2001/10/16 - Pl. ÚS 5/01: Milk Quota Regulation

16 October 2001

HEADNOTES

The

Constitutional Court has already ruled in judgment no. 96/2001 Coll.

that constitutional delimitation of derivative law-making by the

executive branch must respect the following principles: - a decree must

be issued by an authorized entity, - a decree may not interfere in

matters reserved to statutes, - the legislative intent for regulation

above the statutory standard must be evident (room must be made for the

sphere of regulation).

A conclusion that would require all

obligations to be set directly and exclusively by statute would

obviously lead to absurd results, denying the purpose of secondary (and

in some cases even primary) norm creation, as part of the concept of

each legal norm is the definition of certain rights and obligations of

those to whom it is addressed.

In reviewing the use of property,

which may also consist of rent regulation, it is necessary to carefully

consider the existence of a public interest which authorizes the

implementation of regulatory (monitoring) measures and a selection of

detailed rules for implementing these measures. State intervention must

observe a commensurate (fair) balance between the requirements of

general public interest and the requirement of protection of an

individual’s fundamental rights. This means that there must be a

reasonable (justified) proportionality relationship between the means

used and the aims pursued. Otherwise, i.e. if a particular restriction

is purposeless or unreasonable, the regulation in question would be

clearly inconsistent with Art. 4 para. 4 of the Charter, under which, in

employing provisions on limitations on fundamental rights and freedoms,

their essence and significance must be preserved. Such limitations may

not be misused for purposes other than those for which they were laid

down.

Finally, the Constitutional Court states by way of

introduction that, under its settled case law – in accordance with its

constitutional and statutory definition – in proceedings on review of

statutes it is bound by the filed petition’s statement of claim and may

not exceed it.

Neither the constitutional order nor

international agreements on human rights and fundamental freedoms

prohibit the legislature from introducing limitations on the amounts of

farm production, distribution or consumption.

The Constitutional

Court does not share the petitioners’ opinion that Community law is not

relevant for the Constitutional Court of the Czech Republic, as a state

outside the European Union, in evaluating constitutionality. This claim

is impermissibly over-simplified and sketchy. One of the sources of

primary Community law is the general legal principles which the European

Court of Justice excerpts from the constitutional traditions of

European Union member states. They contain fundamental values which are

common to all its members. General legal principles are contained in the

concepts of a state based on the rule of law, including fundamental

human rights and freedoms and fair proceedings within that framework.

Likewise, the Constitutional Court of the Czech Republic has repeatedly

applied general legal principles which are not expressly contained in

legal regulations, but are applied in European legal culture (e.g. the

principle of reasonableness) - see Pl. US 33/97. The Constitutional

Court has thus subscribed to European legal culture and its

constitutional traditions. It also interprets constitutional

regulations, primarily the Charter of Fundamental Rights and Freedoms in

light of general legal principles. Thus, primary Community law is not

foreign to the Constitutional Court, but to a wide degree permeates –

particularly in the form of general legal principles of European law –

its own decision making. To that extent it is also relevant to the

Constitutional Court’s decision making.

The charge that

introducing production quotas on milk is serious interference in, even

prevention of, a free market is unacceptable. A completely free market,

free of all legal regulation, is not a fundamental, constitutionally

required or guaranteed value in the organization of Czech society. An

individual’s right to it is not a fundamental right expressed in the

Constitution of the CR, the Charter or international agreements on human

rights and fundamental freedoms. Even in the European Union, which, at

the highest level (Art. 2 of the Treaty Establishing the European

Community) declares the economy of the whole community and within

individual member states to be a market economy, agricultural regulation

is not seen as a violation of this principle, because other equally

valid aims are recognized, for example the convergence of economic

productivity, economic and social cohesiveness, etc.. Agricultural

regulation by market regulations is also expressly permitted by a

provision of primary law on agriculture (Art. 34 of the Treaty

Establishing the EC).

Therefore, the legislature may (of course,

only within the bounds set by constitutionally guaranteed human rights

and freedoms) in its discretion establish price or quantity regulation

of production in a particular branch of the economy, define or influence

the kind and number of entities active in that branch, or somewhat

restrict freedom of contract in placing production on the market or in

buying raw materials. The claim that restricting the prescribed

possibilities for regulating the conduct of business or other economic

activity applies only to qualification and similar prerequisites can be

described as an unreasonably narrow interpretation of the relevant

provision of the Charter (Art. 26 para. 2). It is evident from Art. 41

para. 1 of the Charter that economic, social and cultural rights, which

include Art. 26 of the Charter, can be claimed only within the bounds of

statues which implement these provisions. The nature of these rights is

fundamentally different from other fundamental rights (e.g. civil and

political rights) and the legislature’s ability to set more detailed

conditions and limitations on them is therefore significantly greater

and is basically limited only by the above cited principle, enshrined in

Art. 4 para. 4 of the Charter.

There is also no justification

for the objection that any limitation on the fundamental right enshrined

in Art. 26 para. 1 of the Charter can only be implemented b y a statue

(and not a government decree), which the decree in question allegedly

does not respect, and thereby becomes inconsistent with Art. 4 para. 2

of the Charter. In this case the government observed the principles

relevant for issuing the contested decree – on the basis of an express

statutory authorization – and the decree (except for § 14 para. 2 and § 4

para. 2) only specifies in more detail the cited statutory

authorization, i.e. the issues governed in the basic features of the

statute itself. In this case the bounds of the fundamental rights and

freedoms were provided directly by law (Art. 4 para. 2 of the Charter)

and obligations arising from the decree are therefore imposed “on the

basis of and within the bounds of law” (Art. 4 para. 1 of the Charter).

Limiting

the production amount of any product is naturally a limitation on the

right to use that product. However, such a limitation is not

expropriation, as the product owner himself may – although to a limited

degree – still control it, use it or even destroy it. Thus, it does not

lead to a passing or transfer of property rights to the product

(produced over the specified amount) to another person. However, an

entitlement to obtaining a particular price on the market is not part of

the fundamental right to own property.

The penalty levy of a

specified amount derived from the minimum price of milk per delivery is

then a necessary instrument which the state must have at its disposal in

implementing any – including a quantitative – regulation of economic

life.

Imposing penalty levies can not be considered expropriation or forced limitation of property rights.

The quota system thus corresponds to the system enshrined in Art. 4

para. 3 of the Charter, under which statutory limitations on the

fundamental rights and freedoms “must apply in the same way to all cases

which meet the specified conditions.” From a constitutional law

viewpoint it is important that the rules for the quota system (i.e. for

milk) are general, accessible and foreseeable, and therefore in that

sense the objection of inequality is unjustified.
 



CZECH REOUBLIC

CONSTITUTIONAL COURT

JUDGMENT

IN THE NAME OF THE CZECH REPUBLIC

 

The

Plenum of the Constitutional Court decided today on a petition from a

group of 28 deputies of the Chamber of Deputies of the Parliament of the

Czech Republic, represented by attorney JUDr. R. W., seeking annulment

of government decree no. 445/2000 Coll., on Setting Production Quotas

for Milk for 2001 to 2005, as follows:
 

As

of 31 December 2001, § 4 para. 2 and § 14 para. 2 government decree no.

445/2000 Coll., on Setting Production Quotas for Milk for 2001 to 2005

are annulled.

The rest of the petition is denied.
 


REASONING

 

I.
 

The

group of 28 deputies of the Chamber of Deputies of the Parliament of

the Czech Republic (the “group of deputies”) filed with the

Constitutional Court a petition to annul government decree no.445/2000

Coll., on Setting Production Quotas for Milk for 2001 to 2005 (the

“decree”). This decree was issued under § 2 para. 5 and § 12 para. 3 to 5

of Act No. 256/2000 Coll., on the State Agricultural Intervention Fund

and Amending Certain Other Acts (the State Agricultural Intervention

Fund Act).

The group of deputies believes that the contested

decree creates legal regulation of milk production and processing which

is incompatible with the fundamental rights guaranteed by the Charter of

Fundamental Rights and Freedoms (the “Charter”) and by the Convention

for the Protection of Human Rights and Fundamental Freedoms (the

“Convention”), as well as with provisions of ordinary laws, particularly

Act No. 256/2000 Coll. In the reasoning of their petition, the deputies

primarily claim that the penalty levies – introduced by § 13 of Act No.

256/2000 Coll. – causes the given volume of milk to become unsalable,

as its price would have to be raised to 215 % of the minimum price. The

essence of the penalty levy is that a producer, processor, or sales

organization which produces a volume of milk or receives it for

processing or sales from the producer, if it exceeds the allocated

individual production quota, pays a penalty in the amount of 115% (§13

para. 3 of Act No. 256/2000 Coll.) of the officially determined minimum

price (§10 of the decree; now CZK 7.60). This individual production

quota consists of an individual delivery quota and an individual direct

sales quota. Yet, under Act No. 256/2000 Coll. the producer is not

required to apply for allocation of a production quota.

The

group of deputies also believes that limiting the production amount is

impermissible interference with the constitutionally guaranteed right to

own property (Art. 11 of the Charter), as it means an expropriation

which is not based on the public interest and which takes place without

compensation (para. 4 of the same article). Setting production quotas

and allocating them without pay among the current producers, as well the

possibility of free trade with the quotas, allegedly burdens current

and future producers who want to invest in the distribution of milk,

which the petitioners also see as impermissible limitation on property

rights. The group of deputies believes that introducing quantitative

regulation in the production of milk leads to restriction of the free

market. They claim that in the Czech Republic the supply of milk does

not exceed demand, and reject the need to introduce this regulation of

production and sales of milk in view of the Czech Republic’s entry into

the European Union. They say that it is also in the public interest to

enable the use of privately owned things, which it supports with the

concept of the public interest under the case law of the First Republic

(“...a public interest exists if a matter is undertaken for the purpose

of meeting the living needs of some wider whole ...” / position of the

Supreme Administrative Court of the CSR in the judgment file no. Boh.

adm. no 14224). They conclude that a public interest in a limitation on

the property rights of milk producers is lacking in this cases, so there

is inconsistency with Art. 11 para.4 of the Charter and with Art. 1 of

the Protocol to the Convention.

The group of deputies claims

that the mechanism introduced, production quotas tied to sanctions for

overproduction, represents the introduction of de facto price

regulation, which causes unconstitutional discrimination against some

owners (producers) directed against those milk producers who do not

apply for allocation of production quotas.

The group of deputies

objects that the system of production quotas is also an impermissible

limitation of the right to conduct business and other economic

activity(Art. 26 para.1 of the Charter). According to them the law may

only set qualification and similar prerequisites for the conduct of

business or similar activity, but such limitations can not be applied to

the process of conducting business itself. Moreover, the interference

is sufficiently intense that it violates the very essence of the right

to conduct business. Quantitative regulation of production means a

limitation on the entrepreneur’s responsibility and his freedom to make

decisions about his business, which is allegedly inconsistent with

statutory principles (§ 2 of the Commercial Code). In the petitioners’

opinion, a system of production quotas can be introduced only by

statute, not by a subsidiary regulation (Art. 26 para.1 in connection

with Art. 4 para. 2 of the Charter), because in this case the bounds of

(limitations on) the fundamental right to conduct business are at issue.

The group of deputies believes that setting production quotas on the

basis of milk production in the previous year, i.e. in 2000 (§ 3-4 of

the decree) does not meet the requirement of equal treatment of all

applicants (§12 para.6 of Act No. 256/2000 Coll.) and does not observe

an objective manner of calculation, as it does not take into account an

affected producer’s possible short-term decline in milk production,

which could be caused by various influences and facts. These influences

are also not paid attention to in setting quotas for individual future

years.

The group of deputies also sees the contested provision

as a violation of the legal principles of openness toward new producers

(§ 12 para.7 of Act No. 256/2000 Coll.), in the manner of increasing

existing individual production quotas and allocating new individual

production quotas when increasing the sum of individual production

quotas from the reserve (§ 3 and § 4 para. 1, 3 and 4 of the decree),

which allegedly exceeds the limits set by Act No. 256/2000 Coll.. The

petitioners also see as unconstitutional inequality (Art. 1 of the

Charter) the disadvantaging of producers doing business exclusively in

dairy farming, whereby – as a penalty – an individual production quota

can not be increased (§ 4 para. 2 of the decree). This penalty allegedly

has no basis in law, which the petitioners also see as exceeding the

bounds provided by Act No. 256/2000 Coll. Finally, the group of deputies

sees as unconstitutional authorization for tertiary norm creation the

Ministry of Agriculture’s right, no later than 30 days before the

beginning of the applicable quota year, to announce the amount of the

reserve in the Bulletin of the Ministry of Agriculture (§ 14 para. 2 of

the decree). Similarly, the petitioners criticize the producer’s

obligation to inform the processor or sales organization about its

individual production quota and the processor’s or sales organization’s

obligation to inform the producer about its fulfillment (§ 11 para. 3,

or § 12 para. 5 and § 13 para. 5 of the decree); these are claimed to be

obligations set by government decree (not by statutes), so they are

imposed in conflict with Art. 4 of the Charter.

Finally, during a

hearing before the Constitutional Court, the attorney of the group of

deputies pointed to the fact that in the adjudicated matter one

allegedly cannot use community law as an argument, as the Czech Republic

is not yet a member of the European Union.
 


II.


The

Constitutional Court asked for a position statement on the petition to

annul the contested decree from the party to the proceedings, the

government of the CR (as the body which issued the contested decree - §

69 para.1 of Act No. 182/1993 Coll., on the Constitutional Court). ...
 

In

its statement, the government of the Czech Republic proposes that the

Constitutional Court deny in full the petition of the group of deputies.

It states that the decree issued to implement Act No. 256/2000 Coll.,

on the State Agricultural Intervention Fund, creates market regulation

of the production and sale of milk in the Czech Republic which is

comparable to the market regulation introduced by the European Community

in all member states. This is necessary for the Czech Republic’s future

membership in the European Union. In any case, by the Europe Agreement

establishing an Association between the European Communities and their

Member States, of he one part, and the Czech Republic, of the other part

(published under no. 7/1995 Coll.) the Czech Republic committed itself

to implement EC law into Czech law. In this regard, it points to the

basic features of community regulation of milk production in member

states of the European Communities. They are based on centrally

determined national production quotas (of individual member states),

from which individual quotas are then allocated to individual

agricultural businesses. The aim of the regulation is to stabilize the

agricultural sector, in which, according to the government, the rules

for protection of economic competition are not applied (Art. 36 of the

Treaty Establishing the EC). In its statement, the government expressly

refers to EC Council directives no. 3950/92, no. 1255/99 and no.

1258/99. It especially emphasizes its authorization to support a

particular form of agriculture under § 2 para. 5 of Act No. 256/2000

Coll. It claims the petitioners are contesting only the cited decree and

not Act No. 256/2000 Coll., even though the substance of the objections

is actually directed against the Act. With regard to the claimed

violation of property rights, the government says that the Convention

does not prohibit states from passing laws which they consider necessary

to regulate the use of property in accordance with the public interest.

Therefore, the government also does not see inconsistency between the

contested decree and the cited articles of the Charter, because – with

reference to Constitutional Court judgment no. 231/2000 Coll. – it goes

on the assumption that price regulation does not prevent anyone from

conducting business or conducting another economic activity, because

everyone has an opportunity to freely decide whether or not to conduct

business in a particular area under the given circumstances. The

government derives the possibility of limiting quotas for producers who

do business exclusively in dairy farming from § 2 para. 5 of Act No.

256/2000 Coll., which establishes the authorization to support

particular forms of agriculture, in this case “ecological” agriculture.

   

For all the foregoing reasons, the government of the CR proposes that

the petition to annul government decree no. 445/2000 Coll. be denied. . .

.  
 


III.
 

Before

the Constitutional Court considered the merits of the submitted

petition, it considered the question of whether procedural prerequisites

for proceedings before the Constitutional Court had been met.

In this regard it states that, under § 64 para. 2 let. b) of Act No.

182/1993 Coll., on the Constitutional Court, a group of at least 25

deputies is entitled to file a petition to annul a legal regulation or

its individual provisions. In the adjudicated matter the petition was

signed by 28 deputies of the Chamber of Deputies, so there is an

entitled petitioner.
 

The

Constitutional Court also considered the issue of whether the contested

government decree had been passed and issued within the bounds of

constitutionally prescribed jurisdiction and in a constitutionally

prescribed manner (§ 68 para. 2 of Act No. 182/1993 Coll., on the

Constitutional Court in fine). In this regard, it stated that the

contested government decree was passed and issued within the bounds of

constitutionally prescribed jurisdiction and in a constitutionally

prescribed manner under § 68 para. 2 of Act No. 182/1993 Coll., on the

Constitutional Court. Therefore, the Constitutional Court could consider

it on the merits.
 


IV.
 

The

Constitutional Court also considered the issue of the legislative

jurisdiction of the government and the Ministry of Agriculture to set a

quota system. In this regard it stated that, in the Czech Republic,

quantitative limitation of production, delivery or the consumption of

particular goods, or the provision, brokering or accepting of certain

services, within the framework of the fundamental right to free choice

of profession, the right to conduct business or to conduct other

economic activity (Art. 26 para. 1 of the Charter) – similarly as with

setting other conditions or limitations – can only be introduced by law

(Art. 26 para. 2 of the Charter). Defining the details related to these

restrictions or specifying framework conditions more closely can be done

by a subsidiary legal regulation, if the relevant body issued it under

authorization of the Constitution of the CR or an ordinary statute. The

Constitution distinguishes between the government’s right to issue a

decree “to implement statutes and remaining within their bounds” (Art.

78 of the Constitution of the CR) and the right of ministries, other

administrative offices and local government bodies “to issue regulations

on the basis of and within the bounds of a statute, if they are so

empowered by statute” (Art. 79 para. 3 of the Constitution of the CR).

The system of milk production quotas is based on Act No. 256/2000

Coll., on the State Agricultural Intervention Fund. The Act defines a

production quota (§ 2 para. 5) and financial penalties which apply to a

producer, processor or distributor in the event a quota is exceed or in

the event of production (sales, processing) without an allocated quota

(§ 13). It also sets principles for allocating production quotas (e.g. §

12 para. 6). The Act directly charges the government (§ 12 para.1), by

decree, within three months after the Act goes into effect, to set

conditions and principles for implementing further measures for the

organization of the market in agricultural products and food under § 1

para. 2 let. b) and c) and, by decree, to set production quotas and

conditions for the system of production quotas (§ 12 para. 3). Thus, it

is evident that in issuing the contested decree, in addition to the

constitutional authorization for the government, statutory authorization

was also applied.

In this regard, the Constitutional Court

states that it does not agree with the claim of the group of deputies

that the contested decree diverges from the bounds set by Act No.

256/2000 Coll. and that it is inconsistent with Art. 4 of the Charter,

under which obligations may be imposed only on the basis of and within

the bounds of law and limitations may be placed on the fundamental

rights and freedoms only by law. The Constitutional Court has already

ruled in judgment no. 96/2001 Coll. that constitutional delimitation of

derivative law-making by the executive branch must respect the following

principles: - a decree must be issued by an authorized entity, - a

decree may not interfere in matters reserved to statutes, - the

legislative intent for regulation above the statutory standard must be

evident (room must be made for the sphere of regulation).

In the

case of the contested decree the Constitutional Court – for the above

mentioned reasons – states that all the cited principles for issuing it

were observed, as the contested decree was issued by the government as

an authorized entity, the substance of the decree does not interfere in

matters reserved to statutes (no. 256/2000 Coll.) and the delineation of

the substance of the contested decree set by the legislature (§ 12 of

Act No. 256/2000 Coll.) is sufficiently specific so that it is possible

to deduce the clear legislative intent in the above mentioned sense.

Thus, we can summarize that the contested decree does not violate the

statutory reservation, because it merely, on the basis of express

statutory authorization, provides specifics for issues whose basic

features are already regulated by statute. The contrary conclusion,

which would require all obligations to be set directly and exclusively

by statute would obviously lead to absurd results, denying the purpose

of secondary (and in some cases even primary) norm creation, as part of

the concept of each legal norm is the definition of certain rights and

obligations of those to whom it is addressed.

Therefore, in this

regard the Constitutional Court found the contested government decree

to be neither unconstitutional nor unlawful.

In contrast, the

Constitutional Court considers unconstitutional and unlawful the

sub-statutory delegation according to which the level of the reserve,

announced by the Ministry in the Bulletin of the Ministry of Agriculture

(§ 14 para. 2 of the decree), is set. The text of the cited provision

does not clearly indicate who sets the amount of the reserve. We can

conclude from the manner of publication that it is done by the Ministry

(Minister) of Agriculture. However, deciding on the level of the reserve

is an inseparable component of the milk production quota system in the

CR. The law provides that the system of production quotas for individual

agricultural commodities is introduced by the government of the CR, by

decree (§ 12 para. 3), which, in accordance with the Constitution of the

CR and Act No. 309/1999 Coll., on the Collection of Laws and the

Collection of International Agreements § 1 para. 1 let. d) is published

in the Collection of Laws. Thus it is not a matter for the Ministry of

Agriculture either by law or under the Constitution. As the

Constitutional Court ruled in judgment no. 96/2001 Coll., because “the

legislature can not delegate to the executive branch an area of

regulation of relationships intended for regulation by law, and thereby

resign its legislative responsibility, all the more so the executive

power can not itself adopt the right to such regulation with reference

to a law which evidently has a different purpose and meaning.”

Therefore,

the Constitutional Court concludes that for this reason § 14 para. 2 of

the contested decree is inconsistent with Art. 79 para. 3 of the

Constitution of the CR.
 


V.
 

After

evaluating the legislative jurisdictional aspects of the government

decree at issue, the Constitutional Court continued with an analysis on

the merits, taking in turn the petitioners’ individual objections in

turn. However, first it is necessary to present several comments of a

more general nature.

A) Under Art. 83 of the Constitution of the

CR, the Constitutional Court is the judicial body for protection of

constitutionality. Under Art. 87 para. 1 let. b) of the Constitution it

is authorized to decide on the annulment of other legal regulations or

their individual provisions, if they are inconsistent with a

constitutional act, a statute or an international agreement under Art.

10. Thus, in its decision making it can evaluate only the

constitutionality (or lawfulness, as the case may be) of the contested

legal regulation and not its appropriateness or suitability to its aim.

Likewise, in the adjudicated matter, which involves a case of “abstract”

review of norms, the Constitutional Court considered only

constitutional law aspects of the contested decree and gives no opinion

on its appropriateness or suitability to its aim from the viewpoint of,

e.g. the existence of a free market and so on (see below).

B) The

Constitutional Court further states that it has already taken a

position on the issue of regulation in judgment no. 231/2000 Coll. In

that judgment, while it evaluated the constitutionality and lawfulness

of decree no. 176/1993 Coll., concerning the regulation of apartment

rents, nonetheless, in the Constitutional Court’s opinion, some general

conclusions contained in that judgment can also be applied

commensurately in the adjudicated matter. Therefore, the Constitutional

Court points out, first of all, that in the reasoning of the cited

judgment it concluded that in reviewing the use of property, which may

also consist of rent regulation, it is necessary to carefully consider

the existence of a public interest which authorizes the implementation

of regulatory (monitoring) measures and a selection of detailed rules

for implementing these measures. State intervention must observe a

commensurate (fair) balance between the requirements of general public

interest and the requirement of protection of an individual’s

fundamental rights. This means that there must be a reasonable

(justified) proportionality relationship between the means used and the

aims pursued.

C) Finally, the Constitutional Court states by way

of introduction that, under its settled case law – in accordance with

its constitutional and statutory definition – in proceedings on review

of statutes it is bound by the filed petition’s statement of claim and

may not exceed it. Thus, in the adjudicated matter it could concern

itself only with the constitutionality and lawfulness of the contested

government decree and not the constitutionality of other regulations,

particularly of Act No. 256/2000 Coll. Therefore, on the basis of the

filed petition, the Constitutional Court could only evaluate whether the

contested decree is inconsistent with a statute, a constitutional act

or an international agreements Art. 10 of the Constitution, but not

whether the statute itself – not contested by a complaint – is

unconstitutional.
 


VI.


Concerning

the first group of the petitioners’ objections concerning the freedom

to conduct business and permissibility of limiting it (Art. 26 para. 1, 2

of the Charter).

Under Art. 26 para. 1 of the Charter,

everybody has the right to the free choice of profession and training

for it, as well as the right to conduct business and conduct other

economic activity. Under para. 2 of that article, the law may set

conditions and limitations on the exercise of certain professions or

activities.

In this regard the petitioners object that the law

may only set qualification and similar prerequisites for the conduct of

business or similar activity, not limitations on the process of

conducting business itself, in the form of de facto price regulation

which is so intense that it violates the very essence of the right to

conduct business.

In response to this the Constitutional Court

states that in judgment no. 231/2000 Coll. it stated that “price

regulation does not prevent anyone from conducting business or

conducting another economic activity, because everyone has an

opportunity to freely decide whether or not to conduct business in a

particular area under the given circumstances.” In the adjudicated

matter the Constitutional Court further emphasizes that neither the

constitutional order nor international agreements on human rights and

fundamental freedoms prohibit the legislature from introducing

limitations on the amounts of farm production, distribution or

consumption. In this connection, it is not inappropriate to point out

the fact that a certain amount of limitation on the amounts of farm

production and distribution happens routinely at the international

level, through the inspection of import or export of goods between

states which contractually liberalize their mutual trade in goods (e.g.

the relevant provisions of the Treaty Establishing the EC or the General

Agreement on Tariffs and Trade).

Thus it is basically up to the

Parliament of the CR (i.e. the legislative assembly), to take into

account, when issuing ordinary statutes, the general interest in the

regulation of relationships in a particular branch of the economy. The

economic purpose and social acceptability of a particular regime should

be subject to political control. On the other hand, one must

consistently insist – as the Constitutional Court already stated in

point V.B) – that in each particular case it is necessary to carefully

consider the existence of a public interest which authorizes the

implementation of regulatory measures, as state intervention must

observe a fair balance between the general public interest of society on

one hand and the protection of an individual’s fundamental rights on

the other. This means that there must be a corresponding reasonable

relationship between the means used and the aims pursued. Otherwise,

i.e. if a particular restriction is purposeless or unreasonable, the

regulation in question would be clearly inconsistent with Art. 4 para. 4

of the Charter, under which, in employing provisions on limitations on

fundamental rights and freedoms, their essence and significance must be

preserved. Such limitations may not be misused for purposes other than

those for which they were laid down.

However, the introduction

of production quotas (for the production, sales and processing of milk)

by the contested decree does not show the cited elements of

purposelessness or unreasonableness. Limitation of the supply of milk

and milk products (as one of the basic food groups) through the setting

of production quotas is not a danger, in view of the long-term milk

surpluses. As the Ministry of Agriculture and the State Agricultural

Intervention Fund correctly state in their statement on the petition,

the job of the production quota system is to protect the market from

speculators and establish conditions such that every producer will

secure sales and receive an appropriate minimum price, i.e. so that a

balance between production and sales will be guaranteed. Setting minimum

milk prices (§ 10 of the decree), whose obvious aim is to stabilize the

market in the event of price declines, is also not inconsistent with

this public interest.

The Constitutional Court accepts the

government’s position that introducing milk production quotas is an

approximation of Czech legal regulations to those in the European Union

and its member states, caused by long-term overproduction of milk in

western Europe (see Europe - European Union - European Commission -

Agriculture: Agriculture -Situation and Outlook: Dairy Sector, in:

www.europa.eu.int/comm/agriculture/public/pac2000/dairy/index_en.htm#top).

Thus, the regulation introduced by the contested decree – as the

government of the CR correctly states- basically represents a transfer

of the community model (regulation) to Czech agriculture, both in terms

of legal-technical means (production quotas and penalty levies for

overproduction), and in terms of setting amounts. We can accept the

government’s opinion that community regulation of milk production is

based on the principle that individual quotas are allocated to

individual producers from the centrally set national production quotas

of individual member states. Therefore, the contested government decree

is a step which brings agriculture in the CR closer to European

standards and thus to a certain extent facilities the Czech Republic’s

entry into the European Union. Moreover, the regulation implemented

means fulfillment of the provision on approximation of Czech law with

community law, as provided and required (though not expressly) by Art.

70 of the Europe Agreement establishing an Association between the

European Communities and their Member states, of the one part, and the

Czech Republic, of the other part of 1993 (no.7/1995 Coll.).

The

Constitutional Court considers it appropriate to emphasize that it does

not share the petitioners’ opinion (stated during the hearing) that

Community law is not relevant for the Constitutional Court of the Czech

Republic, as a state outside the European Union, in evaluating

constitutionality. This claim is impermissibly over-simplified and

sketchy. One of the sources of primary Community law is the general

legal principles which the European Court of Justice excerpts from the

constitutional traditions of European Union member states. They contain

fundamental values which are common to all its members. General legal

principles are contained in the concepts or a state based on the rule of

law, including fundamental human rights and freedoms and fair

proceedings within that framework. Likewise, the Constitutional Court of

the Czech Republic has repeatedly applied general legal principles

which are not expressly contained in legal regulations, but are applied

in European legal culture (e.g. the principle of reasonableness) - see

Pl. US 33/97. The Constitutional Court has thus subscribed to European

legal culture and its constitutional traditions. It also interprets

constitutional regulations, primarily the Charter of Fundamental Rights

and Freedoms in light of general legal principles. Thus, primary

Community law is not foreign to the Constitutional Court, but to a wide

degree permeates – particularly in the form of general legal principles

of European law – its own decision making. To that extent it is also

relevant to the Constitutional Court’s decision making.

The

charge that introducing production quotas on milk is serious

interference in, even prevention of, a free market is unacceptable. A

completely free market, free of all legal regulation, is not a

fundamental, constitutionally required or guaranteed value in the

organization of Czech society. An individual’s right to it is not a

fundamental right expressed in the Constitution of the CR, the Charter

or international agreements on human rights and fundamental freedoms.

Even in the European Union, which, at the highest level (Art. 2 of the

Treaty Establishing the European Community) declares the economy of the

whole community and within individual member states to be a market

economy, agricultural regulation is not seen as a violation of this

principle, because other equally valid aims are recognized, for example

the convergence of economic productivity, economic and social

cohesiveness, etc.. Agricultural regulation by market regulations is

also expressly permitted by a provision of primary law on agriculture

(Art. 34 of the Treaty Establishing the EC). In this regard the

Constitutional Court points out again that in its decision making

activity it can evaluate only the constitutionality (or lawfulness) of

the contested legal regulation and not its suitability or

appropriateness for a purpose. Thus, this objection by the petitioners

is unjustified.

Therefore, the legislature may (of course, only

within the bounds set by constitutionally guaranteed human rights and

freedoms), in its discretion, establish price or quantity regulation of

production in a particular branch of the economy, define or influence

the kind and number of entities active in that branch, or somewhat

restrict freedom of contract in placing production on the market or in

buying raw materials. The claim of the group of deputies that

restricting the prescribed possibilities for regulating the conduct of

business or other economic activity applies only to qualification and

similar prerequisites can be described as an unreasonably narrow

interpretation of the relevant provision of the Charter (Art. 26 para.

2). It is evident from Art. 41 para. 1 of the Charter that economic,

social and cultural rights, which include Art. 26 of the Charter, can be

claimed only within the bounds of statues which implement these

provisions. The nature of these rights is fundamentally different from

other fundamental rights (e.g. civil and political rights) and the

legislature’s ability to set more detailed conditions and limitations on

them is therefore significantly greater and is basically only limited

by the above cited principle, enshrined in Art. 4 para. 4 of the

Charter.

In response to the objection that price regulation

restricts the responsibility a business has for its results (§ 2 of the

Commercial Code), it must be said that a producer’s legal independence –

despite the evidently strict regulation of milk production – remains

preserved. Even now a milk producer can make a profit or suffer a loss,

depending on the productivity of his work, its quality and external

influences. He continues to be responsible for his production, similarly

to other businesses. His position is not like that of an employee,

managed by an employer. Every state regulation of business or economic

activity affects the business environment, the level of realistically

possible revenues and profits and the risk of losses. In the case of

strict regulation of milk production it is certainly possible to

conclude that revenues from milk production are relatively easy to

foresee, in view of the factual impossibility of selling milk above a

certain amount. However, the contested regulation does not change

anything about the substance of doing business in milk production.

Every limitation on business or setting of prerequisites and conditions

for it must have a certain purpose, must pursue a certain public

interest. Purposeless restrictions – as already stated above – represent

the “failure to preserve” the essence and significance of fundamental

rights, forbidden by the Charter. In view of the particular social,

economic and ecological characteristics of agriculture, stabilization of

prices, and thereby of the revenues of agricultural businesses and

private farmers is a public interest which is sufficient grounds for

state intervention in the milk market, including regulating the amount

of production.

In this regard we also can not agree with the

petitioner’s claim that there is a balance between milk supply and

demand in the CR. The annual consumption of milk in the CR (of course,

in the form of various milk products) was 2.1 million tons, while

production was 2.789 million tons (see the Statistical Yearbook of the

CR 2000, Czech Statistical Office, Prague, 2000, p. 278 and p. 713). The

excess, which also results from increasing imports, is, with great

difficulties, primarily exported. Without export subsidies provided from

state funds, this export would be done at a great loss, and it would

only be possible to continue it for a transitional period.

To

conclude this part of the judgment, the Constitutional Court points out

that (in principle) it is not its role to evaluate the economic aspects

of the need and urgency of limitations on the conduct of business or the

setting of conditions for the conduct of business in view of the need

to ensure separate public interest, often parallel or even conflicting.

The choice of limiting (monitoring) instruments and the degree to which

they are applied is primarily the job of the legislature. In our

constitutional system, only the Parliament, as a representative body,

can take such steps. Its responsibility for recognizing problems in the

economy which require regulation, choice of instruments and their

effects, which can sometimes also be negative, is primarily political,

and in this case the Constitutional Court can intervene in its

legislative activity only if it finds it to be unconstitutional.

However, in the adjudicated matter the legislature, by Act No. 256/2000

Coll. (which was not itself subjected to review by the Constitutional

Court), set clear rules of authorization and bounds for issuing a

government decree, and the government observed this authorization in

issuing the contested decree. Thus, one can conclude that the present

government decree is not inconsistent with Art. 26 para. 1 and 2 of the

Charter.

Finally, as the Constitutional Court stated above (in

point IV.) - there is also no justification for the objection that any

limitation on the fundamental right enshrined in Art. 26 para. 1 of the

Charter can only be implemented by law (and not a government decree),

which the decree in question allegedly does not respect, and thereby

becomes inconsistent with Art. 4 para. 2 of the Charter. In this case

the government observed the principles relevant for issuing the

contested decree – on the basis of an express statutory authorization –

and the decree (except for § 14 para. 2 and § 4 para. 2) only specifies

in more detail the cited statutory authorization, i.e. the issues

governed in the basic features of the statute itself. Thus, it is

evident that the contested decree as a whole is not unconstitutional in

this respect either; in this case the bounds of the fundamental rights

and freedoms were provided directly by law (Art. 4 para. 2 of the

Charter) and obligations arising from the decree are therefore imposed

“on the basis of and within the bounds of law” (Art. 4 para. 1 of the

Charter).

For the sake of completeness the Constitutional Court

adds that in this case the system of milk production quotas is also not

unreasonable from a comparative viewpoint, with regard to the similar

regulation of the milk market in European Union member states.

Comparable regulation of the market in milk and some other agricultural

products exist not only in these countries, but also in other developed

democratic western European countries (see Council Directive no.

3950/92, Commission Directive no. 536/93). Although they are often

subject to strong criticism due to their strictness and problematic

competitive and structural effects, this criticism is not based on

doubts about the compatibility of regulation of the milk market with the

European and universal standard of human rights.
 


VII.
 

Concerning

the second group of the petitioners’ objections on the nature of

property rights and the permissibility and conditions for restricting

them (Art. 11 of the Charter and Art. 1 of the Protocol to the

Convention)

Under Art. 11 para. 1 of the Charter everyone has

the right to own property. Each owner’s property right has the same

content and enjoys the same protection. Under para. 4 expropriation or

other mandatory limitation upon property rights is possible in the

public interest, on the basis of law, and for compensation. Under Art. 1

of the Protocol to the Convention every natural or legal person “is

entitled to the peaceful enjoyment of his possessions. No one shall be

deprived of his possessions except in the public interest and subject to

the conditions provided for by law and by the general principles of

international law. The preceding provisions shall not, however, in any

way impair the right of a State to enforce such laws as it deems

necessary to control the use of property in accordance with the general

interest or to secure the payment of taxes or other contributions or

penalties.”

The petitioners basically claim that limiting the

amount of milk production is an impermissible intervention into property

rights, is not based on the public interest, and takes place without

compensation.

In response to this the Constitutional Court stats

that limiting the production amount of any product is naturally a

limitation on the right to use that product – as an object of ownership –

produced over the established production quota and this leads to a

certain form of limitation on property. In particular, this concerns

limiting or even preventing sale of such a product on the market for a

certain price. However, such a limitation is not expropriation (which

the petitioners do not claim in any case), as the product owner himself

may – although to a limited degree – still control it, use it or even

destroy it. Thus, it does not lead to a passing or transfer of property

rights to the product (produced over the specified amount) to another

person. Through regulation the product only becomes difficult to sell,

or even impossible to sell. However, an entitlement to obtaining a

particular price on the market is not part of the fundamental right to

own property. In response to the objection that a quota system is a

forced limitation of the right of ownership, the Constitutional Court

again points out (see point V.B) that this system is a form of

controlling the use of property, with which it is necessary to carefully

consider both the existence of a public interest which authorizes the

implementation of regulatory (monitoring) measures and a selection of

detailed rules for implementing these measures. State intervention must

observe a commensurate (fair) balance between the general public

interest and protection of an individual’s fundamental rights. This

means that there must be a reasonable (justified) proportionality

relationship between the means used and the aims pursued. In the

Constitutional Court’s opinion – as far as the contested decree is

concerned – a public interest (i.e. stabilization of the milk market)

legitimating the state in introducing a quota system does exist, and the

means chosen to achieve this aim (the quota system) are quite

proportionate from a constitutional viewpoint.

In this regard it

must be pointed out that e.g. tightening the qualitative requirements

for the production of goods in the conduct of business or other economic

activity also often means creating, for the party conducting business

or economic activity, a price disadvantage for the products it makes or

raw materials and facilities which it uses for production. However, such

regulation is often necessary in order to better secure a palette of

often inadequately protected important public interests. However, in

such cases the objection that property rights are restricted would

undoubtedly be considered unacceptable.

As the Ministry of

Agriculture of the CR correctly states in its position statement, under

the contested decree, every producer who wants to increase milk

production or wants to start milk production as a result of increased

demand has a chance to apply for allocation of a new quota or for an

increase of his existing quota from the reserve, or can acquire a quota

by contractual transfer from another producer. Thus, it is evident that

the quota system is not a fundamental and unjustified limitation of

property rights, but is – in its essence – a purposefully protectionist

measure. To a certain extent and in a certain regard this may be

subjectively perceived as a restriction on the property rights of milk

producers; however, it can not be overlooked that such a measure – its

final effects under clearly defined conditions set in advance –

objectively protects and develops the producers’ property rights. The

purpose of the quota system is creating conditions such that every

producer will have secured sales and that he will obtain the

corresponding minimum price. However, the answer to the question of

whether this is the optimal and economically most advantageous measure

obviously cannot be given by the Constitutional Court.

The logic

of the newly introduced quota system comes from the fact that given a

long-term greater supply of milk than demand for it (see point VI.) the

profitability of milk production in the CR is ensured only by increasing

state subsidies. Investment in such production under these conditions

are an attempt to take advantage of them. Yet, the impact of introducing

a system of milk production quotas, created day by day, is basically

only a potential one. The penalty levy of a specified amount derived

from the minimum price of milk imposed for production in an amount

exceeding an individual production quota (§ 13 of Act No. 256/2000

Coll.) is then a necessary instrument which the state must have at its

disposal in implementing any – including a quantitative – regulation of

economic life. Its purpose is precisely to deter producers from a

legally prohibited or generally undesirable behavior. A state which, for

important reasons, introduces limits on amounts produced can also

prohibit production exceeding a set amount. Undoubtedly, it can impose

penalties for violation of such a ban. A less intrusive limitation,

which merely makes overproduction of milk above set production quotas or

outside their system disadvantageous, but does not forbid them, is also

admissible (the argument a maiori ad minus). Thus, imposing penalty

levies can not be considered expropriation or forced limitation of

property rights in the above mentioned sense. Moreover, as the

Constitutional Court has already stated, the ability of the State

Agricultural Intervention Fund (SAIF) to impose penalty levies is

regulated in Act No. 256/2000 Coll. and not in the contested decree.

However, the petitioners did not contest that act, and therefore the

Constitutional Court could not review it within the proceedings on

abstract review of norms.

The Constitutional Court did not

overlook the fact that setting quotas for the production of milk (or any

other goods) by the very nature of the matter manifests the state’s

efforts to deter potential investors from further – in this case

quantitative – development of an economic sector in which there is no

public interest. Such deterrence from investment may also mean changes

in qualitative regulations, changes in taxes (restrictive taxation) or

even changes in purchases of goods or services by public entities

appointed to ensure public services. Thus, deterrence of investment in

milk production can not be considered limitation of ownership to means

whose use in other economic sectors current and potential producers

could consider (in view of the cited circumstances). These means can –

generally speaking – be used for the development of a number of other

economic sectors (including agricultural ones) whose quantitative growth

is not a barrier to an important public interest.

From a

comparative viewpoint, we must also point to the case law of the

European Court of Justice (ECJ), which addressed the issue of limiting

the fundamental right to property in connection with the application of

community regulations on agricultural production. In the case of Hauer

(44/79, in: P. Craig and G. de Búrca, EU Law, Text, Cases, and

Materials, Oxford University Press, 1998, pp. 306-307), the ECJ pointed

out that Art.1 of the Protocol to the Convention (on the right to own

property) does not rule out the state’s right to use such regulations as

the state considers necessary to regulate the exercise of property

rights in accordance with the public interest. In that case, the German

authorities, in applying community law, specifically EEC Council

Directive no.1162/76, on adapting vineyards to the needs of the market,

did not permit a winegrower from the German land of Nordrhein-Westfalen

to plant grapevines on her property, precisely with regard to community

limitation of production.
 


VIII.


Concerning

the third group of the petitioners’ objections to application of the

principle of equality and the ban on discrimination (Art. 1 of the

Charter)

Under Art. 1 of the Charter all people are free, have

equal dignity, and enjoy equality of rights. The fundamental rights and

basic freedoms are inherent, inalienable, non-prescriptible and not

subject to repeal. The principle of equality and the ban on

discrimination are further specified in Art. 3 para. 1 of the Charter

(“Everyone is guaranteed the enjoyment of his fundamental rights and

freedoms without regard to gender, race, color of skin, language, faith

and religion, political or other conviction, national or social origin,

membership in a national or ethnic minority, property, birth or other

status”). We must also point to Art. 4 para. 3 of the Charter, under

which “Statutory limitations on the fundamental rights and freedoms must

apply in the same way to all cases which meet the specified

conditions.”

The petitioners find violation of the principle of

equality in the fact that the system of milk production quotas

introduces a certain form of de facto price regulation, which introduces

two prices for milk. The method of calculating the primary allocation

of production quotas is allegedly not objective, as it does not take

into account factors which, in 2000, could have negatively affected a

particular producer’s production of milk. Finally, the limitation

arising under § 4 para. 2 of the contested decree, under which producers

doing business exclusively in dairy farming will not have their

allocated individual production quota raised, nor will they be allocated

a new individual production quota from the reserve, allegedly

discriminates against a certain group of producers, those doing business

exclusively in dairy farming.

First, the Constitutional Court

points out that the issue of equality was already addressed by the

Constitutional Court of the CSFR, which ruled (judgment Pl. US 22/92,

Collection of Judgments and Resolutions of the Constitutional Court of

the CSFR, p. 37 and p. 38): “The equality of citizens before the law was

not seen as an abstract category, but was always attached to a

particular legal norm, taken in the mutual relationships of various

subjects of law, etc. Insofar as equality was made a right, every

individual is entitled to have the state, insofar as it is able, remove

all actual inequalities. However, this construction only applies if we

consider equality to be absolute. Relative equality, as all modern

constitutions understand it, only requires the removal of unjustified

differences. (.) Special norms may set special criteria of equality for

certain fields, criteria which do not arise from the general principle,

because application of the principle of equality does not set such

strict bounds as to rule out any consideration by those who apply it.”

In the adjudicated matter, the Constitutional Court again emphasizes

that the purpose of the production quota system is to create conditions

so that every producer will have sales secured and will receive a

corresponding minimum price. Thus, it is evident that this system was

not created for the purpose of giving advantages or disadvantages to any

group of milk producers, but quite the contrary: its purpose is to

ensure equal conditions on the market and to protect producers and

consumers from undesirable large price fluctuations. The objection of

two milk prices is therefore unjustified, as the price of milk remains

the same for all producers, and the penalty levy in the amount of 115%

of the minimum or regulated price (§ 13 of Act No. 256/2000 Coll.) is

not a (“second”) milk price, but a penalty for violating the rules of

the quota system. In other words, if they observe the rules, all milk

producers have an equal position, and precisely for that reason, in

order to achieve the aim of the quota system, market stability, the law

(not the contested decree) set penalties for violating the rules of the

system.

One must also see the fact that creating a production

quota system does not discriminate against those entities which do not

join it. The objection of inequality or discrimination is groundless in

this sense, because in this case distinguishing between individual

producers is based on a choice by the affected entity. The producer has

an opportunity to apply for an individual production quota, or to not

take advantage of this opportunity. Thus, the quota system corresponds

to the principle enshrined in Art. 4 para. 3 of the Charter, under which

statutory limitations on the fundamental rights and freedoms “must

apply in the same way to all cases which meet the specified conditions.”

In view of the factual impossibility to produce milk outside the

production quota system – with regard to the unsalability of milk, the

purchase of which the state would burden with a penalty levy – the

allocation of production quotas represents an analogous mechanism, e.g.

with entrepreneurs’ activities related to defining the quantitative

scope of their business. From a constitutional law viewpoint it is

important that the rules for the quota system (i.e. for milk) are

general, accessible and foreseeable, and therefore in that sense the

objection of inequality is unjustified.

Of course, it is obvious

from the nature of the matter – as was already stated – that creating a

system of milk production quotas must somewhat “deter” new entities

from entering this sector. The aim of production quotas is to stabilize

production at a certain maximum level, which, in the present situation,

de facto means a certain decrease. Unrestricted access to the sector

could thwart any effect of the production quotas. Thus, the purpose of

limiting the amount of production is to deter persons from entry into

the sector, as well as from future investments where there is a public

interest in limiting them. A certain disadvantaging of potential future

producers vis-à-vis current producers is a natural and irremovable

characteristic of all limitations of the amount of production, and it

cannot be seen as a violation of the constitutionally guaranteed

principle of equality, because – as was already said – equality in

modern constitutional systems can not be seen as an absolute category,

but as a relative one. Therefore, the Constitutional Court also could

not agree with the petitioners’ objections that the contested decree is

inconsistent with § 12 para. 7 of Act No. 256/2000, under which “The

system of production quotas will permit new entities to enter the market

and will ensure that entities which enter the market will have the same

opportunity to obtain production quotas as entities already active in

the market, through allocation of the reserve, but with a maximum level

of the current annual quota.”

Allocation of individual

production quotas among individual farmers according to their production

in the previous calendar year (§ 3 para. 1 et seq. of the decree) can

not in practice be fully consistent with the principle of equality –

which the petitioners claims is violated – enshrined in § 12 para. 6

let. a) of Act No. 256/2000 Coll., if this principle is understood as an

absolute (abstract) concept. One can reason, e.g. that in 2000 some

producers might not have produced a lot of milk, as they had primarily

heifers and calves in their stables for various reasons, their

businesses might have been struck by natural disasters of disease, and

so on. Nonetheless, most such cases are taken into account by the

formula for calculating individual delivery quotas, provided in appendix

no. 1 to the contested decree. Therefore, a certain inequality could

arise if the producer, for a certain period, due to natural disasters or

cattle stocks unbalanced in age or in other respects, delivered only a

limited amount of milk. However, this inequality can not be considered

unconstitutional, because any legally regulated manner of determining

individual production quotas could, in a particular case, under certain

circumstances, lead to a subjectively perceived unjust result. However,

if the legal regime wanted to eliminate these cases, there would be

another – no less serious – danger, consisting of the risk of a certain

arbitrariness in “eliminating harshness” when allocating production

quotas. Thus, even here one can not find the contested decree to be

unconstitutional (or unlawful).

Concerning producers doing

business exclusively in dairy farming, the Constitutional Court

considers that the preference, in the allocation of new production

quotas or increasing of existing ones, for ecological raising of dairy

cattle under a special Act (no. 242/2000 Coll., on Ecological

Agriculture and Amending Act No. 368/1992 Coll., on Administrative Fees,

as amended by later regulations) can not – in and of itself – be

considered unconstitutional discrimination. The legislature has a right

to resort to it precisely for reasons of the public interest, which

improved treatment of animals (see also the position of the Ministry of

Agriculture on animal welfare) certainly is. This is an activity which

is surely correct and acceptable. State support can take the form of,

e.g., subsidies or other forms of public support. Thus, the legislature

has the right to enshrine this preference in the law in connection with

allocating further production quotas or reducing them.

However,

the government can not do so – beyond the framework of the law – at the

stage of issuing a sub-statutory implementing regulation.

Therefore, the government of the CR – in this regard – is mistaken, if

it claims that § 2 para. 5 of Act No. 256/2000 Coll. authorizes it to

give preference to a particular form of agriculture in the way that it

does in § 4 para. 2 of the present decree. That provides that producers

who do business exclusively in dairy farming, shall not have their

allocated individual production quota increased, nor be allocated a new

individual production quota for milk from the reserve. The cited § 2

para. 5 of Act No. 256/2000 Coll. only states that “A production quota

may be conditioned on the provision of a particular form of agricultural

support.” That means that the purpose of the cited statutory provision

evidently lies in permitting positive preferences for a particular form

of agriculture (typically, e.g., ecologically oriented) through state

support, if the condition of participation in the system of production

quotas is met. However, at the same time it is evident that one cannot

draw from the wording of the cited provision a statutory authorization

for the government to exclude certain producers from the possibility of

increasing their current production quotas or allocating a new one as

provided by § 4 para. 2 of the contested decree.

Therefore, this

provision clearly does not observe the statutory reservation and is

thus in conflict with Art. 4 para. 1 and 2 of the Charter.
 


IX.
 

For

all the cited reasons the Constitutional Court annulled § 4 para. 2 of

government decree no. 445/2000 Coll., on Setting Production Quotas for

Milk for 2001 to 2005, due to inconsistency with Art. 4 para. 1 and 2 of

the Charter, and §14 para. 2 of the decree, due to inconsistency with

Art. 79 para. 3 of the Constitution of the CR.

In accordance

with § 58 para. 1 and § 70 para. 1 of Act No. 182/1993 Coll., on the

Constitutional Court, the Constitutional Court annulled these provisions

as of 31 December 2001, in order to give the government sufficient time

for necessary measures and adjustments.

The Constitutional Court denied the remaining part of the petition to annul the contested government decree.

Instruction: Decisions of the Constitutional Court can not be appealed.

Brno, 16 October 2001
 



Dissenting Opinion
of

judges JUDr. P. H. and JUDr. A. P. to the reasoning of the

Constitutional Court’s judgment file no. Pl. US 5/01, on the petition of

the group of deputies to annul government decree no. 445/2000 Coll., on

Setting Production Quotas for Milk for 2001 to 2002

The dissenting opinion, filed to the reasoning of Constitutional Court judgment file no. Pl. US 5/01, is based on these reasons:

In its judgment in the matter of setting the value of a point in health

insurance (file no. Pl. US 24/99), the Constitutional Court expressed

the constitutional law classification of price regulation restrictively:

“An essential component of the democratic state based on the rule of

law is protection of the freedom of contract, which is a derivative of

the constitutional protection of property rights under Art. 11 para. 1

of the Charter (a fundamental component of which is ius disponendi).

Therefore, price regulation is an exceptional measure, acceptable only

under quite limited conditions.”

In its judgment in the matter

file no. Pl. US 3/2000, the Constitutional Court again addressed the

issue of price regulation, this time in connection with evaluating the

constitutionality of legal rent regulation. It took as its starting

point Art. 1 para. 2 of Protocol no. 1 to the Convention for the

Protection of Human Rights and Fundamental Freedoms, which provides

states the right to enforce such laws as it deems necessary to control

the use of property in accordance with the general interest, and also

the case law of the European Court of Human Rights. Under it, such laws

are particularly necessary and usual in the area of housing, which is

becoming a central issue of social and economic policy in modern

societies, and for the purpose of which legislation must have a wide

margin for consideration (evaluation) (“wide margin of appreciation”),

both in determining whether there is a public interest which authorizes

the implementation of regulatory (monitoring) measures and in selection

of detailed rules for implementing these measures. As the European Court

of Human Rights emphasized in the case James et al., state intervention

must observe a the principle of a “fair balance” between the

requirements of general public interest and the requirement of

protection of an individual’s fundamental rights. There must be a

reasonable (justified) proportionality relationship between the means

used and the aims pursued.

Thus, in this matter the

Constitutional Court accepted a possible price regulation of rent, but

on the condition of applying the principle of reasonableness (for

comprehensive discussion of all components of the reasonableness

principle see Constitutional Court judgments file nos. Pl. US 4/94, Pl.

US 15/96, Pl. US 16/98). Although the Constitutional Court acknowledge

the presence of the first component, i.e. the suitability of the means

used in relation to the aim pursued, it found a failure to observe the

principle of necessity, i.e. the subsidiarity of the means used in

relation to other possible means, from the viewpoint of the limited

fundamental right (in the given matter, the property right): “In order

that the apartment building owners could meet their stated obligations,

and that the individual’s right to adequate housing under Art. 11 of the

International Covenant on Economic and Social Rights, the path chosen

could have been, for example, that taken by the legislation of the First

Republic, which, in § 9 para. 4 of Act No. 32/1934 Coll., as amended by

later regulations, permitted increasing rent for reasons of paying

expenses for temporary or exceptional necessary repairs and renovation

of the building.” On the basis of these arguments the Constitutional

Court concluded that there was violation of Art. 4 para. 3 a 4 of the

Charter, in connection with Art. 11 para. 1 of the Charter.

From

a general perspective, in the judgment in question the Constitutional

Court also formulated another criterion for evaluating the

constitutionality of price regulation: “Price regulation, if it is not

to exceed constitutional bounds, may not obviously decrease a price so

that, in view of all the demonstrated and necessarily incurred expenses,

it would eliminate the possibility of their being at least repaid,

because in that cause it would actually imply denial of the purpose and

all functions of ownership.”

Where the Constitutional Court

decided on the issue of production quotas for sugar, in evaluating the

constitutionality of government decree no. 51/2000 Coll., it limited its

argumentation to the question of observance of safeguards contained in

Art. 78 of the Constitution.

The system of milk production

quotas under Act No. 256/2000 Coll. and government decree no. 445/2000

Coll. are established by penalty price regulation under § 13 of the

cited act, affecting that part of production by which the producer

exceeds the set quotas.

From a general perspective, the Act on

Prices considers acceptable reasons for introducing price regulation to

be danger to the market from the effects of limiting economic

competition or from an exceptional market situation (§ 1 para. 6 of Act

No. 526/1990 Coll. on Prices, as amended by later regulations). In this

regard it also fully corresponds to the paradigms of democratic economic

thinking (see P. A. Samuelson - W. Nordhaus, Economics, Prague 1991).

The Act on the State Agricultural Intervention Fund, insofar as it

establishes the possibility of price regulation in agriculture, is a lex

specialis to the Act on Prices.

From the perspective of the

Constitutional Court’s existing case law, the reasoning in the majority

opinion has not observed all the safeguards, which arise from the

principle of reasonableness. It did not analyze fulfillment of the

condition of subsidiarity to possible alternative means permitting the

achievement of the pursued aim as the Constitutional Court did in the

matter under file no. Pl. US 3/2000.

If price regulation is

interference in contractual freedom, which is a derivative of

constitutional protection of property rights under Art. 11 para. 1 of

the Charter (a fundamental component of which is ius disponendi), it is

essential in the present matter to evaluate the observation of

constitutional safeguards for limitation on property rights under Art.

11 para. 3 and 4 of the Charter and Art. 1 para. 2 of Protocol no. 1 to

the Convention for the Protection of Human Rights and Fundamental

Freedoms.

From the perspective of the meaning and purpose of the

cited provisions, which are components of the constitutional order of

the Czech Republic, Art. 1 para. 2 of Protocol no. 1 to the Convention

for the Protection of Human Rights and Fundamental Freedoms applies to

the matter (on interpretation of the concept of mandatory limitation of

property rights, see, in particular, Constitutional Court judgment Pl.

US 15/96). In this regard, a key aspect is interpretation of the concept

of public interest, which is the basis for the regulation of use of

property and the related limitation of property rights.

In the

matter under file no. III. US 31/97 the Constitutional Court applied

European Community law as an interpretative tool of domestic law when it

stated that the interpretation based on competition rules governed by

the Treaty Establishing the European Community cannot be considered

unconstitutional, because that Treaty, just like the Treaty on European

Union, is based on the same values and principles on which the

constitutional order of the Czech Republic is based.

Starting

from the stated legal opinion, the authors of this dissenting opinion

find application of Art. 1 para. 2 of Protocol no. 1 to the Convention

for the Protection of Human Rights and Fundamental Freedoms to be key

for the reasoning of the Constitutional Court’s judgment in matter file

no. Pl. US 5/01, from the interpretative perspective which is given by

European standards contained in Community law..

Brno, 16 October 2001