a) Hungary / b) Constitutional Court / c) / d) 25-05-2004 / e) 17/2004 / f) / g) Magyar Közlöny (Official Gazette), 2004/70 / h) .
Keywords of the Systematic Thesaurus:
Sources - Hierarchy - Hierarchy as between national and non-national sources - Law of the European Union/EU Law and domestic law - EU secondary law and domestic nonconstitutional instruments.
General Principles - Rule of law.
General Principles - Certainty of the law.
General Principles - Legality.
Fundamental Rights - Civil and political rights - Non-retrospective effect of law - Taxation law.
Keywords of the alphabetical index:
Agriculture, surplus stock, taxation / EU, Commission, regulation, implementation.
An Act that provides for inventory to be taken to establish stock as of and on 1 May, while the earliest possible entry into force of the Act is three weeks later, contradicts the requirements of legal certainty for failing to provide for the requisite constitutional adjustment period. A legal rule is unconstitutional if it cannot be known in due time and for that reason does not enable persons to avoid the negative consequences of such a rule upon its entry into force.
On 5 April 2004 parliament enacted a law "on measures concerning agricultural surplus stocks" (henceforth: the Surplus Act). That law was intended to implement Commission Regulation (EC) no. 1972/2003 of 10 November 2003 on transitional measures to be adopted in respect of trade in agricultural products on account of the accession (as amended) and Commission Regulation (EC) no. 60/2004 of 14 January 2004 laying down transitional measures in the sugar sector (as amended). The President of the Republic did not promulgate the Surplus Act; instead, he submitted it to the Constitutional Court for "review of unconstitutionality".
The Surplus Act and the relevant Commission regulations were intended to prevent the accumulation of surplus stocks of certain agricultural products. The legislative intent was to identify the operators or individuals involved in major speculative trade movements before the new member states entered the European Union. The core concern was to ensure that the new member states had a system in place on 1 May 2004 that would enable them to identify those responsible for such speculative developments.
Had the President signed the Surplus Act, it would have entered into force only on 25 May 2004, while the obligations set out in the Surplus Act were to come in effect on 1 May, the date of entry into force of the Accession Treaty. The regulations in question stipulated that the regulations would enter into force on 1 May 2004, subject to the entry into force of the Treaty of Accession, and required the new member states to develop and implement the relevant measures so that they would be applicable as of 1 May. The President claimed that the Surplus Act, with a date of entry into force of 25 May, would have been, at best, retroactive and, hence, unconstitutional.
The Constitutional Court agreed with the President that the Surplus Act was unconstitutional for failing to fulfil the requirement of legal certainty. According to the settled case-law of the Constitutional Court, it follows from the Constitution's definition of Hungary being a state governed by rule of law that legal certainty, including a fair adjustment period and non-retroactivity, must be observed. In particular, the Surplus Act was retroactive in so far as the surplus stock was to be determined on the basis of the difference of the inventory on 1 May and the daily average of the product in 2002-2003. The Surplus Act required that transactions that occurred after 1 January 2004 not be considered for the reduction of stock. That was found to be retroactive, too. The Court also took into account the provision of the National Expenditure Act, under which tax obligations cannot come into effect before 45 days from promulgation. The regulations in question required that holders of surplus stock pay taxes on goods in free circulation. The taxes collected by national authorities were to be assigned to the national budget of the new member state.
Finally, the Court found that the Surplus Act delegated the definition of the taxpayers who were liable to pay the tax in question and the method of the determining the tax to executive decrees. That contradicts the constitutional requirement that fundamental rights and duties are to be determined by an Act of parliament.