Right of for-profit legal persons to legal aid
Legal aid, equal access;
Legal aid free;
Legal person, equality;
08 of May of 2018
At the request of the Public Prosecutor, the Constitutional Court declared Article 7(3) of Law 34/2004, of July 29 (Law on Access to the Law and the Courts), in the wording of conferred by Law 47/2007 of 28 August unconstitutional in breach of Article 20 (1) of the Constitution, in so far as it refuses legal protection to for-profit legal persons regardless of their specific economic situation.
I - The norm under appreciation excludes the access of for-profit legal persons to legal protection (which encompasses legal advice and legal aid) in all circumstances regardless of their concrete economic situation and without need for inquiring whether or not they objectively are in a condition to pay the costs of proceedings in a timely manner; in its current wording, Article 7(3) of the Law on Access to Law and Courts (LADT), excludes from the system of access to the law and the courts - whose goal is to guarantee that justice is not denied on account of one’s insufficient economic means - a whole universe of subjects based solely on the fact that they are for-profit (or limited liability) legal persons.
II - According to Article 12 (2) of the Constitution, "legal persons enjoy the rights and are subject to the duties compatible with their nature". Legal persons enjoy the right of access to the courts as laid down in Article 20 (1) of the Constitution and judicial litigation is acknowledgedly a necessary prerequisite for the exercise of their right to a fair trial.
III - Law 47/2007 has amended the wording of its Article 7 (3) so as to remove this category of legal subjects from one of the essential dimensions of the right of access to the courts for the protection of rights or legally protected interests, ie the right to legal aid in case of insufficient financial resources; on the basis of a purely statutory or categorical consideration, the legislator has precluded any sort of case-by-case assessment, thereby preventing actual access to the courts by for-profit legal persons who have thus become legally unable to request for legal aid; as a consequence, a fundamental dimension of the guarantee of access to the law and to the courts, which prohibits the denial of justice on account of one’s lack of resources, is not applicable to all subjects of law therefore losing the nature of an universal right.
IV - Although Article 20 of the Constitution does not per se exclude that differences between legal subjects may be relevant in order to determine the granting of legal protection as a dimension of the right of access to the courts and a guarantee of the effectiveness of judicial protection, the way in which these differences influence the criteria for granting legal aid must not exclude or affect the provision of legal aid in a disproportionate manner; that is to say, in order to safeguard the universality of the right to legal aid, the criteria should be adequate and non exclusive of the possibility of a concrete assessment of the situation of economic insufficiency invoked by each individual; indeed, if for-profit legal persons enjoy the fundamental right to litigate in court, that right should not be denied in practice without assessing the insufficiency of economic means on which the granting of legal aid depends.
V - Article 7 (3) of the LADT prohibits the granting of legal aid to a whole category of subjects without regard for their specific situation; according to the legislator, the right to legal aid is not compatible with the nature of for-profit legal persons, meaning that those persons are excluded from the scope of protection of Article 20 (1) of the Constitution in fine solely on the basis of their legal nature.
VI - Although in Ruling 216/10 it has been argued that for-profit legal persons are not entitled to the right to legal protection enshrined in Article 20 (1) of the Constitution because the insufficiency of economic means is not compatible with their nature, this understanding should be rejected. Such an understanding is not admissible because, on the one hand, the right of access and the guarantee of access to the courts in the event of insufficient economic means are inseparable; and, secondly, because it is not established that it is impossible for such persons to be inhibited or prevented from taking legal action for economic reasons; in addition, and adding to the literal and teleological elements in Article 20 (1) of the Constitution, which run counter to a legislative option such as that laid down in Article 7 (3) of the LADT, the aforementioned understanding is based on assumptions that are not accurate and do not take into account the latest developments in the interpretation of Article 47 (1) of the Charter of Fundamental Rights of the European Union (hereinafter Charter)), on the right to an effective remedy and to a fair trial.
VIII - The legal exemption of judiciary costs is not intended to safeguard the guarantee of legal protection guaranteed in the constitution; moreover, nothing in the case-law of the European Court of Human Rights (ECHR) precludes the granting of legal aid to for-profit legal persons; finally, the right to effective judicial protection guaranteed by Article 47 of the Charter may require, depending on the circumstances of the specific case, the granting of legal aid to for-profit legal persons, without this being considered as dysfunctional in relation to the competition rules in an efficient market.
IX - Firstly, the Constitutional Court has already held that the right of access to the courts has as its inherent dimension the guarantee that justice will not be denied due to the lack of economic means; the unity of content of this right postulates that the holders may benefit from all their dimensions; in its unity, Article 20 (1) of the Constitution guarantees the right of access to the courts to everyone regardless of one’s economic condition. The right of access to the courts would thus be merely formal or theoretical if it did not conceive for the possibility that for-profit legal persons may be unable to meet their own costs; Article 20 underlines the universal nature of the right of access to courts by stressing that "access to the law and the courts is guaranteed to all"; the constitutional guarantee of access to the courts necessarily includes the right not to be deprived of a judicial remedy on the basis of insufficient fiancial resources; the guarantee dimension (according to which no one can be prevented from bringing action to a court by virtue of their economic condition) is indissociable from the fundamental right to an effective judicial remedy. If for-profit legal persons have the right of access to the courts, it follows that this right can be put at risk if there are no mechanisms in place in order to ensure its economic protection.
X - Secondly, the argument of structural incompatibility of the right of access to legal aid with the for-profit nature of the legal persons, which is based on the assumption that the condition of economic insufficiency presupposed in Article 20 does not verify, does not adhere to reality.
XI - The European Court of Human Rights has stated on a number of occasions that for-profit legal persons hold many of the rights provided for in the European Convention on Human Rights (ECHR); with regard to the alleged structural incompatibility of the guarantee of access to justice with the pursuit of profit, the truth is that it is possible that for-profit legal persons are indeed placed in a situation of economic insufficiency that prevents them from bearing the costs of judicial proceedings, whether or not they are insolvent; an insolvency situation, cannot in itself imply as an automatic effect the loss of the fundamental right referred to in Article 20 (1) of the Constitution.
XII - One of the arguments put forward by Ruling 216/10 is that, notwithstanding Article 7 (3) of the LADT, for-profit legal persons who genuinely lack economic means are already exempt from legal costs, under Article 4 (1) (u) of the Code of Judicial Proceedings Costs. However. that exemption is valid only for as long as the proceedings in question are pending; on the other hand, once the judgment declaring insolvency is pronounced, this will determine the constitution of an insolvent estate, to which this subjective exemption no longer applies.
XIII - In line with this ruling, the legislator would have considered that for-profit legal persons who lack sufficient resources are not entitled to legal protection with the exception of those subject to a Special Revitalization Process (SRP), who are exempt from the action fees; in the logic of that argument, for-profit legal persons who are financially underfunded but are not currently in a state of insolvency would necessarily have to initiate a PER in order to benefit from legal aid.
XIV - However, it may be possible for a company to find itself in a situation where it is unable to immediately pay the costs of a particular court litigation, without necessarily being required to initiate a PER; on the other hand the PER presupposes not only the initiative of the company in a difficult economic situation but also the agreement of at least one of its creditors to initiate negotiations leading to the revitalization of the company by means of the approval of a recovery plan. This is a process that implies, or may imply, the participation of the other creditors of the company and the appointment of a temporary administrator, therefore imposing severe limitations as regards the autonomy and powers of administration of the company, since the practice of important acts requires the prior authorization of the administrator.
XV - In addition, the exemption of costs provided for in Article 4 (1) (u) of the Code of Judicial Proceedings Costs for companies that are insolvent or in a special revitalization process, does not complety safeguard the right to legal aid. Indeed, not only is the exemption of costs only one of the possible modalities of legal aid and does not exhaust its full scope, but the fundamental right of access to courts by legal persons subjected to a PER is severely limited on account of the restrictions placed on the autonomy of the company
XVI - Notwithstanding the differences between Article 20 (1), in fine, of the Constitution and Article 6 (1) of the ECHR, the case-law of the European Court of Human Rights has recognised that the right to a fair trial enshrined in Article 6 of the ECHR may require, in certain situations, the granting of legal aid not only to natural persons, but under certain circumstances, also to legal persons , including those that are for-profit; the refusal to grant legal aid cannot be formulated in abstract terms but requires in all cases, and for all types of procedural subjects, an assessment as to whether the right of access to a court may be at risk; this understanding is not compatible with a legal provision that refuses the granting of legal aid to an entire category of subjects solely on the basis of their legal nature, thus excluding the possibility of an appreciation of the concrete circumstances of the case.
XVII - The argument that the granting of legal aid to for-profit legal persons would be detrimental to the efficient functioning of markets and fair competition between companies protected under Article 81 (f) of the Constitution is also rejected on the same grounds as those invoked in Ruling 591/16. The Court's understanding of the principle of effective remedy enshrined in Article 47 of the EU Charter of Fundamental Rights rejects the idea of a necessary incompatibility between the legal aid provided to for-profit legal persons and the proper functioning of the internal market; legal aid is not a factor of distortion of competition nor can it be equated to an aid granted by the State which distorts or threatens to distort competition by favoring certain companies.
XVIII - The same understanding affirms that legal aid can not be rejected as a whole (pauschal) and that the reference to "general interests" can be interpreted as a summary of all interests relevant for the case; this is incompatible with Article 7 (3) of the LADT which excludes in general and abstract terms any possibility of legal aid for profit-making legal persons and therefore prevents the assessment of the company’s real situation; the absolute impossibility of a for-profit legal person to argue their economic insufficiency for the purpose of obtaining legal aid is contrary to Article 47 (3) of the CDFUE. Taking into account the fundamental right to judicial action in the context of European Union law and within thePortuguese constitutional framework, it must be acknowledged that Article 7 (3) of the LADT may lead to solutions that are clearly contrary to the axiological unity in the field of fundamental rights applicable by the Portuguese courts.
Rulings 216/2010, 01.06.2010, 671/2014, 15.10.2014, 86/2017, 16.02.2017, 266/2017, 31.05.2017
European Court of Human Rights:
Case Steel and Morris v. United Kingdom (Ruling of 15.02.2005, Complaint 68416/01, §§ 59 e 60); Case Urbšienė and Urbšys v. Lithuania (Ruling of 8.11.2016, Complaint 16580/09).