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 November 14, 2019 the Second Board of the Constitutional Court of Georgia adopted the judgment in the case of “Zurab Svanidze v. The Parliament of Georgia” (constitutional complaint №879). The complainant challenged the provisions, which determine that if any duly held auction (consisting of the first and two repeat auctions) fails and the property is not sold, such property shall be discharged from the attachment effected in favor of the creditor carrying out the compulsory sale.¹ No enforcement proceeding involving the same claim in favor of the same creditor shall be conducted with respect to such property.

In view of the complainant, in case of discharging the property from attachment effected in favor of the creditor carrying out the compulsory sale and returning it to the debtor, the creditor would no longer have the opportunity to effectively enforce a court decision in his favor. Complainant assumed that this regulation was incompatible with the right to a fair trial enshrined in Article 31(1) of the Constitution of Georgia.

The respondent explained, that after the impossibility of sale of the property at three auctions, lifting the attachment from the property served the interests of other creditors involved in enforcement proceedings and ensuring timely and effective enforcement of the court’s decision. The respondent indicated that by holding three auctions, the State applied all reasonable measures of realization of the property. Therefore, conducting additional auctions would only delay the enforcement process and increase the administrative costs required to conduct the auction.

The Constitutional Court of Georgia did not accept the respondent’s argument that the restriction of the right of the creditor carrying out compulsory sale was justified by the interests of other creditors. Particularly, the Court explained that creditors of the same order had an equal constitutional interest in satisfying their claims. Moreover, it has not been demonstrated that the creditor who has continued enforcement on the property discharged from the attachment, had a higher interest. Thus, by referring to the protection of the other creditors’ interests, the respondent actually restricted the property interests of one person in favor of another, who had the same position. The Constitutional Court held that in case of the same property interests, the protection of one person’s interests would not be a legitimate aim of limiting the interests of another.

The Constitutional Court did not share the respondent’s argument with regard to ensuring timely and effective enforcement by the limitation set by the disputed provision. According to the Court, the inability to sell the property at three auctions did not indicate that it had no value. Specifically, the value of the property is determined by its market price and not by the fact whether it could be sold at auction or not. The disputed regulation spread to the property with the market value of GEL 5000 or more. Moreover, the Court indicated that there were many factors affecting the sale of the property through auction. The interest in the item, the market demand for it and/or the likelihood of its sale may vary according to specific time periods or other factors. Thus, the impossibility of sale of the item at the auction in an established manner did not necessarily indicate that the property had no value. Furthermore, the property might not be sold because of its high market value. Accordingly, the Court held that releasing the property from attachment and returning it to the debtor not only did not serve timely and effective enforcement of the judgment in favor of the creditor but also deterred the enforcement of the judgment.

The Constitutional Court also assessed whether the disputed regulation constituted proportional means of achieving the legitimate aim of sparing administrative resources. The Court pointed out that it was possible to create an enforcement model that would equally ensure the interest of sparing administrative resources and the enforcement of a judgment in favor of the creditor. For example, the Court considered that in case the sale of the property at the auction was impossible, it would be possible to transfer the property in kind to the creditor. Thus, there was another, less restrictive way of sparing administrative resources.

The Court also noted that after passing some time since the auction failed, market interest in alienating the property could increase. Consequently, if the auction failed three times, the possibility of alienation should not be excluded forever. Thus, the Constitutional Court considered that disputed provision disproportionately restricted the right to a fair trial (Article 31 (1) of the Constitution of Georgia) and declared it unconstitutional.

1. The subject of the dispute fully: constitutionality with regards to Article 42(1) of the Constitution of Georgia (version in force until December 16, 2018) of the first and second sentences of first paragraph of Article 75(8) of the law of Georgia on Enforcement Proceedings.