Composition of the Board:

Besik Loladze – President of the Hearing, Judge Rapporteur;

Otar Sichinava – Member;

John Khetsuriani – Member.

Secretary of the hearing: Lili Skhirtladze.

Title of the case: Citizen of Georgia Shota Beridze and others v. the Parliament of Georgia.

Subject of the dispute: The constitutionality of the wording “on the territory of the Autonomous Republic of Ajara” of Article 12(6) of the Law “On Privatisation of State Property” in terms of Article 14 and Article 31 of the Constitution of Georgia.

Participants of the hearing: Claimant Marine Bedoshvili; representatives of the claimants David Jibladze; Batar Chankseliani and Levan Kasradze, Representatives of the Parliament of Georgia (respondent).

I

1.№392 constitutional claim was lodged with the Constitutional Court on 22 June 2006. Claimants – Shota Beridze, Nadejda Melikishvili, Asmat Sirbiladze and others (altogether 67 claimants) are employed in different limited liability companies doing business in book sales.

2. The First Board of the Constitutional Court of Georgia, under recording notice №1/5/392 of 31 July 2006, admitted #392 constitutional claim for the consideration of the merits, under the head of constitutionality of the impugned provision in terms of Article 14 and Article 31 of the Constitution of Georgia. After the change of the composition of the Boards of the Constitutional Court, the constitutional claim was referred for the consideration of the merits to the Second Board of the Court. Hearings on the consideration of the merits for constitutional claim #392 took place on 22 October and 3 December 2007.

3. The subject of the dispute is the constitutionality of the wording of Article 12(6) - “on the territory of the Autonomous republic of Ajara” of the Law of Georgia “On Privatisation of State Property” in terms of Article 14 and Article 31 of the Constitution of Georgia. Article 12(6) of the Law of Georgia “On Privatisation of State Property” provided for sale of small companies doing business on the territory of the Autonomous Republic of Ajara, specialised in trade, food provision and utility service supply, the value of which did not exceed 100, 000 GEL. Pursuant to law these companies should have been sold through direct sales method to the employees of such companies. The sales price of these companies was determined by the balance value of the company on the day of privatisation and by zone coefficient valid on the date of the adoption of this law.

4. On 11 July 2007 amendments were moved into the Law of Georgia “On Privatisation of State Property”. The title of the law changed into the Law of Georgia “On Privatisation and Rent Transferral of the State and the Local Self-Government Body’s Property”. Article 12(6) was recognised as null and void and hence the wording as well, which is disputed by the claimants. Pursuant to Article 13.6 of the Law of Georgia “On Constitutional Legal Proceedings” “after admission of the case by the Constitutional Court for the consideration of the merits abrogation or invalidation of the impugned provision/act shall not cause termination of proceedings before the Constitutional Court, if the case concerns the human rights and freedoms recognised by the Second Chapter of the Constitution of Georgia.” As the claimant did not refuse to pursue the claim, invalidation of the impugned provision did not cause the termination of examination of #392 constitutional claim in the Constitutional Court.

5. According to the representatives of the claimants, the impugned provision runs counter to the Constitution, because it covers only one region of Georgia and does not apply to the employees working in small businesses located in other regions of Georgia. Compared to employees of small companies located in the Autonomous Republic of Ajara, other persons, including the claimants willing to purchase small companies and real property subjected to privatisation are discriminated. The claimants support establishing certain privileges and discounts for employees during the privatisation process, but they assert that principle of equality should be adhered to and privileged conditions be applicable on the whole territory of Georgia.

The claimants are of the opinion, that the impugned provision violates the constitutional right to non-discrimination and specifically non-discrimination on the basis of the place of residence. According to the representative of the claimants, opinion of the respondent regarding the list of criteria of discrimination in Article 14 of the Constitution being exhaustive is incorrect. Discrimination should be understood more extensively and the usage of word “exhaustive” with respect to the Constitution is a bit inconvenient. Apart from this, “place of residence” from a constitutional perspective shall be understood more extensively than just a place, which a person chooses to live at. It is possible that while adopting the law the legislator did not intend to discriminate among citizens, but judging according to the outcome this is the situation. Wide groups of persons were in a discriminated situation and the Constitution should protect citizens exactly form this. The regulation established by the impugned provision was not justified and reasonable.

The representative of the claimants is of the opinion that Article 31 of the Constitution of Georgia declares a fundamental human right. As impugned provision establishes privileges for a certain group of persons, they have advantages and incentives for economic development, since social economic development process is substantially related to privileges applying to property. Establishment of these privileges is welcomed, because it follows from the essence of Article 31 of the Constitution of Georgia, but this should not happen through the violation of the principle of equality before law.

According to the representatives of the claimants, for the impugned provision to be in line with the Constitution, the words “on the territory of the Autonomous republic of Georgia”, should be taken out from the provision and instead provide for the wording “in Georgia”; this would ensure equal application of the provision with respect to the whole population of Georgia, specifically to the employees including the claimants.

The representative of the claimants pointed out the factual circumstances, which in their opinion confirm that the impugned provision should have applied to the claimants also. The claimants in the past could not benefit from the ordinance of 17 March, 1992 of the Cabinet of Ministers on Certain Measures for Demonopolisation of Economy and ordinance of the 26 August, 1992, #871 of the Government of the Republic of Georgia concerning Certain Measures for Demonopolisation of Economy, as well as from Order of 20 November 1995 #487 of the Head of the State of Georgia regarding Transfer of Administrative Buildings Located in Tbilisi in the Ownership of Tbilisi Municipality. On the basis of these normative acts, in accordance with labour union decision, it was possible to establish book stores into independent legal entities, in which the claimants were employed, and separate them from the State association – Saktsigni.

For the determination of privatised property, the company established as an independent legal entity should have received its fixed assets as well as inventory with the balance value. As to other assets and liabilities they would have been divided proportionally to the company’s share in them. These norms have not been applied with respect to the claimants. They also did not receive real estate property from Tbilisi Mayor’s office, which pursuant to #487 order of 20 November 1995 of the Head of the State of Georgia had the right to decide to sell the municipality property through direct sales method. On the basis of #776 Order of the President of Georgia of 29 December 1997 privatisation of these buildings was terminated. Apart from this, the claimant submitted the additional evidence:#453/65Resolution of the Vice Prime Minister of the Republic of Georgia dated 23 August 1994;#01-10/2824 letter from the Ministry of Property Management of Republic of Georgia, dated 29 September 1994 to the Vice Prime Minister of Republic of Georgia; letter from the Head of Tbilisi Office of the Ministry of Property Management of the Republic of Georgia to the Minster of Property Management; letter of the Head of association of retail-wholesale book trade – Saktsigni to the Prime-Minister of the Republic of Georgia. The representative of the claimants concludes that as privatisation process was terminated with respect to those persons to whom the impugned provision applied as well as with respect to the claimants, therefore the privileged regime of privatisation should have applied to the claimants also.

6. The representatives of the respondent maintain that the reason for the adoption of the impugned provision was the practical impossibility, due to political situation, to carry out privatisation process on the territory of Ajara. Since September 2005 privatisation through auction of State property located on the territory of the Autonomous Republic of Ajara has started. There was a danger that legitimate interests of employees working in small companies operating in trade, food provision and utility service supply would not be taken into account in the process of privatisation through auction and the property subjected to privatisation would have been purchased by a person, offering the highest price. The threat of unemployment of these people and of various social problems was real.

Equality before the law does not mean that every differentiated treatment is discrimination. The representatives of the respondent made an argument on the basis of opinion of UN Human Rights Committee, pursuant to which “differentiated treatment, which is based on reasonable and objective criteria, does not represent prohibited discrimination in accordance with Article 26 of International Covenant on Civil and Political Rights.” In the light of the jurisprudence of the ECtHR and the Constitutional Court of Georgia discrimination is established where: 1. there is a differentiated treatment of similar cases without any reasonable, objective grounds or legitimate aim; 2. There is no balance between the legitimate aim and the means for achieving the aim or 3. In accordance with the Constitutional Court’s jurisprudence there is no level of differentiation between the persons in identical conditions.

The purpose of adoption of the impugned provision was to maintain and improve individuals’ economic well-being, achieve social justice and prevent severe social problems. The principle of proportionality is also fulfilled – there is no element in the impugned provision that would have indicated for the different usage of the norm, other than for the purposes stated above. The impugned provision was the most justified, efficient and effective means for achieving the stated objective. There is not different level of differentiated treatment of the persons in the similar conditions. Therefore principle of equality stated in Article 14 of the Constitution is not violated.

The representatives of the respondent indicate in their reply, that Article 14 of the Constitution of Georgia states exhaustively those criteria on the basis of which discrimination is prohibited. There is no place of residence criteria in those enlisted in Article 14. In reality differentiated treatment on the basis of the impugned provision had taken place not according to place of residence but according to place of employment. However, the representative of the respondent at the court hearing maintained that though he agrees with the claimants that list of Article 14 is not exhaustive, but he nevertheless provided scholarly opinion regarding the exhaustiveness of discrimination criteria.

As to what concerns Article 31 of the Constitution, the state through adoption of the impugned provision facilitated equal social and economic development of various regions on the territory of Georgia. The legislator decided to equalize situation in the Autonomous Republic of Ajara regarding privatisation to other regions of Georgia. State has adopted transitional norm, which facilitated equalization of social and economic conditions in Ajara to the rest of the country.

On the basis of all the above mentioned, the representatives of the respondent are of the opinion that constitutional claim is ill-founded and should not be upheld.

II

1. According to the claimant, words of Article 12(6) of the Law of Georgia “On Privatisation of State Property” – “On the territory of the Autonomous Republic of Ajara” is in conflict with Article 14 of the Constitution of Georgia. Specifically, the claimants are treated differently because of their place of residence. According to them the privileges that were established by the law for the employees of small companies operating in trade, food provision and utility service supply, without any legitimate aim did not apply to them.

2. According to Article 14 of the Constitution of Georgia “ Everyone is free by birth and equal before the law regardless of race, color, language, sex, religion, political and other opinions, national, ethnic and social belonging, origin, property and title, place of residence.” It is important to interpret this fundamental constitutional norm-principle and to identify essence of objective will. Article 14 of the Constitution establishes not only fundamental right to equality before the law, but a fundamental constitutional principle of equality before the law. Its purpose is to ensure equality before the law and not to allow consideration of substantially equal as unequal or vice versa. The criteria enlisted in the article, from grammatical perspective, is exhaustive, however the purpose of the norm is more extensive, than just prohibition of discrimination solely on the basis of these criteria. Article 14 of the Constitution of Georgia does not directly state non-discrimination on the basis of the place of employment, but this naturally stems from the essence and the purpose of this norm. Only grammatical interpretation would make Article 14 empty and undermine its importance within the constitutional sphere. On the basis of this, the Constitutional Court considers that giving privileges to certain group of people on the basis of their place of employment by the legislator, amounts to prima facie interference within the protected sphere of Article 14 and shall be subjected to examination of constitutionality.

3. The group of persons, to whom the privileged privatisation regime apply, includes employees of small companies that operate in the sphere of trade, food provision and utility service supply in the Autonomous Republic and balance value of which does not exceed 100, 000 GEL. It is clear from the materials of the case that claimants are employed in this kind of companies, specifically in small companies specialized in book sales. From legal perspective they are not substantially different from employees of those small companies that operate on the territory of the Autonomous Republic of Ajara, apart from their place of employment. The claimants would have been covered by the norm if there were no exception as to the limitations of territorial application of the norm. Thus, on the basis of the impugned provision, substantially equal subjects are treated legally differently. Pursuant to Article 12(6) of the Law of Georgia “On State Property Privatisation”, advantageous conditions apply to the persons based on the location of the company in which they are employed. At the same time, other persons employed in companies that are located in other parts of Georgia are not benefiting from the same legal regime.

4. It should be noted from the outset, that request of the claimant stated in the submission regarding the substitution by the Constitutional Court of the words of the impugned provision – “On the territory of the Autonomous Republic of Ajara”, with words – “in Georgia” does not have any legal ground. The claimant, pursuant to the Law of Georgia “On Constitutional legal Proceedings”, does not have a right to increase submitted constitutional claim. Apart from this, introducing amendments in the invalidated norm is beyond the competence of the Constitutional Court of Georgia.

5. For examination of the impugned provision with respect to Article 14 of the Constitution it is necessary to determine, whether establishment of legal privileges falls within the competences of different subjects. If this were the case, any legal claim regarding the violation of Article 14 of the Constitution would be unfounded, as principle of equality limits each subject of public authority in their sphere of competences. The parliament of Georgia, the supreme representative body, which on the basis of the Constitution exercises its legislative competences, has right to regulate privatisation issues by law without any restrictions as to its territorial application. It follows, that establishment of privileges on the legal level, as it was undertaken with respect to employees of the companies located on the territory of the Autonomous republic of Ajara, is within the competences of the Parliament.

6. It is clear from the materials of the case that the Parliament of Georgia while adopting the impugned provision did not intend to place claimants and generally individuals of this category in a disadvantageous situation. For determination of the violation of the principle of equality before the law it is not necessary to establish that creation of unequal legal situation was the purpose of the body adopting the impugned provision. In this case, important is not the intention of the legislator, but the actual result produced. The advantage is given on the basis of the words – “on the territory of the Autonomous Republic of Ajara” of Article 12(6) of the Law of Georgia “On Privatisation of State Property” and the person is placed in an unequal situation, who is in the identical situation to those that are privileged but does not receive the same treatment.

7. Unequal treatment of claimants does not automatically mean that the impugned provision violates Article 14 of the Constitution. This point is made clear as in the case-law of ECtHR as well as in the judgments of the Constitutional Court. In judgment of 16 February 2005 #1/2/213,243 the Constitutional Court states: “differentiated legal regulation, evidently would not in every case amount to violation of the principle of equality. The legislator has a right to establish by the law different conditions, but this should be justified, reasonable and legitimate.” In judgment #2/7/219 of 7 November, 2003, the Constitutional Court makes its position regarding the differentiation clear: In social, democratic state governed by rule of law, establishing for separate group of individuals relatively disadvantageous legal regulation by the legislator, should be conditioned by substantial, reasonable and objective criteria.” As it seems it is possible for a differentiated treatment to have a constitutional justification. For this to be the case, adoption of the impugned provision should have sufficiently weighty, reasonable and substantial aims, the action of the legislator should be justified, non arbitrary and proportional. It should also be taken into account that impugned provision has social weight and in this sphere state has wide discretion of action. On the other hand, differentiation is undertaken on the basis of such criteria, on which claimants cannot have objective influence to create privileged situation for them.

8. Information regarding the purposes of the legislator, apart from those provided by the respondent on the hearing can be identified in the documentation provided by the Head of the Administration of the Parliament. This documentation includes an explanatory report for the amendments introduced in the Law of Georgia “On Privatisation of State Property”, also stenographic records of consideration the draft law on 1st, 2nd and 3rd hearings in the Parliament.

9. The employees of small companies operating in trade, food provision and utility service supply have contributed a lot to creation, development and maintenance of these companies and have special attitude towards them. In order to have their interests taken into account the order of the Head of the Republic of Georgia has been adopted regarding Certain Measures for Regulation and Speeding Up of the Privatisation Process. The very first provision of the order provided for sale of the trade, food provision and utility service supply companies to employees of such companies through direct sales method, which was in force during one year beginning from the date of signature of the order. In the explanatory report for the draft law on amendments to the Law of Georgia “On Privatisation of State Property” it is indicated that generally privatisation process and specifically order of 29 May 1994, #178 of the Head of the State did not apply to the Autonomous Republic of Ajara because of political reasons and actions of local authorities. The author of the draft law believed that adoption of the law was necessary for the purposes of restoration of justice and for the interests of those employed in small companies.

10. It is beyond the competences of the Constitutional Court to analyze political reasons behind problems of application of the provision of the order of Head of State of 29 May, 1994 regarding sale of the trade, food provision and utility service supply companies to employees of such companies through direct sales method. However, it should be noted that there has not been undertaken privatisation of objects located on the territory of the Autonomous republic of Ajara on the basis of this provision which is confirmed by the letter #01-22/3816 of 21 November, 2007 of Finance and Economy Minister of the Autonomous Republic of Ajara to the Deputy Chairman of the Constitutional Court of Georgia. It follows that adoption of the impugned provision by the Parliament had a legitimate ground. The norm, on the one hand, intended to restore justice and on the other hand to protect interests of sensitive social group.

11. Establishment of privileges by the state to certain social group, in one case was undertaken on the basis of the order of the Head of the State, and in another case on the basis of a law. Formally, these legal mechanisms are different from each other, but judging from their essence and purpose they are similar. On 29 May 1994 #178 Order was adopted by the Head of State of Georgia taking into account existent legal system and the competences of the state bodies, which then during the years has changed. In this regard, on 13 October of 2005, during the 3rd hearing for adoption of the impugned provision, there was completely different reality, but the purpose of the state was unchanged. In this case, there was an additional motivation – restoration of justice with respect to certain groups of people, which has restricted the application of the norm to this group.

12. According to the representatives of the claimant, restoration of justice was necessary not only with respect to employees of the small companies located on the territory of the Autonomous Republic of Ajara, but with respect to other employees, including the claimants, because these persons have not benefited from privileges during the privatisation. The representatives also indicated to the order of 17 March, #323 of the Cabinet of Ministers of the Republic of Georgia regarding Certain Measures for Demonopolization of Economical Activities. This order regulates not the monopolization of state property, but splitting or termination of state concerns and associations with the purpose of decentralization, removal of old administration system and with the purpose of demonopolisation of economic units. Although it is true that employees are given a right to establish their own company and voluntarily terminate membership in various associations, but their property is retained by the state and their registration is done with the name of state company.

13. The order of 26 august, 1992 of the Government of Georgia regarding the application rules for the order of 17 March 1992 of the Cabinet of Ministers of the Republic of Georgia has not been applied to the privatisation of state property. Through this order the procedure of drawing out of small state companies from state companies was approved. It is noteworthy that, for establishment of a company it was necessary to obtain an order from relevant Ministry or local administrative body, which indicates that these companies were in the property of state. The representative of claimants bases its arguments on the fact that the new company would receive fixed assets and inventories with the balance value, as well as other assets and liabilities proportional to their share in it. The case here concerns not to privatisation of state property, but instead the word – privatized property is used, which is transferred to state company and not to the employees of that company.

14. The order of the Head of the Republic of Georgia #487, dated 20th November, 1995 regarding transfer of administrative buildings located on the territory of Tbilisi in the property of the Municipality of Tbilisi provides not for privatisation of state property, but transfer of the part of state property to the Municipality. The indication of the representative of the claimants on the fact, that on the basis of this act the claimants could not receive building through direct sales method, is not correct. From the contents of the order it is evident that the case concerns transfer of property through rent and not privatisation through direct sales method. Apart from this, exercise of this procedure was within discretion and a duty of the Mayor’s Office.

15. The indication of the representatives of the claimant on the order #776 of the President of Georgia dated 29 December, 1997 regarding unified plan of privatisation of certain industries of national economy, as well as on the basis of the order of Head of Georgia #776 dated 2nd November 1995 as on acts on the basis of which termination of the privatisation process took place. As it was mentioned, #487 order did not provide for privatisation of the property of municipality and therefore order #776 of the President of Georgia dated 29 December 1997 could not terminate inexistent process. It should be also emphasized here, that when #776 order was adopted, the order #178 of 29 May, 1994 regarding direct sales of objects to the employees of the companies operating in food provision, trade and utility service supply, which was in force during one year from its signature, was not any more in force and therefore the President of Georgia had a legal right to determine unified plan of privatisation for certain industries of economy including trade, food provision and utility service supply companies.

16. On the basis of the above mentioned, the Court is of the opinion, that the evidences submitted by the claimants, does not indicate to the application, generally in Georgia and specifically with respect to claimants, of the provision approved by the Order of the Head of State #178, dated 29 May 1994 regarding Direct Sales of Objects to the Employees of Companies Operating in Trade, Food Provision and Utility Service Supply. This order regulated privatisation of trade, food provision and service objects’, i.e. their transfer from state property to the employees of these companies and established certain privileged regime. The acts indicated by the representative of the claimants are not ones that regulate privatisation process. The correspondence submitted by him may indicate to certain burocratic problems, but it does not relate to the case and the Constitutional Court shall not make conclusions on the basis of them.

17. The Constitutional Court of Georgia is of the opinion, that granting certain privileges in the privatisation process to the employees of the companies located on the territory of the Autonomous Republic of Ajara operating in trade, food provision and utility service supply analogously to that established by the order of 1994, #178 represents restoration of justice with respect to these individuals and optimal, necessary and appropriate means for protection of their social interests. During adoption of Article 12(6) of the law of Georgia “On State Property Privatisation” there were no better means for achieving the aim set by the legislator. The scale of application of the impugned provision was determined appropriately and was proportional to the aim.

18. According to the claimants, the impugned provision conflicts with Article 31 of the Constitution. In order to assess the legal grounds of the request of the claimants, the Court should analyze the essence and the purpose of the norm. Pursuant to Article 31 of the Constitution “The state shall take care for the equal socio-economic development of the whole territory of the country. With the view of ensuring the socio-economic progress of the high mountain regions special privileges shall be determined by law. According to the constitutional claim and the statements mad eon the hearing the claimants do not dispute constitutionality of an impugned provision with respect to the second sentences of Article 31. They dispute the norm with respect to the first sentence of the article.

19. Article 31 of the Constitution is placed in the second chapter of the Constitution dealing with issues of citizenship and of fundamental rights and freedoms. This does not unconditionally mean that that it protects certain fundamental right and that arguments of the claimants may be based upon it. Article 31 of the Constitution expresses solidarity of the state with respect to its territorial units. From this perspective, the norm has two subjects – the state and a territorial unit and individual’s role in this relationship is not provided directly.

20. Apart from the above mentioned, Article 31 of the Constitution expresses principle of social state. The purpose of the social state is to establish just social order, maintain common economic balance, and equal social security for population, on the scale of the whole territory provision of equal conditions. These aims, because of objective circumstances, are not fully achievable and represent a permanent aim and issue of concern for the state. The state has a wide discretion of action in this direction. Subjective rights, request of certain social regulation and specific duties of legislature does not stem from the principle of social state. Exactly because of this, the first sentence of Article 31, this is directed towards provision of equal living conditions for whole population, less demanding from the state. Article speaks about consideration and not of a duty. Therefore, first sentence of Article 31 is a norm establishing state’s objective, which is not a duty, but at the same time is not only a declaratory or programmatic provision. Therefore, Article 31 of the Constitution does not grant a fundamental right, its contents and scope. It is about state’s future actions and not about existent, recognised and guaranteed fundamental right.

21. Thus, Article 31 of the Constitution does not establish a fundamental right, but is an expression of state’s solidarity and of the principle of a social State. Constitutional review of the impugned provision in terms of the said Article of the Constitution shall be carried out separately but only jointly with other Articles establishing a fundamental right. This approach is in line with the case-law of the Constitutional Court. It is indicated in judgment of the Constitutional Court #2/2-389 of 26 October 2007, that constitutionality of an impugned provision or an act shall not be carried in isolation only with respect to this Article: “It is true, that constitutional principles do not establish fundamental rights, but impugned provision can be subjected to examination with respect to fundamental principles of the Constitution, in conjunction with separate norms of the Constitution and from this perspective examination should be made within that context”. The Constitutional Court, thinks that the impugned provision is in line with Article 14 of the Constitution and therefore, it cannot be subjected to review in terms of Article 31 of the Constitution.

III

On the basis of the above-mentioned, in the application of Article 89(1)(f) and Article 89(2) of the Constitution of Georgia, Article 19(1)(e), Article 21(2) and Article 21(8), Article 23(1), Article 25(2) and Article 25(3), Article 43(2), Article 43(4). Article 43(7), Article 43(8) and Article 45 of the Organic Law of Georgia “On the Constitutional Court of Georgia”, as well as Article 7(1), Article 7(2), Article 24(4), Article 30, Article 31, Article 32 and Article 33 of the Law of Georgia “On Constitutional Legal Proceedings”,

the Constitutional Court of Georgia
resolves:

1. Not to uphold constitutional claim #392 (citizen of Georgia Shota Beridze and others v. the Parliament of Georgia);

2. The judgment shall be in force from the moment of its official announcement at the hearing of the Constitutional Court;

3. The judgment shall be final and not subject to appeal or review;

4. A copy of the judgment shall be dispatched to the parties, to the Supreme Court of Georgia, the President of Georgia and the Government of Georgia;

5. The judgment shall be promulgated in “Sakartvelos Sakanonmdeblo Matsne” within 15 days.

Members of the Board:

Besik Loladze,

Otar Sichinava,

John Khetsurani.