Translation:The Tvind Case (1999)

by The Supreme Court (Denmark)

TRANSCRIPT
FROM
THE SUPREME COURT'S RECORD OF JUDGEMENTS

J U D G E M E N T

delivered by The Supreme Court Friday the 19. of February 1999 in case

I 295/1998

The Self-owning Institution, The Free School in Veddinge Bakker
(attorney Henrik Christrup, by order)
against
The Ministry of Education
(kammeradvokaten)

In earlier instance the Eastern High Court's 13th division delivered it's Judgement the 13th of May 1998

Eleven judges has participated in the adjudication: Pontoppidan, Marie-Louise Andreasen, Wendler Pedersen, Poul Sørensen, Melchior, Per Sørensen, Jørgen Nørgaard, Walsøe, Børge Dahl, Lene Pagter Kristensen and Søgaard.

The Appellant, Den Self-owning Institution The Free School in Veddinge Bakker, has reiterated it's pleadings.

The Appellee, The Ministry of Education, has pleaded for affirmation.

The Parties agree that a consequence of finding in favour of the principal pleading of The Free School in Veddinge Bakker will be that the school gets the opportunity to apply for subsidies according to the normal rules in the law on free schools and private basic schools etc. (the free school law) the same way as other schools, but that it will not automatically have a claim to such subsidies.

On the 13th of March 1996 the Minister of Education introduced law-proposal nr. L 218 on amendment to among others the free school law and law-proposal nr. L 219 on amendment to law on folk high schools etc. The proposals had the principal purpose of clarifying the laws requirement that the schools have to be self-owning institutions.

In the remarks accommodating law-proposal nr. L 218 (Folketingstidende 1995/96, tillæg A, s. 4372) it is stated among other things:

»A central part in the term self-ownership is the requirement of independence in managerial and economic respects. The main goal of the law-proposal is to clarify this and at the same time amend some provisions regarding it.

...

The proposal shall specify the content in the fundamental requirement of actual independence and secure that schools in the future fulfil it. Therefore a series of clarifications as well as in some instances actual tightenings are proposed.

...

The subsidy-system, for the free basic schools, private gymnasiums and HF-courses, is highly dependent on the schools chosen financial auditors to perform an extensive audit of the foundation for subsidy calculation and the schools annual accounts. It ought therefore to be secured that the financial auditors won't come in an conflict of interests where the auditor has to sees to whether the school as well as then , administrates it's interests best possible.

...

In the resort of the Minister of Education there is multiple forms of self-owning institutions, that all normally receive large stately operation-subsidies, and the minister of education's authorisation to withhold funding, let funding cease and callback funding, should be identical and ought besides to be clarified.«

Law-proposal nr. L 218 was passed as law nr. 503 of the 12th of June 1996. As noted in the remarks the most important change was that the laws requirement, that schools must be self-owning institutions, was clarified. In addition, a series of conflict of interest-provisions regarding board members and auditors and regulation regarding which terms the schools may enter into leasing- and title-contracts. It provides further, that a schools funds shall be administrated to the highest possible benefit of it's purpose. Finally the minister of educations authority to withhold funding, annul subsidies and demand back-pay of subsidies, was expanded.

Law-proposal nr. L 268, which was put forth the 8th of May 1996, went through first consideration the 14th of May 1996, second consideration the 28th of May and third consideration the 31th of May 1996. The law-proposal was passed as law nr. 506 of the 12 of June 1996. By the law, whereby § 7 was implemented, the following provisions were inserted into the free school law:

Ȥ 5, stk. 2. The school must in it's operation as a self-owning educational institution be independent, and the schools funds must solely benefit the schools schooling and educational operation.

§ 5, stk. 3. Schools with boarding-departments, that have not received subsidies in 1996, and schools that have not received subsidies to boarding-departments in 1996, must own the schools buildings, or the greater part thereof, and may not own buildings together with others.

§ 21 a. The minister of Education may furthermore decide that there not be afforded subsidies to a school, including a new school, if according to the discretion of the Minister there isn't adequate assurance that the school fulfils the requirement in § 5 stk. 2, of independence and administration of the schools funds. There may namely by relied on, whether

1) the school is part of a community or cooperation with other schools, institutions, foundations, businesses, associations etc. which pose a risk that the schools is controlled by others,

2) the school's funds is used for purposes outside the school,

3) the school's leadership and teachers are in an legal or economic state of dependence to the in nr. 1 mentioned institutions etc. or

4) the school's perform work, including collection work or agitation work or similar, in a way that is unusual for the school form.«

On the 22th of May 1996 the Folketing considered an enquiry from members of the Socialist People's Part to the Minister of Education:

»What information can the minister give on the initiatives which been taken and will be taken following Rigsrevisionens investigations, the by the minister of education ordered investigations and the state auditors remarks as well as eventual other investigations regarding the The Tvind School-Cooperative, the Tvind schools etc.?«

In response to the enquiry the Minister of Education stated among other things (Folketingstidende 1995/96, s. 6884 ff.):

»...

And now we come to the complicated in this case: How do we stop the transfer of state funds from the schools to the Tvind Corporate Group? In the drafting of the current laws for free schools it was not envisioned that schools would arrange themselves in such School Corporate Groups as is the case here, and therefore there is not today a direct prohibition against school corporate groups or a sufficiently precise definition of the term »a self-owning institution«. There is not adequate authorisation to refrain from paying out subsidies solely because it is part of a corporate group, and administrative stops for subsidies may therefore only be based on a concrete assesment of whether the individual school, viewed in isolation, has breached the law and it's preconditions. How eventual litigation challenging a subsidy-stop will end is uncertain, among other reasons because there is no case law in the area. No school has brought itself into the same situation.

I cannot administratively stop the Tvind Corpate Group without violating current legislation, and that is the background for that I with the introduced law-proposal first and foremost ask the Folketing to decide whether School Corporate Groups are an acceptable for of organisation for free schools with large public subsidies accordingly. Then I ask for the Folketing's decision on whether Tvind's School Corporate Group has exceeded the limit for our trust so gravely, that we no longer believe that the schools ever in fact can or will live up to the requirements of self-ownership and independence, or whether they should continue within the new laws boundaries. My own assessment is that the Tvind schools under the empire has brought themselves in such a relationship of dependence on Fælleseje and the other parts of the the empire, that they in reality neither can nor will break free. I can still not see other options for putting an effective stop to the Tvind Corporate Group than the cabinets law-proposal, and I of course recommend that the Folketing passes it.

The law wil go into force the 1st of January next year, because the schools have been promised that they will receive subsidies in the whole year of 1996. I will not challenge this promise, but I will subtract for eventual breaches of the current subsidy-laws. On the other hand a school does not obtain claim to state funding in al future. The Folketing has in it's sought to draw boundaries for which school that fall into the subsidy-regulations. Those boundaries can always be moved and that is what I now ask the Folketing to do, in a way that will be understood.

In the beginning of this year, the Ministry of Education concluded an investigation of whether the schools under the School Cooperative Tvind are self-owning institutions within the understanding underlying the approval and subsidy legislation for free schools. The conclusion is in short; they are not. The Tvind schools and Poul Jørgensen received the 26th of January the ministry's determination of the self-ownership question, and all the schools declaring within the month of March that that they would abide by the ministry's requirements and submitted their plans for how they would fulfil them.

The 13th of March I took a political initiative and introduced two law-proposals, which both have the purpose of clarifying the requirements that free schools must be self-owning institutions. The law-proposals tightens the conflict of interest-requirements for board members, limits the schools access to invest their liquid assets and grants authorisation to demand the schools' auditors replaced. All that is something the Tvind School Corporate Group has forced me to introduce, but it is not enough, and because of that I have not accepted that the Tvind schools in fact themselves dissolve the Corporate Group. It is difficult to place trust in the schools once again. Their implementation plans are provocatively homogeneous and their bear the impress of having a common source of inspiration.

...

The Primary purpose with L 268 is to stop subsidizing school corporate group for all purposes. There will be set requirements for how an educational institution shall act, and the minister get authority to callback the approval and the subsidy, if the requirements are not met with reasonable assurance. This authority is discretionary - that I will not deny - and it is self-evident that the discretion shall be exercised within the boundaries of the law, it's motives and ordinary principles of justice.

...

But I cannot stop the whole Tvind School Corporate Group at one time. The current laws have neither a adequately precise definition of self-ownership or authorisation to callback the approval and stop the funding of the schools, because they form part of a corporate group.

The School Corporate Group is clearly in violation of the spirit behind the laws of the free schools but to build one's administration on the spirit of the law is a shaky foundation for a minister to move into. Therefore I have chosen to present the case in full openness for the Folketing so that we through a responsible democratic process can express the publicly elected members will in a clear and administrable legislation.

It is not the breach of the subsidy regulations, that is the occasion for the cabinets law-proposal on a stop for subsidies to the Tvind schools and on enhanced authorisations regarding all schools that should enter into corporate group-like cooperatives.

What I propose is to stop for subsidies to a School Corporate Groups and do it now for the Tvind schools who documentedly participate in a expansive School Corporate Group. The decisive thing is that the School Corperate Groups provide a basis for an eternal expansion of both the number of schools as well as existing schools operations financed by a capital stemming from the individual schools but is transferred to, and piles up in, the Foundations etc. behind.

Free schools, apart from Tvind, establish and expand themselves primary on the basis of their own and legal provisioning of an economic basis, whereas the expansion in the Tvind Corperate Group is based on Fælleseje purchasing and distributing real estate, financing house purchases with other schools' rent, centrally managed recruitment and distribution of the sufficient number of pupils as well as systemic breaches of the subsidy-regulations. The Tvind school expand not because the costumers are lining up but because there it is an obvious goal in itself to secure as large a School Corporate Group as possible.

...

I understand the critique and the hesitation that have to be expressed both here in the Ting and outside regarding the law-proposal, and I still ponder whether there are better ways to solve the assigned task, and if amendments are needed.

But there is also a broad demand that we intervene and we must accept that we once in a while must use unusual means to secure the traditional and precious liberty rights and a unique free school legislation.«

The Supreme Court's remarks.

§ 3 of The Basic Law reads:

»The legislative power lies with the king and the folketing in union. The executive power lies with the king. The adjudicative power lies with courts.«

In accordance with the common understanding in the constitutional literature it must be assumed that Basic Law's § 3, 3rd pkt. sets some limits for the range the legislative power can make decisions as to individual persons' legal circumstances (singular legislation). This understanding is in accordance with the consideration of due process of law that is one of the principal considerations behind the separation of powers in § 3.

By law nr. 503 and law nr.506 of the 12th of June 1996 on amendment of among others the free school law it was clarified that a free school in it's operation as a self-owning educational institution must be independent, and that the schools funds only may benefit it's schooling and educational operation. If according to the minister of education's discretion there isn't satisfying security for that a school fulfils the requirements on independence and administration of the funds, the minister can decide that there should not be given subsidies to the school. By the special provision in § 7 in law nr. 506 The Free School in Veddinge Bakke and some other specifically named schools associated with The School Cooperative Tvind were completely barred from receiving public subsidies after the 31th of December 1996.

According to the remarks accommodating the proposal of law nr. 506 (Folketingstidende 1995/96, tillæg A, s. 5238), that the reasoning behind § 7 was that the Minister of Education did not trust that the Tvind schools would use the public subsidies for the purpose which the Folketing and the ministry wishes to further with the support. The background for the lack of trust was that that investigations carried out by the Ministry of Education - with assistance from a private accountants firm - and Rigsrevisionen »shows that the schools are intertwined in a mutual economic, administrative and managerial network - a corporate group - controlled from the outside which among other things has the purpose of transferring money out of the school operations, and hereby from the pupils, to activities which lie outside the legislation on free boarding schools and on free basic schools«,

In the supplementary report from the Folketings education committee (Folketingstidende 1995/96, tillæg B, s. 1114) it is stated:

»The majority's endorsement of this law-proposal is reasoned in that the majority does not

have trust in that these schools associated with the Tvind Corporation in the future will utilize the subsidies for the purposes the Folketing wishes to further with support.

The chosen method of legislation has the purpose of securing the fulfilment of the majority's wish not to give subsidies to the just mentioned schools forthwith.

The Majority is aware of that the effect of the chosen method of legislation will be that there, as far as concerning this part of the law-proposal, shall not be taken administrative decisions on the subsidies to the schools, with the possibility of following judicial review. This consequence of is not a goal of the law in it-self, and it only effects future

subsides, which the schools do not have any legally protected claim to.«

The Folketing thus endorsed the Ministry of Education's general mistrust in the Tvind-schools will to administrate public subsidies in accordance with the law and has with § 7 in law nr. 506 taken away, from among others The Free School in Vedding Bakke, the access to - in accordance with the free school laws normal rules and on equal footing with free schools without association to the School-Coorperative Tvind - seek public subsidies to it's school activities.

The legislative power has hereby with effect to the schools mentioned in § 7 - Including The Free School in Vedding Bakker - decided the disagreement between the Tvind schools and The Ministry of Education, that was of the view that the schools - notwithstanding their declarations and promises - didn't abide to and would not in the future abide to the requirements for public subsidies to school activity. Such a law-measure - that has as consequence, that the Tvind-schools was barred from seeking judicial review of the claim to subsidies - is in reality a final decision of a concrete dispute of law. Following from § 3 of The Basic Law such a decision belongs not to the legislative power, but to the judiciary with the therein lying legal guarantees for the citizens. The Supreme Court therefore finds, that § 7 in law nr. 506 of the 12 of June 1996 is invalid with regards to The Free School in Veddinge Bakker as contradicting the Basic Law §3, 3. pkt.

The Supreme Court hereafter finds in favour of the free schools principal pleading.

Thus determined as just:

The Respondent, The Ministry of Education, shall acknowledge that § 7 in law nr. 506 of the 12th of June 1996 on amendment to the law on folk high schools, continuation schools, home economics schools, needle work schools, the law on free schools and private basic schools etc., the law on the gymnasium etc. and the law on courses to higher preparatory examination and on study-preparatory single-subject education for adults etc. is invalid in regards to the Appellant, The Self-owning Institution, The Free School in Veddinge Bakker.

None of the parties shall pay costs for these proceedings in the high court or The Supreme Court to the other party or to the treasury.

--oo0oo--

The transcript's authenticity is affirmed.

The Supreme Court, the 19th of February 1999

(sign.)