, as well as with certain limitations and prohibitions of this activity (Constitutional Court rulings of 13 May 2005, 5 March 2008, 30 June 2008 and 29 April 2009). In its rulings the Constitutional Court has held more than once that, according to the Constitution, it is permitted to limit the rights and freedoms of a person, including freedom of economic activity, in case the following conditions are observed: this is done by law; the limitations are necessary in a democratic society in order to protect the rights and freedoms of other persons and the values entrenched in the Constitution as well as the constitutionally important objectives; the limitations do not deny the nature and essence of the rights and freedoms; the constitutional principle of proportionality is followed.

Paragraph 5 of Article 46 of the Constitution provides that the state shall defend the interests of the consumer. The Constitutional Court has held more than once that this provision implies that laws and other legal acts ought to establish various measures of protection of the interests of consumers, that state institutions ought to control economic entities how the latter are following such measures, and if the production and the market are virtually concentrated in the area of certain economic relations, a duty falls on the institutions of the state power to establish an additional legal regulation which would ensure the protection of the interests of consumers.

6.2. The petitioners substantiate their doubts as regards the compliance of Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 with Paragraphs 3 and 5 of Article 45 of the Constitution by the fact that by means of the said resolution the Government assumed the obligation not to regulate natural gas prices and thus limited the implementation of the principles of regulation of economic activity and protection of the rights of consumers, which are established in the aforementioned norms of the Constitution.

6.3. In this context it needs to be mentioned that Article 14 “Price Regulation” (wording of 10 October 2000) of the Natural Gas Law, which was valid at the time of the adoption of Government Resolution No. 22 of 9 January 2004, inter alia prescribed:

1. The following prices shall be regulated in the gas sector:

1) transmission prices;

2) distribution prices;

3) storage prices;

4) gas prices for regulated customers.”

It also needs to be mentioned that the Constitutional Court, while investigating the provision “The enterprise which is engaged in gas supply, must: <...> 37.9. Establish for free customers the price of gas supply which would not exceed the price cap of gas supply established by the Commission” of Item 37 (wording of 23 December 2002) of the Rules of Licensing the Transmission, Distribution, Storage and Supply of Natural Gas approved by Government Resolution No. 743 “On the Approval of the Rules of Licensing the Transmission, Distribution, Storage and Supply of Natural Gas” of 19 June 2001 with the Constitution and laws, held that namely Paragraph 1 (wording of 10 October 2000) of Article 14 of the Natural Gas Law established the nomenclature of the regulated prices in the gas sector, and that until Paragraph 1 (wording of 10 October 2000) of Article 14 of the Natural Gas Law was either amended or supplemented, one was allowed to regulate only the prices for gas transmission, distribution and storage and the gas prices for regulated customers, while other prices, inter alia the prices of gas supply for free customers, were contractual (they could not be regulated) (Constitutional Court ruling of 29 April 2009).

Thus, at the time of the adoption of Government Resolution No. 22 of 9 January 2004 the gas prices could not be regulated for free customers (they were contractual ones).

On 20 March 2007, the Seimas adopted the Law on Amending the Natural Gas Law, which came into force on 19 April 2007. By Article 1 of the Law on Amending the Natural Gas Law, the Natural Gas Law (wording of 10 October 2000 with subsequent amendments and supplements) was set forth in a new wording.

Article 23 “Price Regulation” of the Natural Gas Law (wording of 20 March 2007) prescribes:

1. The following prices shall be regulated in the gas sector, by establishing the threshold of top prices thereof:

1) transmission prices;

2) liquefaction prices;

3) storage prices;

4) distribution prices;

5) supply prices.”

Thus, upon amending the Natural Gas Law (wording of 10 October 2000 with subsequent amendments and supplements) and setting it forth in a new wording (wording of 20 March 2007), one established the legal regulation which regulated also the gas supply price, inter alia the gas supply price for free customers. It needs to be noted that, under Paragraph 2 of Article 23 of the Natural Gas Law (wording of 20 March 2007), as from 1 July 2007 all customers (legal and natural persons) who buy gas are free customers (Paragraph 40 of Article 3 of the Natural Gas Law). Thus, under the Natural Gas Law (wording of 20 March 2007), as from 1 July 2007, the gas supply price is regulated for all customers.

6.4. While deciding whether Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 to the extent that the Government assented to selling 34 percent of the shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” to the public joint-stock company “Gazprom” and empowered the Director General of the state enterprise State Property Fund to sign, on behalf of the Government, the Agreement on Purchase and Sale of the Shares and annexes to this agreement are not in conflict with Paragraphs 3 and 5 of Article 46 of the Constitution, it needs to be emphasised that Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 do not contain any provisions whereby the Government would undertake a commitment not to regulate the natural gas prices.

6.5. It has been mentioned in this ruling that, by its Resolution No. 22 of 9 January 2004, the Government not only assented to draft the Agreement on Purchase and Sale of the Shares and to draft annexes thereto, but also empowered the Director General of the state enterprise State Property Fund to sign, on behalf of the Government, this agreement and annexes thereto—as it has been mentioned, Items 3 and 4 of the said agreement prescribed:

3. The state enterprise State Property Fund must, prior to transfer of the ownership right to the shares, submit a draft Long-Term Gas Supply Agreement Between the Joint-Stock Company ‘Lietuvos dujos’ and the Public Joint-Stock Company ‘Gazprom’ (i.e. a draft amendment and extension of validity of the now valid gas supply agreement between the joint-stock company ‘Lietuvos dujos’ and the public joint-stock company ‘Gazprom’ at least until 2014 inclusively).

4. In the long-term gas supply agreement specified in Item 3 of this Resolution the following most important conditions must be established:

4.1. The public joint-stock company ‘Gazprom’ undertakes an obligation to supply natural gas directly to the joint-stock company ‘Lietuvos dujos’ in the amounts, which would satisfy not less that 70 percent of the general needs of consumers in the Republic of Lithuania, which is stated by the joint-stock company ‘Lietuvos dujos’ (save the supply to the joint-stock company “Achema” and the closed joint-stock company ‘Kauno termofikacinė elektrinė’).

4.2. The price for natural gas must be established by the formula specified in the valid gas supply agreement concluded between the joint-stock company ‘Lietuvos dujos’ and the public joint-stock company ‘Gazprom’; this formula can be changed by agreement of the parties by taking account of the dynamism of prices for alternative fuel in the Republic of Lithuania.

4.3. Natural gas must be supplied in the amount provided for in the long-term gas supply agreement from the beginning of the nearest half-year period following the conclusion of this agreement.”

6.6. While deciding whether Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 to the extent that the Government assented to selling 34 percent of the shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” to the public joint-stock company “Gazprom” and empowered the Director General of the state enterprise State Property Fund to sign, on behalf of the Government, the Agreement on Purchase and Sale of the Shares and annexes to this agreement are not in conflict with Paragraphs 3 and 5 of Article 46 of the Constitution, it is also necessary to elucidate whether the legal regulation established in Items 3 and 4 of Government Resolution No. 22 of 9 January 2004, while following which the Government adopted its Resolution No. 292 of 18 March 2004, was in line with the requirements established by laws.

6.7. It has been mentioned that Government Resolution No. 22 of 9 January 2004 was adopted while following Paragraph 5 of Article 10 of the Law on the Privatisation of State-owned and Municipal Property, which provides that the Government shall have the right to set requirements other than those laid down in Paragraph 4 of Article 10 of the Law on the Privatisation of State-owned and Municipal Property for drafting of the object privatisation programmes (including the right to establish binding terms and conditions of the object privatisation programmes and methods of privatisation), and also the right to approve or refuse to approve draft programmes of privatisation of the key objects of Lithuanian economy and draft privatisation transactions of such objects. It has also been mentioned that Paragraph 4 of Article 10 of the Law on the Privatisation of State-owned and Municipal Property prescribes that the object privatisation programme is a document, which specifies: the name of the object and the privatisation method (Item 1); the deadline for privatisation (Item 2); short description of the privatisation object (the authorised capital or value, the nominal value of shares owned by the state or a municipality, profitability of the authorised capital, the volume of production or annual turnover, the number of employees, type of principal activity, geographical location, information on the market share of the production or services of the enterprise controlled by the state or a municipality and the rights of third persons to the enterprise) (Item 3); conditions of privatisation (Item 4).

Thus, the law granted the right to the Government also to set additional requirements (other than those laid down in the Law on the Privatisation of State-owned and Municipal Property) for drafting of privatisation programmes of individual objects.

6.8. It has also been mentioned that the shares of the joint-stock company “Lietuvos dujos” were privatised while following the Regulations for Privatisation of Shares of Enterprises Which Are Important Objects of Infrastructure or Dominant Objects in a Branch of Economy approved by Item 1 of Government Resolution No. 443 of 14 April 1998 which regulate the specific conditions of preparation for privatisation and carrying out the privatisation (by co-ordinating the methods of privatisation provided for in the Law on the Privatisation of State-owned and Municipal Property) of the shares (which belong to the state or a municipality by right of ownership) in enterprises which are controlled by the state or a municipality and which are important objects of infrastructure or dominant objects in a branch of economy.

Item 20 of the Regulations for Privatisation of Shares of Enterprises Which Are Important Objects of Infrastructure or Dominant Objects in a Branch of Economy provide that both the Property Fund and the tender commission, while drafting the programme for privatisation of shares of an enterprise, must consider all issues related to the privatisation of the shares of the enterprise, identify and analyse the questions to be decided prior to and during the privatisation of the object, and inter alia establish:

20.3. financial, technical, managerial and other needs of the enterprise and the requirements for investment and development of the enterprise, which should be met by the strategic investor. These requirements for the investor may be included into the conditions for privatisation of the object and/or used as assessment criteria in the course of assessment of technical bids submitted by potential buyers.”

Thus, the Government, while making use of the right granted to it by Paragraph 5 of Article 10 of the Law on the Privatisation of State-owned and Municipal Property, established the specific conditions of preparation for privatisation of enterprises which are important objects of infrastructure or dominant objects in a branch of economy.

6.9. As mentioned, on 24 May 2002, while following Government Resolution No. 443 “On Approving the Regulations for Privatisation of Shares of Enterprises Which Are Important Objects of Infrastructure or Dominant Objects in a Branch of Economy” of 14 April 1998, the Privatisation Commission assented to “the draft programme of privatisation of 34 percent of shares (which belonged to the state by right of ownership) of the joint-stock company ‘Lietuvos dujos’ (to suppliers of natural gas)”; the Chapter “Terms and Conditions for Privatisation” of the privatisation programme inter alia prescribed that a potential buyer had to secure the gas supply for at least 10-year period, which would satisfy not less that 70 percent of the general needs of natural gas of this country, and propose an acceptable price formula for the supplied natural gas (Item 1).

The Chapter “Qualification criteria and conditions shall be applied to potential buyers” of this privatisation programme inter alia prescribed: “A potential buyer—Supplier of Natural Gas—must be a subject that supplies natural gas to the JSC ‘Lietuvos dujos’ or to other enterprises in Lithuania and which either directly or through its controlled entities controls and exploits natural gas resources and the infrastructure of natural gas transportation, which is necessary to carry out its obligations in an efficient manner, and presents evidence proving this.”

It has also been mentioned that, by its Resolution No. 846 “On Assenting to the Privatisation Programme of 34-Percent Block of Shares (Which Belong to the State by Right of Ownership) of the Joint-stock Company ‘Lietuvos dujos’ with a Provision to Sell Said Block by Means of Public Tender to Suppliers of Natural Gas” of 7 June 2002, while following Paragraph 5 of Article 10 of the Law on the Privatisation of State-owned and Municipal Property (wording of 4 November 1997) and Government Resolution No. 443 “On Approving the Regulations for Privatisation of Shares of Enterprises Which Are Important Objects of Infrastructure or Dominant Objects in a Branch of Economy” of 14 April 1998, the Government assented to the privatisation programme of the 34-percent block of shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” with a provision to sell the said block by means of public tender to suppliers of natural gas.

6.10. In the context of the constitutional justice case at issue one is to draw the following conclusions as regards the legal regulation established in Items 3 and 4 of Government Resolution No. 22 of 9 January 2004:

the legal regulation established in Items 3 and 4 of Government Resolution No. 22 of 9 January 2004 is grounded on corresponding provisions of the privatisation programme of the 34-percent block of shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” with a provision to sell the said block by means of public tender to suppliers of natural gas;

the privatisation programme of the 34-percent block of shares (which belonged to the state by right of ownership) with a provision to sell the said block by means of public tender to suppliers of natural gas is grounded on the provisions of the Regulations for Privatisation of Shares of Enterprises Which Are Important Objects of Infrastructure or Dominant Objects in a Branch of Economy approved by Item 1 of Government Resolution No. 443 of 14 April 1998;

Government Resolution No. 443 of 14 April 1998 and the regulations approved by it are grounded on Paragraph 5 of Article 10 of the Law on the Privatisation of State-owned and Municipal Property.

Therefore, the legal regulation established in Items 3 and 4 of Government Resolution No. 22 of 9 January 2004 was in line with the requirements established by the law.

Thus, the Government, while assenting, by means of its Resolution No. 22 of 9 January 2004, to selling 34 percent of the shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” to the public joint-stock company “Gazprom” and empowering the Director General of the state enterprise State Property Fund to sign, on behalf of the Government, the Agreement on Purchase and Sale of the Shares and annexes to this agreement, alongside obligated the state enterprise State Property Fund to submit, prior to transfer of the ownership right to the shares, a draft Long-Term Gas Supply Agreement Between the Joint-Stock Company “Lietuvos dujos” and the Public Joint-Stock Company “Gazprom” to the Government for assenting, and established the main conditions for this agreement: the public joint-stock company “Gazprom” had to undertake an obligation to supply natural gas in the amounts, which would satisfy not less that 70 percent of the general needs of consumers in the Republic of Lithuania; the price for natural gas had to be established by the formula specified in the valid gas supply agreement, whereas this formula could be changed by agreement of the parties by taking account of the dynamism of prices for alternative fuel in the Republic of Lithuania; gas had to be supplied from the beginning of the nearest half-year period following the conclusion of this agreement. Such legal regulation was in line with the requirements established by the law; by the said legal regulation the Government sought to secure long-term supply of natural gas to Lithuania and that the price for the gas would be established by taking account of the prices for alternative fuel.

Thus, there are no legal grounds to assert that the legal regulation established in Government Resolution No. 22 of 9 January 2004 disregarded the constitutional imperative to regulate the economic activity so that it serves the general welfare of the Nation, or created preconditions to violate the interests of consumers.

6.11. Taking account of the arguments set forth, one is to draw a conclusion that Items 1 and 2 of Government Resolution No. 22 “On Assenting to a Draft Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company ‘Lietuvos dujos’, Annexes to this Agreement, as well as to a Draft Agreement of Shareholders” of 9 January 2004 to the extent that the Government assented to selling 34 percent of the shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” to the public joint-stock company “Gazprom” and empowered the Director General of the state enterprise State Property Fund to sign, on behalf of the Government, the Agreement on Purchase and Sale of the Shares and annexes to this agreement are not in conflict with Paragraphs 3 and 5 of Article 46 of the Constitution.

7. It has been mentioned that the group of Members of the Seimas and the Seimas, the petitioners, dispute the compliance of Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 with inter alia the constitutional principle of a state under the rule of law.

7.1. In its rulings the Constitutional Court has held more than once that, while preparing and adopting legal acts, institutions of state power must follow the principle of a state under the rule of law entrenched in the Constitution. The Constitutional Court has also held that the principle of a state under the rule of law implies, along with the other requirements, that the Constitution has the supreme legal power and that the laws, Government resolutions and other legal acts must be in conformity with the Constitution, that the institutions exercising sate authority and other state institutions must act on the basis of law and in compliance with law; the principle of a state under the rule of law also implies that the institutions exercising state authority may not exceed the powers established for them in the Constitution, and that one institution of state authority may not interfere with the powers of another institution of state authority, which are established for the latter in the Constitution.

The Constitutional Court has also held in its acts more than once that the principle of a state under the rule of law entrenched in the Constitution implies the hierarchy of legal acts as well, inter alia the fact that sub-statutory legal acts may not be in conflict with laws, constitutional laws and the Constitution, that sub-statutory legal acts must be adopted on the basis of laws, that a sub-statutory legal act is an act of application of norms of the law, irrespective of whether the act is of one-time (ad hoc) application, or permanent validity. The Constitutional Court has also held that if the legal regulation established in the Government resolutions competed with the legal regulation established in the laws or were not grounded on the laws, not only the constitutional principle of a state under the rule of law and Item 2 of Article 94 of the Constitution would be violated but also Paragraph 2 of Article 5 of the Constitution, in which it is established that the scope of power shall be limited by the Constitution; the constitutional principle of separation of powers could thus also be violated (Constitutional Court rulings of 31 May 2006, 13 August 2007, 29 April 2009 and 8 October 2009).

7.2. The petitioners substantiate their doubts as regards the compliance of Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 with the constitutional principle of a state under the rule of law by the fact that this resolution assented to the agreement whose content was unknown to the public and principle of publicity was thus violated, and, in addition, the said provisions of the Government resolution of 9 January 2004 to the corresponding extent are in conflict with the constitutional principle of a state under the rule of law also because they are in conflict with Article 5, Paragraphs 3 and 5 of Article 46 and Paragraph 1 of Article 128 of the Constitution.

7.3. While deciding whether Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 to the extent that the Government assented to selling 34 percent of the shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” to the public joint-stock company “Gazprom” and empowered the Director General of the state enterprise State Property Fund to sign, on behalf of the Government, the Agreement on Purchase and Sale of the Shares and annexes to this agreement are not in conflict with the constitutional principle of a state under the rule of law, it needs to be noted that, as mentioned, the assent of the Government to the corresponding draft agreement is to be assessed only as a permit to conclude the transaction (the conditions of which, as it is taken for granted in the commercial practice, are not made public), and not as its conclusion, such draft agreement is not to be treated as a part of this legal act entrenching certain legal regulation, which could be of the same legal power as the other parts of this Government resolution; such draft agreement is not a legal act at all.

Paragraph 2 of Article 7 of the Constitution consolidates that only laws which are published shall be valid. The Constitutional Court has held that, while taking account of the constitutional requirement that law may not be non-public, the notion “laws” which is employed in Paragraph 2 of Article 7 of the Constitution should not be construed only literally—it should be construed in an expanding manner, as a notion that includes not only legal acts, which have the power of the law, but also other legal acts (Constitutional Court rulings of 29 October 2003, 27 June 2007, and 9 February 2010). The Constitutional Court has also held that the constitutional requirement that only laws which are published are valid is inseparable from the constitutional principle of a state under the rule of law and it is one of the essential elements of the constitutional principle of a state under the rule of law—it is an important precondition for legal certainty (Constitutional Court rulings of 29 November 2001, 30 May 2003, 29 October 2003, and 27 June 2007).

It needs to be noted that Government Resolution No. 22 of 9 January 2004 Items 1 and 2 whereof inter alia assented to selling 34 percent of the shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” to the public joint-stock company “Gazprom” and empowered the Director General of the state enterprise State Property Fund to sign, on behalf of the Government, the Agreement on Purchase and Sale of the Shares and annexes to this agreement, was officially published (Official Gazette Valstybės žinios, 2004, No. 8-185), however, the draft agreement and draft annexes thereto, which were assented to by the Government by means of the said resolution, have not been published officially.

In the context of the constitutional justice case at issue it also needs to be noted that the constitutional requirement that law cannot be non-public must be followed also in the course of issuance acts of the Government whereby privatisation agreements are assented to. The said constitutional requirement means not only that a resolution of the Government, whereby draft agreements on privatisation of key objects of Lithuanian economy and draft annexes to such agreements are assented to, must be officially published, but also that such a resolution of the Government must contain not only formal assent to the draft agreement and to the draft annexes thereto, but also it must state the compliance of the provisions of the assented draft resolution with terms and conditions provided for in the privatisation programme, it must specify the principled provisions of the agreement, as, for instance, the purpose of the agreement, the object of the agreement, the basic commitments undertaken by the state. On the other hand, it is not allowed to disregard the requirement for confidentiality established in the commercial practice, where certain conditions of the agreements are not made public. Alongside, it also needs to be noted that in cases where the state is a party to an agreement, inter alia a privatisation agreement, the fact that the conditions are made not public must be constitutionally grounded: as a rule, the agreement conditions can be made not public in order to protect a state, professional, or commercial secret.

This ruling has held: under the legal regulation established in laws and other acts of the Seimas, the Government enjoyed the powers to decide on sale of the shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos”; the Government, while adopting a decision to sell the 34 percent of the shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” to the public joint-stock company “Gazprom”, was following the procedure established in laws and other legal acts; the privatisation programme of 34-percent block of shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” provided to sell the said block by means of public tender to suppliers of natural gas; this programme provided for qualification requirements and conditions for potential buyers and it provided for privatisation conditions; the privatisation programme was public, it was announced in the Information Bulletin of Privatisation in 2002, No. 7; the Government, while assenting, by means of the disputed resolution, to the draft Agreement on Purchase and Sale of the Shares and draft annexes to this agreement, obligated the state enterprise State Property Fund to submit, prior to transfer of the ownership right to the shares, a draft Long-Term Gas Supply Agreement Between the Joint-Stock Company “Lietuvos dujos” and the Public Joint-Stock Company “Gazprom” to the Government for assenting, and established the main conditions for this agreement. Thus, the Government was seeking to secure long-term supply of natural gas to Lithuania, where account would be taken to prices for alternative fuel.

In this ruling it has been mentioned that no law establishes as to what property liability, which could arise from agreements on privatisation of state-owned property, is to be regarded as a basic property liability of the state.

Thus, although the draft Agreement on Purchase and Sale of the Shares and draft annexes to this agreement, which were assented to by the Government by means of Item 1 of its Resolution No. 22 of 9 January 2004, had not been published officially, a certain part of the conditions of this agreement were known from this and other published legal acts.

7.4. Taking account of the arguments set forth, one is to draw a conclusion that Items 1 and 2 of Government Resolution No. 22 “On Assenting to a Draft Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company ‘Lietuvos dujos’, Annexes to this Agreement, as well as to a Draft Agreement of Shareholders” of 9 January 2004 to the extent that the Government assented to selling 34 percent of the shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” to the public joint-stock company “Gazprom” and empowered the Director General of the state enterprise State Property Fund to sign, on behalf of the Government, the Agreement on Purchase and Sale of the Shares and annexes to this agreement are not in conflict with the constitutional principle of a state under the rule of law.

8. It has been mentioned that the group of Members of the Seimas and Seimas, the petitioners, request to investigate whether Government Resolution No. 292 “On a Draft Supplement to the Long-Term Gas Supply Agreement Between the Joint-Stock Company ‘Lietuvos dujos’ and the Public Joint-Stock Company ‘Gazprom’” of 18 March 2004 is not in conflict with Article 5, Paragraphs 3 and 5 of Article 46 and Paragraph 1 of Article 128 of the Constitution and the constitutional principle of a state under the rule of law.

8.1. It has been mentioned that Government Resolution No. 292 of 18 March 2004 prescribed:

Pursuant to Items 3 and 4 of Resolution of the Government of the Republic of Lithuania No. 22 ‘On Assenting to a Draft Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company “Lietuvos dujos”, Annexes to this Agreement, as well as to a Draft Agreement of Shareholders’ of 9 January 2004 (Official Gazette Valstybės žinios, 2004, No. 8-185), the Government of the Republic of Lithuania shall resolve:

To assent to the provisions of the draft supplement to the Long-term Gas Supply Agreement Between the Joint-stock Company ‘Lietuvos dujos’ and the Public Joint-stock Company ‘Gazprom’, which meet the conditions established in Item 1 of the Programme for Privatisation of the 34 Percent Block of Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company ‘Lietuvos dujos’ and in Article 7.4 of the Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company ‘Lietuvos dujos’ concluded between the state enterprise State Property Fund acting and the public joint-stock company ‘Gazprom’.”

8.2. It has also been mentioned that on 24 May 2002 the Privatisation Commission assented to “draft privatisation programme of 34-percent block of shares (which belong to the state by right of ownership) of the joint-stock company ‘Lietuvos dujos’ (to suppliers of natural gas)”. Item 1 of the Chapter “Terms and Conditions for Privatisation” of the said programme prescribed that a potential buyer had to secure the gas supply for at least 10-year period, which would satisfy not less that 10 percent of the general needs of natural gas of this country, and propose an acceptable price formula for the supplied natural gas.

8.3. It needs to be noted that Government Resolution No. 292 of 18 March 2004 was adopted while following Items 3 and 4 of Government Resolution No. 22 of 9 January 2004, which, as mentioned, prescribed:

3. The state enterprise State Property Fund must, prior to transfer of the ownership right to the shares, submit a draft Long-Term Gas Supply Agreement Between the Joint-Stock Company ‘Lietuvos dujos’ and the Public Joint-Stock Company ‘Gazprom’ (i.e. a draft amendment and extension of validity of the now valid gas supply agreement between the joint-stock company ‘Lietuvos dujos’ and the public joint-stock company ‘Gazprom’ at least until 2014 inclusively).

4. In the long-term gas supply agreement specified in Item 3 of this Resolution the following most important conditions must be established:

4.1. The public joint-stock company ‘Gazprom’ undertakes an obligation to supply natural gas directly to the joint-stock company ‘Lietuvos dujos’ in the amounts, which would satisfy not less that 70 percent of the general needs of consumers in the Republic of Lithuania, which is stated by the joint-stock company ‘Lietuvos dujos’ (save the supply to the joint-stock company “Achema” and the closed joint-stock company ‘Kauno termofikacinė elektrinė’).

4.2. The price for natural gas must be established by the formula specified in the valid gas supply agreement concluded between the joint-stock company ‘Lietuvos dujos’ and the public joint-stock company ‘Gazprom’; this formula can be changed by agreement of the parties by taking account of the dynamism of prices for alternative fuel in the Republic of Lithuania.

4.3. Natural gas must be supplied in the amount provided for in the long-term gas supply agreement from the beginning of the nearest half-year period following the conclusion of this agreement.”

8.4. Thus, Government Resolution No. 292 of 18 March 2004 was adopted while implementing the provisions of Item 3 of Government Resolution No. 22 of 9 January 2004; the draft supplement (which was assented to by the Government by means of its Resolution No. 292 of 18 March 2004) to the Gas Supply Agreement had to establish amendments of and supplements to Agreement No. 1GLi-2000 on the Amounts and Conditions of Supply of Natural Gas from Russia to the Republic of Lithuania in 2000-2005 which was concluded between the public joint-stock company “Gazprom” and the joint-stock company “Lietuvos dujos”, which had to be in line with the requirements and main conditions established in Item 4 of Government Resolution No. 22 of 9 January 2004 as well as with the conditions established in Item 1 of the Privatisation Conditions of the Privatisation Programme and Article 7.4 of the Agreement on Purchase and Sale of the Shares.

8.5. It has been mentioned that the legal regulation established in Items 3 and 4 of Government Resolution No. 22 of 9 January 2004, by following which the Government adopted its Resolution No. 292 of 18 March 2004, were in line with the requirements established in laws.

8.6. It has been mentioned that, under the Constitution, the Government, as it has been held by the Constitutional Court more than once, is also bound by the resolutions that it adopted itself. It has also been mentioned that Government Resolution No. 292 of 18 March 2004 was adopted while implementing the provisions of Item 3 of Government Resolution No. 22 of 9 January 2004.

Having held that the legal regulation established in Items 3 and 4 of Government Resolution No. 22 of 9 January 2004 was in line with the requirements established in laws, one is also to hold that the legal regulation established in Government Resolution No. 292 of 18 March 2004 was also in line with the requirements of laws.

8.7. While disputing the compliance of Government Resolution No. 292 of 18 March 2004 with the Constitution, the group of Members of the Seimas and the Seimas, the petitioners, point out the same arguments as those that they indicate when disputing the compliance of Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 with the Constitution.

8.8. It has been held in this Constitutional Court ruling that Items 1 and 2 of Government Resolution No. 22 of 9 January 2004 to the extent that the Government assented to selling 34 percent of the shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” to the public joint-stock company “Gazprom” and empowered the Director General of the state enterprise State Property Fund to sign, on behalf of the Government, the Agreement on Purchase and Sale of the Shares and annexes to this agreement are not in conflict with Paragraph 5, Paragraphs 3 and 5 of Article 46, Paragraph 1 of Article 128 of the Constitution and the constitutional principle of a state under the rule of law. In this ruling it has also been held that the legal regulation established in Items 3 and 4 of Government Resolution No. 22 of 9 January 2004, and in Government Resolution No. 292 of 18 March 2004, was in line with the requirements established in laws.

8.9. Having held this, on the grounds of the same arguments one is also to hold that Government Resolution No. 292 “On a Draft Supplement to the Long-Term Gas Supply Agreement Between the Joint-Stock Company ‘Lietuvos dujos’ and the Public Joint-Stock Company ‘Gazprom’” of 18 March 2004 is not in conflict with Paragraph 5, Paragraphs 3 and 5 of Article 46, Paragraph 1 of Article 128 of the Constitution and the constitutional principle of a state under the rule of law, either.

9. In the context of the constitutional justice case at issue it needs to be noted that the legal regulation and the practice that has come into being on the grounds of the said legal regulation, where the Government in corpore discusses draft privatisation agreements and adopts decisions to assent to such draft agreements and draft annexes thereto, by commissioning a concrete official to sign such agreements on behalf of the Government, are debatable. This virtually creates preconditions to depersonalise responsibility for possibly committed violations.

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

ruling:

1. To recognise that Items 1 and 2 of Resolution of the Government of the Republic of Lithuania No. 22 “On Assenting to a Draft Agreement on Purchase and Sale of 34 Percent of the Shares (Which Belong to the State by Right of Ownership) of the Joint-Stock Company ‘Lietuvos dujos’, Annexes to this Agreement, as well as to a Draft Agreement of Shareholders” of 9 January 2004 (Official Gazette Valstybės žinios, 2004, No. 8-185) to the extent that the Government of the Republic of Lithuania assented to selling 34 percent of the shares (which belonged to the state by right of ownership) of the joint-stock company “Lietuvos dujos” to the public joint-stock company “Gazprom” and empowered the Director General of the state enterprise State Property Fund to sign, on behalf of the Government of the Republic of Lithuania, the Agreement on Purchase and Sale of the Shares and annexes to this agreement are not in conflict with Constitution of the Republic of Lithuania.

2. To recognise that Resolution of the Government of the Republic of Lithuania No. 292 “On a Draft Supplement to the Long-Term Gas Supply Agreement Between the Joint-Stock Company ‘Lietuvos dujos’ and the Public Joint-Stock Company ‘Gazprom’” of 18 March 2004 (Official Gazette Valstybės žinios, 2004, No. 42-1386) is not in conflict with the Constitution of the Republic of Lithuania.

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

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

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