2003/07/09 - Pl. ÚSD 5/03: Territorial Self-Government Unit

09 July 2003

HEADNOTE

According

to the starting thesis, on which the concept of self-government is

built, the foundation of a free state is a free municipality, then, in

terms of regional significance, at a higher level of the territorial

hierarchy a self-governing society of citizens, which, under the

Constitution, is a region. With this concept of public administration

built from the ground up, the following postulate must be immanent to

self-government, as an important element of a democratic state governed

on the rule of law: that a TSU must have a realistic possibility to

handle matters and issues of local significance, including those which

by their nature exceed the regional framework and which it handles in

its independent jurisdiction, on the basis of free discretion, where the

will of the people is exercised at the local and regional level in the

form of representative democracy and only limited in its specific

expression by answerability to the voter and on the basis of a statutory

and constitutional framework (Art. 101 par. 4 of the Constitution).

Thus, territorial self-governing units representing the territorial

society of citizens must have – through autonomous decision-making by

their representative bodies – the ability to freely choose how they will

manage the financial resources available to them for performing the

work of self-government. It is this management of one’s own property

independently, on one’s own account and own responsibility which is the

attribute of self-government. Thus, a necessary prerequisite for

effective performance of the functions of territorial self-government is

the existence of its own, and adequate, financial or property

resources.
 


 

CZECH REPUBLIC

CONSTITUTIONAL COURT

JUDGMENT


IN THE NAME OF THE CZECH REPUBLIC


The

Plenum of the Constitutional Court, consisting of JUDr. Vojtěch Cepl,

JUDr. Vladimír Čermák, JUDr. František Duchoň, JUDr. Vojen Güttler,

JUDr. Miloš Holeček, JUDr. Pavel Holländer, JUDr. Vladimír Jurka, JUDr.

Vladimír Klokočka, JUDr. Jiří Malenovský, JUDr. Jiří Mucha, JUDr.

Antonín Procházka, JUDr. Pavel Varvařovský, JUDr. Miloslav Výborný,

JUDr. Eliška Wagnerová and JUDr. Eva Zarembová ruled on a petition from a

group of 45 deputies of the Chamber of Deputies of the Parliament of

the Czech Republic seeking the annulment of § 1 par. 2 let. b), § 2 par.

2 second sentence, § 3, § 4 par. 2 let. b), § 5 par. 2 second sentence

and § 6 of Act no. 290/2002 Coll., on the Transfer of Certain Other

Things, Rights and Obligations of the Czech Republic to Regions and

Municipalities, Civic Associations in Physical Education and Sport and

on Related Amendments and Amending Act no. 157/2000 Coll., on the

Transfer of Certain Things, Rights and Obligations from the Czech

Republic, as amended by Act no. 10/2001 Coll., and by Act no. 20/1966

Coll., on Care for the Health of the People, as amended by later

regulations, as follows:
 

The

provisions of § 3 and § 6 of Act no. 290/2002 Coll., on the Transfer of

Certain Other Things, Rights and Obligations of the Czech Republic to

Regions and Municipalities, Civic Associations in Physical Education and

Sport and on Related Amendments and Amending Act no. 157/2000 Coll., on

the Transfer of Certain Things, Rights and Obligations from the Czech

Republic, as amended by Act no. 10/2001 Coll., and Act no. 20/1966

Coll., on Care for the Health of the People, as amended by later

regulations,
are annulled as of 31 December 2003.
 

The rest of the petition is denied.

 


REASONING


I.
 

On

24 February 2003 a group of 45 deputies of the Chamber of Deputies of

the Parliament of the CR filed with the Constitutional Court, under Art.

87 par. 1 let. a) of the Constitution of the Czech Republic (the

“Constitution”), a petition to annul § 1 par. 2 let. b), § 2 par. 2

second sentence, § 3, § 4 par. 2 let. b), § 5 par. 2 second sentence and

§ 6 of Act no. 290/2002 Coll., on the Transfer of Certain Other Things,

Rights and Obligations of the Czech Republic to Regions and

Municipalities, Civic Associations in Physical Education and Sport and

on Related Amendments and Amending Act no. 157/2000 Coll., on the

Transfer of Certain Things, Rights and Obligations from the Czech

Republic, as amended by Act no. 10/2001 Coll., and by Act no. 20/1966

Coll., on Care for the Health of the People, as amended by later

regulations, (the “Act” or “Act no. “290/2002 Coll.”).
 

After

recapitulating the individual provisions of the contested Act, the

petitioners allege in the reasoning of their petition that these

provisions, without giving the regions and municipalities the

opportunity to appropriately express their agreement or disagreement,

unilaterally determine that selected things, rights and obligations

previously belonging to the state shall be transferred to these

self-governing units, and at the same time determine that the defined

state-administered departments and state-funded organizations shall

become administered departments or funded organizations of the relevant

self-governing units. The petitioners charge that the Act does not

address such fundamental issues as the issue of payment of state

obligations arising until 31 December 2002, which are transferred to the

regions or municipalities as of 1 January 2003. It also does not

address the question of paying the obligations of state-funded

organizations which became regionally- or municipally-funded

organizations as of 1 January 2003; if such funded organizations were

dissolved their obligations would transfer to their organizer , thus,

after 1 January 2003 to the region or municipality (§ 27 par. 3 of Act

no. 250/2000 Coll., on budgetary rules for territorial budgets).

According to the petitioners, the Act thus impermissibly burdens the

financial position of territorial self-governing units (also referred to

as “TSU”s), which are independent legal entities, separate from the

state, and in which the state can interfere only for reasons of

protecting the law. In paying such obligations the regions will be

forced to use their own funds, and a situation will arise where the

self-governing units will pay out of funds intended for self-government

activities the obligations of the state or obligations of funded

organizations which arose when the state was their organizer. This may

have the undesirable consequence that considerably less money will be

expended for a TSU’s self-government activity than was originally

intended and would have been expended if the state had not transferred

its obligations or the obligations of its funded organizations to these

TSUs. In this regard the petitioners emphasize that for a period of 10

years a key part of the acquired property – real estate – can not be

used for a purpose other than the one for which it was used as of 1

January 2003. According to them, the situation also can not be resolved

on the basis of the legal opinion held by some state representatives,

the opinion that the state is a guarantor for the obligations of former

state-funded organizations which were created up until 31 December 2002.

There is a question whether, in cases where these organizations were

transformed into regionally- or municipally-funded organizations as of 1

January 2003, the state guarantee which existed under § 74 of Act no.

218/2000 Coll., on Budget Rules and Amending Certain Related Acts (the

Budget Rules) did not terminate. However, even if such a state guarantee

existed after that date, this would not solve the problem of

impermissible indebtedness by units of territorial self-government. If

the state, as guarantor, paid the obligations of a former state-funded

organization, the state would then have – in view of the legal

consequences of providing a guarantee – a subrogated claim against the

regionally-or municipally-funded organization, or directly against the

region or municipality, and the relative financial independence of these

self-governing units from the state, in particular the executive

branch, would essentially be denied, as it would depend on the will of

the state whether to exercise its subrogated claim against them or not.

According to the petitioners, such a situation is inconsistent with the

constitutional concept of self-government, as contained in Art. 99, Art.

100 par. l and Art. 8 of the Constitution. The petitioners emphasize

that part of the TSUs’ right to self-government is the right to

commensurate financial resources for the activities performed by these

units in the public interest, which the legislature entrusts to them.

This concept of the right to self-government also corresponds to Art. 3

par. 1 of the European Charter of Local Self-Government (the “Charter”),

which describes local self-government as not only the right, but also

the ability of local authorities, within the limits of the law, to

regulate and manage a substantial share of public affairs, under their

own responsibility and in the interests of the local population. One of

the prerequisites for the capability of a TSU to implements its

self-governing activities is adequate financial resources for them. It

is naturally up to the legislative power how it organizes the system of

taxes, fees and other income of the state and TSUs, but the resulting

system must ensure the long-term financial stability of these public law

entities. Otherwise the relative autonomy of these units would be an

empty concept.
 

As the

petitioners state, the transfer of rights and obligations from the state

to regions or municipalities by statute could be consistent with the

Constitution, if it were accompanied by a system of financial resources

for the tasks connected with the transferring property that would ensure

the long-term financial stability of the regions and municipalities

after the completed transfer. However, the legislature is transferring,

in particular to the regions, largely administered departments or funded

organizations, such as hospitals and other health-care facilities, that

are burdened by extensive debts. These debts not only can not be paid

by the new owners in a reasonable time, under the existing system of

financing, but, on the contrary, they can be expect to grow

relentlessly, at a rate which could seriously endanger the financial

stability of the regions. As evidence of the fact that the health care

financing system is not financially self-sufficient at the present time,

as well as the fact that a number of hospitals being transferred to the

regions have long-term debt, the petitioners proposed presenting a

report of the government or the Ministry of Health and an opinion from

the Association of Regions of the Czech Republic. The petitioners also

point out that not only does the contested legal framework result in

impermissible interference in the independence of self-governing units,

but there is also a risk of deterioration in the position of creditors

of these obligations, who entered into contractual relationships with

the state or a state-funded organization with the knowledge that their

debtor was the state, directly or indirectly, but as a result of the Act

the debtor becomes a different economic entity. They also point out

that Act no. 172/1991 Coll., on the Transfer of Certain Things from the

Czech Republic to Municipalities, which addressed a comparable problem,

the asset base of newly-created municipalities, determined what things

are transferred from state property to the municipalities without,

however, burdening the municipalities with obligations which arose

previously to the state or state organizations.
 

Finally,

referring to Art. 11 par. 1 of the Charter of Fundamental Rights and

Freedoms, in view of what has already been said about the transferred

property, the petitioners conclude that the right of the regions, as

owners of property to freely make decisions about their property is

considerably relativized, and, on the basis of a state decision,

rendered empty. In their opinion, there is also a question whether the

contested provisions do not violate the constitutional principle of

equality of property and freedom of ownership, because they force other

persons to own something, as when the Act went into effect it in fact

imposed ownership – the Act imposed the ownership of certain things on

the regions and put them in the position of debtor in certain private

law obligation relationships, which it certainly could not do to other

persons. It is precisely there that the petitioners see a serious

violation of the principle that the property rights of all owners have

the same content and enjoy the same protection. In addition to that

violation, there is also serious limitation of freedom of ownership, or

the constitutional postulate that property ownership is understood as a

right, not as an obligation, and obligations can only arise subsequently

from ownership. An obligation to own something can not very well be

imposed, and thus the region, as a subject of private law, lost the

right to decide whether to acquire certain things. For these reasons the

petitioners believe that this violated the right to self-government

guaranteed by Art. 8 and Art. 100 par. 1 of the Constitution, violated

the right to property guaranteed by Art. 11 par. l of the Charter of

Fundamental Rights and Freedoms, and violated the principles on the

basis of which the European Charter of Local Self-Government was passed,

and therefore they proposed that the Constitutional Court annul the

abovementioned provisions of the Act.  

 

The

Constitutional Court, in accordance with § 69 par. 1 of Act no.

182/1993 Coll., on the Constitutional Court, as amended by later

regulations, requested opinions from both houses of the Parliament of

the Czech Republic. The Chamber of Deputies and the Senate submitted

opinions on the petition.
 

In

accordance with § 49 par. 1 of Act no. 182/1993 Coll., opinions were

also requested from the Ministry of Health and the Association of

Regions of the Czech Republic.
 

The

opinion of the Ministry of Health states that passage of the contested

Act was the culmination of reform of public administration connected to

terminating of the activities of district offices and transferring their

jurisdiction to TSUs. As part of the implementation of this reform it

was also necessary to sort out state property which was managed by

state-administered departments and state organizations of a regional

nature for which district organizations functioned as founder or

organizer. Thus, this was not a transfer of the exercise of state

administration to TSUs, but a change of owner, and the related change of

the legal position of these state institutions. Government resolution

no. 765 of 25 July 2001 approved, for that purpose, the Schedule of

Legislative Preparations for the Second Phase of Reform of the Public

Administration, and the Ministry of Finance, working with the

appropriate ministries, was assigned to develop a draft Act on the

Transfer of State Property and on the Transfer of the Function of

Organizer from District Offices to State-Funded Organizations and

State-Administered Departments. Thus, as of 1 July 2002 the contested

Act went into effect, and on the basis of it, as of 1 January 2003,

state-funded organizations for which district offices performed the

function of organizer as of the decisive day, became regionally-funded

organizations. These organizations continued to bear all obligations

existing as of the decisive day, and also continued to bear the rights

and obligations from labor law relationships. As of the same day, all

rights and other property values of the state, which these organizations

had jurisdiction to manage, were transferred to the individual regions.

The change of organizer thus did not interrupt the activities of the

funded organizations, as they did not cease to exist; their legal status

was merely changed from state organizations to non-state organizations.

Therefore, no legal successors to them were created, and the

organizations continue to function, under a different organizer with the

same ID number and unchanged contractual and labor law relationships.
 

The

Ministry of Health, under § 10 of Act no. 2/1969 Coll., on

Establishment of Ministries and Other Central bodies of State

Administration of the Czech Socialist Republic, as amended by later

regulations, and under Act no. 20/1966 Coll., on Care for the Health of

the People, as amended by later regulations, primarily handles issues in

the area of providing health care, in accordance with the needs of the

society, and lays out the main directions in the development of health

care. Under the applicable legal framework [Act no. 218/2000 Coll., as

amended by later regulations; Act no. 320/2001 Coll., on Financial

Inspection in Public Administration and Amending Certain Acts (the

Financial Inspection Act), as amended by later regulations; Act no.

147/2000 Coll., on District Offices, as amended by Act no. 320/2001

Coll.], the Ministry of Health is not and was not authorized to address

the issue of financing, or in any other way interfere in the management

of health care facilities if it is not their organizer. The management

of state health care facilities, as funded organizations, is governed by

generally valid legal regulations which, until the end of 2002 also

applied to facilities in the jurisdiction of district offices. When Act

no. 218/2000 Coll. went into effect, district offices and the entities

they organized and managed became part of the relevant budget chapter –

380 – in the jurisdiction of the Ministry of Finance. In view of that,

the Ministry of Health states in its opinion that it can not bear

responsibility for the individual particular results of management of

health care facilities in the jurisdiction of other organizers.
 

The

opinion from the Association of Regions of the Czech Republic of 22 May

2003 indicates that the Association agrees with the petition, and

confirms the fact that the debts of health care facilities under the

existing health care financing system can not be paid by the regions in

the foreseeable future. To pay these debts, the regions would have to

use funds intended for financing other obligations imposed on them by

law, for example in the areas of education, transportation, culture,

environment, social matters, etc.. The failure to address the problems

in health care, long underestimated, could, in the near future,

seriously endanger the financial stability of the regions or the

availability of health care.
 

In

view of the fact that the petitioners emphasize the problem of

obligations in their petition primarily in connection with the

transferring health care facilities, the Constitutional Court also

requested the “Government Report on the Indebtedness of state Hospitals,

on Addressing these Debts and the Legal Arrangements for the Transfer

of Hospitals to the Regions of 5 December 2002, which the government

discussed on 5 December 2002, and the Chamber of Deputies took

cognizance of in its 8th session on 10 December 2002. This report, after

the introductory description of changes brought by Act no.290/2002

Coll., says, among other things, that “the question of the position of

health care facilities was to have been addressed by Act no. 219/2000

Coll., on the Property of the Czech Republic and Its Functioning in

Legal Relationships, which did not happen. There were long discussions,

in connection with the financial incapacity of hospitals, on the future

legal position of health care facilities, primarily about whether health

care facilities will be state or non-state facilities. In the end the

alternative was chosen of so-called funded organizations, as well as

‘health care facilities pending special legal regulation,’ which led to

limiting any organizer positions. The indebtedness of in-patient health

care facilities, whose organizers is a district offices is not a problem

which would arise only at the point of transfer to a region. Some

hospitals have been, in the aggregate, at a certain level of

indebtedness during the entire period of their existence in the system

of payments from health insurance funding. At individual stages there

were attempts to solve this situation, e.g. in 1995 there was a partial

change of the manner [of payment] from health insurance companies by

shifting to payment by a flat fee, which was constructed at a particular

reference period in 1997, and the simultaneous provision of credit to

several large hospitals and individual health insurance companies, most

recently in 1997, with the so-called ‘uniform debt clearance.’ A

comprehensive program was implemented with a two year delay, which

responded to the oldest overdue obligations of health care facilities

which met certain criteria. The source of this program was partial

limitation of investment development proposed in the budget for the

relevant year. With the general belief and certainty that it would not

be possible to significantly increase funds from GDP for health care,

proposals to change the financing of health care to a greater or lesser

degree were repeatedly submitted in the past . Most of them were not

implemented.” The report further states that “the state budget for 2002

and the proposed budget for 2003 do not contain funds for balancing the

balance sheets of individual transferred hospitals. Therefore, it is

necessary to proceed according to Act no. 290/2002 Coll., which

specifies the plan for these transfer, with the provision that there are

considerable differences in the financial management of individual

health care facilities, where the previous organizer, which had direct

influence on the running and thereby the financial management of

hospitals, played an essential role.” The report states that the value

of the transferred property is considerably greater than the existing

level of indebtedness; as of 30 September 2002 these facilities had

receivables of approximately 3.1 billion crowns, and liabilities of 3.8

billion crowns. The value of long-term assets is about 42.2 billion

crowns, which is being transferred to the regions. The report does not

contain a specific solution to the problem of debts burdening the

transferred health care facilities. It is evident from its appendices,

as the text states, that there are considerable differences in the

financial management of individual health care facilities. Reflecting

the situation in the individual regions, the liabilities of hospitals

(after subtracting receivables) are the following: the capital city of

Prague – CZK 6,875,000, Central Bohemian Region – CZK 213,013,000, South

Bohemian Region – CZK 60,001,000, Pilsen Region – CZK 47,579,000,

Karlovy Vary Region – CZK 87,100,000, Ústí nad Labem Region – CZK

131,186,000, Liberec Region – CZK 13,741,000, Hradec Králové Region –

CZK 151,312,000, Pardubice Region – CZK 100,951,000, Vysočina Region –

CZK 88,708,000, South Moravian Region – CZK 66,852,000, Olomouc Region –

CZK 0, Zlín Region – CZK 146,909,000, Moravia-Silesia Region – CZK

154,600,000.
 


II.
 

In

proceedings to annul statutes and other legal regulations the

Constitutional Court reviews the content of a statute according to

criteria contained in § 68 par. 2 of Act no. 182/1993 Coll., as amended

by later regulations, that is, in terms of its consistency with

constitutional acts. Before it turned to reviewing the petition on the

merits, it also reviewed, in accordance with its obligation arising from

that provision (in fine), whether the formal conditions for passing a

statute were met and the contested Act was passed within the bounds of

constitutionally provided jurisdiction and in a constitutionally

prescribed manner.
 

In that

regard, the Constitutional Court determined from the stenographic record

of the 43rd and 47th sessions of the Chamber of Deputies in the 3rd

term that the Chamber of Deputies approved Act no. 290/2002 Coll. after

proper discussion at its 47th session held on 27 March 2002 (by

resolution no. 2208), when, out of the 159 deputies present, 85 voted in

favor of the bill and 69 against. The stenographic record of the 17the

session of the Senate in the 3rd term showed that on 14 May 2002

(resolution no. 384), out of 64 senators present, 55 voted in favor of

the bill, as amended by amending proposals passed by the Senate, and 2

senators were against it. The Chamber of Deputies then voted on the bill

returned by the Senate (as amended by its amending proposals) at its

51st session on 13 June 2002; out of 188 deputies present, 91 were in

favor and 80 were against. Thus, this vote did not pass the bill as

amended by the Senate. In subsequent voting on the bill, in accordance

with Art. 47 par. 3 of the Constitution, this time the version which was

forwarded to the Senate, out of the same number of legislators present,

108 were in favor and 65 were against the proposal (resolution no.

2317). Act no. 290/2002 Coll. was then signed by the appropriate

constitutionally designated persons and duly published in part 106 of

the Collection of Laws, which was distributed on 28 June 2002. The Act

went into effect on 1 July 2002.
 

Based

on these findings, we can state that Act no. 290/2002 Coll. was duly

passed and issued within the bounds of constitutionally provided

jurisdiction and in a constitutionally prescribed manner (§ 68 par. 2 of

Act no. 182/1993 Coll., as amended by later regulations), as a result

of which the petition is eligible for review on the merits, in terms of

evaluating its consistency with constitutional acts, or the

constitutional order [Art. 83 and Art. 87 par. 1 let. a) of the

Constitution].
 

(For

thoroughness we must add that Act no. 290/2002 Coll. was amended by Act

no. 150/2003 Coll., which went into effect on 23 May 2003; however, this

amendment did not affect any of the provisions contested by the

petition from the group of deputies).
 


III.
 

Act

no. 290/2002 Coll. is a transformational statute, which was passed as

part of implementing phase II of the reform of public administration. On

the basis of § 1 par. 1, as of 1 January 2003 there was a transfer from

the property of the Czech Republic to the property of the regions of

things which, as of 31 December 2002 were under the management

jurisdiction of state-administered departments and state-funded

organizations, where the district offices performed the function of

organizer as of 31 December 2002. Also as of 1 January 2003, these

state-administered departments and state-funded organizations became, by

operation of law, administered departments and funded organizations of

the appropriate regions (§ 2 par. 1 and 2 of Act no. 290/2002 Coll.). As

of 1 January 2003 there was also a transfer to the regions of, among

other things, obligations of the state for which, as of 31 December

2002, the state-administered departments performed tasks under Act no.

219/2000 Coll. (on the Property of the Czech Republic and Its

Functioning in Legal Relationships ); the regionally-funded

organizations created by the Act from state-funded organizations

continued ex lege to bear the obligations, including rights and

obligations from labor law relationships, which had, until that date,

been certain named state-funded organizations [§ 1 par. 2 let. b), § 2

par. 2 of Act no. 290/2002 Coll.]. A similar transfer also occurred in

relation to municipalities [§ 4 par. 2 let. b), § 5 par. 1, par. 2 of

Act no. 290/2002 Coll.].
 

According

to the petitioners, these provisions indirectly lead to impermissible

interference in the constitutional right to territorial self-government,

they violate constitutionally guaranteed relationships between the

state and TSUs, impermissibly interfere in the private law position of

third parties, and also violate the right to property guaranteed by the

Charter of Fundamental Rights and Freedoms. The fundamental reason which

led the petitioners to file their petition – as they expressly state –

is the fact that, as a consequence of the Act, obligations previously

belonging to the state are transferred to the regions, municipalities

and organizations funded by them, and the state is thus impermissibly

solving its own indebtedness and that of its organizations, particularly

in the area of health care.
 

The

Constitutional Court first reviewed § 1 par. 2 let. b), § 2 par. 2

second sentence, § 4 par. 2 let. b) and § 5 par. 2 second sentence of

the Act.
 

In its previous

decision-making practice the Constitutional Court made clear that it

considers local self-government to be an irreplaceable component of

democracy, and repeatedly stated that local self-government is an

expression of the right and ability of local bodies to regulate and

manage part of public affairs, within the limits of the law, under their

own responsibility, and in the interests of the local population

(judgments file no. Pl. ÚS 1/96, file no. Pl. ÚS 17/98).
 

The

Constitutional Court addressed the statutory expression of reform of

public administration related to decentralization and de-concentration

of it, connected to the establishment of regions, expanding the exercise

of state power in the transferred jurisdiction of regions and

municipalities and the termination of district offices in judgment file

no. Pl. ÚS 34/02, which denied a petition from a group of Senators of

the Parliament of the Czech Republic seeking the annulment of points 2,

5, 6, 7, 8, 9 and 11 Art. CXVII of Act no. 320/2002 Coll., on the

Amendment and Annulment of Certain Acts in Connection with Terminating

the Activities of District Offices. In the reasoning of that judgment

the Constitutional Court stated that the constitutional guarantee of

territorial self-government under the Constitution is laconic. The

constitutional establishes the status of TSUs as subjects of law, and

assumes that self-governing entities have their own property and manage

themselves with their own budget (Art. 101 par. 3 of the Constitution).

It also expressly assumes that TSUs share in the exercise of state power

on the basis of statutory authorization (Art. 105 of the Constitution).

The last-cited judgment also emphasized that the Czech constitutional

standard of territorial self-government is supplemented and enriched by

the standard which arises from the international obligations of the

Czech Republic, namely the Charter of Local Self-Government, agreed on

15 October 1985, which entered into effect for the Czech Republic on 1

September 1999 by publication in the Czech Republic as no. 181/1999

Coll., with the provision that the rights guaranteed by the Charter of

Local Self-Government are a framework. The Charter itself, in a number

of its provisions, assumes the existence of a detailed domestic legal

framework, and does not guarantee complete freedom of territorial

self-government. Therefore, statues or other regulations may, according

to the choosing and traditions of the parties, define in more detail the

content of matters administered by territorial self-government,

including those which the self-government has an obligation to pursue,

an its organization, and also to set the framework for financial

management, allocate assets and financial resources; nevertheless, as

regards financial resources, Art. 9 par. 1 of the Charter provides that

local authorities shall be entitled, within national economic policy, to

adequate financial resources of their own, of which they may dispose

freely within the framework of their powers, and these shall be

commensurate with the responsibilities provided for by the constitution

and the law (Art. 9 par. 2 of the Charter). In the cited judgment the

Constitutional Court stated that the framework for financing TSUs (just

like the definition of their roles) may not, while maintaining sound

finances, lead to their financial collapse. (It also stated that

therefore, in light of the Charter and of the Constitution, the view of

authoritative delimitation and the functioning of delimited employees of

the terminated district offices within the framework of regions,

authorized cities and municipalities must depend on the manner of

financing the exercise of transferred jurisdiction by the state, with

the conclusion that insufficient financing of the exercise of state

power in transferred jurisdiction endangers the very existence of the

functions of territorial self-government). In view of the material

reviewed, one can draw on these basic arguments, in the present matter.
 

According

to the starting thesis, on which the concept of self-government is

built, the foundation of a free state is a free municipality, then, in

terms of regional significance, at a higher level of the territorial

hierarchy a self-governing society of citizens, which, under the

Constitution, is a region. With this concept of public administration

built from the ground up, the following postulate must be immanent to

self-government, as an important element of a democratic state governed

on the rule of law: that a TSU must have a realistic possibility to

handle matters and issues of local significance, including those which

by their nature exceed the regional framework and which it handles in

its independent jurisdiction, on the basis of free discretion, where the

will of the people is exercised at the local and regional level in the

form of representative democracy and only limited in its specific

expression by answerability to the voter and on the basis of a statutory

and constitutional framework (Art. 101 par. 4 of the Constitution).

Thus, territorial self-governing units representing the territorial

society of citizens must have – through autonomous decision-making by

their representative bodies – the ability to freely choose how they will

manage the financial resources available to them for performing the

work of self-government. It is this management of one’s own property

independently, on one’s own account and own responsibility which is the

attribute of self-government. Thus, a necessary prerequisite for

effective performance of the functions of territorial self-government is

the existence of its own, and adequate, financial or property

resources.
 

In the area of

these issues one must keep in mind the condition that these

organizations, in considerable part health care facilities, are in. Most

of these facilities – as the opinion from the Association of Regions of

the Czech Republic also indicates – have not inconsiderable, in

individual cases reaching as high as tens to hundreds of millions of

crowns, which can markedly affect the budget of the territorial

self-governing unit, particularly where there is a greater number of

such debt-burdened health care facilities in a particular TSU. Act no.

250/2000 Coll., on Budget Rules for Territorial Budgets, as amended by

later regulations, does provide rules for management of financial

resources, the future receipt of which is provided for TSUs by other

statutes – in particular by Act no. 243/2000 Coll., on Budgetary

Allocation of Revenues from Certain Taxes to Territorial Self-Governing

Units and Certain State Funds (the Act on Budgetary Allocation of

Taxes), as amended by later regulations – but that changes nothing about

the fact that at the very beginning of these entities’ activities they

are weighed down by a burden, which was caused by the activities of the

state or its organizations, and its is thus evident that this fact can

markedly affect self-governing activities and present territorial

self-governing units from expending financial resources intended for

their own self-governing activities in such a way as to serve the

expected purpose (Art. 101 par. 3 of the Constitution). Nonetheless, one

can not question the justification for the step where the state

transferred certain property to TSUs, as part of the reform of public

administration, as the reasons for it come from the historically

established belief on the basis of which it is those who are affected by

matters tied to property, and whom the property directly serves, are

capable, and by the nature of the matter also willing and motivated, to

manage it with due care, often better than the central state power, and

in a much more efficient, effective manner. Decentralization of tasks

and the related transfer of property is also not something

constitutionally unacceptable. However, the connection of this step to

the subsequent transfer or further continuation of obligations tied to

this property assumes a further solution, in connection with the system

of taxes, subsidies and similar payments. The state should not – without

anything further – rid itself of liability for debts which arose during

the period when it managed the transferred property and which are a

result of the previous loss-making application of property rights,

perhaps even failure to observe legal regulations [§ 53 et seq. of Act

no. 218/2000 Coll., on Budget Rules and Amending Certain Related Acts

(the Budget Rules)]. It certainly should not do so in relation to

entities which are to also fulfill its responsibilities consisting of

securing the fundamental rights arising from Art. 31 of the Charter of

Fundamental Rights and Freedoms, whose observance the state itself

guarantees. Such behavior by the sovereign power raises questions about

abuse of state power to the detriment of TSUs. Although this may be a

diametrically opposite situation, in this context a reference also comes

to mind to the premise, expressed on a horizontal level in private law

and generally fair, that the acquirer of things – including in cases of

transfer without compensation – is fundamentally responsible for debts

tied to them (§ 500 par. 2 of the Civil Code), including under the

argument a minori ad maius.
 

We

can agree with the Senate’s opinion that the problem of the deficit

from the previous management must be addressed comprehensively, but if

the indebtedness of the property in question is not to continue, there

must be an effort by the state to remove this undesirable situation. If

it were to continue, it could endanger both the performance of

self-government functions and the position of creditors, whose rights

should be secured in a state governed by the rule of law as a matter of

course.
 

However,

intervention by the Constitutional Court consisting of annulling the

abovementioned provisions would not by itself remove this undesirable

situation. Under § 71 par. 4 of Act no. 182/1993 Coll., on the

Constitutional Court, which regulates the legal effects of judgments of

annulment by the Constitutional Court (and by which the Constitutional

Court is bound under Art. 88 par. 2 of the Constitution), the rights and

obligations from legal relationships arising before a legal regulation

was annulled remain untouched. Thus, the Constitutional Court had to

take into consideration that, as indicated above, the contested Act is a

transformational, one-time event. The legal consequences connected to

the reviewed statutory provisions and expected by this Act arose ex lege

as of 1 January 2003, and the capacity of these norms to create

consequences in the future is thus fully exhausted. A favorable judgment

from the Constitutional Court, having effects ex nunc, would thus no

longer be able to change anything about the existing situation,

including in view of § 71 par. 4 of Act no. 182/1993 Coll.. For that

reason, the Constitutional Court had no choice but to deny that part of

the petition.
 


IV.
 

However,

in the opinion of the Constitutional Court, the situation is somewhat

different when reviewing § 3 and § 6 of Act no. 290/2002 Coll., which

limit the new owner (municipality, region) in relation to real estate,

for a period of ten years from the day they are acquired, to use only

for the purpose for which it was used as of the day of transfer, with

the provision that if, before the expiration of that period, they become

unnecessary for that purpose for the municipality (region) based on

local expectations and customs and it does not use them for social,

educational or health care purposes, they must be offered for transfer

to the state without compensation.
 

As

is evident from the construction of this legal framework, as well as

from the background report for the draft of Act no. 290/2002 Coll., this

limitation aims to reflect the need to preserve, at least for a certain

time, the use of the acquired real estate by the self-governing units

for purposes for which they served until the day of the transfer, or to

enable them to be used only for purposes serving other, definitively

listed public interests.
 

In

the Constitutional Court’s opinion, this limitation must also be viewed

(apart from the conclusions given below) in context with the

conclusions given previously and also in terms of Art. 11 par. 3 of the

Charter of Fundamental Rights and Freedoms, under which ownership

entails obligations and may not be misused to the detriment of the

rights of others or in conflict with legally protected public interests.


 

The imposition of a

limitation on property rights, in this case provided by statute, with a

precise, concretely defined and certain definition of the purpose of

that limitation in the abovementioned public interest does not show

elements of arbitrariness, and in view of the arguments on which it is

based, does not meet the elements of unconstitutionality (in contrast to

the situation in the matter under file no. Pl. ÚS 1/02, the judgment

published as no. 404/2002 Coll.). The conclusion thus reached must be

understood in connection with the on-going transformation implemented as

part of the reform of public administration. Within this process one

can ascribe to the public interest the capability of being, at a general

level, permissible, reasonably justifiable grounds for limiting the

property right of territorial self-governing units.
 

The

decision-making practice of the Constitutional Court indicates that

fundamental rights and freedoms may be limited in the event of their

conflict with another constitutionally protected value which does not

have the nature of a fundamental right or freedom, including in the

event of an urgent public interest. The limitation considered must then

be reviewed in terms of the principle of proportionality – see judgments

of the Constitutional Court in the matters file no. Pl. ÚS 4/94, file

no. Pl. ÚS 15/96, file no. Pl. ÚS 25/97, file no. Pl. ÚS 16/98, and file

no. Pl. ÚS 3/02 – of which judgment file no. Pl. ÚS 15/96 also

concerned the constitutionality of limiting the property right of a

self-governing unit, and the matter now under consideration can draw on

the conclusions reached in that judgment.
 

Thus

it must be said that the present limitation of property rights enables

reaching the pursued aim, that of observing the legitimate public

interest in the existence of social, education and health care

facilities (the criterion of suitability, or the principle of capability

to fulfill the purpose). The criterion of necessity, as another

component of the principle of proportionality, then arises from the very

need to continually preserve (for a certain period of time) the

existence of these facilities, including in view of the fundamental

right enshrined in Art. 31 of the Charter of Fundamental Rights and

Freedoms. The restriction also does not appear disproportionate when

evaluating the gravity of both protected values, and in view of the

generally acceptable and share hierarchy of values it can not be

absolutely rejected in the given context. However, its limitation in

time should not be determined only by a relatively short transitional

time period, in which the necessary experience is to be acquired which

permits responsible handling of the property in the free discretion of

the owner, i.e. the relevant TSU. However, the detriment to a

fundamental right guaranteed by Art. 11 par. 1 of the Charter of

Fundamental Rights and Freedoms limited by a ten year period, appears

obvious disproportionate in relation to the intended aim, as it

restricts this right so much that its negative consequences – because of

its “temporariness,” which is excessively long in terms of time –

exceed the positive points, the pursuit of a public interest. Thus, from

the viewpoint of the principle of proportionality, the contested

provisions obviously do not meet the criterion of proportionality in the

narrower sense. In relation to the constitutional requirement of

preserving the essence and significance of the property rights being

limited (Art. 4 par. 4 of the Charter of Fundamental Rights and

Freedoms), in the present matter, out of the basic triad of property

rights (ius possidendi, ius utendi et ius fruendi, ius disponendi) the

right to use and dispose of property, in the sense of transferring it to

another, is affected for a period of ten years; with reference to the

foregoing, the solution adopted, in terms of its temporal aspect, can

not be considered to correspond to the principle of proportionality, and

thus shows elements of unconstitutionality. In this regard, the legal

framework in § 3 and § 6 of Act no. 290/2002 Coll. exceeds the bounds

and aspects of permissible interference in property rights, as the

ten-year period of the limitation does not appear appropriate in the

given context, in view of all the aspects of the issue being considered.
 

Thus,

on the one hand, in relation to the contested (tempoarary) limitation

of property rights, it is not possible to overlook its precisely set,

certain, equal and thus constitutionally acceptable conditions (Art. 11

par. 1 of the Charter of Fundamental Rights and Freedoms, Art. 1 par. 1

of the Constitution); however, on the other hand, the Constitutional

Court believes that the requirements arising from Art. 4 par. 4 of the

Charter of Fundamental Rights and Freedoms can be met only by a legal

framework which would establish this limitation only in the absolutely

necessary extent of time, which can be understood as only a minimal, and

clearly prima facie “transitional” period.
 

The

Constitutional Court thus concluded that the limitation of property

rights in § 3 and § 6 of Act no. 290/2002 Coll., in relation to all the

components required by the principle of proportionality, does not meet

the conditions for limiting a fundamental right, and therefore it

annulled these provisions due to inconsistency with Art. 4 par. 4 in

connection with Art. 11 par. 1 of the Charter of Fundamental Rights and

Freedoms (§ 70 par. 1 of Act no. 182/1993 Coll., as amended by later

regulations). However, it postponed enforceability of this part of the

judgment until 31 December 2003, so that the Parliament of the Czech

Republic would have sufficient time to set new deadlines.
 

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

Brno, 9 July 2003