On the basis of Articles 110 and 112 of the Constitution of the Republic of Macedonia and Article 70 of the Book of Procedures of the Constitutional Court of the Republic of Macedonia (»Official Gazette of the Republic of Macedonia«, no.70/1992), at its session held on 4 December 2013, the Constitutional Court of the Republic of Macedonia took the following
DECISION
1. Article 137 paragraphs 3 and 4 of the Law on Banks (“Official Gazette of the Republic of Macedonia”, nos.67/2007, 90/2009, 67/2010 and 26/2013) SHALL BE REPEALED.
2. This decision shall generate legal effects from the date of its publication in the “Official Gazette of the Republic of Macedonia”.
3. Upon the initiative submitted by Aleksandar Mihajlovski – a lawyer from Skopje, with its Resolution U.br.43/2013 dated 26 June 2013 the Constitutional Court of the Republic of Macedonia instigated proceedings for appraising the constitutionality of Article 137 paragraphs 3 and 4 of the Law noted in item 1 of the present Decision, as there was a reasonable question raised before the Court with regard to its accordance with Article 8 paragraph 1 lines 3, 6 and 7 and Article 30 of the Constitution of the Republic of Macedonia.
4. At its session the Court found that Article 137 paragraph 1, integrated in the part “Restriction of rights from shares”, envisages that “For the shares acquired in contradiction with Article 59 of this Law and shares for which the consent granted has been withdrawn, pursuant to Article 153 of this Law the Governor shall pass a resolution establishing that the shareholder who has acquired those shares shall not have a voting right.
Paragraph 2 of Article 137 envisages that: “The shareholder who has gained shares in contradiction with Article 59 of this Law and the shareholder who has had the consent granted withdrawn under Article 153 of this Law, shall be ordered by the Government to transfer the shares within certain deadline, which may not be longer than 180 days, except in the cases referred to in Article 59 paragraph 2 of this Law when the Governor may determine a longer deadline.
Paragraph 3 of Article 137 of the Law stipulates that: “If the shareholder referred to in paragraph 2 of this Article fails to transfer the shares within the specified period, the Government shall within eight days from the date of expiration of the specified period, pass a resolution declaring that these shares, in addition to the voting right, do not give the shareholder the right to payment of dividend and shall conduct a sale of the shares on behalf of the shareholder referred to in paragraph 2 of this Article.
Under paragraph 4 of Article 137 of the Law “If in the period after the adoption of the resolution referred to in paragraph 3 of this Article until the sale of the shares the bank has paid a dividend to the other shareholders, the dividend for the shareholder for whom with the resolution referred to in paragraph 3 of this Article is has been established not to be entitled to payment of dividend shall be distributed to the general reserves of the bank”.
5. The rule of law and legal protection of property are the fundamental values of the constitutional order of the Republic of Macedonia, under Article 8 paragraph 1 lines 3 and 6 of the Constitution.
Under Article 30 of the Constitution of the Republic of Macedonia, the right to ownership of property and the right to inheritance are guaranteed. Pursuant to paragraph 3 of this Article, no person may be deprived of his/her property or of the rights deriving from it, except in cases concerning the public interest defined by law. Under paragraph 4 of this Article, if the property is expropriated or restricted just compensation is guaranteed, which may not be lower than its market value.
Pursuant to Article 51 of the Constitution, in the Republic of Macedonia laws shall be in accordance with the Constitution and all other regulations in accordance with the Constitution and law.
Article 6 of the Law on the National Bank of the Republic of Macedonia (“Official Gazette of the Republic of Macedonia” nos.158/2010 and 123/2012) stipulates that the primary objective of the National Bank is to achieve and maintain price stability, contributing to the maintenance of a stable and competitive market-oriented financial system.
The National Bank supports the general economic policies without jeopardizing the achievement of the objective set out in paragraph 1 of the said Article and in accordance with the principle of an open market economy with free competition.
Under Article 7, paragraph 1, item 9 of the said Law, with a view to achieving the aim referred to in Article 7 of this Law, the National Bank, inter alia, regulates, issues licenses and supervises banks, savings banks, companies issuing electronic money and other financial institutions in a manner defined by this or any other law.
Under Article 8 of the Law, the stability of the banking system and the measures taken to achieve and maintain its stability are in the public interest.
Article 48, paragraph 1, item 5 of the Law on the National Bank envisages that the Governor of the National Bank in addition to other powers and duties also decides on the issuance of licenses and approvals to financial institutions and revokes issued licenses and approvals, in accordance with law.
The Law on Banks regulates the establishment, operation, supervision and termination of the banks and branches of foreign banks in the Republic of Macedonia, as well as the opening and operation of branches of banks from member states of the European Union (Article 1).
Pursuant to Article 2 of this Law, which defines the meaning of certain terms used in this Law, a “bank ” is a legal entity licensed by the Governor of the National Bank of the Republic of Macedonia, established in accordance with the provisions of this Law, whose main business activity is collecting deposits and other repayable sources of funds from the public and approving loans in its own name and for its own account (item 1).
Under Article 12 of the same Law, a bank is established as a joint stock company based in the Republic of Macedonia.
Under Article 16 of the same Law, the Governor shall issue a license for the establishment and operation of a bank.
Pursuant to Article 131 paragraph 1 of this Law, the Governor takes measures and sets deadlines for their implementation, if the bank, the banking group, the shareholders or the organs of the bank do not respect the regulations that govern the operations of banks or their internal procedures.
Under paragraph 2 of this Article, the measures taken by the Governor are: 1) regular measures; 2) additional measures; 3) introduction of administration; 4) withdrawal of consent; and 5 ) revocation of a license.
The Governor takes the regular measures, in accordance with Article 132 of this Law, when the bank or banking group does not comply with regulations governing the operation of banks.
The Governor takes the additional measures, under Article 133 of the same Law, against a bank or bank shareholder who seriously violate the regulations of the bank. The additional measures taken by the Governor with a resolution are the following:
1) empowering people to directly monitor the operation of the bank or the banking system;
2) imposing the bank and/or shareholder to:
– revise internal policies and procedures;
– lower operating costs;
– reach an adequate level of reserves;
– change a person with special rights and responsibilities;
– conduct an additional audit by an audit company, other than the audit firm engaged by the Bank, to the extent and under the conditions defined by the Governor and to the cost of bank;
– achieve or maintain a higher amount of own funds and/or a higher rate of capital adequacy stipulated by this Law;
– achieve or maintain stricter supervisory standards laid down in Articles 70, 71, 72, 73 and 74 of this Law;
– develop and implement a plan for improving the condition of the bank, if the bank is undercapitalized and
– further capitalize the bank and
3) prohibit, restrict or impose specific conditions for:
– the payment of dividends;
– the exercise of the rights from shares;
– payments to members of management organs;
– exposure to connected persons, unless they are covered by collateral securities issued or guaranteed by the Republic of Macedonia or the European Union, which are held by an independent third party – a depository institution – and the market value of which at any time exceeds 125% of the loan amount, or other forms of exposure;
– transactions with other members of the banking group or persons related to the bank;
– exposure to a person for whom according to the methodology of the National Bank correction of value is performed or special reserves are set aside of at least 20%
– prolongation of approved loans;
– performance of all or certain financial activities;
– opening parts of a bank;
– participation in the foreign exchange market;
– acquisition of equity holdings in other entities; and
– launching new financial activities.
Starting from the said constitutional provisions, the analysis of the provisions of the Law on the National Bank and the content of the contested provisions, it arises that in cases where the shareholder has acquired shares contrary to the provisions of the Law on Banks (Article 59) which are precisely defined and the shares for which the consent has been withdrawn, the Governor
passes a resolution that the shares do not give voting rights to that shareholder, and determines a deadline within which the shareholder is obligated to sell the shares. If the shareholder fails to sell the shares within the set deadline, and the bank has paid dividends to other shareholders, the dividend for the shareholder for whom the resolution found to not be entitled to payment of dividends, is allocated to the general reserves of the bank.
Given the foregoing, the Court finds that the above provisions grant the Governor of the National Bank of the Republic of Macedonia too broad powers in undertaking additional measures which are measures taken in exceptional situations against the shareholders in a bank. It means that in this case the Governor disposes of other person’s shares in the sense that if the shareholder does not sell the shares within the specified period, by order of the Governor they are sold on the stock exchange and the funds go into the reserves fund of the bank. With this kind of regulation of the matter the Governor is positioned above the management bodies of banks that decide on these issues, and these too broadly granted powers question the constitutionally guaranteed right to property defined in the Constitution.
Given the above mentioned, the Court finds that the allegations in the initiative that the legal solution referred to in Article 137 paragraphs 3 and 4 of the Law restricts the right to property without establishing a public interest and without giving proper pecuniary compensation, contrary to Article 8 paragraph 1 lines 3, 6 and 7, Article 30 paragraphs 3 and 4, and Article 58 of the Constitution, have merits.
6. On the basis of the aforementioned, the Court decided as in item 1 of the present Decision.
7. The Court took the present decision with a majority vote in the following composition: Mrs Elena Gosheva, President of the Court, and the judges: Dr Natasha Gaber-Damjanovska, Mr Ismail Darlishta, Mr Nikola Ivanovski, Mr Jovan Josifovski, Mr Sali Murati, Mr Branko Naumoski, Dr Gzime Starova and Mr Vladimir Stojanoski.(U.br.43/2013)