Case no 12/2016-13/2016

THE CONSTITUTIONAL COURT OF THE REPUBLIC OF LITHUANIA

IN THE NAME OF THE REPUBLIC OF LITHUANIA

RULING

ON THE COMPLIANCE OF THE PROVISIONS OF THE REPUBLIC OF

LITHUANIA’S LAW ON PERSONAL BANKRUPTCY WITH THE

CONSTITUTION OF THE REPUBLIC OF LITHUANIA

19 May 2017, no KT5-N4/2017

Vilnius

The Constitutional Court of the Republic of Lithuania, composed of the Justices of the

Constitutional Court: Elvyra Baltutytė, Gintaras Goda, Vytautas Greičius, Danutė Jočienė,

Gediminas Mesonis, Vytas Milius, Daiva Petrylaitė, Janina Stripeikienė, and Dainius Žalimas

The court reporter – Daiva Pitrėnaitė

The Constitutional Court of the Republic of Lithuania, pursuant to Articles 102 and 105 of

the Constitution of the Republic of Lithuania and Articles 1 and 531 of the Law on the

Constitutional Court of the Republic of Lithuania, at a hearing of the Court, on 18 May 2017,

considered, under written procedure, constitutional justice case no 12/2016-13/2016 subsequent to:

1) the petition (no 1B-17/2016) of the Supreme Court of Lithuania (Lietuvos

Aukščiausiasis Teismas), a petitioner, requesting an investigation into whether Item 4 of

Paragraph 8 of Article 5 of the Republic of Lithuania’s Law on Personal Bankruptcy, insofar as,

under this item, personal bankruptcy proceedings may be opened against a natural person convicted

under Article 182 of the Criminal Code of the Republic of Lithuania when his/her conviction has

not expired and where he/she became insolvent as a result of such conviction, is in conflict with

Article 29 of the Constitution of the Republic of Lithuania and the constitutional principle of a state

under the rule of law, as well as whether Paragraph 7 (wording of 22 December 2015) of Article 29

of the Republic of Lithuania’s Law on Personal Bankruptcy, insofar as, under this paragraph, claims

for compensating damage inflicted by intentional criminal acts may be written off, is in conflict

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with Paragraph 1 of Article 23 and Paragraph 2 of Article 30 of the Constitution of the Republic of

Lithuania, as well as the constitutional principle of a state under the rule of law;

2) the petition (no 1B-19/2016) of the Joniškis District Local Court (Joniškio rajono

apylinkės teismas), a petitioner, requesting an investigation into whether Item 4 of Paragraph 8 of

Article 5 of the Republic of Lithuania’s Law on Personal Bankruptcy, insofar as, under this item,

personal bankruptcy proceedings may be opened against a natural person convicted under

Articles 182, 183, 300 of the Criminal Code of the Republic of Lithuania when his/her conviction

has not expired and where he/she became insolvent as a result of such conviction, is in conflict with

Article 29 of the Constitution of the Republic of Lithuania and the constitutional principle of a state

under the rule of law.

By the Constitutional Court’s decision of 20 April 2017, the aforesaid petitions were joined

into one case and it was given reference no 12/2016-13/2016.

The Constitutional Court

has established:

I

The arguments of the petitioners

1. The petitions of the Supreme Court of Lithuania and the Joniškis District Local Court,

requesting an investigation into the compliance of Item 4 of Paragraph 8 of Article 5 of the Law on

Personal Bankruptcy (Fizinių asmenų bankroto įstatymas (FABĮ); hereinafter referred to as the

FABĮ), insofar as, under this item, personal bankruptcy proceedings may be opened against a

natural person convicted under Articles 182, 183, 300 of the Criminal Code (Baudžiamasis

kodeksas (BK); hereinafter referred to as the BK) when his/her conviction has not expired and

where he/she became insolvent as a result of such conviction, with Article 29 of the Constitution

and the constitutional principle of a state under the rule of law, are based on these arguments.

1.1. After Item 4 of Paragraph 8 of Article 5 of the FABĮ has listed the criminal acts where,

if a person commits them, he/she may not initiate personal bankruptcy proceedings if he/she has

become insolvent as a result of committing the said acts and his/her conviction has not expired, this

list does not include crimes and criminal offences against property, property rights, and property

interests (inter alia, fraud, which is punishable under Article 182 of the BK, misappropriation of

property, which is punishable under Article 183 of the BK, forgery of a document and possession of

a forged document, which is punishable under Article 300 of the BK).

The criminal acts envisaged, for example, in Article 207 of the BK (“Credit Fraud”) and in

Article 182 (“Fraud”) thereof, are similar because a person who commits either credit fraud or fraud

for the purpose of defrauding someone else of their property uses deception, damage may be

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inflicted on the injured persons, and the claim for compensating for the damage may equally lead to

the insolvency of a person (as in the case of the commission of the other acts specified in Item 4 of

Paragraph 8 of Article 5 of the FABĮ). However, bankruptcy proceedings may be opened against a

person who is convicted under Article 182 of the BK and whose conviction has not expired,

whereas bankruptcy proceedings may not be opened against a person who has committed the acts

referred to in Item 4 of Paragraph 8 of Article 5 of the FABĮ when his/her conviction has not

expired and where he/she became insolvent as a result of such conviction. Consequently, persons

who are basically in the same situation – since they have committed similar crimes and, as a result

of committing these crimes, have become insolvent – are treated differently, although there are no

convincing arguments for justifying such a differentiated legal regulation.

1.2. The petitioners state that the criterion chosen by the legislature, according to which the

acts are selected and specified in Item 4 of Paragraph 8 of Article 5 of the FABĮ, is not clear.

2. The petition of the Supreme Court of Lithuania, requesting an investigation into the

compliance of Paragraph 7 (wording of 22 December 2015) of Article 29 of the FABĮ, insofar as,

under this paragraph, claims for compensating damage inflicted by intentional criminal acts may be

written off, with Paragraph 1 of Article 23 and Paragraph 2 of Article 30 of the Constitution and the

constitutional principle of a state under the rule of law, is based on the following arguments.

2.1. When establishing the insolvency of a natural person who seeks bankruptcy

proceedings against him/her (inter alia, when calculating the amount owed), no account is taken of

the claims that cannot be written off after the expiry of the period of the implementation of the Plan

for the Satisfaction of Creditors’ Claims and Restoration of the Solvency of the Natural Person

(hereinafter referred to as the Plan). Paragraph 7 (wording of 22 December 2015) of Article 29 of

the FABĮ establishes a complete list of claims not subject to a write-off and the said list may not be

interpreted expansively. According to Paragraph 7 (wording of 22 December 2015) of Article 29 of

the FABĮ, unsatisfied creditors’ claims that arise from the indemnification of damage caused by

intentional criminal acts and that remain upon the completion of the bankruptcy process are written

off.

2.2. Creditors’ claims are their ownership right. The writing off of claims means a

restriction of creditors’ ownership right. Such a restriction by applying the FABĮ is a lawful

measure that meets the objective set in the FABĮ to restore the solvency of a natural person. Such a

restriction is also most often a proportionate measure, since, despite the nominal value of a

creditor’s claim, it cannot be realised in practice because of the insolvency of a relevant natural

person.

However, the requirement for compensation for damage caused by an intentional criminal

act is different from other claims brought by creditors: such a claim arises due to the fact that the

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debtor, deliberately and knowingly, has committed a prohibited act; the creditor claiming damages

is not a voluntary creditor who chose to enter into legal relations with the debtor (for example, by

concluding a contract); thus, the ability of such a creditor to defend himself/herself against damage

by legal means is extremely limited. Therefore, it is doubtful whether the permission to write off

claims for damage caused by intentional criminal acts is a proportionate interference with the right

of ownership of creditors, whether such a restriction on the right of ownership of persons (creditors)

who have suffered from intentional criminal acts is necessary in a democratic society in order to

protect the rights and freedoms of other persons (those who have caused harm by intentional

criminal acts), and whether such a legal regulation is in compliance with Paragraph 1 of Article 23

of the Constitution.

2.3. A claim for compensation for damage caused by an intentional criminal act is socially

valuable. Compensating for damage a person who has suffered as a result of an intentional criminal

act means that at least part of the situation that existed before the commission of the criminal act

will be restored.

Referring to the official constitutional doctrine, the petitioner notes that the necessity to

compensate for material and moral damage inflicted on a person is a constitutional principle, which

is aimed to ensure that persons who have suffered material or moral damage will be compensated.

However, the legal regulation consolidated in Paragraph 7 (wording of 22 December 2015) of

Article 29 of the FABĮ means that damage caused as a result of an intentional criminal act, despite

the fact that a court has awarded the damages, may remain totally or partially not compensated;

therefore, it is doubtful whether such a legal regulation is in compliance with Paragraph 2 of

Article 30 of the Constitution and the constitutional principle of a state under the rule of law.

II

The arguments of the representative of the party concerned

3. In the course of the preparation of the case for the hearing of the Constitutional Court,

written explanations were received from Stasys Šedbaras, the member of the Seimas acting as the

representative of the Seimas of the Republic of Lithuania, the party concerned, in which it is

maintained that the impugned legal regulation is not in conflict with the Constitution. The position

of the representative of the party concerned is based on the following arguments.

4. The decision of the legislature to specify in the impugned Item 4 of Paragraph 8 of

Article 5 of the FABĮ the criminal acts upon committing which a natural person is precluded from

initiating bankruptcy proceedings against himself/herself is clear: these acts are chosen according to

their nature (crimes against the economy and business order and crimes against the financial

system); all these acts inflict harm not only on individuals, but also on the entire state (the economy

thereof).

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4.1. The legislature also chose and specified in Item 4 of Paragraph 8 of Article 5 of the

FABĮ only several criminal acts of a certain type in order to ensure that the application of the law

regulating the bankruptcy relationships of natural persons would not be too restrictive and the law

would not become ineffective for this reason. Extending too excessively this list of criminal acts

(for example, including criminal acts against property, against property rights and property

interests, against government order or state service, or against public interests), a natural person’s

right of bankruptcy would be particularly restricted and the objectives of the law would not be

fulfilled.

4.2. The entire structure of the special part of the BK is based on the classification of the

bodies of criminal acts according to the object. The commission of a certain type of a criminal act

may have legal consequences not exclusively under criminal law. The legal regulation established

in the FABĮ is not exceptional in this respect. Item 4 of Paragraph 8 of Article 5 of the FABĮ points

out the crimes that violate the economy and financial system of the state; such crimes have been

chosen in a reasonable manner, taking into account the specifics of bankruptcy as a phenomenon.

Legal liability for criminal bankruptcy, creditors’ favouritism, or other criminal acts that inflict

damage on creditors, are regulated in Chapter XXXI of the BK, which lays down liability for crimes

and criminal offences against the economy and business order. Thus, the legislature, having

recognised criminal bankruptcy and other acts linked to the condition of a clear threat of bankruptcy

as crimes against the economy and business order, has reasonably established that the commission

of these acts is a condition in which a court refuses to open bankruptcy proceedings against a

natural person.

4.3. The representative of the party concerned also draws attention to the fact that the

criminal act provided for in Article 182 of the Criminal Code – fraud – is one of the most

widespread crimes. In practice, there are many forms of fraud known: the acquisition of maternity

(paternity) allowances by fraud; telephone fraud; defrauding another of money by pretending to be a

person who can help the victim to solve his/her problem; selling or pledging another’s property as

though one’s own; setting up fictitious companies and purchasing goods on a consignment basis

without paying for them afterwards; unlawful recovery or avoidance of value-added tax; etc. Not in

all cases of fraud would it be expedient to formally prohibit the opening of bankruptcy proceedings

against a natural person.

5. The law governing the bankruptcy process of a natural person should establish such a

legal regulation that would protect the debtor from impoverishment with the aim to strike a balance

between the interests of the debtor and the creditors, by limiting the ownership rights of the

creditors also in cases where damage on creditors is inflicted by an intentional criminal act. In the

event that the law establishes a legal regulation according to which compensation for damage

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caused by an intentional criminal act would be recovered indefinitely from an insolvent person, i.e.

a claim for compensation for this damage would not be written off, such a natural person would not

be interested in having a legal source of income, or in acquiring property officially in his/her own

name, because, after recovery of the debts, he/she would lose the said property. Thus, the person

would be left in an uncertain position for an unlimited period of time.

When bankruptcy proceedings are opened against an insolvent natural person, he/she must

carry out the duties established in the FABĮ, including the obligation to work or engage in other

income-generating activities. If a natural person against whom bankruptcy proceedings have been

opened hides funds or other assets received during the bankruptcy process, or does not comply with

the other requirements established in the FABĮ, the bankruptcy proceedings against him/her are

dismissed. Upon the completion of the bankruptcy process of a natural person, such a person is

given the opportunity to integrate into society, his/her social exclusion is reduced, and the state

expenditure allocated for social needs decreases accordingly. Thus, the legal regulation established

in the impugned Paragraph 7 (wording of 22 December 2015) of Article 29 of the FABĮ is

consistent with the interests of a natural person against whom bankruptcy proceedings have been

opened, as well as with the interests of creditors and the public interest, and cannot be regarded as

incompatible with the principle of proportionality.

Taking into account the principle of the equality of the rights of persons, which is

enshrined in the Constitution, creditors who have suffered damage as a result of intentional criminal

acts and creditors who have suffered damage as a result of negligent criminal acts should not be

treated differently in the law simply because of the different forms of guilt as a result of the

commission of these criminal acts.

In addition, damage can be inflicted on persons not only by intentional criminal acts, but

also by other, either intentional or negligent illegal actions (for example, by administrative

offences). Therefore, distinguishing claims for compensation for damage caused exclusively by

intentional criminal acts could discriminate against other creditors who suffered damage as a result

of other unlawful acts that are not considered criminal acts.

III

The material received in the case

7. In the course of the preparation of the case for the hearing of the Constitutional Court,

written opinions were received from Audrius Linartas, Director of the Authority of Audit,

Accounting, Property Valuation and Insolvency Management under the Ministry of Finance of the

Republic of Lithuania, and Jurgita Paužaitė-Kulvinskienė, Director of the Law Institute of

Lithuania.

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The Constitutional Court

holds that:

I

The scope of investigation

8. The Supreme Court of Lithuania, a petitioner, requests an investigation, inter alia, into

whether Item 4 of Paragraph 8 of Article 5 of the FABĮ, insofar as, under this item, personal

bankruptcy proceedings may be opened against a natural person convicted under Article 182 of the

BK when his/her conviction has not expired and where he/she became insolvent as a result of such

conviction, is in conflict with Article 29 of the Constitution and the constitutional principle of a

state under the rule of law.

The Joniškis District Local Court, a petitioner, requests an investigation, inter alia, into

whether Item 4 of Paragraph 8 of Article 5 of the FABĮ, insofar as, under this item, personal

bankruptcy proceedings may be opened against a natural person convicted under Articles 182, 183,

and 300 of the BK when his/her conviction has not expired and where he/she became insolvent as a

result of such conviction, is in conflict with Article 29 of the Constitution and the constitutional

principle of a state under the rule of law.

9. The Supreme Court of Lithuania, a petitioner, also requests an investigation into whether

Paragraph 7 (wording of 22 December 2015) of Article 29 the FABĮ, insofar as, under this

paragraph, claims for compensating damage inflicted by intentional criminal acts may be written

off, is in conflict with Paragraph 1 of Article 23 and Paragraph 2 of Article 30 of the Constitution

and the constitutional principle of a state under the rule of law.

It should be noted that, according to the Republic of Lithuania’s Law Amending Article 13

of the Law (No XII-2235) Amending Articles 4, 5, 6, 7, 8, 9, 14, 17, 19, 25, 27, and 29 of the Law

(No XI-2000) on Personal Bankruptcy, which was adopted by the Seimas on 25 March 2016,

Paragraph 7 of Article 29 of the FABĮ set out in one of its wordings of 22 December 2015 was in

force until 31 December 2016, while the same paragraph set out in its other wording of the same

date, which was established in order to bring the notions used in it into line with the notions used in

the Code of Administrative Offences of the Republic of Lithuania, which was adopted by the

Seimas on 25 June 2015, came into force on 1 January 2017.

The petition of the Supreme Court of Lithuania makes it clear that it impugns Paragraph 7

(wording of 22 December 2015) of Article 29 the FABĮ that was in force until 31 December 2016.

10. Taking account of the petitions of the petitioners, in the constitutional justice case at

issue, the Constitutional Court will investigate whether:

– Item 4 of Paragraph 8 of Article 5 of the FABĮ, insofar as, under this item, personal

bankruptcy proceedings may be opened against a natural person convicted under Articles 182, 183,

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and 300 of the BK when his/her conviction has not expired and where he/she became insolvent as a

result of such conviction, is in conflict with Article 29 of the Constitution and the constitutional

principle of a state under the rule of law;

– Paragraph 7 (wording of 22 December 2015) of Article 29 of the FABĮ, which was in

force until 31 December 2016 (hereinafter also referred to as Paragraph 7 of Article 29 of the

FABĮ), insofar as, under this paragraph, claims for compensating damage inflicted by intentional

criminal acts are written off, was in conflict with Paragraph 1 of Article 23 and Paragraph 2 of

Article 30 of the Constitution and the constitutional principle of a state under the rule of law.

II

The impugned and related legal regulation

11. On 10 May 2012, the Seimas adopted the Law on Personal Bankruptcy, which

established in the Lithuanian legal system a new institution of the bankruptcy of a natural person

and regulated the bankruptcy process of a natural person.

11.1. Paragraph 1 of Article 1 of the FABĮ stipulates that the purpose of this law is to

create conditions for the restoration of solvency of a natural person acting in good faith, in order to

ensure that creditors’ claims are satisfied and to strike a fair balance between the interests of a

debtor and his/her creditors.

11.2. In the explanatory memorandum to the FABĮ draft, it was noted that the adoption of

this law sought to establish the principles of solvency recovery of natural persons, which would

enable natural persons, upon substantial deterioration of their financial position, to meet the claims

of creditors according to their ability within a reasonable time, and, upon the expiry of this term and

under conditions established in the law, to be exempted from further payment of debts, i.e. to enable

them to avoid poverty and restore their solvency, to become consumers again and/or engage in

commercial economic activities, and to ensure the satisfaction of creditors’ claims in accordance

with the established procedure. The explanatory memorandum also points out that such a possibility

would be granted only to natural persons acting in good faith.

11.3. The Supreme Court of Lithuania, which develops the case law of courts of general

jurisdiction, has also interpreted the purpose of the FABĮ (the Supreme Court of Lithuania, the

ruling of 19 November 2014 in civil case no 3K-3-516/2014; the ruling of 19 December 2014 in

civil case no 3K-3-561/2014; etc.). It noted, among other things, that the bankruptcy process of a

natural person gives an opportunity to natural persons (who, due to their deteriorating financial

situation, are no longer able to fulfil their obligations to creditors) to return to active economic

activity and not to become a burden on the state social system, thereby protecting the dignity of a

person and giving creditors a chance to recover at least part of their debts (inter alia, the Supreme

Court of Lithuania, the ruling of 12 June 2015 in civil case no 3K-3-394-415/2015; the ruling of 19

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December 2014 in civil case no 3K-3-561/2014).

In the case law of the Supreme Court of Lithuania, when interpreting Paragraph 1 of

Article 1 of the FABĮ (which provides that the purpose of this law is to create conditions for the

restoration of solvency of only those natural persons who act in good faith) in a systemic manner

and in conjunction with other provisions of this law, it has been noted that a court refuses in two

cases to open bankruptcy proceedings against a natural person because of his/her failure to act in

good faith: if he/she became insolvent due to transactions that violate the rights of creditors where

he/she did not have an obligation to enter into such transactions, or if his/her other actions that are

considered fraudulent are established in the manner prescribed in the Civil Code of the Republic of

Lithuania. A person is regarded as one acting in bad faith if the data regarding the basis of the

appearance of debts and the debtor’s behaviour with his/her money lead to the conclusion that

he/she knowingly (deliberately) allowed the debts to accumulate in the hope that unsatisfied claims

of creditors would be written off, or behaved in other ways in a very careless manner, where his/her

conduct is assessed in concrete circumstances according to the principles of reasonableness and

justice (inter alia, the Supreme Court of Lithuania, the ruling of 19 November 2014 in civil case

no 3K-3-516/2014; the ruling of 16 April 2015 in civil case no 3K-3-217-969/2015); it is the court

considering the case that must, by taking into account the objectives of the FABĮ and the special

legal regulation laid down therein, classify in each individual case a person’s actions as fraudulent

on the basis of the provisions of the Civil Code and the practice of the application of the provisions

of this law, as formed by the cassation court (inter alia, the Supreme Court of Lithuania, the ruling

of 8 April 2016 in civil case no 3K-3-208-313/2016).

11.4. Thus, by means of the legal regulation governing the bankruptcy of a natural person,

the legislature sought to create the preconditions for restoring a balance of interests between the

interests of a debtor and his/her creditors, to protect the interests of creditors by creating an

opportunity to recover at least part of the debts from an insolvent natural person and, at the same

time, to alleviate the situation of an insolvent natural person who is acting in good faint, by giving

him/her the opportunity to return to active economic activity and exempting him/her from further

payment of outstanding debts after the completion of the bankruptcy process. It needs to be

emphasised that the consolidation of the institution of the bankruptcy of a natural person in the legal

system of Lithuania was not aimed at creating conditions for natural persons to escape liability for

assumed obligations in general.

12. The petitioners – the Supreme Court of Lithuania and the Joniškis District Local

Court – impugn the compliance of Item 4 of Paragraph 8 of Article 5 (as amended on 22 December

2015) of the FABĮ with the Constitution.

12.1. Paragraph 8 of Article 5 (as amended on 22 December 2015), titled “Hearing of a

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Personal Bankruptcy Petition in a Court”, of the FABĮ provides:

“A court shall decline to open personal bankruptcy proceedings provided that at least one

of the following conditions is met:

1) in the course of hearing a personal bankruptcy petition, the court establishes that the

condition of the natural person is not adequate to that defined in Paragraph 2 of Article 2 of this

Law. The determination of the condition of the natural person shall not take into account creditors’

claims that, according to Paragraph 7 of Article 29 of this Law, may not be written off;

2) it is established that, within three years preceding the filing of a bankruptcy petition, the

natural person became insolvent as a result of entering into transactions defined in Article 6.67 of

the Civil Code of the Republic of Lithuania […] and violating creditors’ rights, without having the

obligation to enter into such transactions, or any other intentional actions of the natural person in

providing incorrect information to the creditors on the financial condition when assuming debt

obligations or entering into other transactions in order to avoid settlement with the creditors, or a

deliberate omission of an act on the part of the natural person in order to avoid settlement with the

creditors;

3) it is established that the natural person became insolvent by reason of his/her addictions

(abuse of alcohol, narcotic and other psychotropic substances, gambling, etc.);

4) it is established that the natural person has been imposed a penalty for a crime or

criminal offence defined in Articles 207, 208, 209, 216, 222, and 223 of the Criminal Code of the

Republic of Lithuania […] when his/her conviction has not expired and where he/she became

insolvent as a result of such conviction;

5) less than ten years have passed after the discontinuation or completion of personal

bankruptcy proceedings, except for the cases indicated in Items 1, 2, and 7 of Paragraph 1 of

Article 10 of this Law;

6) it is established that the natural person is involved in bankruptcy proceedings opened

against a legal person with unlimited civil liability of which he/she is a member.”

Thus, Paragraph 8 of Article 5 (as amended on 22 December 2015) of the FABĮ stipulates

the conditions under which bankruptcy proceedings against a natural person may not be opened;

having determined that at least one of these conditions is met, a court declines to open bankruptcy

proceedings against a natural person. It should be noted that, in principle, all these conditions relate

to the position of a natural person seeking bankruptcy (such as his/her solvency) or certain actions

performed by this person (such as the commission of certain criminal acts).

The condition stipulated in the impugned Item 4 of Paragraph 8 of Article 5 (as amended

on 22 December 2015) of the FABĮ is related to the commission of the criminal acts referred to in

Articles 207–209, 216, 222, and 223 of the BK: a court declines to open bankruptcy proceedings

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against a natural person if it turns out that this person became insolvent due to the fact that he/she

has been punished for the criminal acts specified in these articles of the BK and his/her conviction

has not expired. Thus, the limitation imposed in this provision on opening a bankruptcy case is

temporary: it is applicable until the person’s conviction for the criminal acts specified in the above-

mentioned articles of the BK has expired. A person who has become insolvent due to being

punished for one or several of the above-mentioned criminal acts may, after the expiry of the

conviction, apply to a court, requesting the opening of bankruptcy proceedings, and such

proceedings may be opened against him/her.

It should be noted in the aspect relevant in this constitutional justice case that the

impugned provision consolidates a final list of criminal acts whose commission by a natural person

prevents the opening of bankruptcy proceedings against him/her. This means that a natural person

who has been punished for any other criminal act (inter alia, for the acts specified in Articles 182,

183, 300 of the BK) and has become insolvent as a result of such punishment may apply to a court,

requesting the opening of bankruptcy proceedings even where his/her conviction has not expired,

and such proceedings may be opened against him/her.

13. Item 4 of Paragraph 8 of Article 5 (as amended on 22 December 2015) of the FABĮ

consolidates a blanket norm, referring to Articles 206–209, 216, 222, and 223 of the BK. Thus, the

provisions of Item 4 of Paragraph 8 of Article 5 (as amended on 22 December 2015) of the FABĮ

should be interpreted in conjunction with the relevant provisions of the BK (with subsequent

amendments and supplements).

13.1. Article 207, titled “Credit Fraud”, of the BK imposes a punishment on a person who,

by deceit, obtains a credit, loan, subsidy, warranty or bank guarantee statement, or another credit

obligation.

Article 208, titled “Dishonesty of a Debtor”, of the BK imposes a punishment on a person

who, owing to his/her difficult economic situation or insolvency, when facing obvious bankruptcy

and being unable to meet all creditors’ claims, meets claims of only one or several of them or

secures claims of one or several creditors and thereby inflicts property damage on the remaining

creditors; this article also imposes a punishment on a person who, owing to his/her difficult

economic situation or insolvency, when facing obvious bankruptcy, conceals, squanders, conveys,

transfers abroad, or sells his/her property at an unjustifiably low price, while it could have been

utilised to repay debts, and thereby inflicts property damage on creditors.

Article 209, titled “Criminal Bankruptcy”, of the BK imposes a punishment on a person

who brings an undertaking to bankruptcy by deliberate mismanagement and thereby inflicts major

property damage on creditors.

Article 216, titled “Laundering of Property Acquired through Crime”, of the BK imposes a

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punishment on a person who, with a view to concealing or laundering his/her own or another

person’s property, while being aware that it has been obtained as proceeds from crime, acquires,

manages, uses, transfers the property to other persons, performs financial operations related to this

property, enters into transactions, uses it in economic and commercial activities, otherwise

transforms it or falsely indicates that it has been obtained from lawful activities, also a person who

conceals the actual nature of his/her own or another person’s property, its source, location, disposal

and movement or ownership thereof or other rights related to the property, while being aware that

the property has been acquired through crime.

Article 222, titled “Fraudulent Management of Accounts”, of the BK imposes a

punishment on a person who fraudulently manages the accounts required by legal acts or conceals,

destroys, or damages accounting documents, where this disables, fully or in part, the determination

of the person’s activities, the amount or structure of the assets, equity, or liabilities thereof.

Article 223, titled “Negligent Management of Accounts”, of the BK imposes a punishment

on a person who is under the obligation, but fails to manage the accounts required by legal acts, or

negligently manages the accounts required by legal acts, or fails to store the accounting documents

for a period stipulated in laws, where this disables, fully or in part, the determination of the person’s

activities, the amount or structure of the assets, equity, or liabilities thereof.

13.2. It needs to be noted that Articles 207–209 of the BK are enshrined in Chapter XXXI,

titled “Crimes and Criminal Offences against the Economy and Business Order”, and Articles 216,

222, 223 are found in Chapter XXXII, titled “Crimes and Criminal Offences against the Financial

System”.

13.3. The interpretation of the impugned legal regulation established in Item 4 of

Paragraph 8 of Article 5 (as amended on 22 December 2015) of the FABĮ together with the

specified articles of the BK makes it clear that bankruptcy proceedings may not be opened against a

natural person who has been punished either for the specified crimes against the economy and

business order (credit fraud, dishonesty of a debtor, criminal bankruptcy), or for the specified

crimes against the financial system (laundering of property acquired through crime, fraudulent

management of accounts, negligent management of accounts) if the person has become insolvent

due to the commission of these listed criminal acts and his/her conviction has not expired.

Consequently, bankruptcy proceedings are not opened against a natural person who has become

insolvent because he/she has been punished for certain crimes against the state economy, business

order, or financial system, and by which he/she, inter alia, sought to avoid fulfilling credit

obligations or otherwise inflict material damage on creditors.

It should be noted that, as it is clear from the discussed legal regulation, according to

Item 4 of Paragraph 8 of Article 5 (as amended on 22 December 2015) of the FABĮ, bankruptcy

13

proceedings may not be opened against a natural person if not any of the criminal acts provided for

in Chapters XXXI and XXXII of the BK have been committed, but only those specifically referred

to in the provision in question.

14. As mentioned above, in the opinion of the petitioners, bankruptcy proceedings should

also not be opened against a natural person who has been punished for the crimes specified in

Articles 182, 183, 300 of the BK.

14.1. Article 182, titled “Fraud”, of the BK imposes a punishment on a person who

acquires by deceit another’s property or property right for his/her own benefit or for the benefit of

other persons, avoids a property obligation or annuls it.

Article 183, titled “Misappropriation of Property”, of the BK imposes a punishment on a

person who misappropriates another’s property or property right entrusted to him/her or held at

his/her disposal or the valuables of a considerable scientific, historical, or cultural significance.

Article 300, titled “Forgery of a Document or Possession of a Forged Document”, of the

BK imposes a punishment on a person who produces a false document, forges a genuine document,

or stores, transports, forwards, uses, or handles a document known to be false or a genuine

document known to have been forged.

14.2. It should be noted that Articles 182 and 183 of the BK are enshrined in its

Chapter XXVIII, titled “Crimes and Criminal Offences against Property, Property Rights, and

Property Interests”, and Article 300 is found in its Chapter XLIII, titled “Crimes and Criminal

Offences against Government Order Relating to Forgery of Documents or Measuring Devices”.

15. The Supreme Court of Lithuania, a petitioner, also impugns the compliance of

Paragraph 7 of Article 29 of the FABĮ with the Constitution.

15.1. Paragraph 7 of Article 29, titled “Satisfaction of Creditors’ Claims”, of the FABĮ

prescribed the following:

“Unsatisfied creditors’ claims, including those backed by collateral and/or hypothec,

remaining in the plan upon the completion of the personal bankruptcy process, except for the case

defined in Item 2 of Paragraph 3 of Article 30 of this Law, shall be written off, except for the claims

for damages in relation to mutilation or other bodily injury, death, or cash (alimony) for the

maintenance of a child/adopted child, claims arising from the natural person’s obligation to pay

penalties to the state imposed for administrative offences or criminal acts committed by the natural

person, and collateral-backed and/or hypothec-backed claims of creditors if these creditors and

natural person have agreed on the preservation of the pledged property during the bankruptcy

proceedings of the natural person, unless otherwise agreed in the agreement referred to in Item 10

of Paragraph 4 of Article 4 of this Law.”

Thus, Paragraph 7 of Article 29 of the FABĮ regulates the relationships between the

14

creditors and the debtor after the completion of the bankruptcy process of a natural person – the

debtor is relieved of the obligation to fulfil the remaining unsatisfied creditor claims and they are

written off. However, this general rule does not apply in all cases: even after the completion of the

bankruptcy process of a natural person, the debtor must fully comply with the requirements set out

in Paragraph 7 of Article 29 of the FABĮ: to compensate for damage in relation to mutilation or

other bodily injury, or death; to maintain his/her own children/adoptive children; to pay penalties to

the state imposed for administrative offences or criminal acts; and to satisfy collateral-backed

and/or hypothec-backed claims of creditors if these creditors and natural person have agreed on the

preservation of the pledged property during the bankruptcy proceedings of the natural person. This

list of requirements that must be fulfilled even after the completion of the bankruptcy process of a

natural person is exhaustive. Thus, claims arising from all other debt obligations owed by a natural

person, inter alia, a claim to compensate damage inflicted by an intentional criminal act, are written

off after the completion of the bankruptcy process, i.e. they no longer have to be met.

15.2. In the context of the constitutional justice case at issue, it needs to be noted that,

according to the legal regulation established in Paragraph 7 of Article 29 of the FABĮ, upon writing

off the unpaid amount of damages caused to a person by an intentional criminal act (except for

damage in relation to mutilation or other bodily injury, or death), the remaining part of not

compensated damage caused by an intentional criminal act is not subject to compensation.

Consequently, under this legal regulation, after the completion of the bankruptcy process and the

write-off of the remaining unpaid part of compensation for damage caused by an intentional

criminal act, the person who has caused such damage is no longer obliged to compensate all the

damage caused (inter alia, the one awarded by a court decision), and a person who has suffered

such damage and who has become in the bankruptcy process of the said natural person a creditor of

the person who caused the said damage cannot receive compensation for the damage suffered.

15.3. The impugned provision of Paragraph 7 of Article 29 of the FABĮ also provides that

unsatisfied creditors’ claims upon the completion of the bankruptcy process of a natural person are

not written off in the case specified in Item 2 of Paragraph 3 of Article 30 of the FABĮ.

Item 2 of Paragraph 3 of Article 30 of the FABĮ provides that, if a bankruptcy

administrator submits to a court documents evidencing that a natural person is able and will be able

to fulfil his/her debt obligations in the future, the court takes a decision to dismiss the personal

bankruptcy proceedings.

Thus, in cases where, during the bankruptcy process, it becomes evident that a natural

person objectively can and will be able in the future to fulfil his/her existing debt obligations, which

led to the opening of bankruptcy proceedings, the natural person must fulfil all owed debt

obligations after the court adopts a decision to dismiss the bankruptcy proceedings.

15

15.4. As mentioned above, on 1 January 2017, Paragraph 7 of Article 29 of the FABĮ, as

set out in its different wording of 22 December 2015, entered into force.

It needs to be noted that the legal regulation laid down in Paragraph 7 of Article 29 of the

FABĮ, as set out in this wording, did not change in the aspect relevant in the case at issue.

16. The legal regulation established in Paragraph 7 of Article 29 of the FABĮ regarding the

fulfilment of debt obligations after the completion of the bankruptcy process should be interpreted

in the context of other provisions of this law.

16.1. According to Paragraph 1 of Article 6 (as amended on 22 December 2015) of the

FABĮ, a court decides to open bankruptcy proceedings against a natural person if it determines that

the natural person is insolvent and where there are no grounds specified in Paragraph 8 of Article 5

of the FABĮ that could preclude the opening of the said proceedings.

16.2. The notion of the insolvency of a natural person is defined in Paragraph 2 of Article 2

of the FABĮ, according to which an insolvent person is a natural person who is unable to fulfil the

debt obligations, as they mature, exceeding 25 minimum monthly wages (MMWs), which are

approved by the Government.

As mentioned above, according to Item 1 of Paragraph 8 of Article 5 (as amended on

22 December 2015) of the FABĮ, when determining whether a natural person is insolvent, claims of

creditors that must not be written off in accordance with Paragraph 7 of Article 29 of this Law are

not taken into account.

Consequently, in determining whether a natural person is insolvent, i.e., when calculating

whether his/her matured debt obligations whose fulfilment is impossible exceed 25 MMWs,

account is taken of only those debt obligations that give rise to the claims that will be written off

after the completion of the bankruptcy process.

In this context, it should be mentioned that the Supreme Court of Lithuania, in interpreting

the notion of insolvency of a person, has noted that, according to Paragraph 2 of Article 2 of the

FABĮ, a court, in deciding whether a natural person can fulfil his/her obligations, must, among other

things, assess the prospects of changes in the debt obligations by taking into account the property of

the person and the income that he/she receives, i.e. the court must establish not only the fact that the

amount of debts whose maturity has expired exceeds 25 MMWs, but also whether the person

objectively has no possibility to cover these debts either now or within a reasonable time limit (the

Supreme Court of Lithuania, the ruling of 11 June 2015 in civil case no 3K-3-379-701/2015).

16.3. Thus, according to Paragraph 2 of Article 2, Item 1 of Paragraph 8 of Article 5 (as

amended on 22 December 2015), and Paragraph 7 of Article 29 of the FABĮ, when establishing

whether a natural person is insolvent, the amount of his/her debt obligations that are objectively

impossible to fulfil does not include debt obligations regarding compensation for damages in

16

relation to mutilation or other bodily injury, death, or regarding the maintenance of children, the

payment of fines to the state, and the satisfaction of collateral-backed and/or hypothec-backed

claims of creditors if these creditors and natural person have agreed on the preservation of the

pledged property during the bankruptcy process of the natural person. This means that a person is

recognised as insolvent only if the amount of his/her debt obligations, except those listed in

Paragraph 7 of Article 29 of the FABĮ, exceeds 25 MMWs. Therefore, if a person owes only such

debt obligations that give rise to claims that, under Paragraph 7 of Article 29 of the FABĮ, are not

written off after the completion of the bankruptcy proceedings, he/she may not be declared

insolvent, in which case bankruptcy proceedings may not be opened against him/her.

17. Summing up the impugned and related legal regulation, it should be held that:

– the legal regulation governing the bankruptcy institution of a natural person was aimed at

creating the preconditions for restoring a balance between the interests of a debtor and his/her

creditors, protecting the interests of creditors by creating an opportunity to recover at least part of

the debts from an insolvent natural person and, at the same time, alleviating the situation of an

insolvent natural person who was acting in good faith, by giving him/her the opportunity to return

to active economic activity; however, when regulating the bankruptcy process of a natural person,

the legislature did not seek to create conditions for natural persons to escape liability for owed debt

obligations in general;

– under the impugned Item 4 of Paragraph 8 of Article 5 (as amended on 22 December

2015) of the FABĮ, bankruptcy proceedings may not be opened against a natural person who has

been punished either for the crimes specified in Articles 207–209 of the BK against the economy

and business order or for the crimes specified in Articles 216, 222, and 223 of the BK against the

financial system if the person has become insolvent due to the commission of these listed criminal

acts and his/her conviction has not expired; however, such proceedings may be opened against a

person who has been punished for any other crimes or criminal offences, inter alia, for the crimes

specified in Articles 82 and 183 of the BK against property, property rights, or property interests, or

for the crime specified in Article 300 of the BK against government order;

– under Paragraph 2 of Article 2, Item 1 of Paragraph 8 of Article 5 (as amended on

22 December 2015), and Paragraph 7 of Article 29 of the FABĮ, a person is recognised as insolvent

only if the amount of his/her debt obligations that are objectively impossible to fulfil, except those

listed in Paragraph 7 of Article 29 of the FABĮ, exceeds 25 MMWs; if a person owes only such debt

obligations that give rise to claims that are not written off after the completion of the bankruptcy

process, bankruptcy proceedings may not be opened against him/her;

– under the impugned Paragraph 7 of Article 29 of the FABĮ, upon the completion of the

bankruptcy process of a natural person, the unsatisfied claims for compensation for damage caused

17

to a person by an intentional criminal act (except for damage in relation to mutilation or other

bodily injury, or death) are written off; thus, the part of not compensated damage (inter alia, the

part for which compensation has been awarded by a court decision) is no longer subject to

compensation.

III

The assessment of the compliance of Item 4 of Paragraph 8 of Article 5 of the Law on

Personal Bankruptcy with the Constitution

18. In the constitutional justice case at issue, the Constitutional Court investigates the

compliance of Item 4 of Paragraph 8 of Article 5 (as amended on 22 December 2015) of the FABĮ,

insofar as, under this item, personal bankruptcy proceedings may be opened against a natural person

convicted under Articles 182, 183, and 300 of the BK when his/her conviction has not expired and

where he/she became insolvent as a result of such conviction, with Article 29 of the Constitution

and the constitutional principle of a state under the rule of law.

19. The Constitutional Court has held on more than one occasion that the constitutional

principle of the equality of persons before the law, which is enshrined in Article 29 of the

Constitution, means the right of an individual to be treated equally, it imposes the obligation to

assess homogeneous facts in the same manner and prohibits any arbitrary assessment of essentially

the same facts in a different manner; the constitutional principle of the equality of the rights of

persons would be violated if certain persons or groups of such persons were treated in a different

manner, even though there are no differences of such a nature and to such an extent between the

said groups of persons so that their uneven treatment could be objectively justified (inter alia, the

Constitutional Court’s rulings of 22 February 2013, 20 June 2016, and 25 January 2017); in

assessing whether a certain different legal regulation has been established reasonably, account must

be taken of concrete legal circumstances; first of all, consideration must be given to differences in

the legal situation of the subjects and objects to which a certain differentiated legal regulation is

applied (inter alia, the Constitutional Court’s rulings of 22 September 2015 and 15 March 2016).

20. In the jurisprudence of the Constitutional Court, it has been held more than once that

the constitutional principle of the equality of the rights of persons is inseparable from the

constitutional principle of a state under the rule of law, which integrates various values

consolidated, protected, and defended under the Constitution; a violation of the constitutional

principle of the equality of the rights of persons is, at the same time, a violation of the constitutional

principle of a state under the rule of law (inter alia, the Constitutional Court’s rulings of 6 February

2012, 22 February 2013, and 7 June 2016).

21. In assessing the constitutionality of the legal regulation of the relationships of

bankruptcy of a natural person, it needs to be noted that, according to the Constitution, the

18

legislature generally has no obligation to establish the institution of the bankruptcy of a natural

person as one of the possible ways of solving the insolvency of natural persons. Having chosen to

establish the institution of the bankruptcy of a natural person in the Lithuanian legal system, the

legislature, in order to ensure, among other things, a balance of interests between an insolvent

natural person and his/her creditors, has wide discretion to regulate the relationships of bankruptcy

of natural persons, inter alia, to choose a model of the institution of the bankruptcy of a natural

person, to define a circle of persons that could go bankrupt, to establish grounds for opening

bankruptcy proceedings against a natural person, also cases where such proceedings must not be

opened, to regulate bankruptcy procedures of natural persons, to determine conditions for the

release of fulfilling debt obligations, as well as other essential elements of the institution of the

bankruptcy of a natural person. However, in doing so, the legislature must respect the norms and

principles of the Constitution.

In this context, it should also be noted that the models of the institution of the bankruptcy

of a natural person are diverse; the choice of the legislature to consolidate one or another model of

the institution of the bankruptcy of a natural person by means of laws may depend on the specific

objectives of the legislature. In addition, laws may establish a judicial or extrajudicial bankruptcy

process of natural person. The legislature, making use of its own wide discretion to choose one or

another model of the institution of the bankruptcy of a natural person, may also establish such a

model where, in the bankruptcy process of a natural person, a court would be granted wider powers

to decide, inter alia, on opening bankruptcy proceedings against a natural person and/or exempting

him/her from the fulfilment of remaining unsatisfied debt obligations after the completion of the

bankruptcy process, when taking into account the circumstances of a particular case and assessing

the situation of a natural person seeking bankruptcy.

In the context of this constitutional justice case, it also needs to be noted that, according to

Article 29 of the Constitution and the constitutional principle of a state under the rule of law, when

regulating the relationships of bankruptcy of a natural person, the legislature must equally treat all

persons who are in the same (similar) situation and establish the grounds and procedure for opening

personal bankruptcy proceedings where such grounds and procedure would be equally applicable to

all natural persons.

22. It has been mentioned that, under Item 4 of Paragraph 8 of Article 5 (as amended on

22 December 2015) of the FABĮ, a court refuses to open bankruptcy proceedings against a natural

person if he/she has been punished either for the crimes specified in Articles 207–209 of the BK

against the economy and business order or for the crimes specified in Articles 216, 222, and 223 of

the BK against the financial system if the person has become insolvent due to the commission of

these listed criminal acts and his/her conviction has not expired; however, such proceedings may be

19

opened against a person who has been punished for any other crimes or criminal offences, inter

alia, for the crimes specified in Articles 182 and 183 of the BK against property, property rights, or

property interests, or for the crime specified in Article 300 of the BK against government order;

23. The petitioners in principle base their doubts as to the compliance of the impugned

provision with Article 29 of the Constitution and the constitutional principle of a state under the rule

of law on the similarity of the criminal acts provided for in Articles 182 and 207 of the BK and

argue that the criterion opted for by the legislature based on which the criminal acts specified in

Item 4 of Paragraph 8 of Article 5 (as amended on 22 December 2015) of the FABĮ were selected,

whose commission precludes opening bankruptcy proceedings against a relevant natural person, is

not clear, and that persons who have committed other criminal acts, which, in the opinion of the

petitioners, are similar, are groundlessly treated more favourably.

23.1. In the context of the arguments put forward by the petitioners, it should be noted that,

although criminal acts other than those referred to in Item 4 of Article 8 of Article 5 (as amended on

22 December 2015) of the FABĮ, inter alia, the criminal acts provided for in Articles 182, 183, and

300 of the BK, can also cause property damage, and a claim to compensate for it may also lead to

the insolvency of a person who has inflicted damage, the criminal acts specified in the impugned

provision for which criminal liability is provided for in Articles 207–209, 216, 222, and 223 of the

BK differ from other criminal acts in their object, i.e. the said acts encroach upon specific legally

protected values such as the state economy, business order, or the financial system; in addition,

inter alia, the said criminal acts are aimed at avoiding the fulfilment of credit obligations or at

otherwise inflicting damage on creditors. Therefore, persons who have committed these criminal

acts and persons who have committed other crimes or criminal offences, inter alia, those that

encroach upon property, property rights, and property interests, cannot be considered to be in the

same (similar) position.

It needs to be emphasised that the provision of Item 4 of Article 8 of Article 5 (as amended

on 22 December 2015) of the FABĮ, according to which personal bankruptcy proceedings may not

be opened against a person who has been punished for any of the crimes referred to in Articles 206–

209 of the BK against the economy or business order, or for any of the crimes referred to in

Articles 216, 222, 223 of the BK against the financial system, applies equally to all those who

committed these criminal acts.

23.2. In this context, it is also worth mentioning that the relationship between Article 182,

titled “Fraud”, and Article 207, titled “Credit Fraud”, of the BK, which are specified in the

petitions, has been considered by the Supreme Court of Lithuania; it, among other things, pointed

out that, although the titles of the two articles use the word “fraud”, these articles are different in the

characteristics of the bodies of crimes, the areas of the commission of crimes (the area of credit

20

fraud is much narrower than that of fraud), the purposes (in the case of fraud, deception is used for

the purpose of appropriating property, while in the case of credit fraud, deception is used not for

appropriating property, but for taking it in order to use it in carrying out an economic, commercial,

or financial activity so that it would be possible later to repay creditors), the objects (the object of

fraud is cash, while the object of credit fraud is terms and conditions for granting loans), the finality

(respectively, the material and formal bodies of crimes), the nature of the dangerousness of criminal

acts, etc. (the Supreme Court of Lithuania, the ruling of 3 February 2009 in criminal case no 2K-

35/2009, the ruling of 25 June 2013 in criminal case no 2K-339/201, and the ruling of 30 December

2016 in criminal case no 2K-7-304-976/2016).

As is apparent from the interpretation of Articles 182, 207 of the BK provided in the case

law of the Supreme Court of Lithuania, the criminal acts referred to in these articles are different;

therefore, persons who commit them may not, as such, be treated as persons who are in the same

(similar) position.

23.3. Consequently, persons who commit the criminal acts listed in Item 4 of Paragraph 8

of Article 5 (as amended on of 22 December 2015) of the FABĮ, as well as other criminal acts, inter

alia, those provided for in Articles 182, 183, and 300 of the BK, are not in the same (similar)

position in terms of the personal bankruptcy process; therefore, their unequal treatment is

objectively justified.

23.4. At the same time, it should be noted that the legislature, when exercising, under the

Constitution, its wide discretion to regulate the bankruptcy relations of a natural person, inter alia,

to establish the grounds and situations where bankruptcy proceedings are opened against natural

persons, and situations where such proceedings must not be opened, may also establish in a law

other cases where personal bankruptcy proceedings must not be opened and, among other things,

may decide that personal bankruptcy proceedings are not opened if a natural person has been

imposed a penalty for criminal acts other than those specified in the impugned provision. Thus, the

fact that, under the impugned provision of Item 4 of Paragraph 8 of Article 5 (as amended on of

22 December 2015) of the FABĮ, personal bankruptcy proceedings must not be opened if a natural

person has been imposed a penalty in particular for such criminal acts that are specified in the

articles of the BK chosen by the legislature does not give grounds for declaring this impugned

provision to be in conflict with the Constitution.

24. Taking into account the arguments set forth, the conclusion should be drawn that

Item 4 of Paragraph 8 of Article 5 (as amended on of 22 December 2015) of the FABĮ is not in

conflict with Article 29 of the Constitution and the constitutional principle of a state under the rule

of law.

IV

21

The assessment of the compliance of Paragraph 7 of Article 29 of the Law on Personal

Bankruptcy with the Constitution

25. In the constitutional justice case at issue, the Constitutional Court also investigates the

compliance of Paragraph 7 of Article 29 of the FABĮ, insofar as, under this paragraph, claims for

compensating damage inflicted by intentional criminal acts are written off, with Paragraph 1 of

Article 23 and Paragraph 2 of Article 30 of the Constitution and the constitutional principle of a

state under the rule of law.

26. Paragraph 2 of Article 30 of the Constitution provides that compensation for material

and moral damage inflicted on a person is established by law.

As held by the Constitutional Court, in protecting and defending human rights and

freedoms, inter alia, human dignity, a particular importance falls on the institution of compensation

for damage (the Constitutional Court’s ruling of 19 August 2006); compensation for damage

inflicted as a result of unlawful actions is one of the main ways of protecting violated rights and

freedoms (the Constitutional Court’s ruling of 30 June 2000).

In its acts (inter alia, the rulings of 19 August 2006, 3 February 2010, and 16 April 2015),

the Constitutional Court has formulated a wide constitutional doctrine of compensation for damage,

which is based on the essential provision that the necessity to compensate for the material and moral

damage inflicted on a person is a constitutional principle, whose consolidation is aimed to ensure

that persons who have suffered material or moral damage will be compensated.

26.1. The Constitutional Court has held that compensation for damage inflicted upon a

person must be real and fair (the Constitutional Court’s rulings of 3 February 2010, 29 November

2010, and 6 December 2013); the Constitution imperatively requires that a legal regulation be

established by means of a law to the effect that a person who was inflicted damage by unlawful

actions would be able in all cases to claim for just compensation for that damage and to receive that

compensation (inter alia, the Constitutional Court’s rulings of 19 August 2006, 3 February 2010,

and 6 December 2013).

26.2. The Constitution guarantees the right of a person to compensation for the material or

moral damage suffered as a result of unlawful actions, including the recovery of damages through

court (inter alia, the Constitutional Court’s ruling of 30 June 2000). The classification of damage

(subject to compensation) inflicted upon a person into material damage and moral damage

determines the particularities of a legal regulation governing the relations linked to compensation

for damage of a particular type; while compensating for material damage, in all cases it is possible

to follow the principle of full (adequate) compensation for damage (restitutio in integrum); thus,

material losses are compensated with material assets; meanwhile, moral damage is a moral injury

that can only be assessed and compensated materially on certain conditions (the Constitutional

22

Court’s rulings of 19 August 2006 and 3 February 2010).

26.3. Paragraph 2 of Article 30 of the Constitution consolidates a duty of the legislature to

pass a law or laws providing for compensation for damage for a person who suffered material and

moral damage (inter alia, the Constitutional Court’s rulings of 3 February 2010 and 18 April 2012),

and to establish sufficient measures for implementing the right to receive compensation for inflicted

damage (the Constitutional Court’s ruling of 3 February 2010). The law may also provide for cases

when inflicted damage must be compensated not in full, or a person who inflicted damage is

exempted from damage compensation (e.g. a person who suffered injury is guilty himself/herself or

in case of indispensable defence) (the Constitutional Court’s ruling of 20 January 1997).

The legislature, while regulating by means of a law or several laws the relations linked to

compensation for material and/or moral damage inflicted on a person, has a certain degree of

discretion inasmuch as this is not restricted by the Constitution (the Constitutional Court’s rulings

of 19 August 2006 and 3 February 2010). For instance, a legal regulation established in laws may

be differentiated according to whether damage inflicted as a result of unlawful actions is

compensated under an extrajudicial or judicial procedure; however, in any case, it is not allowed to

establish any such legal regulation that would deny the right of a person to apply to a court and to

claim for just compensation for damage inflicted as a result of unlawful actions (the Constitutional

Court’s ruling of 19 August 2006). It does not follow from the Constitution that it is possible to

establish by law some exceptions under which moral and/or material damage inflicted on a person

is not compensated (the Constitutional Court’s rulings of 19 August 2006 and 13 May 2010).

27. The general grounds for compensation for damage sustained by a victim stem, inter

alia, from the constitutional principles of justice and a state under the rule of law (inter alia, the

Constitutional Court’s rulings of 3 February 2010, 29 November 2010, and 6 December 2013).

27.1. The constitutional principle of compensation for damage is inseparable from the

principle of justice, which is consolidated in the Constitution (the Constitutional Court’s rulings of

19 August 2006 and 3 February 2010). Justice may be implemented by ensuring a certain balance of

interests and by avoiding contingencies and arbitrariness, the instability of social life, and clashes of

interests (inter alia, the Constitutional Court’s rulings of 24 December 2008, 14 May 2015, and

27 October 2016). Laws must create all necessary preconditions for fair compensation for inflicted

damage; the legislature may not establish any such legal regulation that would create the

preconditions for a situation where a person who suffered damage would not be able to get fair

compensation for damage (the Constitutional Court’s ruling of 3 February 2010).

27.2. The constitutional imperative that damage must be compensated for in a fair manner

is also related to the constitutional principles of proportionality and adequacy of compensation for

damage, which require that the measures that are established in laws and are applicable be

23

proportionate to the objective sought and not limit the rights of persons more than necessary for

achieving the legitimate and universally significant, constitutionally well-founded objective, and not

create the preconditions for abusing law (the Constitutional Court’s rulings of 27 March 2009 and

3 February 2010).

28. The provision of Paragraph 2 of Article 30 of the Constitution that compensation for

material and moral damage inflicted upon a person is established by law is also related to the

provisions of Article 23 of the Constitution, which ensure the inviolability and protection of

property. The Constitutional Court has noted on more than one occasion that the constitutional

protection of the rights of ownership, which arise from the Constitution and the laws that are not in

conflict with the Constitution, means the protection of the right to demand the fulfilment of

obligations of property nature for a person (the Constitutional Court’s rulings of 4 July 2003 and

24 December 2008).

In the context of the constitutional justice case at issue, it should be noted that the right of a

person to claim compensation for damage caused by unlawful acts arises from Paragraph 2 of

Article 30 of the Constitution, and, under Article 23 of the Constitution, the property aspects of this

right are defended.

29. In the context of the constitutional justice case at issue, it also needs to be mentioned

that the striving for an open, just, and harmonious civil society and a state under the rule of law, as

established in the Preamble to the Constitution, implies that it is obligatory to seek to ensure the

security of each person and all society against criminal attempts (inter alia, the Constitutional

Court’s rulings of 8 May 2000, 28 May 2010, and 15 November 2013).

29.1. As held by the Constitutional Court, under the Constitution, only those acts that are

in fact dangerous and seriously harmful to the interests of a person, society, and the state are named

in the law as criminal acts (the Constitutional Court’s ruling of 10 June 2003). Crimes are violations

of law that especially grossly violate constitutional rights and freedoms of individuals, as well as

other values protected and defended by the Constitution (inter alia, the Constitutional Court’s

rulings of 4 July 2003 and 29 December 2004), make negative impact on the living conditions and

subsistence level of people, and encroach upon the fundamentals of the life of the state and society

(inter alia, the Constitutional Court’s rulings of 29 December 2004 and 16 January 2006).

29.2. While exercising its functions and acting in the interests of all society, the state has

the obligation to ensure the effective protection of human rights and freedoms, of other values

protected and defended by the Constitution, of every individual and all society against, inter alia,

criminal attempts (inter alia, the Constitutional Court’s rulings of 29 December 2004 and

16 January 2006). According to the Constitution, the state has not only the right, but also the duty to

take various lawful measures preventing crimes, as well as restricting and reducing crime; these

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measures must be effective (the Constitutional Court’s rulings of 8 May 2000 and 16 January 2006).

29.3. The Constitutional Court has also held that, in a state under the rule of law, it is not

allowed to disregard the general principle of law under which no one may enjoy any profit from a

violation of law committed by him/her (the Constitutional Court’s rulings of 14 March 2006 and

15 March 2008).

30. It has been mentioned that, under Paragraph 7 of Article 29 of the FABĮ, upon the

completion of the bankruptcy process, the remaining unsatisfied creditors’ claims are written off,

except for claims for damages in relation to mutilation or other bodily injury, death, or cash

(alimony) for the maintenance of a child/adopted child, claims arising from the natural person’s

obligation to pay penalties to the state imposed for administrative offences or criminal acts

committed by the natural person, and collateral-backed and/or hypothec-backed claims of creditors

if these creditors and natural person have agreed on the preservation of the pledged property during

the bankruptcy process of the natural person.

It has also been mentioned that, under this legal regulation, after the completion of the

bankruptcy process and the write-off of the remaining unpaid part of compensation for damage

caused by an intentional criminal act, the person who has caused such damage is no longer obliged

to compensate all the damage caused (inter alia, the one awarded by a court decision), and a person

who has suffered such damage and who has become in the bankruptcy process of the said natural

person a creditor of the person who caused the said damage cannot receive compensation for the

damage suffered.

31. The doubts of the petitioner regarding the compliance of the impugned provision with

Paragraph 2 of Article 30 of the Constitution and the constitutional principle of a state under the

rule of law are based on the fact that a creditor demanding compensation for damage caused by an

intentional criminal act is not a voluntary creditor, who himself/herself has decided to enter into

legal relations with the debtor and thereby assumed the appropriate risk, and his/her claim for such

damages is different from that of other creditors. According to the impugned legal regulation,

should damage caused by an intentional criminal act be written off, it may remain completely or

partially not compensated despite the fact that compensation for the said damage has been awarded

by a court.

32. In assessing the compliance of Paragraph 7 of Article 29 of the FABĮ with Paragraph 2

of Article 30 of the Constitution and the constitutional principle of a state under the rule of law, it

needs to be noted that, as mentioned above, according to the Constitution, the legislature generally

has no obligation to establish the institution of the bankruptcy of a natural person; however, having

decided to consolidate it in the legal system of Lithuania, it must adhere to the norms and principles

of the Constitution when regulating the legal relations of bankruptcy of natural persons. This means,

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among other things, that, in order to strike a balance between the interests of an insolvent natural

person and his/her creditors by means of the bankruptcy institution of a natural person established

in the law, the legislature must not deny the requirement, which arises from the Constitution (inter

alia, from the principle of compensation for damage laid down in Paragraph 2 of Article 30 thereof,

as well as from the constitutional principles of justice and a state under the rule of law), that a

person who sustained material and moral damage must be compensated fairly. Consequently, when

determining the conditions of releasing bankrupt natural persons from debt obligations, the

legislature must not establish any such legal regulation according to which persons would be able to

avoid the obligation to compensate for material and/or moral damage caused by them when

committing a criminal act, and according to which a person who sustained the said damage would

not be able to receive fair compensation for it.

32.1. It needs to be noted that the claim to compensate for damage caused by a criminal

act, which, according to the impugned Item 7 of Article 29 of the FABĮ, is written off with other

unsatisfied creditors’ claims upon the completion of the bankruptcy process of a natural person, is

fundamentally different from creditors’ other claims arising from contractual civil legal relations,

inter alia, different in that a creditor entitled to claim compensation for damage is not voluntarily

involved in the relations with the debtor. In view of the fact that, as mentioned above, the personal

bankruptcy process is designed to attain a fair balance between the interests of the debtor and

his/her creditors, it would be unfair to establish such a legal regulation under which the interests

(inter alia, the desire to return to an active economic activity) of a person who has caused damage

by committing a criminal act would enjoy better protection than the rights of a person who has

sustained the said damage, i.e. his/her right to receive fair compensation for sustained damage,

which, at least in part, would restore the situation as it existed prior to the commission of the

criminal act. Thus, not only the insolvency of a person who has committed an intentional criminal

act, but also the insolvency of one who has committed a negligent criminal act is not a

constitutionally justified ground for releasing such a person from the obligation to compensate for

damage that he/she has caused.

32.2. It should also be noted that a legal regulation under which, after the completion of the

personal bankruptcy process, the remaining unsatisfied claims for compensation for damage caused

by a criminal act are written off creates, among other things, the preconditions for a person who has

caused the said damage to benefit from the criminal act that he/she has committed.

32.3. Consequently, the legal regulation established by the legislature in Paragraph 7 of

Article 29 of the FABĮ, according to which a person who has caused damage by means of a

criminal act can in principle avoid the duty to fully compensate for it (inter alia, for the damage or

part thereof compensation for which has been awarded by a court decision), is also incompatible

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with the state obligation, which stems from the Constitution, to take effective measures to limit and

reduce crime.

32.4. Thus, it should be held that the legal regulation laid down in Paragraph 7 of

Article 29 of the FABĮ, according to which claims for compensation for damage caused by criminal

acts after the completion of the bankruptcy process of a natural person are written off, creates the

preconditions for a person who caused such damage to avoid the obligation to fully compensate for

the damage caused, and the preconditions preventing a person who suffered such damage and who,

as a result of the damage inflicted on him/her, became a creditor in the bankruptcy process of a

natural person from receiving fair compensation for the damage suffered. Consequently, this legal

regulation has disregarded the principle of compensation for damage, which is enshrined in

Paragraph 2 of Article 30 of the Constitution, as well as the constitutional principles of justice and a

state under the rule of law.

32.5. At the same time, it should be noted that, as mentioned above, the legislature,

depending on the specific goals pursued by it, may choose to establish in a law one or another

model of the institution of the bankruptcy of a natural person; making use of its own wide

discretion, the legislature could/can also establish such a model of the institution of the bankruptcy

of a natural person where, in the bankruptcy process of a natural person, a court would be granted

wider powers to decide, inter alia, on opening bankruptcy proceedings against a natural person

and/or exempting him/her from the fulfilment of remaining unsatisfied debt obligations after the

completion of the bankruptcy process, when taking into account the circumstances of a particular

case and assessing the situation of a natural person seeking bankruptcy.

33. In view of the arguments set forth, the conclusion should be drawn that Paragraph 7 of

Article 29 of the FABĮ, insofar as, under this paragraph, claims for compensating damage inflicted

by criminal acts are written off, was in conflict with Paragraph 2 of Article 30 of the Constitution

and the constitutional principle a state under the rule of law.

34. Having held this, the Constitutional Court will not further investigate whether

Paragraph 7 of Article 29 of the FABĮ, to the extent stated by the petitioner, was in conflict with

Paragraph 1 of Article 23 of the Constitution.

35. As mentioned above, after the entry into force of Paragraph 7 (as set out in its wording

of 22 December 2015) of Article 29 of the FABĮ on 1 January 2017, the legal regulation laid down

in the said paragraph did not change in the aspect relevant in the case at issue.

After it has been held in this ruling that Paragraph 7 of Article 29 of the FABĮ, insofar as,

under this paragraph, claims for compensating damage inflicted by criminal acts are written off, was

in conflict with Paragraph 2 of Article 30 of the Constitution and the constitutional principle a state

under the rule of law, it should also be held on the grounds of the same arguments that Paragraph 7

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(wording of 22 December 2015) of Article 29 of the FABĮ, which came into force on 1 January

2017, insofar as, under this paragraph, claims for compensating damage inflicted by criminal acts

are written off, is also in conflict with the aforesaid provisions of the Constitution.

Conforming to Articles 102 and 105 of the Constitution of the Republic of Lithuania and

Articles 1, 53, 531, 54, 55, and 56 of the Law on the Constitutional Court of the Republic of

Lithuania, the Constitutional Court of the Republic of Lithuania gives the following

ruling:

1. To recognise that Item 4 of Paragraph 8 of Article 5 (as amended on 22 December 2015;

Register of Legal Acts, 30-12-2015, No 21017) of the Republic of Lithuania’s Law on Personal

Bankruptcy is not in conflict with the Constitution of the Republic of Lithuania.

2. To recognise that Paragraph 7 (wording of 22 December 2015, which was in force until

31 December 2015; Register of Legal Acts, 30-12-2015, No 21017; wording of 22 December 2015,

which came into force on 1 January 2017; Register of Legal Acts, 30-12-2015, No 21017) of

Article 29 of the Republic of Lithuania’s Law on Personal Bankruptcy, insofar as, under this

paragraph, claims for compensating damage inflicted by criminal acts are written off, was/is in

conflict with Paragraph 2 of Article 30 of the Constitution and the constitutional principle a state

under the rule of law.

This ruling of the Constitutional Court is final and not subject to appeal.

Justices of the Constitutional Court: Elvyra Baltutytė

Gintaras Goda

Vytautas Greičius

Danutė Jočienė

Gediminas Mesonis

Vytas Milius

Daiva Petrylaitė

Janina Stripeikienė

Dainius Žalimas