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 18 April 2019, the First Board of the Constitutional Court of Georgia rendered a decision on the case of “"LTD SKS" v. the Parliament of Georgia” (constitutional complaint №655).

In this case, the subject of dispute was the constitutionality of the subparagraph “r” of the Paragraph 3¹ of Article 1 of the law of Georgia “On Public Procurement” with respect to first and second sentences of the article 30(2) of version of the Constitution of Georgia that was in force until 16 December 2018.

Pursuant to the disputed regulation, it was established that the Law of Georgia “On Public Procurement” may not apply to the public procurement by a contracting authority of postal and courier services of the LLC Georgian Post.

According to the complainant, the disputed provision allowed public agencies to procure postal and courier services through direct contract from LLC Georgian Post. Therefore, it excluded the ability of other economic agents operating in the same market to participate in the state procurement process. Under the aforementioned circumstances, LLC Georgian Post was granted the exclusive authority to provide postal and courier services and created a legal precondition for establishing it as a monopolist on the postal and courier service market. Given the above-mentioned argumentation, the complainant considered that disputed regulation was contrary to the constitutional right of the entrepreneurship and the freedom of competition.

The respondent, the representative of the Parliament of Georgia, explained that the measure envisaged by the impugned regulation served the legitimate aim of providing postal and courier services for an affordable price throughout the whole territory of Georgia. In line with the respondent’s argument, the standards of postal and courier services provided by LLC Georgian Post was in accordance with qualitative and tariff requirements established by international documents in this field. At the same time, under the disputed provision, procuring entities had the right - not an obligation - to conclude a direct contract with LLC Georgia Post. Accordingly, they were fully entitled to declare tender in which case economic agents operating in the postal and courier market would have the opportunity to participate in it. Based on provided arguments, the respondent considered that the disputed regulation was not in contradiction with the requirements of the Constitution of Georgia and constitutional complaint should not be upheld.

In the present judgment, the Constitutional Court of Georgia held that public agencies and other entities funded from the state budget had the ability to purchase postal and courier services solely from the LLC Georgian Post, by evasion procedural requirements for public procurement so, as not to take into account the offers of other economic agents provided the same services. Under these conditions, the LLC Georgian Post was given a significant market advantage, as far as, unlike other economic agents operating on the same market, it has already served a significant number of guaranteed purchasers, in the form of public procurement organizations. Accordingly, the Constitutional Court of Georgia indicated that under the disputed regulation LLC Georgian Post was granted such a benefit, through State resources on a selective basis, which improved its market position and created risks for freedom of entrepreneurship and competition. Thereby, it was established that the contested regulation restricted the constitutional right to freedom of entrepreneurship and competition.

The Constitutional Court of Georgia shared the position of the Parliament of Georgia and indicated that providing population with access to the postal and courier services throughout the whole territory of the country was an important legitimate aim. At the same time, The Constitutional Court of Georgia accepted the respondent’s position that the delivering of postal and courier services in less populated and hardly accessible areas of the country may not be commercially attractive. Therefore, followed that in order to ensure affordable prices for postal and courier services on the whole territory of the country, the interference in the relevant market would be justified inter alia by establishing a preferential treatment for the LLC Georgian Post. Nevertheless, the Constitutional Court of Georgia indicated that any such benefits granted to the LLC Georgian Post should be proportional to the services rendered.

Finally, the Constitutional Court of Georgia concluded that the Georgian legislation in the field of the public procurement failed (a) to clearly define the obligation of the LLC Georgian Post to provide postal and courier services with affordable price on the whole territory of the country; (b) to establish transparent and objective criteria for calculation of economic expenses necessary for providing of postal and courier services with affordable price on the whole territory of the country; and, (c) to incorporate a mechanism that would prevent LLC Georgian Post from abusing their market power by receiving benefits, which exceed adequate commercial expenses and reasonable profit. In view of the above mentioned arguments, the Constitutional Court of Georgia established that disputed legal provision unduly restricted the freedom of entrepreneurship and competition and contradicted first and second sentences of the article 26(4) of the Constitution of Georgia.

Furthermore, the Constitutional Court of Georgia indicated that in case of an immediate invalidation of the impugned legal provision LLC Georgian Post would lose granted economic benefits. This may have hindered the process of providing postal and courier services throughout the whole territory of the country at an affordable price and may negatively affect the interests of the postal and courier services customers. For this reason, the Constitutional Court granted the legislature, the Parliament of Georgia, with the reasonable time to address the said regulatory noncompliance with the Constitution of Georgia until 1 May 2020, after which the disputed legal provision will be invalidated.