Composition of the Board:

Besik Loladze – Chairman of the Hearing, Judge Rapporteur;

Otar Sichinava – Member;

John Khetsuriani – Member.

Secretary of the Hearing: Lili Skhirtladze.

Title of the Case: Citizen of Georgia, Zaur Eliashvili v. the Parliament of Georgia.

Subject of the dispute: Constitutionality of Article 534 of the law of Georgia “On Entrepreneurs” with respect to paragraphs 1 and 2 of Article 21 of the Constitution of Georgia.

Participants of the Hearing: Anna Tvaradze, representative of the Claimant; Batar Chankseliani and Levan Kasradze, representatives of the Respondent.

I

1. On 21 July 2008, a constitutional claim was lodged with the Constitutional Court of Georgia by a citizen of Georgia. Zaur Eliashvili. The constitutional claim was registered with number N457. By the resolution of 28 July 2008 of the President of the Constitutional Court of Georgia, the Constitutional claim N457 was referred to the Second Board of the Constitutional Court of Georgia with a view to deciding the issue of admitting it for the consideration on the merits.

2. The disputed normative act is Article 534 of the law of Georgia “On Entrepreneurs”, which reads as follow:

“Article 534 Compulsory sale of stocks:

1. If as a result of purchase of stocks, the stockholder has more than 95% of votes of the stock-company, then this stockholder (for the purposes of this Article – “buyer”) will have the right to redeem the stocks of other stockholders at a fair price.

2. Decision on compulsory sale of stocks shall be rendered by the Court under the rule as determined by the Civil Procedures Code of Georgia. Fair price and date for redemption of stocks shall be defined by the court decision on compulsory sale of stocks in accordance with the rule determined by the Civil Procedures Code of Georgia.

3. A buyer no later than one month before applying to a court shall publish his announcement in the printing body as foreseen by paragraph 2 of Article 54 of this Law, with regard to compulsory sale of stocks. The announcement shall contain the information on reasons, terms and procedures of redemption.

4. A person responsible for exercising the registry (for the purposes of this Article – “registrator”) no later than 5 days before the date of registration for redemption as established by the court decision, shall notify all nominal holders about the date of registration for redemption. All transactions with regard to these stocks save for the actions foreseen by this Article, shall be interrupted from the registration date for redemption till the end of procedures for redemption of stocks. The registrator shall establish as of the date of registration for redemption, the list of all registered holders, their identities, addresses, and indicating the number of the stocks under their possession (“redemption registry”) and based on submission of the documents by a buyer verifying the actions that were fulfilled in accordance with the first paragraph of this Article, he/she shall register all stocks under the name of the buyer. The expenses of the registrator shall be covered by a buyer in accordance with the legislation of Georgia. The buyer shall place the redemption amount of all remaining stocks on the special account opened in a bank in favor of the rest stockholders, with central depositor or broker-company, to whom the buyer shall hand the redemption registry.”

3. Pursuant to the constitutional claim, the claimant is not a stockholder of the stockholder company “Davit Sarajishvili and Eninseli”. The Claimant considers that he is restricted the right to property by the disputed norm, because the law obligates him to alienate his stocks and he is unable to dispose his possession as he desires. The requirements of Article 534 of the law of Georgia “On Entrepreneurs” are not conditioned by the pressing public need, because of which restriction of the right to property would be justified. In the Claimant’s opinion: “the public need, by all means, cannot be construed as a ground for compulsory transfer of property to a private person.” He demands recognizing the disputed norm as unconstitutional with respect to paragraphs 1 and 2 of Article 21 of the Constitution of Georgia.

4. The administering sitting of the Second Board of the Constitutional Court of Georgia with an oral hearing on the constitutional claim N457 was held on 17 March 2009.

5. The Claimant considers that the constitutional claim complies with all requirements for being admitted for the consideration on merits. There are not any grounds as foreseen by Article 18 of the law of Georgia “On the Constitutional Legal Proceedings” for declining admission of the constitutional claim for consideration on merits.

6. In the Claimant’s opinion, the legislative body did not have any right to adopt the norm analogous to one that was recognized as unconstitutional by the Constitutional Court. Nevertheless, the Claimant did not present arguments supporting this opinion neither in the constitutional claim and nor at the administering sitting, and he did not bring up the demand that the disputed norm be recognized as invalid based on paragraph 41 of Article 25 of the organic law of Georgia “On the Constitutional Court of Georgia”.

7. The position of the Claimant changed several times at the administering sitting. Initially, it was pointed out that there are no opposed opinions with regard to the institute on compulsory sale of stocks. However, in the end, the Claimant confirmed that compulsory transfer of property from one person to another, i.e. namely the essence of the institute on compulsory sale of stocks, in his opinion, is unconstitutional.

8. The Respondent is not against that the constitutional claim N457 to be admitted for the consideration on merits. The Respondent considers that as opposed to Article 533 of the law of Georgia “On Entrepreneurs” that was recognized as unconstitutional by the Constitutional Court, the disputed Article 534, in a new manner, regulates the compulsory sale of stocks.

II

1. It gets clarified from the constitutional claim N257 and from the course of the administering sitting that the Claimant, despite the change in position, casts doubt on the constitutionality of the institute on compulsory sale of stocks in general and in this case, excludes the presence of pressing public need.

2. The Board considers that with regard to the aforementioned issues, the attitude of the Constitutional Court of Georgia has been developed in the judgment N2/1-370,382,390,402,405 of 18 May 2007 on the case “citizens of Georgia, Zaur elashvili, Suliko Mashia, Rusudan Gogia and others and the Public Defender of Georgia v. the Parliament of Georgia”.

3. The Constitutional Court pointed out in the first paragraph of the motivational part of the abovementioned judgment that the institute on compulsory sale of stocks was widespread in many foreign developed countries. The Constitutional Court assessed the form of the institute on compulsory sale of stocks which was foreseen by Article 533 of the law of Georgia “On Entrepreneurs”. It is underscored in the judgment: “While considering the constitutionality of the disputed norm, the Constitutional Court should be confined by constitutional-legal assessment of only applicable rule for compulsory sale of stocks” (Judgment N2/1-370,382,390,402,405; II-1).

4. The Constitutional Court did not exercise recognition of Article 533 of the law of Georgia “On Entrepreneurs” because of the fact that in general, the institute on compulsory sale of stocks by its essence contradicted the Constitution and existence of the pressing public need was excluded at all. Quite large section of the motivational part of the judgment is devoted to the discussion on “pressing public need”. This term also contains action for the purposes of bringing positive effects for the public or part of it (Judgment N2/1-370,382,390,402,405; II-15). The content of “pressing public need” within the meaning of paragraph 2 of Article 21 of the Constitution of Georgia, arising from the social nature of property, should be understood comparatively broadly (Judgment N2/1-370,382,390,402,405; II-16).

5. As for the issue of “pressing public need” in the event of compulsory sale of the concrete stocks, in this regard the Constitutional Court, formulating in detail its position, (Judgment N2/1-370,382,390,402,405; II-23,24,25), notes that “compulsory sale of stock shall be possible to be carried out only in the event when it represents required means for normal functioning and development of the relevant enterprise” (Judgment N2/1-370,382,390,402,405; II-26). Stemming from this, the Constitutional Court can see the possibility that compulsory sale of stocks be preconditioned by the pressing public need.

6. Thus, the disputed issue brought up by the Claimant on the constitutional claim N457 had been already decided by the Constitutional Court of Georgia and we face the ground for refusal to admit the constitutional claim for the consideration on merits, as foreseen by subparagraph “d” of Article 18 of the law of Georgia “On the Constitutional Legal Proceedings”.

III

Stemming from the aforementioned and based on paragraphs 5 and 8 of Article 43 of the organic law of Georgia “On the Constitutional Court of Georgia”; subparagraph “d” of Article 18 of the law of Georgia “On the Constitutional Legal Proceedings”,

The Constitutional Court of Georgia
rules:

1. Not to admit the constitutional clam N457 (citizen of Georgia, Zaur Elashvili v. the Parliament of Georgia) for the consideration on merits;

2. The present ruling is final and shall not subject to appeal or revision;

3. Copy of the present ruling shall be sent to the parties.

Members of the Board:

Besik Loladze,

Otar Sichinava,

John Khetsuriani.