Viewing cable 09VILNIUS143
Title: LITHUANIAN CONSTITUTIONAL COURT RULING MEANS

IdentifierCreatedReleasedClassificationOrigin
09VILNIUS1432009-03-17 14:39:00 2011-08-30 01:44:00 CONFIDENTIAL Embassy Vilnius
VZCZCXRO1790
RR RUEHAG RUEHROV RUEHSR
DE RUEHVL #0143 0761439
ZNY CCCCC ZZH
R 171439Z MAR 09
FM AMEMBASSY VILNIUS
TO RUEHC/SECSTATE WASHDC 3361
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
C O N F I D E N T I A L VILNIUS 000143 
 
SIPDIS 
 
E.O. 12958: DECL: 03/17/2019 
TAGS: ENRG ECON PGOV LH
SUBJECT: LITHUANIAN CONSTITUTIONAL COURT RULING MEANS 
LITHUANIAN NATIONAL ENERGY INVESTOR LEO LT,S SUPERVISORY 
AND MANAGEMENT BOARD LIKELY TO CHANGE 
 
REF: 2008 VILNIUS 361 
 
Classified By: Ambassador John A. Cloud for reasons 1.4 (b) and (d). 
 
¶1.  (C) Summary:  A March 2 ruling by the Lithuanian 
Constitutional Court will likely result in changes to LEO 
LT,s supervisory and management boards, but will not lead to 
the demise of the energy holding company.  Initial 
indications are that the current government -- no friend of 
Leo LT -- will satisfy itself with correcting the 
constitutional flaw and changing some members of the 
supervisory and management boards.  The European Commission 
(EC) could still derail LEO LT, if it finds it is 
inconsistent  with EU rules.  End Summary. 
 
THE COMPLAINT 
------------- 
 
¶2.  (U)  Lithuanian MPs asked the Constitutional Court on 
September 22, 2008 to decide if the formation of the national 
energy holding company, LEO LT, violated the constitution. 
The case focused on three issues:  whether the GOL had the 
right to establish an energy monopoly via the formation of 
LEO, whether the non-competitive selection of VST, as the 
private partner within LEO, was a violation of constitutional 
directives, and whether public assets were put into an entity 
that might not use them for the public good. 
 
LEO WILL LIVE ON 
----------------- 
 
¶3.  (U)  The Court ruled that the Law on the Nuclear Power 
Plant, which established LEO, did not violate constitutional 
norms in establishing a monopoly because a new monopoly was 
not created. The court determined that LEO combined existing 
transmission and distribution monopolies.  It likewise ruled 
that the selection of VST (a private Lithuanian electricity 
distributor), despite the absence of a tender or other 
competitive process, did not violate the constitution because 
there were no other potential private partners in Lithuania. 
The Court also said that no constitutional violation of 
consumer rights took place when LEO was created because the 
protection of consumer interests was not part of the law and 
the regulation of such rights in the energy sector is 
provided for in other legislation.  In contrast, however, the 
law was found in violation of paragraph 3 of Article 46 of 
the Constitution, which requires that the State regulate 
economic activity in a manner that serves the welfare of the 
nation as well as paragraph 2 of Article 128 of the 
Constitution that provides for the management, use, and 
disposal of State property. 
 
¶4.  (C) Most observers believe that the relatively minor 
violations of the constitution can be (and will be) fixed 
through changes to LEO's management structure and small legal 
amendments.  Chancellor of the Government (whose role is 
roughly that of a chief of staff for the prime minister) 
Deividas Matulionis told us March 4 that the prime minister 
had already tasked out the drafting of the required legal 
amendments, which would be brought to a vote during the 
spring session of the parliament.  The other changes would be 
to the managing and supervisory boards of the company, to 
give greater representation to the GOL.  (Note: although the 
GOL owns 61.7 percent of LEO shares and VST's NDX Energija 
owns only 38.3 percent, currently only one supervisory board 
member is appointed by the GOL.)  According to Arturas 
Dainius, an Undersecretary in the Ministry of the Economy and 
the GOL member of the supervisory board, the composition of 
the new board could be decided by the GOL and NDX, or 
parliament could choose to weigh in. 
 
 
CLOUD