Trybunał Konstytucyjny

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The freedom of economic activity SK 37/15

The exclusion of the jurisdiction of administrative courts with regard to decisions issued as part of the consideration of an objection submitted by an entrepreneur whose business is subject to an audit on the basis of the provisions of chapter 5 of the Act on the Freedom of Economic Activity is inconsistent with the Constitution.

On 20 December 2017 at 10.00 a.m. the Constitutional Tribunal publicly delivered its ruling issued at a sitting in camera with regard to a constitutional complaint concerning the lack of the possibility that an administrative court could review determinations pertaining to an entrepreneur’s objection to audit activities carried out with relation to his/her business by a competent authority in accordance with the provisions on the freedom of economic activity.

The Constitutional Tribunal adjudicated that Article 3(2)(2) of the Act of 30 August 2002 on Proceedings Before Administrative Courts  – construed as ruling out the possibility of filing a complaint to an administrative court on a decision concerning an appeal against a decision resulting from the submission of an objection referred to in Article 84c(1) of the Act of 2 July 2004 on the Freedom of Economic Activity (Journal of Laws – Dz. U. of 2017, item 2168) – is inconsistent with Article 45(1) and Article 77(2) of the Constitution of the Republic of Poland.

Moreover, the Constitutional Tribunal decided to discontinue the proceedings as to the remainder, due to the inadmissibility of issuing a ruling.

The ruling was unanimous.

In the present case, what was challenged was the constitutionality of Article 84c(1) of the Act on the Freedom of Economic Activity – insofar as no complaint may be lodged with an administrative court, on the basis of Article 3(2)(2) and Article 3(2)(4) of the Act of 30 August 2002 on Proceedings Before Administrative Courts, against a decision determining the validity of an entrepreneur’s objection to the undertaking and carrying out of activities by audit authorities, issued pursuant to Article 84c(9) and Article 84c(10) of the Act on the Freedom of Economic Activity.

Due to the well-established jurisprudence of the Supreme Administrative Court and voivodeship administrative courts as regards the narrowing down of Article 3(2)(2) of the Act on Proceedings Before Administrative Courts as well as due to circumstances related to the facts of the case, justification for a constitutional complaint, as well as submissions of the Public Prosecutor-General and the Ombudsman, the Tribunal – relying on the falsa demonstratio non nocet principle – deemed that the subject of the Tribunal’s review should comprise Article 3(2)(2) of the Act on Proceedings Before Administrative Courts, understood as one that excludes the possibility of lodging a complaint with an administrative court against a decision on an appeal against a decision issued as a result of a submitted objection referred to in Article 84c(1) of the Act on the Freedom of Economic Activity.

In the view of the Constitutional Tribunal, the commencement of audit proceedings in accordance with provisions included in chapter 5 of the Act on the Freedom of Economic Activity, undoubtedly, manifests the legal effects of the activity (interference) of public authorities with regard to the individual.

The final outcome of audit proceedings (i.e. the drafting of an audit report and conclusions included therein) unilaterally determines the legal situation of an entrepreneur whose business is subject to an audit, i.e. it determines whether relevant administrative (tax) proceedings are to be instituted with regard to that entrepreneur.

Undoubtedly, a decision on an entrepreneur’s objection to the undertaking and carrying out of an audit (Art. 84c(9) of the Act on the Freedom of Economic Activity) as well as a decision on an appeal against a decision on the continuity of audit activities (Art. 84c(10) of the said Act) have direct legal effects within the scope of the rights of an entrepreneur whose business is subject to an audit.

The circumstances – where, firstly, audit proceedings are conducted on the basis of the provisions of the Act on the Freedom of Economic Activity and certain special statutes (Art. 77(2) of the said Act), and not on the basis of the provisions of the Administrative Procedure Code, and where, secondly, within the scope not regulated by statute, proceedings in cases referred to in Article 84c(9) and (10) of the Act on the Freedom of Economic Activity are governed by the provisions of the Administrative Procedure Code (Art. 84c(16) of the said Act) – do not make decisions issued as a result of a submitted objection referred to in Article 84c(1) of the said Act lose the character of determinations issued by public administration authorities within the meaning of Article 184, first sentence, of the Constitution.

The content of decisions issued on the basis of Article 84c(9) and (10) of the Act on the Freedom of Economic Activity is not addressed exclusively to an audit authority; on the contrary, the addressee thereof is also an entrepreneur whose business is subject to an audit and who has applied prescribed legal measures to appeal against audit activities undertaken (carried out) with regard to him/her.

Decisions issued as a result of submitting an objection by an entrepreneur (regardless of their content) have no character of acts issued within the realm of internal administration, which actually follows from the possibility of appealing against them on the basis of Article 84c(10) of the Act on the Freedom of Economic Activity.

The very fact that the legislator granted the right to submit an appeal against a decision proves that the legislator had assumed that such an act may infringe the legal realm of a party who is entitled to such a means of appeal.

The procedure introduced in Article 84c of the Act on the Freedom of Economic Activity is aimed at the protection of the rights of entrepreneurs, and the legal means in the form of an appeal against a decision issued on the basis of para 9 of the cited provision constitutes one of instruments guaranteeing the protection of those rights.

Decisions issued on the basis of Article 84c(9) and (10) of the Act on the Freedom of Economic Activity constitute acts which, in a legally effective way, determine the lawfulness of instituting or carrying out an audit of the activity of an entrepreneur, and thus they are not just acts concerning the realm of facts; on the contrary, they pertain to the realm of the rights of entrepreneurs, which are enshrined in the Constitution and are specified in the provisions of the aforementioned Act which entrusts entrepreneurs with the right to effectively demand (with the right to a fair trial included) that public administration authorities maintain standards provided by law with regard to the entrepreneurs.

In the Tribunal’s assessment, the subject of the proceedings commenced by submitting an objection referred to in Article 84c(1) of the Act on the Freedom of Economic Activity has the nature of “a case” within the meaning of Article 45(1) of the Constitution.

Thus, the interpretation of Article 3(2)(2) of the Act on Proceedings Before Administrative Courts which rules out the review of determinations of public administration authorities, issued as a result of an objection submitted by an entrepreneur whose business is subject to an audit, where the review is to be conducted by an independent administrative court, undermines the constitutional right to a fair trial and contradicts the constitutional prohibition against barring recourse to courts.

The basic right of the individual is the possibility of verifying administrative authorities’ determinations issued with regard to the individual (irrespective of the type of determinations) where the verification is conducted by an administrative court, i.e. an authority that is not related structurally to the administrative authorities.

The Presiding Judge of the adjudicating bench was Judge Grzegorz Jędrejek, and the Judge Rapporteur was Judge Andrzej Zielonacki.