Report on local democracy in Armenia - CPL (10) 8 Part II

Rapporteur: Mr Christopher NEWBURY, United Kingdom

Introduction

1. This report has been prepared as part of the implementation by the Congress of Local and Regional Authorities in Europe of its programme for the monitoring of local and regional democracy in the member states of the Council of Europe1. For the purposes of the monitoring exercise in relation to the Republic of Armenia, the rapporteur appointed by the Institutional Committee of the Congress was Mr Christopher Newbury (United Kingdom) and he was assisted, as consultant by Professor Chris Himsworth of the University of Edinburgh and member of the Group of Independent Experts on the European Charter of Local Self-Government (United Kingdom) and by a member of the Congress Secretariat.

2. The Republic of Armenia achieved its independence from the Soviet Union on 21 September 1991; became a member of the United Nations on 2 March 1992; and a member of the Council of Europe on 25 January 2001. The country’s Constitution was adopted by referendum on 5 July 1995 and Armenia signed the Charter of Local Self-Government on 11 May 2001. Ratification followed on 25 January 2002 and the Charter came into force in Armenia on 1 May 2002. At the time of ratification, Armenia declared, in terms of Art 12 of the Charter, that it would bound by the following Articles and paragraphs:
Article 2;
Article 3, paragraphs 1 and 2;
Article 4, paragraphs 1, 2, 3, 4, 5 and 6;
Article 7, paragraphs 1 and 3;
Article 8, paragraphs 1, 2 and 3;
Article 9, paragraphs 1, 2, 3, 4, 5, 6, 7 and 8;
Article 10, paragraphs 1 and 2;
Article 11.

In addition, Armenia has ratified the following treaties and conventions: the European Charter for Regional or Minority Languages; the Framework Convention for the Protection of National Minorities; and the European Outline Convention on Transfrontier Co-operation between Territorial Communities or Authorities.

Geographically, Armenia is located in the southern Caucasus region; it is wholly land-locked; and is bounded by Georgia, Azerbaijan, Iran and Turkey. The country has an average altitude above sea level of 1800m and much of it is covered by mountainous terrain, rising to 4090m (Mount Aragats). The total area of Armenia is 29,743 square kilometres and its current total population is estimated at nearly 4m, of whom it is further estimated that one third (a figure which is rising rapidly) live within the boundaries of the capital city, Yerevan.

Politically, the country is headed by President Robert Kocharyan, re-elected for a five-year term on 19 February and 5 March 2003. The Government of Prime Minister Mr A Markaryan is a formed from a coalition with majority support in the National Assembly to which elections were most recently held on May 2002.

3. In terms of economic development, official figures suggest that Armenia has recently achieved a level of growth and stability not known in the earlier years of independence. Overall economic activity has been expanding, with advances in the industrial sector, in small and medium enterprise, in foreign trade and in tourism. On the other hand, the average monthly wage remains low (at 26,444 drams in 2002 i.e. about 40 euros) and unemployment high at 9.4%.

4. The monitoring team made two visits to Armenia, on 19-22 June 2003 and 2-5 October 2003. In the course of the visits the team was able to meet the Minister and other representatives of the Ministry of Territorial Administration and Development of Infrastructures, two successive Mayors of Yerevan and other city officials, the Mayor of the Kaneker-Zeytun district of Yerevan, the Mayors of Ijevan and Vanadzor, the Marzpeten (Governors) of Lori and Tavush, the community chief of Lernapat and several councillors, representatives of the office of the President and of the Parliament, representatives of the Association of Local Communities of Armenia, as well as representatives of many other local government organisations and NGOs, both local and international. Details of the programmes of the two visits are set out in the Appendix. Throughout the visits, the monitoring team were greatly assisted by Mr Emin Yeritsyan, Head of the Armenian delegation to the CLRAE, and Ms Natalya Lapauri, Secretary to the Armenian delegation to the CLRAE and Executive Director of the Association of Local Communities of Armenia. The CLRAE delegation also greatly benefited from the support of the Information Office of the Council of Europe in Yerevan. The team wishes to thank them and all others who helped with this monitoring exercise and who extended such a warm welcome to the team during its visits to Armenia.

5. In addition to the information gathered during the two visits to Armenia themselves, the monitoring team was greatly assisted by documentary material. The principal constitutional and legal texts are described in Part I below. Another important source was the Report on Local Democracy in Armenia prepared for and approved by the Bureau of the Congress in February 2000. That report was written by rapporteurs Mr Claude Casagrande and Mr Gabor Kolumban as part of the procedure on Armenia's application for membership of the Council of Europe. Although there have been some changes since February 2000, including the enactment of a new Law on Local Self-Government, that report's findings provided a most useful background to the 2003 monitoring exercise and many of the conclusions reached in the report have a continuing resonance and validity. The principal conclusion was that the chief requirements of the Charter of Local Self-Government were fulfilled by Armenian law. No legislative provisions conflicted outright with principles of the Charter. On the other hand, the actual functioning of local government was not without 'defects and shortcomings' that would have to be rectified. There was a need to strengthen the human resources of local government in various ways; the financial resources of authorities should be improved; the oversight of communities by central government through the marzpet (governor) needed attention; and so did the ambiguities in the status of Yerevan.

It was also expected in 2000 that Armenia in becoming a member of the Council of Europe would bring its legislation and practice of local democracy into line with the European Charter of Local Self-government and would amend the then legislation so as to give local authorities greater responsibilities.

6. As well as the 2000 Report, the monitoring team had available other material including, in particular, the chapter on 'Local Government in Armenia' in I Munteanu and V Popa (eds) Developing New Rules in the Old Environment: Local Governments in Eastern Europe, in the Caucasus and Central Asia Vol 3 (1/8/03) by David Tumanyan, whom the monitoring team also met in Yerevan.

7. The remainder of this report is divided into three parts, followed by a Conclusion. The report's overall conclusion, from which more specific recommendations are developed, is that local self-government in Armenia, although formally quite well provided for in legislation, is in need of substantial further development if full compliance with both the letter and the spirit of the Charter is to be achieved. Armenia falls into that group of post-Soviet transitional countries in which the social and institutional obstacles to local democracy are very great2. The lack of a strong local democratic tradition3 combined with economic and political constraints remain barriers to progress. It is impossible to imagine that local government can be severed from this context and reformed unilaterally. On the other hand, certain aspects of the current local government structure and practice can be identified for specific reform and, because they are all related, they need to be addressed as part of a joint programme. The problems of small (especially rural) underpowered, under funded; under resourced and over scrutinised communities need to be addressed. The funding and staffing of all authorities need to be improved. And local democracy in Yerevan demands early attention.

Part I Legal basis and recent developments of local self-government in Armenia

8. Local administration in the Republic of Armenia takes two principal forms. On the one hand, the country is divided into ten Marzer (regions or provinces) plus the capital city of Yerevan for the purposes of the territorial deconcentration of central government. A marzpet or governor heads each region. Marzer vary widely in size. Yerevan itself has a population of 1.25m and the Lori region about 400,000. The Gegharkunik region (including Lake Sevan) is 5,348 square kilometres. On the other hand, the Vayots Drzor region has a population of only 70,000 and the Armavir region is only 1,242 square kilometres (Yerevan is 227 square kilometres). All formal powers are vested in the marzpet but there are also provisions for a consultative and advisory marz council (see below).

9. On the other hand, for the purposes of local self-government the regions are divided into communities (in Yerevan, twelve districts) and, including the capital’s districts, there are 930 in the country as a whole. Communities are classified as either rural or urban but all communities outside Yerevan are attributed the same legal powers and characteristics. Despite their formal legal equalities, however, communities vary enormously in population terms. Gumry, a city second only to Yerevan, has a population of over 200,000 whilst one rural community has a population of only about 37. 36 communities have a population of less than 100; 60 communities of between 10 and 200; 176 between 201 and 500; 186 between 501 and 1000; 321 between 1001 and 3000; 119 between 3001 and 20,000; and only 32 of over 20,000. Communities consist of a directly elected council of community elders and a directly elected community chief. Within Yerevan, the districts have a modified (and reduced) set of formal powers (see below).

10. The legal basis of local self-government in Armenia derives from two principal sources. In the first place, Chapter 7 of the Constitution makes provision for "Territorial Administration and Local Self-Government". Article 104 provides for the regions and for the urban and rural communities. Article 105 requires that "communities shall have local self-government". It provides for three-yearly elections of the council (of five to fifteen members) 4 and the mayor/chief "to manage the property of the district and to solve problems of local significance". The mayor/chief is to organise his or her staff. Article 106 requires the council to approve the budget on the recommendation of the mayor and to "oversee the implementation of the budget, and determine local taxes and fees as prescribed by law". Article 108 provides that the City of Yerevan shall be considered a marz and that the President of the Republic, upon the recommendation of the Prime Minister, shall appoint and remove the mayor. Local self-government is to be instituted in Yerevan through neighbourhood districts. Article 109 provides that, in cases prescribed by law, the Government may remove the mayor/chief of a community on the recommendation of the marzpet. In such a case, special elections must be held within 30 days. An acting mayor/chief is to be appointed by the Prime Minister (urban communities) or Marzpet (rural communities). Election procedures for local self-governing bodies and their powers are to be "determined by the Constitution and the laws" (Art 110).

11. Within this constitutional framework, the most significant source of substantive law is the Law on Local Self-Government of 7 May 2002. This Law replaced the earlier Law on Local Self-Government of 22 July 1996 and has itself been subsequently amended by the Law on Making Amendments and Adjustments to the Law on Local Self-Government of 26 December 2002. The Law of 7 May 2002 states its own objectives as being to “define the concept of local self-government in the Republic of Armenia, general principles, bodies, its powers as well as legal, economic, financial bases of their activities and guarantees, regulate interrelations between the state and local self government bodies” (Art 1). The implementation of local self-government is to be governed by the Constitution, this law, other laws and legal acts (Art 2). The idea of local self-government is further spelled out in Art 3 where it is defined as “the power and capacity defined and guaranteed by the RA Constitution and this law for local self-government bodies acting at their own responsibility and independently as provided by the law, to manage the community’s property and resolve the community’s problems with an aim to improve welfare of the population. Local governance shall be exercised in the whole territory of the Republic of Armenia. Status of the Lake Sevan shall be defined by the law”. The concept of the “community” is then further elaborated in Art 4, which states: “Community is a democratic basis of the state system. A community is a commonality of residents and administrative-territorial subdivision, within the defined boundaries of which local self-government is implemented by the residents of the community directly or through the elected bodies. A community is a legal entity, the specifics of which are established by this law. Community shall manage its property independently, has a budget as well as a seal bearing the coat-of-arms of the Republic of Armenia or community and its name.”

12. These early provisions of the Law are quoted at some length because of their importance (discussed below) in seeking to embed the general principles of local self-government in the legal regime. These principles are further expanded in Art 9 of the Law which inter alia specifies a right to carry out autonomous activity; independence and self-responsibility; a correspondence between powers and financial resources; the protection of the rights, legitimate interests and the property of communities; assistance to financially weak communities; the right of communities to unite with others for the joint implementation of tasks; and the transparency of the activities of local self-government bodies. Thereafter, there are provisions defining community residents and referring to their participation in elections under the RA Election Code (Art 5); defining the territory of communities (as including “territories of one or several settlements, as well as outside of settlements, which may be owned by physical persons, legal entities, community, the Republic of Armenia”) (Art 6, as substituted by the Law of 26 December 2002); and further defining the local self-government bodies themselves. Article 7 provides for the community council (Avagani) and for the chief of community (“mayor” in urban communities). The council is the representative body whilst the chief is to “officially represent community and be the executive body of the community, who shall exercise powers provided for by the Constitution and this Law”5. A concluding provision (Art 10) in Chapter 1 of the Law is a general description of the powers of local self-government bodies. In particular, this draws the distinction between the “own powers” of communities and the powers delegated to them by the state and then the distinction between mandatory and voluntary powers. The specified “voluntary powers” are stated to be not exhaustive. A community may carry out any activity related to the interests of the community and not conflicting with the law. The definition of 'delegated powers' and of the relationship of those powers to 'mandatory powers' has a potentially centralising influence - "Delegated powers shall be exercised in the order established by the law or government. Powers delegated by state shall be fully and in compulsory manner financed by the state budget at the expense of the funds provided for financing the powers delegated by state. Mandatory powers and powers delegated by state shall be subject to priority performance by the community in the manner prescribed by the Law". The difference between a mandatory “own” power and a power “delegated” to a community by primary legislation, although reflecting a distinction drawn in the European Charter, is not entirely clear. One important identifying characteristic of a “delegated power”, however, is that it is supposed to be separately funded by a specific grant (Art 10 and see below).

13. The Law on Local Self-Government contains a further nine chapters, concluding with Chapter 10 which includes transitional provisions - some potentially quite significant 6. Chapter 2 contains provisions relating to the community councils. These are mainly organisational in character but Art 16 (as amended by the Law of 26 December 2002) makes important provision for the powers of the councils. Some 31 different powers (in the style “community council shall”7) are itemised, including the approval of the community development programme, approval of the annual budget, defining the size of local duties and fees, approving the numbers of personnel, payroll and salaries for staff. The powers of the council have to be read in the light of the powers of chiefs of community (Art 32, discussed below) who perform an initiating role. In addition, Councils have the power to “implement supervision over fulfilment of the powers of Chief of Community”; they “can protest in the court decisions of Chief of Community contradicting with the Law and other legal acts”; and they “establish the official salary of chief of community”. In addition they have the power to “bring a motion to the regional governor, and, if in Yerevan, to the mayor in Yerevan, with regard to the removal of the chief of community” (see Constitution, Art 109 above). That power is procedurally supplemented by Art 17 of the Law (as amended). A proposal to remove the chief (which requires to be promoted by at least one-third of the membership) may be made “if the mandatory powers of Chief of Community are not performed within actual revenues of the community budget or if powers delegated by the State are not sufficiently performed, as well as if a number of decisions made by the Chief of Community contradicting with the Law and other legal acts are considered null and void by the decision of the court, or the court recognised the fact of periodic breach of decisions of the Council by Chief of Community”. See also Arts 72-73, discussed below.

14. Chapter 2 of the Law also contains provisions specifying restrictions on occupation of certain other positions by councillors (Art 18); defining the rights and duties of councillors (Arts 19-20); and the early termination of the mandate of councillors (Art 21) and the termination of powers of the council as a whole (Art 22). Article 23 requires that council members “shall receive a pecuniary compensation at the rate of up to 30% of monthly expenses pre-defined for the members of the National Assembly of the Republic of Armenia, by his/her will and decision of the council”, i.e. a permissive power to pay compensation.

15. Chapter 3 of the Law makes organisational provision for chiefs of community and their staff. There are, for instance, requirements as to minimum age (25) and education (“special secondary or higher education”) as qualifications to be a chief. A chief may serve no more than two consecutive terms (Art 24). The remuneration of chiefs is specified by reference to a percentage (from 50% to 90%) of the salary of a member of the National Assembly, depending on population of the community (from less than 1000 to over 75,000) (Art 27). To assist the chief there must be a deputy chief (who retains broad powers in absence of the mayor and is a non elected officer and whose position needs further attention) and a secretary and there may be other staff (Arts 28-31). Separate legislation also requires the appointment of a treasurer/accountant.

16. Chapter 4 of the Law defines the powers of chiefs of communities. Article 32 (as amended) lists a number of general powers, some of which are designated as “mandatory powers” of the chief and others as “delegated by state”. Article 33 then specifies a number of further mandatory powers “in the sphere of protection of the rights of citizens and economic entities”, including some “delegated by state”. Article 34 specifies some mandatory powers in the sphere of finance, again with some “delegated by state”; Art 35 in relation to protection of public order (delegated powers); art 36 in the sphere of defence (voluntary powers); Art 37 in the sphere of urban development and housing utilities (mandatory and voluntary); Art 38 in the sphere of land use (mandatory, delegated and voluntary); Art 39 on transportation (mandatory, delegated and voluntary); Art 40 on trade and services (mandatory powers); and several others (arts 41-45). An important gloss on this allocation of powers to mayors/chiefs is that the position in Yerevan is different. Although districts in Yerevan are, in many respects, directly comparable to communities elsewhere, the powers of their mayors (and also of their councils) are, in formal terms, much reduced 8. Councils do not have the zoning powers of councils elsewhere and the mayors lack, among others, powers to name streets, control meetings and demonstrations, control construction and land use, manage utilities and transportation, and environmental protection. Such powers are exercisable instead by the Mayor of Yerevan.

17. Chapter 5 of the Law (as amended) deals with the property and economic activity of communities. It includes rules on the transfer (from the state) of property to communities (Art 47) and restrictions on the alienation of property (Art 51).

18. Chapter 6 deals with community budgets including elaborate budgetary procedures on the part of chiefs and councils. It is provided that the “state authorized body and office of the regional governor (marzpetaran) shall provide methodological and consultative assistance to drafting of community budget as well as supervise the budgetary process in the manner defined by law”. This and other aspects of the budgetary process are further developed in the Law on Budgetary Systems. Article 57 (as amended) specifies the sources of community revenues. These are to include:
- 1. Tax revenues (land tax, property tax, part/deductions from income tax, part/deductions from profit tax, part/deductions from payment for environmental protection, fines and penalties for breaches of the land and property tax legislation. Rates of taxes which may be levied are specified in the annual State Budget Law.
- 2. State dues (for certain forms of registration), including certain local dues.
- 3. Non-tax revenues including income from property, from penalties for administrative violations and from subsidiaries in respect of delegated powers.
- 4. Revenue granted from capital transactions.
- 5. Official transfers including “subsidies from the state budget based on the principle of financial adjustment" (see also Art 58). Provision is made in the Financial Equalization Law of 24 November 1998.
- 6. Sources (eg loans, credits, alienation of national property) for the financing of budget deficits.

19. Chapter 7 deals with the important issue of relations between state and local self-government. Articles 70 and 71 provide for the general protection of communities from state interference. State intervention is permitted only if envisaged by the Constitution or this law. There is a provision that: “State by the force of laws adopted by it shall not increase the scope or powers of the community or decrease the revenues without relevant financial compensation”. Bodies of local self-government may appeal to the court decisions and actions of the state bodies and official persons violating the rights of the community. Equally, decisions and actions of communities may be challenged by the government. Articles 72 and 73 (as amended) return to the question of the removal of community chiefs by the government. As amended in December 2002, it is provided: “Marzpets and Yerevan Mayor may submit a proposal on dismissal of Chief of Community to the Government if the mandatory powers of Chief of Community are not performed within actual revenues of the community budget or if powers delegated by the State are not sufficiently performed, as well as if a number of decisions made by the Chief of Community contradicting with the Law and other legal acts are considered null and void by the decision of the court, or the court recognised the fact of periodic breach of decisions by the Council by Chief of Community”. There is a provision for the discussion of a draft decision to remove a chief in the community council whose own decision on the matter, together with the chief’s opinion, must be sent to the marzpet prior to his submission of the matter to government. Separately, by amendment in December 2002 but reinforcing earlier provisions, the “marzpet may appeal through the court the decisions made by the Chief of Community that contradict the Law and other legal acts” (Art 72(4)). Article 77 is headed “State Supervision of Local Communities, Inter-Community Unions9 and Inter-Community Union of Districts in Yerevan” and provides for such state supervision “through the National Assembly and Government”. The Supervisory Chamber of the National Assembly is required, no more than once per year to “perform the supervision of targeted utilisation of financial resources” provided to the communities and the inter-community unions from the state budget. The Government through the “state authorised body” (formally defined as “the relevant Ministry in the area of the state administration” (Art 84(9)) but see also below) or the marzpet’s office is to conduct financial inspections, again no more than once a year. The marzpet’s office is also to perform “legal supervision” and decisions of community councils10 may be appealed against in court by the marzpet. Similar arrangements apply in Yerevan. Any materials relating to criminal responsibility arising in the course of inspections are to be passed to the court or prosecutor’s office.

20. Chapter 8 (as amended) deals, rather minimally, with “Inter-Community Unions” and Art 78 provides that local self-government bodies (communities) “may form inter-community unions for the purpose of providing solution to some problems faced by the communities and decrease of expenses”. Such unions have separate legal personality and are formed by agreements/contracts between chiefs, with the approval of community councils.

21. Chapter 9 provides for councils of marzes/regions, including Yerevan. Article 81 requires that advisory bodies, councils of the marzes, are to be formed comprising the chiefs of communities and the marzpet who convenes and presides over council meetings. Council activities are further regulated by decrees of the President of the Republic. Article 82 (as amended) makes specific provision for the council of Yerevan, with the Mayor of Yerevan as its chief. It is stated that the Yerevan council should approve the budget for the city as well as “the order of granting permissions, for which the collection of local dues is defined by law”. In addition, the Mayor, by majority vote of the council, is to perform certain other tasks including the naming of streets; regulation of “the activities of the institutions and organisations in the area of trade and catering/servicing in accordance with the legislation”; and approval of the grant of honorary citizenship of the city. “Regulation on activities of the council of Yerevan shall be approved by the mayor” and such procedural activities of the council are to be regulated “by this law” and decree of the President of the Republic.

22. Both the Constitutional provisions on local self-government and the Law of 7 May 2002 (and, to the extent that its provisions have been retained, the earlier Law of 22 July 1996) have been the objects of some critical scrutiny. The Congress Report of 1 March 2000, commenting on the earlier Law, observed that, although the early provisions contained “an impressive series of principles”, some of these could with advantage be embodied instead in the Constitution itself. The Armenian authorities had expressed a willingness to consider this. In addition to the possibility of the incorporation into the Constitution of these provisions, there has, on the other hand, been criticism in the past that the Constitution creates an inflexibility preventing desirable reform in other areas, notably the three-year periods of elective office, the status of Yerevan and the Government’s power to remove chiefs. Constitutional amendments require approval in a referendum and on 25 May 2003 substantial amendments were proposed for Chapter 7 on local self-government, and many other Chapters in a single package. The referendum did not, however, approve the amendments.

23. As to the Law on Local Self-Government itself, the view in the Congress report was that the intention that the legislation was to be guided by the Charter was plain, although the reality of the declared principles obviously depended, it was observed, on the actual conditions under which they are applied - something to which we return. In addition to the scrutiny by the Congress, the Law of 22 July 1996 had been subjected to detailed examination by experts of the Council of Europe (reporting to the Directorate on Local and Regional Democracy) and also at a Working Group attended by the experts, together with representatives of the Venice Commission and Mr Tigran Torosyan, Vice-Chairman of the Armenian National Assembly in Yerevan in July and October 2001. Reform of the 1996 Law was expected and a number of conclusions were reached and suggestions made, relating especially to the relative competences of chiefs and councils; sources of community revenue and budget procedures; relationships between communities and the state; the relationship between chiefs and their staffs; the union of communities; and the status of Yerevan. Texts for a new Law discussed at this stage were indeed incorporated into the draft Law introduced into the National Assembly early in 2002. That draft was, however, heavily amended in ways which omitted many of the reforms earlier proposed. So, for instance, questions of the relationship between chiefs and councils were not resolved; the status of local government staff was not assured; the local finance issues were not satisfactorily decided; nor the questions of administrative supervision, regional councils and the status of Yerevan. There has been a return to certain of these issues in the amending Law of 26 December 2002 already mentioned and some other legislative reform is under consideration. All these aspects are further discussed below but it is important to note at this stage that the immediate past history of the reform of legislation on local self-government in Armenia has not been without its problems. Current analysis and proposals for further reform have to take this history into account.

24. Among other existing laws forming the overall framework of local government legislation, there are, in addition to the Constitution itself and the Law of 7 May 2002 as amended:
a) The Law on the Administrative-Territorial Division of the Republic of Armenia of
4 December 1995.
b) The Electoral Code of 3 August 2002 .
c) Law on the Budget System of 21 July 1997.
d) Law on Local Duties and Fees of 9 January 1998.
e) the Land Code 2000.
f) The Financial Equalisation Law of 24 November 1998. On this, see para 45 below.

Part II Conformity of legislation and practice with the standards set out in the European Charter of Local Self-government

25. To this account of the constitutional and legislative framework of local self-government in Armenia we have now to add the documentary and oral evidence available to us to provide the basis for an analysis of the current state of local democracy in the country as a whole. To provide an organisational structure for the analysis, the sequence of the substantive articles of the European Charter on Local Self-Government is adopted:

26. Article 2 - Constitutional and legal foundation for local self-government

As already indicated, the Charter’s requirement that the principle of local self-government should be recognised in domestic legislation and, where practicable, in the constitution can quite readily be satisfied in relation to Armenia. There are questions about whether certain principles should be embedded in the Constitution rather than legislation and about specific constitutional provisions (including, for instance, the three-year periods of elective office and the designation of Yerevan as a marz) and these will be raised later but the recognition of the general principle of local self-government is clear.

27. Article 3 - Concept of local self-government

Article 3(1) requires the allocation to local authorities of the right and ability to regulate and manage a “substantial share of public affairs”. If one were to look simply to the lists of powers allocated by the Law of 7 May 2002 to the councils (Art 16) and the chiefs (Arts 32-42) of the communities and leaving on one side the division between councils and chiefs, there would be little doubt that these constitute a “substantial share of public affairs”. The reality is, however, quite different. In a narrow and purely formal sense, communities may have the “right” to exercise the different categories of power, although it has been noted that many of the powers allocated by the Law of 7 May 2002 are, in fact, only "delegated" to them by the state. Much more importantly, even if the communities do have the "right", they do not have the “ability”. Asked what functions are actually discharged by communities, our informants provided very restricted answers. In rural areas, it appears to be the case that many of the smaller communities provide virtually no local services but there may be some street cleansing and limited domestic waste collection. In others there may be some road repairs and welfare assistance. In some urban areas the range of functions is wider, including pre-school/kindergarten provision, and some involvement in road repairs and cultural institutions. Even in the districts of Yerevan where it will be recalled that many functions are formally exercised by the Mayor of Yerevan, actual service provision is not substantial. Districts may be involved in the maintenance of buildings, public housing provision, and some social welfare provision. In Yerevan and in other urban centres, school boards have been established with some representation from the local population but schools have not been brought within the responsibility of local self-government and cannot therefore be regarded as a service provided by communities. It is understood, however, that it is proposed to transfer cemeteries and perhaps school provision to the districts during 2004.

28. Discussion of how this situation comes about is offered below. The funding crisis with all its consequences for staffing and other resources looms large. For the time being, however, it is this stark fact of how little is actually done by communities, in contrast with their extensive formal statutory powers, which dominates. This conclusion should not, however, detract from the sustained work of many community chiefs to act in an informal facilitative way on behalf of their residents.

29. Article 3(2) of the Charter requires the powers of local self-government to be exercised by councils or assemblies which are freely elected. This has two aspects. On the one hand, the powers should, on the face of it, be vested in the councils themselves rather than in “executive organs responsible to them”. On the other hand the councils should be freely elected.

30. As to the first aspect, the direct allocation in Armenia of the most significant operational powers to chiefs rather than to councils raises questions about Charter compliance unless, at the same time, the councils are able to hold their chiefs responsible to them. This, in turn, raises two rather different questions: (1) Do the councils have sufficient general powers of scrutiny and control of their chiefs? (2) In an extreme case, are councils in a position to dismiss, or ensure the dismissal of, their chiefs? The answer here appears to be positive in both cases. The powers vested in the council itself, especially that of budget approval and control provide a good grounding for the scrutiny of chiefs on both a strategic and day-to-day basis. In addition, the council’s powers to initiate the removal of chiefs already noted are a reality and are resorted to by councils from time to time.

31. On the second aspect of Art 3(2) and the question of whether local elections in Armenia are free and fair, the principal evidence is available in the reports of others on the elections held in November 1996, October 1999 and, most recently, in October 2002. In addition to reporting on the conduct of elections themselves, the team from the Congress which observed the elections on 20 October 200211 made a number of more general comments on the law and practice of local elections. Although the conduct of the campaign had been “generally calm and balanced” and voting itself had taken place without major incidents (but some intimidation had been reported), the following points were noted:

(a) The accuracy of voter lists was a source of concern. The Minister promised updating and improvement before the national election. (It is understood that some progress was indeed made in the adoption of a new Registration Law.)
(b) The mandate of chiefs and councillors should be extended to four years.
(c) The level of deposits payable by candidates appeared to be a deterrent in rural areas.
(d) Election staff and observers should be better trained and better identified.
(e) Lower level election results should be required to be published locally.
(f) There should be a fairer political balance on electoral commissions.
(g) There should be guarantees of greater equality in media access and access to other resources during campaigns.

It was further observed that political parties continued to maintain a low profile (most candidates were independents) and, with regret, that turn-out levels were below 50% and, of course, there was no election in Yerevan for the mayor. It was recommended that the training needs of newly elected chiefs and members should be attended to.

Another regret of the election observing team was the low participation level of women. This was confirmed to us. Fifteen women had been elected as chiefs in 1999 - dropping to nine in 2002. Two thousand women councillors in 1999 had dropped to 490. No explanation for this trend was offered.

32. Article 4 - Scope of local self-government

This Article is most important for its embodiment of the subsidiarity principle - public responsibilities shall generally be exercised, in preference, by those authorities which are closest to the citizen. Powers should normally be full and exclusive.

33. The question of whether these requirements are met in Armenia is intimately connected to that raised by Art 3. Because so few powers are in practice allocated to local communities, it has to be concluded that Art 4 is not, in reality, being honoured.

34. Article 5 - Protection of local authority boundaries

The Charter requires that changes in local authority boundaries should not be made without prior consultation of the local communities and this is a requirement also imposed in Armenia by a general statement in the Law on Territorial Division.

35. Article 6 - Appropriate administrative structures and resources

Local authorities must be able to determine their own internal administrative structures. Conditions of service of employees must permit the recruitment of high-quality staff on the basis of merit and competence. There must be adequate training opportunities and career prospects.

36. As earlier noted, the Constitution provides that a chief shall organise his or her staff and the Law of 7 May 2002 provides more detailed regulations on this (Arts 28-31). There is no direct control over this process by central government.

37. It has also been mentioned that a draft law on municipal service is under preparation in Armenia. The draft has already been produced for consultation by the College of Public Administration and is likely to be adopted by the Government in 2004 and introduced into the National Assembly. The draft Law defines the municipal service, its status and its relationship with the state civil service. It provides for recruitment procedures and training requirements.

38. In the meantime, however, there are many problems with the attainment of a high-quality municipal service in Armenia. Three, in particular, may be identified:

(a) In the rural communities, one of the consequences of a general under-resourcing of local self-government is simply a lack of staff. In many communities, the only officials are the chief, a deputy chief, a secretary and an accountant. Without further staff, it is quite impossible for real service provision to be undertaken.
(b) In communities of all sorts, it has sometimes been the case that a newly-elected chief will dismiss up to 90% of existing staff and appoint nominees of his or her own. This leads to severe discontinuities of employment and also undermines the Charter principle of recruitment on the basis of merit and competence.
(c) There are also many deficiencies in the remuneration of staff of communities and the provision of training. Although training has been provided intermittently with the assistance of central government or external agencies, there is no sustained provision of staff training. On the other hand a start has been made towards the development, with the Council of Europe, of a national strategy for training. Already, the Communities Association, the GTZ and the Government have ensured that some 15% of mayors have received training and this provision is to be extended. It is hoped that cooperation with ENTO will be developed.

39. Article 7 - Conditions under which responsibilities at local level are exercised

This Article seeks appropriate conditions for the exercise of elective office, including appropriate financial compensation and, on the face of it, the Law of 7 May 2002 makes good provision for inter alia the rights and duties of council members (esp. Arts 19-20) and their financial compensation (Art 23), but it is understood that councillors do not in practice receive any payments in respect of their service, although some administrative expenses are reimbursed. It appears that Art 18 (Restriction on occupation of other posts) is unproblematic. Chiefs are remunerated in accordance with the rules in Art 27 of the Law of 2002.

40. Article 8 - Administrative supervision

The restraint of administrative supervision by the state is a very important Charter principle. In Armenia, it has to be borne in mind that, because of the general powerlessness of communities, there is relatively little activity which is subject to supervision at all. It is, however, important that any such supervision is legally provided for; that it relates normally only to ensuring compliance with the law and constitutional principles; and that it is proportionate.

41. The main legal provision is Art 77 of the Law of 7 May 2002 (within Ch 7 on Interrelation between State and Local Self-Government Bodies) which deals specifically with state supervision, including the powers of supervision by the National Assembly of use of financial resources and the financial inspections and legal supervision by the marzpet (and Mayor of Yerevan).12 A widely perceived problem with these powers of supervision is that they are open to overzealous use by central authorities at large. In particular, the powers of the “state authorised body” appear to be used not simply by a single ministry but by a wide range of state officials to make wide-ranging inspections, especially of financial records. This position needs to be regularised and brought into conformity with the Charter.

42. The other principal provisions are those relating to the removal of chiefs by the Government - Art 109 of the Constitution and Arts 72-73 (as amended) of the Law of 7 May 2002. These powers have been the cause of problems. The very existence of a constitutional provision for dismissals, especially one stated to be available simply “in cases prescribed by law”, is difficult to justify in Charter terms. Secondly, the power in Art 72 to dismiss a chief “if the mandatory powers of the Chief of Community are not performed within actual revenues of the community budget or if powers delegated by the State are not sufficiently performed, as well as if a number of decisions made by the Chief of Community contradicting with the Law and other legal acts are considered null and void by the decision of the court or the court recognised the fact of periodic breach of decisions of the Council by the Chief of Community” is too vaguely drawn13. Thirdly, the actual record of the deployment of these powers (and their predecessors) has demonstrated their vulnerability to misuse on political grounds. Especially during periods of political tension prior to 2001, the power to dismiss was widely used and a continuing complaint is that full information on dismissals and the grounds on which they are made is not available. It has been pointed out that a chief’s failure to secure the council’s approval of the budget might be sufficient grounds for a dismissal. There is also concern about the procedures for appointing an acting chief following a suspension. Such appointed, unelected officials temporarily have all the powers of a chief.

43. There is widespread agreement that reform of the constitutional and legislative provisions were required. Either the power to dismiss should be removed altogether; or the power should be transferred to the courts. The constitutional amendments rejected in the referendum in May 2003 would have placed the decision with the Constitutional Court, although that might be thought to produce a too cumbersome procedure.

44. Article 9 - Financial resources

One of the Charter’s most fundamental provisions demands that local authorities should, within national economic policy, have adequate financial resources, of which they may dispose freely. Resources should be commensurate with responsibilities and part at least should derive from local taxes and charges, whose rates are determined locally. Financially weak authorities should be supported by equalisation procedures. In Armenia, it is impossible to say that the Charter demands are met. It is certainly true that Armenia’s overall economic and financial status is weak and that this in some measure explains funding problems across the entire public sector but the position of local government is particularly acute.

45. The perception in some parts of central government (notably the Ministry) is that the financial regime now established (principally in terms of Ch 6 of the Law of 7 May 2002) ensures that adequate funding is available to communities, both from state subsidies (subject also to the Financial Equalisation Law of 24 November 1998) and from the local taxes within the control of the communities. The system of grant distribution to communities (since 2002) was described as public and transparent, although some defects were acknowledged in payments for the performance of delegated powers.

46. This is not, however, the perception on the part of communities. For them, the financial regime of the Law of 7 May 2002, although formally well designed, leaves them very badly underfunded. They derive virtually no income from sources over which they themselves have any control. Income is, according to the Law of 7 May 2002, available from land tax and property tax on land and property within their territories but at rates fixed centrally. The Government has not shared with communities the other taxes potentially available. Tax collection was formerly a function solely of the state’s own collection agency although collection powers have been transferred to the Yerevan districts and will be transferred to urban communities by the end of 2003 and it was expected that this arrangement would be extended to all communities by the end of 2004, although perhaps with the need for procedures, not yet devised, to combine the efforts of groups of communities for this purpose. There are already signs in some areas of informal tax collection by communities on behalf of the state agency. The transfer of tax collection to communities is seen as important because currently only about 40% of taxes due are effectively collected. Communities, with a greater interest in the volume of tax gathered, believe they can do a more efficient job and significant improvements are already evident in the Yerevan districts. There may, however, be continuing problems relating to inaccurate cadastre information etc. In addition, the process of registration of municipal property initiated by the Law on State Registration of Property Rights of 30 April 1999 has proved slow and complicated with high registration fees for local communities, which discourage them from applying for registration. Another source of revenue is income from state and local dues.

47. Otherwise, local revenues are derived from direct state subsidies. These provided nearly 60% of local income in the country in 2002. Not only does this in itself make communities highly dependant upon the state but there are many complaints that the payment of subsidies is delayed until the end of the year; debts owed by communities are summarily deducted (even if the basis of the deduction eg for supply of power is challenged); and there are inevitable resulting problems for communities. In addition, there are complaints that the system of grant equalisation is too insensitive. There is no equalisation between the Yerevan districts (producing great inequalities there) and additional equalisation criteria (especially to take into account differential needs of communities) are required in the system as a whole. Funding in respect of delegated powers, although required by statute, is simply not paid. A large majority of communities have no capital budget.

48. Article 10 - Local authorities’ right to associate

Local authorities must have the right both to form consortia and to belong to associations (both domestic and international) to protect and promote common interests. On “consortia”, Chapter 8 of the Law of 7 May 2002 on inter-community unions has been noted but, although the use of this facility might be very important as a means of strengthening the impact of small rural communities in Armenia, there are, in practice, only a very small number (about ten) in the whole of the country. In some other cases, however, informal collaboration between neighbouring communities has been achieved as a part of specific projects funded by international organisations including GTZ and DfID. It appears that the potential for much more joint working is very high. The Government has a commitment (approved by the National Assembly) for the funding of unions of communities extending across the whole country. It is apparent, however, that, if the development of unions is to be taken seriously, the legislative basis for their creation and operation will have to be greatly strengthened beyond the skeleton provision in Chapter 8 of the Law. A model has been prepared by the Association of Local Finance Officers. The rapporteur would recommend drawing up a specific law regulating inter-community issues. At any rate, this issue cannot be regulated only by the Civil Code.

49. Although there is no formal right to establish local authority associations, there is in fact a strong Association of Communities of Armenia. From a launch in 1998, the Association’s membership now extends to all communities. The primary members are the community chiefs but councillors, local officials and former chiefs may join as individuals. 7000 members attended the Association’s General Assembly in 2002. With a permanent staff of five and additional expert assistance, the Association provides an effective voice on behalf of local self government and works closely with central government, the National Assembly, NGOs and international organisations. It is represented on the National Council of Territorial Governance. There is, in addition, a much smaller Association of Elders/ Councillors of Armenia and there is also an Association of Local Finance Officers, as well as an Association of Municipal Civil Servants and an Association of Information Officers. The Association of Finance Officers plays an important role in relation to the financial affairs of communities and is a very significant repository of information.

The strength of these associations (especially the political Association of Communities of Armenia), although already significant, would be greatly enhanced if they were more formally integrated into the processes of national policy formation through consultation procedures, in particular, on questions of financial distribution.

50. Article 11 - Legal protection of local self-government

The Charter requires that local authorities should have the right of recourse to courts to secure the full exercise of their powers and respect for the principles of local self-government. This is, of course, a right which presupposes the existence of a judicial system independent of political or other pressures. Although not widely used, this right of legal protection is available to the communities of Armenia by virtue of Art 17 of the Law of 7 May 2002. Councils are also able to challenge the decisions of chiefs (Art 7).

Part III Current proposals for constitutional and legislative change in Armenia

51. It will be apparent from earlier sections of this report that there is a widely felt sense of “unfinished business” in relation to arrangements for local self-government in Armenia. In particular, the amendments made to the draft which became the Law of 7 May 2002 left many of the original reforming proposals unimplemented - a position not rectified by the amending Law of 26 December 2002. And secondly, the abortive referendum of 25 May 2003 also leaves in place many of the constitutional barriers to further reforms. There are, however, strong indications in official quarters that these issues will be revisited. The Memorandum of Political Coalition, according to which the present Government operates, contains a commitment to constitutional amendments and to "political and in particular election system reforms". In addition, progress is currently being made (as earlier noted) towards the drafting of a new Municipal Civil Service Law.

Conclusions

52. It is to be hoped that, if the reforms just mentioned are duly proceeded with, the condition of local democracy in Armenia will be greatly enhanced. In this report, however, it is on the realities of the present situation that we have to focus and the overall conclusion has to be that local self-government in Armenia currently remains very weak and it is clear that large elements of the European Charter on Local Self-Government remain unimplemented. Across Armenia as a whole, but especially in the rural communities, local government bodies, although their profile has undoubtedly risen, have few substantial powers and their autonomy is compromised by an unsatisfactory financial regime and a lack of other resources such as a strong municipal civil service. This general diagnosis points towards three broad areas of reform:

(a) Across the system as a whole, there is a need for reforms to enable communities to

Make a reality of the powers given to them by the Law of 7 May 2002. Communities need a revenue source of their own and under their own control; they need to be assured each year of a guaranteed percentage of the gross national income of the state; grant equalisation should be reformed to take better account of differing local needs; and state payments to communities should be made on time. Communities need the benefit, as mentioned, of a reformed municipal civil service and substantially improved staff training opportunities. The intrusive control of communities by marzpets and central departments should be lifted and the government’s power to dismiss chiefs should be removed or further reformed to give greater control to the courts on specified grounds. The periods of office of both chiefs and councillors should be, as already proposed, extended to four-five years and consideration should be given to lifting the restriction of chiefs to two successive terms. . Electoral reforms (as in para 31 above) should be made. In these ways the overall strength, autonomy and morale of local government may be lifted.
(b) Special attention needs to be paid to Yerevan. Whilst its position as capital city needs continuing recognition, the condition of local democracy in the city urgently needs reform. The ambition to achieve an elected mayor within five years should be operationalised and the structure of (probably two-tier) local self-government across the city needs urgent attention.
(c) Just as importantly, special attention must also be paid to the 871 rural communities where, at present, local self-government is at its weakest and, in many areas, virtually non-existent. Whilst the reforms already mentioned would contribute in a general way, there can be no possibility of the powers in the Law of 7 May 2002 ever being discharged by the large numbers of tiny rural communities, with populations of under 3000. Three different solutions may be suggested:
(i) A radical restructuring of the territorial division of the country to produce a small number of larger communities. Reduction to one third of the present number has been canvassed.
(ii) The staged creation of a two-tier system of local self-government in Armenia with upper-tier responsibility (perhaps but not necessarily at the level of the current marzer) for the large-scale functions. There seems to be enthusiasm for this, both within and outside Government.
(iii) A substantial strengthening of the existing provisions in the Law of 7 May 2002 to enable (and indeed require) the combination of local authorities into unions of communities for the discharge of their main functions.
All three solutions, with variants on each, are already under discussion in Armenia and it is important that the momentum of reform in general should be maintained, especially where this can be achieved without the need for constitutional amendment which may not be possible until a referendum in 2005.

53. In addition to these core suggestions, we would further commend:

(a) Further strengthening the role (including a regional and international role) of local authority associations.
(b) The encouragement of efforts by border communities (and also border marzeran) in the direction of better relations and shared activities with their cross-border neighbours.
(c) The revisiting of the Articles and paragraphs of the Charter of Local Self- Government with a view to Armenia's adherence to all of the Charter's provisions, ie to add to those mentioned in para 2 above.

APPENDIX 1

CLRAE 1st visit to Armenia (19-21 June 2003)

19 June

Ministry of Territorial Administration and Development of Infrastructures
Mr. Hovik Abramyan, Minister
Mr. Vache Terteryan, Vice-Minister

OSCE
Mr. Roy Stephan Reeve, Head of the Office

Meeting with representatives of the International Organisations
Mr. Stephen J Avalyan Newton (DFID)
Mr. Detlef Dix (GTZ)
Mr. Steven Anlian (Urban Institute)
Mrs Amal Medani (UNDP)
Mrs Sona Hamalyan (Euro-Asia Foundation)

Visit to Kanaker-Zeytun district
Working meeting with Mr. Ruben Sinoyan, Mayor of the District, Member of the Armenian delegation to the CLRAE

Association of Local Communities of Armenia/members of the Armenian delegation to the CLRAE

20 June

Association of Financial Officers of Local Communities of Armenia
Mr Vatan Movsesyan, Chairman
Mr David Tumanyan, Deputy Chairman
Mr Sos Ghimishyan

City of Yerevan
Mr Robert Nazaryan, Mayor

Meeting with NGO’s
Mr Araik Hovhannisyan (Association of Eldermen of Armenia)
Mr Arevik Harutyunyan (Information Training Centre for Local Self government Development)
Mr Agapi Hambardzumyan (Association of Municipal Civil servants)
Mr Arshak Alaverdyan (Association of Lawyers of the State and Local Communities)
Mr Norik Mnoyan (Local self-government Fund)

Administration of the President/Committee of Local Self-Government
Mr Armen Gevorkyan, Chairman

Parliament
Mr Rafik Petrosyan, Chairman of the Committee on Legal Affairs
Members of the Committee from different political parties

21 June

Visit to Ijevan
Working meeting with Mr. Armen Gularyan, Governor of Tavush
Working meeting with Mr. Varuzhan Narsisyan, Mayor of Ijevan
Working meeting with councillors of the city of Ijevan

APPENDIX 2

2nd CLRAE visit to Armenia (2-6 October 2003)

2 October

Ministry of Territorial Administration and Development of Infrastructures
Mr. Hovik Abramyan, Minister
Mr. Vache Terteryan, Vice-Minister

Association of Financial Officers of Local Communities of Armenia
Mr. Vatan Movsesyan, Chairman
Mr. David Tumanyan, Vice-Chairman
Mr. Sos Ghimishyan

3 October

Association of Local Communities of Armenia / members of the Armenian delegation to the CLRAE

City of Yerevan
Mr. Ervand Zaharyan, Mayor

Ministry of Foreign Affairs/Department of European Affairs
Mr. Samvel Mkrtchyan, Director

Parliament of RA
Mr Rafik Petrosyan, Chairman of the Committee on Legal Affairs
Members of the Committee from different political parties

Council of Europe Office
Mrs Natalia Vutova, Special Representative of the Secretary General of the Council of Europe in Armenia

4 October

Visit to Lori province
Working meeting with Mr Henrik Kochinyan, Governor of Lori province

Visit to Lernapat
Working meeting with Mr Vano Yegiazaryan, Chief of the Village

Visit to Vaynadzor
Working meeting with Mr Samvel Darbinyan, Mayor of Vaynadzor

5 October

Working meeting with Mr. Emin Yeritsyan, Head of the Armenian delegation to the CLRAE

1 See Committee of Ministers Resolution 2000 (1).

2 See eg D Fuller “Local Government in the Postcommunist Era” (2001) NISPA.

3 At least in recent times. Much earlier in the history of the region there were, it seems, elected forms of local self-government. See D Tumanyan, p 332.

4 Adjusted by the Electoral Code to a range of 7 to 15 members.

5 In the previous Law of 1996, the chief of community was described as having a “double function”: as an autonomous government body and as a representative of the State authority in its place (Art 4(3)). This provision was not replicated in the Law of 2002.

6 Art 84 has been heavily amended by the Law of 26 December 2002 and a new Art 85 added.

7 The actual formula is: “In accordance with the order defined by this law, community council shall:”. Many of the specific powers, however, are presented in a more discretionary /voluntary style.

8 See the Law of 26 December 2002, adding a new Art 85 to the Law of 7 May 2002.

9 See Ch 8 and discussion below

10 For appeals against decisions of chiefs, see Art. 72 (as amended).

11 Report on the Local Elections in Armenia, Rapporteur Christopher Newbury CG/Bur (4) 60.

12 See also the power of the marzpet to challenge in court alleged illegalities by chiefs - Art 72(4) as added by the Law of 26 December 2002.

13 Although these grounds substituted by the Law of 26 December 2002 are an improvement on the very general grounds which preceded them in the original version of 7 May 2002.



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