The Constitutional Court initiated proceedings in the case on norms of the Credit Institutions Law regulating decision on the implementation of restoration of a credit institution
On 8 March 2012, the First Panel of the Constitutional Court initiated a case “On Compliance of Section 179 (1) of the Credit Institutions Law with Article 105 of the Satversme of the Republic of Latvia and Section 179 (2) of the Credit Institutions Law with the first sentence of Article 92 of the Satversme of the Republic of Latvia[1]”.
Contested Norms
Section 179 (1) of the Credit institutions Law provides that the decision on the implementation of restoration shall be taken by the administrator. The decision on the implementation of restoration and the restoration plan shall come into effect after its approval by the Financial and Capital Market Commission and the meeting of creditors. The restoration of the credit institution shall be managed by the administrator in accordance with the restoration plan adopted and approved by the Financial and Capital Market Commission and the meeting of creditors.
Section 179 (2) of the Credit institutions Law provides that a court may revoke a decision on the implementation of a restoration plan on the basis of an application by an administrator, meeting of creditors or the Financial and Capital Market Commission if the adoption of such decision has been achieved by fraud or duress, or a misleading influence has occurred.
The Facts
On 13 December 2011, the Riga Regional Court [Rīgas apgabaltiesa] initiated an insolvency case of the joint stock company “Latvijas Krājbanka” based on an application of the Financial and Capital Market Commission.
In the frameworks of the insolvency procedure, the administrator of the insolvency procedure has received several suggestions regarding the implementation of restoration of a credit institution, though they have been rejected.
The applicants Ms Santa Anča, Ms Jevgēnija Dimpere, Ms Ina Inkēna and Mr Raimonds Pauls indicate that the purpose of the implementation of restoration is restoration of solvency of the credit institution and satisfaction of all legitimate claims of its creditors. However, in case of bankruptcy procedure, the general purpose is to satisfy such claims of the creditors “as far as possible”. According to the applicants, interests of creditors of the credit institution can be protected in the most effective and full manner particularly by means of the implementation of restoration procedure. Application of the above mentioned procedure and restoration of insolvency as a result of it is the primary aim in case of insolvency of a credit institution. Legal regulatory framework of Section 179 of the Credit Institutions Law that prohibits the meeting of creditors to decide on usefulness of the implementation of restoration, restrict legal interests of creditors, including the right to decide on issues related to their property, in case of a negative decision by the Finance and Capital Market Commission. Therefore the above mentioned norm contradicts the right to own property guaranteed in Article 105 of the Satversme.
It follows from Section 179 (2) of the Credit Institutions Law that control over lawfulness of the decision adopted in respect to the implementation of restoration of a credit institution can be implemented only in cases when a decision on the implementation of restoration has been adopted. Moreover, the decision can be appealed against only in cases when such a decision has been adopted by fraud, constraint or error. Consequently, the meeting of creditors is not even given the opportunity to contest the decision on non-implementation of restoration. Such regulatory framework fails to comply with the first part of Article 92 of the Satversme.
Court procedure
The Saeima was asked to provide, before 8 May 2012, a reply on the facts of the case and legal justification thereof.
The term of preparation of the case is 8 August 2012.
[1] Article 92 of the Satversme of the Republic of Latvia: “Everyone has the right to defend his or her rights and lawful interests in a fair court. Everyone shall be presumed innocent until his or her guilt has been established in accordance with law. Everyone, where his or her rights are violated without basis, has a right to commensurate compensation. Everyone has a right to the assistance of counsel.”, whilst Article 105 provides that „ Everyone has the right to own property. Property shall not be used contrary to the interests of the public. Property rights may be restricted only in accordance with law. Expropriation of property for public purposes shall be allowed only in exceptional cases on the basis of a specific law and in return for fair compensation.”
Linked case: 2012-07-01