TRIBUNAL CONSTITUCIONAL Portugal

RULING No. 32/17

1 of February of 2017

Headnotes:

The Court decided that the members of the Board of Directors of Caixa Geral de Depósitos, SA (CGD) are under a duty to submit a declaration of assets, income and corporate positions within the time limit stipulated in the Law establishing the Regime governing the Public Control of the Wealth of Political Officeholders (LCPRTCP) – a limit that counts from the date on which such directors effectively take office. The Court took the view that inasmuch as CGD is an entirely state-owned joint stock company, when it comes to such declarations the members of its Board of Directors are encompassed by the concept of senior public manager.

CGD is a lending institution which, as a state-owned company, is included in the State Business Sector (SEE). It is also a ‘significant supervised entity’, as defined in Regulation (EU) no. 468/2014 of the European Central Bank, and appears on the relevant ECB list.

The Statute governing Senior Public Managers (EGP) does not apply to the members of CGD’s Board of Directors, because the EGP expressly says that it is not applicable to persons who are appointed to governing bodies of entities that are included in the SEE and classified as ‘significant supervised entities’. However, the transparency requirements that are the LCPRTCP’s raison d’être mean that every board director whom the state or other public entities appoint to enterprises in which they hold stakes (regardless of the company’s legal nature and whether or not the stakes involve the entirety, a majority or a minority of its capital) is subject to the obligation to declare income and assets. For the purposes of the transparency effects sought by the LCPRTCP, it is irrelevant whether the EGP applies to these individuals or not.

Summary:

This case concerned declarations of income and assets made by public officeholders. Several members of the state-owned bank Caixa Geral de Depósitos, SA (CGD) were notified that the Law establishing the Regime governing the Public Control of the Wealth of Political Officeholders (LCPRTCP) required them to make such declarations, and they contested this.

Under the terms of the Organic Law governing the Constitutional Court, the Court is competent to determine whether a duty to submit the declaration of assets, income and corporate positions provided for in the LCPRTCP exists in concrete cases.

The question before the Court was whether members of CGD’s Board of Directors should be considered senior public officeholders for the purposes of the LCPRTCP and thus obliged to submit the declaration which that Law says must be made when such officeholders take up their positions. The key aspect of this question was whether amendments to the Statute governing Senior Public Managers (EGP) made by an Executive Law in 2016 meant that such directors were no longer obliged to present declarations.

The Court recalled that a 2017 State Budget Law 2017 (LOE2017) norm that lays down the terms under which entities are subject to duties of transparency and accountability says that the LCPRTCP applies to members of the boards of directors of lending institutions that form part of the State Business Sector (SEE) and are classified as ‘significant supervised entities’, as defined in the applicable EU Regulation, including those in office at the time of LOE2017’s publication. The LCPRTCP says that senior public managers are among the entities deemed to be senior public officeholders.

The SEE includes state-owned companies – i.e. companies that are wholly owned by the public sector (“empresa pública”, EP). It also includes companies in which the state or any other public-sector entities directly or indirectly hold any permanent stake(s), when that/those stake(s), taken singly or together, does/do not give rise to any of the situations that would result in a dominant influence over the company in question (“empresa participada”, EPa).

The 2016 Executive Law removed appointees to boards of directors of lending institutions that form part of the SEE and are classified as ‘significant supervised entities’ from the scope of the EGP. According to its preamble, it did so with a view to increasing the competitivity of state-owned lending institutions, without thereby reducing the effective ability to control their board directors. The Court said that the goal behind excepting this particular type of director from the applicability of the EGP had nothing to do with subjecting or not subjecting them to the duties imposed by the LCPRTCP.

The EGP created a number of obligations, but none of them are linked to declarations of assets and income. The decision to include a reference to senior public managers in the LCPRTCP was never related to whether or not they are covered by the EGP. The ‘senior public manager’ concept is used solely in order to simplify the reference to a series of entities to whom/which those duties are applicable.

Since the first version of the LCPRTCP was published, the senior managers of state-owned companies have always been subject to the transparency-related duties provided for therein (albeit at that time the concept of a ‘state-owned company’ was itself more limited than it now is). This has always been a minimum threshold, which the legislator subsequently saw fit to extend to other senior managers who are also involved in the administration of public interests. The Court said that to see things otherwise – i.e. to consider that CGD board directors are not senior public managers as defined in and for the purposes of the LCPRTCP – would be to introduce an indefensible subversion of values into the part of the Portuguese legal system concerning transparency-related values and requirements. These are constitutional values that: grant citizens a right to participate in public life – concretely in the present case, by being told how public affairs are managed; subject political officeholders to duties which entail responsibilities and accountability; and subordinate the holders of positions on the governing bodies of public-sector organs to the law and to the principles enshrined in the Constitution. Ordinary-law norms, the values they contain and the goals they seek to attain cannot be allowed to conflict with the values of a democratic state based on the rule of law.

The Court said that any other conclusion in the present case would be illogical, in that it would mean that while every state-appointed manager of a company in which the state merely holds a partial stake was encompassed by the transparency duties laid down in the LCPRTCP, the members of the Board of Directors of CGD – a state-owned company in which the state not only exercises a dominant influence, but actually owns the whole of the share capital – would not be subject to those duties.

The Constitutional Court therefore rejected the arguments presented by the petitioners in the present case and ordered that they be renotified of the requirement to submit declarations.

Supplementary information:

One Justice concurred with the decision, but additionally referred to an aspect of the case which he considered the majority had not addressed.

Cross-references:

Rulings nos. 455/07 (02-05-2007); 279/10 (05-07-2010); 201/11 (14-04-2011); and 242/11 (07-06-2011).