The norm on compensating losses to the providers of public transport services complies with the Satversme
On 8 December 2015 the Constitutional Court passed the judgement in Case No. 2015-07-03 “On the Compliance of Para 3 of the Cabinet of Ministers Regulation of 15 May 2012 No. 341 “The Procedure for Establishing and Compensating Losses linked to the Provision of Public Transport Services and Setting the Tariff of Public Transport Services” with Article 1 and Article 105 of the Satversme of the Republic of Latvia”.
The Contested Norm
The Cabinet Regulation No. 341 provides, inter alia, that losses shall be compensated for to an operator that provides public transport services, if the losses have been incurred because the costs linked with the provision of service exceed the revenue gained. Para 3 of this Regulation (the contested norm) provides that these costs may not exceed the maximum costs to be compensated for, which are defined in an annex to the Regulation.
The Norm of Higher Legal Force
Article 1 of the Satversme: “Latvia is an independent democratic republic.”
Article 105 of the Satversme: “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. “
The Facts
The constitutional complaint, with regard to which a case has been initiated at the Constitutional Court, was submitted by the limited liability company “Jelgavas autobusu parks” and the joint-stock company “Nordeka”. The submitters of the complaint note that they had acquired the right to provide public transport services in the period from 2009 to 2020 in public tenders. Public contracts on provision of services have been concluded with the Road Transport Administration.
The legal regulation, which was in force at the time when the contracts were concluded, envisaged that all loses of the operators of passenger transport (providers of public transport services) linked to the provision of service were to be compensated for. It is alleged that the amendments to the legal regulation limit the amount of compensation. Thus, the applicants’ rights to own property are restricted. It is also contended that the contested norm is incompatible with the principle of legal certainty.
The Court’s Findings and Ruling
The Constitutional Court examined the compatibility of the contested norm with the principle of legal certainty in interconnection with the possible restriction upon the right to own property. [11] The Constitutional Court, first and foremost, determined, what should be considered as the object of the right to own property in the case under review and whether the contested norm restricted this right. [12]
The Court recognised that the right to receive compensation in compliance with the contracts concluded between the applicants and the Road Transport Administration could be regarded as an object of the right to own property. Moreover, even though the contracts envisage that the compensation is to be provided in the procedure provided for in legal acts, the contracts comprise a reference to compensation of costs in full amount. Thus, at the moment of entering into agreements, the applicants could rely upon receiving compensation for all eligible costs in full amount. In adopting the contested norm, the Cabinet of Ministers has restricted the right to receive compensation, by defining the maximum amount of costs to be compensated for. Thus, the contested norm restricts the applicants’ right to own property. [12.3]
To establish, whether the restriction upon fundamental rights is justifiable, the Constitutional Court examines:
- whether the restriction upon rights has been established by law;
- whether the restriction upon fundamental rights has a legitimate aim;
- whether the restriction upon fundamental rights is proportional to its legitimate aim. [13]
The Constitutional Court recognised that the restriction upon fundamental rights had been established by law. [14] The legitimate aim of the restriction upon fundamental rights is protection of public welfare; i.e., the contested norm serves as an incentive for providers of public transport services to limit their costs, thus ensuring savings of the state budget resources. [15]
The Constitutional Court recognised that the restriction upon fundamental rights was proportional to its legitimate aim. The Court took into consideration, inter alia, that the contested norm facilitated economically responsible actions by the providers of public transport services and served as an incentive for improving the effectiveness of their operations. This also leads to savings of the state budget resources. Thus, the public benefit exceeds the losses incurred by the applicants. [17, 19.]
Thus, the Constitutional Court recognised the contested norm as being compatible with Article 1 and Article 105 of the Satversme.
The Judgement by the Constitutional Court is final and not subject to appeal. The Judgement shall enter into force on the day it is published in the official journal “Latvijas Vēstnesis”.
Linked case: 2015-07-03