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 17 December 2019, the Second Chamber of the Constitutional Court of Georgia rendered its judgment on the Case of “"LLC Stereo+", Luca Severini, Lasha Zilpimiani, Robert Khakhalevi and Davit Zilpimiani v. the Parliament of Georgia and the Minister of Justice of Georgia” (the Constitutional Complaint №1311). The complainant contested constitutionality of the regulations governing the procedure for acquiring title to property purchased at compulsory auction. Pursuant to the disputed regulations, any person, including a legal person registered in an off-shore zone could acquire shares or stocks of a license holder and/or authorized person in the field of broadcasting, in case of compulsory auction. At the same time, according to the Georgian legislation, ownership of the aforementioned shares or stocks of a license holder and/or authorized person in the field of broadcasting by a person registered in the off-shore zone would result in revocation of the broadcasting license and/or authorization.

At the same time, on the basis of impugned regulations, acquisition of the ownership interest or shares of an authorized person in the field of electronic communications was allowed without prior notification to the Georgian National Communications Commission (thereafter, the Commission). Under such circumstances, an authorized person may, involuntarily, become an authorized person with significant market power over the relevant segment of the service market. This, in accordance with the Georgian legislation, would result an imposition of one or several specific obligations in the field of electronic communications to an authorized person with significant market power in the relevant segment of the service market. In the light of all the foregoing, the complainant party indicated that the contested regulations disproportionately restricted the right to property and freedom of expression, thereby, contradicted the requirements of the Constitution of Georgia.

The respondents – the representatives of the Parliament of Georgia and the Minister of Justice of Georgia indicated that the disputed provisions served legitimate aims such as satisfying the creditors’ lawful claims in a timely and effective manner, as well as the protection of the proprietary interests of the legal persons registered in the offshore zone wanting to acquire property by means of compulsory public auction.

The Constitutional Court of Georgia has clarified the importance of broadcasting licenses or authorizations and indicated that the broadcasting license/authorization is a prerequisite for doing business in this area and has high economic value. On the basis of the contested regulations, the acquisition of share/stocks of a license holder/authorized person in the field of broadcasting by an entity registered in an off-shore zone may cause the revocation of the company's license and/or authorization. As a result, it would no longer be authorized to carry on broadcasting activities. It would in itself reduce the value of the company and result significant financial losses for its partners/shareholders and deprive them from ability to impart information through broadcasting. In this regard, the Constitutional Court of Georgia held that the impugned provisions restricted applicant company’s and its partners’ right to property and freedom of expression.

The Constitutional Court of Georgia shared respondents’ position and indicated that the creation of proper legal guarantees for the acquisition of property by the auctioneer and the satisfaction of the creditors’ recognized claims are valuable constitutional interests and to achieve such legitimate aims it was allowed to restrict complainants’ right to property and freedom of expression.

The Constitutional Court of Georgia, further acknowledged that even in the case of restrictions on the acquisition of ownership of a license holder/authorized company in the field of broadcasting by person registered in the off-shore zone, creditors still had a real opportunity to satisfy their claims by selling the mentioned property. In particular, shares/stocks of license holder or an authorized broadcasting company, itself, given the nature of the said property, did not belong to such a category of property, which proprietorship interest solely (significantly) comes from a legal entity registered in an off- shore zone. In contrast, there might exist an unlimited number of other potential buyers who are interested in acquiring such property.

In connection with the ownership interest of legal entities registered in the offshore zone regarding the license holder/authorized entity's stocks/shares, the Constitutional Court of Georgia referred that the acquisition interest could not be related to the economic benefits derived from the broadcasting activities, as far as acquisition of shares/stocks by a person registered in an off-shore zone would cause the Company the loss of the right to operate in the broadcasting field. At the same time, the Constitutional Court of Georgia held that the desire to purchase share/stocks of the company may be related to the interest of acquiring other property of the company and/or earning profits from other areas of business that do not require a broadcasting license/authorization. Nevertheless, mentioned interests are not valid to the extent that justifies such an intense restriction of broadcasting company’s and its partners’/shareholders’ rights. Due to all the foregoing, the Constitutional Court of Georgia concluded that such model of balancing the opposing interests did not meet the requirements of the Constitution of Georgia, the interests of the creditors to satisfy their legal claims and proprietary interests of the legal persons registered in the off-shore zone to acquire shares/stocks of the broadcasting company could not outweigh the broadcasting company’s and its partners’ interests. Accordingly, the Constitutional Court of Georgia held that the impugned regulations violated freedom of expression and the right to property.

Furthermore, the Constitutional Court of Georgia indicated that under the terms of the contested normative content, which allowed acquisition of the ownership interest or shares of an authorized person in the field of electronic communications without prior notification to the Commission, authorized person may, involuntarily, become an authorized person with significant market power over the relevant segment of the service market. All above- mentioned led to imposition of numerous specific obligations in this field. The Constitutional Court of Georgia considered that imposing such burden on the company was a restriction of the ownership rights. At the same time, this burden was not considered as severe to cause the restriction of the freedom of expression.

The Constitutional Court of Georgia stated that it was possible to regulate the process of selling the property at a compulsory public auction in such way to exclude the realization of the shares/interests of company without the control of the Commission. Particularly, it was possible to secure the participation of the Commission in the process of selling of shares/stocks of the authorized person in the field of electronic communication prior to the sale of the shares/stocks. The Constitutional Court of Georgia emphasized the importance of establishing the system of compulsory auction in such manner that the sole parties excluded from the list of potential purchasers of the property at compulsory auction were those, whose purchase of this property led to breach of healthy competition and turned this company into authorized person with significant market power over the relevant segment of the service market.

Under such circumstances, the need to protect the interests of the creditors and the interest of the potential acquirer could not outweigh the interest of the authorized company and its partners to carry on their business without interruption. Accordingly, the impugned provision unjustly established the balance of interests and unnecessarily restricted the company’s and its’ partners property right.

In the light of all the foregoing, the Constitutional Court of Georgia held that the normative content of the contested regulations, which permitted selling of shares/interests of the authorized person in the field electronic communications at the compulsory auction without the prior notification to the Commission did not contradict the freedom of expression guaranteed by Article 17 of the Constitution of Georgia, but violated the right to property enshrined in Article 19 of the Constitution of Georgia.