The Constitutional Court recognized the norm prohibiting a legal persons receive compensation for non-material detriment as anticonstitutional
On 6 June 2012, the Constitutional Court adopted a judgment in the case No. 2011-21-01 “On Compliance of Section 8 (2) of the Law on Compensation for Losses Caused by State Administration Institutions with the Third Sentence of Article 92 of the Satversme of the Republic of Latvia”.
On the positive commitment of the State to guarantee the right of a person to a fair remuneration
The Contested Norm
Section 8 (2) of the Law on Compensation for Losses Caused by State Administration Institutions provides that a legal person (businessman) shall have the right to compensation only in case of personal losses caused to reputation of its transactions, commercial secret and copyright.
The Facts
The Administrative Case Department of the Senate of the Supreme Court adjudicates a matter, in the frameworks of which the association “Daugavas vanagi Latvijā” have contested a decision of the Riga City Executive Director to organize a procession and asked to compensate moral detriment – 5 000 LVL to each. The Administrative District Court [Administratīvā rajona tiesa] annulled the decision of the Executive Director and rejected the claim regarding compensation of detriment based on the Contested Norm.
The Applicant, the Senate of the Supreme Court, holds that the legal regulatory framework included into the Contested Norm restricts the rights of persons in a non-proportional manner. By referring to the case-law of the Constitutional Court of the Republic of Latvia stating that the right to compensation is a general guarantee, indicates that in practice it considers this right as an effective remedy. However, the Contested Norm restricts exercise of this right. Consequently, contrary to what has been established in the third sentence of Article 92 of the Satversme, it prohibits the courts assessing circumstances of a particular case to consider whether an ungrounded infringement of rights has taken place entitling a person to a commensurate and fair compensation.
Taking into account the aforesaid, the Senate asks the Constitutional Court to assess compliance of the Contested Norm with the third sentence of Article 92 of the Satversme that establishes that everyone, where his or her rights are violated without basis, has a right to commensurate compensation.
Court Findings and the Ruling
On the scope of Article 92 of the Satversme of the Republic of Latvia
When interpreting the third sentence of Article 92 of the Satversme, the Constitutional Court has recognized that protection of the basic rights of an individual as one of the most important public guarantees commits the State to ensuring an effective protection to everyone whose rights have been infringed. The norm includes a general guarantee which runs as follows – if the State has infringed the rights of an individual, it has the right to compensation [6].
When interpreting the term “commensurate compensation” included in the third sentence of Article 92 of the Satversme, the Court emphasized that it is substantial not to restrict the scope of the particular fundamental right without reason and to apply it only to the field of material rights or compensation of losses. The term “commensurate compensation” shall first of all be interpreted as satisfaction proportional to any infringement of right that includes compensation of losses and compensation of non-material (moral and personal) detriment [6].
The Constitutional Court indicated that Article 92 of the Satversme establishes a material commitment of a law-governed State, which is establishment of a legal mechanism that would ensure that any person whose rights have been infringed or breached on unlawful basis could obtain effective protection of his or her rights. However, the third sentence of Article 92 of the Satversme concretizes a certain aspect of the right to a fair trial by establishing that one of the basic tasks of a court is to grant a commensurate compensation for ungrounded infringement of rights [7].
On the scope of the Contested Norm
By applying several methods for interpreting legal norms, i.e., the grammatical one, the historical one and the systemic one, the Constitutional Court concluded that the Contested Norm permits a court to grant a legal person compensation for personal detriment in three cases: if the detriment has been caused to reputation of its transactions, its commercial secret or copyright [8.3].
On the amount of interest protection characteristic to natural and legal persons
The Constitutional Court indicated that the Satversme does not prohibit the legislator to establish grounded difference between the above mentioned groups of persons by conferring certain rights to a natural person but depriving of them legal persons. However, in legal relations, along with natural persons, legal persons are also involved and therefore the public power might infringe, without reason, the rights of legal persons like it occurs with those of natural persons. Therefore the general assumption that protection of the basic rights of legal persons should be implemented at a lesser extent might lead to arbitrary action of the legislator and threaten the comprehensive effect of the basic rights [9].
Likewise, the Court concluded that, in the field of public law, the State is responsible not only for losses but also for non-material detriment caused to natural or legal persons [9].
The Constitutional Court recognized the following – since the freedom of assembly has been recognized a value of the constitutional level, the duty of the public power is to ensure its effective implementation. Respective rights protect certain natural persons of private law and certain legal persons of private law [10.1].
The Constitutional Court indicated that, in the present case, an association and a natural person enjoy similar situation. By its actions, the public power might infringe both, a legal and a natural person at an equal extent. Namely, in public legal relations, for instance by issuing an administrative act or by means of action of an institution, the public power equally affects both above mentioned groups of persons [10.1].
The Constitutional Court concluded that it would not be reasonable to interpret the third sentence of Article 92 of the Satversme in a way that in certain cases that would completely release a person subject to public law to compensate non-material detriment caused to a legal person. In such a case, a legal person subject to public law would be positioned more disadvantageously if compared to a natural person. It would neither be correct to consider that in the frameworks of an exhaustive or a completed enumeration the legislator would be able to mention all possible situations where detriment could be done to non-material rights of a legal person [10.2].
On the content of commensurate compensation
The Constitutional Court indicated that the term “commensurate compensation” included in the third sentence of Article 92 of the Satversme cannot be interpreted in a way that it is understood only as monetary payment. The above mentioned term includes any fair satisfaction that is commensurable with the infringement of rights of a person provided a particular situation. Consequently, taking into account, for instance, the kind or nature of the infringement of rights, the threatened legal interest, a person subject to law concerned or gravity of the detriment, “commensurate compensation” can also be non-material [11.1].
The Constitutional Court concluded that the third sentence of Article 92 of the Satversme permits the Court to decide all issues that are related to establishment of a commensurate compensation based on rational legal considerations. Such action of the Court is based on the guarantee of a fair trial established in the Satversme rather than on a legally political decision of the legislator [11.3].
On the right to establish a commensurate compensation
The Constitutional Court indicated that those are administrative courts in particular, the Senate included that know the best the facts and other circumstances of a matter that testify such rights or interest of a person that should be protected by granting a commensurate compensation. Likewise, the court has all means at its disposal to assess at what extent a commensurate compensation should be established in the particular case. The Contested Norm does not give the Court the possibility to ensure guarantees of a fair trial and to grant a commensurate compensation for ungrounded infringement of his or her fundamental rights. Consequently, when adopting the Contested Norm, the legislator has failed to fulfil the duty enshrined in Article 92 of the Satversme, which has led to breach of the above mentioned norm of the Satversme [12].
The Constitutional Court recognized that the word “only” included in Section 8 (2) of the Law on Compensation for Losses Caused by State Administration Institutions fails to comply with Article 92 of the Satversme of the Republic of Latvia and shall become null and void as from the date of adoption of the norm.
On the date when the Contested Norm would loose effect
The Constitutional Court concluded that recognition of the Contested Norm as invalid as from the date of its adoption in respect to the applicant of the administrative matter is the only way to protect his fundamental rights in the present situation. However, it should not be neglected that another private person has addressed an administrative case with the purpose to protect his fundamental rights; therefore the Court ruled that the Contested Norm shall loose its effect as from the date of adoption of the particular norm in respect to all those persons who have launched the procedure for protection of their fundamental rights. [13].
In order to avoid infringement of the fundamental rights of persons established in the Satversme before it is amended and the new wording is adopted, the State administration institutions and the courts shall apply the norm pursuant to Article 92 of the Satversme and shall apply, in an analogous manner, an open enumeration of non-material rights and interests to be protected included in the words “or other non-material rights or interests protected by law” of Section 8 (1) of the Law on Compensation for Losses Caused by State Administration Institutions [13].
The judgment of the Constitutional Court is final and not subject to appeal, it shall come into force on the date of publishing it.
Linked case: 2011-21-01