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