The Constitutional Court found no 101 / 2003 Coll.
The Constitutional Court found of 11 March 2003 on the application for annulment of § 24 paragraph 4 of Act No. 328 / 1991 Coll., on bankruptcy and settlement, as amended
Valid
The Constitutional Tribunal found
Text versions:
04.04.2003
101
Found
The Constitutional Court
On behalf of the Czech Republic
On 11 March 2003, the Constitutional Court decided in plenary on the proposal of the Supreme Court in Olomouc to repeal Article 24 (4) of Act No. 328 / 1991 Coll., on bankruptcy and settlement, as amended,
as follows:
Paragraph 24 (4) of Act No 328 / 1991 Coll., on bankruptcy and settlement, as amended, is hereby repealed.
Reasons
On 15 August 2002, the Constitutional Court, pursuant to Article 95 (2) of the Constitution of the Czech Republic (hereinafter referred to as the Constitution) and Article 64 (4) of Act No. 182 / 1993 Coll., on the Constitutional Court, received a proposal by the Supreme Court in Olomouc to repeal the provisions of § 24 (4) of Act No. 328 / 1991 Coll., on bankruptcy and compensation, as amended.
In accordance with the provisions of § 104a of the Civil Code (hereinafter referred to as "o.s. '), the Supreme Court of Olomouc is brought to judgment in cases in which the parties to the proceedings, regional or district courts consider that the bankruptcy court's jurisdiction for the decision on the creditor's claim or the district court for the decision on the creditor's action in the proceedings brought before the district court before the declaration of bankruptcy is given. In such cases, the Supreme Court in Olomouc should decide on the substantive jurisdiction under the contested provision of Paragraph 24 (4) of the bankruptcy and settlement law.
The appellant justified its proposal by the fact that, by Act No. 105 / 2000 Coll., amending Act No. 328 / 1991 Coll., on bankruptcy and settlement, as amended, and certain other laws, effective as of 1 May 2000, were enshrined in the newly formulated provision of § 24 of the Act on bankruptcy and settlement in the fourth paragraph, which states that if, before the declaration of bankruptcy of the contested claim was initiated, the procedure was interrupted [Paragraph 14 (1) (c)], the determination of the contested claim in the proceedings had already been initiated; the new denied claim procedure is not initiated [Paragraph 14 (1) (d)]. The application for the continuation of the suspended procedure must be made within the time limits laid down by the law (Sections 23 (4) and (5) and 24 (1) and (2)); the parties to the proceedings are those which the law refers to as the parties (Sections 23 (2) and (3) and 24 (1) and (2)).
In the appellant's view, the legislator did not consider sufficiently the range of cases on which the disposition of this provision would fall. The application of this provision in various procedural situations puts insolvency creditors whose outstanding claims have been denied in the context of the review proceedings in an unequal position. In some cases they find themselves in an insoluble procedural situation, in others they are, on the contrary, favoured by other insolvency creditors.
The Supreme Court in Olomouc further stated in its proposal that the application of the provisions of Paragraph 24 (4) of the bankruptcy and settlement law takes place in the event that the contested claim was initiated before the bankruptcy declaration and that the bankruptcy declaration was suspended. In the appellant's view, Paragraph 24 (4) does not provide for cases where a decision has already been taken in the proceedings initiated before the Court of First Instance, the decision has not yet acquired legal power and has not been contested by appeal, opposition or opposition. In such cases, the court shall be bound by the decision in accordance with § 156 (3) and § 170 (1) o. s. s. In the present situation, the appellant is of the opinion that there can no longer be a change in the participants or a change in the proposal when the case has already been decided. On the other hand, however, the contested provision prohibits the opening of a new procedure for the contested claim. The appellant therefore considers that, in this case, the creditor does not have a procedural opportunity to reach a decision on the contested claim in bankruptcy proceedings.
The appellant also considers that Paragraph 24 (4) of the bankruptcy and settlement law may, however, lead to a breach of the equality of bankruptcy creditors not only to the detriment of the creditor whose claim was brought before the bankruptcy declaration but also to its advantage over other insolvency creditors. Paragraph 24 (4) of the Insolvency and Compensation Act implies that the court must regulate the scope of the proceedings and the operative part of the judgment on its own motion. Therefore, in cases where the insolvency creditor makes a proposal for the continuation of the procedure already initiated incorrectly or incorrectly, Article 24 (4) of the bankruptcy and settlement law confers an advantage over other insolvency creditors whose claims were also denied in the review proceedings.
In the above, the appellant sees the reasons for the inconstitutionality of the contested provision of the bankruptcy and compensation law and therefore proposed the adoption of a finding which would abolish the provisions of Paragraph 24 (4) of the bankruptcy and compensation law as amended.
The Judge-Rapporteur requested, in accordance with the provisions of Sections 42 (4) and 69 (1) of Act No. 182 / 1993 Coll., on the Constitutional Court, as amended, the observations of the two chambers of Parliament of the Czech Republic.
A) The Chamber of Deputies, represented by President Dr. Lubomír Zaorálk, stated in its statement of 10 October 2002 that the legislature's motive for including the provisions of Paragraph 24 (4) of the Act on bankruptcy and compensation for determining the contested claim in the context of the earlier proceedings and the declaration of bankruptcy of the suspended procedure was to simplify and streamline the way in which the contested claim was dealt with for bankruptcy. In his view, this provision is intended to allow the reduction of the number of incident disputes where it would otherwise be necessary to initiate a new procedure by a separate action to determine the contested claim. As a rule, a number of evidence that has already been carried out in the suspended procedure can be used in the present interim proceedings on the same claim. The legislature was based on the purpose of the law and the objectives of bankruptcy proceedings and was convinced that it met the requirements of the Constitution and the Charter of Fundamental Rights and Freedoms ("the Charter ').
Finally, the President of the Chamber of Deputies of the Parliament of the Czech Republic stated that Act No. 105 / 2000 Coll., amending and supplementing Act No. 328 / 1991 Coll., on bankruptcy and settlement, as amended, and some other laws, was approved by the Chamber of Deputies at the 21st meeting of 28 January 2000 when 128 out of 152 were voted for. The Senate of the Parliament of the Czech Republic approved the bill submitted by the Chamber of Deputies as amended at its 16th meeting of 1 March 2000, and the Chamber of Deputies subsequently approved the bill as approved by the Senate, when 98 in favour and 81 against were voted out of 181. The law was therefore passed by the necessary majority of legislative members, signed by the relevant constitutional authorities and duly declared. According to the opinion of the Chamber of Deputies, the legislature has acted in the belief that the law adopted is in accordance with the Constitution and the constitutional order, and it is solely up to the Constitutional Court to assess the constitutionality of the contested provision in the context of the proposal and to give its decision.
B) In his observations of 16 October 2002, signed by the President, Dr Petr Pithart, the Senate stated that the bill was submitted to the Senate on 7 February 2000. The Senate discussed the proposal at its 16th meeting of the second term of office on 1 March 2000 and, by resolution No 302, returned the bill to the Chamber of Deputies with amendments. In order to return the bill, 52 of the 53 senators present voted and 1 abstained. The Chamber of Deputies renegotiated the bill on 4 April 2000 at its 24th meeting. The draft law, as amended, was approved by Resolution 902 of the Chamber of Deputies, when 181 of the Members were in favour of the adoption of 98 Members and 81 were opposed.
In the Senate committees, the issue of Paragraph 24 (4) of the Act was widely discussed in the context of the intention that the so-called incident disputes should always be decided by the court, even if it is otherwise a claim on which the court has no jurisdiction, which does not correspond to the provisions of Section 7 (1) of the Civil Code. The concept according to which, for example, bankruptcy courts should decide in the case of administrative and tax claims, in the context of Article 24 (4) of the amendment to the Act appeared to be unconsistent, since, according to some opinions, it was overlooked that, according to Article 14 (1) (c), not only judicial proceedings but also other proceedings were suspended. The continuation of the proceedings would be done not in court but by the authority (administrative, tax) to which the proceedings were initiated.
According to the Senate's observations, the committees concluded that the appellants of the law had apparently not been taken into account that any outcome of the dispute on the authenticity, amount or order of the claim did not constitute an obstacle to the case judged on claims in proceedings which had been interrupted by the bankruptcy. This result appeared particularly significant in a situation where, according to Article 45 (2) of the bankruptcy and settlement law, claims which were considered to be established for the purposes of the bankruptcy but which were denied by the insolvency practitioner after the annulment of the bankruptcy should not be an enforceable title. It was also pointed out in the discussion that Article 23 (2) of the last sentence could be directly contrary to Article 24 (4) of the Law, since according to the above views, the order of the claim should be decided by the court in the proceedings in which it is proceeding and which do not have to be legal proceedings.
As the President of the Senate also stated in his observations, despite the above discussions and proposals to delete Paragraph 24 (4) of the draft law, the opinion of the committees subsequently prevailed to keep that provision in the text submitted. The Senate meeting no longer addressed the issue.
Under the provisions of Section 44 (2) of Act No 182 / 1993 Coll., on the Constitutional Court, the Constitutional Court may, with the consent of the parties, refrain from oral proceedings, unless further clarification can be expected from such proceedings. The Constitutional Court therefore requested, in accordance with that provision, from the parties to the proceedings whether they agreed to waive the oral procedure. Administration of 5.3.2003 The Supreme Court of Olomouc and the Administration of 4.3.2003 also of the Chamber of Deputies of the Parliament of the Czech Republic and of 7.3.2003 In the present case, the Senate of the Parliament of the Czech Republic expressed their agreement to abandon the oral procedure.
Before the Constitutional Court took action to assess the content of the contested provision of the Act from the aspects defined by the provisions of § 68 (2) of Act No. 182 / 1993 Coll., on the Constitutional Court, as amended, i.e. from the point of view of compliance with the provisions of § 24 (4) of the bankruptcy and settlement law, it examined the fulfilment of the formal requirements of the adoption of the relevant legal standard.
The draft law amending and supplementing Act No. 328 / 1991 Coll., on bankruptcy and settlement, as amended, was submitted to the Chamber of Deputies as a parliamentary proposal on 29 April 1999. From the short-term report on the 21st session of the Chamber of Deputies, the Constitutional Court found that on 28 January 2000 the Chamber of Deputies, according to the House of Deputies 219, as amended by the approved amendments, agreed to this proposal, with 128 votes in favour of the proposal from 152 Members present and one vote against the proposal.
From the short-term report on the 16th Senate meeting, the second term of office, it was demonstrated that on 1 March 2000 the bill with the amendments adopted was returned to the Chamber of Deputies when 52 of the 53 senators were voted in favour and one senator abstained.
From the short-term report on the 24th meeting of the Chamber of Deputies, the Constitutional Court found that the Chamber of Deputies adopted on 4 April 2000 a draft law amending Act No. 328 / 1991 Coll., on bankruptcy and settlement, as amended, and some other laws, as approved by the Senate, by voting 98 in favour and 81 against out of the 181 Members present.
After the adoption of Act No. 105 / 2000 Coll., amending Act No. 328 / 1991 Coll., on bankruptcy and settlement, as amended, and some other laws, were signed by relevant constitutional officials and published in the amount of 32 Collection of Laws which was circulated on 25 April 2000. The Act became effective in accordance with Article VIII thereof on 1 May 2000.
The Constitutional Court therefore found, within the meaning of Paragraph 68 (2) of the Law on the Constitutional Court, that Act No. 105 / 2000 Coll., which introduced the provision of Paragraph 24 (4) into the Act on bankruptcy and compensation, was adopted and issued within the limits of the Constitution laid down by the legislature of the Parliament of the Czech Republic and in a constitutionally prescribed manner, as the Constitutional Court had already stated in the case sp. zl. ÚS 36 / 01 (No 403 / 2002 Coll.).
Paragraph 24 (4) was inserted into the Act on bankruptcy and compensation by its amendment in the form of Act No. 105 / 2000 Coll., amending Act No. 328 / 1991 Coll., on bankruptcy and settlement, as amended, and some other laws, with effect from 1 May 2000. Paragraph 24 (4) of the contested provision affects situations where the liquidator or bankruptcy creditor denied an inenforceable claim by the creditor resulting from the claim entered into the bankruptcy proceedings in the context of the review proceedings. In the event that the insolvency creditor has exercised any part of that claim in the proceedings which have been interrupted by the bankruptcy declaration, before the bankruptcy declaration, it shall not be admissible to initiate a new incident procedure, but the procedure for determining the authenticity, amount or order of the claim applied for shall be carried out before the court which led the procedure which was terminated by the legal declaration of bankruptcy.
As is apparent from the explanatory memorandum to Act No. 105 / 2000 Coll., in the present case, the legislator intended to rationalise and streamline the insolvency proceedings. The purpose of the legislator was to reduce the number of incidents so far that the law would allow the outcome of the proceedings interrupted as a result of the bankruptcy declaration to be followed by a claim procedure before the bankruptcy declaration.
It is also clear from the explanatory memorandum to the law and from the observations of the parties to the proceedings that the legislator has constructed the provisions of Paragraph 24 (4) of the bankruptcy and settlement law in the belief that it will not be necessary to initiate new proceedings in the future to determine the contested claim, but that it will follow up on their current situation in the original proceedings and in particular all factual and other findings will be used.
The Constitutional Court agrees with the appellant's view that the legislator has not sufficiently appreciated the range of procedural situations to which the provision may affect the practical consequences of such a concept, but also its very constitutional legal dimension.
Article 96 (1) The Constitution lays down as one of the key principles of the functioning and implementation of judicial power in the Czech Republic the procedural principle of equality of rights of parties before the courts. This constitutional principle thus guarantees the equal procedural position of the parties in respect of the rights conferred by the law on the parties to a particular type of proceedings. It can be concluded from this principle, inter alia, that, for a particular type of procedure, a single jurisdiction of a court must be given, which is understood as material and functional, and such an arrangement must be made by law.
The Constitutional provision is intended to guarantee the Institute of Equality in its procedural form, which, however, has the effects of substantive law. The role of ordinary laws, namely procedural regulations, is to transfer the Constitution's protected and so-understood equality institute into procedural guarantees that ensure compliance with such understood equality.
It is clear, however, that for different types of proceedings different from the subject matter, the legislature may provide for different scope of procedural rights and obligations. In other words, the equality of the parties must be interpreted in such a way as to respect the same extent of procedural rights and obligations in the same proceedings. However, it is unacceptable that, instead of the subject-matter of the proceedings, the party itself - even if defined by its procedural position in any previous proceedings, should be the criterion of distinction.
Since that interpretation, Article 96 (1) The Constitution also depends on the interpretation of Article 38 (1) of the Charter, since the appointment of a legal judge must be preceded by a constitutionally conformal legal determination of the jurisdiction of a court. The principle that the jurisdiction of a court is reserved for a law includes not only a postulate, according to which only a law may determine the jurisdiction of a court to discuss a particular case, but also a requirement that the law define such jurisdiction and jurisdiction in the same way for all types of identical cases, and does not make an unjustified distinction in the jurisdiction of the courts which is taken in substance and function.
The substantive jurisdiction of the courts in disputes brought about by bankruptcy or settlement shall be governed by the provisions of Paragraph 9 (3) (c) of the Rules of Procedure, by the fact that it is entrusted to the regional courts as first instance courts. These disputes are, inter alia, disputes concerning the determination of the authenticity, the amount and order of the claims applied for which were denied during the bankruptcy proceedings. In such situations, the insolvency creditor shall be obliged to exercise his claim within the prescribed time limits and in compliance with other formalities in the special (incident) procedure resulting from bankruptcy. In such cases, according to the above-mentioned provisions, § 9 (3) (a) and § 23 (2) of the bankruptcy and settlement law, the bankruptcy court, i.e. the regional court in principle, is legally competent.
However, by proposing the contested provision of Paragraph 24 (4) of the bankruptcy and settlement law, the special definition of the jurisdiction of the court in rem is to prevent the conduct of a special incident proceedings before the bankruptcy court and to construct for the type of dispute in question, i.e. disputes concerning the determination of the authenticity, amount and order of the claim, the specific jurisdiction of the court which had previously brought proceedings before the current creditor, the contested claim, the subject matter of which was linked to the contested insolvent claim.
The consequence of Paragraph 24 (4) is the fact that it constitutes a double regime of jurisdiction. It can be concluded that the relationship between the provisions of § 9 (3) (a), § 23 (2) and § 24 (4) of the bankruptcy and settlement law is the relationship between the general regulation (lex generalis) and the special regulation (lex specialis), while respecting the constitutional requirement of the legal establishment of jurisdiction of the court. However, as mentioned above, it cannot be permitted that the law makes an unjustified difference in the definition of substantive competence in cases which are identical in nature. Article 24 (4) of the bankruptcy and settlement law provides for the duality of a substantive jurisdiction in disputes concerning the determination of authenticity, the amount and order of claims denied in the context of bankruptcy proceedings. It goes as far as the subject matter of the dispute. The application of the provisions of Paragraph 24 (4) of the bankruptcy and settlement law thus causes a difference in the substantive and, where applicable, functional jurisdiction, in which one case the regional court decides in an action for bankruptcy, in which case the district court has held proceedings initiated before the current creditor of the contested claim, the subject matter of which was linked to the contested claim and which was interrupted by the declaration of bankruptcy. In such a case, the decision to determine the authenticity, amount or order of the contested claim shall then be concentrated in a court which has jurisdiction, in substance and locally, in respect of the original proceedings, which is not a court of insolvency. The substantive and local jurisdiction established under Article 24 (4) of the bankruptcy and settlement law therefore depends on the substantive, local and, where applicable, functional jurisdiction of the court in the previous proceedings, which was suspended by the declaration of bankruptcy under Article 14 (1) (c) of the bankruptcy and settlement law; In fact, however, it depends on the position of the creditor as the applicant in the main proceedings.
Such a concept results in inequality in the procedural position of individual creditors who have been guilty of their denied irrecoverable claim under different procedural regimes.
This is because Article 24 (4) of the bankruptcy and settlement law sets out the range of parties to the proceedings (i.e. the parties to the proceedings are those which the law designates as participants) and thus creates an obligation for the court itself to re-designate the parties to the proceedings in order to remove the defects of the application for continuation of the proceedings itself, unless there are relevant requirements (e.g. the name of the parties, petitions, etc.), even in a situation where the original application for the opening of the claim relating to the contested claim was affected by defects which the applicant had not removed. On the contrary, in the case of an emergency procedure, the creditor is under an obligation under Article 23 of the bankruptcy and settlement law to precisely identify the parties within a specified time limit and specify the entire claim. Consequently, it is clear that the party (creditor) who made the application for the continuation of the procedure under Article 24 (4) of the bankruptcy and settlement law is in a favourable position compared to the party (creditor) who makes the application for the opening of a special (incident) procedure at the bankruptcy court pursuant to Article 23 (2) of the bankruptcy and settlement law.
The procedural inequality of creditors who exercise their denied irrecoverable claim under different procedural regimes is further determined by the different charging scheme. In the event that the original proceedings were suspended in a situation where the creditor, as party to the proceedings, had not yet complied with the legal fee obligation and then submitted a proposal for the continuation of the proceedings pursuant to Article 24 (4) of the bankruptcy and settlement law, it will be unjustifiably favoured against the creditor whose claim is initiated by an incident procedure. According to Act No 549 / 1991 Coll., on judicial fees, as amended, the Court of First Instance will be obliged to rule on the charge, even if the fee has not been paid in the main proceedings. On the contrary, the failure to pay the court fee in the incident proceedings will result in the termination of the procedure. In a situation where a party in the main proceedings has paid a higher court fee than he would have been obliged to pay in the case of an incident, this discrepancy cannot be removed, which results from the impossibility of taking action in the proceedings which is suspended by law.
That concept, with the consequences of the unequal rights and obligations of the parties to the proceedings for the determination of authenticity, the amount and order of the contested claim, is contrary to Article 96 (1) of the Constitution, the content of which has been interpreted as far as its impact is concerned. The legislature unacceptably admits various procedural rights and obligations to the parties to the same proceedings, which sometimes leads to an advantage, and sometimes to the disadvantage of those parties. However, the different procedural arrangements depend only on the procedural status of the creditor in the previous proceedings, the subject matter of which was merely linked to the contested claim.
The current practice of the courts in applying Paragraph 24 (4) of the bankruptcy and settlement law shows that the inconstitutionality of that provision cannot be overcome even by an interpretation that is constitutionally conformal.
Nor does the unconstitutional consequences of the regulation remove the interpretation of certain general courts (see, for example, the order of the Supreme Court in Olomouc of 10.9.2002 sp. zn. 4 Cmo 305 / 2002), according to which the provision of § 24 (4) of the bankruptcy and settlement law establishes a specific type of procedure called "proceedings in proceedings', i.e. proceedings which differ from the main proceedings by their object and circle of participants and which are only ex-linked to the original proceedings, according to which the content of the previous proceedings in accordance with § 24 (4) of the bankruptcy and settlement law is not consumed and can be continued after the bankruptcy. This interpretation does not remove the discrepancies described above in the rights and obligations of the parties to" proceedings' and in the incident procedures.
Article 37 (3) The Charter provides that all parties are equal in the proceedings. This provision of the Charter should be interpreted as meaning that it is a principle guaranteeing equal procedural rights and obligations of specific parties in a particular procedure. This distinguishes this provision of the Charter from the provisions of Article 96 (1) of the Constitution, which generally foresees the equality of participants in proceedings having the same subject-matter, as has been set out above.
The application of Paragraph 24 (4), as compared to the application of Paragraph 23 (2) of the bankruptcy and settlement law (the incident proceedings), ultimately establishes the unequal position of creditors falling under these two procedural arrangements in order to satisfy their claims under the schedule procedure (Section 30 of the bankruptcy and settlement law). If an incident dispute is seen as a formalised evidence procedure, the result of which is binding on the bankruptcy court, then it is clear that the law-based original procedural duality has an impact on the procedural position of creditors even in the present bankruptcy proceedings in terms of equality.
Therefore, in the light of the above, pursuant to § 70 (1) of Act No. 182 / 1993 Coll., on the Constitutional Court, as amended, the annulment of § 24 (4) of the Act on bankruptcy and settlement, as amended, has been decided by virtue of Article 96 (1) of the Constitution and Article 37 (3) of the Charter, which will become enforceable on the date of its publication in the Collection of Laws.
In view of this, however, the Constitutional Court also had to deal with the question of the effect of the deregulation of this provision on proceedings conducted by courts whose jurisdiction was based on the contested provision.
If the proceedings already initiated by the courts whose jurisdiction was based on the contested provision were to continue, even after the enforcement of the Constitutional Court's finding that the provisions of Paragraph 24 (4) of the bankruptcy and settlement law were to be repealed, the anticonstitutional inequality introduced by that provision would continue. The Constitutional Court therefore finds that, with the enforceability of the finding, the substantive jurisdiction of the courts under the provisions of § 24 (4) of the bankruptcy and settlement law is no longer supported by law.
At the same time, however, the Constitutional Court underlines that the general courts must act in order to avoid the denial of justice (denegationis iustiae) when dealing with the procedural situation. In accordance with the procedure whereby a court would prevent a party to the proceedings pending from claiming his right before an independent and impartial court, as guaranteed by Article 36 (1) of the Charter, it would infringe the right of a party to a fair trial and, as a result, would undermine the principles of the rule of law (Article 1 (1) of the Constitution). This would lead to further unconstitutional consequences.
Vice-President of the Constitutional Court:
JUDr. Holecek v. r.
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Regulation Information
| Citation | The Constitutional Court found No. 101 / 2003 Coll., on the application for annulment of § 24 paragraph 4 of Act No. 328 / 1991 Coll., on bankruptcy and settlement, as amended |
|---|---|
| Regulation Type | The Constitutional Tribunal found |
| Author | - |
| Collection | Code of Laws |
| Date of Promulgation | 04.04.2003 |
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| Effective from | - |
| Effective until | - |
| Status | Valid |
The regulation text is for informational purposes only.
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