Pl US 39/01


Although  the right to own property and the freedom to  conduct
business  are  classified by the Charter of Fundamental  Rights
and  Freedoms and perceived as rights of different  categories,
the first as fundamental, in contrast to the second as economic
and social, nonetheless they are closely related to each other.
The freedom to conduct business is even usually described as  a
freedom derived from the right to property. This opinion can be
considered  only  partially correct.  Conducting  business  and
other  economic  activity  are certainly  primarily  activities
aimed  at  creating  property values necessary  to  secure  the
necessities  of life. Their everyday result is property  (in  a
modern  economy,  money) which is protected by the  fundamental
right   to   property.  Moreover,  the  ownership  of  property
(capital)   is  a  prerequisite  for  beginning  business   and
continuing it. In addition, of course, conducting business is a
way  of personal and group self-realization. The property right
even,  if it is not to be a self-serving concept, itself  leads
to the exercise of other fundamental and other rights.


   The Plenum of the Constitutional Court decided on a petition
from  a  group  of deputies to annul § 13 of Act  no.  256/2000
Coll., on the State Agricultural Intervention Fund and Amending
Certain  Other  Acts (the State Agricultural Intervention  Fund
Act),  and § 4 para. 3, § 5 para. 3, § 7 and § 13 of government
directive  no.  114/2001  Coll., on  setting  sugar  production
quotas  for  the quota years 2001/2002 to 2004/2005,  with  the
participation of the Chamber of Deputies and the Senate of  the
Parliament  of  the  Czech Republic and the government  of  the
Czech  Republic as parties to the proceedings and the ombudsman
as a secondary party to the proceedings, as follows:
   The provisions of § 4 para. 3, § 5 para. 3, § 7 and § 13  of
government  directive  no. 114/2001  Coll.,  on  setting  sugar
production  quotas for the quota years 2001/2002 to  2004/2005,
are  annulled as of the day this judgment is published  in  the
Collection of Laws.
   The petition to annul § 13 of Act no. 256/2000 Coll., on the
State Agricultural Intervention Fund and Amending Certain Other
Acts (the State Agricultural Intervention Fund Act), is denied.


                           REASONING

I.
In its petition, submitted under Art. 87 para. 1 let. a) and b)
of  the Constitution of the Czech Republic (the "Constitution")
and  §  64  para.  1 let. b) and para. 2 let.  b)  of  Act  no.
182/1993  Coll.,  on  the Constitutional Court,  the  group  of
deputies  claims  that Act no. 256/2000  Coll.,  on  the  State
Agricultural Intervention Fund and Amending Certain Other  Acts
(the  State  Agricultural Intervention Fund  Act),  forbid  the
manufacture of agricultural goods. They find its provisions  to
be inconsistent with the freedom to conduct business under Art.
26  of  the  Charter  of Fundamental Rights and  Freedoms  (the
"SCharter"). Under the Charter, the right to conduct  business,
like  the  conduct of certain professions and  activities,  may
only  be  limited  by  statute, or  conditions  set  for  them;
however,  a  complete  ban is not possible.  According  to  the
petitioner,  the  penalty  levy  of  115%  of  the  minimum  or
regulated   price  of  an  agricultural  product  imposed   for
exceeding  an  individual  production  quota  (§  13   of   the
Agricultural Intervention Fund Act) represents such a ban. This
is a penalty that is applied to conduct not expressly forbidden
by  law.  Regulation  through  production  quotas  led  to  the
creation   of   a  preferred  category  of  "strategic"   sugar
producers, without other producers being able to influence  the
selection.  When  this differentiation is  connected  with  the
freedom to conduct business, an inequality arises under Art.  1
and  Art. 3 para.1 of the Charter. This inequality is reflected
in  the  payment-free  allocation of  production  quotas  among
current  producers,  and  only  a  small  reserve  remains  for
allocation  among other potential producers. According  to  the
group  of  deputies,  one may omit those producers,  owners  of
facilities, who renovated them at great expense in  the  period
before  the Act went into effect and did not produce  sugar  in
the  reference period. Those who purchased facilities are in  a
similar position. Discrimination between entrepreneurs with  an
assigned production quota and entrepreneurs without one creates
discrimination in property rights. Under Art. 11 of the Charter
this  has  the  same  statutory  content  and  protection.  The
aforementioned  owners of production facilities  are  de  facto
legally  forbidden to produce the commodity in  question  by  a
decision of the state, and without compensation. Their property
rights  are  devalued by the application of production  quotas,
whereby  they are given different content and their  protection
is   reduced.  The  group  of  deputies  points  out  that  the
government has previously tried to regulate sugar production by
directive no. 51/2000 Coll., which provides measures and  state
participation  in  the  creation of conditions  to  ensure  and
maintain  production of sugar beet  and sugar and stabilization
of the sugar market. Although the Constitutional Court annulled
this   regulation  by  judgment  no.  96/2001  Coll.,  it   was
nevertheless in effect from 14 March 2000 to 12 March 2001.  In
that  period  it  created unfavorable conditions  for  any  new
applicants  for  beginning  production  and  subsequently   for
allocation  of a quota under government directive no.  114/2001
Coll.
   The group of deputies acknowledges that the legislature,  in
issuing  ordinary  laws, is supposed to take into  account  the
general interest in regulating relationships in sectors of  the
economy,  but on the other hand it is supposed to consider  the
public  interest. Of course, any intervention  must  observe  a
balance  between  the general interest and  individual  rights.
There  must be proportionality between the means used  and  the
aims  pursued.  Otherwise, as the Constitutional Court  already
emphasized in its judgment of 15 February 1994, file no. Pl. US
35/93 (promulgated under no. 49/1994 Coll.), the regulation  in
question  comes  into  conflict with Art.  4  para.  4  of  the
Charter.  According  to  the group of deputies,  regulation  of
agricultural production is in the public interest, and not only
in connection with the preparations for entry into the European
Union.  However, the State Agricultural Intervention  Fund  Act
restricts  the  freedom  to  conduct  business  in  agriculture
through  production  quotas  in  a  disproportionately  general
manner, as it does not specify a range of agricultural products
which can be subject to regulation. Thus, it empowers the State
Agricultural  Intervention Fund (the "Fund")  to  interfere  in
producers' rights without more detailed statutory delimitation.
This creates a danger of abuse. The group of deputies reads the
statutory reference to international treaties (§ 1 para. 2)  as
a reference to European Community regulations, in particular EC
Council  Directive  no.  2038/1999.  The  regulation  of  sugar
production which they create applies for only a limited period,
whereas  the State Agricultural Intervention Fund presumes  the
repeated, and thereby unlimited application of quotas.
   The  group of deputies concludes that there is a  denial  of
judicial  review  (Art.  36  of the  Charter)  in  the  express
restriction (§ 5 para. 5 of the Agricultural Intervention  Fund
Act)  of application of the Administrative Procedure Code  only
to applications for subsidies and not to other decision making,
including  decision  making  on the  allocation  of  quotas  or
imposition of penalty levies.
   The group of deputies points out, that if the Fund specifies
a   reserve  level  which  is  published  in  the  Ministry  of
Agriculture  Bulletin, this must be considered unconstitutional
sub-statutory delegation for the creation of law (§ 4  para.  3
of  government directive no. 114/2001 Coll.). It also considers
unconstitutional the authorization of the Ministry  of  Finance
to  set the minimum price of sugar. In both cases it relies  on
Constitutional  Court judgment no. 96/2001 Coll.,  under  which
the  legislature  may not delegate to the executive  branch  an
area  of  regulation of relationships designated for  statutory
regulation,  and  thereby actually resign from its  legislative
duty;  no  more  can  the executive branch  assume  this  right
itself.  Therefore, both provisions are inconsistent with  Art.
79  of  the Constitution, the first also with § 12 para. 3  and
the  second  with § 12 para. 4 of the Agricultural Intervention
Fund Act.
   The  contested government directive also does not  delineate
any  quality  characteristics of the sugar to which  production
quotas  are  applied.  The  footnote reference  to  decree  no.
334/1997 Coll., which implements § 18 let. a), d), j) and k) of
Act  no. 110/1997 Coll., on Foodstuffs and Tobacco Products and
Amending  and Supplementing Certain Related Acts,  for  natural
sweeteners, honey, non-chocolate sweets, cocoa powder or cocoa-
sugar  mixture, chocolate and chocolate sweets, as  amended  by
decree no. 94/2000 Coll. cannot be considered such delineation.
The  Constitutional  Court  has  ruled  that  the  purpose   of
footnotes is only to clarify regulations and that they have  no
legal significance. The description of the system of production
quotas, being incomplete, does not meet statutory requirements.
   In  the  expansion of the petition, which the Constitutional
Court  permitted,  the  group  of deputies  also  requests  the
annulment of § 7 of government directive no. 114/2001 Coll. The
petitioner   cites   as   grounds  the   inadequate   statutory
authorization for delegating the allocation of sugar production
quotas  and  reserves from the government to the Fund,  without
the  State  Agriculture Intervention Fund  Act  giving  express
authorization for it. Clear authorization is only contained  in
§  4,  7 and 16 of government directive no. 114/2001 Coll.  The
petitioner  considers the Fund's authorization to make  use  of
the  quota system inadequate under § 1 para. 2. let. d) of  the
Agricultural  Intervention  Fund  Act.  On  the  contrary,   in
relation  to  production quotas, various areas of  jurisdiction
are  entrusted to the government [§ 3 para. 3 let. a), § 12  of
the Agricultural Intervention Fund Act]. The provisions of § 4,
6  and  7  of  government  directive  no.  114/2001  Coll.  are
unconstitutional, as they establish illegal delegation  of  the
exercise  of  state  power. Moreover, the  status  of  a  state
administration  body is expressly given to the  Fund  only  for
decision  making  about  subsidies (§  5  of  the  Agricultural
Intervention   Fund  Act).  The  group  of  deputies   proposed
annulment  of  § 13 of government directive no. 114/2001  Coll.
due  to its inconsistency with Art. 79 of the Constitution,  as
the  government  delegated its statutory duty to  another  body
when  it  authorized the Ministry of Finance to set  a  minimum
price  for  sugar  introduced into  the  market  in  the  Czech
Republic,  which  violated § 12 para.  4  of  the  Agricultural
Intervention Fund Act.

II.
The  Chamber  of  Deputies and the Senate, as  parties  to  the
proceedings,  submitted  position  statements  concerning   the
petition  of  the group of deputies, (§ 69 of Act no.  182/1993
Coll.,  as amended by later regulations). Statements concerning
the petition were also submitted by the government of the Czech
Republic,  the Ministry of Agriculture, the State  Agricultural
Intervention Fund and the ombudsman.

III.
The   procedural  requirements  for  proceedings   before   the
Constitutional Court have been met.
…..

IV.
The  Plenum of the Constitutional Court has twice addressed the
issue  of  agricultural production quotas in its  judgments  on
petitions for the annulment of legal regulations.
   In judgment no. 96/2001 Coll. (file no. Pl. US 45/2000 of 14
February 2001), it granted the petition of Cukrovar V.,  s.r.o.
to   annul  government  directive  no.  51/2000  Coll.  In  the
Constitutional Court's opinion, the government  did  not  issue
the  directive for implementation of and within the  bounds  of
Act no. 252/1997 Coll., on Agriculture, as it is required to do
by  Art. 78 of the Constitution. The introductory provisions of
the  Act  (§  1  to  2)  do not presume restrictions  on  doing
business in agriculture (Art. 26 and 41 of the Charter) in  the
form of production quotas. The Constitutional Court did so with
the knowledge that the Parliament of the Czech Republic had, in
the  meantime,  passed  Act no. 256/2000  Coll.,  which  allows
production  quotas, but the reviewed government  directive  had
not been passed in order to implement that.
   In its judgment no. 410/2001 Coll. (file no. Pl. US 5/01  of
16 October 2001) the Constitutional Court decided on a petition
from  a  group  of deputies to annul government  directive  no.
445/2000 Coll., on setting milk production quotas for the years
2001 to 2005. It partially granted the petition, and annulled §
4  para.  2  of  the  directive  due  to  inadequate  statutory
authorization  to restrict the allocation of production  quotes
from  the  reserve  to  agriculture  operators,  farmers  doing
business in ecological cattle farming and § 14 para. 2  due  to
unconstitutionality  and the illegality of delegating  decision
making  on the amount of the reserve to the Ministry (Minister)
of  Agriculture. However, the Constitutional Court did not find
milk  production  quotas themselves to be  unconstitutional  or
illegal.  In  the  judgment's reasoning of  the  Constitutional
Court found penalty levies under § 13 of Act no. 256/2000 Coll.
to  be  constitutional, but it emphasized  that  the  group  of
deputies  described it as unconstitutional in the reasoning  of
its petition, but did not propose that it be annulled (nor,  in
view  of  the  size  of the group of deputies,  could  it  have
successfully done so).
   In these proceedings, the Constitutional Court will evaluate
a  legal  regulation which is similar to a regulation which  it
already  considered.  The arguments of  the  present  group  of
deputies  are  similar.  Of course, they  do  not  request  the
annulment of the entire implementing government directive,  but
only  selected provisions. In addition, annulment of provisions
of   the   Agricultural  Intervention  Fund  Act  is  proposed.
Therefore, the Constitutional Court should rely on its  earlier
evaluation,  unless  it  finds  a  fundamental  distinction  or
changes  its  legal opinion. The evaluation of the  adjudicated
matter  will therefore relate to the reasoning of judgment  no.
410/2001 Coll.
   The  purpose of applying production quotas is to limit  non-
monopoly production to a desired volume. The motivation for  it
is  an  attempt  to  stabilize prices in  the  markets  without
implementing   price  regulation  or  imposing  a   contractual
obligation  on customers. Market forces do not lead  to  market
stabilization  if they are crippled by massive state  subsidies
and  protectionism. The basis of the regulation is  a  national
(state)  production  quota, which is  allocated  among  current
producers according to a certain key. These producers are  then
banned  from  manufacture (purchase, processing) of  production
over  the  quota, or they are discouraged from  it  by  penalty
levies.  New quotas are not allocated at all, or only a little,
and existing ones may be reduced. The use of quotas in a modern
democratic  state  with a market economy is  rare.  In  western
Europe  they  are applied in agriculture and part of  the  food
industry  which  is  affected  by  customs  protectionism   and
extensive  subsidizing,  which  is  caused  by  both  political
recognition  of the general interest in its prosperity  and  by
the  activities  of  farmers  and agricultural  businesses,  as
strong interest groups. Within the European Community (European
Union) common agricultural policy, this is used today only  for
dairy  products and sugar. The aims and effects  of  a  ban  on
cultivating land or spreading cultivation cultures, for example
of wine, are similar to those of production quotas.
   A  key  issue  in the adjudicated matter, as in  the  matter
decided  by  judgment no. 410/2001 Coll., is the constitutional
permissibility  of a restriction on the amount of  agricultural
production  implemented by a penalty levy  for  overproduction.
The  evaluation in light of fundamental (constitutional)  legal
principles  and  fundamental human  rights  necessarily  slides
toward  a  separate search for answers to individual questions,
as indicated by the petition from the group of deputies and the
cited judgment.
  In its case law, the Constitutional Court refuses to tear the
fundamental principles of a state governed by the rule of  law,
such   as   equality   (Art.  1  of  the   Charter)   and   the
proportionality  of legal regulation (Art. 4  of  the  Charter)
away  from individual human rights and freedoms, such as, here,
the  fundamental right to property (Art. 11 of the Charter) and
freedom to conduct business (Art. 26 of the Charter). It  found
violation  of  fundamental principles to  be  grounds  for  its
intervention only if they were not respected in the  regulation
of the exercise of fundamental rights and freedoms.
   Although  the affected fundamental rights are classified  by
the  Charter  and  perceived as rights of different  categories
(the  first  as  fundamental, in  contrast  to  the  second  as
economic  and social), nonetheless they are closely related  to
each  other.  The freedom to conduct business is  even  usually
described as a freedom derived from the right to property. This
opinion  can  be considered only partially correct.  Conducting
business  and  other economic activity are certainly  primarily
activities  aimed  at  creating property  values  necessary  to
secure  the  necessities  of life.  Their  everyday  result  is
property (in a modern economy, money) which is protected at the
constitutional and international European level by the right to
property.  Moreover, the ownership of property (capital)  is  a
prerequisite  for  beginning business  and  continuing  it.  In
addition,  of course, conducting business is a way of  personal
and  group self-realization. The property right even, if it  is
not  to be a self-serving concept, itself leads to the exercise
of other fundamental and other rights.

V.
In  evaluating  the  system of sugar  production  quotas  as  a
regulation  which  affects the freedom to do  business  we  can
begin  with the evaluation in judgment no. 410/2001 Coll. Under
Art.  26 para. 1 of the Charter everyone has the right to  free
choice of profession and training for it, as well as the  right
to  do  business  and  conduct other economic  activity.  Under
paragraph  2, a statute may provide conditions and restrictions
for  the  exercise  of certain professions or  activities.  The
Constitutional   Court  also  emphasized   that   neither   the
constitutional order nor international treaties on human rights
and  fundamental freedoms forbid the legislature to  limit  the
amount  of production, distribution, or consumption of  values.
Therefore,  the  legislature may (within the  bounds  given  by
constitutionally   guaranteed  fundamental  principles,   human
rights  and  freedoms) in its discretion,  implement  price  or
quantity regulation of production in a particular sector of the
economy, delineate or influence the kind and number of entities
active   in  it,  or  limit  contractual  freedom  in  bringing
production  to  the market or in the purchase of raw  materials
and  production facilities. It found the claim of the group  of
deputies,  that  restrictions may  be  only  qualification  and
similar  prerequisites,  to  be  a  disproportionately   narrow
interpretation of this provision. Moreover, it is evident  from
Art.  41  para.  1  of  the Charter that economic,  social  and
cultural rights, which include the freedom to do business,  can
be   exercised  only  within  the  limits  of  the   law.   The
Constitutional  Court did not find a free market  free  of  all
regulation  to  be  a  value of constitutional  importance.  It
pointed  to  the  limits on the freedom to do business  in  the
European Union, where a market economy is directly declared  to
be  a  constitutional principle in the establishment agreement.
It  also  rejected  the opinion that every restriction  of  the
freedom to conduct business can only be implemented by statute.
For  practical  reasons, the Constitution permits sub-statutory
regulations to be passed for the implementation of statutes, if
the  rules  they provide are within the bounds of the statutes.
The Constitutional Court pointed out that production quotas are
applied  in the agriculture sector of the democratic states  of
western  Europe, and in the European Union countries  according
to  a  common model, and they were not found to be incompatible
with   world-wide  or  European  international,  or,  in  state
systems,  with  a  domestic constitutional  standard  of  human
rights.
   World-wide international pacts on human rights are silent on
the subject of the freedom to conduct business as a fundamental
right.   Nor  does  the  European  post-war  standard  of   the
Convention  for the Protection of Human Rights and  Fundamental
Freedoms, with its protocols, recognize it. Its derivation from
the  guarantee  of property rights and personal  freedom  is  a
disproportionately broad interpretation, which finds  no  basis
in  the case law of the European Court of Human Rights. In  any
case,  the  Court never considered similar legal regulation  of
economic  activities in this branch. It is only the Charter  of
Fundamental  Rights  of  the European  Union  which  recognizes
freedom to conduct business (economic activity), but it assumes
that  it  will  be  restricted by European and  national  laws.
Moreover,  the  Charter did not acquire  the  character  of  an
international treaty; it is only a political declaration. Thus,
only  the  Constitutional Court is qualified to  delineate  the
concept  of  the  Czech  guarantee of the  freedom  to  conduct
business under Art.26 of the Charter.
   Current  foreign  models tend to confirm the  Constitutional
Court's restricted concept of the freedom to do business  as  a
right which the legislature may restrict fairly widely.
    In   Germany  the  Constitutional  Court  does  not  reject
references  to the free choice of profession (Art.  12  of  the
Grundgesetz)  in connection with the manner of  regulation  the
exercise  of  a profession; nevertheless it recognizes  a  wide
range  given  for  regulation by the legislature.  It  takes  a
stricter  stance, in light of which Czech legislative  practice
would probably frequently not hold up, only with regard to many
restrictions and entitlements connected with entry to a  field.
Of  course,  the  German Constitutional court did  not  concern
itself  with  regulation of agricultural  or  other  production
through  production  quotas or similar measures,  as  they  are
regulated  by the primary and directly applicable  law  of  the
European Community.
   A  concept of the constitutionally expressed freedom  to  do
business  on which the group of deputies could rely,  might  be
sought  in  the  case law of the Supreme Court  of  the  United
States until the 1930s. Its concept of contractual freedom  and
the  right  to property basically did not permit any  economic-
political  measures. Of course, since the  time  of  the  Great
Depression  the Supreme Court stopped interfering against  non-
discriminatory  political  intervention  in  relationships   in
individual economic sectors.
   In  judgment  no.  410/2001 Coll., the Constitutional  Court
already stated, peripherally, that a penalty levy under § 13 of
the Agricultural Intervention Fund Act in the amount of 115% of
the  minimum or regulated price is a necessary component of the
production  quota  system.  It is a proportionate  penalty  for
production exceeding an individual quota. It may be added  that
a   possible,   substantially  less   effective   penalty   for
overproduction is mere refusal of public subsidy.
   In response to the objection from the group of deputies that
production of sugar over the production quota is not forbidden,
we  can  say that the legal framework does not expressly forbid
many  activities,  but nevertheless makes them  disadvantageous
and thus discourages people from them. We can point to the fees
imposed on operation of lottery machines or consumption  taxes.
Disadvantaging   a  certain  activity  is   a   routine   legal
instrument,  especially  when  a  direct  ban  implemented   by
administrative  or  criminal sanctions (fines,  a  ban  on  the
practice  of  a  profession  or a  prison  sentence)  would  be
excessive.  In  the  cited judgment, the  Constitutional  Court
stated  that if a ban on over-production is possible,  that  of
course means that there is room to disadvantage it. Finally, we
can  state that even the standard formulation of provisions  on
the  elements of crimes ("Anyone who … will be punished …")  in
the Criminal Code does not literally ban crimes. However, there
is  no  doubt  that  they are banned. Thus,  the  reference  to
unconstitutionality of a penalty levy without an express ban of
the  activity which is discouraged by the penalty levy, can  be
rejected.

VI.
In   judgment  no.  410/2001  Coll.  the  Constitutional  Court
recapitulated  the  European  and  domestic  concept   of   the
fundamental  right to property. It rejected the  position  that
limiting production is an uncompensated expropriation which  is
not  justified  by  the public interest.  It  stated  that  the
petitioner is not denied ownership of milk produced  above  the
production  quota. The penalty levy supporting  the  production
quota system of course makes it less easy or even impossible to
sell  the  overproduction. The Constitutional Court  emphasized
that an entitlement to achieve a certain price on the market is
not,  however,  a fundamental right. It pointed  out  that  the
production  quota system is a form of control  on  the  use  of
property, which is implemented due to the public interest.  The
Constitutional Court emphasized that the restrictive means used
should  be proportionate to the aims pursued. It accepted  that
there  is a public interest in stabilizing the market for  milk
and  found the instruments used to be proportionate. It pointed
out, that other measures regulating the conduct of business  or
other  economic activity also have fundamental effects  on  its
profitability.  It  rejected the opinion  that  the  production
quota  system  makes entry into sectors completely  impossible,
pointing out the possibility of acquiring them through purchase
or  allocation from the reserve. The Constitutional  Court  did
not  feel called upon to evaluate whether the production  quota
system   is   an  optimal  or  economically  most  advantageous
solution.  It pointed out that the production quota  system  is
supposed to prevent overproduction which is caused by extensive
state   agricultural   subsidies.  The   Constitutional   Court
emphasized that applying a production quota system (restricting
the  amount  of  production) pursues  the  public  interest  in
discouraging investment in branches with overproduction. In its
arguments,  the  Constitutional  Court  pointed  out  that  the
European Court of Justice (a body of the EC) also did not  find
a  similar Community measure – a ban on planting vineyards – to
be  a  violation  of the European standard of  ownership  under
Art.1  of  the Protocol to the Convention on the Protection  of
Human Rights and Fundamental Freedoms.
   The  arguments  used  in judgment no. 410/2001  Coll.  at  a
general  level  also apply for evaluating the sugar  production
quota  system under of government directive no. 114/2001  Coll.
In   the  present  matter,  the  group  of  deputies  does  not
emphasize,  in  contrast to the preceding petition,  denial  of
ownership of sugar produced above the limit. With regard to the
Constitutional  Court's rejection, in the  cited  judgment,  of
arguments  about the denial of ownership to the milk  produced,
we  can only add that in sectors where the volume of production
is  regulated by production quota systems, production exceeding
the  limits occurs only to a minimal extent, as sales are  made
basically impossible by the imposition of a penalty levy.
   The  present objection of the group of deputies  is  only  a
reference  to  discrimination between  those  owners  of  sugar
refinery  facilities  who  obtain a production  quota  and  can
produce  without actual restrictions and those who do not  have
one   at  their  disposal  and  for  whom  production  is  made
impossible  as  a result of the application of a penalty  levy.
Therefore,  the  issue  of  inequality  in  property  must   be
addressed  in connection with the issue of general equality  in
the application of the sugar production quota system.
   Therefore,  one  can refer to the case law of  the  European
Court  of Justice only peripherally, and in the form of further
development of the Constitutional Court's arguments in judgment
no. 410/2001 Coll. In its verdict on the complaint Metallurgiki
Halyps  v.  the  Commission (258/81),  the  European  Court  of
Justice   emphasized  that  Community  restrictions  on   steel
production  in the public interest, although they can  endanger
the  profitability  of  an enterprise,  do  not  represent  any
violation  of the right to own property. We can also emphasize,
that  the  European Court of Human Rights never  evaluated  the
general legal provisions of the member states of the Council of
Europe,  which  regulated the volume of economic production  in
view  of their compatibility with the European standard of  the
fundamental right to own property.
    A   limited   application  of  production  quota   systems,
particularly in agriculture, is usual in the European Union and
in some other developed countries with a social market economy.
The  current case law of the constitutional and supreme  courts
of  European Union member states and other democratic countries
governed by the rule of law does not indicated that restricting
production  for  reasons  of stabilizing  market  prices  at  a
certain  level,  if  fairly imposed on all existing  producers,
would be considered incompatible with the national standard  of
property. Of course, this statement does not rule out political
criticism  of  them, which is strong. The use of this  form  of
managing the economy is rare. Of course, there is no reason for
the  Constitutional Court to interpret Art. 11 of  the  Charter
otherwise.  It  cannot  be overlooked  that  one  of  the  main
motivations for introducing a production quota system for  some
agricultural and food products was the creation of a  framework
which is applied in the European Union. Radical intervention by
the Constitutional Court against production quota systems would
be  a  step  toward  a  conception of  domestically  guaranteed
fundamental  rights  which would not hold up  after  the  Czech
Republic's  entry  into  the European  Union,  which  is  being
prepared.
   It  must be emphasized that it is not appropriate to compare
the sugar (milk) production quota system, or a penalty levy for
overproduction  which implements it, with price  regulation  to
the   benefit  of  purchasers,  if  it  is  connected  with   a
contractual  obligation  or  forced  preservation  of  existing
contractual  relationships.   In judgment  no.  231/2000  Coll.
(file  no.  Pl.  US 3/2000 of 21 June 2000), the Constitutional
Court  declared regulation of apartment rent under  decree  no.
176/1993  Coll.,  on rent from apartments and compensation  for
services  provided with the use of an apartment, as amended  by
later  regulations,  to be incompatible  with  the  fundamental
right  to  property, with reference to the fact that  the  rent
paid now does not make it possible for apartment owners even to
maintain  them,  and thus their ownership is devalued.  In  the
case  of  agricultural production quotas, no one is  forced  to
produce  in  a manner so that he would have to pay the  penalty
levy.  On the contrary, the purpose of the penalty levy  is  to
discourage  producers from socially undesirable overproduction.
Therefore, the penalty levy can be better compared to taxes and
fees whose purpose is to raise the price of particular goods or
services  and to lower their consumption (consumption taxes  on
alcoholic  beverages,  cigarettes  or  hydrocarbon  fuels,   or
payments  for the operation of lottery game machines).  Relying
on  constitutional  and  international guarantees  of  property
ownership  in  these cases, where, after the implementation  or
increase  of these taxes, part of the facilities used will  not
be  able  to  be  used as before and will lose  value,  because
demand  will  fall  after price increases, would  certainly  be
considered  unjustified. Evaluation of agricultural  regulation
can  not  take the opposite direction, even if it  is  socially
based  and  the legal evaluation of agricultural overproduction
it leads to is not as strict.
   It  must  also  be  pointed out that  the  decrease  in  the
usability of production facilities – as well as in their  price
–   is   not   considerable,  if  the  production  restrictions
introduced  do  not force existing producers  to  reduce  their
present  production. This also applies generally to  the  sugar
production quotas under evaluation.

VII.
In  judgment  no.  410/2001  Coll.,  the  Constitutional  Court
rejected  the  opinion that the differing  legal  positions  of
those  producers who receive a quota and those who do not apply
for    one    represents    unconstitutional    discrimination.
Differentiation  is a matter of choice. The requirement  for  a
quota application is administrative registration of producers.
  The Constitutional Court also did not agree with the claim of
unconstitutional inequality between existing and new producers.
It  pointed  out  that the disadvantaging of new  entrepreneurs
(who  must purchase quotas from existing producers or  rely  on
the uncertain hope that they will be allocated to them from the
reserve,  while  they are, of course, competing  with  existing
producers)  is  an inseparable part of any restriction  of  the
amount  of  production. The aim of disadvantaging  entry  to  a
sector  is  the  interest  in making undesirable  expansion  of
production capacity impossible.
   Of  course,  one  can  not rule out  discrimination  between
producers  who  apply for a quota and receive it  in  the  full
amount  and  producers to whom it is denied or  allocated  only
partially. The Agricultural Intervention Fund Act § 12 para.  6
requires  that  the manner of initial allocation of  production
quotas  among  applicants  be  governed  by  the  principle  of
equality  and  an objective calculation method. The  government
must  keep in mind this general instruction, which is  no  more
than a reflection of the principle of equality under Art. 1  of
the  Charter  and Art. 1 of the Constitution, when  determining
the  method  of initial allocation of quotas within  individual
production  quota  systems  with regard  to  the  features  and
special  characteristics of the production of commodities,  the
manufacture of which is subject to restriction. Therefore,  the
Constitutional Court can evaluate the key used in the  original
allocation of quotas.
   In  judgment  no.  410/2001 Coll., the Constitutional  Court
recognized  the  one  year  reference  period,  together   with
generally specified component regulations, as proportionate. It
also  acknowledged that even a thoroughly detailed  key,  which
keeps  in mind the regular causes of fluctuations in the volume
of  production,  can not take all circumstances  into  account.
Therefore,  in  individual circumstances, injustice  may  occur
which,  however,  does  not  reach a  level  of  constitutional
gravity.  In  view  of  possible abuse, it  took  a  restrained
position   toward  alleviating  severity  on   the   basis   of
administrative discretion.
  The government presumes that individual production quotas for
sugar  production will be determined on the basis of the volume
of three of the most successful (in terms of amount) production
seasons  of the last five (§ 7 para. 1 of government  directive
no.  114/2001 Coll.), and if production did not take place  for
more  than  three seasons, based on the seasons when production
did   take  place.  In  this  regard  we  can  not  ignore  the
circumstance  which  the  group of  deputies  points  out.  The
position  of individual sugar refinery operators was influenced
by  the  legal  framework of government directive  no.  51/2000
Coll.  before it was annulled by the Constitutional  Court.  It
was annulled due to lack of statutory foundation. One can state
additionally    that   the   legal   framework's    anticipated
differentiation  between  strategic  and  non-strategic   sugar
refineries, including an exhaustive enumeration directly in the
text  of  the  former, whose operators enjoy  immediate  direct
allocation of a production quota, can justifiably be considered
a  suspect  qualification (following the methods of the  United
States  Supreme  Court). It is an arbitrary  and  difficult  to
justify   differentiation  between  individual  sugar  refinery
operators. However, we must here deny the claim of the group of
deputies that the current legal framework also introduces  such
differentiation.
   The  method of calculating individual production quotas only
mitigates undesirable effects under the former legal framework,
which   are  both  unconstitutional  for  formal  reasons   and
factually discriminatory, by not deriving the decisive  average
annual  quota  from  the  volume of production  from  all  five
seasons,  which must be reported in the application under  §  5
para. 3 of government directive no.114/2001 Coll., but presumes
that some sugar refineries were not in operation during all the
seasons,  and  takes into account the three  seasons  with  the
highest  production,  or  those seasons  when  production  took
place, if production took place in three or fewer seasons.
   It  is  clear,  of  course, that this does  not  remove  the
inequality.  It  results  just  from  the  fact  that   certain
producers   could,  on  the  basis  of  a  measure   which   is
unconstitutional    for    formal   reasons    and    factually
discriminatory,   increase  production,   because   they   were
protected from the competition, which did not have a production
quota  and  thus  could not produce without  the  burden  of  a
penalty  levy.  Through  the  present  formally  correct  legal
framework,   the  government  preserves  for  the  future   the
undesirable condition which it caused by its previous  formally
and materially unconstitutional framework.
  We also can not ignore the circumstance to which the group of
deputies points in passing in the already rejected argument  on
discrimination   between  existing  and  new   producers.   The
regulation  of  the  price of sugar implemented  by  government
directive  no.  114/2001 Coll. does not in any  way  take  into
account  cases where one sugar factor was operated in the  past
by  a  different entity than it is today. It does not take into
consideration the production of a factory which was transferred
during  the decisive period. However, sales of enterprises  and
factories and company mergers can not be ruled out.
   The key selected for allocation individual production quotas
thus finds itself in conflict with the statutory requirement of
an  objection  method  of calculation (§  12  para.  6  of  the
Agricultural  Intervention Fund Act), and, in particular,  with
the  constitutional requirement of equality under Art. 1 of the
Charter,  which at the same time establishes a constitutionally
impermissible  different  statutory  concept  of  ownership  of
production  facilities under Art. 11 para.1 of the Charter  and
unjustifiable  differentiation between  individual  enterprises
which enjoy the same (i.e. equally governed) freedom to conduct
business under Art. 26 of the Charter.
     Of   course,   it   would   be   difficult   to   consider
unconstitutional,   in  and  of  itself,  the   obligation   of
applicants to state in their production application the  amount
of the sugar production in the sugar production seasons 1996/97
to  2000/01  under  §  5  para. 3 of government  directive  no.
114/2001 Coll.

VIII.
In  judgment no. 410/2001 Coll., the Constitutional Court found
that  the  introduction of milk production quotas is  justified
because  it  serves  the public interest. This  interest  is  a
guarantee  of  a  minimum price in an environment  where  state
subsidies  contribute to increases in production  which  demand
would  not  cause.  State  interventions  in  agriculture   are
motivated    by    its   social,   economic   and    ecological
characteristics.  The  Constitutional  Court  recognized   that
production quota systems for agricultural products exist in the
European  Union  and rejected the proposition that  a  domestic
standard  of human rights would require a pure market  economy,
free of state intervention. It responded with restraint to  the
demand that it subject to strict inspection, with regard to its
necessity  and true need, the legal framework under  which  the
state  intervenes  in  the  economy.  It  emphasized  that  the
Parliament  of the Czech Republic, as the political body  which
bears  political  responsibility toward voters for  recognizing
problems in the economy and for selecting instruments to  solve
them, has jurisdiction to select economic policy.
   The  United States Supreme Court took a similar view of  the
priority role of political bodies in creating production  quota
systems  for  the cultivation of wheat in the case  Wickard  v.
Filburn  [317  U.S 111 (1942)]. Its decision is an  example  of
judicial restraint.
   With these arguments, which can also basically be applied to
the  evaluation  of sugar production quotas, the Constitutional
Court  signed  on  to the approach taken by, for  example,  the
United States Supreme Court since the 1930s, when it ended  the
practice  of  describing  economic and  social  regulations  as
incompatible with an absolute contractual freedom and right  to
property  and recognized that the general formation of economic
policy,  including restrictions on doing business, is primarily
a   matter  for  political  bodies.  In  evaluating  the  legal
framework it is sufficient to apply the rational basis test,  a
routine verification of whether the measure introduced can lead
to  the  goal  pursued.  The production  quota  system  pursues
restriction  of production which is distorted by state  subsidy
policy.  This  also applies in the case of measures  which  are
necessary  only  for preparations for entry into  the  European
Union, where such conditions exist.
   An  inclination to strict evaluation of the production quota
system  would  force the Constitutional Court to  evaluate  the
necessity and usefulness of the state policy of subsidizing and
giving   privileges   to  agriculture.  In   that   case,   the
Constitutional Court would have to incline toward some economic-
political doctrine, in this case to liberalism. However, such a
step  does  not correspond to the relative political neutrality
of the Charter and of the Constitution.

IX.
Consideration  of  the  justifiability and  proportionality  of
applying a sugar production quota system cannot be done without
comparison  with  the model uniformly applied in  the  European
Union,   especially  with  regard  to  the   Czech   Republic's
preparation  for entry into it. Restriction of  the  amount  of
sugar   production  has  a  long  tradition  in  the   European
Community.   It   was  first  introduced  as  a   response   to
overproduction   in   the  1960s.  By  this   common   measure,
exceptionally   strict  even  in  agriculture,   the   European
Community  responded to overproduction which,  of  course,  was
caused   partly   by   the  common  agricultural   policy   and
intervention    by    member   states   including    subsidies,
appropriations,  and market intervention,  and  partly  by  the
intensification and concentration of sugar refining, which  led
to  the  closing of sugar refineries. The basis  of  the  legal
framework is EC Council directives on the single market  rules,
passed  for a period of several years. Related to them are  the
European  Commission implementing directives. For the 2001/2002
to  2005/2006  seasons,  the basic  regulation  is  EC  Council
directive  no. 1260/2001 on common organization of  markets  in
the sugar sector. It was passed as part of a partial reform  of
the common agricultural policy. Its aim is to reduce its fiscal
burden and restrict overproduction. It includes a reduction  in
sugar production quotas.
   The  directive  determines national  quotas  for  individual
member states. For purposes of the production quotas, the sugar
produced  is divided into groups. Sugar A and sugar  B  may  be
produced, even through they too are burdened by penalty levies.
With  sugar  A  they  are a negligible 2% of  the  intervention
price.  The production of sugar B is burdened by a more  marked
penalty levy, which can certainly influence production, in  the
amount   of  30-37.5%  of  the  intervention  price.  Sugar   B
production  does not enjoy the same support and  protection  as
sugar  A production, but in contrast it is not affected by  the
fate of overproduction. That is labeled as sugar C. Sugar C may
be  produced, but may not be sold in the EC market.  Thus,  the
only  legal use of sugar C is export. Any failure to export  is
punished   by  a  penalty  levy.  The  amount  and  method   of
determining  the  penalty levy is regulated  by  the  permanent
implementing Commission directive no. 2670/81 such that sugar C
the  production  of which has been documented but  which  lacks
documentation  of export to third countries is  burdened  by  a
penalty  levy  equal to the highest customs burden  on  imports
from third countries. This customs burden is high, because  the
EC's  unified  external trade policy, in conjunction  with  the
common agricultural policy, despite the liberalization steps of
the  WTO (the World Trade Organisation), remains protectionist.
Just as import of sugar to the Community is generally not worth
it,  neither  is  overproduction of  sugar.  In  addition,  the
different  approach  to sugar A, B and C is  reflected  in  the
opposing  subsidy  and  intervention  policy.  The  production,
processing,  storage, sale and export of sugar C,  compared  to
sugars A and B, does not enjoy any intervention for maintaining
a  desirable high intervention price, or subsidies for ensuring
sufficient income for farmers and processors.
   In  the  Czech  Republic, the uniform  model  of  penalizing
overproduction  in  the amount of 115%  of  the  minimum  price
(equivalent to the intervention price) is used for  sugar.  The
model  for  this  method of determining the  penalty  levy  for
overproduction was the framework of milk production  quotas  in
the  Community  under Council directive no.  3950/92.  Imposing
fees  on  sugar  overproduction in the EC is, in  its  results,
comparable  with measures applied today in the Czech  republic,
even  if  the manner of penalizing overproduction  is  not  the
same.  For  example, the Czech Republic today,  unlike  Poland,
does  not  implement a comparable production quota system,  but
the  EC  aim  to  restrict  sugar production  on  protectionist
grounds  is  pursued  and  the results  are  comparable.  Sugar
production  over the set quotas is not worth it, and  therefore
is not done.
   If  the Czech Republic enters the European Union in the next
few  years,  then, unless there is fundamental  reform  of  the
common  agricultural policy in the area of sugar, the community
standard with comparable effects will gradually (in view  of  a
number of anticipated transition periods) be applied to  it  as
well.  In  the present months negotiations on entry  are  begin
completed.   One  of  the  most  difficult  chapters   in   the
negotiations  is  no.  7 "Agriculture". So  far,  none  of  the
candidate countries has entered into a preliminary agreement on
the manner and budget of incorporating its agriculture into the
common   agriculture   market  and   introducing   the   common
agriculture  policy. The main dispute concerns  the  amount  of
direct  subsidies  to  farmers in the candidate  countries.  Of
course, agreement is also lacking with agricultural commodities
whose  production  is  restricted  by  production  quotas.  The
candidate countries want their agriculture to be able,  without
sanctions,  to  produce  more than the European  Community  and
current member states want to allow.
   In the case of sugar production, the difference in the Czech
Republic  is not a multiple, but neither is it negligible.  The
Czech  Republic  wants 505 thousand tons of  a  national  sugar
production  quota,  which corresponds to the present  aggregate
production   quota  and  reserve  under  government   directive
no.114/2001.  The European Community is offering  441  thousand
tons  for  sugar  A  and  ca.  4 thousand  tons  for  sugar  B.
Agriculture  is  undoubtedly  politically  sensitive  both   in
Western  and  Eastern  Europe. Sugar production  in  the  Czech
Republic   and  elsewhere  shows  not  insignificant   seasonal
deviations  (in thousands of tons: in 1996/7, 610;  in  1997/8,
532;  in  1998/9,  470; in 1999/2000, 395; in 2000/1,  434;  in
2001/2,  491).  Yet,  in the last two seasons,  production  was
already  dampened by production quota systems. Excess sugar  is
produced  in  the Czech Republic. The volume of exported  sugar
consistently  exceeds the volume of imported  sugar  (including
sugar  in  foods  and beverages). Yet, sugar imports  into  the
Czech  Republic are restricted by import duties and quotas;  in
contrast, export is supported.
   The  sugar production quota system now existing in the Czech
Republic,  despite its special features, is not incommensurable
with  the EC system. Pressure from the EC for the reduction  of
sugar   production  in  the  Czech  Republic  continues,  which
provides  a  reason  for introducing and applying  Czech  sugar
production quotas.
   Therefore,  we  must  reject the opinion  that  every  sugar
production   quota  system  based  on  the  State  Agricultural
Intervention Fund Act and ensured by penalty levies under §  13
of  that  Act is an unusual provision in terms of international
and European comparison.
   In  addition,  on  the  basis of provisions  common  to  all
production   quota  systems  in  Czech  agriculture,   a   milk
production  quota system is established; here the penalty  levy
is  determined  and  imposed the same way as  in  the  European
Community. Therefore, there is no reason to annul § 13  of  the
Act.

X.
In  its  judgment no. 410/2001 Coll., the Constitutional  Court
did  not permit further sub-statutory delegation, under  which,
according   to   the  adjudicated  directive's  provisions   on
publication, the amounts of the reserve for subsequent years in
the Bulletin of the Ministry of Agriculture shall be set by the
Ministry  (minister).  The present situation  is  similar.  The
provisions  of § 4 para. 3 of government directive  no.114/2001
Coll. authorize the Fund to determine the amount of reserve for
allocation.  The  Constitutional Court's  opinion  can  not  be
opposite.   The  amount  of  reserve  for  allocation   is   an
requirement of the production quota system under § 12 para. 3 a
4   of  the  Agricultural  Intervention  Fund  Act,  which  the
government is to create by directive.
   The  claim  of  some  parties to the  proceedings  that  the
Ministry  of Finance has jurisdiction to determine the  minimum
price  of  sugar  on  the basis of Act no. 526/1990  Coll.,  as
amended  by  later regulations, is incorrect. It overlooks  the
express   provision  of  §  12  para.  4  of  the  Agricultural
Intervention   Fund   Act.   This   jurisdictional   norm    is
unambiguously  a  lex specialis for general price  regulations.
Jurisdiction  to  determine the minimum price  belongs  to  the
government, which is to do so by directive. A reference to  the
unsuitability  of  such  a  method of  setting  a  price  by  a
directive  applied for a period of several years is groundless.
The  effort to transfer jurisdiction to a different body, which
uses  a legally problematic form of price setting, is only  the
result of unwillingness to observe the recommendation of  §  12
para.  5  of  the  Agricultural  Intervention  Fund  Act   that
directives  on  production quota systems be "generally"  passed
for a one year period.
   Evaluation of the Fund's jurisdiction is not unambiguous, in
light  of  the Agricultural Intervention Fund Act. Although  it
does  not  authorize the Fund to allocate quotas,  it  provides
that  it  shall make use of the production quota  system  [§  1
para.  2  let.  d)], through which it implements  measures  and
introduces  market regulations for stabilizing  the  market  in
agricultural and food products (§ 1 para. 2). The authorization
to  allocate production quotas arises at least from the context
of the Act and general provisions on the Fund's activities. The
provision  of  § 7 of government directive no. 114/2001  Coll.,
which  is  proposed to be annulled on the basis of the  claimed
lack of jurisdiction, appears unconstitutional primarily due to
preservation    of   unjustifiable   differentiation    between
individual producers.

XI.
The  group  of  deputies casts doubt on  the  model  where  the
government  can,  by  directive,  introduce  production   quota
systems  in  a scope which markedly exceeds their  use  in  the
European  Union.  We  can confirm that the  State  Agricultural
Intervention   Fund  Act  does  not  specify  in   detail   the
agricultural  and  food  products  whose  production   can   be
restricted by production quota systems. The extent of room  for
applying  serious  restrictions,  such  as  production  quotas,
reaches  the  very  limit  of acceptability  in  terms  of  the
constitutional  principles  of the separation  of  powers.  The
reference to commitments arising from negotiations on accession
to  the  European Union under § 12 para. 3 of the  Agricultural
Intervention   Fund   Act  is  merely  a   legally   indistinct
restriction. Comparison with other countries also testifies  to
an  excessive  inclination toward regulation  by  sub-statutory
regulations. For example, Poland, which also seeks to join  the
European   Union,  introduces  production  quota  systems   for
agricultural  production  and does so  through  a  special  law
(Ustawa o regulacji rynku cukru from 2001). However, the  group
of   deputies  does  not  propose  annulment  of  the  relevant
provisions  of the Agricultural Intervention Fund  Act  on  the
substantive  jurisdiction of the Act  (the  range  of  economic
sectors subject to regulation).

XII.
In  contrast  to government directive no.445/2000 Coll.,  which
specifies  the  qualitative elements of cow's milk,  government
directive  no.  114/2001 Coll. refers,  in  a  footnote,  to  a
different  legal regulation. We can not share the  position  of
the  group of deputies on the absence of a definition of sugar,
as this legal regulation specifies, in a constitutionally fully
acceptable manner (Ministry of Agriculture decree no.  334/1997
Coll.,  issued on the basis and within the limits  of  Act  no.
110/1997  Coll.), the qualitative elements of sugar,  naturally
sugar produced in volumes determined by production quotas.
   We  can not agree with the position that § 5 para. 5 of  the
Agricultural Intervention Fund Act rules out application of the
Administrative Procedure Code for the Fund's decision making on
quotas   because  it  limits  its  use  only  to  deciding   on
applications  for  support under § 1  para.  2.  The  group  of
deputies  overlooks the systemic placement of  this  provision,
which  is  applied  only  to  the  provision  of  support.  The
exclusion of the Administrative Procedure Code in and of itself
in  no  way  makes room for administrative discretion  and  the
impossibility  of  judicial  review  derived   from   it.   The
Constitutional  Court  has already  stated  that  in  cases  of
unclear  interpretation,  administrative  and  judicial  bodies
should  select an interpretation which ensures greater  respect
for the fundamental rights and freedoms, which also include the
right to proper administrative proceedings and a fair trial.
   As  already  stated,  in drafting government  directive  no.
114/2001   Coll.,  the  government  overlooked  the   statutory
recommendation to issue a directive for one year. Of course, it
is  not  important  whether a production quota  system  can  be
introduced  by government directive repeatedly or  not  without
the intervention of the legislature.
   Nor  does the group of deputies ask the Constitutional Court
to annul those provisions of the Agricultural Intervention Fund
Act  or  of  government  directive no. 114/2001  Coll.,  which,
according  to  the  group, establish an  unacceptable  form  of
defining sugar, ruling out judicial review, or inadequate  time
limits for the application of production quota systems. Even if
the  Constitutional Court recognized these objections, it could
not make a decision within that scope.

XIII.
For  the cited reasons, the Plenum of the Constitutional  Court
decided,  under  §  70 para. 1 of Act no.  182/1993  Coll.,  as
amended  by Act no. 48/2002 Coll., to annul § 4 para.  3,  §  5
para.  3,  §  7  and § 13 of government directive no.  114/2001
Coll.:  §  4  para. 3 for inconsistency with  Art.  78  of  the
Constitution; § 7 for inconsistency with Art. 1 of the Charter,
Art. 11 para. 1 of the Charter and Art. 26 para. 1 and 2 of the
Charter   as   well  as  §  12  para.  6  of  the  Agricultural
Intervention  Fund  Act; § 13 for inconsistency  with  Art.  79
para. 3 of the Constitution as well as with § 12 para. 4 of the
Agricultural Intervention Fund Act.
   Although  §  5 para. 3 of government directive no.  114/2001
Coll.,  in and of itself, is not necessarily inconsistent  with
the  Constitutional  Act or statues, the  Constitutional  Court
annulled it as well, because it is closely related to the other
cited  provisions. A number of other provisions  of  government
directive  no.  114/2001 Coll. could meet this fate,  but  they
were  not proposed to be annulled, and the Constitutional Court
is bound by the petition in its decision making.
   The  petition to annul § 13 of the Agricultural Intervention
Fund  Act  was,  for  reasons cited in  the  reasoning  of  the
judgment, denied under § 70 para. 2 of Act no. 182/1993 Coll.

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

Brno, 30 October, 2002


Dissenting Opinion
of  judges  JUDr.  P.  H. and JUDr. V. J.  to  the  verdict  in
Constitutional  Court judgment file no.  Pl.  US  39/01,  which
denies the petition from a group of deputies to annul §  13  of
Act  no. 256/2000 Coll., on the State Agricultural Intervention
Fund  and  Amending Certain Other Acts (the State  Agricultural
Intervention Fund Act).

This   dissenting  opinion,  submitted  to   the   verdict   in
Constitutional  Court judgment file no.  Pl.  US  39/01,  which
denies  the petition from a group of deputies to §  13  of  the
State Agricultural Fund, is based on these reasons:
  In its judgment in the matter of setting the value of a point
in  health insurance (file no. Pl. US 24/99) the Constitutional
Court  expressed the constitutional law qualification of  price
regulation in a restrictive manner: "A necessary component of a
democratic  state governed by the rule of law is protection  of
the   freedom  of  contract,  which  is  a  derivative  of  the
constitutional  protection of property  rights  under  Art.  11
para.   1  of  the  Charter  (whose  basic  component  is   ius
disponendi).  Therefore,  price regulation  is  an  exceptional
measure, and acceptable only under quite limited conditions."
   In  its  judgment file no. Pl. US 3/2000, the Constitutional
Court repeatedly addressed the issue of price regulation,  this
time in connection with evaluation of the constitutionality  of
legal   regulation  of  rent.  In  doing  so,  it  relied,   in
particular,  on  Art.  1  para. 2 of  Protocol  no.  1  to  the
Convention  on  the Protection of Human Rights and  Fundamental
Freedoms, which provides states the right to pass such laws  as
they  consider  necessary to regulate the use  of  property  in
accordance with the general interest, and from the case law  of
the  European  Court of Human Rights. According to  this,  such
laws  are  especially  necessary and  usual  in  the  field  of
housing,  which,  in  modern societies, is becoming  a  central
issue   of  social  and  economic  policy;  for  this   purpose
legislation   must   have  a  wide  scope   for   consideration
(evaluation)  ("margin of appreciation"), both  in  determining
whether  a  public  interest  authorizing  the  application  of
regulatory  measures exists, and also concerning the  selection
of  detailed  rules  for  implementing such  measures.  As  the
European Court for Human Rights emphasized in the case James et
al.,  state  intervention must observe the principle  of  "fair
balance"  between the demands of the society's public  interest
and  the  demands for protection of an individual's fundamental
rights.  There must be a reasonable (justified) proportionality
between the means used and the aims pursued.
   Thus,  in  this  matter  the Constitutional  Court  accepted
possible price regulation of rent, but on condition of applying
the   principle   of  proportionality  (for   a   comprehensive
discussion   of   all   components   of   the   principle    of
proportionality  see Constitutional Court judgments  file  nos.
Pl.  US  4/94,  Pl. US 15/96, and Pl. US 16/98).  Although  the
Constitutional  Court acknowledged the presence  of  the  first
component,  i.e. suitability of the means used in  relation  to
the aim pursued, it found a failure to observe the principle of
necessity,  i.e. subsidiarity of the means used in relation  to
other  possible  means,  in  terms  of  the  fundamental  right
restricted  thereby  (in  the  given  matter,  the   right   to
property): "In order for the owners of rental buildings  to  be
able  to meet their previously stated obligations and in  order
for the right of the individual to proper housing under Art. 11
of  the International Covenant on Economic and Social Rights to
also  be  realistically considered, the route could  have  been
chosen,  for  example,  which  was  previously  taken  by   the
legislature of the first republic, which, in § 9 para. 4 of Act
no.  32/1934 Coll., as amended by later regulations,  permitted
rent  to  be raised for reasons of payment of expenses incurred
for   occasional   or  exceptionally  necessary   repairs   and
renovations of a building." On the basis of this argument,  the
Constitutional Court concluded that there was violation of Art.
4  para. 3 a 4 of the Charter, in connection with Art. 11 para.
1 of the Charter.
   From  a  general viewpoint, in the judgment in question  the
Constitutional  Court  also formulated  another  criterion  for
evaluation  the  constitutionality of price regulation:  "Price
regulation,   if   it   is  not  to  exceed   the   bounds   of
constitutionality, clearly may not reduce  the  price  so  much
that  the  price,  in  view of all documented  and  necessarily
incurred expenses, would eliminate the possibility at least  of
reimbursing them, because in that case it would actually  imply
a  denial  of  the  purpose  and all functions  of  ownership."
Insofar  as  the Constitutional Court decided on the  issue  of
sugar production quotas, while evaluating the constitutionality
of government directive no. 51/2000 Coll., in judgment file no.
Pl. US 45/2000 it restricted its arguments only to the question
of   observing   safeguard  contained  in  Art.   78   of   the
Constitution, and in another judgment, in the matter under file
no.  Pl.  US  5/01, as a result of the lack of  an  appropriate
petition,  the  unconstitutionality  of  §  13  of  the   State
Agricultural Fund was not evaluated.
   The  system of milk production quotas under Act no. 256/2000
Coll. and government directive no. 445/200Coll. is based  on  a
penalizing  price  regulation under §  13  of  the  cited  Act,
applicable  to  that part of production by which  the  producer
exceeds the set quotas. From a general perspective the  Act  on
Prices  considers  acceptable  reasons  for  introducing  price
regulation  to  be  the  endangering of a  market  through  the
effects   of   restriction  of  economic  competition   or   an
extraordinary  market situation (§ 1 para. 6 Act  no.  526/1990
Coll.,  on  Prices, as amended by later regulations).  In  this
regard it also fully corresponds to the paradigms of democratic
economic  thought (see P. A. Samuelson, W. Nordhaus,  Ekonomie,
Praha  1991).  The  Act on the State Agricultural  Intervention
Fund,  insofar  as  it  establishes the  possibility  of  price
regulation  in agriculture, is a lex specialis to  the  Act  on
Prices.  In terms of the Constitutional Court's case  law  thus
far,  the  reasoning  contained in the majority  vote  did  not
observe  all  safeguards  which arise  from  the  principle  of
proportionality.  It  did  not  analyze,  in  particular,   the
fulfillment  of  the  condition  of  subsidiarity  to  possible
alternative means permitting the aim pursued to be achieved, as
the  Constitutional Court did, for example, in the matter under
file  no. Pl. US 3/2000. In the matter under file no.  III.  US
31/97, the Constitutional Court applied European Community  law
as  an interpretative tool for domestic law when it stated that
it  takes  as its starting point the same values and principles
on  which  the  constitutional order of the Czech  Republic  is
based, and thus represents the expression of European standards
of democratic legal thought.
   In  judgment  no. Pl. US 5/01 the Constitutional  Court,  on
condition of observing constitutional safeguard, recognized the
possibility  of price regulation in the system  of  freedom  of
ownership  and a market economy. However, the price  regulation
contained  in § 13 of the State Agricultural Fund Act enshrines
a markedly more intensive penalty system, and thus represents a
markedly  more serious interference with the right to  property
than does the comparable European framework, which is given  by
EC  Council  directive no. 1260/2001. The  foregoing  indicates
that  there are multiple alternative means of price regulation,
and the Czech legislature, without giving grounds for its steps
in  a  transparent  way,  did  not accept  the  requirement  of
subsidiarity, according to which, if the purpose sought by  the
legislature  can  be achieved by alternative  normative  means,
then  the  constitutional  one is that  which  limits  a  given
constitutionally protected right to the smallest degree. In the
opinion  of  the author of this dissenting opinion  this,  i.e.
violation  of the principle of proportionality, is grounds  for
annulment of § 13 of the Act on the State Intervention Fund due
to  conflict with Art. 11 Of the Charter of Fundamental  Rights
and  Freedoms and with Art. 1 of the Protocol to the Convention
on the Protection of Human Rights and Fundamental Freedoms.

Brno, 30 October, 2001


Dissenting Opinion
of  judges JUDr. E. W., JUDr. V. C. and JUDr. E. Z. to the part
of the verdict in Constitutional Court judgment file no. Pl. US
39/01,  which denies the petition of the group of  deputies  to
annul § 13 of Act no. 256/2000 Coll., on the State Agricultural
Intervention  Fund and Amending Certain Other Acts  (the  State
Agricultural Intervention Fund Act)

We  dissent  from the part of the verdict of the abovementioned
judgment  which  denies the petition  to  annul  §  13  of  the
Agricultural Intervention Fund Act.
   We grant that the quota system is, by its nature and effect,
an  instrument different from simple price regulation, which is
related   to   necessary  interference  with  the  content   of
contractual relationships.
   The Constitutional Court already ruled, in judgment file no.
Pl.  US 5/01, that the penalty levy, in the amount set, derived
from  the  minimum price of milk for production  in  an  amount
exceeding an individual production quota under § 13 of Act  no.
256/2000  Coll.,  in  and of itself, is a necessary  instrument
which the state must have at its disposal in implementing any –
including quantitative – regulation of economic life.
   Nonetheless,  we  believe that the  chosen  method,  and  in
particular the degree of penalizing production over  the  level
of  an allocated quota or without an allocated quota under § 13
violates  the  principle  of  proportionality,  especially   in
comparative perspective with the legal framework implemented in
European law (EC Council directive no. 1260/2001). If the  main
argument  for  preserving  the  production  quota  system   and
penalizing  instances of exceeding them  is  the  fact  that  a
similar  system is applied in European Community law,  then  we
consider  it  necessary for the legal framework in  the  CR  to
preserve  the  same  degree and intensity  of  intervention  in
ownership rights.
   In  view of this, we also can not accept the opinion that  a
radical   intervention  by  the  Constitutional   Court   would
represent,  in  the case at hand, a step toward  a  concept  of
domestically  guaranteed fundamental  rights  which  would  not
stand  after the entry of the CR into the European  Union.  The
approximation of Czech law is supposed to be conducted in  such
a  manner  so  that the same principles which  are  applied  in
European  law are preserved. This also applies in the  case  of
preserving  the  proportionality of the legal  framework,  i.e.
aligning both the purposes and the means which are used. In any
case, the commitment to approximation and reception of European
law itself is built on the principle of approaching and gradual
aligning, not creation of stricter regimes which interfere to a
greater degree in individuals' fundamental rights and freedoms.
Moreover,  in  such a case, we consider the  reference  to  the
European  framework to be, at a minimum, not earnest, and,  for
example, also politically counter-productive.
   The  reference  to  the regulation of production  quotas  in
European law in and of itself demonstrates that the legislature
had a different, more commensurate alternative.
   The  failure to observe the principle of proportionality  in
the   given  matter  is  all  the  more  serious  because   the
legislature left the selection of commodities for which a quota
system is established up to bodies of the executive branch.  In
my opinion, the legislature thereby abandoned its jurisdiction,
which  it  unjustifiably  left  to  the  executive  branch.   A
situation  where the system of penalty levies is directly  tied
to a system of quotas for one or another product, where this is
justified  by the public interest in stabilization of  a  given
market   sector,   also  corresponds  to   the   postulate   of
proportionality. However, in the current legislative  state,  a
uniform and blanket system of penalty levies can be applied  to
any  commodity  for which the executive branch imposes  quotas.
The  system applied in EC law is likewise not reflected in this
aspect of the legal framework.
   The principle of proportionality was derived as a public law
principle  by the Court of Justice of the European  Communities
from  the principle of a state governed by the rule of law  for
the purpose of protecting persons from intervention by EC state
bodies  and national public bodies. The EC Court (decision  no.
4/73  Nold v. Commission /1974/) based this primarily on German
and  French case law, whose development can be described  as  a
judicial   response  to  the  increase   in   power   held   by
administrative   bodies   and  as   a   means   of   moderating
administrative discretion (T. Tridimas, The General  Principles
of EC Law, Oxford University Press, 2000).
   In  interpreting the principle of proportionality, and taken
comprehensively, above all the principle of a  stated  governed
by  the  rule of law, the Constitutional Court of the CR cannot
overlook  the  European dimension of these principles,  if  its
case law is also to perform an integrative role.
   In  view of the abovementioned facts, we believe that  there
were grounds for the Constitutional Court to also annul § 13 of
Act  no. 256/2000 Coll., as proposed by the petitioner, due  to
conflict with Art. 1 para. 1 of the Constitution and Art. 11 of
the Charter of Fundamental Rights and Freedoms.

In Brno, 30 October, 2002