THE CONSTITUTIONAL COURT OF
THE REPUBLIC OF CROATIA
Nos. U-I-2441/2001
U-I-1107/2002
Zagreb, 12 February 2003
The Constitutional Court of the Republic of Croatia, composed of Petar Klarić,
Vice-President of the Court, and Judges Marijan Hranjski, Petar Klarić, Ivan Matija,
Ivan Mrkonjić, Jasna Omejec, Željko Potočnjak, Emilija Rajić, Nevenka Šernhorst,
Vice Vukojević and Milan Vuković, deciding on the proposal submitted by the
Croatian Insurance Office from Zagreb, Martićeva 73, represented by its Director
Ante Lui, and the proposal of the Croatian Chamber of Economy from Zagreb,
Rooseveltov trg 2, represented by its President Nadan Vidošević, to institute
proceedings to review conformity of a law with the Constitution, at its session of 12
February 2003, rendered the following
DECISION
I.
Proceedings are instituted to review conformity with the Constitution of
the Republic of Croatia of Article 12/3 and Article 24/1 point 1 of the Croatian Red
Cross Act (Narodne novine, No. 92/01), and these provisions are hereby repealed.
II.
This decision shall be published in Narodne novine.
Statement of reasons
1.
The proposal to institute proceedings to review the constitutionality of Article
12/3 and Article 24/1 point 1 of the Croatian Red Cross Act (hereinafter: the Act) was
submitted by the Croatian Insurance Office from Zagreb and the Croatian Chamber
of Economy from Zagreb.
The applicants deem that the above provisions of the Act are not in conformity with
Articles 3, 49, 50 and 51 of the Constitution of the Republic of Croatia.
2.
The applicants substantiate their proposals as follows:
The disputed legal provisions impose on insurance companies that provide thirdparty insurance the obligation to co-fund activities of the Croatian Red Cross.
This obligation is imposed on one category of companies only – insurance
companies, and only on those that provide third-party insurance (if this is, as the
applicants observe, the kind of insurance the lawmaker had in mind stipulating this
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obligation for societies that provide “compulsory motor-vehicle insurance”, since no
insurance of this kind exists in the legal order of the Republic of Croatia).
In the applicants’ opinion, this obligation could just as groundlessly have been
imposed on any other legal person, which shows the lawmaker’s selective and
arbitrary approach in the regulation of this material. Arbitrarily singling out only one
class of legal subjects on which to impose the obligation of payment is contrary to the
principles of the rule of law and legal security, and to the principle of the equal legal
position of entrepreneurs on the market. Furthermore, this kind of selective approach,
which is not grounded on the objective economic capabilities of legal subjects, leads
to the unequal distribution of the burden of public expenses, which is in breach of the
constitutional principle of equality and equity in the defrayment of these expenses.
Insurance companies, as the applicants further state, are in most cases privately
owned, and some are predominantly owned by foreign legal and natural persons.
Considerable capital has been invested in them, and obliging them to fund
humanitarian activities is not known in other legal orders. Therefore, the above has a
considerable influence on their total business results, and it must also be noted that
all insurance activities have recently been showing losses. Therefore, imposing
additional financial burdens on insurance companies leads to the further increase of
the costs of insurance, which de-stimulates both citizens, who contract insurance,
and entrepreneurs, who have invested their funds on the basis of investment and
development plans. Thus the applicants deem that this has decreased the
entrepreneurial rights acquired by investing capital and has restricted entrepreneurial
freedoms without achieving any of the constitutionally required goals that would make
any such restriction permitted.
They propose that the Constitutional Court institutes proceedings and repeals the
disputed legal provisions.
The proposal is well founded.
3.
The disputed provisions of the Croatian Red Cross Act read:
Article 12/3:
"Every year 1% of the proceeds from the compulsory insurance of motor
vehicles shall be paid in aid of the Croatian Red Cross to advance the activities of
providing first aid with the purpose of decreasing traffic accidents."
Article 24/1 point 1:
"A fine of 10,000.00 to 50,000.00 kunas for a misdemeanour shall be paid by a
legal or natural person:
1. if insurance companies do not pay the prescribed part of the insurance
premiums in Article 12 of this Act in the stipulated amount to the account of the
Croatian Red Cross."
4.
The legal position of the Croatian Red Cross is regulated by Article 1/1, Article
4/1, Article 9 and Article 25 of the Croatian Red Cross Act.
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These provisions define the Croatian Red Cross as the roof association representing
the national, humanitarian and voluntary alliance of communities of Red Cross
society associations on the county, town and municipal level, which acts as a nonprofit legal person, and which among other activities and tasks of a predominantly
humanitarian and health-education nature, performs many other activities relegated
to it on the grounds of public powers.
5.
Article 9 of the Act lays down thirteen groups of activities relegated to the
competence of the Croatian Red Cross, and among them point 8 provides that this
association also:
"Implements the professional training of teachers in the subject of providing
first aid to persons injured in traffic accidents, keeps records and issues the
corresponding certificates, and organises the re-training of the teachers every fifth
year. Coordinates the national first-aid programme for drivers. Teaches candidates
for drivers to provide first aid to people injured in traffic accidents, organises exams in
first aid for drivers, keeps records and issues the corresponding certificates about the
passed exam."
6.
Article 12/1 of the Act stipulates the sources of funding for the work of the
Croatian Red Cross, without defining their specific purpose.
In accordance with this provision, the Croatian Red Cross is funded from:
membership fees, the state budget and the budgets of all the units of local and
regional self-government, the implementation of contracted programmes, activities of
collecting financial and material resources, grants, subsidies, gifts, inheritance,
income from property and rights, contributions by citizens and legal person, and from
income in accordance with the law and other regulations.
Inter alia, sub-paragraph 3 of the Art (of Article 12/1) provides that the Croatian Red
Cross makes an income from activities which the Republic of Croatia, units of local
and regional self-government and legal and natural persons have relegated to the
Croatian Red Cross, and sub-paragraph 4 that it makes an income from the activities
in Article 9 points 7, 8 and 9 of the Act.
Since all the activities that the Republic of Croatia and units of local and regional selfgovernment relegated to the Croatian Red Cross in accordance with public powers
are enumerated in Article 9 of the Act (including in points 7, 8 and 9 of that Article), it
follows that the Croatian Red Cross makes an income from performing all the
activities relegated to it on the grounds of public authority.
Point 7 of Article 9 of the Act refers to the relegated activity of teaching citizens and
training teachers to provide first aid in everyday life and in traffic, natural, ecological
and other accidents of greater proportions. Point 9 of Article 9 of the Act refers to the
relegated activity of teaching people to provide first aid at work in accordance with
the Protection at Work Act, and point 8 of Article 9 of the Act, which was quoted in
the text above, refers to the relegated activity of the Croatian Red Cross of training
teachers in the subject of providing first aid to persons injured in traffic accidents,
organising exams, keeping records and issuing certificates.
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7.
Article 12/2,3,4 of the Act lays down other sources of funding for the Croatian
Red Cross, but unlike in paragraph 1, in such a way that the Act also prescribes the
purpose of these funds.
These sources are the following:
- 1% of paid tourist tax – to save lives at sea and for the ecological protection of the
coastal area,
- (the disputed) 1% of the compulsory insurance of motor vehicles – to advance
activities of providing first aid with the goal of decreasing traffic accidents, and
- 51% of the assets of the Croatian Lottery set aside for humanitarian aid – to realise
the tasks in Article 9 (relegated public authority – note of the Constitutional Court)
and Article 11 (other tasks and activities – note of the Constitutional Court).
8.
All the above results in the following:
The disputed Act has included among the public powers of the Croatian Red Cross
training teachers of first aid in traffic accidents, teaching candidates for drivers to
provide first aid in traffic accidents, and in connection with the above organising
exams, keeping records and issuing certificates (Article 9 point 8).
The public powers of the Croatian Red Cross, and thus also of the above activity of
providing first aid in traffic accidents, are funded (Article 12) from several sources, as
follows:
- from the state budget and the budgets of all the units of local and regional selfgovernment,
- from the activities relegated to the Croatian Red Cross by the Republic of Croatia
and/or the units of local and regional self-government,
- from the activities in Article 9 points 7, 8 and 9 of the Act,
- 1% of the compulsory insurance of motor vehicles.
This shows that Croatian Red Cross activities of training teachers and teaching future
drivers in first aid are funded from three sources: the budget, the income from
performing the relegated activity, and the premium from (one kind of compulsory)
insurance.
9.
The disputed Article 12/3 of the Act specifies this last form of funding for one
of the activities performed by the Croatian Red Cross on the grounds of its public
powers. The lawmaker laid down the special obligation of insurance companies to
fund this activity, the amount that they are to set aside for this purpose, and the goal
that is to be achieved in this way – decreasing the number of traffic accidents.
In the disputed Article 24/1 point 1 of the Act the lawmaker made Article 12/3
compulsory, prescribing a sanction for not complying with it.
10.
In the view of the Constitutional Court, the applicants have grounds for
indicating the unconstitutionality of Article 12/3 of the Act.
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Prescribing an obligation that places one group of entrepreneurs in an unequal
position in relation to others contravenes the constitutional guarantee of the equal
position of all entrepreneurs on the market (Article 49/2 of the Constitution).
This is exactly what the disputed legal provision does in relation to insurance
companies, which are the only companies that must set aside funds from insurance
premiums, in the specific case from the insurance paid by owners or users of motor
vehicles for third-party insurance in the case of death, injury, impaired health,
destruction or damage to things, for which, in accordance with the law and insurance
contract, the insurance company is liable to those damaged to the amount of the
contracted sum.
The lawmaker has the legitimate right to institute the source and manner of funding
particular activities of interest for the Republic of Croatia, grounded on Article 2/4/1 of
the Constitution, whereby the lawmaker independently and in accordance with the
Constitution and law, decides on the regulation of economic, legal and political
relations in the Republic of Croatia
However, if the lawmaker considered it important for the entire social community to
improve the work conditions of the Croatian Red Cross as a whole, then the
obligation of increased funding for this purpose should have been imposed on all
economic subjects in accordance with their capabilities, which would comply with
Article 51/1 of the Constitution ("Everyone shall participate in the defrayment of public
expenses in accordance with his or her economic capabilities.").
In this case payment is made for a particular Croatian Red Cross activity, but one
that the Croatian Red Cross performs on the grounds of public powers, as has
already been said in the preceding text, which is an additional point in favour of the
need to equally distribute the burden of public expenses.
Public powers are defined by the fact that competent governmental (local or regional)
bodies as a rule implement these matters and activities, but they relegated,
transferred, the competence for performing them to some other public body. When
they did so the funds for performing the activities were ensured in the state budget
(or the budgets of units of local and regional self-government).
In this case competence for teaching people to provide first aid in traffic accidents,
keeping official records and issuing certificates on passed exams has been relegated
to a legal person that is organised as a voluntary and non-profit organisation. It was
established that funding for its work for the above purposes will be provided from the
appropriate budgets.
The entire social community participates in creating budgetary resources, in
accordance with Article 51 of the Constitution, whereby everyone shall participate in
the defrayment of public expenses in accordance with his or her economic
capabilities, and the tax system is based on the principles of equality and equity.
Therefore, all companies participate in creating budgetary resources, including those
that provide third-party insurance, and in this way they already contribute to funding
the Croatian Red Cross activities emerging from public powers.
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In addition, as has been said above, the Croatian Red Cross Act prescribes that the
Croatian Red Cross may also make an income from the activities relegated to it.
Therefore, with funding provided in this way, there are no grounds to burden some
companies only with multiple funding that in the final issue has the same purpose,
without at the same time clarifying the reasons why this is being done, or clearly and
unequivocally showing the standards used.
The allocation of the funding provided in Article 12/3 of the Act (“advancing the
activity of providing first aid with the goal of decreasing traffic accidents”) does not in
any way justify the additional burden on the work (specifically) of insurance
companies. Their work does not increase the risks of traffic accidents, it only provides
insurance when they occur. Likewise, educating the population to provide first aid
(which is undoubtedly of great social importance) does not prevent the occurrence of
or decrease the number of traffic accidents. A population educated to provide first aid
can only contribute to the better recovery from some of the consequences of these
accidents, but this has nothing to do with the work of insurance companies.
11.
The Constitutional Court has also examined the justification for the applicants’
allegations concerning Article 24/1 point 1 of the Act, and has found it a provision in
close contextual connection with the disputed Article 12/3 of the Act. The existence of
Article 24/1 point 1 of the Act depends on the existence of Article 12/3 of the Act,
because Article 24/1 point 1 sanctions not acting in accordance with Article 12/3,
which this Court has found unconstitutional. Therefore Article 24/1 point 1 of the Act
is also unconstitutional.
12.
For all the above reasons, the Constitutional Court of the Republic of Croatia
has found that in this case the disputed provisions of the Croatian Red Cross Act are
in breach of Article 49/2 ("The State shall ensure all entrepreneurs an equal legal
status on the market."), and Article 51/1 ("Everyone shall participate in the
defrayment of public expenses in accordance with his or her economic capabilities.")
of the Constitution of the Republic of Croatia.
13.
Pursuant to the above, the Constitutional Court has on the grounds of Article
55/1 of the Constitutional Act on the Constitutional Court of the Republic of Croatia
(Narodne novine, No. 49/02 – consolidated wording), in conjunction with Article
128/1/1 of the Constitution, decided as in the dictum.
VICE-PRESIDENT
Petar Klarić, LLD, m. p.