15 February 2007

HEADNOTES

To

stray from the restricted field reserved for proposed amendments might

be of such a nature as to overstep the actual content of the bill in

question, or of such a nature as to constitute a blatant departure from

the bill’s subject matter.  The first type of proposed amendment has

long been designated in American doctrine as „legislative riders“, the

use of which in the U.S. is often and heatedly debated and which,

although considered as undesirable, is nonetheless still considered to

be a constitutionally-conforming form of proposed amendment.  It is

necessary to distinguish this first type from a second type, called

„wild riders“.  The second type represents a transgression of the

criteria of the test applied on the basis of the „germaneness“ rule,

that is, the rule of the close relation.  In other words, it tests the

issue as to whether, in a concrete case, a proposed amendment is proper

or is a proposal which has, in the Czech milieu, been given the

designation, „limpet“.  In this case, the technique of proposing

amendments attaches to a bill the legislative scheme from an entirely

different statute, with an unconnected legislative pattern.

The Assembly of Deputies did not recognize that the introduced

amendment cannot be considered as such in the substantive sense.  A

constitutionally-conforming interpretation of the provisions governing

the right to introduce amendments to a debated bill requires that the

proposed amendment in actual fact merely modify the submitted legal

scheme, that is in conformity with the requirement of the „rule of close

relation“, according to which the proposed amendment must concern the

same subject as the bill which is under consideration in the legislative

process, if the given proposed amendment is not to stray from the field

reserved for proposed amendments in the form of a blatant departure

from the debated bill’s subject matter.  In the Constitutional Court’s

view, this corresponds to a constitutionally conforming interpretation

of the first part of § 63 para. 1 of the Standing Orders of the Assembly

of Deputies.  In the Constitutional Court’s view this requirement has

not been met in the given case, however.  In consequence, the principle

of the separation of powers, among others, was violated, with

consequences for the principle of the formation of harmonious,

transparent, and predictable law, which the Constitutional Court has

already previously linked to the attributes of the democratic, law-based

state.  In addition, the institute of legislative initiative under Art.

41 of the Constitution of the Czech Republic was circumvented, as was

the Government’s right, under Art. 44 of the Constitution of the Czech

Republic, to give its view on bills.

Following

consideration of the content and objective, both of the original bill

and the proposed amendment at issue, the Constitutional Court came to

the conclusion that, in terms of content and objective, they are

fundamentally different.  On that ground alone it was necessary to find

that the proposed amendment at issue strays from the restricted field

reserved for proposed amendments.  In other words, it is evident that it

was a „proposed amendment“ which could only be considered as such in

the formal sense not, however, in the material sense.

In a substantive law-based state, a statute in the formal sense cannot

be understood as a mere repository of a wide variety of changes made

throughout the legal order.  On the contrary, the substantive conception

of the law-based state requires that a statute be, both in terms of

form and substance, a predictable, consistent source of law.

The requirement that the law be predictable, which is a component of

the principle of the law-based state, ceases to be satisfied in the

moment when an amendment to a statute is contained in an entirely

different statute, as understood in the formal sense, the content of

which is in no way connected to the amended statute.  Without employing

the instruments of information technology, it is thus becoming entirely

impossible for the addressees of legal norms to orient themselves in the

legal order.  At the same time, it is evident that without the

possibility to make use of these systems, people cannot today acquaint

themselves with the legal order of the Czech Republic, and this makes

problematic the application of the general legal principle, ignorance of

the law is no excuse.  In this way, law becomes for its addressees

entirely unpredictable.



CZECH REPUBLIC

CONSTITUTIONAL COURT

JUDGMENT


IN THE NAME OF THE CZECH REPUBLIC

 


On

15 February 2007, the Constitutional Court Plenum, composed of judges

František Duchoň, Vojen Güttler, Pavel Holländer, Ivana Janů, Vladimír

Kůrka, Dagmar Lastovecká, Jiří Mucha, Jan Musil, Jiří Nykodým, Pavel

Rychetský, Miloslav Výborný, Eliška Wagnerová (judge-rapporteur) ane

Michaela Židlická, on the petition of a group of Senators of the Senate

of the Parliament of the Czech Republic, represented by an attorney,

JUDr. K. Š., proposing the annulment of a portion of Act No. 319/2001

Coll., which became a part of its transitional provisions on the

strength of Act No. 443/2006 Sb., in eventum proposing the annulment of

Part Two of Act No. 443/2006 Coll., specifically its Art. II and Art.

III., with the participation of the parties to the proceeding, the

Assembly of Deputies of the Parliament of the Czech Republic and the

Senate of the Parliament of the Czech Republic, decided as follows:

Part

Two, specifically Art. II and Art. III., of Act No. 443/2006 Coll.,

which amends Act No. 319/2001 Coll., which amends Act No. No. 21/1992

Coll., on Banks, as subsequently amended, is annulled as of the day this

Judgment is published in the Collection of Laws.

 


REASONING


I.
I. A) Summary of the Petition
 

1.

A group of 23 Senators of the Senate of the Parliament of the Czech

Republic by its petition which was duly submitted (cf. Art. 87 para. 1,

lit. a) of the Constitution of the Czech Republic and § 64 para. 1, lit.

b) of Act No. 182/1993 Coll., on the Constitutional Court, as

subsequently amended (hereinafter „Act on the Constitutional Court“)) on

12 October 2006, sought the annulment of a portion of the transitional

provisions of the above-mentioned Act No. 319/2001 Coll., which, on the

strength of Act, No. 443/2006 Coll., became a part of Act No. 21/1992

Coll., on Banks.
 

2. By a

submission delivered to the Constitutional Court on 10 January 2007, the

petitioners elaborated upon the request in their petition as follows: 

the petitioners propose that the Constitutional Court of the Czech

Republic annul, due to their conflict with the constitutional order of

the Czech Republic, the contested provisions cited in Art. I of their

submission, that is, that portion of Act No. 319/2001 Coll. which became

a part of its transitional provisions on the strength of Act No.

443/2006 Coll., in eventum they propose that it annul Part Two of Act

No. 443/2006 Coll., specifically Art. II and Art. III.
 

3.

The essence of the objections are summarized by the petitioners

themselves such that the Parliament of the Czech Republic has exceeded

its authority and that the contested provisions, due to non-genuine

retroactivity (albeit the petitioner subsequently objects rather that it

is a case of genuine retroactivity), may constitute a violation of Art.

1 para. 1 and Art. 2 paras. 1 and 3 of the Constitution of the Czech

Republic.  Further, they may in consequence result in the ownership and

property rights and the right to judicial protection, that is Art. 11

and Art. 36 of the Charter of Fundamental Rights and Basic Freedoms

(hereinafter „the Charter“) also being violated; they may as well result

in a violation of the principle, forming one of the maxims of the

substantive law-based state (deduced by interpretation of Art. 1 and

Art. 2 of the Constitution of the Czech Republic, as well as of Arts. 1

and 4 of the Charter), that legal enactments must be of a due and proper

nature and clear; they may also violate the prohibition of arbitrary

conduct in the legislative procedure (deduced from the provisions of

Art. 1 and Art. 2 para. 3 of the Constitution of the Czech Republic and

Art. 2 para. 2 of the Charter, as well as from Art. 37 para. 2, Art. 41

and Art. 44 of the Constitution of the Czech Republic).  Last but not

least, in the petitioners‘ view the contested provisions are in conflict

with Directive 94/19/EC of the European Parliament and of the Council

on deposit-guarantee schemes, in consequence of which are violated the

international obligations of the Czech Republic arising from its

membership in the EU and thereby also Art. 1 para. 2 of the Constitution

of the Czech Republic.
 

4.

According to the petitioners, the contested provisions of the

above-mentioned Act and the legislature’s intent are in conflict with

the principle of the separation of powers, thus, in conflict with one of

the foundational rules of the democratic, law-based state, as the Czech

Republic is defined in Art. 1 para. 1 and in Art. 2 para. 1 of the

Constitution of the Czech Republic, where it is laid down that the

people exercise all state authority through the legislative, executive,

and judicial bodies.  According to the Constitution of the Czech

Republic, the legislative power is vested in the Parliament of the Czech

Republic, whereas a statute is a normative legal act which binds an

undetermined class of subjects and regulates situations which will come

to pass in the future.  The case of the contested provision was a

situation which had occurred in the past and concerned particularly

known subjects.  In this context the petitioners referred to the

judgments (No. Pl. US 24/04 or No. Pl. US 55/2000), in which the

Constitutional Court declared:  „Among the foundational principles of

the material law-based state belongs the maxim that legal rules be of a

general character (the requirement of the generality of statutes).  The

general character of the content is an ideal, typical, and essential

characteristic of a statute (alternatively, of legal enactments in

general).“  In its decision No. Pl. 12/02, the Constitutional Court

stated, among other things, of a statute which governs a singular case: 

„It departs also from one of the fundamental substantive

characteristics of the concept of a statute, which is its general

character.  Let us recall that the requirement that a statute be of a

general character is an important element of the principle of the rule

of law and thereby also of the law-based state . . . .  A separate

argument against statutes regulating singular cases is the principle of

the separation of powers, that is, the separation of the legislative,

executive and judicial powers in a democratic law-based state.” 

According to the petitioners, in this case the Parliament of the Czech

Republic made an exception to the rule for the specific cases of the

clients of banks granted a preference, alternatively for one particular

subject - the Czech Insurance Company, a.s. (Art. III, point 4 of the

contested Act).  And if the Parliament of the Czech Republic had already

made an exception to this rule in a prior instance, it did so in a

legislatively purer manner, without providing preferences to specific

individual persons, without qualifying as further examples of the

impugned unconstitutional steps, and at a time when this exception was

socially and morally justifiable (the protection of bank customers as

consumers in the period of becoming accustomed to a market setting).
 

5.

According to the petitioners, by adopting the contested provisions, the

Parliament of the Czech Republic also violated Art. 2 para. 3 of the

Constitution of the Czech Republic, as it exerted its power in a manner

which neither a statute nor the Constitution of the Czech Republic

provides for or permits; the Parliament of the Czech Republic acted

beyond the bounds of its authority laid down in the Second Chapter of

the Constitution of the Czech Republic.
 

6.

In the petitioners‘ view, the contested provisions have

unconstitutional retroactive effects and, as such, are in conflict with

the principle of the democratic law-based state, more precisely with the

principle of the protection of citizens confidence in law and with the

principle of the prohibition of genuine retroactivity, that is, with

Art. 1 of the Constitution of the Czech Republic, as the contested

provisions modify the legal consequences which came about, in accordance

with law, long before the day on which the contested provisions came

into effect.  The legislature even amended transitional (intertemporal)

provisions to one of the preceding amendments to Act No. 21/1992 Coll.,

on Banks (hereinafter „the Act on Banks“), the effects of which were

meant to be exhausted by the latter amendment.  If the legislature

intended to resolve the problem of the transitional provisions to Act

No. 319/2001 Coll., in the petitioners‘ view it should have done so at

the time it was adopted.  Since that statute was adopted, the

legislature has carried out several further amendments to the Act on

Banks, each with its own transitional provisions, and now is intervening

retroactively into the transitional provisions several amendments

back.  The relations of the depositors of Kreditní banka Plzeň, Plzeňská

banka and Union banka toward these banks, alternatively toward the

Depositor Insurance Fund (hereinafter „Fund“),came into being pursuant

to the Act on Banking in its current wording.  In accordance with § 41d

of the Act on Banking, a claim to the payment of compensation comes into

being on the day that the Fund receives a written notification from the

Czech National Bank informing it of a bank’s inability to meet its

obligations toward entitled persons, or in consequence of the receipt of

an analogous written notification relating to the branch of a foreign

bank.  Such notification must be sent within a relatively short

time-frame, namely within 21 days of ascertaining that the bank is not

capable of meeting its obligations.  Thus, in the petitioners‘ view, the

relations arising from deposit insurance in relation to the three cited

bankrupt banks, alternatively to the Fund, demonstrably came into being

in May, 2003 at the very latest (the bankruptcy of Union banka occurred

on 29 May 2003, the bankruptcy of the two other banks was declared

earlier).  The petitioners also referred to the decision of the

Constitutional Court, No. Pl. US 33/01, according to which “genuine

retroactivity has no place in a law-based state in situations where the

legislature already could have ‘had its say’, but did not do so.“  In

the petitioners‘ view, the contested provisions expand the class of

entitled persons, change the procedure, and re-open relations after they

had already been resolved by statute.  The enactment allows to come

into being relations between newly-defined entitled persons and the Fund

on the same day in which similar relations arose in favor of entitled

persons under the preceding legal framework (thus, in May, 2003 at the

latest).  And according to the petitioners‘, it is precisely in those

aspects in particular that it is unequivocally a case of impermissible

genuine retroactivity.
 

7. In

the petitioners‘ opinion, in the case of the contested provisions the

State first lays down a general rule as to how it should compensate the

customers of bankrupt banks, which balances the protection of consumers

of bank services and the liability of citizens as investors of their

funds, who have the freedom to choose gainful risk investments or to

prefer the safe, but less lucrative, deposit of monetary funds. 

Afterwards, however, it dealt with these funds in conflict with the

general rules thus laid down, and to the detriment of safety funds,

which manage money turned over by private persons, in consequence of

which it preferred a certain group or a certain subject over others.  In

this they see a violation of the principles of the due functioning of

the substantive law-based state, guaranteed in Art. 1 of the

Constitution of the Czech Republic, consisting in securing the

protection of legitimate confidence in the constancy of the legal order.
 

8.

The petitioners further emphasized that the contested provisions result

in private monies, paid by banks and taken from bank customers, which

are designated for the compensation of bank customers who contribute to

the Fund, will be made available outside of the framework of the rules

which applied at the time the banks contributed to the Fund, which

interferes with the protection of private property and legitimate

expectations under Art. 11 of the Charter and can be perceived to be

expropriation, in the broad sense of the word.  If then the property of

the Fund as such will not be interpreted as the property of a holder of a

fundamental right or basic freedom, this results vicariously in the

limitation of the ownership and the property-related legitimate

expectations of commercial banks contributing to the Fund, as in view of

the consequences expected from the contested provisions, this can

result in an increase of their contribution to the Fund or in injury to

their customers.
 

9.

According to the petitioners, the Fund, as a creditor, is restricted and

discriminated against in its rights and in the protection of the

property it administers because, in view of the time shift, the Fund

would, in the case of a supplementary payment in accordance with the

contested provisions, be deprived of the possibility to declare itself

as a bankruptcy creditor in the bankruptcy proceedings of the affected

banks.  The petitioners stated that the provisions restrict in the same

manner the Fund‘s rights to judicial protection consisting in the

possibility for it to assert, against the bankruptcy debtors, claims

which arose as a result of paying out the compensation.  According to §

41h para. 2 of the Act on Banks, which still remains in effect, on the

day that payment of compensation to entitled persons began, the Fund

became the creditor of the bank in the amount of the rights of entitled

persons of the bank to the payment from the Fund.  From this follows

also its statutory obligation to assert its claims within a bankruptcy

proceeding which had already (1998 or 2003) been initiated.  The

retroactive legislative scheme introduced by the contested provisions

renders ineffective the assertion of this right, as the final deadline

for filing bankruptcy claims against the bank at issue had already

expired.  For this reason, this results in the described situation in

the denial of justice - denegatio iustitiae, by which even the Fund’s

rights to judicial protection according to Art. 36 of the Charter are

violated.
 

10. The

petitioners added, as a further argument, that the contested provisions

are unconstitutional also due to their sharp conflict with EC law, which

can be established at two basic levels.  In the petitioners‘ view, the

contested provisions are in conflict with the Directive 94/19/EC of the

European Parliament and of the Council of 30 May 1994 on

deposit-guarantee schemes, the objective of which is to ensure a

harmonized minimum level of deposit protection for all deposits in the

Community.  The harmonization of the Czech legal arrangements for

deposit protection contained in the amendment to the Act on Banks, No.

319/2001 Coll., anticipates a maximum compensation in the amount of

25,000 Euros, which is higher by 5000 Euros than the amount presumed in

the Directive itself as the minimum level of insurance for all EU Member

States, where by and large the average level of deposits per citizen is

higher than in the Czech Republic.  The maximum limit of compensation

in an amount up to 4 million Crowns, such as is introduced by the

contested provisions, goes entirely beyond the framework for the

protection of small depositors and thus misses the meaning of the

Directive.  The petitioners further stated that Art. 249 of the Treaty

Establishing the European Community provides that directives shall be

binding, as to the result to be achieved, upon each Member State to

which they are addressed, but shall leave to the national authorities

the choice of form and methods.  The result of the aforementioned

directive should be the protection of small bank depositors and the

restriction of anonymous deposits in connection with the protection from

money laundering.  The contested provisions modify the already

introduced harmonized legislative scheme where, by expanding the class

of entitled persons to include also the owners of bearer certificates of

deposit, bearer savings notes, and „guarantors of claims“ and their

legal successors, they make possible the payment of compensation even to

anonymous accounts, which goes directly against the sense of the

directive and is thereby in direct conflict with EC law.
 

11.

According to the petitioners, its conflict with Directive 94/19/EC is

not the only respect in which the contested provisions violate EC law,

and thereby also the obligations arising from Art. 1 para. 2 of the

Constitution of the Czech Republic.  According to the petitioners the

contested provisions breach the existing principle that it is only

injured depositors who can be the beneficiary of compensation from the

Fund.  The bill envisages the compensation of the Czech Insurance

Company, a.s., which in the past voluntarily and entirely in conformity

with its commercial plan paid out compensation to depositors of the

Kreditní banka Plzeň in the amount of 1.78 billion Czech Crowns.  This

unprecedented preference of a commercial subject violates the principle

of not providing unauthorized state aid in the sense of Art. 87 para. 1

of the Treaty Establishing the European Community, by which the Czech

Republic is bound.  State aid is defined as aid granted by a Member

State or through State resources in any form whatsoever which distorts

or threatens to distort competition by favoring certain subjects. 

Monies deposited in the Fund are not monies from the state budget; they

are, however, public monies, on the use of which the State decides. 

Compensation in the amount of 1.78 billion Czech Crowns, which should be

paid out from the Fund of Czech Insurance Companies, is unauthorized

state aid in the sense of Art. 87 para. 1 of the Treaty Establishing the

European Community, as it cannot come under the exceptions laid out in

para. 2 of the cited Article.
 

12.

In connection with the above-mentioned line of argument, the

petitioners also referred to the fact that the very preference given to

the Czech Insurance Company, a.s. (as follows from Art. III, point 4 of

the contested provisions) also is not in conformity with the general

principle of equality of conditions for economic competition expressed

in Art. 3 para. 1 lit. q) of the Treaty Establishing the European

Community.  The contested provisions unjustifiably give a substantial

preference to a private entrepreneurial subject – the Czech Insurance

Company, a.s. and its private owners.
 

13.

The petitioners also stated that the contested provisions in many

places are lacking in sense, preventing any sort of interpretation, or

allowing for several possible interpretations.  Of fundamental

importance is, for ex., the fact that the contested provisions are not

comprehensible as regards the question of the running of time periods

(it is not clear when such periods begin and end), or that the contested

provisions contain concepts not extant in law („the guarantor of a

claim“ cannot exist, as one can only guarantee obligations).  In the

petitioners view, it is very problematic in terms of the

comprehensibility of the text that the contested provisions are an

amendment to the transitional provisions of an act which was adopted

five years previously, whereas those transitional provisions were

exhausted with the respective amendment, and since that time the Act on

Banks has already been amended several times, where individual

amendments each had their own transitional provisions.  The amendment to

the transitional provisions repeatedly changes the regime for banks

which already five years previously come within the terms of certain

exceptions from the regime of the Act and, pursuant to the contested

provisions, now come within the terms of a new exception.  It is in this

respect that the petitioners see conflict with a characteristic

attribute of the substantive law-based state, not explicitly mentioned

in the Constitution of the Czech Republic nonetheless deduced from

interpretation of Art. 1 and Art. 2 of the Constitution of the Czech

Republic, as well as Art. 1 and Art. 4 of the Charter, which is the

principle of legal certainty, where everybody may have trust in the law

and its transparency and comprehensibility, and thereby also with the

principle of the regularity and clarity of the laws.
 

14.

The petitioners drew attention to the fact that the rule laid down both

in the Constitution of the Czech Republic (Art. 2 para. 3) and in the

Charter (Art. 2 para. 2), whereby the State (a state body) is limited by

the rules which it itself lays down, is quite fundamental to the

law-based state.  It then follows from this rule that, in adopting

statutes, the legislature is obliged to observe certain legislative

rules; and in this vein the petitioners referred to the decision of the

Constitutional Court (No. Pl. US 23/04), according to which:  „The

manner in which a statute was passed and promulgated is subject to the

review of the Constitutional Court solely within the confines set out in

the constitutional order (in particular Art. 1, Art. 39 paras. 1 and 2,

Art. 41, Arts. 44 to 48, Arts. 50 to 52 of the Constitution of the

Czech Republic).  It is, therefore, the approved text of a statute which

is the object of the Constitutional Court's review; the records from

the chambers‘ discussions serve as the main evidence in evaluating one

component of the tripartite evaluation, i.e. observance of the

constitutionally prescribed manner of adopting a statute.“  In the

legislative procedure, the legislature is thus bound by the Constitution

of the Czech Republic, as well as statutes (for ex., the Standing

Orders of the Assembly of Deputies).  If in the course of the

legislative procedure the legislature violates the rules which are

prescribed for it by statute, then, according to the petitioners, that

also qualifies, in consequence thereof, as a violation of Art. 2 para. 3

of the Constitution of the Czech Republic and Art. 2 para. 2 of the

Charter.  According to the statute, proposed amendments are limited to

points under debate at the session, whereas the proposed amendment of

Deputy Doktor, on the basis of which the contested provision became a

part of the Act on Banks, had not been placed on the program of that

session of the Assembly of Deputies, whereby the procedure laid down in

Act No. 90/1995 Coll., on the Standing Orders of the Assembly of

Deputies, was violated.  According to the petitioners, it is in conflict

with the prescribed procedure, that is, the constitutional rules for

the legislative procedure, to vote on an act in the framework of a point

of the session of the Assembly of Deputies which is devoted to another

act and where it is not indicated in the program that the former act

should be dealt with.  In the petitioners‘ view, the substantive and

procedural errors of the legislature in the case of the contested

provisions are so numerous and grave that, taken together in the

aggregate, they can lead to a finding of conflict with the

constitutional order, in particular with the principle of regularity and

clarity of the laws, making up one of the principles of the substantive

law-based state, as well as with the prohibition of the arbitrary

conduct of the legislative procedure.
 


I. B) The Statements of Views of Parties to the Proceeding
 

15.

Pursuant to §§ 42 para. 4 and 69 of the Act on the Constitutional

Court, the Constitutional Court sent the petition proposing the

annulment of the contested provisions to the Assembly of Deputies and

the Senate of the Parliament of the Czech Republic.
 

16.

In its 7 November 2006 statement, the Assembly of Deputies of the

Parliament of the Czech Republic, represented by its Chairman Ing.

Miloslav Vlček, stated that the mentioned bill, No. 443/2006 Coll.,

which also amends Act No. 319/2001 Coll., was submitted by a group of

Deputies.  The Assembly of Deputies debated the bill in its 4th

Electoral Term, originally as Assembly Print No. 965.  After it was not

approved on its 3rd reading on 21 December 2005, on 19 April 2006 the

bill at issue was proposed to the full Assembly of Deputies, into

Assembly Print No. 1222, on its 2nd reading.  The Assembly of Deputies

voted on Assembly Print No. 1222 as a whole in its 3rd reading on 23 May

2006, and by a vote of 156 for the bill (of the 176 Deputies present),

it adopted the bill.  On 21 June 2006 the Senate indicated that it did

not intend to deal with the bill.  The Chairman of the Assembly of

Deputies signed the bill on 21 August 2006, and the President of the

Republic let expire the 15 day deadline which the Constitution of the

Czech Republic affords him, without returning the Act to the Assembly of

Deputies or signing it.  On 8 September 2006, the Prime Minister of the

Czech Republic signed the bill, and it was duly promulgated in the

Collection of Laws.
 

17. In

the view of those Deputies who submitted the bill, as stated in the

Explanatory Report, the bill ensures a partial equalization of the

rights of those customers of banks in bankruptcy assisted only to the

extent called for in the statute, whereas in other cases persons were

assisted to a greater degree, and thus to mitigate the basic inequality

which arose in consequence of the unsystematic steps taken in the past

when paying out compensation.  The requirement of equal treatment of the

customers of all banks in bankruptcy, just as the requirement of equal

adequate compensation of all customers, must be considered as entirely

legitimate.  Act No. 319/2001 Coll. introduced a dual system of

compensation, which discriminates against a portion of the customers in

the banking sector.  From the perspective of legal certainty, the

foreseeability of law, and the democratic principles of the equality of

citizens of the Czech Republic, such a state of affairs is entirely

undesirable.  In the view of those Deputies who submitted the bill, the

principle of the protection of the deposits of bank customers in the

form of contributions by banks into the Depositor Insurance Fund

(hereinafter „Fund“) is founded on the joint liability of all persons on

the banking market.  With the bill, these Deputies were thus pursuing a

subsequent curing of the original harshness and non-functionality of

the system for the compensation implemented in relation only to certain

customers of banks presently in bankruptcy, instead of in relation to

all customers of banks presently in bankruptcy, and in the same way the

compensation of persons who played a part, in the Fund’s stead, in

resolving the past crisis situation.  In the view of those Deputies who

submitted the bill, it is necessary to preserve and uphold the principle

of joint responsibility of all persons on the banking market in the

Czech Republic and the connected and logically tied in compensation of

participating persons other than banks, participating in place of the

Fund in the resolution of the overall situation.  As the conclusion of

its statement, the Assembly of Deputies stated that, in debating and

adopting the bill, the legislative body did so in the conviction that

the adopted bill was in conformity with the constitutional order of the

Czech Republic.  It is up to the Constitutional Court to adjudge the

constitutionality of the provisions contested in the petition and to

issue the relevant decision.
 

18.

In its 7 November 2006 statement, the Senate of the Parliament of the

Czech Republic, represented by its Chairman, MUDr. Přemysl Sobotka,

first described the procedure by which the Senate assessed Act No.

443/2006 Coll.  On 25 May 2006 the Assembly of Deputies sent Act No.

443/2006 Coll. to the Senate as a bill, and the Senate’s Organizational

Committee designated it, as Senate Print No. 362 (5th Electoral Term),

for consideration by the Committee for Economics, Agriculture, and

Transportation.  On 15 June 2006, this Committee considered Senate Print

No. 362, but it adopted no resolution on the bill.  The full Senate

considered the bill contained in Senate Print No. 362 at its 12th

Session on 21 June 2006.  Following the Rapporteur’s Report, which

merely incorporated the record of the hearing of the Committee for

Economics, Agriculture, and Transportation asserting that the Committee

had not reached a majority view, it was proposed that the Senate declare

its intention not to deal with the bill.  Before the vote on this

proposal, the Chairwoman of the Club of Open Democracy, Senator S.

Paukrtová, spoke and, in view of the dissenting position on the bill of

the Government of the Czech Republic, of the Ministry of Finance

especially, and of the Czech National Bank, called upon the full Senate

to schedule the bill for full debate.  Then the Vice-Chairman of the

Senate, Senator P. Pithart, spoke and also requested that the bill be

scheduled for full debate on the grounds that it is „a norm that is, in

its way, retroactive, unjust, and discriminatory against bank houses“. 

Nonetheless, in the vote on the bill, of the 69 Senators present 39

Senators voted for (and 18 against) a Senate resolution „not to deal

with the bill“.
 

19. The

Senate further stated of the group of Senators‘ petition that one cannot

but refer to the fact that the relief requested in the petition

proposing the annulment of the transitional provisions is to a certain

extent imprecise and incomplete.  Act No. 319/2001 Coll. is not an act

„on banks“, as is stated in the petition, rather its title reads „an act

which amends Act No. 21/1992 Coll., on Banks, as subsequently amended“;

this fact is in no way changed by the erroneous heading to Part Two of

Act No. 443/2006 Coll. (formally speaking, an act going by the title

„No. 319/2001, on Banks“ does not exist), as the introductory sentences

to Art. II of Act No. 443/2006 Coll. leaves no doubt as to which act was

amended.  It is evident that the amending provisions of Art. II of Act

No. 443/2006 Coll. were incorporated into Art. II of Act No. 319/2001

Coll., however, the following Art. III remains as merely a part of Act

No. 443/2006 Coll., and it was not incorporated into some other act; the

amendment of No. 319/2001 Coll. was restricted solely to Art. II of Act

No. 443/2006 Coll.  It is necessary to emphasize that, even following

further amendments, Art. III of Act No. 319/2001 Coll. continues to

contain only provisions on its entry into effect; in no case, however,

are the provisions of Art. III of Act No. 443/2006 Coll., separate

provisions of the last-named act, incorporated into Act No. 319/2001

Coll.  The Senate has persisted in this view, even in its 19 January

2007 written statement reacting to the 9 January 2007 submission in

which the petitioners stated more specifically the relief requested in

their petition.
 

20. The

Senate further asserted that it can be conceded that the obligation

adopted by the legislature to compensate customers of certain banks in

the scope stated in Part Two of Act No. 443/2006 Coll., to a certain

extent interferes with the private property, and violates the legitimate

expectations, of interested persons (meaning the banks, or the Deposit

Insurance Fund), as, on the basis of these provisions, private funds,

paid by banks and taken from the customers of those banks, will be paid

out beyond the extent of their previous obligations, all the more so, in

that, in many cases this intervenes into already completed judicial

proceedings, or proceedings already in progress, without it being

possible, due to the passing of deadlines, for new facts to be taken

into account.  A broader scope of performance from the Fund could with

great probability, in view of the level of payment into the Fund,

represent increased claims on other banks, in the case that other banks

file for bankruptcy; nonetheless, one cannot disregard the fact that

compensation beyond the bounds of the general legal framework in the Act

on Banks already occurred on the basis of Point 5 of Art. II of Act No.

16/1998 Coll., even if only to a minor extent (and that both in terms

of the persons affected and of the object).  In the case of compensation

of savings, this is not by any means an extraordinary manner of

compensating beyond the bounds of the general legal framework:  for ex.,

in the sector of deposit insurance concerning cooperative credit banks,

at the time the cooperative credit banks went bankrupt and in contrast

to the then valid legal situation, the compensation was increased on the

strength of Point 1 of Art. II of Act. No. 212/2002 Coll., and to cover

the needs of the Safety Fund for Cooperatives, established on the basis

of Act No. 215/2002 Coll., the State even issued bonds, as there was

not enough money in the Safety Fund to pay the full compensation

provided for by statute.
 

21.

Beyond the framework of the petitioners‘ arguments, that the contested

provisions suffer from serious legal defects which could make more

difficult or even „make impossible any sort of interpretation“ or allow

for various interpretations, the Senate stated that it is not at all

clear in what terms or relation is the new legal arrangement introduced

in Art. II of Act No. 319/2001 Coll., as amended by points 1 and 2 of

Art. II of Act No. 443/2006 Coll. and the legal arrangement contained in

Art. III of Act No. 443/2006 Coll.  Thus, a state of affairs came about

in which two procedures are prescribed for the customers of the same

bank, which are in their very essence separate and partially overlapping

procedures, whereas it is laid down in both legal arrangements that

„neither the depositors of the banks, nor any other persons in

connection with the disbursement of supplementary compensation pursuant

to this transitional provision of the Act, are entitled to any claim

other than those which follow from this transitional provision of the

Act“; in addition, in relation to the customers of Kreditní banka Plzeň

a.s., Plzeňská banka, a.s. a Union banka a.s. (all of which are in

bankruptcy proceedings), this procedure has been valid and in effect

from the same day, that is, from 18 September 2006.
 

22.

As far as concerns the petitioners‘ objections to the procedure,

specifically to the violation of the prohibition of arbitrariness in the

legislative procedure, the Senate asserted that proposed amendments

submitted in the second reading (and adopted in the third reading), by

which an entirely unrelated amendment is incorporated into the act under

consideration, have been a quite common phenomenon, especially in the

most recent electoral term of the Assembly of Deputies.  It is a

phenomenon which does not contribute to the good arrangement of the

legal order or to the legal certainty of the addressees of these

amendments; nonetheless, in strictly formal terms, it is evident that,

in the sense of the Constitution of the Czech Republic, Deputies are not

in any way restricted in attaching proposed amendments.
 

23.

The Senate further stated that in assessing the petition it is

necessary to take into account additional very serious aspects

consisting, in particular, in the character of the contested provisions,

as not only have new legitimate expectations (to the compensation of

customers of other bankrupt banks beyond the framework of the general

legal arrangements adopted in the past) without doubt arisen on the

basis thereof, but in many cases even new rights came into being after

the Act came into effect.  It is up to the Constitutional Court to

adjudge whether the petitioners‘ objections against the contested

provisions are so consequential that it would be appropriate to annul

these provisions, and thereby allow already acquired rights to be lost,

which appears quite problematic especially in the case of those small

depositors of bankrupt banks who are not transferees.
 


I. C) Statements of amici curie
 

24.

On 2 November 2006, the Constitutional Court requested the position of

the Czech National Bank and the Czech Bank Association on the issue of

the economic consequences of launching a supplemental compensation for

bank deposits from the Depositor Insurance Fund (hereinafter „Fund“) on

the basis of amendments adopted to the Act on Banks, both in general

terms and in terms of the payment capacity and functioning of the Fund;

it further requested a statement on the issue of whether the adopted

legislative arrangements for supplemental compensation are in conformity

with EC law, when the area of deposit insurance is regulated by

Directive of the European Parliament and Council No 94/19/ES.
 

25.

In its 20 November 2006 position, the Czech National Bank, represented

by its Governor, Ing. Zdeněk Tůma, stated, in relation to the issue of

economic consequences, that as of 30 September 2006 the financial

reserves of the Deposit Insurance Fund (hereinafter „Fund“) amounted to

approximately 6.3 billion Czech Crowns.  The supplementary compensation

of deposits will amount to approximately 3.84 billion Czech Crowns (the

amount will be specified only after each bank submits its documents

demonstrating the right to the payment of compensation).  The Fund’s

reserves will thus be lowered to approximately 2.46 billion Czech

Crowns.  The effectuation of the supplementary compensation payments

will not have immediate direct impact on the levy upon banks of

contributions to the Fund; nevertheless, in the case that another

insured event were to occur, it very realistically could eventuate in a

situation where the Fund did not have sufficient financial means,

precisely due to the currently statutorily-enshrined payment of

supplemental compensation.  In consequence thereof, the amount which

banks would have to pay pursuant to § 41k of the Act on Banks would

double.  The payment of above-standard compensation naturally

significantly puts off the moment when the Fund performs at such a level

as to allow to be enacted into law a drop in the rate of contributions

to the Fund, or to entirely end the levy of contributions.  It must be

added thereto that the current rate of contributions represents for

domestic banks a significant competitive disadvantage.  The rate is

relatively high, especially due to the repeated amendments to the Act on

Banks supplementary above-standard compensation.
 

26.

According to the position of the Czech National Bank, the amendment to

the Act on Banks, leading to the above-standard compensation, markedly

worsens the Fund’s position as a potential debtor.  In § 41i of the Act

on banks is laid down the following provisions:  „In the case that the

Fund’s assets do not suffice to pay the statutorily prescribed

compensations, the Fund shall procure the necessary monetary means on

the market.  The Fund is obliged to see to it that the monetary means

are provided to it on the conditions most advantageous to it.“  It is

evident that prospective creditors will not be prepared to lend at a low

rate of interest to a debtor whose future financial situation is

unforeseeable in consequence of a genuine danger of Assembly action

leading to repeated exhaustion of its assets.  As a potential debtor,

the Fund thus becomes unreadable for investors, and it may not, in

consequence, be accepted as a debtor on the market, alternatively it

will be accepted only in the position of a risk debtor, that is, at a

rate of interest which is markedly increased over that which would be

possible to obtain under normal circumstances.  In this connection, it

is necessary to refer to the fact that, after the integration of

oversight over the financial market, the system for the insurance of

claims from deposits, as laid down in the Act on Banks, applies as well

to savings banks and savings and loan associations.  It is thus only a

matter of time before demands are heard in the Assembly of Deputies for

four-million compensation for members of savings banks and savings and

loan associations which had previously gone bankrupt.
 

27.

On the issue of whether the adopted rules on supplementary compensation

are in conformity with EC law (Directive No 94/19/EC), the Czech

National Bank stated in its position that it sees such nonconformity in

particular in the following:
  a) Conflict with Article 11 of the above-mentioned Directive, which provides:
„Without

prejudice to any other rights which they may have under national law,

schemes which make payments under guarantee shall have the right of

subrogation to the rights of depositors in liquidation proceedings for

an amount equal to their payments.“  In consequence of the Act‘s

retroactive operation, from the Fund’s perspective, all deadlines for

making claims in bankruptcy proceedings will be missed.  This will

result in a violation of Article 11 with negative consequences for the

management of the Fund.
b) Conflict with the spirit of the Directive expressed in its Preamble:
„Whereas,

on the one hand, the minimum guarantee level prescribed in this

Directive should not leave too great a proportion of deposits without

protection in the interest both of consumer protection and of the

stability of the financial system; whereas, on the other hand, it would

not be appropriate to impose throughout the Community a level of

protection which might in certain cases have the effect of encouraging

the unsound management of credit institutions; whereas the cost of

funding schemes should be taken into account; whereas it would appear

reasonable to set the harmonized minimum guarantee level at ECU 20 000;

whereas limited transitional arrangements might be necessary to enable

schemes to comply with that figure . . .“  In the Czech National Bank‘s

view, the contested part of Act No. 443/2006 Coll. is in conflict with

the sense of the Directive, since its declared objective is not solely

the protection of small depositors and the strengthening of the

stability of the banking system, but also the fight against „moral

hazard“ and imprudent conduct by banks.
c) Conflict with Article 9, which provides in its para. 1:
„Member

States shall ensure that credit institutions make available to actual

and intending depositors the information necessary for the

identification of the deposit-guarantee scheme of which the institution

and its branches are members within the Community or any alternative

arrangement provided for in Article 3 (1), second subparagraph, or

Article 3 (4). The depositors shall be informed of the provisions of the

deposit-guarantee scheme or any alternative arrangement applicable,

including the amount and scope of the cover offered by the guarantee

scheme.“  As follows from the given wording, each depositor must receive

information prior to making a deposit, and it must be entirely clear to

them in advance what are the conditions of insurance.  In consequence

of a series of retroactive amendments to the Act on Banks, depositors in

the Czech Republic have for a long time not received true information

on the functioning of the system of deposit insurance and their

prospective investment decision can be made under the influence of

information which subsequently proves to be untrue, distorted.
d)

Beyond the scope of the query, the Czech National Bank called attention

also to the contested provision’s possible conflict with Article 87 of

the Treaty Establishing the European Community, which reads as follows:
„Save

as otherwise provided in this Treaty, any aid granted by a Member State

or through State resources in any form whatsoever which distorts or

threatens to distort competition by favouring certain undertakings or

the production of certain goods shall, in so far as it affects trade

between Member States, be incompatible with the common market.“  In the

Czech National Bank’s view, the contested provisions concern aid

provided to the Czech Insurance Company by the State, although from the

Fund’s money.  Compensation paid out in this manner has no foundation

from the economic perspective, as the previously rendered performance of

that insurance company for depositors was in harmony with its

entrepreneurial plan of the time (the elimination of reputational risk),

follows from its position in the financial group, and was voluntary.
 

28.

On 21 November 2006, the Constitutional Court received the Czech

Banking Association’s statement of position.  In its position, the Czech

Banking Association, represented by its Executive Director, Ing. P. Š.,

stated that it supports the view of the group of Senators as formulated

in their submission, as it is of the same view that the provisions of

the contested act are in conflict with the constitutional order of the

Czech Republic, and further in conflict with the rules for deposit

insurance as set down in EC law.  Due to its retroactive establishment

of unauthorized public aid, the Act represents a serious violation of

the Treaty Establishing the EC.  In its statement of position, it

further described in detail the evolution, from 1994 until the present,

of the insurance of claims from deposits and the higher-than-standard

compensation.  In its statement it also drew attention to the relevant

Community law, and the content thereof.
 

29.

On 12 February 2007, the Constitutional Court of the Czech Republic

received an unrequested statement from the Civic Association of the

Customers of Union banka (hereinafter „UB“).  It is said in this

statement that, in the case that Act No. 443/2006 Coll. is annulled, it

will result „in an entirely unprecedented violation of fundamental

constitutional rights of members of the Civic Association of the

Customers of UB, who consider themselves to be directly affected by the

petition“.  The statement further described the origin of private banks

in the Czech Republic in the era of the formation of the private banking

sector, that is, the era of the transformation of the banking

industry.  It stated that first-rate banking oversight did not function

and no first-rate guarantee existed on the creation and maintenance of

equal competitive conditions for the state-held banks, on the one hand,

and for the newly emerging private banks, on the other.  On this ground

alone, the position of private banks, as well as the orientation of

depositors on the market for banking services, was very difficult.  This

situation, together with the repeated management crises lead to the

situation that private banks got into economic difficulties, in

consequence of which a large number of depositors subsequently lost

their savings.  It was a matter of the State’s poor banking and monetary

policy, as well as the State‘s insufficient and inconsistent regulatory

policy in the banking industry; evidently, these were the reasons it

was subsequently decided that the State would provide compensation, up

to 4 million Czech Crowns per depositor, to the depositors of devalued

deposits.  First of all, the Czech National Bank and the Ministry of

Finance of the Czech Republic provided compensation, later compensation

was provided to customers of bankrupt banks on the basis of various

statutory schemes.  In view of what has been stated, the expectations of

the depositors of Kreditní banka Plzeň, Plzeňská banka and Union banka,

namely that their deposits will be refunded under the same conditions

and in the same amount as applied for previously compensated depositors,

can also be considerable as well-founded.  The contested Act thus

eliminates actual discrimination of the depositors of Kreditní banka

Plzeň, Plzeňská banka and Union banka as compared to the depositors of,

for ex., Pragobanka, Universal banka, Moravia banka and others, and is

thus in conformity with the requirement of equality in rights, which

flows from the Charter of Fundamental Rights and Basic Freedoms.  In its

statement, the Civic Association of the Customers of UB rejected out of

hand the arguments put forward by the Senators seeking the annulment of

the contested act, which it further reasoned.  As its conclusion it

proposed that the group of Senators‘ petition be rejected on the merits.
 

30.

On 13 February 2007, the Constitutional Court received a submission

from the customers of Union banka, a.s., designated as a statement on

the petition proposing the annulment of a portion of Act No. 319/2001

Coll., as amended by Act No. 443/2006 Coll.  I. L. empowered an

attorney, JUDr. P. D., LL.M., Ph.D, to submit the statement, which was

confirmed by the presentation of his power-of-attorney.  According to

the constant jurisprudence of the Constitutional Court of the Czech

Republic (for ex. Pl. US 52/03), the group of persons who may be parties

to a proceeding on the annulment of statutes or other legal enactments

is set by statute and this enumeration cannot by expanded by decision of

the Constitutional Court of the Czech Republic.  The purpose of a

proceeding on the annulment of statutes or other legal enactments is the

protection of the principles and public goods found in the

constitutional order, from which follows that the Constitutional Court

can accept in this type of proceeding the statement of „friends of the

Court“, that is, statements from such persons who are not pursuing

solely their own private interests, rather are able, alone from their

very nature, to take into account the public interest in the form of the

mentioned principles and public goods.  Whereas it was possible to find

the indicated characteristics in the case of the Civic Association of

the Customers of UB, which is an association pursuing certain interests,

the same cannot be said of a private person who considers himself to be

directly affected by the Senators‘ petition, and has the status, in

relation to the Constitutional Court of the Czech Republic, of a person

asserting merely his private interests.  Proceedings on the annulment of

statutes or other legal enactments do not, however, serve this purpose;

therefore, the Constitutional Court of the Czech Republic could not

accept the submission of I. L. as a statement of a „friend of the

Court“.
 


I. D) Evidentiary Material obtained by the Constitutional Court from Public Sources
 

31.

As one of the bases for its decision, the Constitutional Court also

obtained the stenographic records from the debates of the Assembly of

Deputies, the Senate, and their committees, further their resolutions

and assembly prints, freely accessible in the digital library on the web

pages of the Assembly of Deputies and the Senate of the Parliament of

the Czech Republic at www.psp.cz and www.senat.cz., and also the

transcripts from the 11th, 12th and 13th sessions of the Senate’s

Permanent Commission for the Constitution of the Czech Republic and

Parliamentary procedure accessible at www.senat.cz.
 


I. E) The Oral Hearing before the Constitutional Court
 

32.

In their concluding statements given at the oral hearing before the

Constitutional Court, which was held on 15 February 2007, the parties to

the proceedings merely restated and summarized their positions, which

corresponded to the content of the written submissions delivered to the

Constitutional Court.
 


II. Description of the Legislative Procedure for the Adoption of the Contested Provisions of the Act
 

33.

From the statements of both chambers of the Parliament of the Czech

Republic, attached appendices, and documents accessible by electronic

means, the Constitutional Court ascertained that the original bill was

submitted to the Assembly of Deputies on 22 December 2005 by a group of

Deputies (Assembly Print No. 1222/0 – Amendment to the Act on the

Annulment of the Fund of National Property), and they proposed that the

bill be debated so as to allow the Assembly to express its approval of

it already on the first reading.  On 22 December 2005 the bill was

submitted to the Government of the Czech Republic for it to express is

position on it.  On 20 January 2006, it sent to the Deputies its

position along with comments on the bill (Assembly Print No. 1222/1). 

On 25 January 2006 the Organizational Committee recommended debate on

the bill, designated a rapporteur, and proposed assigning it to the

Budget Committee for debate.  The 1st reading took place on 16 March

2006 at the 54th Session, at which the bill was discussed in general

debate.  The Assembly did not agree to the bill being debated so as to

allow the Assembly to express its approval of it already on the first

reading and assigned the bill to the Budget Committee for debate

(Resolution No. 2321).  The Budget Committee debated the bill and on 10

April 2006 issued a resolution, delivered to the Deputies as Print No.

1222/2, in which it recommended that the bill be approved.  In the 2nd

reading on 19 April 2006 at the 55th Session, the original bill first

went through general debate, after which there was detailed debate,

during which was submitted the contested proposed amendment, which was

contained in Print No. 1222/3.  This proposed amendment was distributed

to the Deputies on 21 April 2006.  The 3rd reading took place on 23 May

2006 at the 56th Session, where the vote on the contested proposed

amendment was conducted as serial number 16.  142 of the 167 Deputies

present voted in favor of it, with three against.  Thereafter the bill

passed (Resolution No. 2470) when the Assembly of Deputies expressed its

approval of it, 156 of the 172 Deputies present voting in favor of it,

and three against.
 

34. On 25

May 2006, the Assembly of Deputies transmitted the bill to the Senate

as Print No. 362/0.  The Organizational Committee assigned the Committee

for Economics, Agriculture, and Transportation as the guarantee

committee, and it debated the bill on 15 June 2006 and adopted

Resolution No. 7, which was distributed as Print No. 362/1.  The

petition was debated on 21 June 2006 at the 12th Session of the Senate,

at which was adopted a resolution not to deal with the bill (Resolution

No. 499), where 39 of the 63 Senators present voted for the resolution

and 18 were against, with 6 abstaining.
 

35.

On 21 August 2006 the Act was delivered to the President of the

Republic for his signature.  The President did not sign the Act by the

prescribed deadline, nor did he return it to the Assembly of Deputies. 

On 11 September 2006, the adopted Act was then delivered to the Prime

Minister for his signature.  The Act was promulgated on 18 September

2006 in the Collection of Laws, in Part 144, as No. 443/2006 Coll. and

it entered into effect on the day of its promulgation.
 


III. The Considerations Applicable for the Adjudication of the Petition


III. A) The Principle of the Law-Based State and the Democratic Legislative Process
 

36.

In its decision No. Pl. US 21/01, the Constitutional Court stated: „the

situation where several statutes bearing absolutely no direct

substantive relation to each other are amended by a single act, must be

designated as an undesirable phenomena, and one not corresponding to the

purpose and principles of the legislative process.  Such a situation

comes about, for example, due to the speeding up of the legislative

process, in part in the form of submitted proposed amendments.  (As the

most blatant such example can clearly be given the adoption of Act No.

170/2001 Coll., on the State Bond Program for the Settlement of

Obligations arising from Treaties among the Governments the Czech

Republic, Slovak Republic, and the Federal Republic of Germany, on

amendments to Act No. 407/2000 Coll., on the State Bond Program for the

Partial Defrayment of the Damage suffered by Agricultural Subjects in

the Drought of 2000, and on amendments to Act No. 424/1991 Coll., on

Association in Political Parties and Political Movements, as amended,

into which the amendments to Act No. 424/1991 Coll. were quite

unsystematically included.)  Such a manner of proceeding, thus, does not

correspond to the basic principles of a law-based state, among which

belong the principle that laws should be foreseeable and comprehensible,

and the principle that they should be internally consistent.  If then

the substantive content regulated in several statutes is affected by a

single statute (in the formal sense), and these affected statutes do

not, either by content or systemic considerations, have any connection

with each other, then a quite murky legal situation immediately emerges

which does not respect the principles of foreseeability,

comprehensibility or internal consistency.“ (Collection of Judgments and

Rulings of the Constitutional Court, Volume No. 25, Judgment No. 14, p.

97, No. 95/2002 Coll.).
 

37.

The normative principle of the democratic law-based state is contained

in Art. 1 para. 1 of the Constitution of the Czech Republic, which

expressly designates the Czech Republic as a democratic state governed

by the rule of law, founded on respect for the rights and freedoms of

man and of citizens.  Respect for the rights and freedoms of the

individual also without doubt constitutes one of the principles of the

law-based state, as is meant by the Preamble of the Constitution of the

Czech Republic, alternatively one of the objectives of the functioning

of the State and state power.  The same objective is expressed in Art. 2

para. 3 of the Constitution of the Czech Republic, according to which

state authority may be asserted only in cases, within the bounds, and in

the manner provided for by law.
 

38.

What follows therefrom is that neither the Parliament, nor its two

chambers may conduct themselves in an arbitrary manner, but are bound by

the law.  When engaging in legislative activity, they are bound first

and foremost by the Constitution of the Czech Republic and the standing

orders interpreted in conformity therewith, also by the settled practice

of the parliamentary chambers and their bodies which, owing to

long-term repetition, can be considered as an unwritten part of the

legislative procedure, that is, if they can be found to be in harmony

with the higher values of law formation, of the democratic political

system, etc.  Adherence to the procedural rules contained in the

mentioned sources of law must be demanded due to the fact that, although

the addressees of these norm are not private persons, the

non-observance of them may, in the final outcome, meaningfully affect

fundamental rights of private persons.  There is no doubt that the

addressees of a legal norm have the right legitimately to expect that

any limitation upon their fundamental rights carried out by law will be

by a statute which is the result of a discourse conducted across the

political spectrum, namely a discourse in which all participants had the

opportunity elaborately to acquaint themselves with the matter under

consideration and to give their informed view upon it.  It is also

proper that such a process make possible an open discussion between the

proponents of competing views, including minority views.  Therefore,

those procedures enter into prominence which ensure, on the one hand,

the hearing of the parties and, on the other, the formal quality of the

legislative work.  From this perspective, the legislative procedure

becomes „the actual source of a statute’s legitimacy“.
 

39.

The requirement that the law be predictable, which is a component of

the principle of the law-based state, ceases to be satisfied in the

moment when an amendment to a statute is contained in an entirely

different statute, as understood in the formal sense, the content of

which is in no way connected to the amended statute.  Without employing

the instruments of information technology, it is thus becoming entirely

impossible for the addressees of legal norms to orient themselves in the

legal order.  At the same time, § 13 of Act No. 309/1999 Coll., on the

Collection of Laws and on the Collection of International Agreements,

envisages that territorial self-governing units have the obligation to

make it possible for everyone to look into the Collection of Laws.  The

law is silent on the obligation to afford everyone access to an

informational system containing the full wording of legal enactments in

electronic form.  At the same time, it is evident that without the

possibility to make use of these systems, people cannot today acquaint

themselves with the legal order of the Czech Republic, and this makes

problematic the application of the general legal principle, ignorance of

the law is no excuse.  In this way, law becomes for its addressees

entirely unpredictable.  While the mentioned principle is a necessary

condition of the effectiveness of every system of valid law, it cannot

be interpreted solely to the detriment of the addressees of the law, but

also as an obligation of public authorities to make the law cognizable,

because it is only to such law that people can conform their conduct.  A

related problem is also the prospective nature of law, as it is only

possible to conform one‘s future conduct to the law.
 

40.

Following the example of the right to good administration, it also

makes sense in this context to speak of the „right to good legislation“,

which legal scholarship, and not solely Czech, connects to the

principles of the democratic law-based state (Čebišová, T.: The Right to

Good Statutes (?), in: Vostrá, L., Čermáková, J. (eds.): The Issues of

Law Formation in the Czech Republic, the Polish Republic and the Slovak

Republic, Plzeň, Aleš Čeněk 2005, p. 84 and foll.).
 

41.

According to L. Fuller, judicial proceedings and voting in the

framework of a representative body belong among the basic models of

decision-making in a democracy (Fuller, L, The Morality of Law, Prague

1998 [Translator’s Note: This refers to the Czech translation of the

English original], cited according to Kysela, J.: The Legislative

Process in the Czech Republic as a Form of Rational Legal Discourse?,

Právník [The Lawyer], No. 6/2005).  Parliamentary decision-making

concerns general cases, in favor of which sounds the reservation of

fundamental decisions adopted in parliamentary procedure, which ensures

that political parties, which represent the organized interests of the

civic public, participate in the consideration of the subject which is

being decided upon.  A statute, the end-product of parliamentary

deliberation, is a compromise between interests, into which is projected

societal consensus, a fact which must be considered as a criterion of

the acceptance of the statute.  Each of the institutions forming or

applying law is defined by formal attributes, among which are the

procedures which serve the effectuation of the objective of the given

institution.  The procedures also effect the form in which the

Parliament conducts its business, as well as the division of labor

between its bodies, and should guarantee democracy, the legitimization

of authority, the rationality of legislation, procedural justice

(hearing of parties, debate), etc.  Kysela, J.: The Legislative Process

in the Czech Republic as a Form of Rational Legal Discourse?, Právník

[The Lawyer], No. 6/2005).  For that matter, parliamentary procedures

also constitute a significant component in establishing the form of the

separation of powers and of the conditions for political competition in

the State (Kabele, J.: From Capitalism to Socialism and Back,

Theoretical Examination of the Transformations of Czechoslovakia and the

Czech Republic, Prague, Carolinum 2005, p. 205).
 

42.

From the historical perspective, democratic legislation can be

explained also as the transposition of the notion of the judicial

process to the political process in the form of the creation of

statutes.  As is known, the English Parliament had historical roots in

the Curia Regis, that is, in a body which had the function of a

judicature and the function of development of law.  Its legislative

function was always conceived of as the development of law in broader

contexts (Court of Parliament).  The legislature thus discharged the

role of an „accelerator“, „regulator“, and „director“ of further law

formation.  Common law existed as judicial law even prior to statutes,

and alongside them.  Political power was thus obliged to settle

conflicts, concerning power, opinion, and interests, in a procedurally

regulated discourse, which resulted in a binding decision (Kriele, M.:

The Democratic Principle in the Basic Law [Das demokratische Prinzip im

Grundgesetz], VVDStRL 29, WdeG Berlin 1971, p. 50 and foll.).
 

43.

Finally, for C. Schmitt parliamentarianism was a form of government by

open argumentative discourse, in which differences and opinions confront

each other - political power is thereby forced to engage in a

discussion which allows for oversight by the public (Schmitt, C.: The

Crisis of Parliamentary Democracy, London 1994, as cited in Kysela, J.:

The Legislative Process in the Czech Republic as a Form of Rational

Legal Discourse?, Právník [The Lawyer], No. 6/2005).
 

44.

Similarly as in judicial decision-making, parliamentary decision-making

also requires the idea of a „just decision“, which is an immanent

aspect of the law-based state, the observance of the natural-law maxim

to hear all parties.  Whereas the parties to a dispute are before a

court, in parliament it is a matter of the opportunity to hear the

representatives of all political parties participating therein. 

Transparency of the hearing of parties representing the public conduces

to their identification with the result of the decision-making process,

in this case with statutes.  That is also the main reason for the

preference for parliamentary legislation rather than the adoption,

within the executive, of acts with the force of a statute.
 

45.

Next to substantive quality, however, formal quality also constitutes

an element of „correct“ or „good“ law.  This concerns the „formal

values“ of law which, although they do not determine the content of

legal enactments, they should ensure the existence, acceptance, and

applicability of law:  the values of order, foreseeability, freedom from

arbitrariness, legal equality or legal certainty (Summers, R. S.,

Essays in Legal Theory, Dordrecht – Boston – London: Kluwer Publishing,

2000, p. 30).  N. MacCormick speaks in a similar fashion on the ethics

of legalism, of which regularity, foreseeability, certainty, constancy,

and unity are characteristic (as cited in Přibáň, J., Dissidents of Law,

Prague 2001).  The essence of these considerations is the recognition

that a condition of the effective operation of law is its development

subordinate to certain principles, which should ward off even possible

attacks by the legislature; that is, they should bind it.  In this

connection, Czech legal scholarship emphasizes the requirement of no

contradiction, that is, the harmony and unity of the legal order (Šín,

Z., The Formation of Law and its Rules, Olomouc 2000).
 

46.

Otherwise Czech legal scholarship also draws attention to the

importance of the adherence to parliamentary procedure, all the more so

as its preponderant part has the character of statutory rules.  The

starting point for this perspective is the proposition of V. Knapp: 

„Neither a statute nor any other legal enactment can come into being in

an unlawful manner“, whereas one of the examples of unlawfulness is the

violation of mandatory enactments on the creation of law (Knapp, V., The

Theory of Law [Teorie Práva], Prague C. H. Beck 1995, p. 107).  If the

legislative process is a legal process with precisely formally defined

rules, then, in view of the consequences, it is necessary to insist upon

their strict observance; „it merits consideration that the insistence

upon the rules of parliamentary procedure is far less internalized than,

for example, the judicial procedural codes, although the outcome of the

legislative process (a statute) has far more serious impact on the

society as a whole than has procedural error in the issuance of

individual judgments.“ (Filip, J., Repeated Voting by the Assembly as a

Constitutional Problem, or a Parliamentary Majority Is not Permitted to

Do Everything not Expressly Prohibited by the Standing Orders, The

Journal of Legal Scholarship and Practice [Časopis pro právní vědu a

praxi], No. 4/2001, p. 343).  The Constitutional Court has also

expressed its view on the necessity of adherence to procedural rules for

the purpose of reaching a regular (constitutionally conforming)

decision, namely in its Judgment No. Pl. US 5/02, where it said:  „In a

number of its judgments concerning the review of decision-making by

public bodies, the Constitutional Court repeatedly laid out principles

for which – in terms of the attributes of a law-based state, among other

things - respect for procedural rules is essential; in brief: the

settled decision-making practice of the Constitutional Court concluded

that only in a procedurally flawless process (a constitutionally

conforming proceedings) can a legal and constitutionally conforming

result (decision) be achieved, so that increased attention must be paid

to the procedural integrity of the decision-making process (proceedings)

and it must be provided considerable protection.  If these principles

relate to the constitutionality of proceedings before public bodies and

to decision issued in them (to the legally-prescribed procedure under

Art. 36 para. 1 of the Charter of Fundamental Rights and Freedoms),

there are no reasonable grounds to diverge from these principles in

matters of review of the legislative process and enactments (legal

norms) adopted therein, because, although the legislative

decision-making process differs to a certain extent from decision-making

processes in proceedings before other public bodies - and in that sense

it can be understood as a decision making process sui generis - the

guiding principles of decision-making in which a final result is reached

are, in both cases, identical.  Moreover, one cannot lose sight of the

fact that the consequences arising from legislative acts are, due to

their society-wide effect, certainly more significant than in cases of

individual (defective) decisions by other public bodies.  Requirements

upon which rests the law-based state, and correlatively the life of

citizens in it, gain in prominence in the legislative process, namely

the requirements of the constancy, persuasiveness and indispensability

of legal enactments; however, such enactments, and the attainment of the

necessary authority of legislative bodies, can not be achieved

otherwise than by respect for the rules (the principles of legislative

activity), which the Assembly of Deputies, the prominent bearer of the

legislative power, has otherwise provided by statute for its own

activity.“ (Collection of Judgments and Rulings of the Constitutional

Court, Volume No. 28, Judgment No. 117, p. 25, No. 476/2002 Coll.).
 

47.

From the principle of the substantive conception of the law-based state

follows also the requirement of the separation of powers, which has the

character of a value.  The separation of powers is, at the same time,

also a structural element of the Constitution of the Czech Republic. 

The Constitutional Court outlined the following characteristics of the

separation of powers in its Judgment No. Pl. US 7/02, where it stated: 

„In this state the people, in the sense of Article 2 of the

Constitution, is the source of all state authority, which is asserted

through the bodies of the legislative, executive, and judicial branches.

As can be deduced from this prefatory statement, this enshrined

principle of the separation of powers is the very foundation of our

constitutional system.  It is a principle ensuing from the idea that the

tendency toward the concentration of and abuse of power is rooted in

the very nature of man, which became a guarantee against the arbitrary

exercise and the abuse of state authority and, in essence, also a

guarantee of liberty and the protection of the individual, a principle

which is the outcome of, and reaction to, the then attained historical,

intellectual, and institutional developments for which in the modern era

such notable figures as John Locke and Charles Montesquieu played their

role, as did institutions such as the British Parliament and the

British justice system.  It is not the Constitutional Court's task, in a

situation that can be considered as given, to further concern itself

with the causes of the rise or the evolution of this principle. 

Nonetheless, it considers it essential briefly to assert that at the

very foundations of the given principles lies the conviction that it has

never been possible to attribute to human thought and societal

occurrences a solely rational character, for they include as well an

evidently irrational component, and moreover the rationality of thought

has never fully coincided with the rationality of action.  As the

expression of an already existing state of affairs, the phrase, the

‚government of all‘, is a mere ideological formulation often times

masking the completely opposite social condition.  In a social situation

marked by the internal and external inadequacies of the individual as

well as the entire society, basic human needs can be satisfied, while at

the same time at least maintaining momentum in the direction of a goal

such as democracy represents, solely by the route of a conflictual

settling of individual interests.“ (Collection of Judgments and Rulings

of the Constitutional Court, Volume No. 26, Judgment No. 78, p. 273, No.

349/2002 Coll.). The separation of powers, conceived of from this

perspective, also constitutes a grounds for the constitutional

delimitation of concurrent action by individual powers, in the given

case the executive and the legislative powers in the course of the

legislative process (Art. 41 para. 2 and especially Art. 44 para. 1 of

the Constitution of the Czech Republic, see below).
 

48.

The inadequacy of the collaboration between the Government and the

Parliament in the course of the legislative process is felt very acutely

in the case of the adoption of legal norms which have impact on the

state budget.  It is without doubt the Government’s responsibility to

see to the observance of the state budget, the key instrument for

governing; and if the Government is to meet this obligation, it must

have an effective instrument to prevent subversive conduct by the

Parliament.  This requirement is closely related precisely with the

separation of powers and with the due performance of their function by

particular constitutional bodies within its framework.  Merely at the

margin of the issue, the Constitutional Court alludes to the fact that

in other states this specific requirement is resolved in its

constitution or by the standing orders of the respective parliament.  As

examples can be given the FRG and Spain, where the Government must give

its consent to all bills which have impact on the state budget.
 


III. B) The Principle of the Constitutionally Conforming Interpretation of Sources of Law Governing the Legislative Process
 

49.

The distinction between the terms, „proposed amendment“ and „bill“, is

decisive for the resolution of this case.  Whereas bills are referred to

in various contexts by the Constitution of the Czech Republic (Art. 41,

Art. 42, Art. 44 – Art. 48), if we disregard the relations between the

two chambers of Parliament as governed by the Constitution of the Czech

Republic (in this connection, the Constitution of the Czech Republic

refers to „proposed amendments“ – see Art. 46 para. 2, Art. 47 para. 2, 3

and 4, Art. 50 para. 2), proposed amendments are referred to solely in

Act No. 90/1995 Coll., on the Standing Orders of the Assembly of

Deputies, as subsequently amended (hereinafter „SOAD“).  The

introductory clause of § 63 para. 1 of the SOAD provides that in the

course of the debate a Deputy may submit proposals „on the matter under

consideration“.  These proposals should relate „to a certain matter of

the point under consideration“.  The provisions of § 63 para. 1, point 5

of the SOAD authorizes Deputies to submit proposed amendments which

omit, expand upon or modify certain parts of the original bill.  The

right to submit proposed amendments to bills in the course of

parliamentary debate is derived from the right of legislative

initiative, nonetheless it is not identical to it, as it naturally

restricted by the sphere reserved precisely for the exercise of the

right of legislative initiative.  Alone due to the need to distinguish

the legislative initiative from proposed amendments, for the sake of

observance of the increased constitutional demands on the former, one

can deduce that a proposed amendment should in fact only amend the

submitted legal scheme, thus it should not even modify, nor expand upon,

it in any fundamental manner, much less should it move beyond the

subject of the legislative initiative, or the bill (similarly, Schorm,

V., Easy Rider, Administrative Law [Správní právo], No. 2/2000, p. 65

and foll.)
 

50. To stray from

the restricted field reserved for proposed amendments might be of such a

nature as to overstep the actual content of the bill in question, or of

such a nature as to constitute a blatant departure from the bill’s

subject matter.  The first type of proposed amendment has long been

designated in American doctrine as „legislative riders“, the use of

which in the U.S. is often and heatedly debated and which, although

considered as undesirable, is nonetheless still considered to be a

constitutionally-conforming form of proposed amendment.  
 

51.

It is necessary to distinguish this first type from a second type,

called „wild riders“.  The second type represents a transgression of the

criteria of the test applied on the basis of the „germaneness“ rule,

that is, the rule of the close relation.  In other words, it tests the

issue as to whether, in a concrete case, a proposed amendment is proper

or is a proposal which has, in the Czech milieu, been given the

designation, „limpet“.  In this case, the technique of proposing

amendments attaches to a bill the legislative scheme from an entirely

different statute, with an unconnected legislative pattern.  It is

evident that even the breadth of the changes contained in a limpet, even

if it is submitted in relation to a connected bill (in that case, it

would not of course be a classic limpet, rather more a proposed

amendment that strays due to its breadth), might, in and of itself,

present a problem which is of course not resolved in the process of

adopting a „limpet“ proposed amendment, as in the third reading in the

process of adopting statutes there is no space for this type of

debating.  This would merely multiply and expand the danger of the use

of limpet-type techniques.

52. The rule of close relation (the

germaneness rule) has been applied by the American Congress since 1789

and is today contained in the Congress‘ standing orders (similarly, the

classic handbook, Mason´s Manual of Legislative Procedure, 1989, Art.

402 /Amendments Must Be Germane/, pp. 264-265).  This rule expressed the

requirement, according to which a proposed amendment must concern the

same subject as the bill which is just then being considered in the

legislative process.  It is based on the idea that, at any given time,

an assembly may consider solely one substantively delimited matter.  Its

objective is to ensure a proper procedure, in the sense of duly

informed and substantively prepared debate, and to ensure the

versatility and effectiveness of the assembly’s actions.  If the

proposed amended that is put forward is in conflict with this rule, then

another member of the chamber can object to this fact.  The burden of

proof in demonstrating the proposed amendment’s conflict with the rule

is upon the person who makes the objection.  After one raises the

objection that an amendment is in conflict with the rule, the chair of

the body must first assess the nature and objective of the provision of

the bill under consideration and then the relation to that provision of

the proposed amendment objected to.  It follows from this rule that the

proposed amendment must closely relate to objective of the specific

provision, or part thereof, of the bill under consideration.  Among the

assessment criteria rank, in particular, the following criteria, whereas

in order to establish that a proposed amendment conflicts with the

rule, it is sufficient if only one of them is satisfied:
- proposed amendments must relate to the subject of the bill under consideration;

- the fundamental objective of a proposed amendment must have a

close-fitting relation to the fundamental objective of the bill under

consideration;
- rules concerning a specific subject must not be amended by provisions of a general character;
- general subjects may be modified by specific proposals;
-

if a proposed amendment contains permanent changes in a bill envisaging

only temporary or provisional changes in the law, it cannot be

considered as a proposal having a close-fitting relation.
 

53.

The presidential system in the USA is nonetheless distinguished by a

high degree of autonomy of the Congress, separated from the executive

power.  It is thus more inspirational to review the circumstances of

parliamentary or semi-presidential systems.  For ex., rules concerning

the way in which proposed amendments are dealt with in France are very

subtle, (Schorm, V., The Legislative Process in France, post-graduate

thesis defended at the Law Faculty of the Masaryk University in Brno,

2000, p. 124 and foll.).  It follows therefrom that the amendment

(proposed amendment) must have some connection to the discussed text of

the bill (accessorial relation: change of the content, elaboration,

tying it in with other related provisions of the legal order).  In the

case of a clash in terms of ideas, it would be an impermissible

„legislative rider“, that is, a heterogeneous provision.  The Conseil

constitutionnel began as far back as the 1980’s independently to adjudge

the relation between legislative initiative and the right to submit

proposed amendments, and that regardless of how one or the other chamber

assessed the permissibility of the proposed amendment.  It was

motivated to do so by the especially large growth in the number of

proposed amendment, by which Deputies and Senators wished to circumvent

the conditions of the legislative process (speed up, avoid attention,

etc.).
 

54. In New Zealand

the conditions for proposed amendments are clearly laid down partly by

distinguishing them from the motion to reject the bill, partly and above

all by the criterion of relevance (relation to the matter which should

be modified – the point is given by inclusion in the agenda, thematic

restriction on both speakers and proposers) (McGee, D., Parliamentary

Practice in New Zealand, Wellington, 3rd ed. 2005, esp. pp. 216-217). 

The issue is similarly dealt with in the Australian Senate, where by a

proposed amendment is meant the omission of a word, replacement of a

word by another, or the addition of a new word, of course while

respecting the principle of the proposed amendment’s relation to the

modified bill (Evans, H. (ed.), Odgers´ Australian Senate Practice,

Canberra, 11th ed. 2002, pp. 184-185).  Also German theory devotes

comparable attention to this problem, including the critique of the

„concealed statutes“ (Geheimgesetzgebung), which are the outcome of

unrelated amendments proposed by Deputies, which are not reflected in

the title of the act.  Such a practice violates the principle of the

transparency of law creation and the right of initiative, and both

Deputies and addressees of the right have this right (Klein, E.,

Legislation without Parliament? [Gesetzgebung ohne Parlament?], Berlin,

De Gruyter Recht, 2004, pp. 16-17).  Proposed amendments should be

prepared primarily by expert committees, should modify only the

submitted bill, alternatively have a direct nexus with it, as

„additions“ to a statute should only result from legislative initiative

(Schneider, H., Legislation [Gesetzgebung], Heidelberg: C. F. Müller, 2.

ed. 2002, p. 84).
 

55. As

was stated above, the Constitution of the Czech Republic regulates to a

certain extent questions surrounding bills, namely in Chapter Two, which

deals with the legislative power.  It is thus evident, that the

institute of the bill or proposed act should be governed by the

principles which apply for the exercise of legislative power.  These

principles must be looked for in connection with the functions of this

power, as was indicated above.  The defining characteristic of a

parliament is the free, equal, universal election of its members, their

freedom in carrying out their mandate, further the principle,

fundamentally adhered to, that statutes are to be debated publicly, as

well as the principle that decisions are made by the majority.  The

public debate principle is directed both internally, within the

parliamentary chamber, and externally.  Its internal operation serves

the free formation of opinions of the parliamentary chamber’s members;

its external operation serves to inform the public.  And however much

scholarly literature tends to draw attention to the sterility of

parliamentary debate, such debate must be preserved, if only due to the

fact that through it the public is informed.
 

56.

In a parliament is also reflected the idea of pluralism, which is both

the foundation and a characteristic feature of each free society.  In

parliamentary debate, and naturally also in the work of individual

parliamentary committees, the opposition is also given the floor, and in

that way it also accomplishes the monitoring which can be seen as one

of the basic characteristic features of the law-based state.  Often it

is only in parliament that „weak“ interests, that is, interests of such

societal groups which do not have at their disposal the means to

implement their program, are given the opportunity to express their

views.  It is precisely these characteristics of parliamentary debate

which indicate the parliament’s special role in the accommodation and

integration of interests.  All of these principles need to be taken into

account when creating the legal framework for, and putting into

practice, the procedure pertaining to parliamentary bills, all the more

so that pertaining to the interpretation of what must be considered a

bill.
 


III. C) Safeguards of the Constitutionally Conforming Exercise of the Legislative Process
 

57.

In the first place it is necessary to consider the Chairman of the

Assembly of Deputies, or the presiding officer, as the guarantor of the

observance of the rules of parliamentary procedure.  In the debate on

bills in the appropriate legislative phase, all proposals, including

proposals designated as proposed amendments, are delivered to these

persons.  Without a doubt these persons have the authorization, even the

obligation (even if not asserted), to assess whether a proposal

designated as a proposed amendment genuinely is one in the substantive

sense, in the way described above.  As properly interpreted, § 59 para. 4

a § 63 para. 1 of the SOAD without doubt authorize the presiding

officer to take this step.  In the view of legal science, „if a proposed

amendment is a proposal which would change the content or the outward

form of the bill, the chair should not even permit a vote on the

substantively unconnected, that is, merely apparent, proposed

amendment.  The Government should, in the case of „comprehensive“

proposed amendments, insist upon its right, under Art. 44 of the

Constitution of the Czech Republic, to give its views on the bill, since

in actuality it is a disguised new legislative initiative.“  (Kysela,

J., Law Formation in the Czech Republic: A Tragedy with a Happy Ending?,

Legal Reporter [Právní zpravodaj], No. 7/2006).
 

58.

The debate on a bill in the second chamber of Parliament, that is, in

the Senate, represents a safeguard, the task of which is, among other

things, to expose errors in the legislative process and, in relation to

them, to take the appropriate action within the confines of the

possibilities which the Senate is granted, albeit it is evident that,

regrettably, they are limited possibilities
 

59.

The President of the Republic’s exercise of his right to return adopted

acts to the Assembly of Deputies, as is foreseen in Art. 50 para. 1 of

the Constitution of the Czech Republic, constitutes a further safeguard

in the sense of the monitoring of the proper legislative process. 

Within the bounds of the legislative process, the President’s function

is certainly not a political one, as the function of the President of

the Republic does not consist in the formation of competing policies in

relation to the Government.  In the Constitution of the Czech Republic,

the President of the Republic is conceived of as a non-party

constitutional organ.  In terms of the conception of the Constitution of

the Czech Republic, irrespective of reality, he is predestined by this

specific characteristic to monitor the observance of the

constitutionality of the legislative process with the help of the means

entrusted to him by the Constitution of the Czech Republic, that is, by

the exercise of the presidential veto.
 

60.

Should the foregoing, above-designated safeguards miscarry, the

Constitutional Court may gain the floor, if it is addressed by means of a

petition duly submitted by a petitioner with standing, as § 68 para. 2

of the Act on the Constitutional Court obliges the Constitutional Court,

when deciding on the conformity of a statute with the constitutional

order, to ascertain, among other things, whether the contested act was

adopted and issued in the constitutionally-prescribed manner.  This

provision obliges the Constitutional Court to adjudge the

constitutionality of the legislative procedure with the implication of

derogational conclusions, which the Constitutional Court has made use of

in the past – see Judgment No. Pl. US 5/02.  In this Judgment, the

Constitutional Court stated, among other things:  “In the legislative

process, requirements upon which rests the law-based state, and

correlatively the life of citizens in it, gain in prominence, namely the

requirements of the constancy, persuasiveness and indispensability of

legal enactments; however, such acts, and the attainment of the

necessary authority of legislative bodies, can not be achieved otherwise

than by respect for the rules (the principles of legislative activity),

which the Assembly of Deputies, the prominent bearer of the legislative

power, has otherwise provided by statute for its own activity.“
 


IV. Actual Review


61.

The Constitutional Court considers it necessary, in the first place, to

circumscribe, in the matter under adjudication, the manner and extent

of constitutional review.  In the first place, the Constitutional Court

observes that the petitioners called into doubt not only the merits of

the contested provisions of the Act, but also the manner in which they

were adopted.  In a norm control proceeding under Art. 87 para. 1, lit.

a) of the Constitution of the Czech Republic, in the sense of the

provisions of § 68 para. 2 of the Act on the Constitutional Court, the

Constitutional Court is obliged, apart from the assessment of the

content of statutes in terms of their conformity with constitutional

acts, to review whether a statute was adopted and issued within the

confines of the powers set down in the Constitution, and further whether

it was issued in the constitutionally-prescribed manner.  Since in the

matter under consideration, it was also called into doubt whether the

contested provisions of Act No. 443/2006 Coll. had been adopted in the

constitutionally-prescribed manner within the framework of this trio

(constitutional conformity of the content, the competence, and the

procedure), the Constitutional Court had first of all to deal with the

constitutionality of the procedure for adopting the Act.  It is evident

that one cannot deduce from the wording of the provisions of § 68 para. 2

of the Act on the Constitutional Court the sequence of the aspects of

review stated therein, as they are not logically interconnected steps. 

In place of a grammatical interpretation, or the literal wording of this

provision, it is necessary to employ a logical interpretation, which

first of all requires the review of the competence, then the procedure

and finally the content of the contested provision.
 

62.

The Constitutional Court had no doubts as to the competence of the

Parliament of the Czech Republic, so that it was possible to proceed

directly to the procedure for adopting the contested provisions.
 

63.

For the review of the constitutionally-prescribed manner of the

adoption and issuance of the contested provisions of the Act, the Court

must concern itself with the course of the legislative process which

preceded the adoption and issuance of the Act, of which the contested

provisions forms a part.  As has already been described in detail (see

Point II.), on 21 December 2005, Deputies M. Hašek, M. Kraus and J.

Dolejš submitted to the Assembly of Deputies a bill for the issuance of

an act which amends Act No. 178/2005 Coll., on the Annulment of the Fund

of National Property of the Czech Republic and on the Competence of the

Ministry of Finance in the Privatization of the Property of the Czech

Republic (Act on the Annulment of the Fund of National Property)

(Assembly Print No. 1222/0).  As follows from the stenographic record of

the 55th Session of the Assembly of Deputies from 19 April 2006, during

the consideration of the cited bill, in the detailed debate part of the

second reading, Deputy M. Doktor put forth a proposed amendment which

contained the contested provisions.  The Deputy submitting this proposed

amendment himself stated, as follows from the stenographic record of

the 55th Session as well as from the Appendix, which the petitioners

attached to the petition in this case, that a bill that was identical in

content with the proposed amendment had already at least once been

submitted to the Assembly of Deputies as a separate bill and had been

discussed as Assembly Print No. 965 – the Amendment of the Act on

Banks.  However, after the Government had on 26 May 2005 issued a

negative position on it, this separate bill was not approved in its

third reading at the 51st Session of the Assembly of Deputies.
 

64.

The proposed amendment under review was put forward by Deputy M. Doktor

in the second reading and included in Print No. 1222/3.  This proposed

amendment supplemented the title of the original bill with the words, „ .

. . and Act No. 319/2001 Coll., which amended Act No. 21/1992 Coll., on

Banks, as subsequently amended“.  Further, it inserted into the bill,

following Article I, a new Part Two, which read as follows (the heading

included):  „PART TWO – The Amendment of Act No. 319/2001 Coll., on

Banks“, and which contained the contested provisions, which amend and

supplement the legislative scheme on the disbursement of supplementary

compensation from the Depositor Insurance Fund.  The vote on the

contested proposed amendment was then held in the 3rd reading, on 23 May

2006 at the 56th Session, as serial number 16, when 142 of the 167

Deputies present voted in favor of its adoption, with three against. 

Thereafter the amended bill was approved by the Assembly of Deputies

(Resolution No. 2470).
 

65.

Afterwards, on 25 May 2006 the Assembly of Deputies transmitted the bill

to the Senate (Print No. 362/0).  The bill was debated by the Senate on

21 June 2006 at its 12th Session, at which was adopted a resolution not

to deal with the bill (Resolution No. 499).  As is seen from the

stenographic record of the 12th Session of the Senate, in the course of

action, the Deputy Chairman of the Senate, Senator P. Pithart, put

forward a proposal to bring the bill under consideration up for general

debate, as it was a serious matter.  He also said the following: „That

which was stuck onto (the original bill) is against good morals, not

only against the rules of correct banking . . . Most unfair of all is

the timing of this limpet, which resembles extortion.“  This statement

by the Deputy Chairman of the Senate must be applied to the fact that

the election to the Assembly of Deputies was held on the 2nd and 3rd of

June 2006, so that it was evident that, if the Senate returned the

entire bill to the Assembly of Deputies with proposed amendments, the

bill would not be adopted, since the Assembly of Deputies in its

original composition was no longer able to meet prior to the election. 

Art. 47 para. 1 of the Constitution of the Czech Republic is interpreted

both by scholars (K. Klíma and Collective, Commentary to the

Constitution and the Charter, Plzeň, 2005) and in practice such that the

discussion of a bill is tied to the particular electoral term of the

Assembly of Deputies, which functions on the basis of the principle of

discontinuity between individual electoral terms, according to which, if

discussion of a bill is not completed, it ends.  If the Senate (and

analogously, the President of the Republic) returns a bill to the

Assembly of Deputies, its ruling has the consequence of a „pocket veto“,

as the new Assembly of Deputies may not vote on the bill.  The same

would apply if the Senate had rejected the bill or returned it prior to

the expiration of the Assembly of Deputies‘ electoral term, but the

Assembly did not gather again before the election.
 

66.

In adjudicating, in the given case, the constitutionality of the

legislative procedure for the adoption of the contested provisions, it

is crucial for the Constitutional Court to assess the issue of whether

the Deputy M. Doktor’s proposal, designated as a proposed amendment and

included in Assembly Print No. 1222/3, genuinely was one in the

substantive sense, as was explained above (Point III. B); that means, to

assess whether the proposed amendment at issue in the given case

overstepped the bounds of the restricted field reserved for proposed

amendments, that is, whether it was a case of impermissible extension in

interpreting the issue of what constitutes a proposed amendment.  In

making this interpretation, the Constitutional Court, for the reasons

given in Part III of this Judgment, that is, on the grounds of

considering the applicable constitutional criteria defined in that Part,

dealt with it also in terms of the „rule of the close connection“

(germaneness rule) (Point III. B).
 

67.

For this purpose, it was necessary first of all to assess the content

and objective of the original bill and the content and objective of the

proposed amendment under adjudication.  The Constitutional Court

ascertained that, as follows from Assembly Print No. 1222/0 and from the

Explanatory Report attached to this bill, the content of the original

bill was the adoption of a statute which amends Act No. 178/2005 Coll.,

on the Annulment of the Fund of National Property of the Czech Republic

and on the Competence of the Ministry of Finance in the Privatization of

the Property of the Czech Republic (Act on the Annulment of the Fund of

National Property).  The Deputies submitting the bill sought, by its

adoption, to obtain funds in the amount of two billion Czech Crowns with

the aim of transferring those funds to the Ministry of Work and Social

Affairs for the construction of a home for seniors.  The proposed

legislative scheme was thus intended to correct, at least partially, the

problem of the lack of space in these homes.
 

68.

The Constitutional Court further ascertained that the content of

Assembly Print No. 1222/3, into which was included the wording of the

proposed amendment under adjudication, was an amendment to Act No.

319/2001 Coll., which amends Act No. 21/1992 Coll., on Banks, and which

specifically modifies and supplements the rules concerning the subjects

and the manner of disbursement of supplementary compensation for

deposits from money of the Depositor Insurance Fund (hereinafter „the

Fund“).  In view of the fact that this was a proposed amendment, no

explanatory report was attached to it.  Nonetheless, as follows from the

above-described findings made by the Constitutional Court, this

proposal was identical in content to a separate bill debated by the

Assembly of Deputies as Print No. 965, to which an explanatory report

was naturally attached.  As follows from the wording of that bill, the

purpose of this amendment, or rather of the addition to the statutory

provisions in question, was to ensure the equal enjoyment of rights by

those customers of banks which are currently in bankruptcy, whose claims

against the banks had, in the past, been remitted only in the amount

set by law, whereas in the case of other banks the remittance of

depositors‘ claims also occurred beyond the statutory framework. 

Further, that the objective of this amendment was to provide the Fund

with the certainty that persons, their legal successors, or transferees

of claims arising from the satisfaction of such claims which in certain

cases were secured by the remittance of claims of bank depositors,

instead of by the Fund, will not raise against it any claims other than

claims to the remittance of those funds which these persons used to pay

the supplementary compensation of bank depositors up to the amount of 4

million Czech Crowns.  Last but not least, the objective of this

amendment was to provide the Fund with the certainty that, by satisfying

the depositors of banks listed in the proceeding provision, those

depositors‘ claims against the banks will be satisfied in full and that

these depositors will not be able to raise any further claims against

the Fund.  The purpose of this amendment was also to guarantee the Fund

that payment of supplemental compensation to depositors of banks relate

only to cases from the past, where the purpose thereof is to eliminate

the above-described inequality between depositors of individual banks,

whereas in the case of other banks their depositors will not be

authorized in the future to claim from the Fund remittance of

compensation in an amount beyond the statutory framework.
 

69.

Following consideration of the content and objective, both of the

original bill and the proposed amendment at issue, the Constitutional

Court came to the conclusion that, in terms of content and objective,

they are fundamentally different.  On that ground alone it was necessary

to find that the proposed amendment at issue strays from the restricted

field reserved for proposed amendments.  In other words, it is evident

that it was a „proposed amendment“ which could only be considered as

such in the formal sense not, however, in the material sense.
 

70.

The Constitutional Court is obliged to observe that Deputy M. Doktor’s

proposed amendment does not relate to the subject of the original bill

(that is, the transfer of funds to support the reconstruction of a

seniors‘ home) nor does its fundamental objective (that is, ensuring

equal rights to all customers of banks currently in bankruptcy, whose

claims against the bank had in the past been reimbursed only in the

amount laid down in a statute, further to provide the Depositor

Insurance Fund with security against certain claims and situations that

arise due to its providing supplementary compensation) bear any close

relation to the fundamental objective of the debated bill (that is, the

effort to resolve the shortage of places in a senior home).  Both

proposals under adjudication bear no direct substantive relation to each

other, as a result of which, following the approval of the bill thus

amended, a statute was issued (No. 443/2006 Coll.) which amends statutes

which bear absolutely no direct substantive relation to each other (Act

No. 178/2005 Coll., on the Annulment of the Fund of National Property,

and Act No. 319/2001 Coll., which Amends Act No. 21/1992 Coll., on

Banks), which, for the reasons laid out in Part III of this Judgment,

represents a violation of the sub-principles flowing from the principle

of the democratic law-based state (the separation of powers, the

democratic nature of the legislative process, etc.).  As was stated

above, in it Judgment No. Pl. US 21/01, the Constitutional Court

characterized, in the following manner, the situation where several

statutes bearing absolutely no direct substantive relation to each other

are amended by a single act, moreover, often precisely in the form of

submitted proposed amendments:  „[It is] an undesirable phenomena, one

not corresponding to the purpose and principles of the legislative

process. . . .  Such a manner of proceeding, thus, does not correspond

to the basic principles of a law-based state, among which belong the

principle that laws should be foreseeable and comprehensible, and the

principle that it should be internally consistent.  If then the

substantive content regulated in several statutes is affected by a

single statute (in the formal sense), and these affected statutes do

not, either by content or systemic considerations, have any connection

with each other, then a quite murky legal situation immediately emerges

which does not respect the principles of foreseeability,

comprehensibility or internal consistency.”  The Constitutional Court

would add thereto that in a substantive law-based state, a statute in

the formal sense cannot be understood as a mere repository of a wide

variety of changes made throughout the legal order.  On the contrary,

the substantive conception of the law-based state requires that a

statute be, both in terms of form and substance, a predictable,

consistent source of law.  It cannot be permitted for the communicatory

nature of statutes, as a source of law, to disappear, with all the

above-mentioned negative consequences.  The jurisprudence of the

European Court of Human Rights sounds in a similar spirit, which imposes

comparable requirements on the quality of statute (accessible,

foreseeable, precise), although the mentioned court declared its views

in connection with hearing complaints in specific legal matters (cf.,

for ex., Berger, V., The Jurisprudence of the European Court of Human

Rights, IFEC 2003, pp. 455-6; para. 4 of Kruslin v. France, Huvig v.

France, pp. 502-503, para. 4 of Autronic AG v. Switzerland).
 

71.

If under the above-mentioned circumstances the Assembly of Deputies

adopted a resolution (of 23 May 2006, No. 2470), by which it expressed

its consent with the bill thus amended, that is, if it burdened the

legislative process, to the extent of the „proposed amendment“, with a

defect which cannot be overlooked, this fact is projected into the

assessment of the constitutionality of the entire legislative

procedure.  It is a situation which is all the more serious in that it

is not an aberration, but is becoming an unpropitious practice, of which

moreover the Members of Parliament are aware, to which fact is

attested, for ex., the critical Senate Resolution No. 303 from 25

January 2006, in which is stated, among other things:  „the unceasing

amendment of statutes that have already been amended numerous times and

the technique of effecting them by attaching them to bills with an

unrelated content, makes more difficult or even rules out the

stabilization of awareness of that which applies as law.“  The

literature has already for years drawn attention to it, in part as a

violation of the Act on the Standing Orders of the Assembly of Deputies,

in part as a circumvention of the right of the Government, under Art.

44 of the Constitution of the Czech Republic, to give its view on every

bill, which can also be understood as the right of other participants in

the legislative process to know the Government’s opinion.  (Hujer, M.,

The Deputies‘ Proposed Amendments Are often not Related to the Bill

Being Debated, Parliamentary Reporter, No. 8-9/2001; Kysela, J., in

Klíma, K. and collective, Commentary to the Constitution and the

Charter, Plzeň, 2005, p. 236; Voříšek, V., The Sins of the

Father-Lawgivers, Legal Perspectives [Právní rozhledy] No. 16/2006).  To

this should be added a reference to the fact that proposed amendments

lack an explanatory report, whereas it applies that the absence of

substantiation for a decision always indicates a heightened risk of

arbitrary conduct.  In the specifically adjudicated case, contemplation

on the issue of arbitrariness otherwise makes evident that the separate

bill was first rejected so that it could subsequently be adopted in the

period just before the election in the form of an unrelated proposed

amendment.
 

72. The

legislative process in the Czech Republic generally also suffers from

other defects (the increasing number of cases where statutes are

approved with the date of entry into effect set prior to the day of

adoption), which the Constitutional Court could not deal with in the

specific case; nonetheless, it could not fail to take into account as

evidence the circumstances in the formation of statutes, especially as

far as concerns the merely limited functionality of the supervisory

mechanisms internal to the legislative process.  Naturally that

increases pressure on the operation of external control, represented in

relation to constitutionalism by the Constitutional Court (see also

Filip, J.: Legislative Technique and Constitutional Court Jurisprudence,

Journal for Legal Scholarship and Practice, No. 3/2005, writing of

„legislative mischief or barbarity“).
 

73.

The Assembly of Deputies did not recognize that the introduced

amendment cannot be considered as such in the substantive sense.  A

constitutionally-conforming interpretation of the provisions governing

the right to introduce amendments to a debated bill requires that the

proposed amendment in actual fact merely modify the submitted legal

scheme, that is in conformity with the requirement of the „rule of close

relation“, according to which the proposed amendment must concern the

same subject as the bill which is under consideration in the legislative

process, if the given proposed amendment is not to stray from the field

reserved for proposed amendments in the form of a blatant departure

from the debated bill’s subject matter.  In the Constitutional Court’s

view, this corresponds to a constitutionally conforming interpretation

of the introductory clause of § 63 para. 1 of the Standing Orders of the

Assembly of Deputies.  In the Constitutional Court’s view this

requirement has not been met in the given case, however.  In

consequence, the principle of the separation of powers, among others,

was violated, with consequences for the principle of the formation of

harmonious, transparent, and predictable law, which the Constitutional

Court has already previously linked to the attributes of the democratic,

law-based state.  In addition, the institute of legislative initiative

under Art. 41 of the Constitution of the Czech Republic was

circumvented, as was the Government’s right, under Art. 44 of the

Constitution of the Czech Republic, to give its view on bills.
 

74.

Accordingly, nothing remains but for the Constitutional Court to find

that the contested provisions of Act No. 443/2006 Coll., which amends

Act No. 319/2001 Coll., which amends Act No. 21/1992 Coll., on Banks, as

subsequently amended, were not adopted by the Assembly of Deputies in

the constitutionally-prescribed manner.  This is enhanced by the fact

that the President of the Republic did not sign it, which – with the

legal exception of the overriding of a veto – should be, in accordance

with Art. 51 of the Constitution of the Czech Republic, and according to

the views of theory, the certification of the due completion of the

legislative process.
 

75. The

Constitutional Court proceeded to derogate the statutory provisions

after it had in its previous jurisprudence (see in particular Judgment

No. Pl. US 21/01) made an emphatic appeal to the Parliament of the Czech

Republic, calling upon it to observe the principles of

comprehensibility, transparency, and clarity of the legal order, which

rank among the components of the law-based state, as does respect for

the democratic principles in the legislative process (Art. 1 of the

Constitution of the Czech Republic).  In this matter it proceeded to

annul Part Two, namely Art. II and Art. III of Act No. 443/2006 Coll.;

it thereby opened grounds pro futuro, especially for derogation under

Art. 1 para. 1 of the Constitution of the Czech Republic.  The

Constitutional Court has in the past tied the potential assessment of

similar violations of the principles of the legislative process with the

test of proportionality in conjunction with the protection of citizens‘

justified confidence in the law, legal certainty and acquired rights,

alternatively in connection with further principles protected by

constitutional order, fundamental rights, freedoms, and public goods.
 

76.

This conclusion, in and of itself, makes impossible the constitutional

review, in terms of the substantive objections of unconstitutionality,

of individual provisions of the Act under adjudication.  Thus, the

Constitutional Court of the Czech Republic does not, in this Judgment,

prejudge the question of what would be a constitutionally conforming

solution to the issues governed by the annulled provisions.  

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

Brno, 15 February 2007