After the Fundamental Law of Hungary entered into force, the Hungarian state often transformed the economy's subsystems with a strong hand, and the assessment of the constitutionality of these actions investigates the reason, extent, and way-i.e. the necessity and proportionality - of the economic involvement of the state.
To get a deep understanding of this topic, let us briefly review the principles/propositions manifested in the previous case-law of the Constitutional Court (subject to the Fourth Amendment of the Fundamental Law[2]) regarding the economic function of the state. Decision No. 33/1993. (V. 28.) of the Constitutional Court laid down the general foundations for the economic involvement of the state in relation to economic policy by declaring that [...] Beyond declaring that Hungary is a market economy, the Constitution is neutral in terms of economic policy. The extent, strength or even the prohibition of the involvement of the state in the economy or the limitation of state ownership and the extent of such limitation do not directly derive from the Constitution. Within the restrictions laid down in Section 9 of the Constitution, the legislator has a broad freedom to define state economic policy, and the competence of the Constitutional Court is quite limited in this regard". (Decisions of the Constitutional Court 1993, 247, 249-250.) The Constitutional Court developed these findings further and declared in its Decision 21/1994. (IV. 16.) that the Constitution does not commit itself to any substantive model of the market economy. [...] Therefore, the Constitutional Court determines the critical extent of 'state intervention' in an abstract manner, generally, only for extreme cases; if this is exceeded, then it is considered unconstitutional, due to the injury of the market economy. Nobody is entitled to a market economy, i.e. the market economy is not a fundamental right. Subsequent governments are free to set up their own economic polices in changing economic situations, they are free to liberalise or tighten control-as long as they do not render the 'market economy' obviously impossible.
The market economy has become a fact and remained a programme in terms of constitutional law, and its maintenance and protection are also a continuous constitutional responsibility, which the state can and must ensure though the support of economic competition (as also required by the Constitution), but, first of all, through the enforcement and protection of each fundamental right. Such fundamental rights protection does, however, have its own methodology and characteristics. (E.g. the provisional nature of the limitation of property, as a component of proportionality, is already a real standard of constitutionality.
It continued this previous practice and supplemented it in its Decision No. 8/2010. (I. 28.) of the Constitutional Court on taxes levied on certain properties of high value as follows. "The elaboration of economic policy, more specifically, the supporting of certain activities, the encouragement or de-emphasising of investments do not constitute an issue of constitutionality (Decision No. 620/B/1992. AB, DCC 1994, 542.). They become an issue of constitutionality if the direct legislative implementation of economic policies injures constitutional right(s) or discriminates. [Decision No. 59/1995. (X. 6.) AB, DCC 1995, 295, 300.]" (DCC 2010, 23, 54.)
After 1 January 2012, the property-related case-law of the Constitutional Court and its approach to the involvement of the state in the economy changed tangibly, although Article XIII of the Fundamental Law does not differ substantially from Section 13 of the former Constitution regarding the constitutional pro-
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tection of the fundamental right to property and the constitutional conditions for restricting this fundamental right.
The change is, therefore, less apparent in the connotational conditions but rather in the fact that the legislator has encumbered the right to property in a legal way much more times than previously. The state intervention did typically not aim at traditional things (properties) but at the deprivation of rights (valuable rights and interests in the legal, but at least in the economic sense) of business entities which were active on economically significant markets. The legislator transformed long-term contractual relationships, sometimes to protect one of the parties involved in those relationships (the consumers), but at other times, it obliged enterprises to leave the market and give their market positions to other players, by referring to the interests of the general public, the national economy, and public health.
All this required (at least partly) that the legislator also changes its approach. Several problems to be solved arose during the past years, and the legislator wanted to solve these with strong legal intervention in order to settle the problem 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 legislator always provided a reasoning for state interventions. Sometimes, these arguments were stronger and more convincing, at other times they were less acceptable. The reasons for the intervention are sometimes not convincing enough. a judicial motion to the Constitutional Court mentioned that the actual purpose of the legislation was to transfer certain assets to other owners and not, as the legislator often said, the general interest, economic necessity, national security risk, etc. And the Constitutional Court could "assess" these quite controversially only in its decisions adopted in the past years.
This change appeared, for example, in the review of the constitutionality of Act XXXVIII of 2014 that resolved the problem of consumer loan agreements. The integration of savings cooperatives, the "nationalisation" of gambling activities, questions concerning the tobacco shop act, and the legal regulation of the Quaestor case raise interesting questions regarding the right to property, the economic involvement of the state, and the first half of the sentence in Article O) of the Fundamental Law of Hungary ("Everyone shall be responsible for him- or herself").
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 approach, 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, applying categories similar to the foregoing, can effectively "control" it if it is so required.
The complexity of these questions includes, in my view, the presentation of a part of diverging trends in the protection of fundamental rights in Hungary and internationally. The European Court of Human Rights (hereinafter: ECHR) condemned the Hungarian State and obliged it to pay EUR 10,000 as material damages and EUR 5,000 as non-material damages [and EUR 6,000 as court costs] in its ruling of 13 January 2015 (which became final on 01 June 2015)[3], because the Court established the violation of the right ensuring the protection of property in Article 1 of the First Additional Protocol of the Convention on the Protection of Human Rights and Fundamental Freedoms[4] regarding the complainant who used to have a tobacco shop in the city of Sopron.
The point of the case is that after the entry into force of the Tobacco Shop Act, retailers could have continued to retail tobacco products only with a licence granted under a concession contract, but the complainant did not get this licence for its application submitted in February 2013 and was forced, after the notification of 23 April 2013[5], to stop its tobacco retailing business until 14 July 2013. The disappearance of the relevant revenues rendered the entire business impossible. The complainant turned directly to Strasbourg and presented in its application that the loss of its previous right to sell tobacco products, i.e. its previous licence including the retailing of tobacco products (as "goods") was
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the unjustified deprivation of property without any compensation and in discriminatory circumstances.
After assessing the admissibility of the submission, the ECHR regarded, based on its previous case-law and the measure implementing the new regulations, the excessive individual burden on the petitioner to establish the violation of Article 1 of the First Additional Protocol and decided, according to the foregoing, to condemn the defendant.
This paper attempts to show, through the decision of the Hungarian Constitutional Court on the examination of Point (l) of Paragraph (1) of Section 12 of Act CXCVI of 2011 on National Assets and Section 2 of Act CXXXIV of 2012 on Reducing Smoking Prevalence Among Young People and Retail of Tobacco Products that the legislator often interprets the reference to "public interest, public health" as a command of constitutionality that is to be executed formally and, in doing so, gravely violates the right to property and the right of entrepreneurship. In other words: how could the Constitutional Court (is it actually able to) determine realistic criteria for the constitutionality of the legislative acts of the state. In this regard, I am exploring 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. In addition to evaluating the decision of the Hungarian Constitutional Court, I also present the international criticism of the act through the ruling of the ECHR.
It is generally known nowadays that smoking can have a very negative, even fatal effect on the human body.
The proposer of the act based his argument on the fact that tobacco products are "available almost on every corner" in Hungary. The protection of young people is, however, an accepted concept among smokers as well, and it should be priority, because their smoking depends not only on their free discretion but also on the access to tobacco products, the circumstances, the environment, etc. It is important that assistance in giving up smoking is always available to the already-smoking population; preventing the smoking of young people is, however, an even more important public health goal[6].
The aim of the awareness-raising and prevention activities of the National Institute for Health Development[7] (NIHD) and other non-governmental and international organisations is to reduce smoking of adults and, especially, young people. The latest data (of 2008) revealing, based on widespread international and Hungarian surveys, that smoking of young people means an increasing threat to the health of future generations were publicly available. I would like to mention, in a non-exhaustive fashion, two of these data: nearly 60% of young people between 13 and 15 years of age have already tried some kind of tobacco products, and nearly 30% of this age group are actual smokers. The data pertaining to younger generations were not more promising, sadly.
It was clear that reducing smoking and the smoking of young people was not possible with a single instrument only. The proposer's opinion was that the legislator and the various state and public organisations had to contribute to the shared goal of bringing the healthier lives of our children into the forefront with their own means. Although the law prohibits selling tobacco products to young people, enforcing this is difficult, even despite the continuous and targeted control by the state (consumer protection authorities). Statistical data clearly shows that young people have access to tobacco products practically without any substantial obstacles.
A way to overcome this problem was Act CXXXIV of 2012 on Reducing Smoking Prevalence Among Young People and Retail of Tobacco Products with the concept of limiting access to tobacco products. According to the form of the Act in the Official Gazette, the Act allows that only one tobacco shop may be opened at settlements with a population below 2,000 and one tobacco shop may be opened for every additional 2,000 inhabitants[8]. Tobacco shops may not be sold at other locations. The state grants tobacco retailing licences under concession contracts to persons (primarily family businesses) who wish to make a living
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from tobacco retailing on the long run and do not risk selling tobacco products to young people owing to the high fines imposed for that.
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 Shop Act), the tobacco retailing falls within the scope of exclusive economic activities of the state; in other words, it is a state monopoly (operated by the state through a state-owned company, ND Nemzeti Dohánykereskedelmi Nonprofit Zrt.), which the state may transfer under concession contracts. Consequently, as from 1 July 2013, tobacco may be sold in retail shops only with a licence ensured in a concession contract (for maximum five retail units) and under a tobacco retail licence.
The Tobacco Shop Act kept, however, the rights of smokers also in mind and ensures that tobacco products are accessible at every settlement in the country, even under stricter conditions, states the draft act.
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 Act CLI of 2011 on the Constitutional Court (hereinafter: Constitutional Court Act) - the ascertainment that Point (l) of Paragraph (1) of Section 12 of the National Assets Act is inconsistent with the Fundamental Law and its annulment. (It should also be mentioned that the Commissioner of Fundamental Rights was also contacted for the regulations introduced with the Tobacco Shop Act-more specifically, its application system, but the Commissioner did not find going to the Constitutional Court founded, nor did his report find any anomalies in relation to fundamental rights and only provided pro futuro suggestions for the competent minister regarding the rules of procedure concerning the applications only[9].)
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 objections presented in detail below. These complaints did, however, not reach their goal and were rejected by the Constitutional Court in its Decision No. 3194/2014. (VII. 15.)[10].
The movers were of the opinion that the entry into force of the challenged legal acts prevented them from conducting the retail activities which they used to conduct in good faith, under official licence, and for the purposes of generating regular profits from 1 July 2013. Their argued that the legislative provisions the annulment of which they requested took away their revenues from selling tobacco products. The movers referred to the state's non-compensation for their loss of incomes and also referred to their reducing revenues and profits owing to their being excluded from retailing tobacco products, which also reduces the market values and goodwill of their businesses.
The Constitutional Court first investigated the violation of the right to property[11] by first recalling its case-law summarised in its Decision No. 26/2013. (X. 4.) (Point [161] of the Reasoning): "In its Decision No. 64/1993. (XII. 22.), the Constitutional Court established that the scope and way of constitutional protection of property does not necessarily follow civil law concepts and is not equal to the protection of property, according to the abstract civil-law definition. The content of the right to property, protected as a fundamental right, should be understood in combination with the current public law and (constitutional) private law limitations. The scope of constitutional property-protection is always specific, it depends on the subject, object and function of the property, and also the limitation itself. Viewing it from the other side: depending on the same aspects, the constitutionality of the given type of intervention into property right by public authority is different. [DCC 1993, 373, 380., last referred to in Order no. 3219/2012. (IX. 17.) of
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the Constitutional Court]. The Constitutional Court also said, that due to the specificities of the protection of property, a fundamental right, determination of the constitutionality of the intervention of the state focused, i.e. the actual review of the Constitutional Court is the determination of the proportionality of the ends and means, public interest and the limitation of property rights. [...] Moreover, the social and economic role of property-especially the compatibility of certain regulatory measures with the given tasks of economic policy-render the ascertainment of necessity or unavoidability much more difficult than in the case of other fundamental rights, where general comparison is more possible (DCC 1993, 381.)."
Regarding Article XIII of the Fundamental Law, the Constitutional Court continued to uphold its previous case-law under which the fundamental right to property protects already acquired property and, in exceptional cases, contingent property.
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 this connection, the movers referred to the German constitutional court's case-law that extends the protection of property to established and operating business (eingerichteter und ausgeübter Gewerbebetrieb). 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.
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, and would, as such, be protected by Article XIII of the Fundamental Law (Paragraph [20] of the Reasoning).
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 Shop 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[12]. 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.
The majority reasoning of the Constitutional Court is, in my view, not sound because the
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challenged act did not withdraw the valid official permits explicitly; former permits were, however, lost automatically with the entry into force of the provisions, which means that the result is practically identical to 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 Shop Act removed tobacco retailing from the scope of the Commerce Act- the Tobacco Shop 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). According to the previous practice of the Constitutional Court, the withdrawal of administrative authorisations, as this is what happened here, by operation of law (see Paragraph (7) of Section 25 of the Tobacco Shop Act), 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.]
If the legislator stops a previously permitted, lawfully pursued activity-deciding it by itself, and the Constitutional Court does not investigate the practicality of this decision-, then it will only be constitutional [according to its case-law so far] if it compensates the holders of the permits (the way and content of the compensation are also the responsibility of the legislator). In the absence thereof, the Constitutional Court, however, should have established a failure conflicting the Fundamental Law.
Despite this, the opinion of the Constitutional Court was that the operating permits pertaining to the names and business premises of the complainants and specific businesses/activities as well as the excise authorisations were legislative prerequisites to retailing tobacco products, and are not to be regarded as rights of property value falling within the scope of constitutional protection of property (Paragraph [22] of the Reasoning).
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. 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 Shop 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, as the Tobacco Shop Act allows them to apply for concession.
The movers also argued that the state had deprived them of their legitimate expectation,
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future profits, and this is what caused them the greatest damage. It was explained that mere fact that the complainants retailed tobacco products under an operating license for unlimited term, in the shop indicated therein, and they got regular income from it does not mean that the mentioned business activity could be considered as a constitutionally protected property expectation, and would, as such, be protected by Article XIII of the Fundamental Law (Paragraph [20] of the Reasoning).
The Constitutional Court's argumentation which says that the mere "situation" where the complainants retailed tobacco products under an open-term operating permit to earn regular incomes does not enjoy constitutional protection, although the legislator's expressed intention is that the state gives tobacco retailing-under concession contracts-to persons, primarily small family businesses, that wish to make a living from tobacco retailing in the long run, is also interesting. It is obvious that pre-2013 tobacco retailers were also small businesses (which obtained the necessary official [operating and excise permits], made the necessary investments, and complied with the law) and wanted to make a living from this activity in the long run; the question why it was necessary to alter the scope of right holders in this way-to re-segment the market, actually-is, therefore, a just one.
By comparing Points 1.1 to 1.4 to the complaint of the retailer in Sopron, the Strasbourg court found the measures implementing the new regulations enough to establish the violation of Article 1 of the First Additional Protocol based on the arguments elaborated below.
The Court concluded that the complaint of the petitioner should be assessed based on Article 1 of the First Additional Protocol, which declares the following.
Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.
The evaluation part of the ruling established that the petitioner's previous permit to sell tobacco products is a "property" under Article 1 of the First Additional Protocol, and the withdrawal of the permit to conduct business[13] constituted an interference into the right to the peaceful enjoyment of possessions.
The Court found that the cancellation and non-renewal of the applicant's tobacco licence constituted a measure of control of the use of property, which falls to be considered under the second paragraph of Article 1 of Protocol No. 1[14]
Regarding the compliance with the requirements of the second paragraph, it is not a matter of lawfulness and the interference's purpose, but the proportionality of the interference. Regarding the Hungarian regulation challenged in this context, the interpretation of the Court relied on the previous "requirement" that the measure of interference should strike a "fair balance" between the demands of the general interest of the community and the requirements of the protection of the individual's fundamental rights (see, inter alia, Sporrong and Lönnroth v. Sweden, 23 September 1982, § 69, Series A no. 52); in other words, there must be a reasonable relationship of proportionality between the means employed and the aim sought to be realised[15].
Based on its previous case-law, the Court does not find a proper balance between the general interest and the individual's rights if the person concerned has had to bear an individual and excessive burden (see Rosenzweig, § 48).
In this context, the Court stressed its previously adopted position which is that "proceedings related to the renewal or invalidation of licences that are arbitrary, discriminatory, or disproportionately harsh violate the second paragraph of Article 1 of the Protocol, and authorities must follow a 'genuine and consistent policy' regarding licensing". In terms of the non-granting of a new licence to the applicant,
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however, the Court could not assess the procedure leading up to this development, since the parties did not submit any relevant material on this question. In any case, it found expressing its criticism in the reasoning noteworthy: the procedure appears to have been devoid of elementary transparency and of any possibility of legal remedies.
The Court recalled that it is true that Article 1 of Protocol No. 1 contains no explicit procedural requirements and the absence of judicial review does not amount, in itself, to a violation of that provision; nevertheless, it implies that any interference with the peaceful enjoyment of possessions must be accompanied by procedural guarantees affording to the individual or entity concerned a reasonable opportunity of presenting their case to the responsible authorities for the purpose of effectively challenging the measures interfering with the rights guaranteed by this provision.
The "burden" placed on the applicant as a result of the statutory expiry of his licence, though heavy, must be weighed against the general interest of the community, that is, public health considerations in the instant case. In this context, the States enjoy a wide margin of appreciation.
The Court agreed with the applicant that this was a severe measure in the circumstances and that the individual had to bear an excessive burden; moreover, it laid down that the very short period provided to licence holders to make adequate arrangements to respond to the impending change to their source of livelihood was not alleviated by any positive measures on behalf of the State, for example, the adoption of a scheme of reasonable compensation.
In their separate opinion, judges Spano and Kjølbro emphasised that, owing to the particularly short transition period, the applicant was granted very little time to adjust to the new situation. The consequences were all the more dire as the legislation in question did not provide for any compensation for licence holders who did not obtain a tobacco retail concession under the new legislation.
The Court found that the measure did not offer a realistic prospect to continue the possession because the process of granting of new concessions was verging on arbitrariness[16], given that the existence of the previous licence was disregarded; the possibility of a former licence-holder to continue tobacco retail under the changed conditions accommodating the policy of protection of minors was not considered in the new scheme; the lack of transparent rules in the awarding of the concessions, which took place without giving any privilege to a previous licence-holder, such as limiting the scope of the first round of tendering to such persons.
The complainants had another strong 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[18], 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.
Paragraph (1) of Article M) in the Foundation of the Fundamental Law of Hungary specifies the principle that the economy of Hungary shall be based on work which creates value, and on freedom of enterprise. Within the meaning of the authoritative case-law of the Constitutional Court, the constitutional principle in Paragraph (1) of Article M) of the Fundamental Law of Hungary reinforces and supports the
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fundamental right to conduct business in Paragraph (1) of Article XII.
Within the context of the regulations of the Fundamental Law, Hungary's economy is a market economy which functions based on the equality of the various property forms and the constitutional principles of the freedom of enterprise and the freedom of competition. The freedom to conduct a business and the right of entrepreneurship are, therefore, substantial components of the market economy.
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[19], 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 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 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.
The Constitutional Court referred again to its previously elaborated case-law under which 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. 54/1993. (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 majority of the Constitutional Court came to the conclusion that neither the complainants[20] 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 Shop Act.
Disputing the majority opinion, András Bragyova pointed out that Section 6 of the Tobacco Shop Act reduced the number of tobacco shops by two thirds from the previous level in the concession system. A big part of previous tobacco shop owners (about two thirds) could, therefore, not have got a tobacco retail concession.
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[21] revealed that the necessity, a condition for the constitutionality of the limitation of a fundamental right, applied. Recitals of the Tobacco Shop 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[22], Paragraph (5) of Article XV[23], Paragraph (1) of Article XVI[24] 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/
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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[25].
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. In the opinion of the Constitutional Court, this does not apply to the case in question because the challenged regulations react to an existing social emergency, serves clear general interest[26] objectives and ensures the functioning of fundamental rights that should be protected even if they conflict the fundamental right of entrepreneurship.
The Constitutional Court fund the restriction justified in terms of protecting the interest of the public and proportionate enough to the public health considerations underlying the restriction[27], all the more so because the products sold by the complainants constitute a publicly known health risk[28], and the treatment of diseases caused by smoking is a significant burden on the state.
In my view, the majority ignores the opportunity of a regulation imposing less strict restrictions than the means applied[29]; in other words, it has only done the public interest/necessity test apparently only (e.g. making the regulations in force more strict, increasing fines, withdrawal of official permits if tobacco products are sold to young people or letting previous permit holders adjust to the new regulations to protect young people and continue their tobacco retailing business). Accordingly, I would point out the idea of István Stumpf, expressed in his concurring reasoning, that "this investigation method for the fundamental right restriction generally jeopardises the level of protection of the right of entrepreneurship, a fundamental right, without providing convincing enough reasons for deviating from the text of the Fundamental Law and the investigation criteria specified in a previous Decision of the Constitutional Court in accordance with the text of the Fundamental Law; I, therefore, disagree with this interpretation concept" [Paragraph [62] of the concurring reasoning].
Having regard to the foregoing, however, 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.
Although the reason underlying the adoption of the regulation is a noble one, it is not sufficient on its own, as the 2016 study of the National Institute for Health Development[30] found it in connection with the 2012 amendment of the act on the protection nonsmokers and the public health effects of the entry into force of the Tobacco Shop Act it is/was not sufficient, because "although remarkable steps forward have been made in the fight against smoking over the recent years; statistical data shows, however, that other measures are also necessary." [31]
The Hungarian legislation's tendency to burden fundamental rights in a constitutional way in the past years has significant consequences in several aspects as well; primarily because the Constitutional Court's new caselaw trend finds the indication of objectives defined by the legislator in the reasoning enough to prove the consistency of an act with the Fundamental Law. The analysis of the Constitutional Court's decision on the laws discussed in this paper imply that the Constitutional Court should declare (should have declared) that explaining legislation by referring to the "interest of the public and public health considerations", their protection, the accomplishment of the goals associated with them, etc. in the preamble, legislative text or reasoning is not enough for substantially restricting the right to property or intervening in the right of entrepreneurship[32]. The reasonableness of restricting a fundamental right should, therefore, be subject to conditions the legislator could be held accountable for, such as economic, statistical analyses, impact assessments, etc.
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The Constitutional Court could define the consideration of the mentioned requirements as constitutional requirements. I would, however, point out that non-compliance with this condition, i.e. the non-demonstration of the necessity of the intervention[33] entails the inconsistency of the law in question with the Fundamental Law.
Having regard to the continuing wrong practice of the legislator, which the Constitutional Court regularly gives wrong (confirming) answers to in its decisions, the Constitutional Court should consider establishing unconstitutionality due to nonaction and oblige Parliament to amend the legislative rules and regulate the substantive and formal requirements for demonstrating the "general interest". 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 case examined, the legislator did not support this kind of argumentation.
In addition, the judges of the Constitutional Court draw attention to the harmful phenomenon in relation to the findings of Decision 13/2013. (VI. 17.) of the Constitutional Court[34] that, for example, contrary to the majority position of the Decision studied in the foregoing, the non-consistent application of the statements of principle related to the use of the case-law of the Constitutional Court based on the Constitution might cause [such] controversies in the interpretation of the Fundamental Law (Paragraph [36] concurring reasoning of Imre Juhász), another judge of the Constitutional Court found that the Reasoning[35] has explanations explicitly inconsistent with the Fundamental Law, which, in his opinion, are inconsistent with the provisions of the Fundamental Law [in both cases] (Paragraph [38] concurring reasoning of Béla Pokol).
According to Béla Pokol, the majority reasoning combines the "right to employment and the right of entrepreneurship", (and thus, restricting one of them and giving a broader interpretation to the other); more importantly than this dual bias, however, he still thinks, and I agree, that the differing scope of protection of these rights cannot be clarified in the complete context of the Fundamental Law. The judge of the Constitutional Court drew attention to further ambiguities of the majority reasoning. These are, in my view, perfect examples of the fact that the reasoning regards the intention of the legislator to restrict a fundamental right as constitutional (in the light of the Fundamental Law) without a uniform and adequate position among the majority of the judges of the Constitutional Court regarding the "substantive core" of individual provisions of the Fundamental Law (and this means that the movers cannot be expected to precisely identify their injuries based on the restriction of specific fundamental rights).
In the Constitutional Court's significant decisions of the past years, the judges should have built up their arguments from the foundations regarding the fundamental rights and basic principles set into a new regulatory regime by the Fundamental Law, instead of its current case-law.
We should also mention that the consistency between fundamental rights protection in Hungary and internationally is deteriorating, despite Decision 61/2011. (VII. 13.) of the Constitutional Court, which declares the principle that "for individual fundamental rights, the Constitution defines the substantive content of the fundamental right as an international treaty (such as the Covenant of Political and Civil Rights and the European Convention on Human Rights). In these cases, the level of fundamental rights protection of the Constitutional Court may not be lower than the level of international legal protection (elaborated typically by the Strasbourg Court of Human Rights)"[36] (see Point 2.2 of Part V of the Reasoning of Decision No. 61/2011. (VII.13.) of the Constitutional Court)
The message of the tobacco shop case at hand - more specifically, its opposing assessments in Hungary and in Strasbourg-is, in my opinion, that Hungarian citizens should seek legal remedy from international or EU fora in order to/with a hope for effective legal protection, even by not turning to the competent Hungarian fora. ■
NOTES
[1] 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.
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[2] Article 19 of the Amendment provided for that "Decisions of the Constitutional Court adopted before the entry into force of the Fundamental Law shall be ineffective"; the Constitutional Court, however, made it soon clear that it would continue to use its interpretations developed previously if the decisions it adopts in connection with the application of the previous Constitution remain relevant after the entry into force of the new Fundamental Law as well. (See Decision No. 13/2013. (VI. 17.) of the Constitutional Court)
[3] source: CASE OF VÉKONY v. HUNGARY: https://hudoc.echr.coe.int/eng#(%22itemid%22:[%22001-149201%22]) Subsequently, the Court adopted a condemning ruling in the CASE OF HODOROG v. HUNGARY case on 03 November 2015 as well (for more details, see: https://hudoc.echr.coe.int/eng#(%22appno%22:[%2246626/13%22],%22itemid%22:[%22001-158471%22])).
[4] The Convention on the Protection of Human Rights and Fundamental Freedoms, signed in Rome on 4 November 1950, its Additional Protocol signed in Paris on 20 March 1952, its Second Additional Protocol signed in Strasbourg on 6 May 1963, and its Fourth Additional Protocol signed in Strasbourg on 16 September 1963 applies from 5 November 1992, its Sixth Additional Protocol signed in Strasbourg on 28 April 1983 applies from 1 December 1992, and its Seventh Additional Protocol signed in Strasbourg on 22 November 1984 applies from 1 February 1993. The Convention, and several of its Additional Protocols, were promulgated by Act XXXI of 1993.
[5] The decision did not include any reasoning or reference to the applicant's scores based on the 120-item application assessment sheet, and no legal remedies were available to it.
[6] According to János Lázár, ministerial commissioner: "The Tobacco Shop Act, which has been in force since 2012, was only the beginning. The next step must be the complete prohibition of smoking", he said at one of the biggest conferences of the tobacco industry, in Siófok.
[7] This was in 2012. This institute later became the National Institute of Health Development, then, from 31 December 2017, the general successor of the National Institute of Health Development was the Ministry of Human Capacities, and some of its responsibilities have since then been discharged by the National Healthcare Services Center and the National Public Health Institute.
[8] According to the currently applicable Paragraph (2) of Section 6 of the Tobacco Shop Act, settlements with not more than 3,000 inhabitants may have maximum one, settlements with more than 3,000 inhabitants may have minimum one tobacco shop and another one for every additional 3,000 inhabitants.
[9] For more detail, see: Report of the Commissioner of Fundamental Rights in Case No. AJB-3466/2013
[10] See the source of the decision:
http://public.mkab.hu/dev/dontesek.nsf/0/A3FED588AED2CD7FC1257BBF001BAD97?OpenDocument
[11] Paragraph (1) of Article XIII of the Fundamental Law of Hungary Everyone shall have the right to property and inheritance. Property shall entail social responsibility. Paragraph (2) Property may only be expropriated exceptionally, in the public interest and in those cases and ways provided for by an Act, subject to full, unconditional and immediate compensation.
[12] 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 Shop Act; before 1 July 2013, the entry into force of the Tobacco Shop Act, there was not any similar special permit (the operating license of the shop or the excise license were different permits).
[13] Compare with Point 4 of the parallel opinion of judges Spano and Kjølbro: ...under the case-law of the Court there is no general obligation to pay compensation for interferences amounting to control of the use of property, even in cases concerning the withdrawal of a licence. However, the payment of compensation may be of relevance in assessing the proportionality of the interference in question (see, inter alia, Jahn and Others v. Germany [GC], nos. 46720/99, 72203/01 and 72552/01, § 94, ECHR 2005-VI; Brosset-Triboulet and Others v. France [GC], no. 34078/02, § 94, 29 March 2010; and Uzan and Others v. Turkey (dec.), no. 18240/03, § 102, 29 March 2011).
[14] (cf. Tre Traktörer, cited above, § 55; Megadat.com SRL v. Moldova, no. 21151/04, § 65, ECHR 2008; see also Malik v. the United Kingdom, no. 23780/08, §§ 88-89, 13 March 2012).
[15] Compare with the test of necessity and proportionality applied by the Hungarian Constitutional Court.
[16] In their separate opinion, judges Spano and Kjølbro emphasised that there is not a sufficient basis for finding that the process of granting concessions was "verging on arbitrariness" (see paragraph 36 of the judgment). Furthermore, the Court's task is not to tell the State what it could or should have done in implementing its policy in this area (ibid.).
[17] Paragraph (1) of Article XII of the Fundamental Law of Hungary Everyone shall have the right to choose his or her work, and employment freely and to engage in entrepreneurial activities. Everyone shall be obliged to contribute to the enrichment of the community through his or her work, in accordance with his or her abilities and potential.
[18] Paragraph (2) of Article 38 of the Fundamental Law of Hungary The scope of the exclusive property and of the exclusive economic activities of the State, as well as the limitations and conditions of the alienation of national assets of outstanding importance for the national economy, shall be determined in a cardinal Act with regard to the goals referred to in paragraph (1).
[19] Compare with Dissenting opinion of András Bragyova: [80] ... justifying the state monopoly of tobacco retailing with values of fundamental rights or equivalent constitutional values is difficult. There has been consensus in the relevant literature-since time immemorial, one could say-that the tobacco monopoly exists for fiscal reasons, i.e. to increase or ensure state revenues. Because, according to the legislation and the relevant literature, the state's tobacco (including tobacco retailing) monopoly serves state revenue goals, just like the introduction of the Austrian tobacco monopoly in 1784. (Vilmos Mariska: Az államgazdaságtan tankönyve [State economics coursebook], 1905, 86ff) Fiscal goals are, however, not equivalent with fundamental rights.
[20] Compare with Dissenting opinion of András Bragyova [72]: The right to choose one's work includes the continued re-choosing of the already chosen work (tobacco retailing in the case at hand), and its exercising. In contrast to the majority, my opinion is that tobacco retailers indeed had the constitutional right to exercise and conduct their occupations if they have chosen this one. The Tobacco Shop Act excluded this by ex lege terminating the legal conditions for exercising their occupations.
[21] 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.
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[22] Everyone shall have the right to physical and mental health
[23] By means of separate measures, Hungary shall protect families, children, women, the elderly and persons living with disabilities
[24] Every child shall have the right to the protection and care necessary for his or her proper physical, mental and moral development.
[25] See also: Dissenting opinion of András Bragyova [86]: ... the purpose of the Tobacco Shop Act (youth protection and state revenues) could have been reached without the disproportionate (or any) limitation the fundamental rights of the complainants. The Tobacco Shop Act could have chosen a solution that respected the fundamental rights of the complainants. A simple way to do so would have been making the granting of concessions to the operators of existing tobacco shops mandatory (or a subjective right), if they met the new regulations.
[26] See also: Dissenting opinion of László Kiss [100] 4.: ... In my view, the mere reference to a few provisions of the Fundamental Law is not enough to restrict a fundamental right for an "overriding public interest". I think that an "overriding public interest", which also appears in a standard expressed in the Fundamental Law and justifies the limitation of a fundamental right, more specifically the jeopardising of this "overriding public interest" must be direct, realistic, demonstrable, but at least probable and unavoidable.
[27] See also: Dissenting opinion of László Kiss [94]. 2.2. ...reference to overriding public interest might be (exceptionally) important in the application of the fundamental right test. The legislator is obliged to provide evidence of the "overriding public interest" regarding the right to property and even more the right of entrepreneurship. And this must, in my view, be direct and realistic. In the case at hand, the legislator could not provide evidence of the overriding public interest.
[28] See also: Dissenting opinion of László Kiss: [98] ...In my view, if the reason for the limitation of the fundamental right was be generally accepted, it still could not be demonstrated, as there is no logical connection, that the legislative means are appropriate for achieving the objectives, because making tobacco retailing a state monopoly and requiring a concession contract for this activity will obviously not reduce the health-damaging effect of smoking.
[29] See also: Dissenting opinion of András Bragyova: [70] I do not accept the argument saying that the right of the complainants was not violated because former tobacco shop owners may conduct other business activities. This means that the freedom of occupation does not protect the conducting of the already-chosen occupation only that one has an occupation. But if one has an occupation, then this is a specific occupation, like fisherman, hunter or critic, and it must be protected (which is not possible according to the argumentation of the decision adopted by the majority), or, if one does not have any right to have an occupation.
[30] From 31 December 2017, the general successor of the National Institute of Health Development was the Ministry of Human Capacities, and some of its responsibilities have since then been discharged by the National Healthcare Services Center and the National Public Health Institute.
[31] http://www.fokuszpont.dohanyzasvisszaszoritasa.hu/sites/default/files/dohanyzas_visszaszoritasa_2016_dohanyzas_fokuszpont.pdf: Dohányzás visszaszorítása 2016 [Fight against Smoking 2016]: Foreword, p. 4.
[32] See also: Decision No. 20/2014. (VII. 03.) of the Constitutional Court: Dissenting opinion of László Kiss [359]. It accepts this argumentation of the legislator and the majority reasoning of the Decision makes it a "constitutional value", but this is what I fundamentally object to: regarding policy, economic policy goals appearing at legislative level as constitutional values and goals in the review of constitutionality, without the substantial and critical review the Constitutional Court should make in interpreting the constitution.
[33] See also: Decision No. 20/2014. (VII.03.) of the Constitutional Court, dissenting opinion of László Kiss [356]:The legislator is obliged to provide evidence of overriding public interest regarding the right to property, and even the right of association and the right of engaging in entrepreneurial activities. ... this must, in my view, be direct and realistic. In the case at hand, the legislator could not provide evidence of the overriding public interest. I would only like to remind of the fact that I have stressed in my several dissenting opinions (last time in the one on Decision No. 26/2013. (IX.30.) of the Constitutional Court) that the legislator must demonstrate the necessity to restrict rights in the interest of the public - as outlined by the interpretation of the Constitution since 2007 as well-, and this is especially true for the right of association and entrepreneurship, which may not be restricted, in principle, by reference to the general interest.
[34] "The achievements of Hungarian and European constitutionalism to date and the rules of constitutional law necessarily affect the interpretation of the Fundamental Law. 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."
[35] Paragraphs [26]-[31] of Point 4 of Part IV
[36] Pursuant to the pacta sunt servanda principle [Paragraph (1) of Section 7 of the Constitution and Paragraphs (2) and (3) of Article Q of the Fundamental Law], the Constitutional Court must follow the Strasbourg case-law and the level of fundamental rights protection defined by it even if its previous Decisions did not imply it.
Lábjegyzetek:
[1] The Author is Doctoral Student, Doctoral School of the Faculty of Law at the University of Pécs
Visszaugrás
