Decided 9 July 2003 – Pl.. US 5/03
                               
              “Territorial Self-Government Unit”

HEADNOTE
According to the starting thesis, on which the concept of self-
government is built, the foundation of a free state is  a  free
municipality,  then, in terms of regional  significance,  at  a
higher  level  of  the territorial hierarchy  a  self-governing
society  of  citizens,  which, under  the  Constitution,  is  a
region.  With this concept of public administration built  from
the ground up, the following postulate must be immanent to self-
government,  as  an  important element of  a  democratic  state
governed  on the rule of law: that a TSU must have a  realistic
possibility to handle matters and issues of local significance,
including  those  which  by their nature  exceed  the  regional
framework and which it handles in its independent jurisdiction,
on  the  basis of free discretion, where the will of the people
is  exercised at the local and regional level in  the  form  of
representative  democracy  and only  limited  in  its  specific
expression by answerability to the voter and on the basis of  a
statutory and constitutional framework (Art. 101 par. 4 of  the
Constitution).    Thus,   territorial   self-governing    units
representing the territorial society of citizens  must  have  –
through  autonomous  decision-making  by  their  representative
bodies – the ability to freely choose how they will manage  the
financial resources available to them for performing  the  work
of self-government. It is this management of one’s own property
independently,  on  one’s own account  and  own  responsibility
which  is  the attribute of self-government. Thus, a  necessary
prerequisite  for  effective performance of  the  functions  of
territorial  self-government is the existence of its  own,  and
adequate, financial or property resources.

JUDGMENT
The  Plenum  of the Constitutional Court, consisting  of  JUDr.
Vojtech  Cepl,  JUDr. Vladimir Cermak, JUDr. Frantisek  Duchon,
JUDr.   Vojen   Guttler,  JUDr.  Milos  Holecek,  JUDr.   Pavel
Hollander, JUDr. Vladimir Jurka, JUDr. Vladimir Klokocka, JUDr.
Jiri  Malenovsky,  JUDr. Jiri Mucha, JUDr.  Antonin  Prochazka,
JUDr.  Pavel Varvarovsky, JUDr. Miloslav Vyborny, JUDr.  Eliska
Wagnerova  and JUDr. Eva Zarembova ruled on a petition  from  a
group  of  45  deputies  of  the Chamber  of  Deputies  of  the
Parliament of the Czech Republic seeking the annulment of  §  1
par.  2  let. b), § 2 par. 2 second sentence, § 3, § 4  par.  2
let. b), § 5 par. 2 second sentence and § 6 of Act no. 290/2002
Coll.,  on  the  Transfer of Certain Other Things,  Rights  and
Obligations   of   the   Czech   Republic   to   Regions    and
Municipalities,  Civic Associations in Physical  Education  and
Sport  and on Related Amendments and Amending Act no.  157/2000
Coll.,   on   the  Transfer  of  Certain  Things,  Rights   and
Obligations  from  the Czech Republic, as amended  by  Act  no.
10/2001  Coll., and by Act no. 20/1966 Coll., on Care  for  the
Health  of  the  People,  as amended by later  regulations,  as
follows:
      The  provisions of § 3 and § 6 of Act no. 290/2002 Coll.,
on the Transfer of Certain Other Things, Rights and Obligations
of  the  Czech  Republic  to Regions and Municipalities,  Civic
Associations  in Physical Education and Sport  and  on  Related
Amendments and Amending Act no. 157/2000 Coll., on the Transfer
of  Certain  Things,  Rights  and Obligations  from  the  Czech
Republic,  as  amended by Act no. 10/2001 Coll.,  and  Act  no.
20/1966 Coll., on Care for the Health of the People, as amended
by later regulations,
are annulled as of 31 December 2003.
     The rest of the petition is denied.

REASONING

I.
On  24  February 2003 a group of 45 deputies of the Chamber  of
Deputies   of  the  Parliament  of  the  CR  filed   with   the
Constitutional  Court, under Art. 87 par.  1  let.  a)  of  the
Constitution  of  the  Czech Republic (the  “Constitution”),  a
petition  to  annul  § 1 par. 2 let. b),  §  2  par.  2  second
sentence,  § 3, § 4 par. 2 let. b), § 5 par. 2 second  sentence
and  §  6 of Act no. 290/2002 Coll., on the Transfer of Certain
Other  Things, Rights and Obligations of the Czech Republic  to
Regions  and  Municipalities, Civic  Associations  in  Physical
Education and Sport and on Related Amendments and Amending  Act
no.  157/2000 Coll., on the Transfer of Certain Things,  Rights
and  Obligations from the Czech Republic, as amended by Act no.
10/2001  Coll., and by Act no. 20/1966 Coll., on Care  for  the
Health  of  the  People, as amended by later regulations,  (the
“Act” or “Act no. “290/2002 Coll.”).
      After  recapitulating the individual  provisions  of  the
contested Act, the petitioners allege in the reasoning of their
petition that these provisions, without giving the regions  and
municipalities the opportunity to appropriately  express  their
agreement or disagreement, unilaterally determine that selected
things,  rights  and obligations previously  belonging  to  the
state  shall be transferred to these self-governing units,  and
at  the same time determine that the defined state-administered
departments   and  state-funded  organizations   shall   become
administered  departments  or  funded  organizations   of   the
relevant self-governing units. The petitioners charge that  the
Act  does  not address such fundamental issues as the issue  of
payment  of  state obligations arising until 31 December  2002,
which are transferred to the regions or municipalities as of  1
January  2003. It also does not address the question of  paying
the  obligations  of  state-funded organizations  which  became
regionally- or municipally-funded organizations as of 1 January
2003;   if  such  funded  organizations  were  dissolved  their
obligations would transfer to their organizer , thus,  after  1
January 2003 to the region or municipality (§ 27 par. 3 of  Act
no.   250/2000  Coll.,  on  budgetary  rules  for   territorial
budgets).   According  to  the  petitioners,   the   Act   thus
impermissibly  burdens  the financial position  of  territorial
self-governing  units (also referred to as “TSU”s),  which  are
independent  legal entities, separate from the  state,  and  in
which  the  state can interfere only for reasons of  protecting
the  law. In paying such obligations the regions will be forced
to  use  their own funds, and a situation will arise where  the
self-governing units will pay out of funds intended  for  self-
government   activities  the  obligations  of  the   state   or
obligations of funded organizations which arose when the  state
was  their organizer. This may have the undesirable consequence
that considerably less money will be expended for a TSU’s self-
government activity than was originally intended and would have
been  expended if the state had not transferred its obligations
or  the obligations of its funded organizations to these  TSUs.
In  this regard the petitioners emphasize that for a period  of
10  years  a key part of the acquired property – real estate  –
can  not be used for a purpose other than the one for which  it
was used as of 1 January 2003. According to them, the situation
also can not be resolved on the basis of the legal opinion held
by some state representatives, the opinion that the state is  a
guarantor   for   the   obligations  of   former   state-funded
organizations  which were created up until  31  December  2002.
There is a question whether, in cases where these organizations
were   transformed   into  regionally-  or   municipally-funded
organizations  as of 1 January 2003, the state guarantee  which
existed  under § 74 of Act no. 218/2000 Coll., on Budget  Rules
and  Amending Certain Related Acts (the Budget Rules)  did  not
terminate.  However,  even if such a  state  guarantee  existed
after   that  date,  this  would  not  solve  the  problem   of
impermissible  indebtedness  by  units  of  territorial   self-
government. If the state, as guarantor, paid the obligations of
a former state-funded organization, the state would then have –
in view of the legal consequences of providing a guarantee –  a
subrogated  claim  against the regionally-or municipally-funded
organization,  or directly against the region or  municipality,
and the relative financial independence of these self-governing
units from the state, in particular the executive branch, would
essentially  be denied, as it would depend on the will  of  the
state whether to exercise its subrogated claim against them  or
not.  According  to  the  petitioners,  such  a  situation   is
inconsistent   with  the  constitutional   concept   of   self-
government, as contained in Art. 99, Art. 100 par. l and Art. 8
of the Constitution. The petitioners emphasize that part of the
TSUs’  right  to  self-government is the right to  commensurate
financial resources for the activities performed by these units
in the public interest, which the legislature entrusts to them.
This  concept of the right to self-government also  corresponds
to  Art.  3  par.  1  of the European Charter  of  Local  Self-
Government   (the  “Charter”),  which  describes  local   self-
government as not only the right, but also the ability of local
authorities,  within  the limits of the law,  to  regulate  and
manage  a substantial share of public affairs, under their  own
responsibility  and in the interests of the  local  population.
One  of  the  prerequisites for the  capability  of  a  TSU  to
implements its self-governing activities is adequate  financial
resources for them. It is naturally up to the legislative power
how it organizes the system of taxes, fees and other income  of
the  state  and TSUs, but the resulting system must ensure  the
long-term  financial  stability of these public  law  entities.
Otherwise  the  relative autonomy of these units  would  be  an
empty concept.
      As  the  petitioners state, the transfer  of  rights  and
obligations  from  the  state to regions or  municipalities  by
statute  could be consistent with the Constitution, if it  were
accompanied  by a system of financial resources for  the  tasks
connected with the transferring property that would ensure  the
long-term financial stability of the regions and municipalities
after  the  completed  transfer. However,  the  legislature  is
transferring,   in   particular   to   the   regions,   largely
administered  departments  or  funded  organizations,  such  as
hospitals  and other health-care facilities, that are  burdened
by extensive debts. These debts not only can not be paid by the
new  owners in a reasonable time, under the existing system  of
financing,  but, on the contrary, they can be  expect  to  grow
relentlessly,  at  a  rate which could seriously  endanger  the
financial  stability of the regions. As evidence  of  the  fact
that  the health care financing system is not financially self-
sufficient  at  the present time, as well as the  fact  that  a
number of hospitals being transferred to the regions have long-
term debt, the petitioners proposed presenting a report of  the
government  or the Ministry of Health and an opinion  from  the
Association  of Regions of the Czech Republic. The  petitioners
also point out that not only does the contested legal framework
result  in  impermissible interference in the  independence  of
self-governing units, but there is also a risk of deterioration
in  the position of creditors of these obligations, who entered
into contractual relationships with the state or a state-funded
organization  with  the knowledge that  their  debtor  was  the
state,  directly or indirectly, but as a result of the Act  the
debtor becomes a different economic entity. They also point out
that  Act no. 172/1991 Coll., on the Transfer of Certain Things
from  the  Czech Republic to Municipalities, which addressed  a
comparable   problem,   the   asset   base   of   newly-created
municipalities,  determined what things  are  transferred  from
state   property   to  the  municipalities  without,   however,
burdening  the  municipalities  with  obligations  which  arose
previously to the state or state organizations.
      Finally,  referring to Art. 11 par. 1 of the  Charter  of
Fundamental  Rights and Freedoms, in view of what  has  already
been  said  about  the  transferred property,  the  petitioners
conclude  that the right of the regions, as owners of  property
to  freely  make decisions about their property is considerably
relativized,  and,  on the basis of a state decision,  rendered
empty.  In their opinion, there is also a question whether  the
contested   provisions  do  not  violate   the   constitutional
principle  of  equality of property and freedom  of  ownership,
because they force other persons to own something, as when  the
Act  went  into effect it in fact imposed ownership –  the  Act
imposed the ownership of certain things on the regions and  put
them  in  the  position  of  debtor  in  certain  private   law
obligation relationships, which it certainly could  not  do  to
other persons. It is precisely there that the petitioners see a
serious violation of the principle that the property rights  of
all owners have the same content and enjoy the same protection.
In addition to that violation, there is also serious limitation
of  freedom of ownership, or the constitutional postulate  that
property  ownership  is  understood  as  a  right,  not  as  an
obligation,  and  obligations can only arise subsequently  from
ownership. An obligation to own something can not very well  be
imposed, and thus the region, as a subject of private law, lost
the  right  to  decide whether to acquire certain  things.  For
these  reasons the petitioners believe that this  violated  the
right to self-government guaranteed by Art. 8 and Art. 100 par.
1   of   the  Constitution,  violated  the  right  to  property
guaranteed  by  Art.  11 par. l of the Charter  of  Fundamental
Rights  and Freedoms, and violated the principles on the  basis
of  which  the  European Charter of Local  Self-Government  was
passed,  and  therefore they proposed that  the  Constitutional
Court   annul  the  abovementioned  provisions  of   the   Act.
.   The Constitutional Court, in accordance with § 69 par. 1 of
Act no. 182/1993 Coll., on the Constitutional Court, as amended
by  later  regulations, requested opinions from both houses  of
the  Parliament of the Czech Republic. The Chamber of  Deputies
and the Senate submitted opinions on the petition.
      In accordance with § 49 par. 1 of Act no. 182/1993 Coll.,
opinions  were also requested from the Ministry of  Health  and
the Association of Regions of the Czech Republic.
      The opinion of the Ministry of Health states that passage
of  the  contested Act was the culmination of reform of  public
administration  connected to terminating of the  activities  of
district  offices and transferring their jurisdiction to  TSUs.
As  part  of  the  implementation of this reform  it  was  also
necessary to sort out state property which was managed by state-
administered departments and state organizations of a  regional
nature  for which district organizations functioned as  founder
or  organizer. Thus, this was not a transfer of the exercise of
state  administration to TSUs, but a change of owner,  and  the
related   change   of  the  legal  position  of   these   state
institutions.  Government resolution no. 765 of  25  July  2001
approved,   for  that  purpose,  the  Schedule  of  Legislative
Preparations  for  the  Second Phase of Reform  of  the  Public
Administration, and the Ministry of Finance, working  with  the
appropriate ministries, was assigned to develop a draft Act  on
the  Transfer  of  State Property and on the  Transfer  of  the
Function  of  Organizer from District Offices  to  State-Funded
Organizations and State-Administered Departments. Thus, as of 1
July  2002 the contested Act went into effect, and on the basis
of  it,  as  of 1 January 2003, state-funded organizations  for
which  district offices performed the function of organizer  as
of  the  decisive day, became regionally-funded  organizations.
These  organizations continued to bear all obligations existing
as  of  the decisive day, and also continued to bear the rights
and  obligations from labor law relationships. As of  the  same
day,  all rights and other property values of the state,  which
these   organizations   had  jurisdiction   to   manage,   were
transferred to the individual regions. The change of  organizer
thus   did   not  interrupt  the  activities  of   the   funded
organizations,  as  they did not cease to  exist;  their  legal
status was merely changed from state organizations to non-state
organizations.  Therefore, no legal  successors  to  them  were
created,  and the organizations continue to function,  under  a
different  organizer  with the same  ID  number  and  unchanged
contractual and labor law relationships.
      The  Ministry  of Health, under § 10 of  Act  no.  2/1969
Coll.,  on Establishment of Ministries and Other Central bodies
of  State  Administration of the Czech Socialist  Republic,  as
amended by later regulations, and under Act no. 20/1966  Coll.,
on  Care  for  the  Health of the People, as amended  by  later
regulations, primarily handles issues in the area of  providing
health  care, in accordance with the needs of the society,  and
lays out the main directions in the development of health care.
Under  the applicable legal framework [Act no. 218/2000  Coll.,
as  amended  by later regulations; Act no. 320/2001  Coll.,  on
Financial  Inspection  in  Public Administration  and  Amending
Certain  Acts  (the Financial Inspection Act),  as  amended  by
later regulations; Act no. 147/2000 Coll., on District Offices,
as  amended by Act no. 320/2001 Coll.], the Ministry of  Health
is  not  and  was  not  authorized  to  address  the  issue  of
financing,  or in any other way interfere in the management  of
health  care  facilities  if it is  not  their  organizer.  The
management   of  state  health  care  facilities,   as   funded
organizations, is governed by generally valid legal regulations
which, until the end of 2002 also applied to facilities in  the
jurisdiction  of district offices. When Act no. 218/2000  Coll.
went  into  effect,  district offices  and  the  entities  they
organized  and  managed  became part  of  the  relevant  budget
chapter – 380 – in the jurisdiction of the Ministry of Finance.
In  view  of that, the Ministry of Health states in its opinion
that   it  can  not  bear  responsibility  for  the  individual
particular  results of management of health care facilities  in
the jurisdiction of other organizers.
      The  opinion from the Association of Regions of the Czech
Republic  of 22 May 2003 indicates that the Association  agrees
with  the  petition, and confirms the fact that  the  debts  of
health care facilities under the existing health care financing
system  can  not  be  paid by the regions  in  the  foreseeable
future. To pay these debts, the regions would have to use funds
intended  for financing other obligations imposed  on  them  by
law,  for  example  in the areas of education,  transportation,
culture,  environment, social matters,  etc..  The  failure  to
address  the  problems  in  health care,  long  underestimated,
could,  in  the  near future, seriously endanger the  financial
stability of the regions or the availability of health care.
      In  view  of the fact that the petitioners emphasize  the
problem   of   obligations  in  their  petition  primarily   in
connection  with  the transferring health care facilities,  the
Constitutional Court also requested the “Government  Report  on
the  Indebtedness of state Hospitals, on Addressing these Debts
and the Legal Arrangements for the Transfer of Hospitals to the
Regions of 5 December 2002, which the government discussed on 5
December  2002, and the Chamber of Deputies took cognizance  of
in  its 8th session on 10 December 2002. This report, after the
introductory description of changes brought by Act  no.290/2002
Coll.,  says,  among other things, that “the  question  of  the
position  of health care facilities was to have been  addressed
by  Act  no.  219/2000  Coll., on the  Property  of  the  Czech
Republic and Its Functioning in Legal Relationships, which  did
not happen. There were long discussions, in connection with the
financial incapacity of hospitals, on the future legal position
of  health care facilities, primarily about whether health care
facilities  will be state or non-state facilities. In  the  end
the  alternative was chosen of so-called funded  organizations,
as  well  as  ‘health  care facilities  pending  special  legal
regulation,’ which led to limiting any organizer positions. The
indebtedness  of  in-patient  health  care  facilities,   whose
organizers  is a district offices is not a problem which  would
arise only at the point of transfer to a region. Some hospitals
have been, in the aggregate, at a certain level of indebtedness
during  the entire period of their existence in the  system  of
payments  from  health insurance funding. At individual  stages
there were attempts to solve this situation, e.g. in 1995 there
was  a  partial change of the manner [of payment]  from  health
insurance companies by shifting to payment by a flat fee, which
was  constructed at a particular reference period in 1997,  and
the simultaneous provision of credit to several large hospitals
and  individual  health insurance companies, most  recently  in
1997,   with   the  so-called  ‘uniform  debt   clearance.’   A
comprehensive  program was implemented with a two  year  delay,
which  responded  to the oldest overdue obligations  of  health
care  facilities which met certain criteria. The source of this
program   was  partial  limitation  of  investment  development
proposed in the budget for the relevant year. With the  general
belief  and  certainty  that  it  would  not  be  possible   to
significantly  increase  funds  from  GDP  for   health   care,
proposals  to change the financing of health care to a  greater
or  lesser degree were repeatedly submitted in the past .  Most
of  them were not implemented.” The report further states  that
“the state budget for 2002 and the proposed budget for 2003  do
not   contain  funds  for  balancing  the  balance  sheets   of
individual transferred hospitals. Therefore, it is necessary to
proceed  according to Act no. 290/2002 Coll.,  which  specifies
the  plan for these transfer, with the provision that there are
considerable   differences  in  the  financial  management   of
individual   health   care  facilities,  where   the   previous
organizer,  which  had  direct influence  on  the  running  and
thereby  the  financial  management  of  hospitals,  played  an
essential  role.”  The  report states that  the  value  of  the
transferred property is considerably greater than the  existing
level of indebtedness; as of 30 September 2002 these facilities
had  receivables  of  approximately  3.1  billion  crowns,  and
liabilities  of  3.8  billion crowns. The  value  of  long-term
assets is about 42.2 billion crowns, which is being transferred
to the regions. The report does not contain a specific solution
to  the problem of debts burdening the transferred health  care
facilities.  It  is evident from its appendices,  as  the  text
states,  that  there  are  considerable  differences   in   the
financial  management  of  individual health  care  facilities.
Reflecting  the  situation  in  the  individual  regions,   the
liabilities  of  hospitals (after subtracting receivables)  are
the  following:  the capital city of Prague  –  CZK  6,875,000,
Central  Bohemian  Region  –  CZK 213,013,000,  South  Bohemian
Region  –  CZK  60,001,000,  Pilsen Region  –  CZK  47,579,000,
Karlovy  Vary Region – CZK 87,100,000, Usti nad Labem Region  –
CZK  131,186,000,  Liberec  Region  –  CZK  13,741,000,  Hradec
Kralove   Region   –  CZK  151,312,000,  Pardubice   Region   –
CZK  100,951,000,  Vysocina  Region  –  CZK  88,708,000,  South
Moravian Region – CZK 66,852,000, Olomouc Region – CZK 0,  Zlin
Region   –   CZK   146,909,000,   Moravia-Silesia   Region    –
CZK 154,600,000.

II.
In  proceedings  to annul statutes and other legal  regulations
the  Constitutional  Court reviews the  content  of  a  statute
according  to  criteria contained in § 68 par.  2  of  Act  no.
182/1993  Coll., as amended by later regulations, that  is,  in
terms  of  its consistency with constitutional acts. Before  it
turned  to  reviewing  the petition  on  the  merits,  it  also
reviewed,  in accordance with its obligation arising from  that
provision (in fine), whether the formal conditions for  passing
a  statute were met and the contested Act was passed within the
bounds  of  constitutionally provided  jurisdiction  and  in  a
constitutionally prescribed manner.
      In  that regard, the Constitutional Court determined from
the  stenographic record of the 43rd and 47th sessions  of  the
Chamber  of  Deputies  in  the 3rd term  that  the  Chamber  of
Deputies   approved  Act  no.  290/2002  Coll.   after   proper
discussion  at  its  47th session held on  27  March  2002  (by
resolution no. 2208), when, out of the 159 deputies present, 85
voted  in  favor  of the bill and 69 against. The  stenographic
record  of  the  17the session of the Senate in  the  3rd  term
showed  that  on 14 May 2002 (resolution no. 384),  out  of  64
senators present, 55 voted in favor of the bill, as amended  by
amending  proposals passed by the Senate, and 2  senators  were
against  it.  The Chamber of Deputies then voted  on  the  bill
returned  by the Senate (as amended by its amending  proposals)
at  its  51st  session  on 13 June 2002; out  of  188  deputies
present, 91 were in favor and 80 were against. Thus, this  vote
did  not  pass the bill as amended by the Senate. In subsequent
voting  on the bill, in accordance with Art. 47 par. 3  of  the
Constitution, this time the version which was forwarded to  the
Senate, out of the same number of legislators present, 108 were
in  favor  and  65  were against the proposal  (resolution  no.
2317).   Act  no.  290/2002  Coll.  was  then  signed  by   the
appropriate  constitutionally  designated  persons   and   duly
published  in  part 106 of the Collection of  Laws,  which  was
distributed on 28 June 2002. The Act went into effect on 1 July
2002.
      Based  on  these  findings, we can  state  that  Act  no.
290/2002 Coll. was duly passed and issued within the bounds  of
constitutionally    provided    jurisdiction    and    in     a
constitutionally  prescribed manner (§ 68 par.  2  of  Act  no.
182/1993  Coll., as amended by later regulations), as a  result
of  which the petition is eligible for review on the merits, in
terms  of evaluating its consistency with constitutional  acts,
or the constitutional order [Art. 83 and Art. 87 par. 1 let. a)
of the Constitution].
      (For thoroughness we must add that Act no. 290/2002 Coll.
was  amended by Act no. 150/2003 Coll., which went into  effect
on  23 May 2003; however, this amendment did not affect any  of
the  provisions  contested by the petition from  the  group  of
deputies).

III.
Act no. 290/2002 Coll. is a transformational statute, which was
passed as part of implementing phase II of the reform of public
administration.  On the basis of § 1 par. 1, as  of  1  January
2003  there  was  a  transfer from the property  of  the  Czech
Republic to the property of the regions of things which, as  of
31  December  2002  were under the management  jurisdiction  of
state-administered departments and state-funded  organizations,
where  the district offices performed the function of organizer
as of 31 December 2002. Also as of 1 January 2003, these state-
administered departments and state-funded organizations became,
by  operation  of  law,  administered  departments  and  funded
organizations of the appropriate regions (§ 2 par. 1 and  2  of
Act no. 290/2002 Coll.). As of 1 January 2003 there was also  a
transfer to the regions of, among other things, obligations  of
the  state  for  which,  as  of 31 December  2002,  the  state-
administered departments performed tasks under Act no. 219/2000
Coll.   (on  the  Property  of  the  Czech  Republic  and   Its
Functioning  in  Legal  Relationships ); the  regionally-funded
organizations   created   by   the   Act   from    state-funded
organizations  continued  ex  lege  to  bear  the  obligations,
including  rights and obligations from labor law relationships,
which  had,  until  that date, been certain named  state-funded
organizations  [§  1 par. 2 let. b), § 2  par.  2  of  Act  no.
290/2002  Coll.]. A similar transfer also occurred in  relation
to  municipalities [§ 4 par. 2 let. b), § 5 par. 1, par.  2  of
Act no. 290/2002 Coll.].
      According to the petitioners, these provisions indirectly
lead  to impermissible interference in the constitutional right
to  territorial  self-government, they violate constitutionally
guaranteed   relationships  between   the   state   and   TSUs,
impermissibly  interfere in the private law position  of  third
parties,  and also violate the right to property guaranteed  by
the Charter of Fundamental Rights and Freedoms. The fundamental
reason  which led the petitioners to file their petition  –  as
they  expressly  state – is the fact that, as a consequence  of
the  Act,  obligations previously belonging to  the  state  are
transferred  to  the regions, municipalities and  organizations
funded by them, and the state is thus impermissibly solving its
own indebtedness and that of its organizations, particularly in
the area of health care.
      The  Constitutional Court first reviewed § 1 par. 2  let.
b), § 2 par. 2 second sentence, § 4 par. 2 let. b) and § 5 par.
2 second sentence of the Act.
        In    its   previous   decision-making   practice   the
Constitutional Court made clear that it considers  local  self-
government  to be an irreplaceable component of democracy,  and
repeatedly  stated that local self-government is an  expression
of the right and ability of local bodies to regulate and manage
part  of  public affairs, within the limits of the  law,  under
their  own  responsibility, and in the interests of  the  local
population  (judgments file no. Pl. US 1/96, file  no.  Pl.  US
17/98).
       The   Constitutional  Court  addressed   the   statutory
expression  of  reform  of  public  administration  related  to
decentralization and de-concentration of it, connected  to  the
establishment of regions, expanding the exercise of state power
in  the  transferred jurisdiction of regions and municipalities
and  the  termination of district offices in judgment file  no.
Pl.  US 34/02, which denied a petition from a group of Senators
of  the  Parliament of the Czech Republic seeking the annulment
of  points  2,  5,  6, 7, 8, 9 and 11 Art.  CXVII  of  Act  no.
320/2002 Coll., on the Amendment and Annulment of Certain  Acts
in  Connection  with  Terminating the  Activities  of  District
Offices.  In  the reasoning of that judgment the Constitutional
Court  stated that the constitutional guarantee of  territorial
self-government   under  the  Constitution  is   laconic.   The
constitutional  establishes the status of TSUs as  subjects  of
law,  and  assumes that self-governing entities have their  own
property and manage themselves with their own budget (Art.  101
par.  3  of  the Constitution). It also expressly assumes  that
TSUs  share  in  the exercise of state power on  the  basis  of
statutory  authorization (Art. 105 of  the  Constitution).  The
last-cited   judgment   also   emphasized   that   the    Czech
constitutional  standard  of  territorial  self-government   is
supplemented and enriched by the standard which arises from the
international  obligations of the Czech  Republic,  namely  the
Charter  of  Local Self-Government, agreed on 15 October  1985,
which entered into effect for the Czech Republic on 1 September
1999  by  publication  in the Czech Republic  as  no.  181/1999
Coll.,  with  the provision that the rights guaranteed  by  the
Charter  of Local Self-Government are a framework. The  Charter
itself, in a number of its provisions, assumes the existence of
a  detailed  domestic legal framework, and does  not  guarantee
complete  freedom  of  territorial self-government.  Therefore,
statues or other regulations may, according to the choosing and
traditions of the parties, define in more detail the content of
matters  administered by territorial self-government, including
those which the self-government has an obligation to pursue, an
its  organization, and also to set the framework for  financial
management,   allocate   assets   and   financial    resources;
nevertheless, as regards financial resources, Art. 9 par. 1  of
the  Charter provides that local authorities shall be entitled,
within   national   economic  policy,  to  adequate   financial
resources of their own, of which they may dispose freely within
the  framework of their powers, and these shall be commensurate
with the responsibilities provided for by the constitution  and
the  law  (Art. 9 par. 2 of the Charter). In the cited judgment
the   Constitutional  Court  stated  that  the  framework   for
financing  TSUs (just like the definition of their  roles)  may
not,  while maintaining sound finances, lead to their financial
collapse.  (It  also stated that therefore,  in  light  of  the
Charter  and  of  the Constitution, the view  of  authoritative
delimitation and the functioning of delimited employees of  the
terminated  district offices within the framework  of  regions,
authorized cities and municipalities must depend on the  manner
of  financing the exercise of transferred jurisdiction  by  the
state,  with the conclusion that insufficient financing of  the
exercise  of state power in transferred jurisdiction  endangers
the  very  existence  of  the functions  of  territorial  self-
government). In view of the material reviewed, one can draw  on
these basic arguments, in the present matter.
      According to the starting thesis, on which the concept of
self-government is built, the foundation of a free state  is  a
free municipality, then, in terms of regional significance,  at
a  higher  level  of the territorial hierarchy a self-governing
society  of  citizens,  which, under  the  Constitution,  is  a
region.  With this concept of public administration built  from
the ground up, the following postulate must be immanent to self-
government,  as  an  important element of  a  democratic  state
governed  on the rule of law: that a TSU must have a  realistic
possibility to handle matters and issues of local significance,
including  those  which  by their nature  exceed  the  regional
framework and which it handles in its independent jurisdiction,
on  the  basis of free discretion, where the will of the people
is  exercised at the local and regional level in  the  form  of
representative  democracy  and only  limited  in  its  specific
expression by answerability to the voter and on the basis of  a
statutory and constitutional framework (Art. 101 par. 4 of  the
Constitution).    Thus,   territorial   self-governing    units
representing the territorial society of citizens  must  have  –
through  autonomous  decision-making  by  their  representative
bodies – the ability to freely choose how they will manage  the
financial resources available to them for performing  the  work
of self-government. It is this management of one’s own property
independently,  on  one’s own account  and  own  responsibility
which  is  the attribute of self-government. Thus, a  necessary
prerequisite  for  effective performance of  the  functions  of
territorial  self-government is the existence of its  own,  and
adequate, financial or property resources.
      In  the  area of these issues one must keep in  mind  the
condition that these organizations, in considerable part health
care  facilities,  are in. Most of these facilities  –  as  the
opinion  from the Association of Regions of the Czech  Republic
also  indicates – have not inconsiderable, in individual  cases
reaching  as  high as tens to hundreds of millions  of  crowns,
which  can markedly affect the budget of the territorial  self-
governing unit, particularly where there is a greater number of
such  debt-burdened health care facilities in a particular TSU.
Act  no.  250/2000  Coll.,  on  Budget  Rules  for  Territorial
Budgets,  as  amended by later regulations, does provide  rules
for  management of financial resources, the future  receipt  of
which is provided for TSUs by other statutes – in particular by
Act  no.  243/2000 Coll., on Budgetary Allocation  of  Revenues
from  Certain  Taxes  to Territorial Self-Governing  Units  and
Certain State Funds (the Act on Budgetary Allocation of Taxes),
as  amended  by  later regulations – but that  changes  nothing
about  the  fact that at the very beginning of these  entities’
activities they are weighed down by a burden, which was  caused
by the activities of the state or its organizations, and its is
thus  evident that this fact can markedly affect self-governing
activities  and present territorial self-governing  units  from
expending  financial  resources intended for  their  own  self-
governing  activities in such a way as to  serve  the  expected
purpose (Art. 101 par. 3 of the Constitution). Nonetheless, one
can not question the justification for the step where the state
transferred certain property to TSUs, as part of the reform  of
public  administration, as the reasons for  it  come  from  the
historically  established belief on the basis of  which  it  is
those  who are affected by matters tied to property,  and  whom
the property directly serves, are capable, and by the nature of
the  matter also willing and motivated, to manage it  with  due
care, often better than the central state power, and in a  much
more efficient, effective manner. Decentralization of tasks and
the   related  transfer  of  property  is  also  not  something
constitutionally unacceptable. However, the connection of  this
step  to  the  subsequent transfer or further  continuation  of
obligations  tied to this property assumes a further  solution,
in  connection with the system of taxes, subsidies and  similar
payments. The state should not – without anything further – rid
itself  of  liability for debts which arose during  the  period
when it managed the transferred property and which are a result
of  the  previous  loss-making application of property  rights,
perhaps even failure to observe legal regulations [§ 53 et seq.
of Act no. 218/2000 Coll., on Budget Rules and Amending Certain
Related Acts (the Budget Rules)]. It certainly should not do so
in   relation  to  entities  which  are  to  also  fulfill  its
responsibilities consisting of securing the fundamental  rights
arising  from Art. 31 of the Charter of Fundamental Rights  and
Freedoms,  whose  observance the state itself guarantees.  Such
behavior by the sovereign power raises questions about abuse of
state  power to the detriment of TSUs. Although this may  be  a
diametrically opposite situation, in this context  a  reference
also  comes  to mind to the premise, expressed on a  horizontal
level  in private law and generally fair, that the acquirer  of
things – including in cases of transfer without compensation  –
is fundamentally responsible for debts tied to them (§ 500 par.
2  of the Civil Code), including under the argument a minori ad
maius.
     We can agree with the Senate’s opinion that the problem of
the  deficit  from  the previous management must  be  addressed
comprehensively,  but if the indebtedness of  the  property  in
question  is  not to continue, there must be an effort  by  the
state  to  remove this undesirable situation.  If  it  were  to
continue,  it  could  endanger both the  performance  of  self-
government  functions  and  the position  of  creditors,  whose
rights should be secured in a state governed by the rule of law
as a matter of course.
       However,   intervention  by  the  Constitutional   Court
consisting of annulling the abovementioned provisions would not
by itself remove this undesirable situation. Under § 71 par.  4
of  Act no. 182/1993 Coll., on the Constitutional Court,  which
regulates  the legal effects of judgments of annulment  by  the
Constitutional Court (and by which the Constitutional Court  is
bound under Art. 88 par. 2 of the Constitution), the rights and
obligations  from legal relationships arising  before  a  legal
regulation   was   annulled   remain   untouched.   Thus,   the
Constitutional  Court had to take into consideration  that,  as
indicated above, the contested Act is a transformational,  one-
time  event.  The legal consequences connected to the  reviewed
statutory provisions and expected by this Act arose ex lege  as
of  1  January 2003, and the capacity of these norms to  create
consequences in the future is thus fully exhausted. A favorable
judgment from the Constitutional Court, having effects ex nunc,
would  thus  no  longer be able to change  anything  about  the
existing situation, including in view of § 71 par. 4 of Act no.
182/1993  Coll.. For that reason, the Constitutional Court  had
no choice but to deny that part of the petition.

IV.
However,  in  the  opinion  of the  Constitutional  Court,  the
situation is somewhat different when reviewing § 3 and §  6  of
Act   no.   290/2002   Coll.,  which  limit   the   new   owner
(municipality, region) in relation to real estate, for a period
of  ten  years from the day they are acquired, to use only  for
the  purpose  for which it was used as of the day of  transfer,
with  the  provision  that if, before the  expiration  of  that
period,  they  become  unnecessary for  that  purpose  for  the
municipality (region) based on local expectations  and  customs
and it does not use them for social, educational or health care
purposes,  they  must  be offered for  transfer  to  the  state
without compensation.
      As  is  evident  from  the  construction  of  this  legal
framework, as well as from the background report for the  draft
of  Act no. 290/2002 Coll., this limitation aims to reflect the
need  to preserve, at least for a certain time, the use of  the
acquired  real estate by the self-governing units for  purposes
for  which  they  served until the day of the transfer,  or  to
enable  them  to  be  used  only for  purposes  serving  other,
definitively listed public interests.
      In  the  Constitutional Court’s opinion, this  limitation
must also be viewed (apart from the conclusions given below) in
context with the conclusions given previously and also in terms
of  Art.  11  par. 3 of the Charter of Fundamental  Rights  and
Freedoms, under which ownership entails obligations and may not
be  misused  to  the detriment of the rights of  others  or  in
conflict with legally protected public interests.
     The imposition of a limitation on property rights, in this
case  provided  by statute, with a precise, concretely  defined
and certain definition of the purpose of that limitation in the
abovementioned  public  interest  does  not  show  elements  of
arbitrariness,  and in view of the arguments  on  which  it  is
based,  does  not meet the elements of unconstitutionality  (in
contrast to the situation in the matter under file no.  Pl.  US
1/02,  the  judgment  published as  no.  404/2002  Coll.).  The
conclusion  thus reached must be understood in connection  with
the  on-going transformation implemented as part of the  reform
of  public administration. Within this process one can  ascribe
to  the  public interest the capability of being, at a  general
level, permissible, reasonably justifiable grounds for limiting
the property right of territorial self-governing units.
      The  decision-making practice of the Constitutional Court
indicates  that fundamental rights and freedoms may be  limited
in  the  event  of their conflict with another constitutionally
protected value which does not have the nature of a fundamental
right  or  freedom, including in the event of an urgent  public
interest.  The limitation considered must then be  reviewed  in
terms  of  the principle of proportionality – see judgments  of
the  Constitutional Court in the matters file no. Pl. US  4/94,
file  no. Pl. US 15/96, file no. Pl. US 25/97, file no. Pl.  US
16/98,  and file no. Pl. US 3/02 – of which judgment  file  no.
Pl.  US  15/96 also concerned the constitutionality of limiting
the property right of a self-governing unit, and the matter now
under consideration can draw on the conclusions reached in that
judgment.
       Thus  it  must  be said that the present  limitation  of
property  rights  enables reaching the  pursued  aim,  that  of
observing  the legitimate public interest in the  existence  of
social, education and health care facilities (the criterion  of
suitability,  or  the principle of capability  to  fulfill  the
purpose).  The criterion of necessity, as another component  of
the  principle  of proportionality, then arises from  the  very
need to continually preserve (for a certain period of time) the
existence  of  these  facilities,  including  in  view  of  the
fundamental  right  enshrined in Art.  31  of  the  Charter  of
Fundamental Rights and Freedoms. The restriction also does  not
appear  disproportionate when evaluating the  gravity  of  both
protected  values, and in view of the generally acceptable  and
share hierarchy of values it can not be absolutely rejected  in
the  given context. However, its limitation in time should  not
be  determined  only  by a relatively short  transitional  time
period,  in  which the necessary experience is to  be  acquired
which permits responsible handling of the property in the  free
discretion  of the owner, i.e. the relevant TSU.  However,  the
detriment to a fundamental right guaranteed by Art. 11  par.  1
of the Charter of Fundamental Rights and Freedoms limited by  a
ten  year  period, appears obvious disproportionate in relation
to  the  intended aim, as it restricts this right so much  that
its  negative  consequences – because of  its  “temporariness,”
which  is  excessively  long in terms  of  time  –  exceed  the
positive  points, the pursuit of a public interest. Thus,  from
the   viewpoint  of  the  principle  of  proportionality,   the
contested  provisions obviously do not meet  the  criterion  of
proportionality  in  the narrower sense.  In  relation  to  the
constitutional  requirement  of  preserving  the  essence   and
significance of the property rights being limited (Art. 4  par.
4  of  the Charter of Fundamental Rights and Freedoms), in  the
present matter, out of the basic triad of property rights  (ius
possidendi,  ius  utendi et ius fruendi,  ius  disponendi)  the
right  to  use  and  dispose  of  property,  in  the  sense  of
transferring  it to another, is affected for a  period  of  ten
years;  with reference to the foregoing, the solution  adopted,
in  terms  of  its  temporal aspect, can not be  considered  to
correspond to the principle of proportionality, and thus  shows
elements  of  unconstitutionality. In this  regard,  the  legal
framework in § 3 and § 6 of Act no. 290/2002 Coll. exceeds  the
bounds  and  aspects  of permissible interference  in  property
rights,  as  the  ten-year period of the  limitation  does  not
appear  appropriate in the given context, in view  of  all  the
aspects of the issue being considered.
      Thus,  on  the  one hand, in relation  to  the  contested
(tempoarary) limitation of property rights, it is not  possible
to   overlook  its  precisely  set,  certain,  equal  and  thus
constitutionally acceptable conditions (Art. 11 par. 1  of  the
Charter  of Fundamental Rights and Freedoms, Art. 1 par.  1  of
the   Constitution);   however,  on   the   other   hand,   the
Constitutional  Court  believes that the  requirements  arising
from  Art.  4 par. 4 of the Charter of Fundamental  Rights  and
Freedoms  can  be  met  only by a legal framework  which  would
establish  this  limitation only in  the  absolutely  necessary
extent of time, which can be understood as only a minimal,  and
clearly prima facie “transitional” period.
       The   Constitutional  Court  thus  concluded  that   the
limitation  of  property rights in § 3  and  §  6  of  Act  no.
290/2002  Coll., in relation to all the components required  by
the  principle of proportionality, does not meet the conditions
for  limiting  a fundamental right, and therefore  it  annulled
these  provisions due to inconsistency with Art. 4  par.  4  in
connection  with Art. 11 par. 1 of the Charter  of  Fundamental
Rights and Freedoms (§ 70 par. 1 of Act no. 182/1993 Coll.,  as
amended   by   later   regulations).  However,   it   postponed
enforceability of this part of the judgment until  31  December
2003,  so that the Parliament of the Czech Republic would  have
sufficient time to set new deadlines.
Notice:  Decisions  of  the Constitutional  Court  can  not  be
appealed.
Brno, 9 July 2003