The abstract of the judgment (The judgment is available only in Georgian). Abstracts published by the Constitutional Court of Georgia summarise the facts of the case and key legal considerations of the judgment.

Abstract

On 29 December, 2017, the Grand Chamber of the Constitutional Court of Georgia adopted the Judgement in the case of ""LLC Broadcasting Company Rustavi 2" and "LLC Television Company Sakartvelo" v The Parliament of Georgia" (constitutional complaint N679).

The subject of the dispute in this case was constitutionality of Articles 54 and 55 of the Civil Code of Georgia with regard to Article 16 and Paragraphs 1 and 2 of Article 21 of the Constitution.

The complainant stated, that Article 54 of the Civil Code of Georgia, which provides for voidness of contracts which are against “norms of morals” and “public order”, contradicts the right to property and right to free development of personality.

The complainants asserted, that the terms of Article 54 of the Civil Code of Georgia, “public order” and “norms of morals” have subjective content and give a judge unjustifiably wide discretion to define the substance of these terms in each individual case. Moreover, the normative content of the disputed rule, which, declares a deal void, based solely on the inadequate price of the deal is unconstitutional. The parties of a deal should have full opportunity to determine the price of a deal without any interference from the State.

The complainant asserted at the oral hearing on merits, that they considered unconstitutional the text of Article 55 of the Civil Code of Georgia that was in force until 8 May, 2018. In view of the complainants, it was true that Article 55 of the Civil Code of Georgia was amended on 8 May, 2012, however if interpreted together with Article 6 of the Civil Code of Georgia, it can still be considered as effective legal act with regard to those deals, which were executed within the period when the old version of the disputed provision was in force. The complainant referred to the non-uniform interpretation of Article 55 of the Civil Code of Georgia. In his opinion, in view of the existing case law, the focus is on disproportionality of price and no regard is given to the second imperative premise provided in this Article – abuse of power and exploitation of naivety of the other party.

In view of the respondent, the use of broad legal terms like “norms of morals” in civil law is caused by objective reasons. Disproportionality of the price of a deal, under the disputed provision, is not an independent premise for voidness of a deal and presence of other preconditions is also required. The respondent also pointed out, that the Constitutional Court of Georgia did not admit for consideration on merits the text of Article 55 the Civil Code of Georgia, which was in force until 8 May, 2012

Reviewing this dispute, in the first place, the Constitutional Court identified the claim raised in the complaint and pointed out, that the complainant alleged unconstitutionality of determination of content and scope of property rights based on the rules of general character and referred to incompatibility of such regulations with the principles of legal security and certainty. Hence, this Judgement is seminal as far as the Court considered and evaluated whether Constitution allows for regulation of contractual relationships on the basis of general rules. Furthermore, the Constitutional Court reviewed the rules regulating civil law relations with regard to the standard of legal certainty.

Elaborating on the issue of certainty of the disputed provisions, the Constitutional Court differentiated between standards of certainty applicable to the rules prescribing liability, rules of public law and rules of civil law. The Court pointed out that setting forth the grounds of voidness of contracts the State does not impose any type of liability or prohibition, violation of which would be punished with sanction. On the contrary, the rules determining the voidness of contracts apply to those cases, where the State refuses to interfere in the relations between individuals and to coerce one party to carry out certain activities in favour of the other party. Therefore the requirement of the degree of certainty applicable to the rules regulating civil law should not be as strict, as the criteria that should be met by the rules prescribing legal liability. The Constitutional Court also emphasized the importance of flexibility of the rules of civil law and the risks associated with introducing rigid legislation to regulate this area.

The Constitutional Court interpreted, that the law of contracts applies to wide area of relations, substance and scope of which entirely depend on the acts and will of individuals. In view of ever-developing social and economic relations it is impossible to determine in advance, what type of contract will be concluded by parties; it is also impossible to identify in advance and exhaustively those contracts enforcement of which conflicts with pubic interests. The Court interpreted that the goal of general rules is to regulate civil law relations as comprehensively as possible and to establish fundamental principles of civil circulation, which would provide for legal solution for any type of contractual relations. As in certain cases, solution for contractual relation without its direct, specific regulation is inevitable necessity, the Constitutional Court pointed out that in absence of general rules it would be necessary to either regulate any civil law relation in a maximally detailed manner, that would impede full operation of dynamically developing civil circulation, or to use analogy of statutes and/or law, which would reduce the degree of legal certainty even more. Therefore the Constitutional Court of Georgia did not share the position of the complainant, asserting that general nature and vagueness of the content of disputed provisions constituted self-sufficient ground for finding it unconstitutional.

The complainant also referred to the terms present in Article 54 of the Civil Code of Georgia – “public order” and “morals”, which in their view, are matter of subjective evaluation and ascertaining their content depends of personal convictions of a judge, which grants them unfettered discretion.

In this regard, the Constitutional Court interpreted, that Article 54 of the Civil Code of Georgia provides the most general ground of voidness of deals, the goal of which is not to leave unregulated the situation, where the enforcement of a deal is essentially at conflict with the fundamental purposes of the contractual law, but it does not fall under the grounds of voidness set forth in other rules.

The Constitutional Court of Georgia did not share the argument of complainants, according to which, the disputed rule grants unreviewable discretion to a judge and they can give the rule any content desirable to them. According to the interpretation of the Constitutional Court of Georgia, applying the disputed rule, the measure of evaluation used by the judge cannot be their personal conviction about appropriateness of a behaviour and/or how the judges themselves would behave in respective cases. Judges should evaluate whether the deal itself, its content, is acceptable in view of the established morals of the public and general requirements of public order. The Court indicated, that the disputed rule can be interpreted not according to the subjective views of a judge, but systemically, in the context of other rules and legal principles, while the appropriateness of each interpretation made by a judge can be objectively checked and reviewed by the courts of upper instances. Compliance with the Constitution of each interpretation is ascertained by the Constitutional Court case by case. The Constitutional Court also pointed out, that the grounds of voidness of a contract as general as the terms “public order” an “morals” is not uncommon for the legislation of various other countries, including the states of continental Europe and the United States. This, in its turn, shows the general consensus among civilized states on this issue.

The complainant referred to unconstitutionality of the normative content, according to which a deal is void based solely on inadequacy of a price of a deal. In this regard, the Constitutional Court took into account the established case law of the Supreme Court of Georgia; namely, it referred to the Judgement (Case №ას-664-635-2016) of the Grand Chamber of the Supreme Court of Georgia of 2 march, 2017, according to which solely the price of a deal cannot serve as ground of voidness of a deal under Article 54 of the Civil Code.

According to the Judgement of the Constitutional Court of Georgia, the judgement of the Supreme Court of Georgia is mandatory for the courts of all instances. No court is empowered to interpret Article 54 of the Civil Code differently from the interpretation of the Grand Chamber of the Supreme Court and to declare a deal void based solely on the inadequacy of its price. Thus the Constitutional Court of Georgia declared, that there is no lawful way of applying Article 54 of the Civil Code of Georgia with the normative content challenged by the complainant.

Based on the analysis of the constitutional complaint №679, the text of normative legal act annexed to it and the Recording Notice №1/3/679 of the Constitutional Court of Georgia, the Court ascertained that the present constitutional complaint was admitted for consideration on merits with regard to Article 55 of the Civil Code of Georgia, only in part which challenged the constitutionality of the version of Article 55 of the Civil Code of Georgia which was currently in force, not the version, which was in force from 25 November, 1997 until 25 May, 2012. Therefore, within this case, the Constitutional Court of Georgia was not authorized to review the issue of constitutionality of the text of Article 55 which was in force from 25 November, 1997 until 8 May, 2012. The representative of the complainant stated at the oral hearing on merits, that they considered as problematic the text of Article 55 of the Civil Code of Georgia, that was in force until 8 May, 2012 and they did not bring the arguments against the challenged version of Article 55.

In view of all the above-mentioned, the Constitutional Court did not uphold the constitutional complaint №679.

The dissenting opinion of the Members of the Constitutional Court – Irine Imerlishvili, Giorgi Kverenchkhiladze, Maia Kopaleishvili and Tamaz Tsabutashvili is appended to the Judgement.