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, Suliko Mashia v. the Parliament of Georgia.

Subject of the Dispute: Constitutionality of the first paragraph of Article 534 of the law of Georgia “On Entrepreneurs” with respect to the first paragraph of Article 21 of the Constitution of Georgia.

Participants of the Hearing: The Claimant – citizen of Georgia Suliko Mashia; Representatives of the Respondent – Batar Chankselian and Levan Kasradze.

I

1. On the 1st of August 2008, a constitutional claim was lodged with the Constitutional Court of Georgia by a citizen of Georgia, Suliko Mashia. The Constitutional claim was registered with the number N460. By the resolution of 6 August 2008 of the President of the Constitutional Court of Georgia, the Constitutional claim was referred to the Second Board of the Constitutional Court of Georgia with a view to deciding the issue of admitting the constitutional claim for the consideration on the merits and joining it with the Constitutional claim N457.

2. The disputed normative act is the first paragraph (compulsory sale of stocks) of Article 534 of the law of Georgia “On Entrepreneurs”, which is adopted with the current wording on 14 March 2008. The disputed norm had the contents as follow: “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.”.

3. The Claimant, who is a minority stockholder of several stock-companies, considers that the disputed norm has analogous contents as Article 533 of the law of Georgia “On Entrepreneurs”, which was upheld as unconstitutional by the Constitutional Court of Georgia in its decision N2/1-370,383,390,402,405 of 18 May 2007. In his opinion, this contradicts paragraph 4 of Article 25 of the Organic law of Georgia “On the Constitutional Court of Georgia”. Stemming from this, if the court arrives to a similar conclusion at the administering sitting, based on paragraph 41 of Article 25, the disputed norm should be upheld invalid by the ruling.

4. In the event of admitting the constitutional claim for the consideration on the merits the Claimant demands recognizing the first paragraph of Article 534 of the law of Georgia “On Entrepreneurs” as unconstitutional with respect to the first paragraph of Article 21 of the Constitution of Georgia. In his opinion, it is clearly clarified from the decision N2/1-370,382,390,402,405 of 18 May 2007 of the Constitutional Court of Georgia that compulsory redemption of stocks, arising from its contents, is unconstitutional and the emphasis is not made on fairness of the price of compulsory redemption. The Claimant considers that despite the fact that whether or not a minority stockholder will have the right to apply to the court during the compulsory sale of stocks, the disputed norm will still not be constitutional with respect to the first paragraph of Article 21 of the Constitution of Georgia.

5. The Claimant also requires suspending the operation of the disputed norm before rendering the final decision, pursuant to paragraph 5 of Article 25 of the organic law of Georgia “On the Constitutional Court of Georgia”, because its operation may have irremediable effects to the party to the legal proceedings.

6. The administering sitting of the Second Board of the Constitutional Court of Georgia with oral hearing of the constitutional claim N460 was held on 18 March 2009.

7. At the administering sitting, the Claimant again confirmed that in his opinion, the institute on compulsory sale of stocks by its essence is unconstitutional. The disputed norm repeats the content of the norm that was upheld as unconstitutional, despite the fact that it may envisage different procedures. Not the procedures, but essence of the institute is important for the Claimant.

8. The Claimant at the administering sitting again requested suspending the operation of the disputed norm before rendering the final decision by the Constitutional Court. He did not present any document, which would verify that the procedure on compulsory sale of stocks is launched in those stock-companies, where the Claimant is a minority stockholder.

9. The Respondent, at the administering sitting, declared that an applicable procedure on compulsory sale of stocks, which is regulate by Article 534 of the law of Georgia “On Entrepreneurs” and by the norms of the Civil Code of Georgia, is substantially different from the rule, which was established by Article 533 that was upheld as unconstitutional of the law of Georgia “On Entrepreneurs”.

10. In the Respondent’s opinion, there is no reference about unconstitutionality of the institute on compulsory sale of stocks in the decision N2/1-370,382,390,402,405 of 18 May 2007 of the Constitutional Court. The reasons, because of which, the Constitutional Court considered Article 533 of the law of Georgia “On Entrepreneurs” as unconstitutional, were foreseen by the legislator and the legislator has, in a new manner, formulated the procedure on compulsory sale of stocks.

II

1. The Constitutional Court indicated in the decision N2/1-270,382,390,402,402 of 18 May 2007 of the Constitutional Court of Georgia 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” that: “While considering the constitutionality of the disputed norm, the Constitutional Court should be confined only to constitutional-legal assessment of the applicable rule” (Decision N2/1-370,382,390,402,405; II-1).

2. Having assessed the rule determined by Article 533 of the law of Georgia “On Entrepreneurs” in constitutional-legal terms, the Constitutional Court did not arrive to the conclusion that the institute on compulsory sale of stocks by its essence was unconstitutional. On the contrary, having seen the possibility that this procedure may be preconditioned by the pressing public need, and having formulated its position in this regard (Decision N2/1-370,382,390,402,405; II-23,24,25,26), having checked proportionality of the disputed norm, the Constitutional Court thus excluded unconstitutionality of the institute based on its essence.

3. The Claimant’s opinion is incorrect that when declaring Article 533 of the law of Georgia “On Entrepreneurs” as unconstitutional, the Constitutional Court did not accentuate on the fairness of the price for compulsory sale of stocks and on importance of legal protection of the interests of a minority stockholder. Exactly, these two moments, as opposed to the essence of the institute on compulsory sale of stocks, were important for upholding the disputed norm as unconstitutional.

4. The Constitutional Court indicated that a minority stockholder “should have the legal remedy for expressing and defending his position” (Decision N2/1-370,382,390,402,405; II-26). After it, the Court underlines: “when assessing proportionality of compulsory sale of stocks, not a single essential element of this procedure should be left beyond our attention. In this regard, we should single out and assess two moments – in the first place, to what extent the procedure on deciding and executing the decision on compulsory sale of stocks is compatible with the abovementioned requirements and secondly, to what extent the procedure on establishing a stock price assures the fair compensation of minority stockholders during the compulsory sale of stocks. Without giving due regard to these two most important circumstances, even in the event of presence of legitimate public goal, the means to achieve this goal will be inadequate and disproportionate.” (N2/1-370,382,390,402,405; II-27).

5. The Constitutional Court considered that the disputed norm failed to assure a minority stockholder with the means for legal protection: “Under such conditions a minority stockholder does not only have the legal means to protect himself from the abuse of economic power by a majority stockholder, but also he does not have the possibility to receive the relevant information on the reasons for compulsory sale of stocks and to present his position in this regard.” (Decision N2/1-370,382,390,402,405; II-28).

6. The Constitutional Court also devoted much of its attention to fair price for stock sale (Decision N2/1-370,382,390,402,405; II-29,30,31,32) and declared: “The picture changes in the event when the procedure for establishing the fair price is determined by a statute of an association. At this time, the balance is again broken to the detriment of a minority stockholder and he even does not have the means for legal protection.” (Decision N2/1-370,382,390,402,405; II-32).

7. Based on the aforementioned, the Claimant’s opinion that it is the institute on compulsory sale of stocks arising from its essence that is unconstitutional comes with contradiction with the decision N2/1-370,382,390,402,405of 18 May 2007 of the Constitutional Court of Georgia 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”.

8. The disputed issue brought up by the Claimant in the constitutional claim N460, with regard to constitutionality of the essence of the institute for compulsory sale of stocks, has already solved by the Constitutional Court of Georgia and there is the ground for rejecting admission of the constitutional claim for the consideration on merits as prescribed by subparagraph “d” of Article 18 of the law of Georgia “On the Constitutional Legal Proceedings”.

9. It is impossible to discuss on the first paragraph of Article 534 of the law of Georgia “On Entrepreneurs” and its contents similarity with any parts of Article 533 of the law of Georgia “On Entrepreneurs” that was upheld as unconstitutional, without considering other norms regulating the compulsory sale of stocks and out of the context in general. The procedure for compulsory sale of stocks is foreseen not only by the challenged norm, but also by Article 534 as a whole and by the Chapter XXXIV2 of the Civil Procedures Code of Georgia.

10. Stemming from the claim requirement, the Constitutional Court is deprived of the possibility to completely compare the contents of the applicable rule on compulsory sale of stocks with that of the rule which was upheld as unconstitutional. However, the first paragraph of Article 534 of the law of Georgia “On Entrepreneurs”, despite its literal contents, acquires other logic weight, even because of the following circumstances – as opposed to the norm which was upheld as unconstitutional, the decision on compulsory sale of stocks is not made by a majority stockholder, but by the court.

11. As far as the constitutional claim N360 is not admitted for consideration on merits, the Constitutional Court does not any longer focus on reasonability of the requirement to temporarily suspend the operation of the disputed norm, because suspension of the disputed norm is possible only in the event of admission of the constitutional claim for consideration on merits.

III

Stemming from the aforementioned and based on paragraph 41 of Article 25, 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 Claim N460 (citizen of Georgia, Suliko Mashia v. the Parliament of Georgia) for the consideration on the merits;

2. Not to uphold the demand of the Claimant as to declare invalid the first paragraph of Article 534 of the law of Georgia “On Entrepreneurs” based on the rule determined by paragraph 41 of Article 25 of the organic law of Georgia “On the Constitutional Court of Georgia”.

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

4. Copy of the present ruling will be sent to the parties.

Members of the Board:

Besik Loladze,

Otar Sichinava,

John Khetsuriani.