A judgment in the case on education required for an insolvency administrator has been adopted
On 22 November 2011, the Constitutional Court adopted a judgment in the case No. 2011-04-01 “On Compliance of Section 13 (1) (2) of the Insolvency Law insofar as It Applies to Persons Who have Started Working as an Insolvency Procedure Administrator Pursuant to the Requirement of Section 13 of the Law “On Insolvency of Enterprises and Companies” regarding Higher Education in Economy, Management or Finance, and Para 7 of Transitional Provisions of the Insolvency Law with Article 1, Article 91 and Article 106 of the Satversme of the Republic of Latvia”
On education and qualification requirements for the position of an insolvency procedure administrator
The Contested Regulatory Framework
Section 13 (1) (2) of the Insolvency Law provides that an able-bodied natural person who has obtained a state education document on the second level vocational education in law and acquired the lawyer’s qualification, or who has obtained a state education document on higher academic education in Law and acquired a scientific degree shall have the right to work as an insolvency procedure administrator (hereinafter – the Contested Norm).
Para 7 of Transitional Provisions of the Insolvency Law provides the following: “Administrators who have obtained their certificates pursuant to requirements of Section 13 of the Law “On Insolvency of Enterprises and Companies” and who have no less than three years of practical working experience in monitoring or executive institutions for enterprises and companies but who have no higher education in Law, the requirement mentioned in Section 13 (1) (2) of this law regarding the higher education in Law shall be applicable since 1 January 2017. Administrator who have obtained their certificates before 31 October 2010 but who have no higher education in Law, the requirement regarding higher education in Law referred to in Section 13 (1) (2) of this Law shall be applicable as of 1 January 2017. If administrators mentioned in paragraph 1 and 2 of this section has failed to start studying in a higher education institution to obtain education in Law, he or she shall have the duty to start studying before 1 January 2012, which shall be certified by a notice on initiating studies at a higher education institution to be submitted to the Administrators’ Association. Administrators mentioned in paragraph 1 and 2 of this section who study at a higher education institution, apply for a repetitive certification, shall submit, to the Administrators’ Association, a notice issued by the higher education institution regarding successful continuation of studies. In case if the administration has failed, within the term established in the third sentence of this section, to initiate studies at a higher education institution or, when applying for a repetitive certification, has failed to submit a notice on successful continuation of studies, his or her certificate shall be regarded as null and void as of the date established therein, and the administrator shall no more have the right to a repetitive certification” (hereinafter – the Contested Transitional Norm).
The Facts
Two cases, the case No. 2011-04-01 “On Compliance of Para 7 of Transitional Provisions of the Insolvency Law with Article 1, Article 91 and Article 106 of the Satversme of the Republic of Latvia” initiated pursuant to a constitutional complaint of Mr. Normunds Karlsons (hereinafter – the First Applicant), and the case NO. 2011-06-01 “On Compliance of Section 13 (1) (2) of the Insolvency Law insofar as It Applies to Persons Who Have Started Working as an Insolvency Procedure Administrator Pursuant to the Requirement of Section 13 of the Law “On Insolvency of Enterprises and Companies” regarding Higher Education in Economy, Law or Finance with Article 91 and Article 106 of the Satversme of the Republic of Latvia” initiated based on constitutional complaints of 14 insolvency administrators who have failed to obtain what has been established in the contested regulatory framework (the Second Applicants) were merged into the present case.
The Second Applicants hold that the requirement of the Contested Norm, namely, to obtain higher education in Law, restricts the fundamental rights of certified administrators established in Article 91 and Article 106 of the Satversme. It has been indicated in the application that certified administrators enjoy equal and comparable conditions if compared with two groups of persons: 1) administrators who have obtained higher education in Law; 2) representatives of other professions, in respect to whom the legislator has established certain preconditions for working in a particular profession. According to the Second Applicants, the legislator could reach the legitimate aim of the Contested Norm by applying more lenient measures, for instance, by means of examinations or training of administrators.
However, the First Applicant indicates that the Contested Transitional Provision establishing the term, up to which certified administrators have to obtain higher education in Law, as well as the period, within which respective studies have to be launched and a notice on initiating studies or successful continuation thereof should be submitted, contradicts the principle of legitimate expectations and therefore fails to comply with Article 1 of the Satversme. It has been indicated in the Application that the action of the legislator, namely, amending the normative regulatory framework, was inconsistent. The Applicant had legitimate trust into the fact that he would be able to work as an administrator based on higher education and certificate already obtained.
The Findings and the Ruling
On the claim regarding non-compliance of the Contested Norm with Article 91 and Article 106 of the Satversme
The Constitutional Court concluded that the applicant requested recognizing the Contested Norm as non-compliant with the first sentence of Article 91 of the Satversme and that of Article 106 of the Satversme. Taking into account the aforesaid and the fact that the Constitutional Court has established in its case-law that the principle of equality established in the first sentence of Article 91 of the Satversme shall be assessed in conjunction with other fundamental rights, the Constitutional Court concluded that compliance of the Contested Norm with the first sentence of Article 91 of the Satversme shall be assessed in conjunction with the fundamental rights established in the first sentence of Article 106 of the Satversme [10., 10.1., 10.2., 10.3.].
On groups of persons enjoying equal and comparable conditions
The Constitutional Court concluded that persons who have obtained higher education in economy, finance or Law and persons having higher education in Law enjoy equal and comparable conditions. The Constitutional Court indicated that, compared to other professions, administrators are committed to different duties and responsibility. Consequently, compliance of the Contested Norm with the principle of equality shall be assessed only in the context of requirements to be set forth in respect to education of administrators [14.1.].
Taking into account education requirement included into the Contested Norm, person having no higher education in Law though being certified insolvency administrators at the date of coming into force of the Contested Norm are committed to obtain another higher education, namely, higher education in Law. Such requirement shall not be applicable to person who became administrators after 1 January 2008 since these persons already had an obligatory requirement of higher education in Law, as established in norms of the Insolvency Law of 1 November 2007. Consequently, the Constitutional Court concluded that the Contested Norm provides a different attitude towards persons with higher education in Law, finance or management and persons with higher education in Law [14.2].
On the legitimate aim of the restriction included into the Contested Norm
Taking into account the amount of duties of an administrator, the Constitutional Court concluded that it is necessary for him or her to have an appropriate qualification, knowledge and experience. The Constitutional Court also indicated that this ensures not only an undisturbed course of insolvency procedure but also trust of the society into effectiveness of regulatory framework on insolvency. Consequently, the length and costs of insolvency procedure are reduced, amount of recovered resources is increased, which generally complies with interests of creditors, debtors and the State; likewise, it facilitates balancing of interests. Taking into account the aforesaid, the Constitutional Court concluded that the legitimate aim of the Contested Norm is protection of rights of other persons [16].
The Constitutional Court established that the Contested Norm is appropriate for reaching of the legitimate objective because knowledge in Law, which is testified by a proper education, is needed to correctly apply legal norms and reach the most optimal and fairest solution in each insolvency case. Although practical experience serves as a considerable pre-condition for the work of insolvency administrators, it cannot substitute the legal knowledge required in the profession of insolvency administrators [18].
Taking into account the fact that insolvency administrators are appointed by the court and it fulfils important functions of the national level, the legislator has the margin of appreciation when establishing requirements to the profession of insolvency administrators needed to reach the legitimate aim. The Constitutional Court concluded that, having assessed the nature of the regulatory framework and the amount of responsibilities of administrators, the legislator has the right to establish stricter requirements in respect to education of insolvency administrators if compared to previous requirements [19.4].
On more lenient measures for reaching of the aim set forth by the legislator
Having assessed the content of study programmes of insolvency administrators, the Constitutional Court concluded that it is not aimed at ensuring acquisition of knowledge in Law [19.5].
It has been concluded in the judgment that the purpose of re-certification is not examination of legal knowledge; therefore it cannot be regarded as a measure to test legal knowledge of insolvency administrators [19.6].
The purpose of the Contested Norm is to establish education and qualification requirements in a particular field rather than to ensure that a person would reach a certain level of education [19.7.].
The Constitutional Court concluded that the Contested Norm ensures that the administrator obtains necessary special knowledge in Law, which can be certified only by a document testifying higher education thus proving competence of a person in legal issues. Consequently, the society can be sure that the person has the required competence to fulfil the duties of an insolvency administrator. Consequently, there are no other alternative measures that would ensure reaching of the legitimate aim of the Contested Norm at the same quality [19.7].
On proportionality of the restriction included in the norm
The Contested Regulatory Framework prohibits person having no higher education in Law to work as an insolvency administrator. It has been indicated in the judgment that, by establishing a transitional period for meeting of the requirements of education of the Contested Norm, the legislator has selected a lenient solution for reaching of the legitimate aim [20.].
Taking into account the role of higher education in Law when fulfilling duties of an insolvency administrator, as well as the fact that the different attitude established in the Contested Norm has an objective and reasonable grounds, and that the requirement included into the Contested Norm shall be recognized as the most appropriate solution for reaching of the legitimate aim, the Constitutional Court concluded that benefit gained by the society from the Contested Norm is greater than detriment caused to a person, and therefore the Contested Norm does comply with the principle of proportionality [20].
On the Contested Transitional Norm
It has been concluded in the judgment that the legislator had the right to establish that certified administrators have to obtain higher education in Law. They could have legal trust into the fact that the legislator would establish reasonable transitional terms before coming into force of the new regulatory framework [22.2.].
Taking into account the fact that the term established for initiating studies, as established in the Contested Transitional Norm, also applies to the term as of which the requirement regarding higher education in Law would be applied, the Constitutional Court concluded that the above mentioned terms are inadmissibly short because they fail to allow administrators to get properly prepared for the studies and initiate their studies at a higher education institution according to proper procedure [24.2.].
The Constitutional Court indicated that a reasonable term should be established for transition to the new regulatory framework for certified administrators to be able to obtain the required education by co-ordinating it with their work duties. Moreover, such term should also provide a possibility to suspend studies in extraordinary cases [24.2.].
The Constitutional Court concluded that the Contested Transitional Norm, insofar as it establishes 1 January 2012 as the term for initiating studies at a higher education institution to acquire education in Law, and 1 January 2017 as the term, as of which the requirement on higher education in Law would be applicable, fails to comply with the principle of legitimate expectations [24.2].
On the date, as of which the terms established in the Contested Transitional Norm shall loose force
When establishing the date, as of which the terms established in the first, the second and the third sentence of the Contested Transitional Norm would lose force, the Constitutional Court took into consideration the close link between the Contested Norm and the Contested Transitional Norm [26].
In order to ensure legitimate expectations of persons, in the period from the date of coming into force of the present judgment up to introduction of amendments into the Contested Transitional Norm, the Contested Transitional Norm insofar as it establishes 1 January 2012 as the term for initiating studies at a higher education institution and requiring submitting, to the Association “ Latvian Association of Certified Insolvency Procedure Administrators” [“Latvijas Sertificēto maksātnespējas procesa administratoru asociācija”] a notice on initiating studies issued by the higher education institution, shall not be applied.
The Constitutional Court rules that the legislator has to prevent deficiencies of the normative regulatory framework before 1 March 2012.
The Constitutional Court has recognized the terms established in the first, the second and the third sentence of Para 7 of Transitional Provisions of the Insolvency Law as non-compliant with Article 1 of the Satversme of the Republic of Latvia and declared them as null and void as from 1 March 2012.
As to Section 13 (1) (2) of the Insolvency Law, insofar as it applies to persons who have started working as an insolvency procedure administrator pursuant to the requirement of Section 13 of the Law “On Insolvency of Enterprises and Companies” regarding higher education in economy, management or finance, the Constitutional Court recognized it as compliant with Article 91 and Article 106 of the Satversme provided that the legislator would amend the terms for acquisition of education established in the first, the second and the third sentence of Para 7 of Transitional Provisions of the Insolvency Law by thus ensuring persons with the possibility to execute, within reasonable term, requirements regarding acquisition of education in Law.
The judgment of the Constitutional Court is final and not subject to appeal. It shall come into force on the date of publishing it in the newspaper “Latvijas Vēstnesis”.
Linked case: 2011-04-01