Report on the situation of Local and Regional Democracy in the Lithuania - CG (8) 4 Part II

Rapporteurs: Owen MASTERS (United-Kingdom) and Louis ROPPE (Belgium)

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EXPLANATORY MEMORANDUM

I. INTRODUCTION

1. On the basis of Article 2.3 of the Committee of Ministers’ Resolution (2000) 1 which set forth that the Congress prepares country by country monitoring reports on the situation of local and regional democracy in member and applicant States, the Congress Bureau entrusted the Institutional Committee with the preparation of a full report on the situation of local and regional democracy in Lithuania.

2. For this purpose, the above Committee appointed Mr Owen Masters (United-Kingdom, R) as Rapporteur on regional democracy and Mr Louis Roppe (Belgium, L) as Rapporteur on local democracy. In order to, fulfil their task, the Rapporteurs were assisted by Mr Riccardo Priore, Secretary of the Congress Institutional Committee and Mr Igor Munteanu, Expert (Moldova).

3. The decision to prepare the above report was also motivated by an appeal addressed on 26 September 2000 by the President of the Association of local authorities of Lithuania (ALAL) to the Institutional Committee (see Appendix 1). This appeal refers to the possible violation, by the Lithuanian central authorities concerned, of Articles 4 (6), 9 (2, 4 and 6) and 11 of the European Charter of Local self-Government (ECLSG).

4. The Rapporteurs were requested to present a full report on local and regional democracy in Lithuania, possibly accompanied by political proposals, to the Congress Plenary Session to take place in Strasbourg on 29-31 May 2001. On the basis of this report, the Congress is likely to adopt a recommendation and address it to the Committee of Ministers and the Lithuanian governmental and parliamentarian authorities concerned.

5. With this in mind, the Rapporteurs decided to organise two official visits to Lithuania. The first visit took place on 21-24 January 2001. The second visit took place on 26- 27 March 2001 . Further to the first visit, the Rapporteurs prepared a preliminary draft report which was submitted to the Lithuanian authorities concerned as a basis for an open and constructive discussion. On the basis of the comments provided by the Lithuanian authorities concerned and taking into account the results of the second official visit, the rapporteurs finalised their report together with a preliminary draft Recommendation, in view of the Institutional Committee approval. These texts will be examined by the above committee during its next meeting to be held in Strasbourg on 27 April 2001.

6. On the occasion of their official visits the Rapporteurs met representatives from governmental, parliamentary, Presidency and municipal authorities, in accordance with the programmes prepared by the Ministry of the Interior - Department for local public administration, in co-operation with the ALAL and under the direct responsibility of Mr Skardžius, Director of the above Department.

It should be pointed out that during the above visits, the CLRAE Delegation experienced a very friendly and co-operative atmosphere. In this respect, the Rapporteurs wish to express their gratitude to the Lithuanian authorities for their warm welcome and the perfect organisation of different meetings.

7. The present report is divided into four main parts. The first part provides an historical, social and political background. It gives some general information on the structure and the functioning of public administration in Lithuania and gives a general description of the current territorial administrative organisation of the country based on the relevant laws. In this respect, last developments and future perspectives are briefly introduced. Detailed references to this important subject are made when describing the organisation of public administration at regional level.

8. The second part is devoted to the organisation and the functioning of local self-government and, therefore, it describes the legal framework of this important tier of administration. In this respect, the report notably refers to the Chapter of the Lithuanian Constitution and the newly adopted law (October 2000) primarily concerned with local self-government, as well as other relevant laws.

In particular, taking into account the principles enshrined in the ECLSG and other relevant Council of Europe conventions, it describes the main provisions of these legal texts regarding:

- the legal recognition of the principle of local self-government,

- the constitution and the powers of local councils and the executive bodies responsible to them,

- the administrative internal structures of local authorities,

- the conditions under which responsibilities at local level are exercised,

- local authorities’ responsibilities and financial (own and transferred) resources,

- the institutional relations between local authorities and State authorities (and the role representatives of central authorities at local level)

- the right of local authorities to create associations and to participate in trans-frontier co-operation,

- the right of local authorities to judicial protection.

9. On the basis of this description, the report makes an attempt to assess, theme by theme, the real implementation of the above mentioned provisions and the concrete functioning of local self-government in Lithuania. The appeal presented by the President of ALAL is examined in this context.

10. The third part of the report is devoted to public administration at regional level. Further to a presentation of the evolution of the situation during last years, a description of the current situation and a reference to the new legal framework concerned, this part describes future perspectives of regionalisation in Lithuania on the basis of the political programme presented by the central authorities concerned.

11. The final part of the report contains a summary of the main positive facts and the problems encountered. On this basis, it draws constructive conclusions which could represent a European reference for the improvement of local and regional self-government and administration in Lithuania.

II. BACKGROUND INFORMATION

12. Lithuania is located at the western end of the East European Plain, on the shores of the Baltic Sea, covering 65.300 square kilometres. It borders in the north Latvia, in the east and south, Belarus; in the southwest, Poland and the Kaliningrad district of the Russian Federation. Lithuania’s population totals 3.7 million people, of which 68.2% live in urban areas. In all, 81.6% of the population is ethnic Lithuanians. The most numerous ethnic minority groups are Russians (8.2%) and Poles (6.9%). Linguistically, Lithuanian belongs to Baltic group of the Indo-European languages.

Lithuania was among the first nation to fight for immediate separation of the USSR and, in spite of desperate military and political pressures imposed on it, it succeeded in gaining its complete independence from Moscow. On 11 March 1990, the previous statehood was restored by a decision that was later confirmed in a nation wide referendum.

In 17 September 1991, Lithuania joined the United Nations and started to gain immediate international recognition. Since 1992, a new Constitution defined Lithuania as ‘an independent and democratic republic’, and that ‘the territory of the state is whole and complete and cannot be divided’.

The powers of the state are exercised by the Seimas (parliament), President of the state, Government and Judiciary. The Lithuanian Republic is usually referred to as ‘semi-parliamentary’ republic in which the Seimas, President and Government seek consensus through a permanent process of consultation and co-ordination.

The Seimas is the highest body of the state powers, consisting of 141 Members, elected for a 4-years term. The President of Lithuania is elected by direct suffrage for a term of 5 years. The Government is composed of a Prime Minister and 13 Ministers.

13. In 1993 Lithuania joined the Council of Europe and, consequently, ratified the ECLSG on 25 May 1999, without reservations. The Charter entered into force in Lithuania on 1 October of the same year.

On 13 June 1997, Lithuania also ratified the European outline Convention on transborder co-operation between territorial communities or authorities, which entered into force on 14 September of the above year. As to the additional protocols to this Convention, Rapporteurs were informed that further to their recent signature, Lithuanian Authorities are currently examining the possibility to ratify them. It should be noted that Lithuania did not sign the European Charter for regional or minority languages nor the Convention on the participation of foreigners in public life at local level.

14. Since March 1997, a Delegation for the European Union (EU) Pre-accession Negotiations was set up in Lithuania to co-ordinate the work of various departments regarding the preparation for Lithuania’s membership in the European Union and to develop the position of Lithuania in the negotiations.

Integration into the EU, alongside other aspects, implies the removal of barriers to exchanges between the two parties, as well as the adoption of the EU common set of principles, rules and norms (the acquis communautaire). Lithuania's updated EU Accession Programme (NPAA) was approved by the Governmental European Integration Commission on 31 May 1999. First January 2004 is seen as the possible date when Lithuania will be ready for full membership to the EU.

It is to be emphasised that EU authorities are trying to help Lithuania to achieve the above results without forgetting to improve the democratic and civil society dimension. In particular, local authorities are associated to several EU programs focused on social and democratic improvements. With this in mind, Lithuanian and EU authorities seem to be aware that the achievement of the requirements linked to the accession of Lithuania to the EU should not undermine the reinforcement of local and regional democracy in the country.

III. TERRITORIAL ORGANISATION

15. The territorial administrative reform of Lithuania was started after the restoration of the country independence. In July 1994, a new Law on territorial administrative units of the Republic of Lithuania and their boundaries replaced the former system consisting of 581 administrative units with a new system consisting of a 66 territorial units: 10 counties and 56 municipalities (44 municipalities of regions and 12 municipalities of cities and towns). in addition, municipal Councils have the right to divide the municipal territories into neighbourhoods. Neighbourhoods do not enjoy any form of local autonomy, being only the administrative subdivisions of the municipalities.

16. In December 1999, in view of the local elections of March 2000, the number of municipalities was increased from 56 to 60. These elections were organised on the basis of a revised proportional system consisting of party lists, giving the voters the possibility to choose a number of candidates on a determined party list. It should be noticed that the participation rate for these local elections was of 51% and that the number of voters significantly increased during these elections also due to the introduction of the possibility to express direct preferences for candidates.

17. Counties are deconcentrated State authorities. Centrally appointed governors head them. They dispose of their own administration. Further to the Parliamentary elections held in October 2000, the Parliamentary and Governmental authorities have initiated a reform leading to a regionalisation of the country.

IV. THE LEGAL AND CONSTITUTIONAL BASIS OF LOCAL SELF-GOVERNMENT, ITS IMPLEMENTATION AND THE COMPLIANCE WITH THE PRINCIPLES ENSHRINEINED IN THE EUROPEAN CHARTER OF LOCAL SELF-GOVERNMENT

1. Presentation of the main legal texts

18. Article 2 of the ECLSG states that “the principle of local self-government shall be recognised in domestic legislation and where practical, in the constitution”. The Constitution of Lithuania, adopted by referendum on 22 October 1992, contains a specific chapter on local self-government including 6 Articles (119-124). The organisation and functioning of local

authorities in Lithuania are specifically enacted by a considerable number of laws and resolutions, the most important of them being:

- The Law on budgeting (adopted on 30 July 1990 and revised in July 2000);

- The Law on temporary direct governing in urban and rural local governments (adopted on 28 March 1994);

- The Law on Elections of municipal councils (adopted on 7 July 1994 and revised in 1999);

- The Law on Administrative-territorial units and their Boundaries (adopted July 1994 and amended in September 1995 and December 1999);

- The Law on Governing of the County (adopted on 15 December 1994);

- The Law on the Status of municipal Councillors (this law was adopted on 7 February 1995 and replaced by the revised law on local self-government adopted in October 2000);

- The Law on the basic regulations of the Association of Municipalities of Lithuania (adopted on 28 March 1995);

- The Law on territorial planning (adopted on 12 December 1995);

- The Law on the transfer of State property to municipalities (adopted on 12 February 1997);

- The Law on the methodology of determination of municipal budgetary revenues (adopted on 7 July 1997 and revised in October 1999);

- The Law on administrative supervision of local authorities (adopted on 14 May 1998);

- The Law on Management, Utilisation and Disposition of State and Municipal Properties (adopted in May 1998);

- The Law on public service (adopted in July 1999 and revised in July 2000);

- The Resolution No.578 on the Approval of the Procedures of Coordination of the size of the municipal budget revenues and indicators determining the equalisation, adopted in May 2000;

- The Resolution on the Bilateral Agreement on the Consultation of the Association of Local Authorities by the Government of Lithuania (signed in June 2000);

- The Law on Regional Development (adopted in July 2000);

- The Law on Local Self-Government (this text was adopted by the outgoing Seimas in October 2000).

2. The compliance with the ECLSG and the practical situation

19. Article 2 of the ECLSG (constitutional and legal foundation of local self-government) is fulfilled by the Constitution, which establishes the right to self-government (Article 119) and the State support for local authorities (120) but also by the Law on local self-government [LLSG] (Article 3.1).

20. Article 3.1 of the ECLSG (concept of local self-government) is implemented by the Constitution which foresees (Article 120) that local authorities shall act freely and independently within the limits of their competence determined by the constitutions and the laws. The LLSG sets forth that local authorities have the right and power (…) to freely, independently, under their own responsibility, and of public benefit regulate and manage public local affairs according to the Constitution and the laws (Article 3.1).

21. Article 3.2 of the ECLSG (elected councils and their executive bodies) is implemented by the Constitution (Article 119) which sets forth the elective character of local authorities’ deliberative bodies and the right to form executive bodies responsible to them. This provision is specified in the LLSG which refers to municipal councils, executive boards and mayors (who are indirectly elected by the councils members). Local councils have the right to create their own executive bodies (boards) for the implementation of the laws, their decisions and those of the government when carried out under their responsibility (delegated tasks). (see Articles 11, 12, 18 and 20 of the LLSG) .

22. Article 4.1 of the ECLSG (scope of local self-government) is not directly implemented by the Constitution, which does not directly refer to local authorities responsibilities.

On the contrary, the LLSG (Articles 5-9) is very detailed in this respect and makes a detailed classification of local authorities responsibilities (it foresees four different categories): independent functions (compulsory tasks like pre-school and supplementary education, provision of social services, health care, public order and peace, local crime control and prevention programmes, residents employment, acquiring qualification and retraining), functions of limited independence (for the implementation of laws referring to adult school education, protection of children and youngsters, social integration of handicapped persons, health-care programs, control of prohibition and limiting of alcohol and tobacco, territory planning, public libraries, planning infrastructure, social residence, environmental protection and green plantations, etc), delegated functions (tasks delegated by the State as registration of civil acts, civil security organisation, state registers, fire-prevention services, calculation and disbursement of social payments, nutrition of children from poor families, social compensations for disadvantaged social groups, citizenship, control of state language usage and conscript organisation) and conventional functions (tasks based on specific agreements).

Another important reference to local authorities’ responsibilities is made in Articles 17, 19 and 21 which refers to powers of municipal bodies.

23. Article 6.13 of the LLSG sets forth that local authorities can perform all other functions which are not attributed to governmental institutions (implementation of Article 4.2 of the ECLSG referring to the principle of general competence). In this respect, it appears that some conflicts arise when referring to the share of responsibilities between local authorities and counties.

24. Article 4.3 of the ECLSG (principle of subsidiarity) is not formally expressed in the Articles on local self-government of the Lithuanian Constitution and in the relevant laws. Nevertheless, the LLSG sets forth a set of basic principles which refers responsibility to the electors, participation of local residents in local affairs, transparency etc. (Article 4).

25. The principle contained in Article 4.4 of the ECLSG (extent of local authorities responsibilities) is not mentioned by the LLSG or the Constitution.

26. No mention is made in the LLSG of the possibility for local authorities to adapt the exercise of delegated powers to local conditions (Article 4.5 of the ECLSG).

27. Article 38.3 of the LLSG foresees the right for the local authorities to be informed by the State institutions on all issues concerning local authorities. Article 40.6 also recognises the right of local authorities to take part in the preparation of laws or other legal acts, regulating local self-government and determining the functions of local authorities.

These provisions are in line with paragraph 6 of Article 4 of the Charter, although they do not seem to be fully applied in practice. In particular, the ALAL claims that in the recent past local authorities representatives have not been officially consulted on financial matters. In this respect, the Government expressed its readiness in the future to improve the implementation of the Agreement on the consultation of the ALAL by the Government.

28. Article 5 of the ECLSG (protection of local authorities boundaries) is implemented by Article 7 of the Law on territorial administrative units and their boundaries which specifies that when establishing or abolishing local authorities or changing their boundaries and centres, State competent authorities have to take into consideration local authorities proposals. However, the law does not refer to the direct consultation with local communities.

29. Article 6.1 of the ECLSG administrative structures and resources of local authorities is fully implemented by Article 29 of the LLSG which states that the structure of the municipality administration, the regulation of its activities and its funding are to be approved by the municipal council.

30. The conditions of service of administrative structures of local authorities (Article 6.2 of the ECLSG) are regulated by the Law on Public Service which refers to all categories of public employees by making a distinction between elected officials and civil servants. The latter represents the largest share of local authorities personnel (teachers, nurses, employees providing services for residents, etc). It is to be specified that important aspects concerning the above personnel (structure, activities, salaries) are subject to the Municipal Council’s approval within the limits set by the Law on Public Service. It is also important to note that the Chief Administrator of the municipality must report to the Mayor.

31. Article 7.1 of the ECLSG (conditions under which local elected representatives exercise their mandates) is referred to into Article 120 of the Constitution which establish that local authorities have to act freely and independently; this principle is also contained in Article 3.1 of the LLSG (see above) and in Article 40.3 of the same law which protects the mandate of local elected persons by stipulating that rights of the municipalities established in the Constitution or in the laws may not be restricted or curtailed.

More precisely, Article 22.3 of the above law establishes that members of the municipal council cannot be persecuted for voting or expressed opinion during the sittings of the council or its committees. However, the same article sets forth that the member concerned can be brought before an ordinary court if he has insulting attitudes or circulates false information.

32. Article 26 of the LLSG represents a partial implementation of Article 7.2 of the ECLSG (financial compensation) by foreseeing a compensation for the work of local authorities’ elected representatives. No mention is made in the LLSG about social protection of these representatives.

33. Article 8 (1 and 2) of the ECLSG (administrative supervision of local authorities activities). In this respect, Article 123 of the Constitution and Article 41 of the LLSG stipulates that government representatives (one per county) supervise the legality of local authorities’ decisions. One can conclude that the control over the expediency of local authorities’ acts is apparently not allowed.

Article 4.2 of the Law on Administrative Supervision of Local Government states that a decision of any official municipal authority is in conflict with the Constitution and/or the laws, the government representatives can, inter alias, suspend by decree the enforcement of the local authority decision concerned.

It should be observed that, in these cases, governmental representatives have also the possibility to exercise their control through motivated recommendations and requests addressed to the local authorities concerned (Article 4.1 and 4.3 of the LLSG). If these means of action are not successful, Governmental representatives can directly appeal to courts (Article 4.6 of LLSG).

34. It is interesting to observe that according to the new LLSG (Articles 27 and 28), each council is now empowered to appoint an internal independent municipal controller. This controller, who is not a political representative (he is not related to the expiry of municipal council mandate), shall supervise the use of municipal budgetary funds and the expediency, effectiveness and legality of the use of municipal or state property entrusted to the respective local authority. In the event of the municipal controller finding any irregularities, he should inform the mayor of the council and, when he deems it necessary, he may inform State controllers. In addition, the municipal controllers submit regular reports to the Ministry of Finances.

35. Concerning the issue of control over municipal bodies (excluded by the ECLSG), one should note that a temporary direct supervision might be introduced in Lithuania on a given territory of local authority in accordance with the Constitution and the Law on Temporary Direct Governing of Urban and Rural Governments. This may occur in 6 different cases (see Article 123 of the Constitution and the above law): (1) when local government institutions threaten the integrity and the constitutional order; (2) when courts establish that the local government Council does not observe the Constitution or violates laws; (3) when the local government Council does not elect the mayor, the deputy mayor, and the local government institutions within the specified period; (4) when sittings of the local government Council is not convened or if it is convened, but does not gather 3 consecutive times in accordance with Article 7 of the Law on local self-government; (5) when the mayor and the local government council do not observe the requirements of Article 9.3 of the (1994) Law on local self-government; (6) when the results of repeated elections to local government councils are invalidated. In all these cases, Seimas is directly responsible for the steps, which are to be taken to introduce this ‘temporary governance’ upon the official notification from the Government (i.e. Seimas Committee for Public Administration and Local Authorities).

36. The Lithuanian Constitution recognises the right of local authorities ‘to (…) draft and approve their own budgets, to establish local fees and to levy taxes and duties (…)’ (Article 121).

The LLSG (Article 36) presents the financial sources of local authorities as local taxes, state transfers (grants and subsidies), other sources coming from state funds (for large local authorities), and borrowed funds.

The Law on Budgeting (Article 22) establishes that the Municipal budget revenues are:

- taxes revenues received by municipal budgets according to the relevant laws and other legal acts;

- revenues from municipal properties;

- penalties as provided by the law;

- local charges;

- income coming from municipal budgetary institutions services;

- revenues arising from current account balances;

- revenues arising from the land plots (for non-agricultural use) sold or rented under the procedure stipulated by the Government;

- subsidies from the state budget and other transferred funds;

- other revenues stipulated by the legislation;

- grants (monetary funds).

37. In terms of legal rules, the above situation seems to satisfy to the standards set fort in Article 9 of the ECLSG (financial resources of local authorities).

In practice, the situation seems to be very different.

If one takes into account the information provided by the ALAL, it appears that although the Law on the Transfer of State-Owned Property to Municipalities determines the framework and the time planning concerning the share of the State owned property assignable to the ownership of municipalities as well as the procedure of this transfer, the State competent authorities have not yet fully proceeded to such a transfer. Moreover, pursuant to the Constitutional Law on the subjects, procedure, terms, conditions and restrictions for the acquisition of land plots, local authorities may acquire non-agricultural land plots required for the construction and operation of buildings and facilities necessary for their direct activities. In practice, however, due to the shortage of own revenues, the local authorities concerned do not very often use this possibility.

38. In this respect, the average data provided by the ALAL on the basis of the information gathered from municipalities at the end of 2000 and submitted to the Government, seems to confirm that, in reality, the revenue of Lithuanian local authorities is not adequate to their responsibilities. In particular, own resources of local authorities (a part of which, according to Article 9.3 of the ECLSG should be derived from local taxes) appear to be limited. Recourses of Lithuanian local authorities are actually composed of :

- a share of personal and State income tax following deduction of the funds allocated to the compulsory health insurance fund in accordance with the Law on Health Insurance. This share is transferred by the county office of the State tax inspectorate on the basis of financial indicators and confirmed by the Law on the annual budget (87%);

- land local tax (0.6%);

- local tax on state-owned land and on bodies of water belonging to the state water stock, leased for commercial or amateur fishing purposes (2%);

- local taxes paid for real estate by enterprises and organisations (6.1%);

- stamp duties, established in the Law On Stamp Duty (2.5%);

- market place local tax (0.3%);

- inheritance or gift property local tax (0.05%);

- revenues from municipality owned assets (property) (0.03%);

- fines and revenues resulting from confiscation according to procedures established by law (1%);

- other local tax ;

- municipal budgetary revenues obtained for the services rendered; other revenues, ie: (0.05%):

revenues on the balances of municipal funds in bank accounts;

income derived from the lease or sale, according to established procedures, of plots of state-owned land, not designated for agricultural use;

other, non tax-derived income, established by law.

39. State transfers are composed of grants (including specific compensations) and subsidies.

Compensation is given when municipal expenditure rises due to the decisions taken by state authorities. In this respect, although in past years expenditures went up due to the decisions taken at central level, compensation was not fully given. The Ministry of Finances pointed out that when expenditures decreased, revenues were not reduced.

The Law on the Methodology of Determination of Municipal Budgetary Revenues provides the system of financial equalisation. Part of revenues from personal income tax is redistributed and municipalities having weak fiscal capacity are supported.

40. In this respect, it is important to mention that in 1999, Thirty-nine Lithuanian municipalities plus the municipality of Vilnius made court appeals demanding, from the Government, 89 + 129 (Vilnius) million Litas as compensation for new obligations given to local authorities in the year 2000. These municipalities also requested to the Constitutional Court to clarify if municipal (constitutional) rights are not being violated.

The ALAL also introduced an appeal before the Congress’ Institutional Committee. This political appeal to a European institution, also mentioning the question of the respect of the ECLSG, indicates that:

Central authorities ignored the local authorities request to balance the municipal budget for 2000 by allotting extra funds in proportion to the functions and obligations delegated to the State,

the Law on the approval of financial indicators of State and municipal budgets for the year 2000 was passed without co-ordination with the ALAL,

the above law did not provide for a sufficient amount of compensation to local authorities,

local authorities have been recently deprived of the right to address the Administrative court regarding the Government decisions violating local authorities’ rights .

41. It should be noted that government representatives seem to be in favour of continuing a dialogue to solve this conflict. In this respect, a draft law on the recognition of the debt of the government to the local authorities for the implementation of the delegated tasks was recently submitted by the Government to the Seimas. Further to the consultation of ALAL, this draft should now be examined by the two Seimas’s competent Committees: on Local Public Administration and on Finances. On this basis, the Seimas should be in a position to adopt a Law before the end of this year. However, the recognition of the debt would not indicate the procedure and the date of payment.

42. Concerning financial aspects, the CLRAE delegation was also informed that conflicts exist concerning the calculation of the share of income tax given to local authorities, effective use of resources and lack of transparency in the distribution of subsidies.

43. Article 10 of the ECLSG (local authorities’ right to associate) seems to be well implemented. A specific Law on the Basic Regulations of the Association of Municipalities of Lithuania was adopted in 1995. The ALAL was then created as a national association representing the ‘common interests of its members – Municipalities – in all institutions of state power and government’. It replaced the existing 4 associations. The Law defines the objectives and the legal framework of the association basing it on principles of ‘benevolence of its members, democracy and decentralisation of power’. Thus, the Charter of ALAL set its own goals and objectives as: ‘to represent general interest of local governments in all state and government institutions; to take part in drafting and improving the laws and other legal acts related to the activities of local governments; to implement the provisions of the ECLSG in Lithuania; to represent general interests of local governments in foreign countries and in international organisations’. Registered as a non-profit organisation, the ALAL (Lietuvos Savivaldybiu Asociacija) seems to be quite an active and visible entity and is currently representing all the 60 Lithuanian municipalities. With this aim in mind, the ALAL attempts to participate actively in the public life; to find out possibilities of dialogue with central governmental officials (Seimas, Government) in order to adjust the legislation to their local authorities current needs and constraints.

The Law of the Association does not refer to the right to belong to an international association of local authorities, as derived from Article 10.2 of the ECLSG or to initiate trans-border co-operation with similar associations. However, this possibility exists on the basis of the Madrid Convention on Transfrontier Co-operation ratified by Lithuanian authorities in1997, is addressed by the association bylaws, and is mentioned in the LLSG.

44. Article 11 of the ECLSG sets forth the right of local authorities to a recourse of a judicial remedy when their rights are violated. This right is guaranteed by the provisions of the Article 122 of the Constitution and by Article 40 of the LLSG.

In this respect, as already mentioned when referring to financial matters (see above), after repeated letters and petitions addressed to the Lithuanian Government, in 2000 the ALAL decided to apply to the higher administrative court against the Government. The above-mentioned 39 municipalities plus the municipality of Vilnius have endorsed this official claim against the government the reason being the government refused to balance the municipal budgets with the necessary funds in proportion to the functions and obligations delegated by the state.

45. The examination of this appeal was apparently delayed by the reform concerning the system of administrative justice and, apparently, due to the changes operated by the Parliament on the Law on Administrative Proceedings. These changes seem to deprive local authorities of the right to address the Administrative Court against central government decisions. In this respect, the revised Article 16.2 of the said law states that the administrative courts are not competent to hear the cases related to the activities of, inter alias, the government. The Ministry of Justice representatives stressed that ‘this change is not intended to deprive local authorities of their right to judicial remedies, but ‘to simply re-organise the existing jurisdictional competencies’.

During the Rapporteurs’ second official visit, the Vice Minister of Justice also referred to a resolution adopted by the Appeal Court Administrative Division, which interprets the above-mentioned article. This resolution dated on 18 September 2000, states that: In view of the systemic aspects of the Constitution and the Law on Administrative Procedures, the provision of the Article 5.2 (Article 16.2 replaced Article 5.2) on the competence of the Administrative Courts not covering the actions/activities of the Government (as a collegial body), in its contents, separates the competence of the Constitutional Court and does not restrict the right to judicial protection in case of conflict of dispute on the actions of the Government in the area of public administration.

V. THE CURRENT SITUATION AND THE PERSPECTIVE OF PUBLIC ADMINISTRATION AT REGIONAL LEVEL

46. Lithuanian counties do not correspond to the definition of regional self-government, set forth by the draft European Charter of Regional Self-Government, adopted by the Congress at its 4th Session, (June 1997) . This is because in the existing 10 counties there are no elected regional bodies. The counties are run by centrally appointed governors and belong to the state administration system. As “deconcentrated authorities” counties are exclusively financed by the State. It should be noted that counties were introduced in Lithuania by the new Constitution (1992), directly approved by the population (with over 70% participation of voters).

47. Although counties do not supervise local authorities’ activities directly, they have an indirect influence on them. This is because counties administrations are involved in service delivery when the regional dimension is concerned.

In this respect, Article 5 of the Law on the governing of the county stipulates that the tasks of the counties’ governors include:

- the implementation of state policy in the spheres of social maintenance, education, culture, health care, territorial planning, monument protection, land use and protection, as well as agriculture, environmental protection and other spheres, and the implementation of state and inter-regional programs;

- the co-ordination of activities of the ministries and other structural subdivisions of Government institutions lying within the limits of the county, as well as the co-ordination of the activities of executive institutions of local authorities in implementing regional programs.

48. Articles 6, 7, 8, 9, 10 and 11 of the above mentioned law describe other exclusive important functions of counties in the field of education, culture, sport and social welfare, health, territorial planning, land use, land register, agriculture, natural resources, environmental protection.

49. In the internal ongoing political debate concerning the perspectives of regionalisation in Lithuania, local authorities expressed their readiness to exercise responsibilities currently exercised by the counties. However, it seems that counties administrations (and some of the ministries concerned) are somewhat reluctant to transfer their powers to municipalities.

50. A number of responsibilities that belonged to municipalities such as construction, have been recently transferred to the county administration. In this respect, municipalities claimed that they should oversee construction inspectorates but also land management (now - under the sole control of the county administration). Moreover, the responsibilities in the field of education, social protection and health-care are traditionally enumerated among the most difficult issues for the relations between counties’ administrations and municipalities. As a consequence, there is friction between municipal elected authorities and county non-elected administrations which seem to have a too large an influence over those issues that are directly affecting the everyday well being of local communities.

51. An important contribution to this difficult situation was provided by the Parliament on 20 July 2000 by adopting a new law in regional development (LRD). The main purpose of this text is to set up the main objectives of the Lithuanian regional development policy towards adequate distribution of EU funds and, from a more political point of view, to foster a better co-operation between counties and municipalities in order to create preconditions for the country regionalisation .

52. Article 6 of the LRD refers to the setting up of regions (formed by) several counties or municipalities having common administrative borders. Moreover, Article 12 refers to the setting up of Regional development councils composed of counties governors, mayors and local councillors who belong to a given region. Article 12 also authorises counties governors to form regional development councils.

53. Taking into account the above-mentioned law, the Government, in the framework of its political programme for 2000 - 2004, approved a number of measures towards the reform of the current public administration system. These measures are aimed at reducing the influence currently exercised by central authorities in order to improve the role of municipalities to the benefit of the population. In particular, concerning local and regional issues, the above measures are notably aimed at:

- prolonging the mandate of municipal councils from 3 to 4 years;

- establishing 5 enlarged regions;

implementing a reform of counties and expanding the rights of the municipalities;

replacing the counties with the above 5 enlarged regions, represented by elected bodies;

recognising the authorities running these regions a number of responsibilities qualified as a second level of public administration;

avoid delegation of functions to municipalities without adequate funding;

transferring land and land management to the municipalities;

giving municipalities the right form their budgets derived from their own local taxes and levies;

decentralising the distribution of budgetary funds;

giving to the municipalities the right to establish the rate of municipal taxes within the limits of the law;

consulting the population regarding the possible changes in the boundaries of municipalities, and more generally, when major resolutions concerning the territorial organisation are taken by the Government.

In November, 2000, the Seimas approved the above-mentioned programme in the framework of its Resolution No.IX-20.

54. In order to implement this Programme and its specific measures, the Government is now working to elaborate a detailed Action Plan which is to be finalised next summer. This Plan should in particular include concrete proposals in order to decide upon the name, the number and the size of the regions proposed in the Governmental Programme. These proposals will take into account economic, ethno-cultural and infra-structural criteria and should be based on a wide consultation process of the population. The proposed regions should be responsible for the management functions which cannot be performed by single local authorities (municipalities).

The final objective of this important reform should be the creation of regions run by directly elected representatives.

55. It is important to not that, taking into consideration that for this kind of reform it is necessary to amend the Constitution (two thirds majority and two parliamentary readings are required), the Government is inclined to implement it in a very gradual manner.

With this in mind, on the basis of the LRD, 10 regional councils were already created and their Presidents were elected. As already specified, these regional councils are composed of municipal councillors, mayors and county governors.

56. The administrative structures supporting these councils are the counties’ existing administration. For the time being, counties are maintained; they will be responsible for the implementation of the state decisions at local level and for the supervision of the tasks which are delegated to local authorities from the state.

Several responsibilities, which are currently entitled to counties, will be gradually transferred to the municipalities.

When the proposed 5 (autonomous) regions will be created, a political decision concerning the future role of the current counties will be taken. In this respect, the Lithuanian authorities will have also to determine the sources of financing of these emerging regions, which could be entitled to levy direct taxes on the basis of a revised system of public taxation.

VI. CONCLUSIONS

57. Even if the Lithuanian regulatory and legal provisions described in previous chapters do, in general, respect the principles enshrined in the European Charter of Local Self-Government, they seem to be, in some cases, incomplete and contradictory (see paragraph IV, chapter 2 of the present report).

In this respect, some laws and implementing regulations concerning local self-government should be revised or adopted (see Article 45 of the new Law on Local Self-Government).

58. With this in mind and taking into account the information gathered on the occasion of their two official visits, the Rapporteurs are of the opinion that in order to fully respect the principles enshrined in the European Charter of Local Self-Government in terms of the law but also in practice, the following steps could be usefully taken by the competent Lithuanian authorities:

A) From a general point of view, the principle of subsidiarity defined in Article 4 paragraph 3 of the European Charter of Local Self-Government could be explicitly reflected in the legislation(s) regulating the share of responsibilities between the different tiers of government.

Further to the incorporation of the above mentioned article in the domestic legal system (the Charter was ratified by Lithuania in 1999), the express mention of the principle of subsidiarity in a legal text alongside the principle of local self-government (already recognised in the Constitution and in the law on local self-government), would complete the legal framework of Lithuania in the field of public administration by making this framework an innovative model for other Council of Europe’s member States.

B) Concerning local authorities’ responsibilities, it should be noted that the detailed description of functions combined with the principle of general competence made by the Lithuanian legal system, represents a very positive basis for the functioning of local authorities in Lithuania.

Nevertheless, the Rapporteurs consider that the Law on local self-government could be further improved by specifying that responsibilities transferred (ie by legislative decisions) to local authorities shall normally be full and exclusive and that they may not be undermined or limited by another central or regional authority except as provided for by the law (see Article 4 paragraph 4 of the European Charter of Local Self-Government).

Another important improvement of the above-mentioned law should refer to the possibility for local authorities to adapt the exercise of delegated responsibilities to local conditions (see Article 4 paragraph 5 of the European Charter of Local Self-Government).

Last but not least [in this respect see also the paragraph C) below], care must be taken to avoid assigning too many responsibilities to local authorities without adequate financial provision.

C) Concerning local authorities’ financial resources, it can be useful to remember that in order to exercise their responsibilities, in the context of national economic policy, local authorities need adequate financial resources of their own, which they may dispose of freely (see Article 9 paragraph 1 of the European Charter of Local Self-Government) .

In this connection, the Rapporteurs should like to point out the limited proportion of revenue raised in Lithuania by genuine local taxation for which local authorities can set the rates and the predominant role played by transfers as opposed to own resources. In this context, the relative lack of productivity of the taxes which local authorities are entitled to levy has also to be noted. These authorities also suffer the consequences of national economic problems, which, in some cases, are linked to the constraints imposed by the conditions fixed by the European Union or the International Monetary Fund.

With this in mind, the Rapporteurs are of the opinion that:

i. when new responsibilities are transferred to local authorities, adequate financial resources to carry them out must be also provided. In order to implement this principle, the Lithuanian Governmental and Parliamentarian authorities should adopt by law the principle of concomitant financing as it was proposed by the Congress in its Recommendations 64 (1999) and 79 (2000) .

ii. as already announced by some representatives of the Government and the Parliament, the system of public taxation should be revised. On this basis, local authorities will have in practice the possibility to levy their own taxes representing a part of their resources and for which they can determine the rate; (in particular, this could also be applied to a part of the personal income tax).

iii. Concrete measures should be taken so that, as foreseen by law, and in application of the above-mentioned principle of subsidiarity, land property and real estate are transferred to local authorities in practice.

D) The existing Agreement regulating the framework and the procedures of the consultation of the Association of Local Authorities of Lithuania by central authorities should be carefully implemented in the future. In this respect, it is essential that a regular consultation of the above Association be undertaken when referring to local authorities’ interests and responsibilities. In particular, when a change is proposed in relation to the territorial-administrative organisation, in order to fully respect Article 5 of the European Charter of Local self-Government, the local communities concerned should be also duly consulted.

E) Taking into account Article 8 paragraph 3 of the European Charter of Local Self-Government, any administrative supervision of the local authorities by a central or regional authority should be exercised in such a way as to ensure that the intervention of the controlling authority is kept in proportion to the importance of the interest which is intended to protect.

With this in mind, the control performed by government’s representatives through motivated recommendations and requests, as well as well as through appeals to courts must be preferred to any supervision aimed at suspending by decree the enforcement of local authorities’ decisions.

As the status of the municipal controller was recently modified, for the time being, one can simply recommend that the municipal controller should not, in practice, become for central authorities a way to perform an indirect financial a priori control on the expediency of municipalities’ decisions.

F) Taking into account the problems encountered in respect of the judicial protection of local self-government in Lithuania, it is essential to secure in a definitive manner in the legislation the constitutional rights of local authorities to lodge appeals against decisions and/or omissions of central authorities (including the Government) which appear to violate local authorities’ rights.

The constitutional rights of the local authorities for judicial protection will be definitely secured in practice when the competent courts are able to expediently adopt a decision in response to the above-mentioned appeals.

G) The discussions on the reform related to the direct election of mayors by the population should be further discussed by central and local authorities and by the political parties concerned. These discussions must take into account all the advantages (political stability, interest of the citizens in the local public life, etc.) and the disadvantages (populism, democratic deficit, one issue candidates, etc.) of this possible reform. The complexity of the procedure requested (which would necessitate the amendment of the Constitution) does represent a guarantee to insure an in-depth and shared understanding of the above advantages and disadvantages, taking into account the current social, political and economical situation of the country.

H) Another very important step to be taken for a better implementation of the principles of subsidiarity and of local self-government in Lithuania is represented by the development of training activities.

Local authorities should be given the resources to organise and be responsible of the training of local elected officials and local staff. These resources should be considered by central authorities like an investment and not a mere cost. Well-trained local officials represent a guarantee for the reinforcement of local democracy and economic development of the country as a whole.

I) Concerning the ongoing reform on regional administration, the Rapporteurs :

taking into account the Law on regional development, the Programme of the Government for 2001-2004 (approved by the Parliament in November 2000), and the Governmental Action Plan related to this programme,

bearing in mind the principles contained in the draft European Charter of Regional Self-Government,

should like to stress the importance of the political objective of this reform aimed at setting up regions run by directly elected regional councils.

These regions should represent a genuine system of regional self-government, based on the principles enshrined in the above-mentioned draft Charter.

With this in mind, the Rapporteurs agree that this reform cannot be realised artificially and must be based on concrete socio-economical and ethno-cultural needs. Moreover, the Rapporteurs are convinced that the reform must be pursued gradually by means of a regular consultation of the population.

The existing system of regional administration based, on the one side, on regional councils consisting of municipal councillors (elected), mayors (elected) and counties’ governors (appointed by central authorities), and, on the other side, by counties (representing central authorities at regional level) must be regarded as an initial step allowing the Lithuanian authorities to achieve the above mentioned territorial reform towards the creation of a system of regional self-government.

The functioning of this provisional system will allow the Lithuanian authorities to assess the necessity to maintain the counties once the reform will be achieved and think about the possibility to attribute specific executive bodies and administrative structures to the authorities representing the proposed new tier of regional self-government.

As for the share of responsibilities between municipalities, regions (the current ones and those which could be created as a result of the ongoing reform) and counties the Rapporteurs are of the opinion that it should be determined on the basis of the principle of subsidiarity which, as already mentioned, establish that responsibilities must be generally exercised, in preference, by those authorities which are closest to the citizens.

Appendix 1

LIETUVOS SAVIVALDYBIŲ

ASOCIACIJA 26 09 2000

__________________________________________

The Association of Local Authorities in Lithuania

To: The Congress of Local and Regional

Authorities of Europe

RE: Appeal of the Association of Local Authorities in Lithuania (ALAL) to CLRAE

Dear Sirs,

Following the decision of the Council of the Association of Local Authorities in Lithuania (see attached), we hereby appeal to the Congress of Local and Regional Authorities of Europe informing that the central governing bodies of Lithuania do not comply with the European Charter of Local self-government. We would like to ask the Congress to revise the material attached and assess the violations listed in it.

We attach the list of the following documents (in English and Lithuanian):

1. Application of the Association of Local Authorities in Lithuania regarding violation of rights of Local Authorities.

2. Decision No 3 of Council of ALAL.

3. ALAL appeal to the Seimas and Government of Lithuania (22 October 1999).

4. Resolution of the Council of ALAL (7 December 1999).

5. ALAL appeal to the Government and the Resolution of ALAL (7 January 2000).

6. Resolution of the Board of ALAL (21 January 2000).

7. Respond from Seimas of Lithuania (28 February 2000).

8. Respond from the Ministry of Finance (16 March 2000).

9. ALAL appeal to Seimas (21 March 2000).

10. Resolution of the Government of Lithuania (17 April 2000).

11. ALAL appeal to the Government (02 June 2000).

12. ALAL appeal to the Government (14 June 2000).

13. ALAL appeal to President of Lithuania (20 June 2000).

14. The protocol of the meeting with Prime Minister’s Office (4 July 2000).

15. Resolution of the Government (14 July 2000).

16. Respond from Seimas (20 July 2000).

17. Law on the amendment to the Law on the Methodology of determination of municipal budgetary revenues.

18. Law on Local self-government.

19. Law on Administrative proceedings.

President Bronis Ropė

APPLICATION

of the Association of Local Authorities in Lithuania

Regarding Violation of Rights of Local Authorities

The Seimas and the Government of the Republic of Lithuania are not acting in compliance with the provisions of the European Charter on Local Authorities, which was unconditionally ratified by the Seimas of the Republic of Lithuania on 25 May 1999, as:

1. They ignored and essentially did not address the requests contained in the Resolutions adopted by the Council of the Association of Local Authorities in Lithuania (hereinafter referred to as the ALAL) (No. 22 dated 7 December 1999 and No. 25 dated 21 January 2000) as well as in further repeated addresses of the ALAL (letters of the ALAL addressed to the Seimas: No. 3-178 dated 21 March 2000; letters addressed to the Government: No. 3-139 dated 2 March 2000, No. 3-326 dated 2 June 2000, No. 3-369 dated 14 June 2000, etc.) to balance the municipal budgets for 2000 by allotting extra funds in proportion to the functions and obligations delegated by the state, and thus violated the provisions of Paragraph 6 of Article 4 of the European Charter on Local Authorities and Article 23 of the Law on Local Authorities of the Republic of Lithuania.

The majority of the letters of the ALAL have not been replied to. On 28 February 2000, the Seimas Committee on Budget and Finance noted that the problem of covering the non-received municipal revenues from taxes had to be addressed by the Government. In 1999, local authorities did not receive a part of the revenues originally projected by the state (LTL 189.1 million). Upon the instruction of the Government, the Ministry of Finance informed that the issue of insufficient funding of municipalities would not be addressed because the state currently did not have extra financial resources at its disposal. Therefore, municipal expenditures for 2000 have not yet been balanced against municipal revenues.

2. Law on the Approval of Financial Indicators of State and Municipal Budgets for the Year 2000 of the Republic of Lithuania No. VIII-1504 was passed on 23 December 1999, without having co-ordinated it with either the Association of Local Authorities in Lithuania or local authorities themselves, thus violating the provisions of Paragraph 6 of Article 4 and Paragraph 6 of Article 9 of the European Charter on Local Authorities, Article 23 of the Law on Local Authorities of the Republic of Lithuania, and Part 1 of Article 11 of 19 October 1999 Law on the Amendment to the Law on the Methodology of Establishing Municipal Budget Revenues of the Republic of Lithuania, No. I-1362 (hereinafter referred to as the Law on Methodology).

In 2000, while preparing the draft financial indicators of municipal budgets, the Association of Local Authorities in Lithuania practically did not receive any official information. The draft laws were obtained either at the meetings of the Government or one day in advance. In preparing the Budget for 2000, the Government had to furnish to the ALAL the indicators determining the municipal budget revenues in 1 year and 3 years and their reconciliation for co-ordination purposes. However, the Government failed to adhere to Article 10, Part 1 of Article 11, and Article 12 of the Law on Methodology, as well as the established procedure of the alignment of legislation, as neither these indicators nor draft law on the Budget for 2000 and accompanying documents were officially submitted for co-ordination purposes. Both the Seimas and the Government ignored the lawful requirement set forth in the address of the ALAL’s Meeting of 22 October 1999 to the Seimas and the Government to furnish draft Minutes of the negotiations held between the Government and the ALAL.

3. Failing to follow the provisions contained in Paragraphs 2 and 4 of Article 9 of the European Charter on Local Authorities, Article 23 of the Law on Local Authorities of the Republic of Lithuania, and Parts 5 and 8 of Article 11 of the Law on Methodology, the Law on the Approval of Financial Indicators of State and Municipal Budgets for the Year 2000 of the Republic of Lithuania No. VIII-1504 did not provide for a sufficient amount of general grant compensation to local authorities.

In violation of Part 5 of Article 11 of the Law on Methodology (when the Seimas or the Government adopts or intends to adopt decisions affecting municipal expenditures, a general grant compensation of a certain amount has to be allotted to compensate the difference in the expenditures), local authorities were not allotted a general grant compensation at all, though public institutions did make a few decisions resulting in the increase in municipal budgets.

In violation of Part 8 of Article 11 of said Law (when the amount of revenues excluding special target grants for the following budget year is less than the estimated amount of these revenues in the budget year), local authorities were not allotted a general grant compensation of LTL 72 million.

4. In violation of the provisions contained in Article 122 of the Constitution of the Republic of Lithuania, Article 11 of the European Charter on Local Authorities, and Article 23 of the Law on Local Authorities of the Republic of Lithuania, the right of local authorities to take up judicial measures in order to enforce the right to freely exercise their powers or defend violated rights has been restricted in Lithuania, as local authorities have been deprived of the possibility to address the Administrative Court regarding Government decisions violating the rights of local authorities or affecting the guarantees of their activities.

Article 5 of the Law on Administrative Proceedings was amended on 13 April 1999, pursuant to which the jurisdiction of the Administrative Courts does not cover the activities of the Government anymore.

On 11 July 2000, the Seimas of the Republic of Lithuania passed a Law on the Amendment to the Law on Budget Composition; Part 7 of Article 26 and Article 29 thereof do not provide for the right of local authorities to take up judicial measures in order to defend their violated rights. Moreover, Part 2 of Article 31 of this Law eliminates the liability of the Government for the implementation of the municipal revenues plan by unreasonably transferring this liability to local authorities, though only the institutions under the Ministry of Finance have the right to administer taxes.

President

of the Association of Local Authorities in Lithuania Bronis Rope

Appendix 2

Congress of Local and Regional Authorities of Europe

Strasbourg, 28 March 2001

First official visit of the Rapporteurs on the situation of local and regional democracy in Lithuania

Vilnius, Kaunas, Lithuania, 21 - 24 January 2001

Draft Programme

Congress of Local and Regional Authorities of Europe

Strasbourg, 28 March 2001

Second official visit of the Rapporteurs on the situation of local and regional democracy in Lithuania

Vilnius, Lithuania, 25 - 27 March 2001

Programme



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