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On limiting the opportunity of the owners of flats or other premises in blocks of flats to choose the supervisor of the heating and hot water systems of a building

Case no 5/2014

 

 

 THE CONSTITUTIONAL COURT OF THE REPUBLIC OF LITHUANIA

IN THE NAME OF THE REPUBLIC OF LITHUANIA

 

RULING

ON THE COMPLIANCE OF PARAGRAPHS 2 AND 4 (WORDING OF 28 JUNE 2012) OF ARTICLE 20 OF THE REPUBLIC OF LITHUANIA’S LAW ON THE HEAT SECTOR (WORDING OF 20 NOVEMBER 2007) WITH THE CONSTITUTION OF THE REPUBLIC OF LITHUANIA

 

7 June 2016, no KT17-N8/2016

Vilnius

 

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

The court reporter – Daiva Pitrėnaitė

The Constitutional Court of the Republic of Lithuania, pursuant to Articles 102 and 105 of the Constitution of the Republic of Lithuania and Articles 1 and 531 of the Law on the Constitutional Court of the Republic of Lithuania, at the Court’s hearing, on 24 May 2016, considered, under written procedure, constitutional justice case no 5/2014 subsequent to the petition (no 1B-4/2014) of the Vilnius City Local Court (Vilniaus miesto apylinkės teismas), the petitioner, requesting an investigation into whether Paragraphs 2 and 4 (wording of 28 June 2012) of Article 20 of the Republic of Lithuania’s Law on the Heat Sector (wording of 20 November 2007) are in conflict with Articles 23 and 29 of the Constitution of the Republic of Lithuania, as well as the constitutional principles of justice and a state under the rule of law.

The Constitutional Court

has established:

I

1. The Vilnius City Local Court, the petitioner, was investigating a civil case in which a representative of the residents of a block of flats, the claimant, had filed an action, complaining about the obligation to enter into a contract. The claimant indicated that he wished to conclude a contract with the supervisor (operator) of the heating and hot water systems of the building offering the most favourable price; however, according to Paragraphs 2 and 4 (wording of 28 June 2012) of Article 20 of the Law on the Heat Sector (wording of 20 November 2007) (hereinafter also referred to as the Law), this was prohibited.

The petitioner, having found that there were sufficient grounds for doubting the compliance of Paragraphs 2 and 4 of Article 20 (wording of 28 June 2012) of the Law with the Constitution, suspended the consideration of the civil case and applied to the Constitutional Court with a petition, requesting an investigation into the compliance of the said paragraphs with the Constitution.

2. The petition of the Vilnius City Local Court, the petitioner, is substantiated by the following arguments.

2.1. The impugned legal regulation, entrenched in Paragraphs 2 and 4 of Article 20 (wording of 28 June 2012) of the Law, imposed certain limitations on choosing the supervisor (operator) of the heating and hot water systems of a building – heat suppliers and persons who had an employment relationship with heat suppliers, the producers of fuel used for producing heat, the manufacturers of heat metering equipment used in heat supply activities, persons engaged in trade in fuel used for producing heat, or persons who belonged to the groups of economic operators associated with the persons listed above, as defined by the Republic of Lithuania’s Law on Competition, were not allowed to act as the supervisor (operator) of the heating and hot water systems of a building; the impugned legal regulation also pointed out the exceptions when the imposed limitations are not applicable.

Such a legal regulation restricted the right of the owners of flats and other premises in blocks of flats to manage their property in a manner acceptable to them. The common shared property owned by all the owners in proportion to the part of the property managed by them is a value that enjoys the same protection under the Constitution as private ownership. Thus, the owners of flats and other premises have not only the constitutional right to use, possess, and dispose of the property managed under common shared ownership, but also the right to choose such a supervisor (operator) of the heating and hot water systems of the corresponding building that is the best in its field and has relevant experience and qualification, therefore, can best represent their interests. In addition, the obligation of the co-owners themselves to take care of their property cannot be ignored.

It should be noted that the objective of the imposed limitations on choosing the supervisor (operator) of the heating and hot water systems of a building was to reduce the prices of maintenance services provided in the heating sector, but, upon conducting an analysis, it became clear that, after the adoption of the impugned provisions of the Law, the maintenance costs of heating systems did not change; thus, the measures imposed by the legislature did not achieve the desired objective.

There are serious doubts as to whether, following the imposition of the limitations by the impugned legal regulation on the choice of the supervisor (operator) of the heating and hot water systems of a building (where the said limitations were aimed at the protection of the rights of consumers), the right of the owners to manage and dispose of their property was unreasonably restricted more than necessary, without leaving any possibility for the residents of blocks of flats to choose the desired supervisor (operator) of the above systems; there are also serious doubts as to whether it was possible to achieve this objective by less restrictive measures. For these reasons, the petitioner has doubts as to whether the impugned provisions of the Law were in compliance with Article 23 of the Constitution.

2.2. The right to choose the entities providing heating and hot water system maintenance services was limited only to residents of blocks of flats located in major cities (Vilnius, Kaunas, and Klaipėda). Residents of other cities could choose the most suitable supervisors (operators) of the heating and hot water systems of buildings without reservation.

In those cities and small towns where the provisions of the Law did not apply, namely the heat supplier was the only qualified person having appropriate technical facilities and capable of performing the functions of the supervisor (operator) of the heating and hot water systems of buildings. However, it is not clear why the heat supplier or the other persons specified in Paragraph 2 (wording of 28 June 2012) of Article 20 of the Law would not also be able to provide maintenance services of heating and hot water systems in the major cities, without limiting the freedom of choice of the residents of these cities and by not discriminating them compared with residents of other cities. The constitutional principle of a state under the rule of law obliges the legislature to adopt legal acts that do not restrict more than necessary the rights and freedoms of persons, that are non-discriminatory, and that do not create inequality. Thus, the impugned legal regulation was in conflict with Article 29 of the Constitution, as well as the constitutional principles of justice and a state under the rule of law.

II

In the course of the preparation of the case for the hearing of the Constitutional Court, written explanations were received from Seimas member Jurgis Razma, acting as the representative of the Seimas, the party concerned, where it is maintained that the impugned legal regulation was not in conflict with the Constitution. The position of the representative of the party concerned is substantiated by the following arguments.

1. Paragraphs 2 and 4 of Article 20 (wording of 28 June 2012) of the Law consolidate the measures that ensure that the supervisors (operators) of the heating and hot water systems of buildings would act in the interests of heat customers. To avoid a conflict of interest that inevitably occurs when the maintenance of the heating and hot water systems in blocks of flats is carried out by persons who are related to the heat supplier on the basis of the relationships of ownership, management, or indirect additional benefit is possible only by limiting, in the maintenance of heating and hot water systems of buildings, the involvement of persons related to the heat supplier on the basis of certain relationships. Having stipulated under the impugned legal regulation that these persons may not act as the supervisor (operator) of the heating and hot water systems of a building, it is aimed at ensuring that decisions taken by the supervisor (operator) of the heating and hot water systems of a building would be more objective and the price and quality of the services would be more in line with the interests of the residents of a block of flats.

2. The measure enshrined in the law is the least restrictive, as the owners of blocks of flats and other premises may choose any supervisor (operator) of the heating and hot water systems of a building, except for the persons specified in the impugned provision of the Law. Moreover, the limitation established in the Law did not deny the essence of the right of ownership to flats and other premises in blocks of flats, as the owners had the right to choose various ways, consolidated by law, of the management of the heating and hot water systems of a building owned by them as shared property: they could establish an association of the owners of flats and other premises in a block of flats, which itself had the right to supervise the heating and hot water systems of the block of flats, or they could choose an administrator providing the maintenance of communal use items, who complied with the requirements established by the Law, to act as the supervisor (operator) of the said systems.

3. The impugned limitations applied only to the maintenance of the heating and hot water systems of blocks of flats located in large residential areas (inhabited by more than 150 thousand inhabitants, i.e. in Vilnius, Kaunas, and Klaipėda). It is not by chance that the big cities of Lithuania were distinguished: this was determined by the social environment, the industrial and economic infrastructure of these cities, the situation in the market, competitive conditions, and their influence on the participants of heat supply services located in these cities. In the largest cities of Lithuania, the heat supply to customers is ensured by the large heat suppliers, i.e. those who, according to the number of customers of heat supply systems and their dominance in the market of these cities, occupy almost a monopolistic position. The prohibition, established in the impugned provisions of the Law, precluding heat suppliers and persons associated with them from acting as the supervisors (operators) of the heating and hot water systems of buildings in the largest cities of Lithuania was specifically aimed at preventing the maintenance market segment from becoming dominated by a single service provider, which was also confirmed in Paragraph 4 (wording of 28 June 2012) of Article 20 of the Law, according to which no limitations apply to small heat supply companies.

In addition, the impugned provisions of the Law singled out the large cities also because of the fact that the implementation of the prohibition on vertical integration can be very difficult in cities where both the maintenance of the heating and hot water systems of buildings and the supply of heat are carried out by municipal enterprises. Such a regulation would also be difficult to implement in small towns, which, due to their low population density, the small market, and the low number of skilled specialists, can find it difficult to find companies and persons who could carry out the maintenance of the heating and hot water systems of buildings and would in no way be connected with the heat supplier or with persons providing the latter with goods or services. Thus, it appears that there are such differences between the major residential areas of Lithuania and other residential areas that would make it possible to objectively justify such a differentiated legal regulation, especially since it aims at positive, socially significant goals, and the establishment of the above limitations is connected with the peculiarities of the relations between regulated participants of the heat sector.

III

In the course of the preparation of the case for the hearing of the Constitutional Court, written opinions were received from Rokas Masiulis, the Minister of Energy of the Republic of Lithuania, Ričardas Žoramskis, the Deputy Head of the State Energy Inspectorate under the Ministry of Energy, Šarūnas Keserauskas, the Chairperson of the Competition Council of the Republic of Lithuania, Feliksas Petrauskas, the Director of the State Consumer Rights Protection Authority, Inga Žilienė, the Chairperson of the National Commission for Energy Control and Prices, Roma Žakaitienė, the Director of the Association of Local Authorities in Lithuania, Žilvinas Šilėnas, the President of the Lithuanian Free Market Institute, Juozas Antanaitis, the President of the Lithuanian Chamber of the Management and Maintenance of Houses, Vytautas Stasiūnas, the President of the Lithuanian District Heating Association, Antanas Miškinis, the President of the Association of Household Consumers, and Valdas Bekunskas, the Deputy Mayor of the City of Vilnius; in addition, a letter of Giedrius Krasauskas, the Chancellor of the Chancellery of the President of the Republic of Lithuania, regarding the provision of information was received.

IV

In the course of the preparation of the case for the judicial consideration, the specialists were questioned – Ivan Podmasko, the Head of the Planning and Controlling Division of the State Energy Inspectorate under the Ministry of Energy, Dovilė Kapačinskaitė, the Head of the Heating and Energy Efficiency Division of the Ministry of Energy of the Republic of Lithuania, Saulius Kubilius, a chief specialist at the Heating and Energy Efficiency Division of the Ministry of Energy of the Republic of Lithuania, Vilma Skinderytė, the Deputy Director of the Heat and Water Department of the National Commission for Energy Control and Prices, Ramunė Zailskienė, an adviser at the Heat Division of the Heat and Water Department of the National Commission for Energy Control and Prices, and Raimonda Ragelytė, an adviser at the Law Division of the National Commission for Energy Control and Prices.

The Constitutional Court

holds that:

I

1. The Vilnius City Local Court, the petitioner, requests an investigation into the compliance of Paragraphs 2 and 4 (wording of 28 June 2012) of Article 20 of the Law with the Constitution.

2. On 20 May 2003, the Seimas passed the Law on the Heat Sector, which came into force on 1 July 2003 (with the corresponding exception) and which regulates the state management of the heat sector, the activities of the heat sector entities, their relations with heat customers, as well as their interrelationships and responsibilities.

2.1. Article 19, titled “The Maintenance of Heating and Hot Water Systems in Buildings”, of the Law on the Heat Sector stipulated, inter alia, that the heating and hot water systems of blocks of flats connected to the heat supply system must be maintained by the supervisor (operator) chosen by the owners of the flats and other premises; if the owners of the flats have not decided on the choice of the supervisor of the heating and hot water systems, temporarily, until such a choice is made, the heat supplier that supplies heat to the owners of the flats and other premises is also the supervisor of the heating and hot water systems of the block of flats.

It should be noted that, after it had been prescribed in Article 19 of the Law on the Heat Sector that the heating and hot water systems of blocks of flats were to be maintained by the supervisor (operator) chosen by the owners of flats and other premises, the said law imposed no limitations preventing persons from acting as the supervisors (operators) of heating and hot water systems of buildings.

2.2. The Law was set out in its new wording by the Republic of Lithuania’s Law Amending the Law on the Heat Sector, which was passed by the Seimas on 20 November 2007. In Article 20 of the Law, which regulates the maintenance of the heating and hot water systems of buildings, no limitations on the choice of the supervisor (operator) of the heating and hot water systems of buildings were established.

2.3. By the Republic of Lithuania’s Law on Amending and Supplementing Articles 2, 3, 20, 22, 28, 31, and 32 of the Law on the Heat Sector, which was passed by the Seimas on 29 September 2011 and came into force on 1 November 2011, Article 20 of the Law was amended and supplemented – its Paragraph 2 singled out the following groups of persons who could not be supervisors (operators) of the heating and hot water systems of buildings: heat suppliers, persons who had an employment relationship with heat suppliers, or provided goods or services to heat suppliers, producers of fuel used for producing heat, manufacturers of heat metering equipment or other equipment used in heat supply activities, persons engaged in wholesale or retail trade in fuel used for producing heat, or persons who belonged to the groups of economic operators associated with the persons listed above, as defined by the Law on Competition. According to Paragraph 4 (wording of 29 September 2011) of Article 20 of the Law, these limitations did not apply in the two cases: with regard to the supervisor (operator) of the heating and hot water systems of a block of flats located in a small residential area (inhabited by less than 50 thousand inhabitants), unless the municipal council decided otherwise, as well as in cases where the supervisor (operator) was a natural person who lived in that building. This means that in these two cases it was possible to choose the heat supplier and persons associated with it, as well as the other persons who could not be chosen according to the general rule stipulated in Paragraph 2 (wording of 29 September 2011) of Article 20 of the Law, as the supervisor (operator) of the heating and hot water systems of a building.

The legal regulation entrenched in Article 20 (wording of 29 September 2011) of the Law, compared with the one established in Article 20 (wording of 20 November 2007) of the Law, was changed substantially. Paragraph 2 (wording of 29 September 2011) of Article 20 of the Law for the first time determined who cannot act as the supervisors (operators) of the heating and hot water systems of buildings, and Paragraph 4 (wording of 29 September 2011) of the same article provided for exceptions to this regulation, i.e. the cases where the limitations established in Paragraph 2 did not apply.

In the context of the constitutional justice case at issue, it should be mentioned that it is clear from the travaux préparatoires of the Law on Amending and Supplementing Articles 2, 3, 20, 22, 28, 31, and 32 of the Law on the Heat Sector, adopted on 29 September 2011, which for the first time determined who is not allowed to be the supervisors (operators) of the heating and hot water systems of buildings and established exceptions to this regulation, that the amendment was aimed at ensuring fair competition and the protection of the interests of the owners of blocks of flats. The supervisor (operator) of the heating and hot water systems of a building, whose duties include seeking to use heat energy economically and rationally and, at the same time, to reduce heating bills, enters into a conflict of interest if he/she is connected with the heat supplier or the manufacturers or suppliers of materials, equipment, or facilities of heating systems on the basis of ownership, employment, or similar relationships; therefore, the said amendments to the Law aimed to establish measures in order to ensure that the supervisors (operators) of the heating and hot water systems of buildings would act in the interests of the owners of blocks of flats, that his/her decisions would be more objective, and that the price and quality of his/her services would be better suited to the needs of the residents.

2.4. On 28 June 2012, the Seimas passed the Republic of Lithuania’s Law Amending Article 20 of the Law on the Heat Sector, whereby Paragraphs 2 and 4 (wording of 29 September 2011) of Article 20 of the Law, which are relevant to this constitutional justice case, were amended and set out as follows:

2. Heat suppliers or persons who have an employment relationship with heat suppliers, the producers of fuel used for producing heat, the manufacturers of heat metering equipment used in heat supply activities, persons who are engaged in wholesale or retail trade in fuel used for producing heat, or persons who belong to groups of economic operators that are associated with the persons listed above, as defined by the Law on Competition, are not allowed to act as the supervisor (operator) of the heating and hot water systems of a building.

[…]

4. The prohibition set out in Paragraph 2 of this Article does not apply to the maintenance of the heating and hot water systems of blocks of flats located in a residential area where, according to the Statistics Lithuania, there are less than 150 000 inhabitants, unless the municipal council decides otherwise. This prohibition does not apply to heat supply companies serving less than 5 000 connected customers or heat supply companies that sell less than 50 000 MWh of heat per year, as well as in cases where the certified supervisor (operator) of the heating and hot water systems is a natural person who lives in that building.”

In the constitutional justice case at issue, the petitioner impugns the constitutionality of the provisions of Article 20 of the Law that were set out in this wording.

2.4.1. Having compared the legal regulation established in Paragraph 2 (wording of 28 June 2012) of Article 20 of the Law with the one established in Paragraph 2 (wording of 29 September 2011) of Article 20 of the Law, it should be noted that it changed in the sense that it narrowed the circle of persons who cannot be the supervisors (operators) of the heating and hot water systems of buildings: it excluded from this circle persons supplying goods or services to the heat supplier, as well as manufacturers of equipment other than heat metering equipment used in heat supply activities.

Having compared the legal regulation established in Paragraph 4 (wording of 28 June 2012) of Article 20 of the Law with Paragraph 4 (wording of 29 September 2011) of Article 20 of the Law, it should be noted that it changed in the sense that the possibility of not applying the limitations set out in Paragraph 2 of this article was granted to larger residential areas than before – it was established that the limitations did not apply in residential areas with a population of less than 150 thousand inhabitants; an additional case was also provided for in which the limitations referred to in Paragraph 2 did not apply: where heat was supplied by small companies (serving less than 5 thousand connected customers or selling less than 50 thousand MWh of heat per year), they could act as the supervisors (operators) of the heating and hot water systems of blocks of flats, regardless of the size of the residential area.

2.4.2. Summing up the above and interpreting the impugned legal regulation laid down in Paragraphs 2 and 4 (wording of 28 June 2012) of Article 20 of the Law, it should be noted that these provisions imposed the limitations that prohibited certain persons from acting as the supervisors (operators) of the heating and hot water systems of blocks of flats located in large residential areas (with a population of at least 150 000 inhabitants): heat suppliers themselves or persons who had an employment relationship with heat suppliers, the producers of fuel used for producing heat, the manufacturers of heat metering equipment used in heat supply activities, traders in fuel used for producing heat, and persons that belonged to groups of economic operators associated with the persons listed above were not allowed to act as the supervisors (operators) of the heating and hot water systems of blocks of flats. The limitations did not apply to small heat supply companies (serving less than 5 thousand connected customers or selling less than 50 thousand MWh of heat per year) and natural persons who were certified supervisors (operators) of heating and hot water systems of buildings and who lived in the blocks of flats that they themselves supervised.

It should be noted that that municipal councils could also decide to apply the limitations established in Paragraph 2 (wording of 28 June 2012) of Article 20 of the Law to residential areas with a population of less than 150 000 inhabitants.

2.4.3. It needs to be mentioned that it is pointed out in the travaux préparatoires of the Law of 28 June 2012 on Amending Article 20 of the Law on the Heat Sector that the wide circle of persons who were prevented from acting as the supervisors (operators) of heating and hot water systems of buildings had been established unreasonably. This was equivalent to a prohibition preventing all those economic operators related to heat suppliers on the basis of certain relationships from acting as the supervisors (operators) of heating and hot water systems of buildings, although it was among those operators that competent experts in the maintenance of the energy systems of buildings could be found. In addition, the stipulation that the impugned limitations did not apply to residential areas with a population of less than 150 000 inhabitants and to heat supply companies serving less than 5 thousand connected customers or selling less than 50 thousand MWh of heat per year was intended to avoid a disproportionate financial and administrative burden placed on small heat suppliers – to grant the respective companies an exemption from the legal requirements to separate the supervision (operation) of the heating and hot water systems of buildings from heat supply, as well as to widen the circle of municipalities to which the prohibitions laid down in Paragraph 2 of Article 20 of the Law on the Heat Sector would not apply. From the aspect of the availability of services in the supervision (operation) of the heating and hot water systems of buildings, the situation of municipalities is objectively very different: in smaller municipalities, the heat supplier is often the only qualified entity that has appropriate technical facilities and is capable of performing the functions of the supervisor (operator) of the heating and hot water systems of buildings.

As can be seen from the conclusion (no 108-P-25) of 27 June 2012, which was adopted by the Economic Committee of the Seimas, after the 29 September 2011 amendments to the Law had prescribed that the imposed limitations preventing certain persons from acting as the supervisors (operators) of the heating and hot water systems of buildings applied in residential areas with a population of more than 50 thousand inhabitants, there were no people in these residential areas who were ready to carry out the maintenance of the complex equipment of the heating units; whenever there was a disruption in heat supply, there was no one to repair the equipment.

2.5. On 13 May 2014, the Seimas passed the Republic of Lithuania’s Law Amending Articles 20 and 22 of the Law on the Heat Sector, by which it amended, inter alia, Paragraph 2 (wording of 28 June 2012) of Article 20 of the Law and set it out as follows:

2. The heat supplier that supplies heat to the relevant building or a natural person who has an employment relationship with the heat supplier (except a natural person who has an employment relationship with the heat supplier lives in the relevant block of flats and supervises himself/herself the block of flats he/she lives in or other blocks belonging to the house owners’ association), as well as persons whose business activities include fuel preparation and/or supply, or persons who belong to groups of economic operators that are associated with the persons listed in this Paragraph, as defined by the Law on Competition, are not allowed to act as the supervisor (operator) of the heating and hot water systems of a building. […]”

2.5.1. Having compared, from the aspect relevant to the constitutional justice case at issue, the legal regulation established in Paragraph 2 (wording of 13 May 2014) of Article 20 of the Law with the one established in Paragraph 2 (wording of 28 June 2012) of Article 20 of the Law, it should be noted that the circle of persons who cannot act as the supervisor (operator) of the heating and hot water systems of a block of flats was modified: the heat supplier that supplies heat to the relevant house, as well as persons whose business activities include fuel preparation and/or supply, cannot act as the supervisor (operator) of the heating and hot water systems of the block of flats; however, it is no longer prescribed that the producers of fuel used for producing heat, the manufacturers of heat metering equipment used in heat supply activities, and persons who are engaged in wholesale or retail trade in fuel used for producing heat cannot be the supervisor (operator) of the heating and hot water systems of a building. In addition, it is stipulated that it is allowed to choose a natural person who has an employment relationship with the heat supplier to be the supervisor (operator) of the heating and hot water systems of a block of flats if he/she lives in the same block and supervises himself/herself the block he/she lives in or other blocks belonging to the house owners’ association.

2.5.2. It should be mentioned that it is indicated in the travaux préparatoires of the Law of 13 May 2014 Amending Articles 20 and 22 of the Law on the Heat Sector that the purpose of the limitations imposed on the economic activities is to prevent monopolistic tendencies in the heat sector, where the maintenance of the heating and hot water systems of a building is carried out not by independent persons, but by those related to the heat supplier, and who are directly interested in the increase of heat consumption. These antitrust restraints aimed to protect fair competition and, thus, to defend such interests of final customers purchasing heat that were related to the economical and rational consumption of heat, ensuring the lowest heat bills. The envisaged prohibition preventing persons who have an employment relationship with the heat supplier from carrying out the supervision (operation) of the heating and hot water systems of a building is aimed at ensuring that the heat supplier that supplies heat to the building would not be able to indirectly act as the supervisor (operator) of the heating and hot water systems of that building, i.e. through persons who have an employment relationship with this heat supplier. The profitability of the preparation and delivery of fuel used for heat production depends on the scale of the activity, which is determined by the heat demand of the buildings; therefore, it is necessary to avoid a clear conflict of interests between the activity of the preparation and delivery of fuel and the activity of the maintenance of the heating and hot water systems of a building.

3. The impugned legal regulation should be interpreted in the context of the provisions consolidated in the other paragraphs of Article 20 of the Law.

3.1. Paragraph 1 (wording of 29 September 2011) of Article 20 of the Law provides that the heating and hot water systems of a bloc of flats that are connected to heat supply systems and belong to the owners of flats and other premises by right of common shared ownership, as well as the heating units, which belong by right of ownership either to the heat and/or hot water supplier (or third parties) or to the owners of flats and other premises, must be supervised (operated) by the supervisor (operator) of the heating and hot water systems of the building. The right to regulate (remotely or otherwise) the operation of the heating unit of a bloc of flats in compliance with the established hygiene norms is exercised only by the supervisor (operator) of the heating and hot water systems of the building, or a representative of the association of the bloc of flats with appropriate qualification or an authorised representative with appropriate qualification elected by the owners of the flats and other premises in the block of flats. The supervisor (operator) of the heating and hot water systems of the block of flats supervises (operates) the heating units owned by the heat and/or hot water supplier or by third parties on the basis of this law, without entering into separate contracts with the owners of the heating units. The supervisor (operator) of the heating and hot water systems of the building carries out his/her obligations by acting with care, honestly, and in the interests of the customers of heat and/or hot water.

This provision also stipulates that the supervisor (operator) of the heating and hot water systems of a building is chosen, according to the decision-making procedure established in Article 4.85 of the Civil Code of the Republic of Lithuania, by the owners of flats and other premises in the block of flats, the association of the owners of flats and other premises in the block of flats, or, in the absence of such a decision, the administrator of communal use items. The contract on the supervision (operation) of the heating and hot water systems of a block of flats is concluded with the supervisor (operator) of the heating and hot water systems of the building by the association of the owners of flats and other premises in the block of flats, a person authorised by contracting parties to the agreement of joint activities concluded by the owners of flats and other premises, or the administrator of communal use items. The supervisor (operator) of the heating and hot water systems of the building has no right to authorise other persons to engage in the activities regulated by certificate, or transfer them this right under a contract, or otherwise entrust this activity to them. Where the supervisor (operator) of the heating and hot water systems of a building is the association, it can purchase separate pieces of work or services from the entities having corresponding competence, technical means, and skills. The association of the owners of a block of flats and/or the administrator of communal use items can act as the supervisor (operator) of the heating and hot water systems of the building.

3.2. Thus, the owners of flats and other premises in a block of flats, the association of the owners of flats and other premises in a block of flats, or, if they fail to adopt a decision, the administrator of communal use items must choose the supervisor (operator) of the heating and hot water systems of the building in order that he/she would carry out the maintenance of the heating and hot water systems and heating units of the block of flats that are connected to the heat supply systems. After the aforesaid persons have chosen the supervisor (operator) of the heating and hot water systems of the building, this maintenance must be carried out namely by the chosen person – the supervisor (operator) of the heating and hot water systems of the building has no right to authorise other persons to engage in the activities regulated by certificate, transfer them this right under a contract, or otherwise entrust this activity to them.

3.3. It should be noted that the functions of the supervisor (operator) of the heating and hot water systems of a building, inter alia, may be performed by the administrator of communal use items and/or the association of the owners of flats and other premises in a bloc of flats – a representative of the association of the bloc of flats, who is appointed by this association and has corresponding qualification, has the right to regulate the work of the equipment of the heating unit; in addition, the association has unlimited possibilities of purchasing individual pieces of work or services from entities having appropriate competence, technical means, and skills.

The fact that the association of the owners of flats and other premises of a bloc of flats that is the supervisor (operator) of the heating and hot water systems of the building can purchase individual pieces of work or services from entities having appropriate competence, technical means, and skills means that it could purchase individual pieces of work or services from the heat supplier or the other persons who, in accordance with Paragraph 2 (wording of 28 June 2012) of Article 20 of the Law, could not act as the supervisor (operator) of the heating and hot water systems of the building.

4. The impugned legal regulation should be interpreted in the context of the other provisions of the Law.

4.1. According to Paragraph 22 (wording of 2 July 2013), titled “Definitions”, of Article 2 of the Law, the heating and hot water systems of a building is the complex of technical facilities installed in the building intended for the delivery to the premises of heat transmitted to, or produced in, the building and/or delivery of hot water to the premises. The inlet of the building separates this system from the supplier’s network.

The same article defines the supervisor (operator) of the heating and hot water systems of a building as a person who meets the requirements of this law, is certified in accordance with the established procedure, and is engaged in the business of supervision (operation) of the systems (Paragraph 23 (wording of 2 July 2013)); the heat supplier is defined as a person who has a heat supply licence and supplies heat to customers in accordance with sale and purchase agreements (Paragraph 39 (wording of 2 July 2013)).

4.2. The provision of the Law that the supervisor (operator) of the heating and hot water systems of the building carries out his/her obligations by acting with care, honestly, and in the interests of the customers of heat and/or hot water is detailed in the Rules for Heat Supply and Consumption, which were approved by the Minister of Energy.

In the context of the case at issue, it should be mentioned that the rights and obligations of the supervisor (operator) of the heating and hot water systems of a building were laid down in Chapter XI of Part II of the Rules for Heat Supply and Consumption, approved by the order (No 1-297) of 25 October 2010 of the Minister of Energy. These rights and obligations were, inter alia, as follows: to ensure the possibility of connecting only in accordance with the procedure laid down in the rules the facilities of a heating system that are newly installed or reconstructed by consumers to the heat transmission networks (Item 138.7); to ensure equal heating of a building and of all its flats and other premises by maintaining the temperature within the flats and premises, as established in legal acts, and the temperature of hot water supplied to flats and other premises, as established in legal acts, where the building’s heating and hot water systems comply with mandatory requirements and there are technical possibilities of regulating this (Item 138.14); by making use of all the available technical and organisational possibilities, to seek to achieve such operating mode of the building’s heating and hot water equipment that it would comply with the requirements for the cost efficient and rational use of heat and hot water (Item 138.15).

Thus, the supervisor (operator) of the heating and hot water systems of a building, when performing the activities of the supervision (operation) of the systems with care, honestly, and in the interests of the customers of heat and/or hot water, inter alia, must seek to use heat energy economically and rationally.

4.3. Paragraph 2 (wording of 29 September 2011) of Article 32 of the Law provides that the prices of heat and/or hot water are based on necessary (state-regulated) costs, incurred by the supplier, of the preparation (purchase) and transmission of heat or hot water, and/or the installation, maintenance, and checking of inlet heat and hot water meters (based on the readings whereof the heat and hot water consumption is paid for), the preparation of bills (payment messages) for heating and/or hot water, as well as accounting. The holder of a heat supply licence is obliged to supply heat at prices established in accordance with the Methodology for Determining the Prices for Heat and Hot Water, which is approved by the National Commission for Energy Control and Prices (Item 3 of Paragraph 13 (wording of 21 December 2009) of Article 30 of the Law).

The Methodology for Determining Heat Prices (wording of 28 February 2013) (hereinafter referred to as the Methodology), as approved by the resolution (No O3-96) of 8 July 2009, which was adopted by the National Commission for Energy Control and Prices, regulates the separation of accounting, the apportionment of the costs, and heat pricing (Item 1).

4.3.1. The Methodology states that the prices of price-regulated services (products) are equal to the necessary (state-regulated) costs of the provision of price-regulated services (products), including the return on investment (Item 52).

The heat supplier’s return on investment depends, inter alia, on the amount of capital used in the activities and is calculated by taking into account, inter alia, the amount of long-term and short-term assets (Items 6 and 57.7). In determining the cost price of services/products, the heat supplier is prohibited from distributing the value of unutilised items of fixed assets in inventories among business units (of heat production, heat transmission activities, etc.) (Items 5, 6, 13, and 20.3.9).

Thus, the value of unused, fixed assets in inventories is not included in the calculation of the cost price of services provided and, accordingly, it is not included in the calculation of the necessary costs of the provision of services/products (a part of such costs is the return on investment).

4.3.2. In addition, the Methodology stipulates that the price of price-regulated services/product is determined by taking into account, inter alia, the amount of the price-regulated service/product, where this amount is calculated, among other things, by assessing the actual annual volume of sales during the last three years (Items 59 and 60). If the amount of calculated costs for acquiring fuel and/or heat from independent producers of heat that is included in the price of a thermal unit of the heat supplier during the relevant period does not meet the amount of the actual costs, incurred by the supplier, for acquiring fuel and/or heat from independent producers of heat, the difference is assessed at the moment of establishing and recalculating the heat base prices (price components): a positive difference (when more revenue has been collected) is compensated for the benefit of customers, by establishing an additional heat revenue component that reduces the heat price and by distributing the difference within the period of 12 months; a negative difference (where the revenue collected has been less than the cost incurred for purchasing fuel and/or heat from independent producers of heat) is compensated for to the benefit of the heat supplier, by establishing an additional component of the heat costs and by distributing the difference within the period of 12 months (Item 76).

4.3.3. Thus, it is clear from the overall legal regulation established in the Methodology that the return on investment of the heat supplier depends on, inter alia, the value of the fixed assets used in its activities. In addition, the price of price-regulated services/product is determined by taking into account, inter alia, the actual annual volume of sales during the last three years; if there is any incompatibility between the amount of calculated costs for acquiring fuel and/or heat from independent producers of heat that is included in the price of a thermal unit of the heat supplier during the relevant period and the amount of the actual costs for acquiring fuel, the price of heat for a period of 12 months is correspondingly increased or decreased in the amount of the income difference.

5. The impugned legal regulation should be interpreted in the context of the provisions of the Law on Competition.

As mentioned above, according to Paragraph 2 (wording of 28 June 2012) of Article 20 of the Law, with the exception of the cases provided for in Paragraph 4 (wording of 28 June 2012) of this article, persons who belong to the groups of economic operators that are associated with the persons specified in the said paragraph, as defined by the Law on Competition, are not allowed to act as the supervisors (operators) of the heating and hot water systems of blocks of flats.

Paragraph 14 of Article 3 of the Law on Competition (wording of 22 March 2012) determines what is considered to be associated economic operators:

“‘Group of associated economic operators’ shall mean two or more economic operators that, due to their mutual control or interdependence and possible concerted actions are considered as one economic operator when calculating joint income and market share. Unless proved otherwise, a group of associated economic operators shall be considered to be comprised of each economic operator concerned and:

1) of economic operators in which, as in the economic operator concerned, the shareholding of one and the same natural person or the same natural persons accounts for 1/3 or more of the authorised capital or carries 1/3 or more of all the voting rights;

2) of economic operators that are subject to joint management or have a joint administrative subdivision with the economic operator concerned or half or more of whose members of supervisory board, administrative board, or another management or supervisory body are also members of the management or supervisory bodies of the economic operator concerned;

3) of economic operators in which the shareholding of the economic operator concerned accounts for 1/3 or more of the authorised capital or 1/3 or more of all the voting rights or that have a commitment to co-ordinate decisions relating to their economic activity with the economic operator concerned, or of economic operators whose responsibility for the meeting of their obligations to third parties has been assumed by the economic operator concerned, or of economic operators that have committed to transfer all or part of their profit or have transferred the right to make use of 1/3 or more of their assets to the economic operator concerned;

4) of economic operators whose shareholding in the economic operator concerned accounts for 1/3 or more of the authorised capital or 1/3 or more of all the voting rights or with which the economic operator concerned has committed itself to co-ordinate decisions relating to its economic activity, or that have assumed the responsibility for meeting the obligations of the economic operator concerned to third parties, or to which the economic operator concerned has committed to transfer all or part of its profit or has granted the right to make use of 1/3 or more of its assets;

5) of economic operators connected directly or indirectly, through other economic operators, with the economic operators referred to in Items 1, 2, 3, and 4 of this Paragraph in any of the ways specified in Items 1, 2, 3, and 4 of this Paragraph.”

Consequently, in certain cases provided for in the Law, not only heat suppliers and persons who have an employment relationship with heat suppliers, the producers of fuel used for producing heat, the manufacturers of heat metering equipment used in heat supply activities, and traders in fuel, but also persons who were jointly managed or jointly supervised together with the said economic operators or had a joint administrative subdivision with the economic operator concerned, or were linked by the shares held in the economic operator, by the fulfilment of obligations, by the commitment to co-ordinate decisions relating to their economic activity, by the sharing of profits or assets transferred for use, or by persons either directly or indirectly connected with them were prohibited from acting as the supervisor (operator) of the heating and hot water systems of a building.

6. Summing up the above legal regulation and interpreting, in its context, the impugned legal regulation set out in Paragraphs 2 and 4 (wording of 28 June 2012) of Article 20 of the Law, it should be noted that:

the owners of flats and other premises in a block of flats, the association of the owners of flats and other premises in a block of flats or, if they fail to adopt a decision, the administrator of communal use items must choose the supervisor (operator) of the heating and hot water systems of the building in order that he/she would perform the maintenance of the heating and hot water systems and heating units of the block of flats that are connected to the heat supply system;

the supervisor (operator) of the heating and hot water systems of a building, when performing the activities of the supervision (operation) of the systems with care, honestly, and in the interests of the customers of heat and/or hot water, inter alia, must seek to use heat energy economically and rationally;

the impugned legal regulation laid down in Paragraphs 2 and 4 (wording of 28 June 2012) of Article 20 of the Law imposed the limitations that prohibited certain persons from acting as the supervisors (operators) of the heating and hot water systems of blocks of flats located in large residential areas (with a population of at least 150 000 inhabitants): heat suppliers themselves or persons who had an employment relationship with heat suppliers, the producers of fuel used for producing heat, the manufacturers of heat metering equipment used in heat supply activities, traders in fuel used for producing heat, and persons that belonged to groups of economic operators associated with the persons listed above were not allowed to act as the supervisors (operators) of the heating and hot water systems of blocks of flats; the limitations did not apply to small heat supply companies (serving less than 5 thousand connected customers or selling less than 50 thousand MWh of heat per year) and natural persons who were certified supervisors (operators) of heating and hot water systems of buildings and who lived in the blocks of flats that they themselves supervised;

the functions of the supervisor (operator) of the heating and hot water systems of a building, inter alia, could be performed by the administrator of communal use items and/or the association of the owners of flats and other premises in a bloc of flats – a representative of the association of the bloc of flats, who was appointed by this association and had corresponding qualification, had the right to regulate the work of the equipment of the heating unit of the building; the association could purchase individual pieces of work or services from entities having appropriate competence, technical means, and skills, inter alia, from the heat supplier and the other persons that were listed in Paragraph 2 (wording of 28 June 2012) of Article 20 of the Law and that were prohibited from providing the maintenance services of the heating and hot water systems of a building;

municipal councils could also decide to apply the limitations established in Paragraph 2 (wording of 28 June 2012) of Article 20 of the Law to residential areas with a population of less than 150 000 inhabitants.

7. In the context of the constitutional justice case at issue, mention should also be made of Directive 2012/27/EU of the European Parliament and of the Council of 25 October 2012 on energy efficiency, amending Directives 2009/125/EC and 2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC. It is, inter alia, specified in this Directive that the European Union is facing unprecedented challenges resulting from increased dependence on energy imports and scarce energy resources, and the need to limit climate change and to overcome the economic crisis. Energy efficiency is a valuable means to address these challenges. It improves the Union’s security of supply by reducing primary energy consumption and decreasing energy imports.

It should be noted that energy resource efficiency and energy efficiency are among the most important Lithuania’s strategic long-term energy goals, which are provided for in the National Energy Independence Strategy, approved by the Seimas resolution (No XI-2133) of 26 June 2012 on the approval of the National Energy Independence Strategy.

II

On the compliance of Paragraphs 2 and 4 (wording of 28 June 2012) of Article 20 (wording of 20 November 2007) of the Law on the Heat Sector with Articles 23 and 29 of the Constitution and the constitutional principles of justice and a state under the rule of law

1. The petitioner requests an investigation into the compliance of Paragraphs 2 and 4 (wording of 28 June 2012) of Article 20 of the Law with Articles 23 and 29 of the Constitution and the constitutional principles of justice and a state under the rule of law.

2. According to the petitioner, the impugned legal regulation restricted the right of the owners of flats and other premises in blocks of flats to manage their property in a manner acceptable to them, i.e. to choose, in their opinion, the most suitable competent supervisor (operator) of the heating and hot water systems of the buildings; thus, Article 23 of the Constitution was violated. In addition, the prerequisites were created for unequal conditions for choosing the supervisors (operators) of the heating and hot water systems of blocks of flats located in largest residential areas (with a population of more than 150 thousand inhabitants) and smaller residential areas; thus, the principle of the equality of all persons, enshrined in Article 29 of the Constitution, as well as the constitutional principles of justice and a state under the rule of law, were violated.

3. When interpreting the provisions of Article 23 of the Constitution, the Constitutional Court has held that the right of ownership is one of fundamental human rights. The inviolability and protection of ownership, as consolidated in Article 23 of the Constitution, inter alia, means that owners have the right to perform any actions with regard to their property, with the exception of those prohibited by law, as well as to use their property and determine its future in any way that does not violate the rights and freedoms of other persons (inter alia, the Constitutional Court’s rulings of 14 March 2006 and 20 December 2013). Laws must protect the rights of ownership of all owners (inter alia, the Constitutional Court’s rulings of 30 September 2003 and 9 October 2013). An owner has the right to demand that other persons not violate his/her rights of ownership and the state has the duty to ensure, defend, and protect ownership against unlawful encroachment on it (inter alia, the Constitutional Court’s rulings of 19 September 2002 and 6 January 2011). Article 23 of the Constitution gives rise to the duty of the legislature to regulate ownership relations in such a manner that would defend and protect the rights of ownership and would ensure the inviolability of property (the Constitutional Court’s rulings of 23 August 2005 and 30 October 2008).

3.1. The Constitutional Court has emphasised on more than one occasion that ownership includes obligations (inter alia, the Constitutional Court’s rulings of 21 December 2000 and 3 April 2015). As a rule, the subjects of the ownership relations that are regulated by means of legal norms not only have certain rights, but also particular duties (the Constitutional Court’s rulings of 8 April 1997 and 31 January 2011). When using his/her property, an owner must behave responsibly and carefully (the Constitutional Court’s ruling of 30 October 2008). An owner, when enjoying the right to possess, use, and dispose of his/her property, may not violate laws and the rights of other persons (inter alia, the Constitutional Court’s rulings of 14 March 2002 and 12 April 2013). The obligations of an owner are determined, inter alia, by the specificity of the objects of ownership; thus, taking account of the particularities of the objects of ownership, the legislature may establish certain obligations of the owners of these objects, as well as their liability for non-compliance with these obligations (the Constitutional Court’s ruling of 12 April 2013).

3.2. Under the Constitution, the right of ownership is not absolute; it can be limited by means of a law, inter alia, due to the character of the object of ownership and due to a constitutionally reasonably need that is essential to society. In all cases where the rights of ownership are limited, the following conditions must always be observed: ownership may be limited only by invoking the law; limitations must be necessary in a democratic society in order to protect the rights and freedoms of other persons, the values consolidated in the Constitution, and the constitutionally important objectives that are essential to society; regard must be paid to the principle of proportionality, under which the measures provided for in laws must be in line with the objectives sought that are essential to society and are constitutionally justified (inter alia, the Constitutional Court’s rulings of 19 September 2002 and 20 December 2013). It needs to be emphasised that, under the Constitution, it is not allowed to deny the essence of the right of ownership by means of any limitation on the right of ownership; if the right of ownership were limited to the extent that its implementation becomes impossible, if the said right were restricted to the extent that reasonable limits would be exceeded, or its legal protection would not be ensured, in such a case there would be grounds for asserting that the essence of the right of ownership is violated, which would be tantamount to denying the said right (the Constitutional Court’s ruling of 13 May 2005).

3.3. The Constitutional Court has also held that the ownership right of the owners of residential and non-residential premises are protected under the Constitution and laws; the Constitution and laws protect and defend the rights of owners irrespective of the fact whether there is a certain association in a relevant block of flats or whether there is no such association (the Constitutional Court’s ruling of 23 June 1999). The proper maintenance of blocks of flats and their preservation is not only the private interest of their owners, but also a public interest (the Constitutional Court’s ruling of 21 December 2000). It has been noted in the doctrine of the Constitutional Court that, under the Constitution, the existence of a public interest (constitutionally important objective) may serve as a ground for limiting the right of a person to ownership only in cases where the non-limitation of this right, due to the nature of property and/or other important reasons, would render the protection of the values consolidated in the Constitution impossible and would harm the public interest (inter alia, the Constitutional Court’s rulings of 14 March 2002 and 5 July 2013).

4. When interpreting the constitutional principle of a state under the rule of law, the Constitutional Court noted that, under the Constitution, the legislature has the duty to lay down such a legal regulation under which the measures that are established in legal acts and are applicable would be proportionate to the objective sought and would not limit individual rights more than necessary in order to attain a legitimate and universally significant objective (inter alia, the Constitutional Court’s rulings of 27 March 2009 and 16 June 2015).

5. The constitutional principle of a state under the rule of law is also closely related to the constitutional values upon which the national economy is based (inter alia, the Constitutional Court’s rulings of 4 December 2008 and 29 October 2015).

In the context of the constitutional justice case at issue, mention should be made of the provisions of the official constitutional doctrine that disclose the requirements, stemming from the Constitution, inter alia, Article 46 thereof, for the legislature when it regulates the economic activity, among other things, in the heat sector:

the main criterion of regulating economic activity is the general welfare of the Nation; the legal regulation governing economic activity is not an objective in itself, but, rather, a means of social engineering and a way to achieve the welfare of the Nation through law (inter alia, the Constitutional Court’s rulings of 13 May 2005 and 29 October 2015); when regulating economic activity, the state must comply with the principle of the reconciliation of the interests of a person and society, must ensure the interests of both a private person (an economic entity) and society, and must seek not the welfare of individual persons, but precisely the general welfare of the Nation, which must not be opposed to the welfare, rights, and legitimate interests of an economic operator whose activity falls under the regulation, or those of persons that have established, have control over, or are otherwise connected with the said economic operator (inter alia, the Constitutional Court’s rulings of 13 May 2005 and 29 October 2015);

the duty of the state consolidated in Paragraph 3 of Article 46 of the Constitution to regulate, by taking account of the resources of the state, its material and financial possibilities and other important factors, the economic activity so that it would serve the general welfare of the Nation implies the requirement for the legislature to balance various constitutional values in regulating such activity, inter alia, to find a balance among freedom of individual economic activity and initiative, freedom of fair competition, and the protection of consumers’ interests (inter alia, the Constitutional Court’s rulings of 3 April 2015 and 29 October 2015);

Paragraph 5 of Article 46 of the Constitution lays down the duty of the state to defend the interests of consumers; this constitutional provision implies that various measures of the protection of consumers’ interests must be established by means of legal norms and that state institutions must exercise control over how economic operators comply with established requirements etc. (inter alia, the Constitutional Court’s rulings of 18 October 2000 and 29 October 2015 ); the specific features of relations in certain spheres of economic activity are typical of the said spheres only; such specific features may imply, inter alia, the particularities of the regulation governing the relations of the protection and defence of the rights and interests of consumers in certain fields of economic activity; namely the content of the economic activity, its specific features, and the particularities in certain fields of economy may determine the necessity and need for a special regulation governing the legal relations of the protection and defence of the rights and interests of consumers in a certain sphere of economic activity; thus, the measures of the protection and defence of the rights and interests of the consumers in certain spheres of economic activity may differ depending on the specific features of the relations of a concrete economic activity (the Constitutional Court’s rulings of 2 March 2009 and 29 October 2015); the legislature, when regulating the relations of a certain sector of economy in which a specific legal situation of certain economic subjects is consolidated, and while providing for in other laws the exceptions to the regulation governing the said relations, must also establish additional legal measures that would ensure the protection of the rights and legitimate interests of consumers (the Constitutional Court’s rulings of 17 March 2003 and 29 October 2015);

the economic activity of persons may be subject to limitation where it is necessary to defend the interests of consumers, to protect fair competition and other values consolidated in the Constitution; the prohibitions provided for in a law must be reasonable, non-discriminatory, and clearly formulated; due to the complexity of economic activity and the dynamism of particular relations, the regulation in this area may not be the same all the time, i.e. the proportion of prohibitions and permissions may fluctuate; however, in the course of the alteration of the content of the legal regulation, the principles of the regulation concerning the national economy, which are consolidated in the Constitution, must not be denied (the Constitutional Court’s rulings of 6 October 1999 and 13 May 2005);

the state must regulate economic activity so that it would also ensure, inter alia, the public interest consolidated in Article 54 of the Constitution – the protection of the natural environment, wildlife and plants, individual objects of nature, areas of particular value, as well as the sustainable use of natural resources, their restoration and increase; the state is under the constitutional obligation to guarantee the said public interest (inter alia, the Constitutional Court’s rulings of 29 April 2009 and 29 October 2015).

6. In the context of the constitutional justice case at issue, it should be noted that the specific character of the economic activity conducted in the energy sphere – the supply of all consumers with energy resources – is determined, inter alia, by the necessity in accordance with the public interests (arising, inter alia, from the obligations of the membership of the Republic of Lithuania in the European Union) to ensure energy efficiency as a means of striving for the security and reliability of the energy system and to reduce greenhouse gas emissions.

7. It has been mentioned that the impugned legal regulation, laid down in Paragraphs 2 and 4 (wording of 28 June 2012) of Article 20 of the Law, imposed the limitations that prohibited certain persons from acting as the supervisors (operators) of the heating and hot water systems of blocks of flats located in large residential areas (with a population of at least 150 000 inhabitants): heat suppliers themselves or persons who had an employment relationship with heat suppliers, the producers of fuel used for producing heat, the manufacturers of heat metering equipment used in heat supply activities, traders in fuel used for producing heat, and persons that belonged to groups of economic operators associated with the persons listed above were not allowed to act as the supervisors (operators) of the heating and hot water systems of blocks of flats. The limitations did not apply to small heat supply companies (serving less than 5 thousand connected customers or selling less than 50 thousand MWh of heat per year) and natural persons who were certified supervisors (operators) of heating and hot water systems of buildings and who lived in the blocks of flats that they themselves supervised.

7.1. It has been mentioned that the supervisor (operator) of the heating and hot water systems of a building, when performing the activities of the supervision (operation) of the systems with care, honestly, and in the interests of the customers of heat and/or hot water, inter alia, must seek to use heat energy economically and rationally.

7.2. It has been mentioned that the return on investment of the heat supplier depends on, inter alia, the value of the fixed assets used in its activities. In addition, the price of regulated services/product is determined by taking into account, inter alia, the actual annual volume of sales during the last three years; if there is any incompatibility between the amount of calculated costs for acquiring fuel and/or heat from independent producers of heat that is included in the price of a thermal unit of the heat supplier during the relevant period and the amount of the actual costs for acquiring fuel, the price of heat for a period of 12 months is correspondingly increased or decreased in the amount of the income difference.

Thus, a heat supplier is interested in the fact that the amount of heat sold by it would not decrease or would even increase – the value of the fixed assets used in its activities and, accordingly, the return on investment, as well as the price of regulated services/product and the time when the heat supplier will receive income, depend on the amount of heat sold by it.

7.3. Consequently, the interests of the supervisor (operator) of the heating and hot water systems of a building, who, while acting in the interests of the customers, must seek that heat energy is used in an economical and rational manner, and the interests of the heat supplier and persons who are associated with the heat supplier and belong to the groups of associated economic operators, as defined by the Law on Competition, are substantially different.

7.4. In the context of the constitutional justice case at issue, it should be noted that, the Constitution, inter alia, the provision of Paragraph 5 of Article 46 thereof, whereby the state defends the interests of consumers, gives rise to the duty of the legislature to adopt such a legal regulation governing the relations related to heat supply where this regulation would consolidate the provisions prohibiting heat suppliers from acting as the supervisors (operators) of the heating and hot water systems of buildings; having established that the interests of certain persons associated with the heat supplier are contrary to the interest of heat customers to consume heat energy in an economical and rational manner, the duty stems from the Constitution, inter alia, Paragraph 5 of Article 46 thereof, for the legislature to impose the above prohibiting provisions on the said persons as well; if it transpires that the provisions (consolidated in laws) prohibiting certain persons, inter alia, entities conducting economic activity of a certain type or on a certain territory, from acting as the supervisors (operators) of the heating and hot water systems of buildings do not (would not) ensure the rendering, at competitive prices, of appropriate-quality services related to the supervision of the heating and hot water systems of a building, the Constitution, inter alia, Paragraph 3 of Article 46 thereof, gives rise to the duty of the legislature to establish such a legal regulation that would provide for relevant exceptions to the prohibition preventing heat suppliers and certain related persons from acting as the supervisors (operators) of the heating and hot water systems of buildings.

It should also be noted that, in cases where, in the sphere of an economic activity related to heat supply, the circumstances leading to the conflict of interests between a certain person (persons) and heat customers arise or cease to exist, the Constitution, inter alia, the constitutional principle of a state under the rule of law, gives rise to the duty of the legislature to appropriately amend the legal regulation that defines the circle of persons prohibited from acting as the supervisors (operators) of the heating and hot water systems of buildings.

7.5. It has been mentioned that the functions of the supervisor (operator) of the heating and hot water systems of a building, inter alia, may be performed by the administrator of communal use items and/or the association of the owners of flats and other premises in a bloc of flats – a representative of the association of the bloc of flats, who is appointed by this association and has corresponding qualification, has the right to regulate the work of the equipment of the heating unit of the building; if the association of the owners of flats and other premises in a bloc of flats is the supervisor (operator) of the heating and hot water systems of the building, it can purchase individual pieces of work or services from entities having appropriate competence, technical means, and skills, inter alia, it could purchase individual pieces of work or services from the heat supplier and the other persons that were listed in Paragraph 2 (wording of 28 June 2012) of Article 20 of the Law and that were prohibited from providing the maintenance services of the heating and hot water systems of a building.

Consequently, if the association of the owners of flats and other premises in a bloc of flats is the supervisor (operator) of the heating and hot water systems of the building, it has (had) the opportunity to purchase individual pieces of work or services from various persons (thus, it could purchase individual pieces of work or services from the persons that were listed in Paragraph 2 (wording of 28 June 2012) of Article 20 of the Law), and may (might) freely choose the persons offering, in the opinion of the association, the most suitable price for, and quality of, pieces of work or services, inter alia, those related to the maintenance of the heating and hot water systems of the building.

7.6. It has also been mentioned that the limitations imposed on certain persons regarding acting as supervisors (operators) of heating and hot water systems of blocks of flats did not apply to small heat supply companies (serving less than 5 thousand connected customers or selling less than 50 thousand MWh of heat per year) and natural persons who were certified supervisors (operators) of heating and hot water systems of buildings and who lived in the blocks of flats that they themselves supervised.

7.7. Thus, the impugned legal regulation did not restrict the right of the owners of flats and other premises in blocks of flats located in larger residential areas (with a population of at least 150 thousand inhabitants) to choose not the person specified in Paragraph 2 (wording of 28 June 2012) of Article 20 of the Law, but any other person, including the entities that met the requirements specified in Paragraph 4 (wording of 28 June 2012) of Article 20 of the Law, as the supervisors (operators) of the heating and hot water systems of buildings; in addition, the same legal regulation stipulated that the administrator of communal use items and/or the association of the owners of flats and other premises in a block of flats, which may use without restrictions the opportunities to purchase separate pieces of work or services from the entities having corresponding competence, technical means, and skills, inter alia, from the persons listed in Paragraph 2 (wording of 28 June 2012) of Article 20 of the Law, could also act as the supervisor (operator) of the heating and hot water systems of the building.

7.8. Thus, the impugned provisions of the Law, having consolidated the legal regulation limiting the circle of persons allowed to provide the maintenance services of the heating and hot water systems of buildings in residential areas with a population of at least 150 thousand inhabitants, with a view to balancing, on the one hand, the interest of the owners of flats and other premises in blocks of flats to receive services in the maintenance of the heating and hot water systems of the buildings at the lowest price and, on the other hand, their interest to receive quality services in the maintenance of the heating and hot water systems of the buildings, as well as the public interest to ensure the proper supervision (operation) of blocks of flats and to use heat energy in an efficient manner, did not deny the possibility of the owners of flats and other premises in blocks of flats to choose the persons providing the said services from a relatively large circle of persons who provide such services; thus, competition among the supervisors (operators) of the heating and hot water systems of buildings, inter alia, competition on the prices of the provided services, was ensured.

8. It should be held that the legislature, having stipulated in Paragraphs 2 and 4 (wording of 28 June 2012) of Article 20 of the Law that heat suppliers and persons who had an employment relationship with heat suppliers, the producers of fuel used for producing heat, the manufacturers of heat metering equipment used in heat supply activities, persons engaged in wholesale or retail trade in fuel used for producing heat, or persons who belonged to the groups of economic operators associated with the persons listed above, as defined by the Law on Competition, were not allowed to act as the supervisors (operators) of the heating and hot water systems of the buildings and having established the exceptions when those limitations did not apply, did not restrict the rights of the owners of flats and other premises in blocks of flats more than necessary in order to attain the legitimate and universally significant objective of using heat energy in an efficient manner.

Consequently, the legal regulation, enshrined in Paragraphs 2 and 4 of Article 20 of the Law (wording of 28 June 2012), that limited the possibility of the owners of flats and other premises in blocks of flats to choose the supervisors (operators) of the heating and hot water systems of the buildings may not be regarded as unreasonably restricting the ownership rights of the owners.

9. In the light of the foregoing arguments, the conclusion should be drawn that Paragraphs 2 and 4 (wording of 28 June 2012) of Article 20 of the Law are (were) not in conflict with Article 23 of the Constitution.

10. The Constitutional Court, in interpreting the provisions of Article 29 of the Constitution, has held on more than one occasion that the constitutional principle of the equality of all persons before the law, as consolidated in the said article, requires that fundamental rights and duties be established in law equally to all; this principle means the innate right of a person to be treated equally with others, it imposes the obligation to assess homogenous facts in the same manner and prohibits any arbitrary assessment of the facts that are the same in essence in a different manner. The constitutional principle of the equality of persons would be violated if certain persons or groups of persons were treated in a different manner even though between the said persons or groups of persons there would be no differences of such a character or extent that could objectively justify their uneven treatment.

A violation of the constitutional principle of the equality of the rights of persons is also a violation of the constitutional imperatives of justice and harmonious society; thus, it is also a violation of the constitutional principle of a state under the rule of law (inter alia, the Constitutional Court’s ruling of 6 February 2012 and its ruling (no KT9-N6/2016) of 15 March 2016).

11. It has also been mentioned that the state, when regulating economic activity, must follow the principle of the reconciliation of the interests of a person and society, must ensure the interests of both a private person (an economic entity) and society, and must seek not the welfare of individual persons, but precisely the general welfare of the Nation, which must not be opposed to the welfare, rights, and legitimate interests of an economic operator whose activity falls under the regulation, or those of persons that have established, have control over, or are otherwise connected with the said economic operator; the duty of the state, as consolidated in the Constitution, to regulate economic activity so that it serves the general welfare of the Nation implies the requirement for the legislature, when regulating this activity, to balance various constitutional values.

12. It has also been mentioned that, if it transpires that the prohibitions (consolidated in laws) precluding certain persons, inter alia, entities conducting economic activity of a certain type or on a certain territory, from acting as the supervisors of the heating and hot water systems of buildings do not (would not) ensure the rendering, at competitive prices, of appropriate-quality services related to the maintenance of the heating and hot water systems of a building, the Constitution, inter alia, Paragraph 3 of Article 46 thereof, gives rise to the duty of the legislature to establish such a legal regulation that would provide for relevant exceptions to the prohibition preventing heat suppliers and certain related persons from acting as the supervisors (operators) of the heating and hot water systems of buildings.

13. It has been mentioned that the impugned legal regulation, laid down in Paragraphs 2 and 4 (wording of 28 June 2012) of Article 20 of the Law, imposed the limitations that prohibited certain persons from acting as the supervisors (operators) of the heating and hot water systems of blocks of flats located in large residential areas (with a population of at least 150 000 inhabitants): heat suppliers themselves or persons who had an employment relationship with heat suppliers, the producers of fuel used for producing heat, the manufacturers of heat metering equipment used in heat supply activities, traders in fuel used for producing heat, and persons that belonged to groups of economic operators associated with the persons listed above were not allowed to act as the supervisors (operators) of the heating and hot water systems of blocks of flats. The limitations did not apply to small heat supply companies (serving less than 5 thousand connected customers or selling less than 50 thousand MWh of heat per year) and natural persons who were certified supervisors (operators) of heating and hot water systems of buildings and who lived in the blocks of flats that they themselves supervised.

13.1. It should be noted that, although the limitations on acting as supervisors (operators) of heating and hot water systems of buildings were imposed on certain persons, the same limitations also restricted the possibility for the owners of flats and other premises in blocks of flats to choose these persons as supervisors of the said systems.

13.2. It has also been mentioned that, from the aspect of the availability of services in the supervision (operation) of the heating and hot water systems of buildings, the situation of municipalities is objectively very different: in smaller municipalities, the heat supplier is often the only qualified entity that has appropriate technical facilities and is capable of performing the functions of the supervisor (operator) of the heating and hot water systems of buildings.

13.3. It has also been mentioned that the impugned provisions of the Law, having consolidated the legal regulation limiting the circle of persons allowed to provide the maintenance services of the heating and hot water systems of buildings in residential areas with a population of at least 150 thousand inhabitants, with a view to balancing, on the one hand, the interest of the owners of flats and other premises in blocks of flats to receive services in the maintenance of the heating and hot water systems of the buildings at the lowest price and, on the other hand, their interest to receive quality services in the maintenance of the heating and hot water systems of the buildings, as well as the public interest to ensure the proper supervision (operation) of blocks of flats and to use heat energy in an efficient manner, did not deny the possibility of the owners of flats and other premises in blocks of flats to choose the persons providing the said services from a relatively large circle of persons who provided such services; thus, competition among the supervisors (operators) of the heating and hot water systems of buildings, inter alia, competition on the prices of the provided services, was ensured.

In the context of the constitutional justice case at issue, it should be noted that, in view of the fact that it is in the equal interest of all owners of flats or other premises in blocks of flats, who are consumers of heat and hot water, to receive quality services in the maintenance of the heating and hot water systems of buildings and on the basis of the provision of the official constitutional doctrine, according to which legal acts may not demand impossible things (lex non cogit ad impossibilia), it should be held that the Constitution, inter alia, Paragraph 3 of Article 46 thereof, and the constitutional principle of a state under the rule of law give rise to the duty of the legislature, after assessing the particularities of the municipal heat sector, the circle of entities carrying out, or having the possibility of carrying out, the activity related to the maintenance of the heating and hot water systems of buildings, and other important circumstances, to determine the size of residential areas in which the imposed limitations preventing certain persons from providing the maintenance services of the heating and hot water systems of buildings would ensure the protection of the rights of the aforementioned consumers and, conversely, the size of residential areas in which, in the absence of any entity (entities) capable of carrying out the said maintenance, the interest of the owners, as well as the public interest, in ensuring the proper maintenance of the heating and hot water systems of buildings would be denied.

13.4. It should be noted that, as mentioned above, municipal councils could also decide to apply the limitations established in Paragraph 2 (wording of 28 June 2012) of Article 20 of the Law to residential areas with a population of less than 150 000 inhabitants.

Thus, the municipality, having assessed the situation in the sphere of heat supply and having determined that, in addition to the entities specified in Paragraph 2 (wording of 28 June 2012) of Article 20 of the Law, there were other entities that could provide heating and hot water system supervision (operation) services at competitive prices, had to decide to apply in that municipality the limitations established in Paragraph 2 (wording of 28 June 2012) of Article 20 of the Law.

14. It should be held that, having stipulated in Paragraph 4 (wording of 28 June 2012) of Article 20 of the Law that the prohibition established in Paragraph 2 of the same article did not apply in cases where the supervisors (operators) of the heating and hot water systems of blocks of flats were chosen to provide their services in a residential area where, according to the Statistics Lithuania, there were less than 150 000 inhabitants (unless the respective municipal council decided otherwise), the legislature took account of the particularities (differences) of these residential areas in the sphere of the economic activity of heat supply and sought to achieve the universally important objective of ensuring the proper maintenance of heating and hot water systems of blocks of flats located on the territories of all municipalities.

It should also be held that, in the constitutional justice case at issue, there are no legal arguments that would make it possible to state that the legislature, when establishing the legal regulation impugned by the petitioner, inter alia, in the context of the equality of the rights of persons, was not following the objective criterion of legal differentiation, i.e. that it took no account of the fact that, based on a general approach, the uneven assessment of persons (economic operators supplying (or capable of supplying) heat to blocks of flats and associated economic operators, as well as the owners of premises in blocks of flats) who, from the legal (notably, constitutional) point of view, are the same or are in a similar situation was objectively justified by the market concentration of the supervision (operation) services of the heating and hot water systems of blocks of flats in residential areas of a certain size.

In the light of the foregoing arguments, the conclusion should be drawn that Paragraphs 2 and 4 (wording of 28 June 2012) of Article 20 of the Law are (were) not in conflict with Article 29 of the Constitution and the constitutional principles of justice and a state under the rule of law.

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

ruling:

1. To recognise that Paragraph 2 (wording of 28 June 2012; Official Gazette Valstybės žinios, 2012, No 79-4089) of Article 20 of the Republic of Lithuania’s Law on the Heat Sector (wording of 20 November 2007) was not in conflict with the Constitution of the Republic of Lithuania.

2. To recognise that Paragraph 4 (wording of 28 June 2012; Official Gazette Valstybės žinios, 2012, No 79-4089) of Article 20 of the Republic of Lithuania’s Law on the Heat Sector (wording of 20 November 2007) 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.

 

Justices of the Constitutional Court:        Elvyra Baltutytė

                                                                             Vytautas Greičius

                                                                             Danutė Jočienė

                                                                             Pranas Kuconis

                                                                             Gediminas Mesonis

                                                                             Vytas Milius

                                                                             Egidijus Šileikis

                                                                             Algirdas Taminskas

                                                                             Dainius Žalimas