Black Friday for the Constitutional Court marks the downfall of the Western European hope in commercial litigation for foreign investors

November | 2012

Most western investors would think that presenting prayers for relief in a prioritised and subordinated order is natural. For example, the claimant may seek to have the contract declared void ab initio. It is the priority prayer. However, should the court find the there is no basis to hold the contract void, the court is requested to reduce the contractual penalty imposed by the contract as too excessive. Obviously, if the priority prayer is granted (the contract is held void) there is no need to decide on the subordinated prayer (reduction of the contractual penalty), because there is no valid contract and hence there is no valid contractual penalty contained therein. This approach allows submitting the whole dispute for adjudication and helps saving litigation time. It presents the dispute in a logical way. If “A” is not granted, then the court is requested to consider “B”, but only if “A” is not granted. Referrals for a preliminary ruling to the Court of Justice of the European Union are phrased in this manner. Western governments present their opinions to the Court of Justice of the European Union in this manner. Countries like Switzerland and Germany have provisions in their domestic civil procedure rules specifically allowing for this approach.

Not in Latvia. The approach described above has been denied to litigants in Latvia by the Latvian parliament and the Constitutional Court has upheld it as constitutional today.

There is no provision in the applicable Latvian civil procedure rules that prohibits this western approach expressis verbis. Moreover, there was no ruling of the Latvian civil courts dealing with the impermissibility of this approach and yet the Constitutional Court ruled that it does not violate the basic rights to know one’s rights.

The logic of the Constitutional Court is to protect the defendant. The Court has ruled that the defendant may not prepare the defence properly if it is not clear enough what the claim is about. It follows from today’s ruling that prayers presented in a manner of their priority are impermissible because of just that, i.e. they do not make it clear enough to the defendant what the claim is about. Instead, the Court ruled that it is perfectly acceptable that all the prayers that the claimant wishes to introduce are presented in separate proceedings. Multiplying proceedings is OK. Presenting prayers in a manner of priority how they are requested to be decided in one proceeding is not OK.

We had hoped that the Latvian Constitution and its understanding by the Constitutional Court would be wiser and derived from the contemporary common values originating in the western approach to the rule of law and basic rights. After all, we did not have justice Antonin Scalia on the bench. We hoped that the Constitutional Court would have no doubt that litigation in Latvia is fully capable of grasping these western legal concepts. After all, Ms. Solvita Aboltina, the Chairwoman of the Latvian Parliament, recently announced that the Latvian judicial system has completed its transformation to fit the western legal system. Seems we were mistaken, and so it seems was the Chairwoman.