After the Fundamental Law of Hungary entered into force, the relationship of the Constitutional Court towards property and the role the state plays in the business sector changed tangibly.
All this required (at least partly) that the legislator also changes its approach. There were many issues the legislator wanted to solve with strong legal intervention, so that it can solve the issue at hand quickly and, in a certain respect, efficiently. Such cases often required the choice between solutions that are long but comply with constitutional guarantees and rapid solutions that considered constitutional guarantees less pronouncedly.
The transformation of the economic role of the state is present not only in legislation but also in the practice of the Constitutional Court judging it. Even the former President of the Constitutional Court, Barnabás Lenkovics, said several times that the Constitutional Court itself had to change the way it perceives its role, and it had to reconsider its previous practice due to economic necessities[1].
The replacement of the Constitution with the Fundamental Law in 2012 resulted in the modification of the relevant fundamental rights and constitutional guarantees, it was a good basis for the Constitutional Court to "transform" its practice going unnecessarily beyond the changes and to accept legislative solutions that are often regarded as border-line cases in terms of constitutionality. The Constitutional Court was forced into situations where it had to accept legislative arguments it could actually not control ("overriding public interest", "aspects of national security" etc.). This, however, raises the question: does the Constitutional Court really formulate its argumentations of constitutionality (within the limits set by the Fundamental Law) or the legislator, operating with categories similar to the foregoing, can effectively "control" the Constitutional Court if it is so required.
To support this, I study the practice of the Constitutional Court, its new decisions (adopted in the topics above) and explore whether the direction pursued by the Constitutional Court is right, as it gives way to legislative pursuits and allows the legislator to treat fundamental rights and values in a new setting.
I will outline the changed approach of the Constitutional Court using the following decisions:
Referring to the introduction, I will review and analyse the Decisions of the Constitutional Court on Act XXXVIII of 2014 on consumer loan agreements, the decisions adopted on the integration of savings cooperatives, and the decision on gambling.
Act CXLIV of 2012 on the Amendment of Act XXXIV of 1991 on the Organisation of Gambling - adopted by the Hungarian Parliament on 2 October 2012 and promulgated in the Hungarian Official Journal on 9 October 2012 - (hereinafter referred to as Amendment Act) enacted the provisions prescribing that slot machines may operate in casinos only as from 10 October 2012 into Act XXXIV of 1991 on the Organisation of Gambling (hereinafter referred to as Gambling Organisation Act), meaning that slot machines outside casinos were not operable any more, and the slot machine operating permits issued before the entry into force of
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the Amendment Act became ineffective on the date following the date of entry into force of the Amendment Act, which rendered the conduct of many gambling businesses impossible.
Responding to this move of the legislator, the advocacy organisation of the businesses "damaged/rendered impossible" (37 in total) due to their non-compliance with the provisions turned to the Constitutional Court in a constitutional appeal to have the changed legislative environment "restored" by ascertaining that the Amendment Act is in conflict with the Fundamental Law and by annulling it.[2]
Based on Paragraph (2) of Section 26 of the Constitutional Court Act, the movers moved for the ascertainment of the conflict between Paragraph (3) of Section 26 and Paragraph (1) of Section 40/A. of the Gambling Organisation Act (enacted by Act CXLIV of 2012) and the Fundamental Law, and their annulment. It is remarkable that the Commissioner of Fundamental Rights also submitted a motion in this subject.
The movers (both the motion of the Commissioner of Fundamental Rights and the two constitutional appeals) referred to the violation of Paragraph (1) of Article B) and Paragraph (1) of Article XIII of the Fundamental Law; hence, I am analysing these for the purposes of my paper, in the light of the decision of the council of the Constitutional Court, with regard to the limits of length[3].
They also found it injurious that the legislator did not ensure the required preparation time when it determined the entry into force of the challenged provisions. In their position, Paragraph (3) of Section 26 and Paragraph (1) of Section 40/A. of the Gambling Organisation Act violated the right of the businesses concerned to human dignity, the right to entrepreneurship and constituted discrimination.
The acting council of the Constitutional Court rejected the motion and constitutional appeals - based on Paragraph (1) of Article B), Article M), Article II, Paragraph (1) of Article VI, Paragraphs (1)-(2) of Article XIII and Paragraph (2) of Article XV of the Fundamental Law - for the ascertainment of the conflict between the first sentence of Paragraph (3) of Section 26 and Paragraph (1) of Section 40/ A. of the Gambling Organisation Act and the Fundamental Law and their annulment, and otherwise refused the constitutional appeals for the ascertainment of the conflict between the first sentence of Paragraph (3) of Section 26 and Paragraph (1) of Section 40/ A. of the Gambling Organisation Act and the Fundamental Law.
The motion(s) therefore aimed at the judgement of fundamental issues of constitutionality regarding the violation of the principle of the rule of law, the right to property and the assurance of the freedom of entrepreneurship.
The Constitutional Court - having regard to the fact that the challenged legislative provisions concerned the operation of slot machines - found, after reviewing the regulations concerning the operation of slot machines, that in the 22 years long period under review[4], the legislator was almost continuously and consequently tightening the regulations on the operation of slot machines. Consequently, according to the majority position of the council of the Constitutional Court, the ever tighter requirements of the legislator - differently from other services and focusing on the specificities of the gambling sector - expressed the intention of the legislator to favour the mitigation of objectionable, negative social phenomena associated with the use of slot machines, and not the short and long term promotion of business entities providing this services, even though the reasoning for certain amendments of the Gambling Organisation Act (Act XLVIII of 1995 on certain Amendments of Acts for Economic Stability and Act CXXV of 2011 on the Amendment of Certain Taxation Acts for the Stability of Public Finances) expressly referred to the increasing of tax revenues.[5]
The Body reviewed the regulations of the European Union on the operation of slot machines, because the operation of slot machines is considered a service, for which Article 56 of the Treaty on the Functioning of the European Union (previously: Article 49 of the Treaty Establishing the European Community) prohibits any limitation. Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market serves the guaranteeing of legal certainty necessary for the freedom of providing services, Paragraph (25) of its recitals reads "Gambling activities, including lottery and
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betting transactions, should be excluded from the scope of this Directive in view of the specific nature of these activities, [...]". Article 2(2) (h), regulating the scope of the Directive, does that.
After reviewing the relevant practice of the Court of Justice of the European Union (hereinafter referred to as CJEU) - reviewing the general findings made in the operative part of the reference for preliminary ruling in Associaçao Nacional de Operadores de Máquinas Recreativas (Anomar) and Others v Estado portugues 2003 (C-6/01)[6] - the Body set out that, according to the rulings of the CJEU, organising gambling is a special business activity which the Member States may limit or they may delineate all or certain types of gambling services based on goals of public interest that they wish to protect in relation to gambling.
The Constitutional Court found that the intention of the legislator, expressed in the reasoning for the bill, to radically reduce the access of the most vulnerable groups, classes of society to slot machines for social, health and economic reasons can be regarded as being in the interest of the public and does not violate, on its own, the provisions of the Fundamental Law. The Body expounded that the legislator implemented the limitation that slot machines may be operated in casinos only, under a concession agreement, for a duly justified public interest. I would make the remark here that the repeated permission to make palinka either by brewing it at home or having it brewed - thus making palinka easier to access[7] - also concerns an activity that could be justifiably prohibited for social, health reasons (though regulations go in the opposite direction). In my view, therefore, selection and prohibition of an activity for some reasons (more specifically, the relocation of an activity in the case at hand) could have other underlying reasons, interests.
At the same time, however, the deciding council of the Constitutional Court came to the conclusion that adoption of the Amendment Act was necessary for eliminating national security risks; their public definition, however, was not possible due to the investigation in process at the time of making the decision. Consequently, the Constitutional Court justifiably raised the question, which it had to judge, whether the review of constitutionality could consider a reference to a national security risk not specified in the legislation process.
In the case at hand, the national security risk logically threatens the interests of the national economy, the protection of which may involve the limitation of constitutional fundamental rights.
The Constitutional Court noted that the Minister for Public Administration pointed out in his reply that the state decided to ban slot machines outside casinos, in the interest of public order, public security and public morals, even though it caused a revenue loss of HUF 3.2 billion from gambling taxes. (Reasoning [146])
The Constitutional Court first examined the objections concerning the infringement of the principle of the rule of law, raised in the motions, because all motions referred primarily to the shortness or absence of the preparation time, derivable from the rule of law, and it did so relying on the generalities in its Decision No. 28/1992, (IV. 30.) summarising its position on the promulgation of and giving effect to pieces of legislation, which the Constitutional Court regarded as authoritative in the examination of the challenged act.[8]
The Body emphasised that it regarded the findings of its Decision No. 28/1992. (IV. 30.) as authoritative which stated that there were exceptional cases where ignoring the requirements of the rule of law does not infringe the principle of the rule of law: "There can be cases, although rarely, when the intention of the state to reach a constitutional goal can operate only by giving effect to the relevant piece of legislation on the day of its promulgation - either due to the nature of the so regulated social relationships or historical conditions or any other reason -, because, for example, an earlier disclosure of the content of the regulations would induce such social movements that could frustrate the goal to be reached by the relevant piece of legislation. If such pieces of legislation get before the Constitutional Court - for finding the date of entry into force
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injurious - either in the form of a constitutional appeal or a motion for the subsequent review of the constitutionality of the relevant piece of legislation, the Body shall investigate the existence of the important and otherwise non-operable social interest that made the legislator put the relevant legislation immediately into effect on a case-by-case basis" (Decision No. 28/1992. (IV. 30.) of the Constitutional Court, DCC 1992, 159).
The majority position of the council of the Constitutional Court is that the putting into effect of the Amendment Act really did not ensure any preparation time; this was, however, necessary to act against the national security risk as soon as possible.
I would like to note here that the Body regarded the provision of the act challenged for the absence of required preparation time, which constituted a violation of the rule of law, as being consistent with the Fundamental Law on the grounds that putting into effect of the Amendment Act without the required preparation time(!) was necessitated by the need for an urgent action against a national security risk, by referring to a national security risk that is actually hypothetical, because it considered a reference to a national security risk not specified in the legislative process.
In this case, in the view of the Body, ensuring the preparation time would have run counter the intention of the legislator, making the implementation of the piece of legislation put into effect less efficient. Furthermore, as for game addicts, it is justifiably expected that the "willingness to play" would have unpredictably intensified during the preparation time, i.e. it would have lead to the spreading of the avoidable negative phenomena by the end of the preparation time (Reasoning [149]). Regarding the absence of the required preparation time (sic!), this argument is, in my opinion, irrational and unrealistic, because it is likely that gamers who used the slot machines instead, during or after working (until they had the money) find it irrelevant towards the relocation of the slot machines to casinos or the timing thereof; who, in turn, was not a gamer before the making of the challenged piece of legislation, will not start to feel the urge to play with slot machines from the required preparation time for introducing the change in the relevant piece of legislation.
Nevertheless, the Constitutional Court found that the absence of preparation time does not violate the principle of the rule of law in the case at hand.
I would, however, also note that, in my opinion, slot machines could mean a national security risk, hence the injury of the interests of the national economy; however, in my view, the Body could not reason that a legislative provision is - having ascertained the absence of the required preparation time, thus the violation of the rule of law - consistent with the Fundamental Law on the grounds of a presumed, unsupported and unspecified "national security risk", presuming the most urgent action against something, which is completely hypothetical, because the Body[9] itself ascertained that there were not any data that could have been made public at the time of adopting the decision, because investigations were still in process to reveal the risk. This argument is not sound to me.
I also regard the majority reasoning of the Body regarding its findings made in the examination of the fundamental right to property (which refers back to the absence of the required preparation time) as disconcerting, because it stated that the intervention of the state was in the interest of the public for the other reason: the national security risk (see this Decision, Reasoning [138]-[146]), which can explain the immediateness of the intervention on the part of the legislator. The national security risk has not been specified for the public, due to the still ongoing investigation. The Constitutional Court does not have the opportunity to analyse and interpret the scope of national security, due to the justified lack of necessary information, in this case; however, it understands that the legislator put the Amendment Act into effect without any preparation time referring to the same (Reasoning [166]).
In connection with this finding of the Constitutional Court, I would like to note, or highlight, that if the legislator refers to a goal of legislation which can be integrated into the concept of public interest or national security risk, then all the Constitutional Court can do is acknowledging it, because the Body does not have any meaningful opportunity to in-
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vestigate the "real" or "realistic" existence of the public interest.[10] This can, however, lead to misuse by the legislator; thus, opening new ways to the revised treatment of fundamental rights, values in the Fundamental Law. "When it comes to the judgement of the limitation of the right to property, as a fundamental right, any purpose of a law can be regarded as the public interest if one can give a logical reason for it. Due to the fact that a constitutional system is neutral in terms of economic policy, economic policy goals can virtually always be accepted as goals of public interest. The light benchmark provided by public interest (as necessity), however, requires the application of an even stricter benchmark of proportionality. The constitutionality of the limitation of property depends virtually on the result of the examination of proportionality. Proportionality means the relationship between the goal and extent of the limitation."[11] I would refer here to the position of one of the judges of the Constitutional Court stating that proving the necessity for limiting rights for the interest of the public rests with the legislator[12].
The Commissioner of Fundamental Rights regarded the unpredictable binding of the operation of slot machines to concession agreements by the legislator with the challenged provisions, in comparison with previous regulations, as a violation of the principle of the rule of law, i.e. asking whether the state has the right to subject a liberalised activity to a state monopoly.
The Constitutional Court rejected the alleged violation of the principle of the rule of law referred to in the motion of the Commissioner of Fundamental Rights, having regard to Decision No. 469/B/1997. AB[13]: "Determining which gambling activities are liberalised and which are not is within the freedom of decision of the state. Comparatively, the state is, in terms of the organisation of gambling, a monopoly of the state, free to decide to liberalise an activity, i.e. it provides more room for private businesses [...], or involves them, or parts of them, into the scope of its exclusive economic activities. It has the constitutional authorisation to do so based on Paragraph (2) of Section 10 of the Constitution" (Decision No. 469/B/1997. AB, DCC 1998, 717, 720.).
All three motions referred to the violation of the fundamental right to property enshrined in Paragraph (1) of Article XIII of the Fundamental Law of Hungary by the challenged provisions, because, on the one hand, licensed machines had to be removed from the market, which made rendered the property underlying their profit- and work-generating activity invaluable, and, on the other hand, deprivation of the source of income, economic basis of their activity was also an argument in the motions. The Commissioner of Fundamental Rights missed the compensation, damages provided by the state, by referring to Decision No. 369/B/1997. and further Decisions of the Constitutional Court. (see: Reasoning [167])
I would note here, drawing a parallel to the position of the Commissioner of Fundamental Rights, the reasoning of the Curia in a civil lawsuit against the Hungarian State as defendant. The plaintiffs filed a lawsuit against the Hungarian State, and sought to oblige the Hungarian State, as defendant, to pay damages on the grounds of violating Articles 34 and 56 of the Treaty on the Functioning of the European Union by the provisions of Sections 5 and 8 of Act CXLIV of 2012, which limited the operation of slot machines to the area of casinos (hereinafter referred to as: ban). In the lawsuit, the court of first instance ascertained that the defendant (the Hungarian State) is liable to pay full damages to the plaintiffs to reimburse the damage arisen under the title of impairment of the investments carried out in closed game halls. The Curia explained that, in the given case, the ban is a damaging action by the legislator, making the operation of slot machines in game halls immediately impossible, without providing any period of transition and damages. The damaging action caused the damage immediately, and the need for new licences to change over to server-based operation as from 1 January 2013 is only relevant for the expected yield in the future.[14]
I find the fact that the civil judicial forum ascertains the liability for damages of the Hungarian State, as defendant, in the foregoing; the Constitutional Court, however, comes to the conclusion in its decision that the challenged statutory rule did not violate any fundamen-
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tal right interesting. Nevertheless, the Constitutional Court was on the opinion that making compensation ex lege possible is related to the exploration of the national security risk, it would be neither practical nor constitutionally circumventable due to the ongoing procedure. The Body noted, however, that providing compensation in this case is an expectation derived from the rule of law, which the legislator can fulfil after the procedure focusing on the national security risk is closed down.
It must be stressed, based on the dissenting opinion of András Bragyova, that "...what we have here is that the constitutional principle of the rule of law in Article B) of the Fundamental Law prohibits the legislator to terminate legal situations created by itself and benefitting individuals without any compensation, the permit to operate slot machines in this case. But it did that..." (Reasoning [196])
In my view, the remark that the state may fulfil the "expectation derived from the rule of law" and provide damages after the procedure focusing on the national security risk is closed means that the Body acknowledges its presumption that the legislator failed in terms of the compensation, but it still did not launch ex officio the procedure falling within the scope of its competence, which should have, in my opinion, ascertain the failure of the legislator. In this context, I would refer to the dissenting opinion of András Bragyova[15], touching upon the issue that "if the legislator stops a previously permitted, lawfully pursued activity for the interest of the public - deciding it by itself, and the Constitutional Constitutional Court does not investigate the practicality of this decision -, then it will only be constitutional if it provides damages to the holders of the permits. The form and content of such damages are also determined by the legislator. The Constitutional Court, however, should have ascertained a failure in conflict with the Fundamental Law due to the lack thereof." (Reasoning [199])
Comparatively, the majority of the deciding council of the Body investigated, in connection with the violation of the fundamental right to property, on he basis of the test of necessity and proportionality, if the state intervention was necessary and proportional for the given goal and if it was justified by public interest. In the Reasoning of this Decision[16] the Constitutional Court ascertained that the overriding public interest is to create a state monopoly for slot machines and to narrow gaming opportunities, justified by social, healthcare and economic reasons, such as reducing game addiction to an acceptable level and strongly reducing the concomitant negative effects (including crime, such as money laundry and embezzlements). The Constitutional Court also considered that (i) the business entities pursued their business activities that is, traditionally and consequently, under increasing limitation by the state[17], and this is generally typical of European countries; (ii) the legislator has broad discretion to determine what threats the society must be protected from, and it would overstep the limits of its opportunities in a manner inconsistent with the Fundamental Law if the result of the assessment of the legislator would be, due to its falsehood, incapable of providing grounds for the subsequent legislation; (iii) the legislative intervention challenged by the movers allows for an easier and more direct control for the state with a view to achieving the goals set by the legislator.
In the view of the majority of the council of the Constitutional Court, the findings above justified the proportionality of the legislative intervention; they note, however, that this could also be achieved by efficient state control and a real limitation of the access to slot machines. As for its necessity, the Constitutional Court found that the implementation of a monopoly can better assist the reaching of the goals than any other, less restrictive measure. It must be noted that, in the examination of necessity, the Body only ascertained its existence regarding the challenged act, but it did not provide a detailed reasoning for this ascertainment.
I would like to note that the remark "efficient state control and the meaningful limitation of access to slot machines would also be sufficient" made by the majority of the Body regarding the necessity actually means that a less restrictive measure of the state would be enough; it, however, regards the greater intervention as being consistent with the Fundamental Law. I would also mention that this legislative solution is, in my opinion, inconsistent with the test of limiting fundamental rights, because the limitation of fundamental
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rights can be regarded as constitutional if (the measure) is necessary to protect other fundamental rights, no other instruments are available and is proportional. It must be noted that the Constitutional Court said expressis verbis that another measure would also be sufficient to reach the goal set by the legislator, i.e. there would have been another instrument instead of the challenged provisions.
Overall, the Constitutional Court ascertained that the intervention effected with the Amendment Act serves such significant goals subject to public interest which are capable of justifying the objective limitation of operating slot machines; therefore, it rejected the motions alleging that the Amendment Act was inconsistent with the Fundamental Law due to its violation of the right to property.
The movers found it also injurious that the challenged legal provisions violated the freedom to conduct a business, enshrined in Paragraph (1) of Article M) and Paragraph (1) of Article XII of the Fundamental Law; moreover, the Amendment Act renders their businesses impossible.
The Constitutional Court examined - considering Decision No. 3062/2012. (VII. 26.) - in this regard whether the challenged legislative provisions completely exclude the possibility to operate slot machines, i.e. the entry into this set of economic conditions. In this regard, the majority position of the Body is that it was one of the challenged pieces of legislation that stated that slot machines may be operated in a casino only. The Gambling Organisation Act also defines the conditions for the operation of slot machines in casinos; these conditions make it possible within considerably tighter limits (compared to the previous regulations), requiring significant capital investment. At the same time, the challenged pieces of legislation do not render the provision of such services impossible under concession agreements.
I would like to highlight the dissenting opinion of András Bragyova, which I agree with, stating that the Amendment Act cancelled valid official permits ex lege within one day (with the entry into force of the act). These permits were valid under the amended act; this is not changed by the fact that they would have expired soon, as the Decision argued[18]. According to the practice of the Constitutional Court, the withdrawal of administrative authorisations, as this is what happened here, by operation of law, is unconstitutional. It is unconstitutional, because it violates a constitutionally acquired, personally held right. Anyhow, most acquired rights are based on administrative decisions, or the existence of a right is established by an administrative decision, such as pensions or social benefits [see Decision No. 43/1995. (VI. 30.), DCC, 1995, 188.].
Within the meaning of Point (l) of Paragraph (1) of Section 12 of Act CXCVI of 2011 on National Assets (hereinafter referred to as National Assets Act) and Section 2 of Act CXXXIV of 2012 on Reducing Smoking Prevalence Among Young People and Retail of Tobacco Products (hereinafter referred to as Tobacco Act), the retail sales of tobacco products falls within the scope of exclusive economic activities of the state, which it may transfer under concession agreements. Consequently, as from 1 July 2013, tobacco may be sold in retail shops only with a right ensured in a concession agreement and under a tobacco retail licence.
This statutory rule was challenged by 16 motions (constitutional appeals) before the Constitutional court; the movers sought for -under Paragraph (2) of Section 26 of the Constitutional Court Act - the ascertainment that Point (l) of Paragraph (1) of Section 2 of the National Assets Act is inconsistent with the Fundamental Law and its annulment.
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In their motions, the complainants sought for the ascertainment of the inconsistency between the concerned statutory rules and the Fundamental Law and their annulment based on the following objections.
i) The movers rendered the violation of the fundamental right to property [Article XIII of the Fundamental Law] likely for various reasons. Firstly, they explained that rights existing under an authorisation to pursue a certain activity are protected by Article XIII of the Fundamental Law. The economic activity actually pursued under an official licence allows for the application of the property guarantee and gives an economic value to the official permit. In their position, the Constitutional Court regards a right existing under an authorisation to pursue an activity as property if the holder of the authorisation pursues the activity in question to generate regular incomes. They also argued that the state had deprived them of their legitimate expectation, future profits, and this is what caused them the greatest damage.
In terms of this component of the motions, It was ascertained that the economic activity pursued by the complainants is not protected by Article XIII of the Fundamental Law, because the mere fact - explained the Constitutional Court - that the complainants retailed tobacco products over a longer period under an operating license for unlimited term, in he shop indicated therein, and they got regular income from it does not mean that the mentioned business activity could be considered as an acquired property or a constitutionally protected property expectation, and would, as such, be protected by Article XIII of the Fundamental Law (Paragraph [20] of the Reasoning).
ii) In the view of the movers, the right to property was violated in the challenged statutory provision and took away rights of property value from them with a normative act, without due compensation, because an official permit was a right of property value, as they pursued a profitable business under it. Nevertheless, they found the deprivation of rights of property value (the withdrawal of official permits by way of an act of Parliament) injurious because the state did not provide any compensation for this.
The Constitutional Court ascertained that the challenged statutory provisions did not contain any expressed provision on the withdrawal of the operating licenses or any other official permits of the complainants, and that the complainants could retail tobacco even after 1 July 2013, if they met the conditions of the changed legal regulations. Within the meaning of the challenged provisions of the Tobacco Act, tobacco may be retailed, as from 1 July 2013, tobacco may be retailed under a tobacco-retailing right and tobacco-retailing permit under a concession agreement. The right holder winning the concession tender and having been awarded the concession agreement must request the new official permit for tobacco retailing from the authority competent for excise matters, the customs authority[19]. As for shops retailing only tobacco products (e.g. specialised tobacco shops), after 1 July 2013, tobacco retailing is allowed if they meet the conditions set by the changed legal regulations, i.e. have a national tobacco shop, the entitlement and permit to retail tobacco.
In my view, the majority reasoning of the Constitutional Court is not sound in terms of the fact that, even though the challenged act did not expressly withdraw valid official permits, the entry into force of the provisions rendered the retailing of tobacco impossible; thus, the result is practically identical to an expressis verbis withdrawal. I would also draw attention to the dissenting opinion of András Bragyova, stating that - by the changing of Section 1 of Act CLXIV of 2005 on Commerce (hereinafter referred to as Commerce Act), Paragraph (7) of Section 25 of the Tobacco Act removed tobacco retailing from the scope of the Commerce Act -the Tobacco Act cancelled the tobacco-retailing permit of all tobacco shops (and non-specialised tobacco retailing shops) to the effect that they could continue their tobacco retailing for an additional 10 months (Paragraph [74] of the Dissenting Opinion).
iii) The movers also referred to expropriation under Paragraph (2) of Article XIII of the Fundamental Law in this case, because the state deprived the property of movers by operation of law without providing any immediate, complete and unconditional compensation.
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Through the entry into force of the challenged statutory provisions, the property of the complainants reduced considerably and without any compensation; hence, in their opinion, violation of property rights applies even if the state intervention would not be an expropriation.
They were not compensated for their previous investments in this activity and the assets serving this activity, which they could not use in the future or sell. Non-compensation did, in their position, rendered the state intervention into the property of the movers disproportionate.
With this Decision, the Constitutional Court confirmed that the fundamental right to property in Article XIII of the Fundamental Law does not guarantee the lasting market value of investments made and equipment purchased by the businesses/entrepreneurs with a view to pursuit business. In the view of the Constitutional Court, the acquired property and the constitutionally protected property expectation were not deprived in the case examined, thus the obligation of compensation in Paragraph (2) of Article XIII of the Fundamental Law did not apply (Paragraph [24] of the Reasoning). As the Constitutional Court ascertained in the foregoing, tobacco retailing, as a business activity pursued by the complainants under an official permit before the entry into force of the Tobacco Act is not protected by the fundamental right to property in Paragraph (1) of Article XIII of the Fundamental Law.
The Constitutional Court stressed that the challenged statutory provisions did not prevent ex lege the complainants from pursuing their previous tobacco-retailing, the Tobacco Act allows them to submit an application for concession.
The complainants had another strong weapon as an argument for ascertaining the inconsistency with the Fundamental Law, the violation of the fundamental right to conduct a business. In this context, they explained that if a business retailing tobacco is not to be regarded as property, then retailing tobacco constitutes the exercising of the right to conduct a business, which the challenged statutory provisions pass over exclusively to the state. The "monopolistic state" may, however, freely decide to assign the exercising of this activity to an alternative business. The movers explained - referring to Paragraphs (1) and (2) of Article 38 of the Fundamental Law - that a cardinal act of Parliament, hence the National Assets Act which is a cardinal act of Parliament adopted under the authorisation in Paragraph (1) of Article 38 of the Fundamental Law, may not transfer certain economic activities to the exclusive economic activities of the state. In their view, the unlimited extension of the scope of exclusive activities of the state is incompatible with Paragraph (1) of Article M) of the Fundamental Law.
In the view of the Constitutional Court, the challenged provision of the National Assets Act, classifying tobacco retailing as an exclusive economic activity of the state, may not be regarded as an arbitrary legislative procedure, because the legislator may freely decide - in accordance with the provisions of the Fundamental Law; thus, especially 38.the goals in Paragraph (1) of its Article 38 - which activities it classifies as exclusive economic activities of the state in a cardinal act adopted under the authorisation in Paragraph (2) of Article 38 of the Fundamental Law. It also added that, in the case at hand, general aspects of public health, protecting the health of young people are such, especially important interests of the public that meet the requirement of "serving the interest of the public" in Paragraph (1) of Article 38 of the Fundamental Law, a goal recognised by the Fundamental Law (Paragraph [27] of the Reasoning).
In this regard, one can justifiably ask why a goal recognised by the Fundamental Law can be achieved only if the state passes retailing rights from one tobacco retailer to another under a concession agreement.
In the view of the Constitutional Court, the mentioned basic principle of constitutionality was not violated by the fact that the legislator classified tobacco retailing as an exclusive economic activity of the state with a view to achieve the goal in Paragraph (1) of Article 38 of the Fundamental Law.
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The Body ascertained again that the right to conduct a business may not be made absolute and is not unlimited: nobody has the subjective right to conduct a business in a specific trade or to do that in a given legal form of business. The right to conduct a business only means, but this is an absolute requirement of constitutionality, that the state should not prevent or render becoming an entrepreneur impossible (Decision No. 54/199. (X. 13.) AB, DCC 1993, 340, 341-342.; confirmed by Decision No. 32/2012. (VII. 4.) AB, Paragraph [155] of the Reasoning). Based on its authoritative practice, the Constitutional Court came to the conclusion that neither the complainants or anybody else is prevented to retail tobacco, an activity classified as an exclusive economic activity of the state and assigned under a concession agreement, in the form of a business under the provisions of the Tobacco Act.
The Constitutional Court made the test of necessity & proportionality for the challenged statutory provisions limiting the exercising of the fundamental right to conduct a business to the detriment of the complainants[20], and concluded that the necessity, a condition for the constitutionality of the limitation of a fundamental right, applied. Recitals of the Tobacco Act clearly specify the goal of the legislator in limiting tobacco retailing with the Act, it wanted to reduce smoking among young people (Paragraph [30] of the Reasoning). To this end, it, therefore, limited the widespread availability and appearance of tobacco, ensured by previously effective regulations.
The Constitutional Court ascertained that the state must - in fulfilling its obligation of objective institutional protection ensuring the functioning/fulfilment of fundamental rights (laid down in Paragraph (1) of Article XX[21], Paragraph (5) of Article XV[22], Paragraph (1) of Article XVI[23] of the Fundamental Law) and obligations defined in the Fundamental Law - ensure that the physical and mental health of children and young people are exposed to the least harmful impact; the harm tobacco does to health is, however, publicly known.
It was expounded, regarding proportionality, that the state passed the exercising of monopolised tobacco retailing to entrepreneurs/ enterprises under state-concession agreements under specific statutory conditions; thus, it may not be regarded as a disproportionate limitation of the fundamental right to conduct a business.
The Constitutional Court also considered the fact that the legislator has quite a broad discretion, within the limits set by the Fundamental Law, what to regard as dangerous to society and to what extent, and the result of such a consideration may be considered inconsistent with the Fundamental Law if its falseness renders it impossible to be grounds for the subsequent legislation; in the view of the Constitutional Court, however, this was not ascertainable in the case at hand.
Having regard to the foregoing, the Constitutional Court rejected complaints alleging the violation of the fundamental principle in Paragraph (1) of Article M), the fundamental right in Paragraph (1) of Article XII and the provision in Paragraph (3) of Article I of the Fundamental Law.
a) Parliament made many steps to handle social issues generated by the considerable increase of repayment instalments due to the economic crisis started in 2008; hence, it adopted Act XXXVIII of 2014 on the Settlement of Particular Issues Related to the Uniformity Decision of the Supreme Court (Curia) on Consumer Loans Provided by Financial Institutions (hereinafter referred to as the Foreign Currency Act or Act).
The issue of constitutionality regarding the Foreign Currency Act did not concern the right to property or the freedom to conduct a business. The intervention of the state into the economy lied in the fact that the state transferred a part of the issues related to the "resolution" of the problems of foreign currency loans to the banks; thus, those who raised issues of constitutionality were also banks.
As the subsequent constitutional review as an actio popularis is not known to the Fundamental Law anymore, the banks which were affected by the legal provisions had a limited
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number of opportunities to "neutralise" the provisions of the Act; the options they had were the constitutional appeal and the concrete subsequent constitutional review initiated by a judge[24]. At "first", four judicial initiatives were submitted to the Constitutional Court; one of them came from a judge of the Budapest-Capital Regional Court, three came from the council of the Budapest Court of Appeal. In summary, the judicial initiatives referred to the infringement of the following provision(s) of the Fundamental Law of Hungary: Paragraph (1) of Article B); Paragraph (1) of Article C) Paragraph (1) and (2) of Article M); Paragraph (2) of Article Q); Paragraph (1) of Article XXVIII; Paragraph (7) of Article XXVIII; Paragraph (1) of Article 25 and Paragraph (l) of Article 26.
It must be noted that the Decision on Foreign Currencies rejected the judicial initiatives seeking for the ascertainment of inconsistency between the entirety of Act XXXVIII of 2014, Paragraphs (1)-(3) and (6)-(7) of its Section 1, Section 4-15 and Section 19, and the Fundamental Law and their annulment.
b) the Act applied the solution that the contractual stipulation - save for individually negotiated conditions - allowing for an unilateral increase of interest rates, costs, fees shall be presumed as unfair as regards consumer loan agreements containing the opportunity of unilateral contract modification, having regard to the fact that it does not comply with the principle in Points (a)-(g) of Paragraph (1) of Section 4 the Act[25]. The financial institutions could file for lawsuits to rebut this presumption. The financial institutions regarded this solution as a violation of the prohibition of retroactivity, and an infringement of due process. According to the Act, the banks had 30 days to act and prove that their contract stipulations were fair.
It should be remarked that the period made subject to debates may not be regarded as uniform and homogenous, the legislative environment was changing constantly (after 1 August 2009, 1 January 2010 and after 15 November 2011 and 9 December 2012, until 26 July 2014). The Foreign Currency Act did that. Ignoring this, the Constitutional Court found, in its majority position, that the Act does not create any substantive law retroactively, but enacts the interpretation of the substantive law that was always in force in the time period concerned, and elaborated and made mandatorily applicable by European and Hungarian judicial practice (meaning that the clarification of the interpretation of substantive law made it already part of substantive law) into the Act, and raised it to the level of laws. This is what Judge Sulyok of the Constitutional Court also emphasises, meaning that the principles of the Act were present earlier as well. This approach is also reinforced by Decision No. 7/2015. (III. 19.) of the Constitutional Court - to which László Kiss, the Judge of the Constitutional Court, attached a dissenting opinion in the same regard -, and Decision No. 11/2015. (V. 14.) of the Constitutional Court, which did not found the motion raising objection against the "legislation" of the Supreme Court (Curia) as substantiated.
According to the position of the Decision of the Constitutional Court, the current conditions were deductible from the general legislative provisions from the outset, which were subsequently set out in an opinion of the Civil Department (2/2012), a Decision (2/2014) of the Supreme Court for the Uniform Application of the Law, and law (Act XXXVIII of 2014). According to the reasoning of the Constitutional Court, it can be presumed that the interpretation of the law would be the task of the parties concluding the contract, because the principles were ab ovo deductible from the general legislative environment. Contrary to the majority position, Péter Paczolay argues that the Act is only a combination of certain elements existing in judicial practice, and it represents the interpretation of the Opinion of the Civil Department and the Decision of the Supreme Court on the uniform application of the Law (ad Directive 93/13/EEC) by the legislator [348].
The Constitutional Court, therefore, accepted that the prohibition of retroactive effect is not violated by the intervention into the economic sector, if the conditions enacted and itemised in the new act were derivable from previous judicial practice. I cannot identify myself with this.
c) The Constitutional Court also investigated the issue whether the period available for the bringing of an action by the financial institutions is sufficient for their realistic consideration and
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decision whether they want to rebut the legal presumption of unfairness.
The majority reasoning of the Constitutional Court is the following:
According to Paragraph [156] of the Reasoning, the financial institutions did actually not have only thirty days to decide on the foregoing issues (to rebut the presumption). Although the Constitutional Court calculates the time for preparation from the promulgation of a law in its practice so far explained in the in conjunction with the required preparation time, this case required the consideration of other aspects as well (namely that the issue at hand affects a large part of the society and is of prominent gravity in terms of the national economy and the society). In the view of the Constitutional Court, the deadline to initiate the lawsuits aimed at the refutation of the unfairness of the stipulations became obvious to the financial institutions at the promulgation of the act at the latest.
In my opinion, this argumentation is not sound. The Hungarian legal system has several examples for the changing of the legislative text by the legislator still before the entry into force of the promulgated act. Consequently, the Constitutional Court does not make the retrospective assumption that the legislator will not take this opportunity in terms of the Foreign Currency Act as well, therefore the Constitutional Court cannot state it without any doubt that it became known at the promulgation of the act at the latest.
At the same time - says the Constitutional Court - having regard to the fact that the texts of bills are accessible in an electronic format on the homepage of the Parliament, the main issue of the civil lawsuit became obvious to the financial institutions latest[26] at the voting of the bill, on 4 July 2014 (i.e. Constitutional Court one and a half months before the expiry of the deadline for initiating the lawsuits). The Constitutional Court has emphasised again that the legislative intention of the Hungarian Parliament was not without any prehistory in this matter. It was not only the persons with loans denominated in foreign currency and the financial institutions having previously concluded such contracts to whom it was obvious that law would be adopted within a relatively short time in this issue, but the entire society and even the international professional community had the chance on several occasions to obtain information about the pursuits of the government in this respect via the printed and electronic media. The financial institution could therefore had the profound reason to expect general legislative provisions and such steps of the Government".
I regard this argumentation as unacceptable, because, with this, the Constitutional Court says and conveys to the society that it has to/should gather information about the legislative intention of the state and the draft laws from the printed and electronic media and this could be a realistic basis - in a case of such a serious gravity - of calculating the preparation time, moreover, it regards this as an appropriate argumentation.[27] In my opinion, this is a dangerous tendency, which can separate the calculation of the required time for the promulgation (there was a wrong track in this matter previously but the Constitutional Court did not follow it later on - the argumentation in Decision No. 349/B/2001 did however come to the surface again, as a toxic underground stream).[28]
The point is that the Constitutional Court overlooked the application of provisions giving rise to suspicion of inconsistency with the Fundamental Law with reference to special circumstances, special situations in this decision as well.
The great-volume decisions presented in this paper outline, in my view, a practice of the Constitutional Court that integrates legislative intention practically mechanically into its argumentation, and accepts it without any revision, declaring it public interest; it is, however, to be noted that the Constitutional Court cannot actually examine the "real existence" of public interest. In my view, however, it may not be accepted that the Constitutional Court declares, by referring to abstract categories belonging to the scope of public interest (i.e. economic necessity, social, health and economic reasons, national security interest, etc.), statutory provisions that limit fundamental rights and render them void.
In my view, the Constitutional Court could ascertain the nonaction of the legislator in
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its decisions described above, namely that it should elaborate the background of its referring to public interest, and develop, in appropriate detail, what methods, solutions, detailed statistical data, examination are necessary for making references to public interest in a controllable manner. This legal background could serve as a basis of the decision regarding the acceptance of the reference of the legislator in the Constitutional Court's investigation. In the cases examined, the legislator did not support this kind of argumentation at all[29].
I would like to make the remark here that the Constitutional Court could ab ovo not check or examine the content of the public interest, although it could examine its actual existence and details[30]. Mandatory disclosure could mean substantive control.
In my view, analysis of the decisions revealed the trend that the Constitutional Court stepped back from the previous level of protection regarding certain fundamental rights (i.e. the right to property).
In the relevant decisions, the movers refer, almost without exception, to the same fundamental rights and other rules in the Fundamental Law, and the Constitutional Court neglected the potential inconsistency of legislative efforts to treat undoubtfully existing social issues with the Fundamental Law, accepting the uncontrollable arguments referred to by the legislator, based on public interest, national security interests or similarly broad concepts. ■
NOTES
* This paper has been made within the framework of the programmes initiated by the Hungarian Ministry of Justice to raise the standard of legal education.
[1] http://www.jogiforum.hu/interju/122
[2] I want to mention that another constitutional appeal was lodged before the Constitutional Court after he first motion arrived, and the Commissioner of Fundamental Rights also turned to the Constitutional Court. Based on Paragraph (2) of Section 58 of the Constitutional Court Act, the Body ordered the merging of the two constitutional appeals (original case numbers: IV/3567/2012. and IV/3755/2012.) and the motion of the Commissioner of Fundamental Rights (original case number: II/3797/2012.) under No. IV/3567/2012.
[3] In addition, both constitutional appeals referred to the violation of Article M), Paragraph (1) of Article XII and Paragraph (2) of Article XIII of the Fundamental Law.
[4] This means the period from the entry into force of the Gambling Organisation Act, 16 August 1991, until the entry into force of the Amendment Act, 10 October 2012. The Body made the remark in its decision that the legislator amended the Gabling Organisation Act more than 40 times; therefore, it touched upon the more significant amendments.
[5] This is supported by official statistics, showing a clear, gradual decrease in the number of slot machines and gambling halls from 2004, then a significant, nearly two-thirds drop from November 2011.
[6] According to Point 4 of the operative part of the ruling, Article 49 of the Treaty establishing the European Community does not exclude such national regulations, as long as they are justified by social policy considerations and the prevention of fraud.
[7] After 90 years of prohibition, brewing palinka at home became legal again as of 27 September 2010.
[8] Based on Decision No. 13/2013. (VI. 17.), stating that the Constitutional Court found that "for issues of constitutional law examined in newer cases, it may use the arguments, legal principles and the constitutional context elaborated in its previous decisions, if there is nothing against the applicability of the findings on the basis the identicality in terms of content of the given section of the Fundamental Law and the Constitution, its contextual identicality as regards the entirety of the Fundamental Law, consideration of the interpretation rules of the Fundamental Law and the case at hand, and their incorporation into the decision to be adopted seems necessary."
[9] Reasoning [140] As for national security risks, the Minister of the Interior announced, replying to questions during his hearing at the meeting of the National Security Committee on 24 May 2013, (based on the relevant minutes), that the public may not be informed because the investigation is still in process, but if the Committee adopts a decision in this regard, then its members may check the relevant materials at the Constitution Protection Office. The minister also emphasised that the Government and the Parliament acted in time and made a good decision.
[10] Compare with: Reasoning [138]. The proponent of the bill gave the reasons of "already emerged" national security risks for banning the operation of slot machines, stating that the risks are "real" and "realistic".
[11] Decision No. 20/2014. (VII. 3.) of the Constitutional Court: Dissenting opinion of András Bragyova [336]-[337]
[12] See Decision No. 50/2007. (VII. 10.) and Decision No. 3062/2012. (VII. 26.) of the Constitutional Court
[13] Under reference to Decision No. 28/1992. (IV. 30.) AB and having regard to the fact that the previous provision of the Constitution referred to is substantively identical to Paragraph (2) of Article 38 of the Fundamental Law, the Constitutional Court regarded the finding above as authoritative for the case at hand.
[14] For more detail, see: Information material on the decision of the Curia in the case No. Pfv.IV.20.211/2017. initiated for damages
[15] László Kiss backed it.
[16] In Paragraphs [135]-[146]
[17] See Paragraphs [65]-[124] of the Reasoning
[18] Reasoning [167]: The Constitutional Court notes that Point 2 of Section 397 of Act CXXV of 2011 on the Amendment of certain Tax Acts Amending the Gambling Organisation Act and Promoting the Stability of Public Finance mean that, as from 1 November 2011, licencing conventional slot machines was not possible anymore, the validity of already issued licences would expire on 31 December 2012, meaning that the Amendment Act rendered them invalid 100 days earlier.
[19] See: Paragraph [21] of the Reasoning: The tobacco-retailing permit, an official permit issued by the customs authority and specifically authorising the retailing of tobacco products was introduced by the Tobacco Act; before 1 July 2013, the entry into force of the Tobacco Act, there was not any similar special
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permit (the operating license of the shop or the excise license were different permits).
[20] See: Within the meaning of the second sentence of Paragraph (3) of Article I of the Fundamental Law, a fundamental right may be limited with a view to the effectiveness of another fundamental right or the protection of a constitutional value, to the extent absolutely necessary and in proportion to the goal to be achieved, respecting the substantial content of the fundamental right.
[21] Everyone shall have the right to physical and mental health
[22] By means of separate measures, Hungary shall protect families, children, women, the elderly and persons living with disabilities
[23] Every child shall have the right to the protection and care necessary for his or her proper physical, mental and moral development.
[24] As there was not any preliminary constitutional control initiated by the President of the Republic concerning the Act, and no motion was submitted to initiate a subsequent control by those who would have been entitled to do so, I neither mention nor examine these options.
[25] (a) the principle of clear and understandable formulation: its content is not clear or understandable to the consumer;
(b) the principle of itemised definition: the conditions of unilateral contract modification are not defined in an itemised fashion, meaning that the list of reasons is missing, or there is one but its list is only exemplary;
(c) the principle of objectivity: the conditions of unilateral modification are not objective, meaning that the party contracting the consumer has the means to make the condition apply, contribute to that and influence the extent of the change giving rise to the modification;
(d) the principles of effectiveness and proportionality: the conditions defined in the list of reasons do not effectively affect the interest rates, costs and fees or not to the extent of the change of circumstances;
(e) the principle of transparency: the consumer could not have foreseen at the application of which conditions and to what extent can additional charges be transferred to him/her;
(f) the principle of termination: the right of termination is not ensured for the consumer in case a contract modification applies or
(g) the principle of asymmetry: it excludes that the effect of any changes of conditions in favour of the consumer are enforced in favour of the consumer.
[26] Paragraph [156] of the Reasoning contradicts itself; the expressions "it became obvious at the promulgation of the act at the latest" - "it became obvious at the voting of the bill at the latest" contradict each other.
[27] Decision No. 34/2014. of the Constitutional Court: Paragraph [160] of the Reasoning: Against this background, the Constitutional Court has found that there was a sufficient amount of time available for making the application, the challenged provisions of this Act are therefore not in conflict with the Fundamental Law.
[28] Ildikó Kovács - Péter Tilk: Thoughts on the starting point for calculating the required preparation time - in Jogtudományi Közlöny, accepted for publication. - provides a detailed insight into the problems in this connection.
[29] I would refer, especially, to the amendment of the gambling organisation rules that the proponent of the bill argued for the amendment with "already arisen" national security risks. The Constitutional Court declared, however, that the national security risk has not been specified (even so far) for the public, due to the still ongoing investigation.
[30] Reference to the interest of the public would not be a simple statement, see: the proponent of the bill gave the reasons of "already emerged" national security risks for banning the operation of slot machines, stating that the risks are "real" and "realistic".
Lábjegyzetek:
[1] The author is Doctoral Student, Doctoral School of the Faculty of Law at the University of Pécs.
Visszaugrás
