in the matter of the constitutional appeal by the President of Ukraine concerning the compliance (constitutionality) of the Law of Ukraine “On Accounting Chamber of Ukraine“ with the Constitution of Ukraine (case on the Accounting Chamber)

The Constitutional Court of Ukraine, consisting of the following judges of the Constitutional Court of Ukraine:

Volodymyr Denysovych Voznyuk,

with the participation of representatives of the subject of the constitutional appeal -- the President of Ukraine -- Fedir Hlibovych Burchak and Leonid Vasylyovych Pidpalov, representatives of the Verkhovna Rada of Ukraine -- Anatolij Pavlovych Zayets and Anatolij Oleksandrovych Selivanov, and the following persons invited by the Constitutional Court of Ukraine to take part in consideration of the case:

- on behalf of the Antimonopoly Committee of Ukraine -- Svitlana Mykhailivna Moroz;

- on behalf of the General Accounting Department of Ukraine -- Volodymyr Volodymyrovych Bahinskyj, Nina Mykolaivna Nikolenko, Mykhailo Vasylyovych Romaniv;

- on behalf of the State Tax Administration of Ukraine -- Oleksandr Hnatovych Dorosh, Valentyna Mykolayivna Kulinichenko;

- on behalf of the Ministry of Finance of Ukraine -- Volodymyr Makarovych Matvijchuk;

- on behalf of the National Audit Committee of Ukraine -- Stepan Ivanovych Pavlyuk;

- on behalf of the National Bank of Ukraine -- Viktor Petrovych Ryabets;

- on behalf of the Procuracy of Ukraine -- Ivan Yukhymovych Hrishchenko;

- on behalf of the Accounting Chamber of the Verkhovna Rada of Ukraine -- Oleksandr Ivanovych Andrusenko, Serhij Tymofiyovych Kadkalenko, Valerij Vasylyovych Malikov, Tamara Vasylivna Nizhenska;

- on behalf of the State Property Fund of Ukraine -- Vitalij Ivanovych Kryukov, Andrij Petrovych Pidhajnyj,

guided by paragraph 1 of part 1 of Article 150 of the Constitution of Ukraine, paragraph 1 of Article 13 and Articles 40 and 65 of the Law of Ukraine “On the Constitutional Court of Ukraine,” began, at a plenary meeting, to review the case regarding constitutional appeals by the President of Ukraine of December 28, 1996, and May 19, 1997, concerning whether the Law of Ukraine “On the Accounting Chamber of the Verkhovna Rada of Ukraine” and the Resolution of the Verkhovna Rada of Ukraine “On Interpretation of Article 98 of the Constitution of Ukraine” are in compliance with the Constitution of Ukraine.

During the process of reviewing materials in the case, the Constitutional Court of Ukraine, at a plenary meeting, by its Resolution of July 10, 1997, in accordance with paragraph 23 of the Rules of the Constitutional Court of Ukraine, split the above-mentioned constitutional proceeding into two separate proceedings. On July 11, 1997, the Constitutional Court of Ukraine rendered a Decision regarding the constitutionality of the Resolution of the Verkhovna Rada of Ukraine “On the Interpretation of Article 98 of the Constitution of Ukraine.”

The basis for considering this case, in accordance with Articles 39, 40 and 71 of the Law of Ukraine “On the Constitutional Court of Ukraine”, was the constitutional appeal by the President of Ukraine of December 28, 1996, regarding the constitutionality of the Law of Ukraine “On the Accounting Chamber of the Verkhovna Rada of Ukraine” of July 11, 1996.

The reason for considering this case, in accordance with Article 75 of the Law of Ukraine “On the Constitutional Court of Ukraine,” is the existence of a dispute concerning whether that portion of the Law of Ukraine “On the Accounting Chamber of the Verkhovna Rada of Ukraine” which defines the status, goals, functions and powers of the Accounting Chamber is in compliance with the Constitution of Ukraine.

After hearing the reports of judges P.F. Martynenko and M.V. Kostytsky, the explanations by the subject of the constitutional appeal’s representatives -- F.H. Burchak and L.V. Pidpalov, representatives of the Verkhovna Rada of Ukraine -- A.P. Zayets and A.O. Selivanov, representatives of the state bodies and institutions requested by the Constitutional Court to consider the case -- O.I. Andrusenko, O.H. Dorosh, S.T. Kadkalenko, V.I. Kryukov, V.V. Malikov, V.M. Matvijchuk, S.M. Moroz, S.I. Pavlyuk, V.P. Ryabets, and after studying and analyzing the conclusions of financial, economic and legal experts, the interim committee of the Constitutional Court of Ukraine and other materials of the case, the Constitutional Court of Ukraine

e s t a b l i s h e d:

1. The subject of the constitutional appeal maintains that the Law of Ukraine “On the Accounting Chamber of the Verkhovna Rada of Ukraine” (hereinafter “the Law”) does not correspond to the Constitution of Ukraine, is unconstitutional in general, and offers the following arguments.

First of all, the subject of the constitutional appeal points out that the portions of the Law which define the nature of the Accounting Chamber and its interrelations with the Verkhovna Rada of Ukraine do not correspond to the Constitution of Ukraine. If the Constitution of Ukraine provides for creation of the Accounting Chamber as a state body which acts “on behalf of the Verkhovna Rada of Ukraine” and its functions are defined as “control over utilization of funds of the State Budget of Ukraine” (Article 98), then the Law defines the Accounting Chamber as a body of the Verkhovna Rada itself which is charged with carrying out high-level state financial and economic control.

In its explanations of this provision of the constitutional appeal, the Verkhovna Rada of Ukraine points out that since the Accounting Chamber acts on behalf of the Verkhovna Rada of Ukraine (Article 98 of the Constitution of Ukraine) and is formed by it (paragraph 16 of Article 85 of the Constitution of Ukraine), then it is, in fact, the body of parliamentary control and, therefore, its legislative definition as the body of state financial and economic control which is created by the Verkhovna Rada and is subordinate and accountable to it, is legally justified.

In attempting to resolve this dispute, the Constitutional Court of Ukraine proceeds from the fact that the Constitution of Ukraine has the highest legal force (the second part of Article 8 of the Constitution of Ukraine). Superiority of constitutional norms applies to all spheres of state activity, including the legislative process. When adopting laws, the Verkhovna Rada of Ukraine must avoid discrepancies with any provisions that are directly expounded in the Constitution of Ukraine.

In the Law of Ukraine “On the Accounting Chamber of Ukraine,” however, the Verkhovna Rada of Ukraine changed the constitutionally established name of the Accounting Chamber and its functions.

The definition of the Accounting Chamber as a body of the Verkhovna Rada itself creates the possibility that direct implementation of parliamentary functions will be extended to the Accounting Chamber, and this contradicts the principle of a single legislative body which is the Verkhovna Rada of Ukraine (Article 75 of the Constitution of Ukraine).

First of all, the Verkhovna Rada of Ukraine -- which, by its juridical nature, is a parliament -- exercises its constitutional powers (Articles 85 and 92 of the Constitution of Ukraine), in particular in the sphere of financial and economic activity (paragraphs 4, 6, 11, 13, 14, 16, 18, 19, 24, 33, 36 of Article 85; Paragraphs 5, 6, 7, 8, 9, 22 of the first part of Article 92; paragraphs 1 and 8 of the second part of Article 92 of the Constitution of Ukraine), precisely as a body of general constitutional competence. According to Article 98 of the Constitution of Ukraine, the Accounting Chamber is a body of special constitutional competence which, in the context of the general powers of the Verkhovna Rada of Ukraine, has a limited and exclusive nature. Powers of the Accounting Chamber are derived from the powers of the Verkhovna Rada of Ukraine and, according to Article 19 of the Constitution of Ukraine, it {the Accounting Chamber} cannot exceed these limits in its activity.

Thus, in the normative and legal meaning of the Constitution of Ukraine, the Accounting Chamber is an independent body of special constitutional competence, and the Verkhovna Rada of Ukraine, being a legislative body, has no right to take away or restrict the constitutional powers of the Accounting Chamber, to transfer them to other bodies or to take upon itself their implementation. The abovementioned provisions, however, do not apply to the Verkhovna Rada of Ukraine as a body which, according to Article 155 of the Constitution of Ukraine, is authorized to introduce amendments to the Constitution of Ukraine and in particular to Article 98.

The Constitutional Court of Ukraine also takes into consideration the fact that on January 23, 1997, the Verkhovna Rada of Ukraine passed the Law of Ukraine “On Introduction of Amendments to the Law of Ukraine ‘On the Accounting Chamber of Ukraine’,” in which it made an attempt to correct the discrepancy between the Constitution of Ukraine and the legislative definition of the place of this body by changing its name to the “Accounting Chamber,” but this {Law}, however, did not enter into force.

Secondly, the definition of the purpose of the Accounting Chamber in the Law also does not correspond to the Constitution of Ukraine. If the Constitution of Ukraine charges the Accounting Chamber with the function of exercising “control over utilization of the funds of the State Budget of Ukraine” (Article 98), then part one of Article 1 and Article 3 of the Law charge the Accounting Chamber with the function of the “highest” {control} and “state financial and economic control,” while Article 36 of the Law establishes its status as “the highest independent body of financial and economic control”.

The notion of “state financial and economic control,” as affirmed by financial, economic and legal expert studies, is much broader than the notion of “control over utilization of the funds of the State Budget of Ukraine.” By implementing a more expansive notion in the Law, the Verkhovna Rada of Ukraine actually gave a broad interpretation of Article 98 of the Constitution of Ukraine, and affirmed it with the Resolution of the Verkhovna Rada of Ukraine “On the Interpretation of Article 98 of the Constitution of Ukraine” of October 1, 1996. By its Decision of July 11, 1997, the Constitutional Court of Ukraine declared this Resolution null and void because it did not correspond to the Constitution of Ukraine.

Thirdly, the provision of the Law according to which the “Head of the Accounting Chamber, First Deputy and Deputy Head, the chief inspectors and Secretary of the Accounting Chamber cannot be taken into custody or have criminal charges brought against them without the consent of the Verkhovna Rada of Ukraine” (the first part of Article 37 of the Law) cannot be considered as constitutional either.

In effect, this provision extends the immunity (without using this term) conferred upon national deputies that is provided for by Article 80 of the Constitution of Ukraine to the Accounting Chamber officials mentioned above.

The purpose of establishing additional guarantees of immunity, which are comparable to personal inviolability, for certain categories of state officials is to create conditions necessary for fulfillment of the responsibilities with which they have been entrusted by the state and for protecting them against illegal interference in their activity.

Immunity for state officials constitutes a higher level guarantee in comparison with the inviolability of person, which is established for all people and which corresponds to the principle of equality of rights and freedoms of citizens and their equality before the law (Article 24 of the Constitution of Ukraine).

Therefore, if the rights and freedoms of person and citizen as well as guarantees of these rights and freedoms (including additional guarantees of personal inviolability) are defined exclusively by the laws of Ukraine (paragraph one of Article 92 of the Constitution of Ukraine), then higher level guarantees (for deputies, judges and other officials), insofar as they allow for exceptions to the general principle of equality of rights and freedoms of citizens and their equality before the law should, according to the dictates of logic, be determined exclusively by the Constitution. The Constitution of Ukraine does not provide such guarantees of immunity for officials of the Accounting Chamber.

Thus, those provisions of the Law which define the name of the Accounting Chamber as the Accounting Chamber of the Verkhovna Rada of Ukraine (the name of the Law, preamble, Articles 1 and 39), the place of the Accounting Chamber and its purpose (the first part of Article 1, Articles 3 and 36 of the Law), guarantees of the legal status of officials mentioned in part one of Article 37 of the Law, should be regarded as such that do not comply with the Constitution of Ukraine.

2. The subject of the constitutional appeal points out that the Law authorizes the Accounting Chamber not only to exercise control over “implementation of the State Budget of Ukraine” in general, i.e., over both its “expenditure” and “revenue” portions, but also to exercise direct managerial functions with respect to state bodies, enterprises, organizations and institutions with different forms of ownership, public foundations and associations, and charges it with the right to carry out operational and compulsory measures by means of “compulsory instructions.”

Explanations by the Verkhovna Rada of Ukraine of this provision of the constitutional appeal point out that Article 98 of the Constitution of Ukraine cannot be interpreted as one that defines the entire status of the Accounting Chamber, and that the Accounting Chamber has to execute control over all aspects of State Budget implementation, including both its expenditure and revenue portions.

Analysis of the provisions of the Law shows that the Accounting Chamber is charged, on the one hand, with the function of “organizing and exercising control over timely implementation” of the “revenue” portion of the State Budget of Ukraine in particular (paragraph 2 of Article 2) and, on the other hand, with the authority to carry out control, audit and other types of activities which ensure an integrated system of control “over implementation of the State Budget of Ukraine” in general (paragraph 1 of Article 7). In turn, analysis of Articles 2, 6, 7, 15, 22 of the Law shows that powers of the Accounting Chamber cover both expenditure and revenue portions.

In the course of court proceedings, disagreements emerged between representatives of the parties concerning the essence of very division of the State Budget’s implementation into implementation of revenue and implementation of expenditure portions. Legislative recognition of this division, however, is an established fact: paragraph two of Article 2 of the Law contains a provision on organization and execution of control over timely implementation “of revenue and expenditure portions of the State Budget of Ukraine.” The Constitutional Court of Ukraine proceeds from the fact that “control over utilization of funds of the State Budget of Ukraine,” the exercise of which, according to Article 98 of the Constitution of Ukraine, is entrusted to the Accounting Chamber, constitutes control over implementation of the expenditure portion of the State Budget of Ukraine.

Thus, provisions of the Law according to which the Accounting Chamber is charged with the function of organization and execution of control: over timely implementation, in particular “of the revenue . . . portion of the State Budget of Ukraine” (paragraph 2 of Article 2); “over timely and complete transfer of revenues and funds to the State Budget of Ukraine” (paragraph 2 of Article 6 of the Law); “over revenues of the State Budget of Ukraine received from management of state property, including its privatization and sale; from management of property which is object of the right of state ownership” (the third part of Article 23 of the Law); “over implementation of the State Budget of Ukraine” in general (paragraphs 1 and 6 of Article 7 of the Law), should be regarded as not corresponding to the Constitution of Ukraine.

The conclusion regarding the unconstitutionality of the enumerated provisions does not apply to the Accounting Chamber’s conduct of some expert, analytical, informational and other types of activity, which does not involve control and audit, as well as the revenue part of the State Budget of Ukraine if such activity is necessary for execution of control over the spending of Ukraine’s State Budget according to Article 98 of the Constitution of Ukraine.

Analysis of provisions of the Constitution of Ukraine shows that execution of control over the implementation of Ukraine’s State Budget and over management of state finances is entrusted to bodies of different branches of power, first and foremost to the Verkhovna Rada of Ukraine (paragraphs 4, 6, 13, 14, 33 of part one of Article 85; paragraph 1 of part two of Article 92, Articles 95 and 96 of the Constitution of Ukraine) and to the Accounting Chamber (Article 98 of the Constitution of Ukraine).

The Verkhovna Rada of Ukraine is directly charged with the task of approving the State Budget of Ukraine, control over implementation of the State Budget of Ukraine; approval of national economic, scientific, technical, social, ethnic and cultural development programs as well as environmental programs; execution of parliamentary review within the limits established by the Constitution of Ukraine, etc. According to Article 98 of the Constitution of Ukraine, the Accounting Chamber of Ukraine is charged with exercising control on behalf of the Verkhovna Rada over utilization of funds of Ukraine’s State Budget.

At the same time, in the system of executive authority and beyond it, based on the Constitution and laws of Ukraine, the following state bodies were established whose powers include control over the implementation of the State Budget of Ukraine: the Cabinet of Ministers of Ukraine, the State Property Fund of Ukraine, the General Accounting Department of Ukraine, the Main Office of the State Treasury of Ukraine, tax bodies and others.

All these bodies function based on principles defined in the Constitution of Ukraine, in particular, division of State power into legislative, executive and judicial {branches} (the first part of Article 6 of the Constitution of Ukraine) with a delineation of their respective areas of competence.

In the context of abovestated, charging the Accounting Chamber with additional direct executive functions, the establishment of accountability and subordination to the Accounting Chamber of executive branch bodies, local government bodies, etc. (paragraph 8 of Article 6, paragraphs 2, 4 of Article 7, part three of Article 22, part one of Article 23 of the Law) complies neither with the principle of the independence of legislative and executive bodies in exercising their authority as a fundamental principle of the constitutional system of Ukraine (the second part of Article 6 of the Constitution of Ukraine); nor the basis of the legal order in Ukraine according to which the bodies of state power and their officials are bound to act solely based on, within the authority of and in the manner provided for by the Constitution and laws of Ukraine (the second part of Article 19 of the Constitution of Ukraine); nor provisions of the Constitution of Ukraine on the status of the Cabinet of Ministers of Ukraine as the highest body in the system of executive power (the first part of Article 113 of the Constitution of Ukraine).

Implementation of the abovementioned provisions of the Law would enable the Verkhovna Rada of Ukraine - a legislative body - to implement laws that it [itself] adopts through a constitutional body - the Accounting Chamber - which is subordinate and accountable to the Verkhovna Rada. Moreover, its high officials cannot be taken into custody or tried for a criminal offense without the consent of the Verkhovna Rada of Ukraine (the first part of Article 37 of the Law), and they can be dismissed from their position only by decision of the Verkhovna Rada of Ukraine in cases “of violation of the legislation of Ukraine or abuse of office” (paragraph 1 of part four of Article 37 of the Law).

This also applies to those provisions of the Law according to which the Accounting Chamber is charged with exercising administrative and instructive measures, including those of a compulsory nature. Thus, according to paragraph 4 of part two of Article 12 of the Law, staff members of the Accounting Chamber are authorized -- in case they find in the materials that are audited “falsifications, forgery, misappropriations and abuses -- to confiscate the necessary documents leaving in the file a deed on confiscation and a copy or description of the confiscated documents,” i.e., to perform actions that according to procedural legislation are carried out by investigative bodies.

According to the first part of Article 31 of the Law, the Accounting Chamber is authorized to issue compulsory instructions concerning immediate cessation of violations if they are found in economic, financial, commercial or other activity which causes direct damage to the state, as well as in case of deliberate or systematic noncompliance with the procedures and terms for reviewing decisions and conclusions of the Accounting Chamber and impeding its exercise of control measures.

In cases of repeated violation or misimplementation of instructions on spending funds of the State Budget of Ukraine, the Board of the Accounting Chamber is authorized to adopt a decision suspending all financial, payment and accounting operations on bank accounts as well as all or some operations on a correspondent account of the National Bank of Ukraine and simultaneously to inform Ukraine’s Verkhovna Rada of this (part four of Article 31 of the Law). Moreover, if a compulsory instruction can be appealed in court (part six of Article 31 of the Law), then the decision of the Board, as it derives from part four of Article 31 of the Law, is final and not subject to appeal. Carrying out actions of this kind, however, and adopting a concrete decision of a compulsory nature that has direct legal consequences, belongs to the authority of the executive branch (part two of Article 6 of the Constitution of Ukraine).

Thus, those provisions of the Law which entrust the Accounting Chamber with executive powers of an administrative and instructive nature (paragraph 4 of Article 12, Article 31 of the Law), should be regarded as such that do not correspond to the Constitution of Ukraine.

3. The constitutional appeal points out that the Constitution of Ukraine charges the Accounting Chamber with control over utilization of “funds” of the State Budget of Ukraine (Article 98), while the Law also charges the Accounting Chamber with control over the sphere of financial and economic activity that is beyond the scope of the State Budget of Ukraine: over securing compliance with laws in financial and economic spheres; money emission, spending of gold reserve, precious metals, gems, granting loans and conducting operations with gold and currency reserves, maintenance and use of state property; securing compliance with laws governing loans made by Ukraine, economic and other types of assistance to foreign countries, international organizations, entering into agreements on state loans and credits with foreign partners and their implementation, utilization of free assistance to Ukraine received from international sources, etc.

Explanations of the Verkhovna Rada of Ukraine state that while the Accounting Chamber is a body of “parliamentary control” and the content of Article 98 of the Constitution of Ukraine on the definition of its status is “auxiliary,” it is authorized to exercise overall control functions of the Verkhovna Rada of Ukraine in general and auditing functions in particular.

Studies of this issue from the perspective of existing legislation show that “budget” means neither property, nor monetary policy, but financial resources which are accumulated in the budget and are spent therefrom. Legislators view the budget as a plan for creating and spending financial resources in order to ensure the operation of government bodies of Ukraine, government bodies of the Autonomous Republic of the Crimea and local councils (Article 1 of the Law of Ukraine “On the Budgetary System of Ukraine” of December 5, 1990).

On the basis of this definition, it follows that the creation of financial resources constitutes the revenue part of the budget, while the spending of financial resources constitutes its expenditure part. Funds (appropriations) of the State Budget of Ukraine, in turn, represent the financial resources of the State Budget of Ukraine held in special budgetary accounts in institutions of the National Bank of Ukraine, authorized banks and credit institutions and are spent by administrators of budgetary expenditures. Only the expenditure of these resources in accordance with their targeted purpose completes the process of their utilization. Such an object of the Accounting Chamber’s control powers as “money emission” is not a part of “the State Budget of Ukraine,” and the manner of spending funds received from allocation of gold and currency reserves has not been determined by legislation in effect at the present time.

Since according to the Constitution of Ukraine (Article 98) the Accounting Chamber is charged precisely with exercising control over the utilization of the funds of Ukraine’s State Budget which are located in the relevant accounts, it must limit its means of financial control with regard to the utilization of the funds of Ukraine’s State Budget while functionally interacting with the Verkhovna Rada of Ukraine within the limits of its constitutional powers.

Analysis of the provisions of the Constitution shows that the exercise of control or oversight over lawful conduct in the financial and economic area is the responsibility of several constitutional bodies: the Verkhovna Rada of Ukraine, the Accounting Chamber and the Procuracy of Ukraine.

According to Article 92 of the Constitution of Ukraine, the State Budget of Ukraine is established by the Law which must be observed by all participants in the budgetary process. Because it is bound by the aforementioned Law, the Verkhovna Rada of Ukraine has the right of supreme control over adherence to the law in the State’s financial activity and, primarily, in the actions of the Cabinet of Ministers. According to Article 116 of the Constitution of Ukraine, the Cabinet of Ministers of Ukraine is charged with powers to ensure implementation of fiscal and taxation policy, preparation of a draft law on the State Budget of Ukraine, implementation of the approved State Budget of Ukraine as well as submission of a report on its implementation. The Verkhovna Rada of Ukraine exercises supreme control over adherence to existing financial legislation within the framework of its parliamentary powers.

According to paragraph 9 of Chapter XV of “The Transitional Provisions” of the Constitution of Ukraine, the Procuracy of Ukraine, in accordance with existing laws, continues to carry out the function of overseeing the observance and implementation of laws until such time when laws are adopted that regulate the activity of state bodies with regard to control over adherence to laws, including laws that govern the areas of finance and the economy.

The Constitution of Ukraine granted the Accounting Chamber powers that are considerably more limited. The Accounting Chamber has the right to exercise control over the lawfulness, expediency and effectiveness of the utilization of the funds of Ukraine’s State Budget. The Constitution of Ukraine, therefore, by entrusting the Accounting Chamber with powers on behalf of the Verkhovna Rada to control the implementation of precisely the expenditure portion of the State Budget, also entrusted it {the Accounting Chamber} with the responsibility of controlling the lawful expenditure of budgetary funds, but only their expenditure.

This provision is also affirmed by the conclusion reached by the interim commission of the Constitutional Court of Ukraine, according to which the Accounting Chamber is not entitled to exercise general control over the lawfulness of the execution of the Verkhovna Rada’s Acts, particularly its resolutions regarding control in the financial and economic area in general, although such control on the part of the Accounting Chamber is constitutionally substantiated solely in the area of utilization of the funds of Ukraine’s State Budget.

All three bodies, i.e., the Verkhovna Rada of Ukraine, the Accounting Chamber and the Procuracy of Ukraine, exercise control or oversight over adherence to existing financial legislation “on the basis and within the limits of, and in a manner provided for by the Constitution and the laws of Ukraine” (part two of Article 19 of the Constitution of Ukraine).

Hence the provisions of the law which empower the Accounting Chamber with control over the “implementation of the Laws of Ukraine and resolutions adopted by the Verkhovna Rada of Ukraine, implementation of the State Budget of Ukraine, financing of all-state programs, the maintenance and utilization of property which falls into the category of state ownership, over executive branch agencies and officials who are elected, appointed or confirmed by the Verkhovna Rada (paragraph 1 of Article 6 of the Law), in the part of control which does not deal with the utilization of Ukraine’s State Budget funds, must be considered as such which do not correspond to the Constitution of Ukraine.

Analysis of the Law reveals that a number of its provisions entrust the Accounting Chamber with powers which, according to the Constitution of Ukraine, belong exclusively to the control powers of the Verkhovna Rada of Ukraine and the Cabinet of Ministers of Ukraine in the financial and economic area and thus fall outside the framework of utilizing the funds of the State Budget of Ukraine.

Hence, the Law charges the Accounting Chamber with control over:

- over the “utilization of the objects of the right of ownership, which are not subject to privatization” (paragraph 4 of Article 2 of the Law) as well as the “currency issue, utilization of the gold stock, precious metals, gems, granting credits and execution of the operations of placement of gold and hard currency reserves” (paragraph 7 of Article 2 of the Law);

- over the “maintenance and utilization of property, which is the object of the right of state ownership” (paragraph 1 of Article 6 of the Law);

- over the “maintenance and utilization of property which is the object of the right of state ownership and is not subject to privatization” (paragraph 1 of Article 7 of the Law);

- over the “maintenance and utilization of property which is the object of the right of state ownership” (the title and the first part of Article 23 of the Law), including conducting examinations “of the property complexes, their maintenance as well as their utilization in the interests of the State” (the first part of Article 23 of the Law), obtaining essential information “from the State Property Fund of Ukraine, from central and local bodies of executive power, bodies of local self-government, enterprises, institutions and organizations,” conducting inspections and audits in relation to the “observance of the law in the management of property which is the object of the right of state ownership” (the first part of Article 23 of the Law);

- over the status of “the maintenance and utilization of property, which is the object of the right of state ownership, as well as of property which falls completely within the jurisdiction of the National Bank of Ukraine, its territorial divisions and the specialized enterprises, institutions and organizations which fall into the departmental jurisdiction” (part three of Article 25 of the Law) and also over the results of “production and economic activity, conducted privatization or other management of property, which is the object of the right of state ownership” (part one of Article 26 of the Law);

- over the status of “utilization and management of objects of the right of state ownership which are subject to privatization” (paragraph 3 of Article 1 of the Law) as well as the legal regime of the “objects of the right of state ownership, including the land resources of Ukraine” (paragraph 7 of part 1 of Article 27 of the Law).

According to the Constitution of Ukraine, the management of objects of state ownership is ascribed onto the powers of the Cabinet of Ministers of Ukraine (paragraph 5 of Article 116), whereas the legislative conditions of its implementation and legal regime of ownership are defined exclusively by the Laws of Ukraine (paragraph 7 of part one of Article 92 of the Constitution of Ukraine), and parliamentary control, in this particular sphere, belongs solely to the Verkhovna Rada of Ukraine (paragraph 33 of part one of Article 85 of the Constitution of Ukraine). Consequently, the transfer by the Verkhovna Rada of Ukraine of the aforementioned powers to the Accounting Chamber must be considered an act which contravenes the Constitution of Ukraine since, according to the Constitution of Ukraine (part two of Article 6, and part two Article 19), both the Accounting Chamber as a separate constitutional body and the Verkhovna Rada of Ukraine must act solely on the basis and within the limits of their constitutional powers.

If the Verkhovna Rada’s constitutionally affirmed powers of control in the areas of finance and the economy came to belong completely and on a permanent basis to the Accounting Chamber, which the Verkhovna Rada insists upon in its explanations [the explanations run as follows: “By establishing the Accounting Chamber, the Verkhovna Rada did not hand over its own powers of exercising parliamentary control in the areas of finance and the economy to the Accounting Chamber but assigned the aforementioned powers to the Accounting Chamber”], it would signify that adoption of the Law would result in a redistribution of the constitutional powers, which is only possible through introduction of amendments to the Constitution of Ukraine in accordance with Chapter XIII of the Constitution of Ukraine.

The aforementioned regarding the discrepancy with the Constitution of Ukraine is also applicable to the provisions of the Law, according to which the Accounting Chamber is charged with exercising control:

- “over adherence to the law regarding the granting by Ukraine of loans to international organizations, economic and other assistance to the international organizations, as well as the entering into agreements on state loans and credits, exercising control over the use of credits received by Ukraine from foreign countries, banks and international financial organizations, and loans, which are not foreseen by the State Budget of Ukraine” (paragraph 5 of Article 2 of the Law);

- “over implementing the decisions of the Verkhovna Rada of Ukraine on the allotment by Ukraine of loans and economic assistance to foreign states and international organizations” [except for loans specified in the State Budget of Ukraine], “as well as on Ukraine’s receipt of loans from foreign states, banks and international financial organizations which were not envisaged by the State Budget of Ukraine, utilization of assistance provided to Ukraine free of charge, received from foreign sources, over currency emission, utilization of credit and currency resources by bodies of the executive branch and their officials, allotment of credits and execution of operations regarding placement of gold and currency reserves, as well as credit operations“ (paragraph 9 of Article 6 of the Law).

The respective powers belong exclusively to the powers of the Verkhovna Rada of Ukraine (paragraph 14 of Article 85 of the Constitution of Ukraine), which the Verkhovna Rada of Ukraine should exercise independently by means of parliamentary control within the limits established by the Constitution of Ukraine (paragraph 33 of part one of Article 85 of the Constitution of Ukraine). The Constitution of Ukraine does not provide for the delegation of the aforementioned powers to another body.

Hence, these provisions of paragraph 5 of Article 2 and paragraph 9 of Article 6 of the Law must also be considered as such which do not correspond to the Constitution of Ukraine.

4. The subject of the constitutional appeal calls attention to the fact that according to the Law, the Accounting Chamber is also charged with the right of exercising powers of control over funds which, according to Article 98 of the Constitution of Ukraine, are not connected with the utilization of the funds of the State Budget of Ukraine, in particular, funds which are not provided for by the State Budget of Ukraine, funds of local self-government bodies, various subjects of economic activity, etc., if their authorized {statutory} fund contains any share of state property, if they participate in the implementation of all-state programs or if they are being provided with the customs duty, tax or other privileges by the state.

The explanations provided by the Verkhovna Rada of Ukraine in connection with these provisions of the constitutional appeal emphasize that Article 98 of the Constitution of Ukraine cannot be interpreted as one which defines the complete status of the Accounting Chamber and, according to paragraph 1 of Article 32 of the Law of Ukraine “On Ownership,” the Verkhovna Rada of Ukraine is a subject of the right of all-state ownership. In view of the abovementioned, on the basis of paragraph 13 of Article 85 and paragraph 5 of Article 116 of the Constitution of Ukraine, the Verkhovna Rada is obliged to control revenue coming into the State Budget of Ukraine resulting from the utilization of state property managed by the Cabinet of Ministers of Ukraine.

Analysis of the provisions of the Constitution of Ukraine shows that, according to Article 98 of the Constitution of Ukraine, the scope of the Accounting Chamber’s control powers is defined by the concept “State Budget of Ukraine.” The dispute between the parties of the constitutional proceeding centers on whether funds which are not directly specified in the Law “On the State Budget of Ukraine” and in this sense are considered “nonbudgetary,” but which according to the Law are relegated to the sphere of the powers of control of the Accounting Chamber, are included in the State Budget of Ukraine.

According to conclusions reached by the financial and economic experts, the following are not considered components of the State Budget of Ukraine: the Pension Fund (with some discrepancies in the existing legislation), the financial resources of all-state programs of economic, scientific, technical, social and national-cultural development, environmental protection, in the event that the funds for financing the abovementioned programs were taken from the other sources (which means that they were not included in the structure of the appropriations of the State Budget of Ukraine for a corresponding year), in particular, funds received from economic assistance of foreign states, international organizations or from foreign credits, received without the Cabinet of Ministers’ guarantees.

According to Article 98 of the Constitution of Ukraine, the Accounting Chamber is charged with control over the utilization of all funds of the State Budget of Ukraine, irrespective of their sources. In this context only nongovernmental funds (public funds, civic organization funds, funds of local self-government, etc.) are considered “nonbudgetary.”

Analysis of the provisions of the Constitution of Ukraine provides grounds for concluding that the area of implementation of the Accounting Chamber’s powers is restricted solely to the utilization of the funds of the State Budget of Ukraine.

According to paragraph 4 of part one of Article 138, and Article 142 of the Constitution of Ukraine as well as paragraph 6 of Article 16 of the Law of Ukraine “On Local Self-Government in Ukraine” of May 21, 1997, the budget of the Autonomous Republic of the Crimea and local budgets are not part of the State Budget of Ukraine. According to Article 98 of the Constitution of Ukraine, local budgets are not subject to the Accounting Chamber’s powers of control.

If, however, the State, in accordance with the part three of Article 143 of the Constitution of Ukraine, by the effect of a corresponding law provides the bodies of local self-government with certain powers of executive bodies and finances the execution of these powers in full using funds from the State Budget of Ukraine or, if the state uses its budget to financially support local government in another manner consistent with part 3 of Article 142 of the Constitution of Ukraine, then control on the part of the Accounting Chamber over the utilization of the funds of local budgets may be exercised to the extent that State Budget funds of Ukraine are utilized.

Therefore the provisions of the second part of Article 16 of the Law, according to which the sphere of implementation of the powers of the Accounting chamber is extended to bodies of local self-government in that portion of their activity which is outside the limits of utilizing funds of the State Budget of Ukraine, must be considered as such which do not correspond to the Constitution of Ukraine.

According to analysis of the provisions of Article 16 of the Law, the sphere of implementation of the powers of the Accounting Chamber also covers the activity of diverse subjects of entrepreneurial activity and management of various forms of ownership. These powers are applicable to the following:

enterprises, establishments, organizations, banks, credit institutions, economic associations, insurance companies, other financial institutions and their unions as well as associations of different types irrespective of their form of ownership under the condition that they receive, transfer, and utilize funds of the State Budget of Ukraine, or have a share of state ownership in their authorized fund, utilize objects of the right of state ownership or manage them, as well as in the event that the state grants them customs duty, taxation and other privileges.

Expanding the area of implementation of the Accounting Chamber’s powers regarding the subjects of economic activity of various forms of ownership without any limitations does not comply with such a general principle of the constitutional system in Ukraine as ensuring state protection of the rights of all subjects of the right of ownership and economic management (part four of Article 13 of the Constitution of Ukraine). According to Article 98 of the Constitution of Ukraine, implementation of the powers of control by the Accounting Chamber with regard to the subjects of economic activity of various forms of ownership must be restricted to the actual amount of funds of the State Budget of Ukraine, which is being utilized by a corresponding subject.

The provision mentioned above is derived from part two of Article 95 of the Constitution of Ukraine where it is stated that “All expenditures of the state for general social needs, their amount and purpose, are determined solely by the Law on the State Budget of Ukraine.” This means that the Accounting Chamber exercises control over the utilization of Ukraine’s State Budget funds in accordance with their designated objective, that is, over expenditure of the funds in accordance with the objectives established by the State Budget of Ukraine.

Hence, the provisions of the second part of Article 16 of the Law, according to which the area of implementation of the powers of the Accounting Chamber is expanded to subjects of the right of ownership and economic management of various forms of ownership in that area of their activity which falls outside the realm of utilizing the funds of the State Budget of Ukraine must be considered as not being in compliance with the Constitution of Ukraine.

According to the second part of Article 16 of the Law, the control powers of the Accounting Chamber shall also be expanded to associations of citizens, non-governmental foundations and other non-governmental and non-profit civic organizations in the event their activity is connected with the receipt, transfer or utilization of the funds of the State Budget of Ukraine, implementation of the budgets of all-state target funds, participation in the implementation of all-state programs, utilization of property which falls into the category of objects of the right of state ownership and their management, and also in the portion of tax, customs or other privileges or deferral of payments to the state only to the extent of the actual amount of state funds, state property or state privileges or deferments in settling accounts with the state that have been granted by the legislation of Ukraine or state bodies.

The expansion of the area of implementation of the powers of the Accounting Chamber to associations of citizens, non-governmental foundations and other non-governmental and non-profit civic organizations due to the clear reasons of concern for the state funds, their unrestricted utilization as provided for by the second part of Article 16 of the Law does not comply with the provisions of the Constitution of Ukraine which provide citizens with the guarantee to freely manage their own property individually or jointly (first part of Article 41 of the Constitution of Ukraine), including the satisfaction of their political, economic, social, cultural and other interests within the limits of non-governmental and non-profit associations (first and third parts of Article 36 of the Constitution of Ukraine).

Therefore, the provisions of the second part of Article 16 of the Law, according to which the area of implementation of the powers of the Accounting Chamber are expanded to the associations of citizens, non-governmental foundations and other non-governmental, non-profit civic organizations in that portion of their activity which falls outside of the limits of utilizing the funds of the State Budget of Ukraine, must be considered as such which do not correspond to the Constitution of Ukraine.

Based on the aforesaid and being governed by Articles 85, 92, 95, 96, 98, and 150 of the Constitution of Ukraine, Articles 40, 51, 61, 63, 65, 70, 77, of the Law of Ukraine “On the Constitutional Court of Ukraine,” the Constitutional Court of Ukraine

resolves:

the Law of Ukraine of July 11, 1996 “On the Accounting Chamber of the Verkhovna Rada of Ukraine” is determined as such which does not correspond to the Constitution of Ukraine (is unconstitutional) in the part of its specific provisions which follow:

1. Determined as such which do not correspond to the Constitution of Ukraine (are unconstitutional) are the following provisions of the Law of Ukraine “On the Accounting Chamber of the Verkhovna Rada of Ukraine”:

1.1. regarding the naming of the Accounting Chamber as the “Accounting Chamber of the Verkhovna Rada of Ukraine” (title of the Law, its preamble, Articles 1 and 39 of the Law;)

1.2. regarding the definition of the Accounting Chamber as a body of “supreme,” “state financial and economic” control (first part of Article 1, Article 3 of the Law) and “supreme . . . financial and economic control” (Article 36 of the Law;)

1.3. regarding the guarantees of the legal status of Accounting Chamber officials as provided for by the first part of Article 37 of the Law.

2. Determined as such which do not correspond to the Constitution of Ukraine (are unconstitutional) are the provisions of the Law of Ukraine “On the Accounting Chamber of the Verkhovna Rada of Ukraine,” according to which the Accounting Chamber is empowered with:

2.1. the task of organizing and exercising control over the timely implementation of the “revenue” portion of the State Budget of Ukraine (paragraph 2 of Article 2 of the Law;)

2.2. the function of exercising control over the “timely and complete influx of revenues into the State Budget of Ukraine” (paragraph 2 of Article 6 of the Law);

2.3. the authority to implement “control and auditing” types of activity which ensure a “unified system of control over the implementation of the State Budget of Ukraine” (paragraph 1 of Article 7 of the Law) as well as to organize and exercise operational control over the implementation of the State Budget of Ukraine for a period under review;

2.4. powers to exercise control over the “funds received by the State Budget of Ukraine as a result of management of state property, including its privatization and sale; and from management of property which falls into the category of the right of state ownership” (third part of Article 23 of the Law);

2.5. the power “in the event of uncovering forgery, counterfeiting, misappropriation and abuses -- to extract the required documents, leaving behind the Act of Extraction and copies or a description of the extracted documents” (paragraph 4 of the second part of Article 12 of the Law);

2.6. the execution, without exception, of all actions stipulated in Article 31 of the Law.

3. The following provisions of the Law of Ukraine “On the Accounting Chamber of the Verkhovna Rada of Ukraine,” according to which the Accounting Chamber is granted control over the area of financial and economic activity which falls outside the limits of utilizing the funds of the State Budget of Ukraine, are deemed as not corresponding to the Constitution of Ukraine (are unconstitutional):

3.1. “over carrying out the laws of Ukraine as well as resolutions adopted by the Verkhovna Rada of Ukraine, over implementing the State Budget of Ukraine and over the financing of all-state programs” (in that area of control, which is not connected with the utilization of the funds of the State Budget of Ukraine) and “over the maintenance and utilization of property which is the object of the right of state ownership by bodies of the executive branch and officials who are elected, appointed or confirmed by the Verkhovna Rada of Ukraine” (paragraph 1 of Article 6 of the Law);

3.2. over the “utilization of objects of the right of ownership, which are not subject to privatization” (paragraph 4 of Article 2 of the Law) as well as “currency emission, utilization of gold reserves, precious metals, gems, granting credits and conducting operations on the placement of gold and currency reserves” (paragraph 7 of Article 2 of the Law);

3.3. over the “maintenance and utilization of property which is the object of the right of state ownership” (paragraph 1 of Article 6 of the Law);

3.4. over the “maintenance and utilization of property, which is the object of the right of state ownership and which is not subject to privatization” (paragraph 1 of Article 7 of the Law);

3.5. over the “maintenance and utilization of the objects of the right of the state ownership” (the title and the first part of Article 23 of the Law), including the performance of inspections of the “property complexes, their maintenance and utilization for the benefit of the interests of the state” (the first part of Article 23 of the Law), receiving required information “from the State Property Fund of Ukraine, central and local bodies of the executive branch, bodies of local self-government, enterprises, establishments and organizations,” conducting inspections and audits “regarding observance of the law in the process of managing property which is the object of the right of state ownership” (the first part of Article 23 of the Law);

3.6. over the status of “maintenance and utilization of property which is the object of the right of state ownership, as well as of property which is under the complete management of the National Bank of Ukraine, its territorial divisions and subdepartmental specialized enterprises, establishments and organizations” (the third part of Article 25 of the Law), and also over the results of “production and economic activity, privatization or other management of property which is the object of the right of state ownership” (the first part of Article 26 of the Law);

3.7. over the status of “utilization and management of objects of the right of state ownership which are subject to privatization” (paragraph 3 of part 1 of Article 27 of the Law) and over the legal regime “of the objects of the right of state ownership, including the land resources of Ukraine” (paragraph 7 of part 1 of Article 27 of the Law);

3.8. “over adherence to the law regarding the granting by Ukraine of loans as well as economic and other assistance to foreign countries and international organizations as well as the entering into agreements on state loans and credits, exercising control over the utilization of credits received by Ukraine from foreign countries, banks and international financial organizations, and loans, which are not envisaged by the State Budget of Ukraine” (paragraph 5 of Article 2 of the Law);

3.9. “over the implementation of decisions of the Verkhovna Rada of Ukraine on the allotment by Ukraine of loans and economic assistance to foreign states and international organizations” [except for loans provided for by the State Budget of Ukraine], “as well as Ukraine’s receipt of loans from foreign states, banks and international financial organizations which were not provided for by the State Budget of Ukraine, utilization of assistance to Ukraine received from foreign sources free of charge, over currency emission, utilization of credit and currency resources by bodies of the executive branch and their officials, allotment of credits and execution of operations on the placement of gold and currency reserves, as well as credit operations“ (paragraph 9 of Article 6 of the Law).

4. The provisions of the Law of Ukraine “On the Accounting Chamber of the Verkhovna Rada of Ukraine,” according to which the area of implementation of the powers of the Accounting Chamber is expanded to “bodies of local self-government, enterprises, establishments, organizations, banks, credit institutions, economic associations, insurance companies, other financial institutions and their unions, associations of different types irrespective of the form of ownership;” “associations of citizens, non-governmental foundations and other non-governmental and non-profit civic organizations” (the second part of Article 16 of the Law) in that portion of their activity which falls outside the limits of the utilization of the funds of the State Budget of Ukraine, have been determined as not being in compliance with the Constitution of Ukraine (have been found unconstitutional).

5. The provisions of the Law in the part which was found to be unconstitutional shall become null and void on the day the present decision is enacted.

6. The responsibility for ensuring implementation of the Decision of the Constitutional Court of Ukraine resides with the Verkhovna Rada of Ukraine and the President of Ukraine.

7. Implementation of the decision of the Constitutional Court of Ukraine is mandatory in the territory of Ukraine, final and without appeal.

The decision of the Constitutional Court of Ukraine shall be published in the “Herald of the Constitutional Court of Ukraine” as well as in other official publications of Ukraine.

The constitutional Court of Ukraine.