Access to justice by for-profit legal persons
Right to free legal aid
For-profit legal persons
RULING Nº 216/10
1 of June of 2010
Where access to justice is concerned, there is no constitutional requirement to treat for-profit entities in the same way as natural persons and not-for-profit legal persons, by providing a generalised grant of free legal counsel in cases of a lack of sufficient economic resources.
I – This Ruling concerned an appeal by a for-profit legal person against a judicial decision that upheld the denial of a request for legal aid in the form of a dispensation from the court fee and other costs related to the case. The author of the appeal to the Constitutional Court had alleged that it did not possess the financial capacity to pay the cost of a lawsuit, which it did not in fact bring. It argued that legal persons cannot be required to have access to greater financial resources than natural persons, and that without the ability to resort to legal aid and given its financial situation and the legal costs facing it, it was denied access to justice. It said that this is in breach of the constitutional requirement regarding access to the law and to effective jurisdictional protection.
II – The Constitutional Court emphasised that the constitutional requirement designed to guarantee access to the law and the courts falls within the scope of the fundamental rights that emanate from the value attached to the dignity of the human person. This is a right that is also enshrined in both the Universal Declaration of Human Rights and the European Convention on Human Rights.
It is widely recognised that the fundamental rights pertain primarily to natural persons, and it is not legitimate to consider legal persons equivalent to the latter as holders of such rights. On the contrary, the Constitution places a limitation on that equivalence when it states that “Legal persons enjoy the rights and are subject to the duties that are compatible with their nature”. It is certainly true that the right in question is compatible with the nature of legal persons. However, the situations of natural persons and not-for-profit legal persons on the one hand and of for-profit entities on the other are not comparable when it comes to the effects of the state’s promotion of access to justice. For-profit entities are required by law to integrate any costs they may incur in relation to judicial litigation into their business activities, thereby ensuring the protection of both the asset-related interests of all their creditors and the general interest in the healthy development of the economy.
The Court’s jurisprudence has underlined the fact that the existence of disputes that arise out of an enterprise’s normal commercial life, and the profit-oriented goal of such entities, mean that the costs incurred in relation to legal professionals must be incorporated into the planning for the enterprise’s normal business activities and must subsequently be reflected in the end price of the goods and services it supplies to the consumer. So the inability to bear such costs is evidence of the enterprise’s lack of economic viability and, at the end of the day, may lead to its bankruptcy, thereby acting in favour of the healthy development of a free economy. The state must give priority to promoting access to justice by natural persons and not-for-profit entities, to the detriment of the option of providing public funding for the costs that are inherent in an enterprise’s normal, profit-making activities.
III – Although it is the state that shoulders the duty of guaranteeing access to justice by every citizen and of actually making it available to them, it is also obliged to bear in mind that in strictly economic terms the administration of justice is an asset with extremely high costs for the community. Universal access to justice is generically guaranteed by the institution of legal aid, which ensures that no citizen is deprived of access to the law and the courts for financial reasons, all the more so in the socially more pressing field of criminal justice. In other situations – particularly those in which asset-related and economic interests are in play – the legislator felt that it was necessary to accept that a part of judicial costs be borne by the person who resorts to justice and receives benefits therefrom for himself, rather than for people as a whole. It was recognised that the previous system did not make provision for this objective, but rather benefited both anyone who turned to the courts indiscriminately and without weighing up the consequences, and the party that was responsible for the cause of the action, thereby obliging the state (and the community) to bear the burden of paying for a large part of the resulting legal costs. This is why changes were made in both the regime governing access to the law and the courts and the regime governing court costs.
The legislator wanted to lay down the principle that, save for particularly meritorious exceptions, all the subjects in legal proceedings, whatever their nature or the way in which the law qualifies them, must be subject to payment of court costs, on condition that they possess the economic and financial capacity to do so. The exceptions to this rule were then addressed under the heading of legal aid.
IV – It is true that in 2004, by a majority, the Constitutional Court (Rulings nos. 106/2004 and 560/2004) held that it is unconstitutional to forbid the grant of free legal counsel to companies, and to do so even when they prove that their costs substantially exceed their economic possibilities and the actions in question fall outside the field of their normal economic activities.
However, in the first of these two cases the applicant for legal aid was a commercial company that was in the process of being liquidated on the grounds of its bankruptcy; while in both cases the object of the lawsuit had nothing to do with the normal business of the company in question.
V – The current norm governing the possibility of granting legal aid to for-profit legal persons is more restrictive than the previous law, to the point that it excludes that option without any exceptions.
Even so, the Court considered that this restriction is not in breach of either the right of access to the courts, or the principle of equality.
Apart from anything else, the norm in question does not make the right of access to justice entirely unviable, inasmuch as legal persons that are in a truly loss-making situation are exempt from court costs in any proceedings (except those related to the labour law), and therefore do not need any support.
What is more, legal persons are allowed to fiscally deduct the costs derived from litigation, and so, although it has to pay them up front, those costs end up reducing the legal person’s taxable income. Enterprises should also take out civil liability insurance to cover the cost of lawsuits that are not directly related to their business, and the fact is that expenditure on such policies is also considered to be a tax-deductible cost (and also that losses that arise out of insurable situations cannot even be considered to be costs).
Nor can one forget that to provide for-profit legal persons with protection in the form of legal aid would be to opt to protect the ability to litigate of commercial companies that are not in a position to be sure that they can continue to trade. This would be contrary to the constitutional requirement to ensure the proper operation of the markets in a way that guarantees balanced competition between enterprises, and the latter’s competitivity.
The Court was also of the opinion that the norm before it does not constitute a disproportionate and unjustified restriction on the right to the effective implementation of access to justice, given that, even if one were to feel that the differentiation involved cannot be total, or that one must respect a certain proportionality in relation to the other possible situations, that differentiation is underpinned by reasons related to the public interest and the option adopted by the legislator was not arbitrary. The fact is that the legislator enjoys a certain amount of room in which to shape the practical implementation of the concept of a lack of sufficient economic means where legal aid is concerned. This is a reality with imprecise boundaries, which is inevitably linked not only to the concrete costs of the lawsuit in which the interested party is involved, but also – and essentially – to that party’s economic situation.
This Ruling refers to a large number of other Rulings issued by the Court, which give an idea of the jurisprudential differences that have existed in relation to this question. In particular, see Rulings nos. 106/04, 560/04 and 279/09.