THE CONSTITUTIONAL COURT OF THE REPUBLIC OF LITHUANIA

Transcription

1 Case No. 70/06 THE CONSTITUTIONAL COURT OF THE REPUBLIC OF LITHUANIA RULING ON THE COMPLIANCE OF THE RESOLUTION OF THE GOVERNMENT OF THE REPUBLIC OF LITHUANIA (NO. 1698) ON THE CONSENT TO THE DRAFT AGREEMENT ON THE SALE AND PURCHASE OF THE SHARES OF THE JOINT-STOCK COMPANY ALITA WHICH BELONG TO THE STATE BY RIGHT OF OWNERSHIP OF 24 DECEMBER 2003 WITH THE CONSTITUTION OF THE REPUBLIC OF LITHUANIA AND PARAGRAPH 1 (WORDING OF 4 NOVEMBER 1997) OF ARTICLE 16 (WORDING OF 17 DECEMBER 2001) OF THE REPUBLIC OF LITHUANIA S LAW ON THE PRIVATISATION OF STATE-OWNED AND MUNICIPAL PROPERTY 23 May 2007 Vilnius The Constitutional Court of the Republic of Lithuania, composed of the Justices of the Constitutional Court: Armanas Abramavičius, Toma Birmontienė, Egidijus Kūris, Kęstutis Lapinskas, Zenonas Namavičius, Ramutė Ruškytė, Vytautas Sinkevičius, Stasys Stačiokas, and Romualdas Kęstutis Urbaitis The court reporter Daiva Pitrėnaitė Seimas members Jonas Pinskus and Julius Veselka, acting as the representatives of the Seimas of the Republic of Lithuania, the petitioner Giedrius Pažūsis, the Head of the Legal Department of the State Property Fund, and Vaida Sinušaitė, chief specialist of the Company Law and Privatisation Department of the Ministry of Economy of the Republic of Lithuania, acting as the representatives of the Government of the Republic of Lithuania, the party concerned The Constitutional Court of the Republic of Lithuania, pursuant to Articles 102 and 105 of the Constitution of the Republic of Lithuania, in its public hearing, on 22 May 2007, considered

2 2 constitutional justice case No. 70/06 subsequent to the petition set forth in Article 2 and Annex 2 of the Resolution of the Seimas of the Republic of Lithuania (No. X-922) On the Conclusions of the Seimas Provisional Investigation Commission for Investigation into the Privatisation of the Jointstock Company Alita 23 November 2006, the petitioner, requesting an investigation into whether the Resolution of the Government of the Republic of Lithuania (No. 1698) On the Consent to the Draft Agreement on the Sale and Purchase of the Shares of the Joint-Stock Company Alita which Belong to the State by Right of Ownership of 24 December 2003 is not in conflict with the principle of a state under the rule of law, which is entrenched in the Constitution of the Republic of Lithuania and Articles 3 and 16 of the Republic of Lithuania s Law on the Privatisation of Stateowned and Municipal Property. The Constitutional Court has established: I 1. On 23 November 2006, the Seimas, the petitioner, adopted the Resolution (No. X-922) On the Conclusions of the Seimas Provisional Investigation Commission for Investigation into the Privatisation of the Joint-stock Company Alita (hereinafter referred to as the Seimas resolution of 23 November 2006) in Article 2 and Annex 2 whereof a petition is set forth, requesting the Constitutional Court to investigate whether the Government Resolution (No. 1698) On the Consent to the Draft Agreement on the Sale and Purchase of the Shares of the Joint-Stock Company Alita which Belong to the State by Right of Ownership of 24 December 2003 (hereinafter also referred to as the government resolution of 24 December 2003) is not in conflict with the principle of a state under the rule of law, which is entrenched in the Constitution, and with Articles 3 and 16 of the Law on the Privatisation of State-owned and Municipal Property (hereinafter also referred to as the Law). This petition of the Seimas, the petitioner, was received at the Constitutional Court on 12 December By its Decision On Accepting the Petition of a Petitioner of 15 December 2006, the Constitutional Court decided to accept the petition set forth in the Seimas resolution of 23 November 2006 requesting an investigation into whether the government resolution of 24 December 2003 is not in conflict with the constitutional 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)

3 3 of the Law on the Privatisation of State-owned and Municipal Property. 3. The announcement of the President of the Constitutional Court about the acceptance of the said petition was officially published in the official gazette Valstybės žinios (Official Gazette Valstybės žinios, 2006, No ). From that day the validity of the government resolution of 24 December 2003 has been suspended until the announcement of a ruling of the Constitutional Court in this constitutional justice case. II The petition of the Seimas, the petitioner, is substantiated by these arguments. 1. On 3 February 2003, the Government assented to the programme of privatisation of the joint-stock company (hereinafter also referred to as JSC) Alita shares which belonged to the state by right of ownership, which had to be privatised by means of a public tender. Four participants were registered in the 7 May 2003 public privatisation tender of the JSC Alita. The best tender bid was submitted by L. Bosca who proposed LTL 90,700,000 for the JSC Alita share portfolio. By his order No. IV-266, P. Milašauskas, Director General of the state enterprise (hereinafter also referred to as SE) State Property Fund, annulled the results of the Commission for the Public Tender for the Privatisation of the Joint-stock Companies Stumbras, Vilniaus degtinė, Alita and Anykščių vynas (hereinafter also referred to as the Commission for the Public Tender) and charged this commission to negotiate on the sale of the JSC Alita share portfolio with the participant of the tender, who took second place. By its ruling of 10 October 2006, the Supreme Court of Lithuania ruled this decision unlawful. On 22 October 2003, the SE State Property Fund invited the Consortium of V. Junevičius, V. Pečiūra, A. J. Stankevičius and D. Vėželis (hereinafter also referred to as the Consortium of V. Junevičius and others), which submitted the LTL 57,500,000 bid in the tender, for negotiations on selling the JSC Alita share portfolio. The difference between the bid submitted by the Consortium of V. Junevičius and others and the best bid of the tender was LTL 33,150,000, i.e. almost 37 per cent, while this is more than twice of the amount permissible established by law. On 10 November 2003, a draft agreement of sale and purchase of the JSC Alita share portfolio which belonged to the state by right of ownership was initialled, while on 27 November 2003 the Privatisation Commission assented to this draft agreement. On 24 December 2003, the Government, while taking account of the said decision of the Privatisation Commission, adopted the impugned resolution whereby it assented to the draft agreement of sale and purchase of the JSC Alita share portfolio which belonged to the state by right of ownership. The SE State Property Fund and the Consortium of V. Junevičius and others signed this agreement on 6 January Paragraph 1 of Article 16 of the Law provides that negotiations on how to improve the bids may be entered into with the potential buyer or potential buyers who have submitted the

4 4 highest bids and whose bids do not differ from each other by more than 15 per cent. Under Item 35 of the Regulations for the Privatisation of State and Municipal Property by Way of Public Tender (hereinafter also referred to as the Regulations) approved by the Resolution of the Government of the Republic of Lithuania (No. 1502) On Approving the Regulations for the Privatisation of State and Municipal Property by Way of Public Tender of 31 December 1997, while assessing the submitted bids of the tender, the commission of the public tender shall enter the potential buyers, the difference in the bids of whom is not more than 15 per cent from the best bid in the tender, into the certificate < > in the sequence according to assessment results established under the procedure specified in Item 34 of these Regulations. 3. In the opinion of the petitioner, the impugned government resolution assented to a transaction (which, according to the petitioner, should be regarded as a constituent part of the same government resolution), which had been concluded by not following the imperative requirements of the Law and the Regulations; due to this the impugned government resolution violates the constitutional principle of a state under the rule of law. 4. According to the petitioner, the Seimas Provisional Investigation Commission for Investigation into the Privatisation of the Joint-stock Company Alita established that there was not a single member of the Commission for the Public Tender, including the Director of the SE State Property Fund, who had the right to familiarise themselves with the information which constituted a state secret, therefore, in the course of the adoption of the decisions on the privatisation of the JSC Alita it was impossible to ensure the adherence to the requirements of Item of the Regulations on reliability of persons who participate in a public tender. Due to this by the 27 November 2003 decision of the Privatisation Commission to assent to the draft transaction and by the impugned government resolution adopted while following the latter, whereby it was assented to the draft agreement of sale and purchase of the JSC Alita share portfolio which belonged to the state by right of ownership, one violated the principle that no law (right) can appear on the basis of unlawfulness, as well as the principle of responsible governance. In the opinion of the petitioner, the said government resolution is in conflict with the principle of a state under the rule of law, which is entrenched in the Constitution, and Paragraph 2 of Article 3 of the Law under which The government resolutions on privatisation issues, which have been adopted by following this Law and other laws of the Republic of Lithuania, shall be mandatory to state and privatisation institutions. III In the course of the preparation of the case for the Constitutional Court s hearing, written explanations were received from G. Pažūsis and V. Sinušaitė, the representatives of the Government, the party concerned, in which it is maintained that the government resolution of 24

5 5 December 2003 is not in conflict with the constitutional principle of a state under the rule of law and Articles 3 and 16 of the Law. The position of representatives of the Government, the party concerned, is substantiated by these arguments. 1. The Commission for the Public Tender, the SE State Property Fund, the Privatisation Commission and the Government, by privatising the shares of the JSC Alita by means of a public tender and thus inflicting non-material damage to the public order of the state (since one did not follow the Law) and material damage to the state (since the SE State Property Fund, by carrying out the decision of the Supreme Court of Lithuania, compensated L. Bosca the losses incurred 1,754,920 litas and 84 cents), substantiated their actions by Paragraph 6 of Article of the Civil Code of the Republic of Lithuania (hereinafter referred to as the CC), which provides for the necessary need, and applied it lawfully. 2. According to the representatives of the party concerned, there are grounds to believe that the government resolution of 24 December 2003 assented to such a transaction, which had been concluded without following the imperative requirements of the Law and the Regulations. However, if the legal regulation of the privatisation relations is analysed in a systemic manner, it becomes clear that the state and the participant of privatisation by means of a public tender are tied by civil legal relations; along with the special norms, the norms of substantive law of the CC should be applied mutatis mutandis to privatisation relations. The principles of public and private law are different: in private law the principle is valid whereby everything is permissible what is not directly prohibited by law, while in public law the principle is valid whereby subjects may act only without exceeding the freedom established to them by law, i.e. only what is directly specified in (permitted by) the law is allowed. It is impossible to assert that, allegedly, one could not apply Paragraph 6 of Article of the CC in regard of the privatisation relation. The fact that the said paragraph was applied directly is not a violation of the constitutional principle of a state under the rule of law. 3. The privatisation of the JSC Alita was specific and extraordinary. The necessity to make use of the institute of the necessary need was determined by the circumstances under which the Commission for the Public Tender and the SE State Property Fund had to decide the issues of annulment of the results of the public tender of privatisation of the JSC Alita shares in regard of L. Bosca and the issues of possible further execution of the same public tender. One month had passed from the first invitation to initial the agreement. It was not possible to procrastinate the privatisation, since in case of the protracting of the privatisation of the shares of state-controlled alcohol enterprises, another public tender could take place only after one year at best, however, after the state lost the monopoly of strong alcoholic beverages in Lithuania on 1 January 2004, it was impossible to expect to sell the shares of the JSC Alita even for the price which was proposed by the bid that took the fourth place at the tender which had already taken place. Since the participants

6 6 who proposed the price which took the second and third places had withdrawn themselves from the tender, upon evaluation of the existing threats and in presence of the necessary need it was decided to annul the results of the JSC Alita shares privatisation tender and to sell this object of privatisation to the fourth participant of the tender. Under such economic circumstances this was the only way to avoid bigger damage in the future. In the opinion of G. Pažūsis and V. Sinušaitė, the Government, while administering the affairs of this country and executing the privatisation of stateowned property, may apply Paragraph 6 of Article of the CC so that dangers to the state interests could be evaded. 4. According to the representatives of the Government, in the course of the privatisation of the JSC Alita the members of the Commission for the Public Tender enjoyed the right to become familiarised with information constituting a state secret: S. Spėčius, an advisor to the Prime Minister with information marked Secret, N. Eidukevičius, Vice-minister of Economy with information marked Top Secret, V. Grušauskas, Secretary of the Ministry of Agriculture with information marked Secret. This Commission, while executing a duty established to it in the Regulations to verify the reliability of the participants of the public tender, established that the notes submitted to the SE State Property Fund by corresponding competent state institutions did not contain any information due to which a certain participant of the public tender of the privatisation of the JSC Alita could be recognised as unreliable. IV In the course of the preparation of the case for the Constitutional Court s hearing, additional written explanations were received from G. Pažūsis and V. Sinušaitė, the representatives of the Government, the party concerned, in which it is maintained that the form of the certificate which is mentioned in Item 35 of the Regulation and into which the potential buyers are entered, whose bids do not differ from the best bid of the tender by more than 15 per cent (Annex 4), has never been published officially; taking account of this circumstance, commissions of public tenders, while assessing the bids of the tenders and the potential buyers whose bids would not differ from the best bid of the tender by more than 15 per cent, used to enter this in the minutes of a corresponding sitting of the commission. V In the course of the preparation of the case for the Constitutional Court s hearing, the SE State Property Fund submitted information about the privatisation of the shares of the JSC Alita which belonged to the state by right of ownership, while the Office of the Prosecutor General of the Republic of Lithuania submitted information about the investigation which has been conducted and that being conducted as regards this privatisation.

7 7 VI 1. At the Constitutional Court s hearing, the representatives of the Seimas, the petitioner, who were Jonas Pinskus and Julius Veselka, both of whom are Members of the Seimas, virtually reiterated the arguments set forth in the Seimas resolution. 2. At the Constitutional Court s hearing, G. Pažūsis and V. Sinušaitė, the representatives of the Government, the party concerned, virtually reiterated the arguments set forth in their written explanations. The Constitutional Court holds that: 1. The Seimas, the petitioner, requests an investigation into whether the Government Resolution (No. 1698) On the Consent to the Draft Agreement on the Sale and Purchase of the Shares of the Joint-Stock Company Alita which Belong to the State by Right of Ownership of 24 December 2003 is not in conflict with the principle of a state under the rule of law, which is entrenched in the Constitution and Articles 3 and 16 of the Law on the Privatisation of State-owned and Municipal Property. 2. By its Decision On accepting the petition of a petitioner of 15 December 2006, the Constitutional Court accepted the petition set forth in Article 2 and Annex 2 of the Seimas resolution of 23 November 2006 requesting an investigation into whether the government resolution of 24 December 2003 is not in conflict with the constitutional 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. 3. The government resolution of 24 December 2003 provides: In pursuance of Paragraph 5 of Article 10 of the Republic of Lithuania s Law on the Privatisation of State-owned and Municipal Property (Official Gazette Valstybės žinios, 1997, No ) and taking account of the 27 November 2003 decision of the Privatisation Commission (Protocol No. 55 (350)), the Government of the Republic of Lithuania has resolved: 1. To assent to the draft agreement of sale and purchase of the shares of the JSC Alita (enterprise code ) which belong to the state by right of ownership. 2. To commission the state enterprise State Property Fund to ensure that the origin of the funds of the potential buyer payable for the privatised object be verified. 4. The petition of the Seimas, the petitioner, requesting an investigation into the compliance

8 8 of the entire government resolution of 24 December 2003 with the Constitution as well as the articles (paragraphs thereof) of the Law is grounded, first of all, on the doubt that, according to the petitioner, Item 1 of the said government resolution whereby it was decided to assent to the draft agreement of sale and purchase of the shares of the JSC Alita which belonged to the state by right of ownership is/was in conflict with the corresponding provisions of the Constitution and the Law In this context, it should be noted that the other parts of the government resolution of 24 December 2003 are inseparably related with the provision of Item 1 thereof: the introductory part of this government resolution points out the legal grounds thereof (thus, first of all the legal grounds of the decision to assent to the draft agreement of sale and purchase of the shares of the JSC Alita which belonged to the state by right of ownership), while Item 2 obliges the SE State Property Fund to ensure that the origin of the funds of the potential buyer payable for the privatised object be verified, i.e. such obligation means that the origin of the funds of that potential buyer (which is not explicitly mentioned (to which reference is made in Item 1 of the said government resolution)) of the shares of the JSC Alita which belonged to the state by right of private ownership payable for the privatised object be verified. Therefore, in the course of the investigation and making a conclusion whether Item 1 of the government resolution of 24 December 2003 is not in conflict with the Constitution, also whether it is/was not in conflict with the articles (paragraphs thereof) of the Law, one will also have to draw a conclusion whether the entire said government resolution is/was not in conflict with the corresponding provisions of the Constitution and the Law The draft agreement to which the Government assented by Item 1 of its resolution of 24 December 2003 has not been officially (publicly) published. Taking account of the fact that the assent of the Government to the corresponding draft agreement should only be regarded 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 should not be treated as a part of this legal act entrenching certain legal regulation, which could be of the same legal force 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 the powers to present a certain conclusion (decision) in the operative part of its ruling. This will not be done. However, when deciding, subsequent to the petition of the petitioner requesting an investigation into whether the Government Resolution (No. 1698) On the Consent to the Draft Agreement on the Sale and Purchase of the Shares of the Joint-Stock Company Alita which Belong to the State by Right of Ownership of 24 December 2003 is not in conflict with the

9 9 Constitution as well as whether it is/was not in conflict with the articles (paragraphs thereof) of the Law, one must also assess (in the aspect specified by the petitioner) the circumstances under which the said draft agreement was assented to; otherwise it would be impossible to answer to the question whether the Government, by assenting to the draft agreement on sale and purchase of the shares of the JSC Alita which belonged to the state by right of ownership by Item 1 of its resolution of 24 December 2003, acted ultra vires. 5. While deciding whether the impugned government resolution is not in conflict with the Constitution and whether it was not in conflict with the Constitution and whether it was not in conflict with 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, the following circumstances are important By its Resolution (No. 170) On Assenting to the Programmes of the Privatisation of the Joint-stock Companies Stumbras, Vilniaus degtinė, Alita and Anykščių vynas of 3 February 2003, the Government, inter alia, assented to the programme of privatisation of the shares of the JSC Alita which belonged to the state by right of ownership. This government resolution came into force on 8 February During its sitting of 7 May 2003, the Commission for the Public Tender (formed by the Order of the SE State Property Fund Director General P. Milašauskas (No. 1V-008) On Forming the Commission for the Public Tender of 10 January 2003) considered the documents submitted by potential buyers in privatising, inter alia, the JSC Alita and held that the following submitted the documents for privatisation of the JSC Alita by way of public tender: the Consortium of V. Junevičius and others; L. Bosca; the Consortium of the closed-type joint-stock company (hereinafter referred to as the CJSC) Eugesta and the CJSC Vinvesta ; and the CJSC Mineraliniai vandenys (Protocol No. 1 of the 7 May 2003 sitting of the Commission for the Public Tender) In its 26 June 2003 sitting, the Commission for the Public Tender declared L. Bosca the winner of the public tender for privatisation of the shares of the JSC Alita which belonged to the state by right of ownership and held that the bids proposed by the other participants of the tender differed by more than 15 per cent from the best bid in the tender, and decided to inform the other participants of the bid about the tender results and return them their initial deposits (Protocol No. 6 of the 26 June 2003 sitting of the Commission for the Public Tender) After the Commission for the Public Tender together with the representatives of L. Bosca prepared a draft agreement of sale and purchase of the shares of the JSC Alita which belonged to the state by right of ownership (the Letter of the Chairperson of the Commission for the

10 10 Public Tender A. Malikėnas (No. (25)-3R-2397) On Announcing the Winner of the Public Tender of 30 June 2003 to G. Skorupskis, an authorised representative of L. Bosca; Protocol No. 10 of the 8 July 2003 sitting of the Commission for the Public Tender; Protocol No. 11 of the 11 July 2003 sitting of the Commission for the Public Tender; Protocol No. 20 of the 26 August 2003 sitting of the Commission for the Public Tender (which was not signed by G. Skorupskis, an authorised representative of L. Bosca); the Letter of the Chairperson of the Commission for the Public Tender A. Malikėnas (No. (25)-3R-3359) On Initialling the Agreement of 2 September 2003 to G. Skorupskis, an authorised representative of L. Bosca; Protocol No. 24 of the 10 October 2003 sitting of the Commission for the Public Tender). L. Bosca and his authorised representatives were invited to come to the SE State Property Fund to initial the said draft agreement (the 2 September 2003 Letter of the Chairperson of the Commission for the Public Tender A. Malikėnas (No. (25)- 3R-3359) On Initialling the Agreement of A. Malikėnas, Chairperson of the Commission for the Public Tender, to G. Skorupskis, an authorised representative of L. Bosca; the Letter of the Chairperson of the Commission for the Public Tender A. Malikėnas (No. (25)-3R-3868) On Announcing the Winner of the Public Tender of 30 September 2003 to L. Bosca and the 30 September 2003 letter (No. (25)-3R-3869) of A. Malikėnas, Chairperson of the Commission for the Public Tender, to G. Skorupskis, an authorised representative of L. Bosca); upon repeated invitation L. Bosca and his authorised representatives were informed that in case they fail to arrive to initial the said agreement, the SE State Property Fund, while following Item 58 of the Regulations, will annul the results of the public tender (the 30 September 2003 letter (No. (25)-3R-3868) of A. Malikėnas, Chairperson of the Commission for the Public Tender, to L. Bosca and the 30 September 2003 letter (No. (25)-3R-3869) of A. Malikėnas, Chairperson of the Commission for the Public Tender, to G. Skorupskis, an authorised representative of L. Bosca), however, neither L. Bosca nor his authorised representatives appeared within the specified time period in order to initial the said agreement In its 10 October 2003 sitting, the Commission for the Public Tender held that L. Bosca did not appear within the specified time period in order to initial the agreement of sale and purchase of the shares of the JSC Alita which belonged to the state by right of ownership and proposed that the SE State Property Fund annul, while following Item 58 of the Regulations, the results of the public tender of privatisation of the shares of the JSC Alita which belonged to the state by right of ownership and adopt corresponding decisions on the further course of the privatisation of the JSC Alita (Protocol No. 24 of the 10 October 2003 sitting of the Commission for the Public Tender) P. Milašauskas, Director General of the SE State Property Fund, by his Order (No. 1V- 266) On the Privatisation of the JSC Alita of 14 January 2003 annulled the results of the public tender of the JSC Alita share portfolio and charged the Commission for the Public Tender to

11 11 negotiate on the sale of the JSC Alita share portfolio with the participant of the tender, who took second place By its Letter On the Further Participation of the Consortium in the Public Tender for Privatising the JSC Alita of 14 October 2003, the Consortium of the CJSC Eugesta and the CJSC Vinvesta informed A. Malikėnas, Chairperson of the Commission for the Public Tender, and by its 14 October 2003 letter the CJSC Mineraliniai vandenys informed the SE State Property Fund, that they refuse to further participate in the public tender for privatisation of the shares of the JSC Alita which belonged to the state by right of ownership In its sitting of October 2003, the Commission for the Public Tender held that only one public tender participant remained in the privatisation tender of the JSC Alita, which was the Consortium of V. Junevičius and others. Having requested an opinion from the advisor of the privatisation, the consortium headed by the financial brokerage company (hereinafter referred to as the FBC) CJSC Suprema and upon presentation of the opinion by the said advisor of the privatisation, the Commission for the Public Tender, while implementing the provision on negotiations on the sale of the shares of the JSC Alita with the participant of the public tender, who took second place of the Order (No. 1V-266) On the Privatisation of the JSC Alita of 14 January 2003 issued by the Director General of the SE State Property Fund, taking account of the conclusions submitted by the representatives of the consortium headed by the FBC CJSC Suprema on possible decrease of the state income for the privatised object in the future and following Paragraph 6 of Article of the CC, recognised that the second place was taken by the public tender participant the Consortium of V. Junevičius and others and decided to start negotiations on improving the bid of the tender and on conclusion of a transaction of sale and purchase (Protocol No. 25 of the October 2003 sitting of the Commission for the Public Tender; the 21 October 2003 letter of A. Galubickas, Director of the FBC CJSC Suprema, to A. Malikėnas, Chairperson of the Commission for the Public Tender) A. Malikėnas, Chairperson of the Commission for the Public Tender, by his Letter (No. (25)-3R-4093) On Improving the Bids Submitted at the Public Tender of 22 October 2003, invited the Consortium of V. Junevičius and others to start the said negotiations. The proposals on improving the bid of the tender were submitted; negotiations took place on such proposals and on the conclusion of a transaction of sale and purchase of the shares of the JSC Alita which belonged by right of ownership to the state (the 31 October 2003 letter of the Consortium of V. Junevičius and others On Improving the Bids Submitted at the Public Tender to the SE State Property Fund; Protocol No. 26 of the 3 November 2003 sitting of the Commission for the Public Tender; the Letter of the Consortium of V. Junevičius and others On the 3 November 2003 Letter No. (25)-3R of 5 November 2003 to the SE State Property Fund; Protocol No. 27 of the 5 November 2003

12 12 sitting of the Commission for the Public Tender; Protocol No. 28 of the 6 November 2003 sitting of the Commission for the Public Tender; Protocol No. 29 of the 10 November 2003 sitting of the Commission for the Public Tender; Protocol No. 2V-53 (348) of the 13 November 2003 sitting of the Privatisation Commission; Protocol No. 3V-227 of the 28 November 2003 sitting of the Board of the SE State Property Fund) Upon the proposal of the Privatisation Commission (Protocol No. 2V-53 (348) of the 13 November 2003 sitting of the Privatisation Commission) and upon the request of the SE State Property Fund (Invitation No. (11VŠ)-3R-4470) of 17 November 2003; Agreement (No. (11)-7R ) On Legal Services between the SE State Property Fund and the law firm Aničas, Okinčic ir partneriai ), on 24 November 2003, the law firm Aničas, Okinčic ir partneriai submitted a legal conclusion On the actions of the state enterprise State Property Fund in privatising the share portfolio of the JSC Alita by way of the public tender to the SE State Property Fund in which it was held, inter alia, that: it would be possible to qualify the circumstances pointed out by the FBC CJSC Suprema, the advisor of the privatisation, by presuming that they are economically reasoned, as a threat to state interests ; there are grounds to assert that this threat, when one does not know the amounts of the possible damage (due to actions of the State Property Fund) and the avoidable damage (in the future), however, upon the assessment of a much greater possibility of the occurrence of the latter, may be qualified as greater damage facing the state than the damage which the state will possibly incur due to actions of the State Property Fund ; it is possible to qualify the actions of the State Property Fund as the only way to avoid the faced damage when the issue of civil liability of the State Property Fund against the third persons, including the state, on whose behalf the Property Fund is acting, is decided ; In this particular situation < > the provisions of the Civil Code regulating the necessary need may be applied (the 24 November 2003 legal conclusion of the law firm Aničas, Okinčic ir partneriai submitted to the SE State Property Fund) In its 27 November 2003 sitting, the Privatisation Commission assented to the draft agreement of the sale and purchase of the share portfolio of the JSC Alita which belonged to the state by right of ownership (between the SE State Property Fund and the Consortium of V. Junevičius and others) (Protocol No. 2V-55 (350) of the 27 November 2003 sitting of the Privatisation Commission) In its 28 November 2003 sitting, the Board of the SE State Property Fund approbated the draft agreement of the sale and purchase of the shares of the JSC Alita which belonged to the state by right of ownership (between the SE State Property Fund and the Consortium of V. Junevičius and others) (Protocol No. 3V-227 of the 28 November 2003 sitting of the Board of the SE State Property Fund).

13 By her Letter (No. 114-S-344) On the Decision of the Commission of 6 November 2003, N. Steiblienė, Chairperson of the Seimas Anticorruption Commission, applied to the Office of the Prosecutor General of the Republic of Lithuania and, inter alia, requested checking whether the imperative norms of the Law on the Privatisation of State-owned and Municipal Property were not violated when the participant who took the fourth place in the public tender for privatisation of the shares of the JSC Alita which belonged to the state by right of ownership was declared the winner of this public tender. By her Letter (No ) On the Privatisation of the JSC Alita of 1 December 2003, V. Urmonaitė, Deputy Prosecutor General of the Republic of Lithuania, informed N. Steiblienė, Chairperson of the Seimas Anticorruption Commission, that the SE State Property Fund, when it recognised the Consortium of V. Junevičius and others as the participant of the public tender who took the second place and when it proposed to start negotiations on improving the bid of the tender and on the conclusion of the transaction of sale and purchase, violated the requirements of the Law on the Privatisation of State-owned and Municipal Property and substatutory acts and, alongside, she noted that the fact that regardless of the violations of the requirements of legal acts, at present it is necessary, useful and expedient that the SE State Property Fund sign the agreement of sale and purchase of the shares of the JSC Alita that belong to the state precisely with the Consortium of V. Junevičius and others is an economic, but not a legal issue, and its decision is not within the competence of the Civil Cases Division. By her Letter (No. 114-S-394) On Violation of Legal Acts by Recognising the Consortium of V. Junevičius and others as the Participant Who Took the Second Place in the JSC Alita Privatisation Public Tender and the Expression of the Opinion by the Government on This Issue of 2 December 2003, N. Steiblienė, Chairperson of the Seimas Anticorruption Commission, applied to the Prime Minister A. M. Brazauskas and proposed that the Government assess the conclusions submitted by the Office of the Prosecutor General and express an opinion on the conclusion of the transaction of the JSC Alita privatisation transaction with the Consortium of V. Junevičius and others. By his letter No of 2 December 2003, the Prime Minister A. M. Brazauskas requested the SE State Property Fund to consider this letter of N. Steiblienė, Chairperson of the Seimas Anticorruption Commission, and to submit the conclusions and proposals to the Government prior to 5 December When carrying out the said commissioning by the Prime Minister A. M. Brazauskas, the SE State Property Fund considered the Letter of the Republic of Lithuania s Deputy Prosecutor General V. Urmonaitė (No ) On the Privatisation of the JSC Alita of 1 December 2003, and the Letter of the Chairperson of the Seimas Anticorruption Commission N. Steiblienė (No. 114-S-394)

14 14 On Violation of Legal Acts by Recognising the Consortium of V. Junevičius and others as the Participant Who Took the Second Place in the JSC Alita Privatisation Public Tender and the Expression of the Opinion by the Government on This Issue of 2 December By the Letter of the SE State Property Fund Director General P. Milašauskas (No. (11)-3R-4700) On Commissioning No of 2 December 2002 of 5 December 2003, the Government was notified that the State Property Fund, while deciding the existing problems, was following the principles of justice, reasonableness and fairness and other norms of the Civil Code and thus sought to protect the financial interests of the state as much as possible and to ensure maximum income for privatisation, as well as that the Privatisation Commission assented to this strategy of continuing the tender, which was chosen by the State Property Fund, however, the final decision as regards to conclusion of the agreement with the Consortium of V. Junevičius and others remains within the discretion of the Government. 6. On 24 December 2003, the Government adopted the Resolution (No. 1698) On the Consent to the Draft Agreement on the Sale and Purchase of the Shares of the Joint-Stock Company Alita which Belong to the State by Right of Ownership whereby, as mentioned before, in pursuance of Paragraph 5 of Article 10 of the Law and taking account of the aforesaid 27 November 2003 decision of the Privatisation Commission, it assented to the draft agreement of sale and purchase of the shares of the JSC Alita which belonged to the state by right of ownership (between the SE State Property Fund and the Consortium of V. Junevičius and others) (Item 1); it commissioned the SE State Property Fund to ensure that the origin of the funds of the potential buyer (i.e. the Consortium of V. Junevičius and others) payable for the privatised object be verified (Item 2), and whose compliance with the constitutional principle of a state under the rule of law, 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 is impugned at the constitutional justice case at issue. This government resolution came into force on 31 December It needs to be mentioned that on 6 January 2004, the SE State Property Fund and the Consortium of V. Junevičius and others signed the agreement of sale and purchase of the shares of the JSC Alita which belonged to the state by right of ownership (Agreement of sale and purchase No. 1/107 between the State Property Fund, acting on behalf of the Republic of Lithuania ( Seller ) and the Consortium of Mr. V. Junevičius, Mr. V. Pečiūra, Mr. D. Vėželis and Mr. A. J. Stankevičius via CJSC Irvinus ( Buyer )). 8. It also needs to be mentioned that on 16 July 2004, the Government adopted the

15 15 Resolution (No. 903) On the Consent to the Deal Regarding the Amendment to the Draft Agreement on the Sale and Purchase of the Shares of the Joint-Stock Company Alita which Belong to the State by Right of Ownership whereby it assented to the deal regarding the amendment to the draft agreement on sale and purchase of the shares of the JSC Alita which belonged to the state by right of ownership. This government resolution came into force on 21 July In this context it needs to be noted that this government resolution adopted later is not a matter of investigation in the constitutional justice case at issue. 9. In the context of the constitutional justice case at issue it also needs to be mentioned that L. Bosca disputed the decision of the SE State Property Fund on his (L. Bosca s) removal from the negotiations on the conclusion of the agreement on sale and purchase of the shares of the JSC Alita which belonged to the state by right of ownership in courts. By its decision of 28 April 2005, the Vilnius Regional Court in part granted the claim of L. Bosca, the claimant, and recognised the decision of the SE State Property Fund, the respondent, on the removal of L. Bosca from the said negotiations as unreasoned and unfair and adjudged that the respondent pay to the claimant the damages that were incurred by the claimant, inter alia, when he participated in the public tender for privatisation of the shares of the JSC Alita which belonged to the state by right of ownership. By its decision of 28 December 2005, the Court of Appeal granted the appeal of the SE State Property Fund and rescinded the 28 April 2005 decision of the Vilnius Regional Court and rejected the claim of L. Bosca. By its ruling of 10 October 2006, the Supreme Court of Lithuania rescinded the 28 December 2005 decision of the Court of Appeal of Lithuania and ruled the 28 April 2005 decision of the Vilnius Regional Court to be in effect. 10. In the context of the constitutional justice case at issue, the circumstance is of importance where it is clear from the 10 October 2006 ruling of the Supreme Court of Lithuania that the shares of the JSC Alita which belonged to the state by right of ownership were sold for the price which was smaller than that proposed by L. Bosca and that it differed from it by more than 15 per cent. 11. Taking account of this, as well as of the fact that, as it was held in this ruling of the Constitutional Court, in its 26 June 2003 sitting, the Commission for the Public Tender held that the bids proposed by the other participants of the tender differed by more than 15 per cent from the bid of L. Bosca (i.e. from the best bid in the tender), it needs to be held that in the constitutional justice case at issue the said fact should be regarded as res judicata (without ascertaining what was the real difference between the tender bids submitted by L. Bosca and the Consortium of V. Junevičius and others in the public tender for privatisation of the shares of the JSC Alita which belonged to the state by right of ownership).

16 16 In addition, in the constitutional justice case at issue the representatives of the Government, the party concerned, did not dispute this fact. 12. While deciding, subsequent to the petition of the Seimas, the petitioner, requesting an investigation into whether the government resolution of 24 December 2003 is not in conflict with the Constitution as well as whether it was not in conflict 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, it is important to ascertain whether the Government had the powers to give assent to a corresponding draft agreement of the sale and purchase (concluded between the SE State Property Fund and the Consortium of V. Junevičius and others). 13. At the time of the adoption of the government resolution of 24 December 2003, Article 16 of the Law was set forth in the wording of 17 December 2001, however, Paragraph 1 thereof, with which, in the opinion of the petitioner, this government resolution is in conflict, has not been amended and was set forth in its initial wording, i.e. that of 4 November 1997; the following was established in this paragraph: A public tender is the transfer of one or several privatisation objects to the successful bidder, whose written offers with regard to the price and investment (money for the acquisition of the long-term and short-term tangible assets by increasing the authorised capital of the public or private company), subject to meeting the minimum requirements for the preservation of jobs have been found to be the best. 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. Later, by Article 7 of the Republic of Lithuania s Law on Amending and Supplementing Articles 4, 7, 9, 10, 11, 13, 16, 17, 19, 20, 21, and 22 of the Law on the Privatisation of State-owned and Municipal Property, which was adopted by the Seimas on 5 December 2006 and which came into force on 1 March 2007, Paragraph 1 (wording of 4 November 1997) of Article 16 (wording of 17 December 2001) of the Law was amended and set forth in a new wording. 14. Thus, under Paragraph 1 (wording of 4 November 1997) of Article 16 (wording of 17 December 2001) of the Law, in the course of privatisation of state property by way of a public tender, one could negotiate not with all participants of the public tender, but only with the potential buyer or potential buyers who submitted the highest bids and whose bids did not differ from the best bid by more than 15 per cent. 15. Paragraph 1 (wording of 4 November 1997) of Article 16 (wording of 17 December

17 ) of the Law should also be related with the other provisions of the Law, which were valid at the time of adoption of the government resolution of 24 December It should be mentioned, inter alia, that: under Paragraph 1 of Article 1 (wording of 4 November 1997) of the Law, privatisation as transfer of state-owned and municipal property to the ownership of potential buyers concluded under privatisation transactions is executed in accordance with the procedure established by this law; Paragraph 1 (wording of 4 November 1997) of Article 13 (wording of 14 October 1999) of the Law pointed out a public tender as one of the ways of privatisation; Paragraph 3 (wording of 4 November 1997) of the same article prescribed that the Government shall establish the procedure of implementation of the ways of privatisation established in this law. It should also be mentioned that, under Paragraph 5 (wording of 4 November 1997) of Article 10 (wording of 5 March 2002) of the Law, the Government had the right either to assent or not to assent to draft privatisation transactions; also, the corresponding powers of other institutions in the privatisation of the property which belonged to the state by right of ownership were established, inter alia, those of the Property Fund, of the commissions formed by the latter, as well as those of the Privatisation Commission which, as a state institution established for the purpose of privatisation supervision, had the powers, under Item 2 (wording of 7 July 1999) of Paragraph 4 (wording of 17 December 2001) of Article 5 of the Law, either to assent or not to assent to draft privatisation transactions (save the privatisation transactions concluded in securities exchanges). 16. Under the Constitution, the Government, as the institution of the executive, enjoys broad discretion to form and pursue the economic policy of the state and to correspondingly regulate economic activity. Under Paragraph 1 of Article 95 of the Constitution, the Government shall resolve the affairs of state governance at its sittings by adopting resolutions by majority vote of all the members of the Government; it shall be jointly and severally responsible to the Seimas for the general activities of the Government (Paragraph 1 of Article 96 of the Constitution). The Government, while forming and pursuing the economic policy of the state and by respectively regulating the economic policy within the Government competence defined by the Constitution and laws, inter alia, while passing resolutions, may not act ultra vires; it must observe the Constitution and laws. Should the Government fail to observe laws, the constitutional principle of a state under the rule of law, which implies the hierarchy of legal acts, as well as Item 2 of Article 94 of the Constitution whereby the Government, inter alia, shall execute laws, would be denied. In the context of the constitutional justice case at issue, it should be noted that, as the Constitutional Court held in its rulings of 30 September 2003 and 23 August 2005, the provision of Paragraph 2 of Article 128 of the Constitution that the procedure concerning the possession, use, and disposal of state-owned property shall be established by law means that the transfer of the property, which belongs by right of ownership to the state, as ownership to other subjects must be