THE CONSTITUTIONAL COURT OF                                    
                  THE REPUBLIC OF LITHUANIA                                     
                                                                                
                                                                                
                           RULING                                               
                                                                                
                                                                                
  On the compliance of Article 292 of the Civil Code of the                     
     Republic of Lithuania with the Constitution of the                         
                    Republic of Lithuania                                       
                                                                                
                                                                                
                   31 March 1994, Vilnius                                       
                                                                                
      The Constitutional Court of the Republic of Lithuania,                    
composed  from  the  Justices of  the  Constitutional  Court                    
Algirdas  Gailiūnas,  Kęstutis Lapinskas,  Zigmas  Levickis,                    
Pranas  Vytautas  Rasimavičius,  Stasys  Stačiokas,  Teodora                    
Staugaitienė, Stasys Šedbaras and Juozas Žilys,                                 
     the secretary of the hearing - Rolanda Stimbirytė,                         
      pursuant to Part 1, Article 102 of the Constitution of                    
the  Republic of Lithuania and Part 1, Article 1 of the  Law                    
on the Constitutional Court of the Republic of Lithuania, in                    
its   public   hearing  of  24  March  1994  conducted   the                    
investigation  of Case No 4/94 subsequent  to  the  petition                    
submitted  to  the Court by College of Civil  Cases  of  the                    
Supreme  Court  of the Republic of Lithuania  requesting  to                    
investigate  if  Article  292  of  the  Civil  Code  is   in                    
compliance   with  the  Constitution  of  the  Republic   of                    
Lithuania.                                                                      
                                                                                
                                                                                
     The Constitutional Court                                                   
                         has established:                                       
      College  of  Civil Cases of the Supreme Court   on  10                    
January  1994  investigated in cassation procedure  a  civil                    
case  upon  the  complaint  lodged by  defendant  Anatolijus                    
Volkovas  against  the decision passed by Klaipėda  District                    
Court  on  3 December 1993 which had complied with the  suit                    
brought  by  plaintiff  Igoris  Vysockis  against  defendant                    
Anatolijus  Volkovas  pertaining to repayment  of  the  loan                    
amounting to 457.5 litas.                                                       
      College  of Civil Cases while examining the lawfulness                    
and  validity of this decision, by its ruling suspended  the                    
investigation   of   the  civil  case  and   addressed   the                    
Constitutional  Court  with the request  to  investigate  if                    
Article  292  of  the Civil Code is in conformity  with  the                    
Constitution.                                                                   
      In  the ruling the College of Civil Cases grounds  its                    
request  on the fact that the Court complied with  the  suit                    
pursuant to the loan contract for the sum of $ 200 USD which                    
had  been concluded between the parties (Article 291,  Civil                    
Code).  In  the argumentation of the contracting parties  as                    
well as complaints it is stated that the plaintiff gave  the                    
defendant  a loan of $ 50 USD and his requirements exceeding                    
the  above  mentioned sum are based on  the  right  to  take                    
interest  on the loan, i.e. on the provisions of Article  46                    
of  the  Constitution which establish the right  to  private                    
ownership  and freedom of individual economic activity.  The                    
subject matter of the dispute is regulated in Article 292 of                    
the Civil Code which limits the realization of the right  to                    
ownership. This provides the basis for maintaining that  the                    
contents  of said Article contradicts the provision  of  the                    
first part of Article 46 of the Constitution.                                   
      In  the  preliminary investigation of  the  case,  the                    
petitioner's representative explained that the  contents  of                    
the right to ownership includes management, use and disposal                    
of  property. The use of money similarly to the use  of  any                    
other  article (thing) manifests itself in its utilizing  in                    
order  to  satisfy  the owner's needs as  well  as  to  gain                    
profit.  Article  292  of the Civil Code  provides  for  the                    
possibility  to take interest in compliance  with  the  loan                    
contract, i.e. to gain profit from the use of money only  in                    
cases prescribed by law as well as executing loan operations                    
with  respect to public mutual aid funds and city pawnshops.                    
This norm restricts the possibility to realize the right  to                    
ownership to full extent.                                                       
      Chairman  of the Seimas of the Republic of  Lithuania,                    
representative  of the party concerned, in  the  preliminary                    
investigation  of the case informed that the draft  law  "On                    
Amending  and  Appending the Civil Code of the  Republic  of                    
Lithuania" is under consideration in the Seimas at  present,                    
which  establishes the following wording of Article  292  of                    
the  Civil Code: "The amount of interest according  to  loan                    
contract  may be determined by agreement between parties  if                    
the law does not prescribe otherwise".                                          
                                                                                
     The Constitutional Court                                                   
                    holds that:                                                 
                                                                                
      In  Article 1 of the Civil Code which was  adopted  in                    
1964  and  is now in force it is established that  it  shall                    
regulate property relations and related to them non-property                    
relations.  In  accordance with this  Code,  the  basis  for                    
property   relations  was  socialist  economic  system   and                    
socialist property of means of production, and the state had                    
to provide conditions for the increase of this property. The                    
Code  also  provided for individual property  as  one  which                    
derived  from  socialist property. It was  established  that                    
individual  property  may  be  only  articles  of   personal                    
consumption,  articles  of domestic utility  and  subsidiary                    
household  articles, dwelling-house and labour savings.  The                    
basis  of  this  property is earned income. Property,  being                    
private  ownership of citizens, may not  be  the  source  of                    
unearned  income. Thus, the right to private  ownership  was                    
denied.  In compliance with these provisions of Article  292                    
of  the Civil Code it was established that it is allowed  to                    
take  interest  according to loan  contract  only  in  cases                    
prescribed by laws.                                                             
      The Supreme Council of the Republic of Lithuania by 11                    
March  1991 Act has restored independent State of  Lithuania                    
and  on the same day confirmed the Provisional Basic Law  of                    
the  Republic of Lithuania. In Article 44 of this Law it was                    
stipulated that the economy of Lithuania shall be  based  on                    
the  property  of  the  Republic of Lithuania,  which  shall                    
consist  of  the  private  property  of  its  citizens,  the                    
property  of  groups  of citizens, and  state  property.  In                    
Article  46 of the 1992 Constitution it is established  that                    
Lithuania's economy shall be based on the right  to  private                    
ownership,  freedom  of  individual economic  activity,  and                    
initiative.  Thus, by these constitutional  provisions,  the                    
right  to private ownership has found its way back into  the                    
legal system of the state.                                                      
      In  Article 23 of the Constitution of the Republic  of                    
Lithuania it is set forth that property shall be inviolable,                    
the  rights  of ownership shall be protected  by  law.  That                    
means  the right of the owner to manage, use and dispose  of                    
this  property and the duty of other individuals to restrain                    
from    behaviour    violating   ownership    rights.    The                    
implementation of property owner's rights is also guaranteed                    
by   the   freedom  of  individual  economic  activity   and                    
initiative  which  are  established in  the  first  part  of                    
Article  46  of  the Constitution. Thus, the property  owner                    
does not only have the right to freely use his property  and                    
to  gain  profit  but also to delegate his rights  to  other                    
individuals by way of contracts. Therefore, contracts may be                    
concluded which would ensure use of property (e. g. contract                    
of  insurance), confirm management of property (e. g.  lease                    
contract),  certify disposal of property (e. g. contract  of                    
purchase).  The  freedom  of  making  contracts  means  that                    
contracting  parties of their free own will shall  establish                    
mutual rights and duties.                                                       
     One of the forms of civil contracts is a loan contract.                    
By  the  loan  contract  a  loan giver  transfers  into  the                    
ownership  of  a  loan borrower the money or other  articles                    
defined  by  characteristics of sort and the  loan  borrower                    
takes the responsibility of repayment to the loan giver  the                    
same sum of money or the same amount of articles of the same                    
kind and quality for compensation or without it.                                
     The right to getting payment according to loan contract                    
was  already  established in Roman civil law.  Subsequently,                    
this right was interpreted in various ways, however, it  has                    
survived  in  modern  civil law which is  based  on  private                    
ownership. Thus, in compliance with traditions of civil law,                    
the  contracting  parties may agree about  the  compensation                    
(interest).                                                                     
      The  freedom  of  concluding contracts,  similarly  to                    
property rights, has certain limits. While implementing  his                    
rights  and exercising freedoms, an individual must  observe                    
the  Constitution and the laws of the Republic of Lithuania,                    
and must not impair the rights and interests of other people                    
(Article  28  of  the  Constitution).  Thus,  in  terms   of                    
protecting  the  rights of a loan borrower, there  might  be                    
restrictions in the amount of compensation (interest) which,                    
by the way, have been applied since the times of Roman civil                    
law. In the third part of Article 46 of the Constitution  it                    
is  established  that  the  State  shall  regulate  economic                    
activity  so  that  it  serves the general  welfare  of  the                    
people.  Thus,  when  a  person, while  exercising  property                    
rights, takes part in economic activity, he becomes  one  of                    
special  entities  of economic relations, and  then  special                    
restrictions  prescribed by laws  may  be  applied  to  him.                    
However,  even such entities according to their  status  may                    
freely  conclude contracts. Thus, said restrictions  do  not                    
deny the principle of freedom in concluding contracts.                          
      The  provision  of  Article  292  of  the  Civil  Code                    
establishing,  that  according  to  loan  contract   it   is                    
permissible  to  take interest only in cases  prescribed  by                    
laws,   actually   means  prohibition  to  freely   conclude                    
contracts  and,  hereby, restricts  the  rights  of  private                    
property owner and other persons, their economic freedom and                    
initiative,  therefore, this Article contradicts  the  first                    
part  of  Article 46 of the Constitution of the Republic  of                    
Lithuania.                                                                      
      Conforming to Article 102 of the Constitution  of  the                    
Republic of Lithuania as well as Articles 53, 54, 55 and  56                    
of  the  Law on the Constitutional Court of the Republic  of                    
Lithuania,  the  Constitutional Court  of  the  Republic  of                    
Lithuania has taken the following                                               
                          ruling :                                              
                                                                                
      To recognize that Article 292 of the Civil Code of the                    
Republic of Lithuania contradicts the first part of  Article                    
46 of the Constitution of the Republic of Lithuania.                            
                                                                                
      This  Constitutional Court ruling  is  final  and  not                    
subject to appeal.                                                              
      The ruling is promulgated on behalf of the Republic of                    
Lithuania.                                                                      
                                                                                
     Justices of the Constitutional Court:                                      
                                                                                
Algirdas     Gailiūnas                Kęstutis     Lapinskas                    
Zigmas Levickis                                                                 
                                                                                
                                                                                
                                                                                
Pranas Vytautas Rasimavičius  Stasys Stačiokas         Teodora                  
Staugaitienė                                                                    
                                                                                
                                                                                
                                                                                
Stasys Šedbras           Juozas Žilys