U-I-90/95

Reference no.:
U-I-90/95
Act:
Act on Measures for Rehabilitation of Economic Position of TAM Maribor d.d. and its Affiliated Companies and Avtomontaža AM BUS d.o.o. Ljubljana (Official Gazette of RS, Nos. 20/95, 70/95) (ZSTAMAB), paragraph 2 of article 6
Operative provisions:
The provision of paragraph 2 of article 6 of the Act on Measures for Rehabilitation of Economic Position of TAM Maribor d.d. and its Affiliated Companies and Avtomontaža AM BUS d.o.o. Ljubljana, according to which debts due to the Health Insurance Bureau of Slovenia by business corporation TAM Maribor d.d., amounting to SIT 288,620,650, and by business corporation Avtomontaža AM BUS d.o.o., Ljubljana, amounting to SIT 42,055,568, shall be converted into a shareholding interest in each of the said companies, is not in disagreement with the Constitution.
Abstract:
To provide compulsory health insurance in accordance with article 50 of the Constitution, the Republic of Slovenia founded the Health Insurance Bureau of Slovenia as public institution.

Health Care and Insurance Act defined the sources of finance for the activities of the latter; the determination of the amounts to be obtained from such sources falls within the competence of the State, and the power of the Bureau is in this respected limited just to the preparation of proposals for determining the amounts to be derived from individual sources.

The Health Insurance Bureau of Slovenia is a legal person and is empowered to autonomously administer and manage the financial resources acquired on the basis of the sources determined by statute.

By making the conversion of claims into shareholding interests compulsory by statute, the legislator did not do away with the right which the Health Insurance Bureau of Slovenia had acquired with the maturing of debts, for its right arising from a relation established under civil law was changed into a right to shareholding interest. By converting the claims into shareholders' rights, the legislator actually interfered with the sources from which compulsory health care is as a rule financed, and thus also with the initiator's right of autonomous administration and management of these resources. However, as the State, is so far as the founder of the Bureau, is responsible for its operation and the adjusting of the level of the sources of finance for compulsory health care to the requirements of beneficiaries and to financial capacities of obligers, and since it is subsidiarily liable, as the founder, for the liabilities of the Bureau, the conversion effected by the legislator, the enacting of which was dictated by public interest (to prevent bankruptcy of debtors and to preserve the majority of the jobs of the workers employed by both debtors), did not violate the Constitution (article 2).

The Old-Age and Disability Insurance Bureau of Slovenia is a public corporation and is not designed to carry out activities on the market with a view to making profit. This is why by making the conversion compulsory the legislator did not violate article 74 of the Constitution.

The conversion of the initiator's rights arising from the law of obligations into shareholders' rights does not have retrospective effect but is prospective in effect. The disputed provision did not either prevent or render more difficult the asserting of the anticipated rights of beneficiaries regarding retirement and disability pensions, which is why, with the enacted provision of paragraph 2 of the Act on Measures for Rehabilitation of Economic Position of TAM Maribor d.d. and its Affiliated Companies and Avtomontaža AM BUS d.o.o., the legislator did not violate article 155 of the Constitution. In the case if the measure adopted by the legislator should have adverse effect on the ensuring of the rights arising from old- age pension and disability insurance, the State would be obliged, on the basis of articles 50 and 51 of the Constitution, to make up the deficit in public funds, even if by doing so it would exceed the earmarked item of the budget.

The constitutionality of the disputed provision of the Act should be assessed from the viewpoint of those reasons which had dictated it at the time of its enacting, rather than from the viewpoint of subsequent events, which the legislator could not have foreseen. In the case where, after the conversion of claims into shareholders' rights, bankruptcy proceeding has been instituted against the debtors or a particular debtor, this is not of any importance for the constitutional review.

The inability of the creditor to collect the amounts due from debtors results from constitutionally admissible conversion of claim and the extinguishing of the same resulting therefrom, which is why it is not in disagreement with article 23 of the Constitution.
Password:
Public institution, interference with legal autonomy of, and its sources of finance. Old-age pension and disability insurance, constitutionally guaranteed duty of the State to provide old-age pension and disability insurance. Claims, conversion of claims into shareholders' rights. Right to due process of law. Public institution, rights of the founder of a public institution. Retrospective effect of statutory provision on anticipated rights of legal entities. Constitutional Court, constitutional review of a measure taken by the legislator, from the viewpoint of the reasons which dictated the same at the time of its enactment. Principle of law-governed and social state. Right to social security. Right to health insurance. Right of free enterprise, entrepreneurship. Prohibition of retrospective effect of legal acts. Concurring opinion of a judge of the Constitutional Court.
Legal basis:
Constitution, articles 2, 23, 50, 51, 74, 155. Health Care and Insurance Act (ZZVZZ), articles 12, 13, 14, 15, 17, 18, 55, 56, 57, 60, 69. Institutions Act (ZZ), articles 4, 49. Constitutional Court Act (ZUstS), articles 26, 21.
Document in PDF:
The full text:
U-I-90/95
4.12.1997

D E C I S I O N

At the meeting of 4 December 1997 concerning the procedure for the evaluation of constitutionality commenced on the initiative of the Health Insurance Bureau of Slovenia, represented by its director Franc Košir, the Constitutional Court

made the following decision:

The provision of paragraph 2 of article 6 of the Act on Measures for Rehabilitation of Economic Position of TAM Maribor d.d. and its Affiliated Companies and Avtomontaža AM BUS d.o.o. Ljubljana (Official Gazette of RS, Nos. 20/95, 70/95), according to which debts due to the Health Insurance Bureau of Slovenia by business corporation TAM Maribor d.d., amounting to SIT 288,620,650, and by business corporation Avtomontaža AM BUS d.o.o., Ljubljana, amounting to SIT 42,055,568, shall be converted into a shareholding interest in each of the said companies, is not in disagreement with the Constitution.

R e a s o n s :

A.

1. The initiator disputes paragraph 2 of article 6 of the Act on Measures for Rehabilitation of Economic Position of TAM Maribor d.d. and its Affiliated Companies and Avtomontaža AM BUS d.o.o. (hereinafter: "the ZUS TAM"), according to which debts due according to the balance sheet of 31 December 1994 by the company TAM Maribor, amounting to SIT 288,620,650, and by the company AM BUS Ljubljana, amounting to SIT 42,055,568, shall be converted into shareholding interest and/or stocks of the said business corporations. The initiator considers that article 6 of the ZUS TAM is in the disputed section in disagreement with article 2 and article 74 of the Constitution. By changing into shareholding interests the amounts due to the initiator by both debtors, the legislator supposedly forced the initiator into accepting ownership of capital which is highly questionable when considering the acquisition of funds for the ensuring of insurance and of corresponding rights.

2. The initiator states that it has the status of a public institution founded for the purposes specified in article 1 of Health Care and Insurance Act (Official Gazette of RS, Nos. 9/12, 13/92 - hereinafter: "the ZZVZZ"). With the disputed provision, the legislator is claimed to have actually seized the funds designed to be used for health care and insurance and to have transferred them outside the field of activities of the initiator. According to the ZZVZZ, the initiator is claimed to have the right to autonomously manage the said funds and through them to ensure the carrying out of its activities. The actual decrease in the earmarked funds is according to the assertions of the initiator in conflict with article 51 of the Constitution, and any further acts of modification of relations based on law of obligations into shareholding interests in debtors could, as is claimed by the initiator, lead to the stopping of its basic activity.

3. The disputed section of the provision of article 6 of the ZUS TAM is claimed to be in conflict with article 155 and article 23 of the Constitution, supposedly for interference with the accrued rights of the initiator in accordance of applicable laws and regulations to collect from debtors the outstanding amounts due for payment.

4. The initiator proposes to the Constitutional Court to accept the initiative and assess the constitutionality of the disputed provision.

5. The National Assembly (hereinafter: "the NA") did not reply to the claims made by the initiator.

B.

6. The Constitutional Court accepted the initiative and, finding the conditions specified in paragraph 4 of article 26 of Constitutional Court Act (Official Gazette of RS, No. 15/94 - hereinafter: "the ZUstS") fulfilled, immediately proceeded to decide on the merits of the case.

7. Paragraph 2 of article 50 of the Constitution imposes upon the State the duty of regulating compulsory health insurance and of ensuring the proper administration thereof. For this obligation be fulfilled, the ZZVZZ was passed, and by the latter the initiator was founded (paragraph 1 of article 69 of the ZZVZZ) as public institution (paragraph 2 of article 12).

According to paragraph 1 of article 4 of Institutions Act (Official Gazette of RS, No. 12/91 - hereinafter: "the ZZ"), the initiator is a legal person, and its rights, obligations and responsibilities are regulated by statute or foundation charter. Funds for ensuring compulsory health insurance are secured for the benefit of the initiator by contributions of employers and other obligers defined in the ZZVZZ (article 45 of the ZZVZZ).

In the framework of administration and management, the initiator is empowered to propose the levels of contributions (article 55), by a general act to specify the criteria for determination of an increased rate of contributions of obligers whose expenses arising from professional injuries and diseases during each particular year exceed the average amount per insured person in a branch of economy (article 56), to set lump-sum contributions of obligers referred to in items 12, 13, 14, 21 of articles 15, 17 and 18 (article 57), in accordance with the Act on Social Security Contributions (Official Gazette of RS, No. 5/96) to calculate the contributions and collect the payments (article 58), to determine the criteria and conditions under which in the case of certain parties under the obligation to pay health insurance contributions the latter may be decreased or written off (article 60). According to article 59, the initiator is also empowered to carry out inspection over the calculating and payment of contributions.

8. By enacting the disputed provision, the legislator interfered with the initiator's right - within the framework of administration and management of compulsory insurance funds - of collecting from the obligers TAM Maribor and AM BUS Ljubljana the amounts due and of autonomously deciding concerning the possibility of postponing the payment, decreasing, or writing off the claims towards the said companies.

9. By interfering with the initiator's right of autonomous administration and management of the funds for compulsory health insurance, that is, by interfering with the sources of finance determined by statute, the legislator did not violate the Constitution. Article 50 of the Constitution imposes upon the State the duty of regulating compulsory health insurance and of ensuring the proper administration thereof. To carry out the said constitutional task, the State by the ZZVZZ founded the initiator as public institution. With the same law it defined the sources of finance for the activities of the same. In this connection the State, in so far as the founder, reserved for itself the right of determination of the level of individual sources and in this respect restricted the initiator's role just to the preparation of proposals. The right of the founder to decide on the level of funds from individual sources derives from its role as defined in article 50 of the Constitution, and from article 49 of Institutions Act (Official Gazette of RS, No. 12/91 - hereinafter: "the ZZ"), according to which it is subsidiarily liable for the liabilities of the Bureau. Such legal status of the State, namely of being the founder of the initiator, allows the former to adjust the sources of funds as and when appropriate, as dictated on the one hand by the scope of rights of beneficiaries arising from compulsory health insurance and defined by the ZZVZZ, and the actual circumstances existing in the parties under the obligation to pay the contributions. The State may and should adjust the disproportions between such scope of rights arising from compulsory health insurance as is defined by statute and the capacity of the initiator to fulfil such obligations from the sources of funds defined by statute by determining the level of sources of finance and via its responsibility for fulfilment of the obligations of the initiator. From such nature of the relationship between the State as founder of the initiator and the initiator it follows that, when it has good and concrete reasons, the State may by individual measures interfere with the sources of funds earmarked for financing the initiator's public service in the field of compulsory health insurance - also by converting the claims into shareholding interests, and in this connection with its autonomy in so far as legal form is concerned.

10. The legislator had good and concrete grounds for adopting the measure enacted in the disputed provision, and in doing so it did not act arbitrarily. In addition, the measure of compulsory conversion of the initiator's claims into shareholding interest in both business corporations is proportionate to the aim pursued by it. From conclusions of the managing board of the company TAM Maribor and the conclusions of the Government as the proposer of the ZUS TAM it follows that outstanding debts of TAM Maribor and of its affiliated companies and of AM BUS Ljubljana exceed by several times the real market value of their property and that four fifths of real property of the company TAM and of its affiliated companies are mortgaged to the benefit of creditor banks. In such situation of the property of the company TAM and having regard to the fact that the costs of bankruptcy proceeding and the claims of workers arising from wages to be paid from bankruptcy estate should be paid out on priority basis, the creditors who did not secure their claims by mortgages would not have any real possibility to be paid back their claims. The Government as the proposer of the disputed law judged that it was not be expected for the two over-indebted entities to be able in the period of five to ten years on the basis of their business and income to cover the identified losses and to pay the outstanding debts. At the same time, the Government established that, based on market demand for products of the company TAM, there was a possibility that about 2200 workers might remain employed, and 500 workers in the company AM BUS (Journal, No. 7/95). By converting the initiator's claims into the stocks of the company TAM and into a business share in the company AM BUS, and by other measures introduced by the disputed law, the legislator tried to prevent the instituting of bankruptcy proceeding in the over-indebted companies. The preventing of the instituting of bankruptcy proceeding was in the public interest, that is, aimed at improving the economic position of the over-indebted companies and preserving the jobs for the majority of the workers employed in the said two companies. At the same time, the legislator with the disputed provision averted the impeding danger that, in the event of execution or of bankruptcy, the initiator would lose the right to the claims against the over-indebted companies arising from unpaid contributions for compulsory health insurance. Thus, the act of conversion of the initiator's claims into shareholding interests was enacted by the legislator in the public interest, to preserve the jobs for approx. 2700 workers, which is why it is not in disagreement with principles of law-governed state and of social state (article 2 of the Constitution). It is true from the viewpoint of legal form, that, in the event of bankruptcy of the company TAM or AB BUS, the initiator in so far as creditor would have been in a better position than in the case of being a party entitled to shareholders' rights, but it is from balance sheet data evident that it would be unrealistic to expect the asserting of its claims in the framework of bankruptcy proceeding.

11. In this connection it should be said that the initiator draws attention just to the possibility that, in the case if the legislator should continue to pass such measures, its financial position could deteriorate and endanger the fulfilling of its obligations, but it has failed to provide any evidence whatsoever of the claim that, due to the measure enacted by the disputed provision, it has been prevented from, or has experienced greater difficulties in ensuring the basic health care scheme. The Constitutional Court does not doubt that the disputed measure has an effect, at least temporarily, on financial position of the initiator, but the said effect is, having in mind the actual circumstances which dictated its enacting, so just in appearance. Due to complete insolvency and excessive indebtedness of the debtors, the claims of the initiator at the time of the coming into force of the measure could not be collected by bringing action against them. Any deficit, resulting from the fact that claims could not be collected by lawsuit, and from the enacting of the measure of conversion of the claims, which would show in the process of ensuring the rights of beneficiaries arising from compulsory health insurance as defined in the ZZVZZ, must be made up by the State from public funds, even if by doing so it would exceed the funds assigned in the budget for the purpose of covering the debts of the initiator.

12. The Circuit Court in Maribor on 3 July 1996 instituted bankruptcy proceeding against the company TAM and its affiliated companies, but this fact cannot have any impact on the evaluation of constitutionality of the disputed provision.

Whether at the time of initiating the bankruptcy proceeding the conversion was effected or not is also not of any importance for the evaluation of constitutionality of the controversial provision. The constitutionality of the controversial measure should be assessed from the viewpoint of those reasons which had dictated it at the time of its enacting, rather than from the viewpoint of subsequent events, which the legislator could not have foreseen.

13. The initiator is a public corporation designed to deliver a public service in the field of compulsory health insurance. In so far as public corporation it is not profit-oriented and is not designed to carry out activities on the market with a view to making profit. Its rights, obligations and responsibilities are regulated by statute or foundation charter, which is why the legislator did not violate article 74 of the Constitution by enacting the disputed provision.

14. Paragraph 1 of article 155 of the Constitution prohibits retrospective effect of legal acts. A particular provision of a law may only exceptionally be given retrospective effect, provided that no accrued rights of legal entities are infringed thereby, and when this is in the public interest. Retrospective effect of individual provisions of a law can only be prescribed by the relevant statute itself. A law, regulation or a provision thereof has retrospective effect when the date of its coming into force is set sometime before the effective date of the law, and when such effect of a law, regulation or provision thereof interferes with legal situations or legal facts which occurred during the period of validity of some previous legal norm. The constitutional principle of trust in law (article 2 of the Constitution), however, does not protect just accrued rights but, to a certain extent, the anticipated rights as well. In the case under consideration, thus, the Constitution protects also the rights relating to basic health insurance, which are defined by the ZZVZZ on the basis of articles 50 and 51 of the Constitution. The conversion of the initiator's rights arising from law of obligations into shareholders' rights does not have retrospective effect but is prospective in effect. The initiator did not provide any such evidence as would prove that, due to the said measure, its possibilities concerning the ensuring of rights arising from compulsory health insurance were reduced, and that this was the reason why it could not ensure them in the scope and with the content determined by the ZZVZZ. Such interference with anticipated rights of the initiator and the rights of the parties entitled to basic health care as would be in disagreement with the Constitution would be involved only in the case if, due to the effect of the disputed provision of the ZUS TAM, the initiator would not be able to ensure the coverage of the costs of compulsory health case in the scope and in the amount defined by the ZZVZZ, and if the State would not provide to the initiator the shortfall. From the foregoing it follows that the disputed provision of the ZUS TAM is not in disagreement either with article 155 of the Constitution or with article 50 of the Constitution.

15. The initiator asserts that, by the enacting of compulsory conversion of claims, the legislator supposedly made it impossible for it to collect from the companies TAM and AM BUS the outstanding debts, but it has failed to specify the activities which it supposedly already carried out prior to the coming into force of the measure concerned. As already stated, the legislator had good and concrete grounds for enacting the conversion, and in this way the legislator did not interfere with the essence of the initiator's rights. Impossibility of collecting the claims through lawsuit, then, is just the consequence of the claims extinguished by conversion, which is why it does not constitute interference with the initiator's constitutional right to due process of law under article 23 of the Constitution.

16. The Constitutional Court did not find any of the asserted violations of the Constitution, which is why it decided as is evident from the adjudication hereof.

C.

17. This Decision was made on the basis of article 21 of the ZUstS by the Constitutional Court in the following composition:
Dr. Lovro Šturm, President, and Dr. Peter Jambrek, Dr. Tone Jerovšek, Matevž Krivic, M.L., Janez Snoj, M.L., Dr. Janez Šinkovec, Franc Testen, Dr. Lojze Ude and Dr. Boštjan M. Zupančič, the judges. The Decision was reached with six votes in its favour and three votes against it. Votes against were cast by judges Jambrek, Jerovšek and Šturm. Judge Krivic gave a concurring opinion. Judge Jerovšek will prepare a dissenting opinion.


P r e s i d e n t :
Dr. Lovro Šturm
Type of procedure:
review of constitutionality and legality of regulations and other general acts
Type of act:
statute
Applicant:
Health Insurance Bureau of Slovenia
Date of application:
26.05.1995
Date of decision:
27.11.1997
Type of decision adopted:
decision
Outcome of proceedings:
establishment – it is not inconsistent with the Constitution/statute
Document:
AN01379