Rapporteurs : Mr Tomas JIRSA (Czech Republic) and Mr Wilbert L. F. VAN HERWIJNEN (Netherlands)

EXPLANATORY MEMORANDUM

I. INTRODUCTION

1. At its meeting on 11 March 2002 the Group of Independent Experts on the European Charter on Local Self-Government (hereinafter referred to as “the Charter”) decided to suggest to the Institutional Committee of the Chamber of Local Authorities that a report be prepared on municipal ownership in the light of the principles of the Charter. The suggestion was accepted by the committee at its meeting on 15 April 2002 and the group was instructed to begin preparing the report, which would be entitled "Forms of Municipal Ownership", making Mr Corneliu-Liviu Popescu responsible for preparing the consolidated report. The rapporteurs wish to express their thanks to Mr Popescu for his valuable help in preparing the report and the recommendation.

The draft questionnaire was sent to the secretariat of the Institutional Committee on 6 September 2002 and was discussed at the meeting of the Group of Independent Experts on 27 September 2002.

After being amended and supplemented as proposed by members of that group, the questionnaire was adopted under the title "Municipal Property" by the Institutional Committee at its meeting on 13 November 2002 and then sent to all group members.

2. 27 experts (group members) sent replies to the questionnaire in respect of their countries. These experts were Artan Hoxha (Albania), Peter Pernthaler (Austria), Alexandre Vodenitscharov (Bulgaria), Zvonimir Lauc (Croatia), Andreas Pandelides (Cyprus), Richard Pomahac (Czech Republic), Hans Otto Jørgensen (Denmark), Sulev Mäeltsemees (Estonia), Olli Mäenpää (Finland), Jean-Marie Woehrling (France), Spiridon Flogaitis (Greece), Zoltan Szente (Hungary), Unnar Stefànsson (Iceland), Francesco Merloni (Italy), Edvins Vanags and Inga Vilka (Latvia), Artashes Gazaryan (Lithuania), Jean-Mathias Goerens (Luxembourg), Ine van Haaren-Dresens (Netherlands), Eivind Smith (Norway), António Rebordão Montalvo (Portugal), Corneliu-Liviu Popescu (Romania), Franc Grad (Slovenia), Angel Manuel Moreno (Spain), Torsten Bjerkén (Sweden), Rusen Keles (Turkey), Vadym Proshko (Ukraine) and Chris Himsworth (United Kingdom). The drafter is deeply grateful to the national experts for their replies and for the quality of their technical work.

3. The first version of the draft report on "Municipal Property" was drawn up by Mr Corneliu-Liviu Popescu and represents an analysis of the replies for 27 countries out of the 41 entitled to have their own member on the Group of Independent Experts on the European Charter of Local Self-Government.

The draft was sent to the secretariat on 20 January 2003 for analysis at the group's meeting on 14 February 2003.

4. The preliminary draft report was discussed and approved by the Group of Independent Experts at their meeting in Aix-en-Provence on 14 February 2003 in the presence of Mr Van Herwijnen, co-rapporteur, and Mr Newbury, Chair of the Institutional Committee of the Chamber of Local Authorities.

5. The preliminary draft report has been modified by Mr Popescu following the discussions and proposals made by the national experts at or after the 14 February 2003 meeting.

It has also been supplemented by the replies to questionnaire from the following experts: Dian Schefold (Germany), Gordana Siljanovska Davkova and Ilija Todorovsko (former Yugoslav Republic of Macedonia), Michal Kulesza (Poland) and Liudmila Lapteva (Russia).

6. The final version of the draft report thus takes account of the replies for 31 countries out of the 41 entitled to have their own member on the Group of Independent Experts on the European Charter of Local Self-Government.

The analysis in the draft report refers only to the replies from the 31 national experts. Thus, if an expert has not given a reply concerning a specific matter, the conclusions do not take the situation in that state into account. This remark obviously also applies to states for which there are no replies.

The rapporteurs and Mr. Popescu wish to express their warm thanks to the national experts for their replies, for their contributions to the meeting of the Group on 14 February 2003, for the suggestions and corrections made after the meeting and, it goes without saying, for the quality of their scientific work.

II. PRELIMINARY REMARKS

7. The report on “Municipal Property in the light of the principles of the European Charter of Local Self-Government " is the first of the "second-generation" reports - political reports covering several articles for the purposes of monitoring the implementation of the European Charter of Local Self-Government.

The second-generation reports take a closer look at the topics dealt with, which are not comprehensive but specific. However, this does not mean going into excessive detail, since the reports must retain a perspective.

8. The term "municipal property " used in this report covers ownership by lower-tier territorial authorities. The report does not concern intermediate-tier local authorities or the federate entities of a federal state. On the other hand, when the relations between municipal ownership and state ownership are analysed, both the federal state and the federate entities are concerned with regard to state ownership.

The report is chiefly linked to the Charter - as will be shown below - by Article 3 ("Concept of local self-government") paras. 1 and 2, interpreted in the light of the preamble, and by Article 9 ("Financial resources of local authorities") paras 1. and 2 of the Charter. Other articles concerned are: Article 4 ("Scope of local self-government") paras. 2, 4 and 6, Article 8 ("Administrative supervision of local authorities' activities") paras. 2 and 3, Article 10 ("Local authorities' right to associate") paras. 1 and Article 11 ("Legal protection of local self-government").

Moreover, as advocated by the European Court of Human Rights in respect of the European Convention on Human Rights, the Charter must be regarded as a living instrument to be interpreted in the light of today's living conditions.

9. The main body of the report consists of six chapters:

- general rules governing municipal ownership; assets owned by local authorities;
- acquisition, use and disposal of municipal property;
- expropriation, requisition and exercise of a right of pre-emption by local authorities;
- relationships between municipal ownership and the exercise of local self-government, administrative supervision of local-authority decisions, democratic rules and the legal protection of local self-government;
- municipal ownership and local authorities' own resources, taxation and transfers of powers;
- specific problems concerning municipal ownership and democratic changes in the central and east European countries.

Each chapter is divided into several sections.

Each section begins with an indication and interpretation of the corresponding provisions of the European Charter of Local Self-Government. This is followed by a description of the comparative situations in states party or signatory to the Charter. A conclusion is then drawn up stating how far the various national situations conform to the Charter's provisions and proposals are submitted, where appropriate.

At the end of the report general conclusions are formulated and recommendations made regarding interpretation of the Charter.

III. GENERAL RULES GOVERNING MUNICIPAL OWNERSHIP; ASSETS OWNED BY LOCAL AUTHORITIES

III.1 Legal right of local authorities to own property

10. At first sight, the European Charter of Local Self-Government contains no provisions on local-authority property, ownership or assets. However, municipal ownership is implicitly safeguarded in the Charter.

Article 3 ("Concept of local self-government") defines local self-government as the right and ability of local authorities, within the limits of the law, to regulate and manage a substantial share of public affairs under their own responsibility and in the interests of the local population.

The report explaining the Charter states that the term "ability" expresses the idea that the legal right to regulate and manage certain affairs must be accompanied by the means of doing so effectively.

At the same time, Article 3 para. 1 must be interpreted in the light of the ninth paragraph of the preamble to the Charter, which states that local self-government implies, inter alia, that local authorities possess a wide degree of autonomy with regard to the resources required for the fulfilment of their responsibilities.

In the interpretation in the explanatory report and in the preamble there is no limitation on the resources which the local authority must possess if local self-government is genuinely to exist. Accordingly, ubi lex non distinguit nec nos distinguere debemus, all types of resources, whether financial, material or human, are allowed. The right of local authorities to own material resources (goods, property, other assets) is thus an intrinsic component of local self-government included in the Charter.

Given the fundamental role of Article 3 in Part I of the Charter, all the other articles, which cover particular aspects of local self-government, must be interpreted in accordance with its provisions. With specific respect to the subject of this report, the provisions of Article 9 ("Financial resources of local authorities") should be read in conjunction with Article 3.

It is true that the title of Article 9 mentions "financial resources" but it should be pointed out that these are not simply fiscal in nature but may also include non-fiscal resources. Moreover, para. 1 of that article refers to "adequate financial resources of their own" for local authorities, without specifying what kind of resources, whereas para. 3 mentions, inter alia, "charges" (which include the price of a contract for the transfer of assets).

A systematic interpretation of Articles 3 and 9, of the explanatory report and of the preamble leads necessarily to the conclusion that local self-government in the sense intended by this international treaty must entail the right of local authorities to own not only financial but also material assets. Municipal ownership is therefore viewed as a basic element of local self-government.

11. In concrete terms, lower-tier local authorities in all the states examined enjoy the right to own property, ie "municipal ownership".

A qualification must be entered regarding the situation in Ukraine: that country's legislation embodies the right of local authorities to own property, but there is as yet no law that allows state ownership to be differentiated from municipal ownership, so that this right is still purely theoretical.

12. It is therefore clear that the Charter's provisions on the right of local authorities to own property are respected in the member states, except in the special case of Ukraine.

It is accordingly recommended that national legislation should recognise the right of local authorities to own property, for the purposes of the accomplishment of tasks of local public benefit, as an intrinsic component of local self-government.

III.2 Forms of municipal ownership

13. The Charter does not lay down any specific legal form or forms of municipal ownership. Quite obviously, whatever national policies may be adopted in this area, local authorities must still possess their own assets and be able to use them for discharging their functions.

14. A comparative analysis shows that there are two main legal systems as regards forms of municipal ownership: states where only one form of municipal ownership exists, and states which have two forms, public and private.

The two systems exist in more or less equal proportions, with the first enjoying a slight advantage. Seventeen states have only one form of municipal ownership (Austria, Croatia, Cyprus, Czech Republic, Denmark, Finland, Germany, Hungary, Iceland, Latvia, Lithuania, Netherlands, Norway, Poland, Slovenia, Sweden and United Kingdom), while 12 states have two forms (Albania, Bulgaria, Estonia, France, Greece, Italy, Luxembourg, former Yugoslav Republic of Macedonia, Portugal, Romania, Spain and Turkey).

It should be emphasised that the inclusion of Germany in the first group of states (where there is a single form of municipal property) is based on the situation in most of the country, since the national expert pointed to an exception with regard to the “law of Hamburg”, which has introduced a public property model (ie, it has two forms of municipal property).

The Russian national expert did not provide any specific information on this subject.

15. In the first group of states there is only one form of ownership for all natural and legal persons, ie both individuals and corporations, including local authorities and the state. If (with the qualifications necessitated by the transposition of one legal system to another) we use the categories applying in the second group of states, such ownership may be described as "private". The only exception is Lithuania, where municipal ownership (of a unique type) is public ownership, as in the case of the state and in contrast to ownership by private individuals.

However, the duality featured in the other system is not without influence on the situation in some countries belonging to this first group. In Germany, for example, if private property benefits the public and especially if it is used by the public (streets, roads, water courses, etc) some elements of public law may be adopted. In Austria, although only private ownership is involved, a distinction is drawn between public property (intended for general public use, for example highways, streets, markets, fountains, water courses, lakes), local property (intended for the common use of a small number of persons, eg farmland) and local assets (eg municipal businesses). Likewise, a characteristic of Croatia and the Netherlands is that, in the category of municipal property alone, some have a public function (public use or public institutions). In Hungary, municipal property consists of basic assets (intended for the local authority's statutory tasks) and other assets. Finally, in Poland municipal assets are, irrespective of the actual legal situation, divided by legal writers into assets for public use and assets for commercial use.

The expert for Germany considers that the important question is the use of municipal property for public purposes, and it is only necessary to draw a distinction as to the legal system applicable, ie between public and private law, as a secondary consideration.

16. As regards the second situation, municipal ownership is composed of two elements, the public and the private. There are therefore two types of municipal ownership (of municipal property): public ownership (public property) and private ownership (private property).

For example, in France public property includes immovable and (more rarely) movable goods earmarked for public use or a public service and specially designed for that purpose. Such property may be earmarked directly for the public (roads, squares, cemeteries) or allocated to a public service (fire station, prison, library, stadium) and may include special amenities (meeting-room, tourist beach). Private property consists of property which has not been allocated to the public or to a public service and which has not been specially fitted out for the purpose (rented accommodation, low-cost housing, farm land, forests, ordinary vehicles etc). In Spain, public ownership applies in the case of property intended for public use or a public service, while private ownership applies to property intended to produce a return. In Greece, property for public use and property intended to serve local-authority purposes are public property, all other property being private. In the case of Luxembourg, public property includes all property earmarked for the authority's functioning and for public use, and private property includes property intended to produce a return.

Attention is drawn to the particular case of Italy, where municipal ownership is triple in structure: public property, non-disposable assets and disposable assets. However, because of the legal system applicable and in the interests of a structured analysis, the first two forms provided for by national legislation (public property and non-disposable assets) may be combined into the theoretical category of public ownership, with disposable assets being regarded as private property.

17. For systems which have two forms of municipal ownership there is the problem of classification and declassification (we would stress that the expert for Germany; which has a single form of municipal property, also speaks of the use of assets intended for a public purpose) and it is necessary to know who has the power to declare that an item is public property or the private property of the local authority: the latter or the state.

A very simple solution is to grant that power either to the local authority (Estonia, former Yugoslav Republic of Macedonia) or to the state (Greece, Turkey).

Situations in which powers are shared between the local authority and the state are more complicated and numerous. In Bulgaria, the law establishes the allocation criterion, after which the actual decision is taken by the local authority. In Spain the law decides (using a general criterion followed by an explicit instruction, with a fall-back rule that in case of doubt the item must be presumed to be private, not public, property) and the authority then takes the actual decision. In France, the local authority chooses to allocate an item of property to the public or to a public service and makes the corresponding arrangements. However, the consequences fall outside the authority's control; by law the item becomes public property and any formal classification to the contrary is ineffective. In Italy, allocation depends partly on the law and partly on the local authority's administrative decision as to purpose. In Luxembourg, allocation is decided by the local authority, subject to approval by the Ministry of the Interior. In Portugal, the decision is taken, on the basis of the law, by the local authority concerned. Finally, in Romania, it is possible to have either an explicit listing in the law or a decision by the local authority.

18. In every case (whether there is only one form of municipal ownership or whether the two forms, public and private, are present), the situation regarding forms of municipal ownership is the same as for state ownership.

It can therefore be concluded that, from this point of view, the state and lower-tier local authorities are subject to the same legal arrangements.

19. Whether they operate under a single form of municipal ownership or under two forms (public and private), local authorities may dispose freely of the assets in accordance with the principle of local self-government. Moreover, equality of legal treatment between the state and local authorities with respect to forms of ownership is a positive element that must be retained, even though the Charter does not stipulate any particular course of action.

III.3 General rules governing municipal ownership

20. The Charter contains no provision laying down legal rules applicable to municipal ownership. Just as in the case of forms of municipal ownership, national rules must not invalidate the need for the existence of municipal assets nor for them to be earmarked for the discharge of local authorities' specific functions.

21. In states where only one form of municipal ownership exists, the right of local authorities to own property is generally subject to ordinary (civil) law on ownership, which applies in the same way to private individuals, local authorities and the state.

First, there is the situation where private law applies exclusively, as in the case of any other legal person (Cyprus, Denmark, Finland).

Second, there are cases in which private law applies in principle, as in the case of any other legal person, subject to certain special rules (Germany, Iceland, Norway, Slovenia, Sweden, United Kingdom), to certain exceptions concerning respect for human rights and the public interest (Austria) or to certain public-law exceptions, either across the board (Lithuania) or only for assets intended for the benefit of the public (Croatia, Netherlands, Poland).

Third, public and private law may be applied jointly (Czech Republic, Hungary).

Finally, public law may be applied exclusively (Latvia).

22. The situation regarding the law applicable is also different in states which have two forms of municipal ownership.

A very simple situation is represented by the applicability of public law to public ownership and private law to private ownership (Albania, Portugal).

A second situation involves applying public law and private law together to both forms (former Yugoslav Republic of Macedonia, Turkey).

Finally, there are the more complicated cases where public and private law are applied simultaneously in differing degrees.

In one case (Luxembourg), private law is generally used for both forms of municipal ownership, with exceptions for public property only.

It is possible for public law to be used for public ownership as the only arrangement, while for private ownership it is normally private law that applies, with special exceptions (Bulgaria, Greece). Alternatively, (still in the case of private property), use may be made of public law and, in the absence of special public-law rules, of the general rules of private law (France).

In Italy, public-law provisions constituting exceptions to the general law apply to public ownership and non-disposable assets, and private law applies to the rest, while disposable assets are covered wholly and exclusively by private law.

In Spain, recourse is had, in the case of public ownership, mainly to public law and to private law where public law is lacking, and, in the case of private ownership, to special public-law rules and then general private law. In Romania, on the other hand, while the rules are the same for public property, private law is normally applied to private property, with special public-law exceptions.

For Estonia, the national expert stated that no clear distinction exists between public and private law.

23. Irrespective of the nature of the rules applicable (public and/or private), the same type of rules applies both to state ownership and to municipal ownership in the majority of states.

The situation in the Czech Republic constitutes an exception since public law is used for state ownership, and both public and private law for municipal ownership.

24. It emerges that whether a single legal system or two legal systems apply (public and/or private) in no way affects the existence of municipal property or its use for carrying out the specific functions of local authorities. The Charter is therefore respected. Similarly, it must be stressed that, with one exception, the legal system (or systems) applicable to municipal ownership is (or are) the same as for state ownership, which shows that there is equality of treatment in this respect. This is a positive feature, even though the Charter does not prescribe any particular approach.

III.4 Assets owned by local authorities and their demarcation from state-owned assets

25. It emerges clearly from Article 3 ("Concept of local self-government") para. 1 of the Charter, interpreted in the light of the preamble and the explanatory report, that the resources (ie including material resources) of local authorities must be sufficient for the discharge of their local self-government role. Consequently, the type and quantity of municipally owned property must be sufficient for this rule to be observed.

26. In the majority of states, local authorities can normally own all types of tangible property (movable and immovable) and intangible property (shares in companies, intellectual property rights etc).

Situations exist in which certain assets are owned wholly by the state, to the exclusion of anyone else, including local authorities (eg Albania, Bulgaria, Romania, Russia).

Very few exceptions are found to this general entitlement of local authorities to own any type of property and, where they exist, they concern shares in public limited companies (Denmark) or private limited-liability companies (Russia). In the past, this ban on owning property existed in Lithuania in the case of land.

27. In general, the items most often found as part of the property of local authorities are: public roads, streets, squares, markets; administrative buildings (town hall), local public amenities and institutions (theatres, schools, day nurseries, hospitals, old people's homes etc); stadiums, sports grounds, swimming pools; cemeteries; vehicles; office furniture; movable goods needed for administrative activities.

28. The demarcation of state ownership from municipal ownership differs according to the legal criterion used in each state.

One approach is for the law to determine or expressly list municipal property (Hungary, Spain).

Other states (Albania, Portugal, Russia) use a functional criterion whereby state property is distinguished from municipal property according to the functions of the two types of entity.

Another approach is to assess the local or national importance of the property (Bulgaria).

There is also the subsidiarity criterion according to which all assets not belonging to the state form part of municipal property (Latvia, Romania - in the latter case only for public property; in the case of Romania again, the subsidiarity principle operates not only between state property and local-authority property but also in relations between the property of middle-tier authorities and municipal property). The opposite approach is for all public assets not belonging to local authorities to belong to the state (Greece).

Finally, a number of criteria may be used: the law, the responsibility criterion (allocation of responsibility is accompanied by the allocation of property) and the historical criterion (Italy).

29. No national expert raised problems concerning the quantitative or qualitative insufficiency of municipal property or its demarcation from state property.

IV. ACQUISITION, USE AND TRANSFER OF MUNICIPAL PROPERTY

It must first be stressed that the analysis in this chapter does not concern problems connected with the exceptional rights of public authorities - expropriation, requisition, right of pre-emption - which will be discussed in the next chapter.

IV.1 Acquisition of municipal property

30. The provisions of Article 3 ("Concept of local self-government") para. 1 of the Charter, interpreted in the light of the preamble and the explanatory report, according to which the resources (ie including the material resources) of local authorities must be sufficient for the discharge of their local self-government role, must naturally be interpreted as meaning that these authorities possess the right to possess and acquire assets that then become municipal property.

No specific ways of acquiring such assets are prescribed, provided the requirement that local authorities be able to acquire the property they need is met.

31. In systems where there is only one form of property ("private" property), the means of acquiring the property are normally the same as in the case of any other legal person.

By way of exception, in Austria the same means of acquiring property are normally employed as for any other legal person but with special rules requiring respect for economy and effectiveness criteria. In Poland, municipal assets may be acquired according to either private or public law.

On the other hand, in two Baltic states (Latvia, Lithuania), acquisition takes place according to public law.

32. The situation also varies in states which have two forms of municipal ownership.

The general rule is for property to be acquired according to normal private-law methods: purchase, exchange, donation, legacy, prescription (Bulgaria, Estonia, former Yugoslav Republic of Macedonia, France, Italy, Luxembourg, Turkey), possibly with auctions for purchases (Greece, Romania).

There are situations in which differences are found according to the type of ownership, with civil-law means being used for acquiring private property and specific procedures for public property, eg a declaration by law (Spain) or an administrative decision (Portugal).

In Albania, in addition to the usual procedures, there may be special acquisition in cases of tax evasion.

33. No national expert raised problems concerning the possibility and methods of acquiring municipal property.

IV.2 Use of municipal property

34. The provisions of Article 3 ("Concept of local self-government") para. 1 of the Charter, interpreted in the light of the preamble and the explanatory report, according to which the resources (ie including the material resources) of local authorities must be sufficient for the discharge of their local self-government role, must also be interpreted as meaning that those authorities have the right to use and exploit municipal property in order to carry out their self-government functions.

The Charter lays down no requirement regarding particular procedures for the use, operation and exploitation of municipal property, provided that the methods recognised conform to the requirement that it be possible to use those assets to meet local authorities' needs.

35. It should first be pointed out that, as in the case of state property and, generally speaking, contrary to the situation for assets owned by individuals, certain municipal assets may be used directly (public roads, parks, works belonging to a public library etc).

Direct use may or may not be free of charge. The expert in respect of France indicated that in his country the free-of-charge principle was increasingly undermined by the power granted to local authorities to introduce tolls or charges in certain cases.

36. In states where there is only one form of municipal ownership, the property is normally exploited according to the private law applicable to all legal persons (Croatia, Cyprus, Denmark, Finland, Iceland, Netherlands, Norway, Sweden, United Kingdom), possibly with certain exceptions (Austria, Germany, Hungary, Poland).

In Slovenia private arrangements plus concessions are used, while Latvia employs concessions and leases.

37. For states which have two forms of municipal ownership, methods of exercising ownership generally differ from those for the use of private property.

The commonest methods are concession (Turkey) or concession and lease (Bulgaria, Portugal), possibly with some distinction between the two (concession for public property and for non-disposable assets, lease for disposable assets - Italy) or lease only (for arable land - Greece).

Situations exist in which concessions and leases exist in addition to the usual arrangements (Albania, former Yugoslav Republic of Macedonia), and to other specific procedures (administration, concession and lease for public property, concession, lease, personal use free of charge for private property - Romania).

In France, for public property there is still occupation by agreement or by unilateral authorisation as well as agreements with provisional tenure, while for private property the method used is management based on private law but with special administrative restrictions.

In Spain, there is direct use, with authorisation and concession for public property, while civil-law procedures apply to private property.

Estonia only has ordinary procedures for the use of municipal property.

Situations are found in which the use of public municipal property leads to the creation of a right in rem, eg long leases which confer a right in rem on the lessee (France), or a levy on behalf of a public institution or independent state-run business (Romania).

38. No national expert raised problems concerning the possibility and methods of using, operating and exploiting municipal assets.

IV.3 Use of municipal property by associations and commercial companies set up by local authorities

39. Article 10 ("Local authorities' right to associate") para. 1 of the Charter states that local authorities shall be entitled, in exercising their powers, to co-operate and, within the framework of the law, to form consortia with other local authorities in order to carry out tasks of common interest.

As already shown, municipal ownership is an element of local self-government. In carrying out tasks of common interest, consortia of local authorities are consequently entitled to dispose of or at least use assets belonging to member local authorities.

40. Generally speaking, local authorities have the right to associate freely with other authorities, with the state and/or with private individuals, as well as to set up commercial companies, whilst making municipal assets available to the consortium or company (Albania, Croatia, Czech Republic, Estonia, Finland, former Yugoslav Republic of Macedonia, Greece, Hungary, Iceland, Latvia, Luxembourg, Netherlands, Norway, Romania, Slovenia, Spain, Turkey, Ukraine, United Kingdom), possibly with some exceptions (Denmark, Poland, Russia). The national expert for Finland stated that cases where consortia comprising local authorities and the state were set up were rare.

Some special situations also exist: only private assets may be made available to the consortium or company (Bulgaria) or to the company (Portugal). In Italy, publicly owned property or non-disposable assets may be made available without depriving them of their public-interest function.

In France the possibility exists as regards private property of setting up consortia and companies (in the latter case, only for carrying out activities in the public interest), while, for public property, only transfers of management are possible.

In Sweden and Finland there is a ban on setting up commercial companies in order to make profits for the authority, this being allowed only where public benefit will result.

In Russia, local authorities may not own shares in private limited-liability companies.

In Cyprus the right to set up commercial companies exists only for municipalities and not for (the smaller) communes.

41. Local authorities' right to form consortia with other local authorities for carrying out tasks of common interest and to endow consortia with (certain) municipal assets or to transfer to them responsibility for the management of (certain) municipal assets complies with the requirements of the Charter in this field.

IV.4 Disposal of municipal property

42. There is no provision in the Charter concerning the disposal of municipal property. However, any absolute ban on the disposal of assets which are no longer needed by the authority and which would consequently represent an excessive, disproportionate and unjustified burden may constitute a breach of the requirements regarding respect for local self-government laid down in the Charter.

43. In states where only one form of municipal ownership exists, the disposal of municipal assets normally takes place under the private law applicable to all legal persons (Croatia, Czech Republic, Denmark, Finland, Iceland, Latvia, Lithuania, Netherlands, Norway, Sweden, United Kingdom).

There are certain exceptions (Hungary, Poland, Slovenia), for example the necessity for government approval (Cyprus), a prohibition on selling assets that are indispensable (Austria) or the rule that the disposal may not affect the use of the municipal assets for the public benefit (Germany).

44. In the case of states with two forms of municipal ownership, the rule is inalienability of public property and alienability of private property (Bulgaria, Portugal, Turkey), or inalienability of public property and of non-disposable assets and alienability of disposable assets (Italy).

Notwithstanding this rule, some special features are attached to the disposal of private property: using private law but with special public-law exceptions (France, Luxembourg, Romania); using the auction procedure (Spain); using the auction procedure and disposing of property only for the manifest benefit of the community (Greece).

As special cases, in Estonia and the former Yugoslav Republic of Macedonia both private and public assets may be disposed of.

IV.5 Provision of tangible security and seizure of municipal assets

45. The Charter contains no rule on the provision of tangible security or the seizure of municipal assets. However, national policies must respect the right of local authorities to own property.

46. Policies in this area are many and various. The distinction between systems with only one form of municipal ownership and those with two forms is meaningless here.

An extreme practice is found in states where it is impossible to give tangible security on municipal assets or to seize such assets, including, if appropriate, private assets.

The other extreme is represented by situations in which these possibilities exist (Croatia, Cyprus, Denmark, Finland, former Yugoslav Republic of Macedonia. Latvia, Lithuania, Netherlands, Norway, Poland, Russia, Slovenia). For Cyprus the national expert indicated that this rarely happened, while the Danish expert stressed that the possibility was only theoretical as local authorities could discharge their obligations through taxes or borrowing. The purely theoretical nautre of this possibility was mentioned by the expert from the Netherlands.

Between these two extremes there are generally states with two forms of municipal ownership, where public property cannot be offered as tangible security or seized, but where the reply is affirmative for private property (Bulgaria, France, Greece, Luxembourg, Romania, Turkey; in the case of Italy, the reply is negative for public property and non-disposable assets and affirmative for disposable assets).

There are other intermediate situations.

In Germany, municipal assets can be used as tangible security and are, in principle, not specially protected from legal action but if they are used for the public benefit this must not be affected.

In Austria, municipal property can theoretically constitute tangible security and be seized by creditors, like the assets of other legal persons, with certain exceptions (if the right to seize the assets is not based on a contract, assets may be seized only if this does not jeopardise the public interest and they are not indispensable).

In Iceland the reply is broadly affirmative except in the case of immovable assets necessary for compulsory tasks, which may not constitute tangible security.

On the other hand, in Albania the answer is negative but it is possible to seize shares held in commercial companies.

In Slovenia, the answer is negative as regards basic assets and affirmative for other assets.

It is noteworthy that in Austria local authorities can be declared bankrupt.

47. Given the highly diverse situations described by the national experts, it is difficult to decide whether the Charter's provisions have or have not been respected on this point.

I find it hard to believe that the possibility of declaring a local authority bankrupt is consistent with local self-government as intended by the Charter, but it will be possible to give a definite answer to this question only after a thorough analysis of the legal rules concerning the consequences of such action for the capacity of the local authority concerned.

V. EXPROPRIATION, REQUISITION AND RIGHT OF PRE-EMPTION CONCERNING LOCAL AUTHORITIES

V.1 Expropriation, requisition and right of pre-emption for local authorities

48. No provision of the Charter relates, at least directly, to expropriation, requisition or the right of pre-emption either on behalf of local authorities or against them.

However, for reasons of public interest and, where necessary, in exceptional situations, national legislation may provide for the possibility of resorting to special coercive procedures in respect of acquisition, the right of pre-emption or at least the use of certain assets on behalf of the local authority concerned.

According to Article 4 ("Scope of local self-government") paras. 2 and 6, local authorities shall, within the limits of the law, have full discretion to exercise their initiative with regard to any matter which is not excluded from their competence nor assigned to any other authority and shall be consulted, insofar as possible, in due time and in an appropriate way in the planning and decision-making processes for all matters which concern them directly.

In our view, a systematic interpretation of Articles 3 ("Concept of local self-government") and 4 of the Charter in the light of the preamble and the explanatory report leads to the conclusion that some provision should normally be made whereby local authorities, in their capacity as holders of rights necessary for regulating and managing public affairs, have the opportunity to obtain, if need be by extraordinary and coercive means, ownership or the use of assets essential for the carrying out of their tasks or a right of pre-emption in respect of such assets.

This facility could be granted to the authority itself (exclusively or jointly with higher-tier authorities, state authorities or the courts) or to another public authority or court but, in the latter case, in consultation with the local authority concerned.

49. From the analysis of the national experts' replies, it seems that it is possible in all states, with the exception of Lithuania, to expropriate assets on behalf of local authorities.

50. As regards the body competent to decide on the expropriation of assets on behalf of a local authority, a wide variety of practices are found.

The first possibility is for the decision to be taken by the local authority itself (Bulgaria, Denmark, Greece, Hungary, Italy, Latvia, Portugal, Spain, Ukraine). In Turkey, the decision is taken by a joint local-authority body composed of local elected representatives and appointed members. However, there are cases in which the decision devolves exclusively on another authority (or other authorities): the government (Albania, Finland), the government and courts (Slovenia), another state authority (former Yugoslav Republic of Macedonia, Estonia).

Between the two extremes, the decision falls jointly to the local authority and to another authority or other authorities in several cases: decision by the local authority with parliamentary authorisation (Austria); by the government on a proposal by the local authority (Cyprus); local-authority initiative and decision by central government and the court (France); joint decision by the local authority and the state, subject to court appeal (Russia); local-authority decision, with a declaration of public interest being made by central government (Luxembourg); local-authority decision with the agreement of the minister concerned (Iceland, United Kingdom); declaration of public interest by the local authority and court decision (Netherlands, Romania); decision by the local authority with approval by central government and the court (Sweden).

51. The following may be expropriated on behalf of local authorities: all assets (Albania, Austria, Finland, Norway, Russia, Spain), only immovable assets (Croatia, Denmark, Latvia, Portugal, Romania, Sweden, Turkey) or only land (former Yugoslav Republic of Macedonia, Ukraine). The experts for Finland and Spain stated that, although in theory any assets could be expropriated, in practice the measure concerned immovable assets alone and was implemented for spatial planning purposes. For Germany, the national expert stressed that in practice only land is expropriated.

52. In states which have two forms of municipal ownership, assets expropriated on behalf of a local authority may include: public property (Bulgaria, former Yugoslav Republic of Macedonia, Romania, Turkey), public property and non-disposable assets (Italy); both public and private property (France); private property, with allocation taking place afterwards (Spain).

53. The possibility of requisitioning assets on behalf of local authorities exists in Albania, Austria, Cyprus, Denmark, Finland, former Yugoslav Republic of Macedonia, France, Greece, Italy, Latvia, Lithuania, Luxembourg, Norway and Romania. It is, however, not recognised in the Netherlands, Portugal, Slovenia, Spain, Sweden, Turkey and the United Kingdom.

54. The requisition decision is taken by the local authority (Denmark, Greece, Italy, Latvia), by central government (Finland, former Yugoslav Republic of Macedonia, Romania) or by central government on a proposal from the local authority (Albania, Cyprus). In Germany, the power to take this decision is vested in the local authority (the mayor’s office) but as an instrument of delegated state administration. In Luxembourg the decision is taken by central government and only exceptionally and provisionally by the local authority.

The expert for France said that requisitions were normally decided on by central government and were taken by local authorities only in exceptional cases, while the expert for Greece said that requisitions for the benefit of a number of local authorities were decided on by central government.

55. A right of pre-emption on behalf of local authorities exists in a limited number of cases only.

A special right of pre-emption may exist: in special cases (Iceland, Norway); if the law expressly so provides (Austria); for immovable assets necessary for the local authority (Latvia); for land earmarked for municipal development, recreation or nature conservation (Finland); for immovable assets as part of planning policy - town planning, housing, construction of public amenities - and for land needed for property ventures (France); for the purchase of a company (Greece); for land (Netherlands); for certain land important for town and country planning (Germany); for immovable assets as part of urban development (Sweden); for cultural assets and building land (Slovenia); for urban-development programmes (Portugal); for regional-development plans (Bulgaria); for housing (Russia); or low-cost housing (Denmark); for assets used by education. health, culture and child-protection institutions (Estonia); for cultural or health care buildings (Ukraine); for certain assets (former Yugoslav Republic of Macedonia).

It is worth mentioning that in Bulgaria and Croatia the right of pre-emption precedes the expropriation procedure.

The expert for Austria stated that cases where local authorities had a special right of pre-emption were rare. The expert for France said that, in principle, the special right of pre-emption existed only where the item in question was subsequently to be earmarked for public-interest use.

However, no right of pre-emption by the local authority exists in Cyprus, Italy, Lithuania, Luxembourg, Turkey or the United Kingdom.

In Romania, there is no special right of pre-emption by the local authority, which merely possesses the same right of pre-emption as any individual (eg the general right of pre-emption of co-owners and neighbours in respect of land).

56. In conclusion, it can be recommended, on the basis of Article 3 para. 1 of the Charter, as interpreted in the light of the preamble and the explanatory report, that national legislation should include the right to resort to exceptional coercive procedures for the acquisition, pre-emption or at least use of certain assets in exceptional situations.

In such cases the decision must be taken by the local authority concerned or in collaboration or at least consultation with it to the greatest extent possible, in accordance with Article 4 para. 6 of the Charter.

In order to respect democratic requirements and human rights, such measures that interfere with property rights must be commensurate with the legitimate ends pursued (in other words, there must be just and fair compensation) and provide for the possibility of private individuals to challenge the decision before a competent tribunal.

V.2 Expropriation and requisition of municipal property

57. To look at things from the opposite angle to that of expropriation or requisition on behalf of a local authority, we do not believe that the Charter contains any prohibition on expropriating or requisitioning municipal assets. However, it is our view that this right should not be unlimited since, if it were, it would deal a serious blow to the existence and use of municipal property and thus to the performance of local authorities' tasks, and hence to local self-government itself.

At the same time, Article 4 ("Scope of local self-government") para. 6 of the Charter is applicable in such a case, and local authorities must be consulted as far as possible, in good time and in an appropriate fashion, on matters of direct concern to them during the planning and decision-making process.

As has been shown above, the existence of municipal property is, according to Articles 3 and 9 of the Charter, the preamble and the explanatory report, an indispensable element of local self-government. In addition, according to paras. 2, 4, 5, 8 and 9 of the preamble to the Charter, there is a close connection between local self-government and democracy, ie the Charter conceives local self-government solely within the framework of a democratic political system. It must not be forgotten that, according to the Statute of the Council of Europe, democracy is one of the organisation’s fundamental values.

It follows that the compulsory expropriation of local authority assets must comply with the rules recognised in a democratic society, ie it must be carried out according to the law, be in the public interest and usually involve the payment of fair compensation.

This conclusion is supported by other sources of international law established under the auspices of the Council of 'Europe. Thus, in view of the interdependence of sources of international law, particularly those stemming from the Council of Europe, we consider that on this point the European Charter of Local Self-Government can and should be interpreted in accordance with Article 1 ("Protection of property") of the first Protocol to the European Convention on Human Rights, itself interpreted in the light of the case law of the European Court of Human Rights. Expropriation or requisitioning of local-authority assets is therefore possible only according to the law (which must be accessible and foreseeable and provide safeguards against abuses), in the public interest and with due regard for necessity in a democratic society, with proportionality being ensured between the various interests involved, which usually means compensation, normally corresponding to the real value of the asset (or its use) and convincing reasons provided by the national authorities for taking this measure.

I am aware that this method of interpretation and the conclusion resulting from its use are open to criticism. However, local self-government (the field covered by the European Charter of Local Self-Government and by the Congress of Local and Regional Authorities of Europe) and respect for human rights (the field covered by the European Convention on Human Rights and by the case law of the European Court of Human Rights) are not unconnected, both being closely bound up with democratic values. One might therefore incorporate, mutatis mutandis, the approaches taken by European human rights law into European law on local self-government, especially as the former is much more highly developed than the latter. It is true that a long and painstaking process was required for the European Court of Human Rights to decide that compensation was necessary in cases of deprivation of ownership, but this is now an "established right" and it is hard to see why such human-rights protection should not also be extended to the protection of self-governing local authorities.

Clearly, as in the case of European human rights law, situations are conceivable where no compensation is payable. For example, it could be considered that the principle of proportionality has been observed when the compulsory transfer of a municipal asset to the state sector results from the transfer of a corresponding public service and the local authority no longer needs this asset since it has ceased to exercises the function to which the asset was assigned. This does not rule out the possibility of compensation being paid for any investments previously carried out by the local authority.

58. The possibility of expropriating municipal assets exists for: all assets (Austria - in certain Länder, Croatia, Cyprus, Denmark, Finland, former Yugoslav Republic of Macedonia, Germany, Hungary, Italy, Latvia, Lithuania, Luxembourg, Netherlands, Norway, Portugal, Russia, Slovenia, Sweden, United Kingdom); private assets only (Bulgaria, France, Greece, Romania, Spain, Turkey); land only (Ukraine).

In Estonia municipal assets may be expropriated only with the consent of the local authority concerned, which changes the legal nature of expropriation.

In Italy, publicly owned assets and assets forming part of the non-disposable assets of local authorities may be expropriated. In the case of Cyprus, the expert stated that the expropriation of municipal assets generally applies to immoveables.

It is not possible to expropriate municipal assets in Czech Republic.

In France, municipal public property, which may not be expropriated, may be subject to a transfer of management. In Romania, municipal public property may not be expropriated either but public assets may be transferred to state ownership by decision of the local authority with or without compensation (as the law makes no provision on this point, the local authority decides case by case).

The German expert stated that the expropriation of municipal assets by the state (federal or Land government) must respect the individual rights of certain users.

59. The expropriation of local-authority assets gives rise to compensation in nearly all states, according to information from the national experts (Austria, Bulgaria, Croatia, Cyprus, Denmark, Finland, former Yugoslav Republic of Macedonia, France, Germany, Greece, Hungary, Latvia, Luxembourg, Netherlands, Norway, Portugal, Romania, Russia, Slovenia, Spain, Sweden, Turkey, United Kingdom).

No national expert explicitly stated that the expropriation of municipal assets was, by law, not liable to compensation. However, it is necessary to exclude cases where the transfer of municipal assets to the state is only the consequence of a transfer of powers and there is no automatic obligation to compensate the local authority. For example, the expert for Germany stated that in principle compensation had to be paid for expropriated municipal property but this depended on the circumstances (for example, a transfer of powers to the state accompanied by a transfer of corresponding assets) and could be reduced to zero.

However, the expert for Lithuania stressed that, under the Constitution, the expropriation of municipal assets must be subject to compensation, but that an interpretation ruling out the need for compensation was possible; in any case, there was very little experience to go on.

60. The requisitioning of municipal assets is permitted either for all assets (Austria - in certain Länder, Croatia, Cyprus, Finland, former Yugoslav Republic of Macedonia, Latvia, Lithuania, Norway, Portugal, Romania, Russia) or only for privately owned assets (France, Spain).

As in the case of expropriation, in Estonia the requisition of municipal assets is possible only with the agreement of the local authority concerned; this changes the legal nature of requisition.

In France, municipal public property may not be requisitioned but may be the subject of a transfer of management.

The requisition of municipal assets is prohibited in the Czech Republic.

61. The necessity for compensation where municipal assets are requisitioned was expressly referred to by the experts for Austria, Croatia, Finland, former Yugoslav Republic of Macedonia, Latvia, Norway and Romania.

The expert for Lithuania stressed that, as in the case of the expropriation of municipal assets, under the Constitution the requisition of those assets entails compensation but that the provision in question may be interpreted to mean that no compensation is necessary; in any case, there is very little experience to go on.

62. To conclude, in our opinion it is possible and indeed desirable, on the basis of Article 3 para. 1 of the Charter, interpreted in the light of the preamble, the explanatory report and international human-rights sources, to recommend that the expropriation or requisition of municipal assets must, in that it interferes with the right of municipal ownership, must be proportionate to the legitimate ends pursued and should normally be subject to fair compensation.

Such measures must be taken, moreover, following consultation, insofar as possible, with the local authority concerned as provided by Article 4 para. 6 of the Charter.

VI. RELATIONSHIPS BETWEEN MUNICIPAL OWNERSHIP AND THE EXERCISE OF LOCAL SELF-GOVERNMENT, ADMINISTRATIVE SUPERVISION OF LOCAL-AUTHORITY DECISIONS, DEMOCRATIC RULES AND THE LEGAL PROTECTION OF LOCAL SELF-GOVERNMENT

VI.1 Right of local authorities to own property

63. Article 4 ("Scope of local self-government") para. 4 of the Charter provides that powers given to local authorities shall normally be full and exclusive. They may not be undermined or limited by another, central or regional, authority except as provided for by the law.

A reading of this text in conjunction with Article 3 ("Concept of local self-government") para. 1 shows that local authorities' rights over their property must, for the fulfilment of their tasks in connection with local self-government, normally lie exclusively with the local authority concerned. Any limits prescribed by national legislation must pursue a legitimate purpose and respect the principle of necessity in a democratic society, in particular proportionality between the interference and the end sought.

64. In the majority of cases, local authorities exercise full ownership rights over their property, and no instruction, opinion, authorisation, approval or oversight by central government or regional authorities is required (Croatia, Czech Republic, Denmark, Finland, former Yugoslav Republic of Macedonia, Greece, Hungary, Iceland, Italy, Latvia, Lithuania, Norway, Poland, Portugal, Romania, Slovenia, Sweden).

However, exceptions exist, namely situations where, as a rule, local authorities exercise their powers fully, subject to certain exceptions: the agreement of the supervising authority for the disposal of certain assets or a change of category from public to private (Germany); existence of major interests going beyond the local level (Austria); acquisition, leasing or disposal of an asset exceeding a certain value - state tax authorities; change of category of assets allocated to state education - the prefect; prior authorisation for assets of historical, cultural or natural value - specialised departments, as for any private individual (France); the privatisation of assets of historical or social value (Russia); acquisitions, sales, shares in private companies over a certain limit - Minister of the Interior or a decree by the Grand Duke (Luxembourg); disposal at less than the best price - ministerial authorisation (United Kingdom); shares in companies and association - scrutiny by the province, but only after the decision has been taken, with powers to revoke it (Netherlands); disposal of private property of a value exceeding a certain limit - approval by the region (Spain); immovable assets, long-term contracts - Government, Minister of the Interior or prefect (Cyprus); change of use of agricultural or forest land (Bulgaria); privatisation of historic assets - Government (Estonia).

Situations exist in which exceptions to prohibitions or restrictions laid down by law are approved by central government: by the Minister of the Interior in certain cases (Denmark); in respect of immovable assets, by the Government (Albania).

In Turkey decisions to acquire or dispose of municipal assets are not taken by the local authority but by a joint body composed of local elected representatives and appointed members with the authorisation of the Government or its local representatives.

The expert for Ukraine indicated that in the absence of a law on the matter the right to own property was exercised fully by the local authority.

65. We believe it is worth recommending that full exercise by the local authority of its right to own property should constitute the rule, while interference (opinions, authorisation, approval etc) by other public authorities should be the exception, be provided for by law, pursue a legitimate purpose and be proportionate to that purpose.

VI.2 Local-authority bodies exercising the right to own property

66. Under Article 3 ("Concept of local self-government") para. 2 of the Charter, local self-government should be exercised mainly by councils or assemblies composed of members freely elected on the basis of direct, equal, universal suffrage, and which may possess organs responsible to them. This provision shall in no way affect recourse to forms of direct citizen participation.

Paragraph 2 of Article 3 must obviously be interpreted in conjunction with para. 1 of the same article. We have shown that this text embodies the right to own property. Accordingly, the exercise of local self-government, including a local authority's right to own property, is a matter for the elected deliberative body or the executive body, which must be responsible for such matters to the assembly or to the citizens through direct democracy.

67. In concrete terms, situations exist where powers are shared between the representative body (in plenary or committee composition) and the executive body (Germany, Austria - different situation in each Land, Cyprus, Denmark, Italy, Russia), with the important decisions - rule-making decisions, conveyances, decisions on property of high value etc - being taken by the assembly, while day-to-day administration, management, conclusion of contracts approved by the assembly etc are the responsibility of the executive (Bulgaria, Finland, France, Hungary, Luxembourg, Netherlands, Romania, Spain, Ukraine). The expert for Finland stressed that power-sharing between the executive and the assembly was not governed by special rules and was a matter of practice.

There are cases in which power devolves on the assembly absolutely (Croatia, Czech Republic, Latvia, Lithuania) or in principle (Estonia), with no possibility of delegation (Albania) or with the possibility of delegation to the executive (Norway, Slovenia).

In Iceland, power belongs to the committees elected by the representative body.

Another possibility is for basic power with respect to municipal ownership to lie with the executive as a general rule (former Yugoslav Republic of Macedonia) or as a general rule with only specific powers – the most important – restricted to the deliberative body (Poland). In Portugal, authorisation is required from the assembly for certain more important decisions, while Sweden the deliberative body only takes decisions on the disposal of immovable or valuable assets, although it may delegate its power to the executive.

Power may be delegated to the executive by the representative body as regards certain aspects of municipal ownership (France, Italy, Norway, Sweden). Power may be delegated to a committee or an official of the council (United Kingdom).

Many national experts indicated that the executive body was accountable to the assembly for the exercise of powers regarding municipal ownership. ). In Russia, there is an obligation to submit a report on municipal property to the deliberative body, usually every four months.

68. In general, the experts made no mention of special procedural conditions for the adoption of decisions on municipal ownership by the deliberative body, so that it can be concluded that, on the whole, the ordinary procedure is employed.

However, there are exceptions: absolute majority of members of the council for the acquisition, use and disposal of municipal assets (Greece); absolute majority for all decisions (Bulgaria); qualified 2/3 majority for immovable assets (Cyprus); qualified 2/3 majority for all decisions (Romania); qualified 3/5 majority for disposals (Albania); qualified majority in certain exceptional cases (Germany).

69. As regards recourse to direct democracy in municipal-ownership matters, special cases include consultation of the citizens on public-ownership questions in Albania, and the possibility of a referendum in Hungary.

70. In conclusion, it is recommended that the right to own municipal property be exercised by the elected representative body of the local authority or by the executive, which must (also) be accountable for decisions in this field to the assembly, without prejudice to the possibilities of direct local democracy.

VI.3 Administrative supervision of local-authority decisions on municipal ownership

71. Article 8 ("Administrative supervision of local authorities' activities") paras. 1 and 2 of the Charter allows administrative supervision of local authorities, exercised under the conditions laid down by national legislation. Such supervision must in principle be aimed only at ensuring compliance with the law but may be carried out exceptionally with regard to expediency. Proportionality is required. by Article o3 para. 3 of the Charter.

A reading of this text together with that of Article 3 ("Concept of local self-government") para. 1 leads to the conclusion that administrative supervision, may, subject to these conditions, also be exercised with respect to the existence and use of municipal property.

72. The national experts' replies indicate, first of all, that municipal ownership is subject, in general, to the ordinary administrative checks.

Nevertheless, certain specific forms of supervision exist for municipal ownership: the court of auditors (Albania, Romania, Slovenia); the general or state audit board or office (Cyprus, Estonia, former Yugoslav Republic of Macedonia, Hungary, Latvia); the regional audit boards (France); a state auditor (Lithuania); auditors (Spain); the Minister of Finance (Croatia, former Yugoslav Republic of Macedonia); the decentralised services of the Ministry of Public Finance (Romania); private audit companies (Latvia); an independent professional auditor (Denmark); an auditor appointed by the assembly (Sweden); an external auditor (Hungary, Russia); the prosecutor’s office (Ukraine).

The expert for Spain referred to the existence of an expediency check by the regional authority in respect of the transfer of privately owned assets exceeding a certain value.

73. It is recommended that administrative supervision of municipal ownership be performed in accordance with the law, and that it should as a rule concern compliance with the law and only exceptionally expediency, with due regard for the proportionality principle.

VI.4 Transparency in the exercise of ownership

74. Paras. 2, 4, 5, 8 and 9 of the preamble to the Charter stress the close link between local self-government and democracy. The existence of any democratic government implies freedom of information and therefore transparency and openness in matters of public interest.

As has been said, Article 3 ("Concept of local self-government") para. 1 also covers municipal ownership, a dimension of local self-government. A reading of this article together with the preamble leads necessarily to the conclusion that transparency and openness must also be ensured for municipal ownership.

75. Many national experts referred to auctions as the right procedure for ensuring transparency in matters of municipal ownership.

The expert for Luxembourg also mentioned the use of expert reports, while the expert for Greece referred to public enquiries when important decisions on public property are at stake.

76. With regard to openness, in addition to the usual rules on the deliberations of assemblies and decisions by local authorities, special cases are found in which information on municipal ownership is made available to the public: registers and inventories of municipal property (Spain); auctions (Estonia, Greece, Latvia, Portugal, Romania, Spain); public purchases (Austria, Lithuania); sale of immovable property (Denmark); real-estate operations (France); changes of classification (Italy); expropriation (Romania, United Kingdom); concessions and privatisations, in the Official Gazette (Bulgaria); findings of the courts of auditors (France, Romania); financial audit (Czech Republic).

The expert for Sweden very pertinently stressed the practical difficulties of seeing that the public was informed, because of the complex and multifarious nature of information on municipal ownership.

The expert for Ukraine said there were no rules on transparency in respect of municipal ownership.

77. In conclusion, it is recommended that there should be genuine transparency and openness in regard to municipal ownership.

VI.5 Courts having jurisdiction in municipal-ownership matters

78. Article 11 ("Legal protection of local self-government") provides that local authorities shall have the right of recourse to a judicial remedy in order to secure free exercise of their powers and respect for such principles of local self-government as are enshrined in legislation. Recourse must naturally be accessible and useful. The Charter contains no provision as to the nature of the court (ordinary civil, administrative or other court).

A reading of this text together with Article 3 ("Concept of local self-government) para. 1 suggests that such recourse must be available to local authorities so that they may safeguard ownership of their property.

79. In the majority of states (all those with only one form of municipal ownership and nearly half - 6 out of 12 - of those with two forms), disputes concerning municipal ownership fall within the jurisdiction of the ordinary civil courts (Albania, Austria, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, former Yugoslav Republic of Macedonia, Hungary, Latvia, Lithuania, Luxembourg, Netherlands, Norway, Poland, Portugal, Russia, Slovenia, Sweden, Ukraine, United Kingdom).

However, for the other half of the states (6 out of 12) where there are two forms of municipal ownership, two types of court have jurisdiction: administrative courts for public property, and civil courts for private property (Greece, Romania, Spain, Turkey); the situation is similar in the special case of Italy (administrative court for public property and non-disposable assets, and civil court for disposable assets). For France, the administrative courts are also competent to deal with certain private-property disputes.

In Germany, although there is only one form of municipal property it is the civil courts that have jurisdiction, but there are also exceptional cases (situations involving the use of assets) where jurisdiction lies with the administrative courts.

In all cases, the same type of court is competent to hear disputes concerning municipal ownership and state ownership.

Regarding Iceland, the national expert mentioned the existence in practice of friendly settlements between central government and local authorities in cases of disputes.

80. In conclusion, the system in which all disputes concerning municipal ownership are settled by the ordinary civil courts predominates (over three quarters of the states analysed). However, there are also cases of dual jurisdiction in which power is shared between the administrative courts and the ordinary civil courts.

The equality of treatment between municipal ownership and state ownership from the point of view of the courts competent to settle disputes on these matters is to be welcomed.

It is recommended that local authorities should have recourse to an accessible and useful judicial remedy before an independent impartial tribunal established by law for the protection of their ownership rights.

VII MUNICIPAL PROPERTY AND LOCAL AUTHORITIES’S OWN RESOURCES, TAXATION AND TRANSFERS OF THE COMPETENCE

VII.1 Municipal ownership and local authorities' own resources

81. Under Article 9 ("Financial resources of local authorities") para. 3 of the Charter, at least part of the financial resources of local authorities shall derive from local taxes and charges.

82. In all the states examined, charges and other proceeds of municipal assets constitute local authority financial resources.

The nature of such resources is either fiscal (Cyprus, Czech Republic, Netherlands, Slovenia) or non-fiscal (former Yugoslav Republic of Macedonia, Greece, Italy, Luxembourg, Portugal, Turkey). In Spain, the income from public property is fiscal, as is the income from authorisations in Albania.

There are also states in which there are both fiscal and non-fiscal resources: in Germany, the charges for public law concessions constitute fiscal income, while other resources are non-fiscal; in Austria, charges are non-fiscal resources, and taxes on the use of municipal assets are fiscal; in Bulgaria, charges are generally non-fiscal and the latter taxes are fiscal; in France, charges are indirect taxes and the proceeds from private property are non-fiscal resources; in Norway, these resources are non-fiscal in general and quasi-fiscal for certain services; in Poland, the fiscal or non-fiscal character of income depends on the type of asset management; in Romania, the resources are non-fiscal, except for charges for the occupation of public property.

The experts for Finland and Lithuania stressed that the charges for municipal property formed a small part of local-authority resources, while the expert for the Netherlands said that for the latter country they were a fairly small part of such resources.

However, the expert for Spain said that these charges represented a significant proportion of the total income of local authorities.

83. It can be concluded that the Charter's provisions are respected inasmuch as charges and other income from municipal assets constitute local authority financial resources.

It is recommended that at least part of the charges for municipal assets should constitute local authority financial resources.

VII.2 Taxation of municipal assets

84. In a large number of states, local authorities are not liable for taxation on municipal assets (Cyprus, Finland, former Yugoslav Republic of Macedonia, France, Iceland, Lithuania, Norway, Portugal, Slovenia, Romania, Turkey).

While continuing not to tax local-authority assets, certain states impose taxes or charges on enterprises belonging to local authorities (Austria, Poland), run for commercial purposes (Denmark) or operated for the commercial exploitation of municipal assets (Hungary). In Germany, municipal property for public use is not subject to taxation, while tax can be charged on municipal property for private use and on capital.

On the other hand, taxes or charges are payable on their assets by local authorities in Greece, Latvia, Luxembourg, Russia and the United Kingdom.

In Sweden, the reply is generally in the affirmative, with the exception of immovable assets of public interest.

85. In conclusion, it is recommended that, where it exists, the taxation of municipal assets should not be excessive and should respect the actual existence of municipal property and local self-governments.

VII.3 Relationship between municipal ownership and the new powers conferred on local authorities

86. A systematic interpretation of Articles 3 ("Concept of local self-government"), 4 ("Scope of local self-government") and 9 ("Financial resources of local authorities") of the Charter in the light of the preamble and the explanatory report leads to the conclusion that the transfer of new powers to the local authorities must be accompanied by a transfer of appropriate resources, both financial and - as far as possible - material (ie assets which become municipal property).

87. The national experts' replies reveal the following situation: by law, the transfer of powers is accompanied by a transfer of either the ownership or the management of assets, and is effected by a special law (France); constitutional obligation to transfer the necessary "resources" as well - which also means assets - an obligation that is being increasingly complied with in practice (Greece); existence of a legal obligation to transfer; disputes about the practical application of this rule (Hungary); existence of a legal obligation to transfer but one that is in practice breached in certain cases (Estonia); legislation provides for this obligation but it is not honoured in practice (Turkey); legal obligation but no cases in practice to date (former Yugoslav Republic of Macedonia); no legal obligation but transfer generally takes place in practice (Bulgaria); in practice, assets are transferred free of charge (Denmark); a practical possibility of transferring assets exists (Netherlands); transfer of assets (Albania, Portugal, Ukraine); the answer is yes in theory and, in general, there are no problems in practice (Slovenia); the answer is yes in theory but the rule is inadequately applied in practice (Croatia, Sweden); the transfer of financial resources is obligatory and the transfer of ownership is possible if reasonable but is not obligatory (Lithuania); in principle, the transfer of powers must be accompanied by a transfer of assets but this depends on the nature of the powers transferred (Poland); the transfer of assets depends on the nature of the functions transferred (Germany); by law there is an express obligation to transfer financial resources and, depending on the purpose, it may also be compulsory to transfer property, although this is still a matter of dispute (Romania); financial resources are transferred to enable the local authority to acquire property (Austria); in principle there is no transfer of assets although there is no ban (Finland); transfer does not always take place (Latvia, Russia).

In Cyprus there are few examples of new powers and, in these cases, discussions on the transfer of assets take place in practice between the local authorities and central government. In the United Kingdom, transfer of powers is not a standard procedure. In Spain assets are not normally transferred in this case. In Iceland, the problem does not normally arise but, when cases occur, a solution is found that suits both central government and the local authority. In Czech Republic, the matter is complex and still in the process of being settled. In Luxembourg, the relevant legislation is being discussed. In Norway, according to the national expert, the problem is dealt with on a case by case basis.

88. In conclusion, the rapporteur suggests that an obligation be imposed to transfer assets (ie, material resources) if the exercise of the new powers requires their use by the local authorities. At all events, situations must be avoided where the state transfers assets to the local authorities that constitute more a burden than the useful resources they need to carry out their functions and also put an unnecessary strain on their budgets.

VIII. SPECIFIC PROBLEMS CONCERNING MUNICIPAL OWNERSHIP AND DEMOCRATIC CHANGES IN THE CENTRAL AND EAST EUROPEAN COUNTRIES

We would point out that the review of the specific problems of the central and east European countries (former communist states) covers 15 states: Albania, Bulgaria, Croatia, Czech Republic (for former Czechoslovakia), Estonia, former Yugoslav Republic of Macedonia, Germany (for the former GDR), Hungary, Latvia, Lithuania, Poland, Romania, Russia, Slovenia for the former FR of Yugoslavia) and Ukraine (for the former USSR).

VIII.1 The right of local authorities to own property under the communist regime

89. Most of the experts (those elected for Albania, Bulgaria, Estonia, Hungary, Latvia, Lithuania, Poland, Russia and Ukraine) stated that before the fall of the communist regime the local bodies were merely elements of the state organisation, which simply administered state property; those bodies had therefore no right to own property.

Similarly, the expert for the Czech Republic said that local bodies were simultaneously state and local institutions, whose function was simply to administer national assets.

According to the expert for Germany, in the former GDR the local authorities retained their legal personality under the communist government in spite of the absence of genuine local self-government.

More cautiously, the experts for Croatia and Slovenia pointed out that local bodies had the right to own property but that this was "social" property specific to the Yugoslavia’s socialist system.

The expert for Romania said that the system was similar in that country. Under the communist regime, district councils, towns and municipalities (as well as counties) had been legal entities and, in theory, owned assets; however, under the Constitution there was no local self-government, and district councils, towns and municipalities (counties as well) were not self-governing local authorities separate from central government but only components of the state; their assets were part of "socialist property", which, under the Basic Law, meant the "socialist property of the state", the owner being " the people as a whole". Account must therefore be taken of this feature of the ownership system. The expert concluded that one could not talk of the existence of true owner status in the case of district councils, towns and municipalities.

By contrast, the expert for the former Yugoslav Republic of Macedonia stated that the local authorities had considerable assets in various areas.

90. It can be concluded that, in general, the absence of local self-government and the existence of "socialist property" ruled out any concept of real municipal ownership in the central and east European countries under communism.

VIII.2 Development of municipal ownership after the beginning of the change to democracy

91. The national experts' replies reveal the following situation:

- Albania: transfers of state assets to local authorities under the law connected with the transfer of powers; the process began in 1998-99 and is still in progress;
- Germany (former GDR): creation of municipal property in 1989 after reunification; large-scale privatisation of local enterprises (with separate legal personality); no transfers of assets by the federal government or Länder to the local authorities; certain transfers of municipal assets to the state
- Bulgaria: as of 1991, transfers free of charge of state assets to local authorities and restoration of property;
- Czech Republic: in 1991 restoration of municipal ownership and certain transfers of state assets to local authorities; the expert does not believe there is any cause-and-effect relationship between the change to democracy and municipal ownership;
- Croatia: after independence, a phase of centralisation followed by a reduction in municipal ownership; the process is now in reverse and municipal ownership is increasing;
- Estonia: considerable increase in municipal ownership after 1989 to the 1940 level; transfers of assets now only in special cases; there is similarly a tendency to convert public into private assets;
- Former Yugoslav Republic of Macedonia: almost all the municipal assets became the property of the state in 1991; in 2001-2002, changes in the law on decentralisation permitted the local authorities to acquire more assets.
- Hungary: creation of the right of ownership for assets in the possession of local authorities; transfers of state assets to local authorities, but also privatisation by the state of municipal services, with compensation (on the basis of case law), the result being a substantial decrease in municipal ownership;
- Latvia: increase in municipal ownership;
- Lithuania: increase in municipal ownership from zero; after the initial transfer of state assets to local authorities, no significant change;
- Poland: creation of and big increase in municipal property in conformity with the local authorities’ considerable powers; privatisation and sale of certain types of assets (housing, land, goodwill; in exceptional cases, transfer of powers to the state accompanied by a transfer of municipal property to the assets of the state.
- Romania: provision for municipal ownership in the law and its demarcation from state ownership; increase in municipal as compared with state ownership; decrease in municipal ownership following the privatisations;

- Russia: in 1990 creation of municipal property; subsequent considerable increase in municipal property by means of transfers of state assets
- Slovenia: after the setting up of the new local authorities, these became the owners of the assets of the former authorities, except for assets required for state tasks; they currently own less than the former local authorities;
- Ukraine: the law on demarcation between state and local-authority ownership has not been passed; centralisation of certain public services; privatisation of local businesses.

92. The diversity of situations permits of only one general conclusion, namely that municipal ownership has become part of the process of evolution towards a democratic society following the embodiment in law of local self-government and of the recognition of local bodies as local authorities separate from the state and possessing legal capacity. It is necessary to except the special case of the former Yugoslav Republic of Macedonia, where municipal property has been transferred to the assets of the state.

Another special case is the former GDR, which did not undergo democratic development as an independent state but as part of the Federal Republic of Germany, a long-standing member of the Council of Europe and the European Communities (Union).

VIII.3 Restoration of municipal assets confiscated during the communist regime from the former (true) owners

93. The restoration of assets confiscated by the state from their true owners concerns both the state and local authorities (Germany – for the GDR - Bulgaria, Croatia, Estonia, former Yugoslav Republic of Macedonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovenia) or the state only and not the local authorities (Albania). In Russia, restoration did not concern individuals but – in practice – the religious organisations. In Ukraine (where the communist regime lasted much longer than in other states examined here), the process is extremely complicated and very limited

The restoration of municipal assets is embodied in law and carried out by the local authorities themselves (Bulgaria, Croatia, Estonia, former Yugoslav Republic of Macedonia, Germany, Hungary, Latvia, Lithuania, Poland, Romania, Slovenia).

Restoration may be effected without compensation for the local authority by the state (Croatia, Estonia, Latvia, Lithuania, Romania, Slovenia, Ukraine) or with compensation (Hungary).

The expert for Czech Republic said that, in general, there were no problems between the state and local authorities. The municipal ownership situation corresponded to the 1949 situation and where disputes arose the courts decided.

94. The conclusion here is that the restoration of assets taken by the communist regime normally concerns both assets held by the state and those held by local authorities, that this process is covered by the law and that, generally speaking, it takes place without compensation for local authorities.

We consider this last aspect to be just, since the assets in question were not legally and morally acquired and kept by the local authority (or its creator, the state). In reality, therefore, there is no true "municipal ownership", and restoration without compensation is simply an act of reparation towards the true owners.

VIII.4 Privatisation of municipal property

95. According to the replies from the national experts, it is possible to identify many different situations: the existence of a large-scale privatisation process (Hungary), a clear trend towards privatisation (Poland, Russia), the existence of a privatisation process (Slovenia), privatisation of nearly all the commercial businesses run by local authorities (Latvia), significant privatisation of housing and businesses (Lithuania); privatisation of local businesses and certain public services, eg water (Ukraine), privatisation of public assets and services (Romania); privatisation possible under the law (Bulgaria); no developments regarding privatisation apart from housing (Czech Republic); no developments yet regarding privatisation, as what is currently happening is the transfer of state assets to local authorities (Albania); no trend towards privatisation; but certain initiatives are in preparation in this field (former Yugoslav Republic of Macedonia); the expert said he had no information (Croatia).

96. The wide variation in situations permits of only one conclusion, for the central and east European countries: the privatisation process following the democratic changes in those states primarily affects former "socialist property", which may no longer have as owner a public corporation (principally the state or local authorities), and does not, to any significant extent, concern "normal", "conventional" municipal assets or the public services that use them.

IX. CONCLUSIONS

IX.1 General conclusions

97. With regard to the situation in the 31 states analysed, the replies from the national experts lead the rapporteurs to make the following assessment:

a. in all these states (with one exception), the local authorities are legally entitled to own municipal property;

b. in general, there are two systems for municipal property: states that have only one form and those that distinguish between municipal property under public ownership (public property) and private ownership (private property); depending on the criteria applied, states are split into two almost equal groups, with the system with a single form of municipal property enjoying a slight numerical advantage;

c. in all states, the forms of municipal property are the same as those of state property, ie there is equality of legal treatment in this connection between the state and the local authorities;

d. municipal property is subject either to a single or mixed (public law - private law) legal system;

e. the applicable law is, with one exception, the same for local authority and for state property;

f. in general, the local authorities may possess assets;

g. the procedures for the acquisition and use of municipal assets vary;

h. in general, the local authorities can set up commercial companies and form consortia with other local authorities or entities, transferring to these companies or consortia either the ownership or the management of certain municipal assets;

i. in certain states, all or part of the municipal assets can constitute tangible security or be seized and/or disposed of;

j. in all states, the local authorities have the right to benefit from an expropriation, requisition or/and a right of preemption in their favour for reasons of public interest, this right either being exercised by the local authority concerned (alone or in collaboration with another legal person) or by another legal entity.

k. in certain states, municipal property may be expropriated and/or requisitioned by the state in the public interest, usually against payment of compensation;

l. in general, the local authorities that own municipal property can, as a rule, fully exercise their ownership rights, subject to certain exceptions;

m. the local authority bodies that exercise the rights of owners of municipal property are the elected representative body and/or the executive, the latter acting under the authority of the former;

n. checks on municipal property either take the form of the ordinary administrative supervision of the local authorities or certain specific forms of scrutiny;

o. there is openness and transparency with regard to municipal property in accordance with ordinary or specific rules relating to the local authorities' work;

p. in the majority of states, the courts with jurisdiction in municipal ownership matters are the ordinary civil courts, but there are a certain number of states with two types of court: administrative and civil;

q. charges on municipal assets constitute local authority resources, whether fiscal or non-fiscal;

r. there are many different national methods of taxing municipal assets;

s. in certain states, the transfer of powers from central government to the local authorities is accompanied by a transfer of assets;

t. in the former communist states (the CEECs), democratic change was generally accompanied by the establishment of genuine municipal property, which in most cases subsequently underwent a privatisation process.

IX.2 Recommendations for the interpretation of the European Charter of Local Self-Government

98. According to Article 3 paras. 1 and 2, Article 4 paras. 2, 4 and 6, Article 8 paras. 2 and 3, Article 9 paras. 1 and 3, Article 10 para. 1 and Article 11 of the European Charter of Local Self-Government, interpreted in the light of the preamble and the explanatory report:

a. local self-government comprises the right of local authorities to own municipal property, within the limits of the law, in order to exercise functions in the local public interest. The local authorities' capacity to possess municipal ownership rights must be recognised by the constitution and/or national legislation;

b. the existence of a single form of municipal property or of two (or even more) forms (public - private), the applicability of a single or mixed legal system (public law - private law) and similarities or differences concerning the situation of state property are matters to do with national legal traditions and the Charter does not impose any particular system;

c. the nature and quantity of municipal assets must allow local authorities to fulfil their functions in the local public interest, in accordance with the law;

d. the local authorities must have the possibility of acquiring and using municipal assets, in accordance with the law;

e. the local authorities have the right, in the exercise of their functions, to associate with other local authorities in order to carry out their tasks in the public interest and to transfer to the associations thus constituted the ownership or management of part of the municipal assets under democratic supervision.

f. where the law provides for the possibility for municipal assets to be disposed of, constitute tangible security or be seized, this must not have any detrimental effect on the general existence of municipal property and local self-government;

g. the local authorities may, within the limits of the law, be able to purchase on a preferential basis or use the assets of third parties in a coercive manner (expropriation, requisition, pre-emption, etc) for the public benefit and in accordance with democratic principles; the decision must normally be taken by, or in consultation with, the local authority concerned;

h. the expropriation of municipal assets, if permitted by law, must be carried out for the public benefit and with respect for democratic principles, ie as a general rule by, inter alia, paying just and fair compensation;

i. normally, the local authorities entitled to own municipal property must fully exercise this right in accordance with the law, and any exceptions must be provided for by law, be for a legitimate purpose, be necessary in a democratic society (including the question of proportionality) and respect the principle of local self-government, bearing in mind that they are subject to a strict interpretation;

j. the rights of the entity entitled to own municipal property may be exercised, in accordance with the law, by the representative and/or the executive body, without affecting the right to have recourse to forms of direct democracy; the executive must act under the authority of the assembly or the council;

k. the administrative supervision of municipal property, exercised in accordance with the law, must in principle only be carried out to ensure legal compliance but may, in exceptional cases, be exercised with regard to expediency, while at the same time respecting the criterion of proportionality;

l. in keeping with the rules of democracy, and in accordance with the law, it is necessary to ensure genuine management transparency and openness in municipal property matters;

m. the local authorities must have the right, in accordance with the law, of recourse to an accessible and useful judicial remedy in order to secure the protection of municipal property; states are free to allocate jurisdiction on the matter to the civil, administrative or other courts, provided that the court is independent, impartial and established by law;

n. in principle, according to the law, the local authorities must be able to use as their own resources all the charges made for the use of municipal assets;

o. the taxation of municipal assets, where it exists, must not be excessive and must support the actual existence of municipal property and local self-government;

p. the transfer of new powers by the state to the local authorities must, as far as possible and according to the law, be accompanied by not only the transfer of financial resources but also of assets, which must at least include certain assets that have been allocated to the public services transferred and are necessary for the exercise of the new powers.