Report on the state of local and regional democracy in Croatia - CG (5) 4 Part II

Rapporteurs: Helene Lund (Denmark) and Josef Leinen (Germany)

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EXPLANATORY MEMORANDUM

A. INTRODUCTION

On 3 July 1997, the Bureau appointed Helene Lund (Denmark, L) and Josef Leinen (Germany, R) rapporteurs on the situation of local and regional democracy in Croatia, with a view to submitting a report at the 1998 session. The expert who assisted them in this task was Nicolas Levrat.

A first visit was made to Croatia from 15 to 17 October 1997. Josef Leinen was unable to accompany the delegation on this first visit.

The complete delegation made a second visit to Croatia from 10 to 12 February 1998, as requested in the interim report (CG/GT/DEM/REG (4) 4, Confidential), which was drawn up after the visit in October and submitted to the Working Group on Local and Regional Democracy on 19 December 1997.

Although the delegation was not able to stay in the country for very long, it had an extremely busy programme and was able to meet many people interested in questions relating to local and regional self-government. During the two visits, meetings also took place with the main parties concerned, enabling the Rapporteurs to note that progress had been made on some questions and to reiterate requirements, as deriving from membership of the Council of Europe, with regard to outstanding issues.

The Rapporteurs note with satisfaction that, in the opinion of all those met during the visit, the situation of local authorities has generally improved over the last few years. One problem which is, however, regularly raised is that there is no clear definition of the resources allocated to the local authorities to allow them to exercise the powers assigned to them. This can place them in an awkward situation. The Congress ought to study this question, especially since the Romanian authorities on the basis of such shortcomings in the organisation of local self-government removed a large number of mayors from office in 1994 and 1995 on the grounds that they had violated the law.

The first part of this report contains a recapitulation of the relations between the CLRAE and Croatia (1), presents the terms of reference for the report (2) and examines the general context of the situation in Croatia with regard to the requirements of local and regional democracy (3).

The second part examines the main questions concerning the functioning of local and regional self-government which were raised during the delegation's visits to Croatia, ie problems with regard to the interpretation of the Local Administration and Autonomy Act (1), the problem of the redistribution of powers by means of special laws (2), the serious problem of the financing of both local and regional authorities (3), problems concerning local authorities' right of association (4), the specific problems in the zone governed by UNTAES until 20 January 1998 (5) and the questions concerning Croatian local and regional authorities and transfrontier co-operation (6).

The delegation noted that between their two visits, progress had been made in the situations examined in the second part of this report. Precise commitments had also been entered into by the representatives of the Croatian Government and approved by the parliamentary committees responsible for local self-government and should enable progress to be made with a number of outstanding issues. It is regrettable that no acceptable solution has yet been found to a number of problems. These findings have been put in writing in the conclusions of this report.

The Rapporteurs thank the expert, Nicolas LEVRAT, Lecturer at the Free University of Brussels, for his assistance during their visits and with the drafting of this report.

1. Background to the CLRAE reports on democracy in Croatia

There have been many CLRAE reports on local and regional democracy in Croatia since this state became independent. Despite this close and continued co-operation, CLRAE Resolution 58 (1997) on the situation of local democracy in member countries mentions Croatia in paragraph 11 as one of the countries in which there are major problems of local democracy.

During the numerous visits to Croatia to take stock of the situation and in several of the letters exchanged between the Croatian authorities and the CLRAE, the former gave specific undertakings following the revelation of shortcomings in local democracy. So as to place this report in its correct context, let us remind you of the existing reports:

a. Observation of elections

1. A delegation of observers from the CLRAE, chaired by Mr MORGAN (United Kingdom), observed the local elections held on 7 February 1993 and submitted a report to the Standing Committee of the CLRAE (doc. CPL/P (27) 70 rev.).

2. A delegation of observers from the CLRAE, chaired by Mr KIERES (Poland), observed the local elections held from 13 to 15 April 1997. A report on their visit was submitted by Baroness FARRINGTON of Ribbleton (United Kingdom) and approved by the Bureau of the Congress on 5 June 1997 (doc. CG/BUR (4) 2 rev.).

b. Reports drawn up with regard to Croatia's application for membership

1. A delegation from the Bureau of the CLRAE - composed of MM HOFMANN (Germany), MARTINI (Italy) and MORGAN (United Kingdom), all Vice-Presidents of the CLRAE, accompanied by the Executive Secretary, Mr LOCATELLI - visited Croatia from 5 to 8 May 1994. This visit was made with a view to granting the status of special guest to a Croatian delegation to the CLRAE. A report on the visit was submitted to the Bureau of the Congress (doc. CPL/Bur (28) 36 rev.).

2. A report on the state of local and regional democracy in Croatia was drawn up following a visit by two rapporteurs, Mr MARTINI (Italy) for the Chamber of Local Authorities and Mr CHEVROT (France) for the Chamber of Regions. This visit, which took place from 21 to 27 July 1995, was made in connection with the drafting of a CLRAE opinion on Croatia's accession to the Council of Europe. A report was submitted to the Bureau of the Congress (doc. CG/BUR (2) 22), which approved it, but only provisionally, on 23 September 1995.

3. The same rapporteurs made a second visit to Croatia for the same reasons from 9 to 12 January 1996; this was followed by a report (doc. CG/BUR (2) 72), which was adopted by the Bureau on 26 February 1996.

4. Conclusions on the various reports concerning the situation of local and regional democracy in Croatia (doc. CG/BUR (2) 101 rev.) were adopted by the Bureau of the Congress on 15 April 1996 and approved the following day by the Standing Committee.

These six reports have provided the Congress with wide-ranging and specific knowledge of the situation of local and regional democracy in Croatia. This report, which is the seventh in four years, will be based to a large extent on information gathered during previous visits and will examine the extent to which the Croatian authorities have honoured their undertakings with regard to the problems noted in the democratic functioning of local and regional institutions.

2. Terms of reference for the present report

The section on Croatia in the Report on the situation of local democracy in member countries presented by Mr CHENARD (France) at the fourth Plenary Session of the Congress ends by saying, "Having regard to these considerations and to the significance of the Croatian authorities' undertakings in the field of local democracy, the working group considers it appropriate to initiate a frank and constructive dialogue with these authorities on the basis of a detailed report on the state of local and regional democracy in Croatia. The report must be drawn up in accordance with paragraphs 8 and 11 of Congress Resolution 31 (1996)." At its meeting held on 3 July 1997 the Bureau of the CLRAE appointed Ms Helene LUND Rapporteur for the Chamber of Local Authorities and Mr LEINEN Rapporteur for the Chamber of Regions.

3. General context

A series of events concerning the autonomy of local and regional authorities have recently taken place; these are briefly examined below, in as far as it is necessary to take account of them in analysing the questions dealt with in the second part of this report.

a. General context of the relations between Croatia and the Council of Europe

Croatia became the 40th member state of the Council of Europe on 6 November 1996. Its accession was conditional on undertakings by this state to bring its legislation, institutions and practices into line with the requirements of democracy, respect for human rights and the rule of law, as they exist in the member states of the Council of Europe.

During the September 1997 session of the Parliamentary Assembly, the representative of the United States of America (which has observer status with the Council of Europe) accredited to the Council of Europe distributed a "non-paper" within the Committee of Ministers suggesting that the member states consider suspending Croatia's membership of the Organisation (Agence Europe, 24 September 1997). This procedure was considered unacceptable by the member states, which, through the Chair-in-Office of the Committee of Ministers (France), rejected this inexpedient move on the part of a state which was not a member of the Council of Europe. Finally, on 10 October, on the occasion of the 2nd Summit of Heads of State and Government, the Deputy Under-Secretary of State for Human Rights announced at a press conference that the United States had taken note of the significant progress made in Croatia and was no longer asking for Croatia's membership to be suspended (Agence Europe, 10 October 1997).

On the other hand, as a result of the specific commitments entered into by Croatia on accession to the Organisation, the Council of Europe bodies - the Committee of Ministers, the Parliamentary Assembly and the CLRAE - have the right to examine the extent to which this member state has honoured its undertakings.

b. Monitoring procedures and commitments entered into on accession to the Council of Europe

As stated above, the Croatian Government entered into specific commitments during the membership procedure. The various bodies of the Council of Europe are therefore examining the manner in which Croatia is honouring its undertakings. This is the context of the present report; we will see that several of the questions raised (Part B of the report) clearly concern the specific commitments entered into by Croatia with regard to improving local and regional democracy.

c. Contact made by some of the elected representatives of Primorsko-Goranska

On 19 September 1997 representatives of the five political parties which formed a coalition in the Zupanija of Primorsko-Goranska sent a letter to the CLRAE Secretariat denouncing the government's decision to dissolve the Assembly of the Zupanija of Primorsko-Goranska. After contacting the elected representatives who are members of the Bureau of the CLRAE, the Secretariat sent a copy of this letter to the Permanent Representative of Croatia to the Council of Europe on 25 September. On 6 October the latter sent the Executive Secretary of the CLRAE a “reply from the Ministry of Administration concerning the recent developments with regard to the situation in the county of Primorsko-Goranska”.

The delegation which visited Croatia on 15 October had been informed of the various letters and endeavoured to shed light on the questions which had been raised in this particular case. Following discussions and undertakings given by the Croatian governmental authorities with a view to settling this question, the delegation noted with satisfaction that new elections had taken place in the Zupanija of Primorsko-Goranska on 29 and 30 November 1997 and that this particular problem had fortunately been settled. Nevertheless, this episode underlines the difficulties that persist because of the way in which the Local Administration and Autonomy Act is currently worded and it therefore seems advisable to ensure that the wording of the revised law will prevent such occurrences.

d. Ratification by Croatia of the European Charter of Local Self-Government

At the 2nd Summit of Heads of State and Government of the Council of Europe on 10 and 11 October 1997, the President of the Republic of Croatia, Frandjo TUDJMAN, and the Minister of Foreign Affairs, Mate GRANIC, deposited with the Council of Europe Secretariat the instruments for the ratification of several major Council of Europe conventions, including the European Charter of Local Self-Government.

The Congress welcomes this ratification, whereby Croatia has honoured one of the undertakings it gave on accession to the Organisation and responded to one of the issues of concern raised in paragraph 13 of Resolution 58 (1997). This ratification does not take immediate effect since, in accordance with Article 15 para. 3 of the Charter, it will not come into force until 1 February 1998. As from that date, the legal framework of Croatia's obligations with regard to local self-government will therefore be modified and officially include the obligations set forth in the Charter.

Although the Congress welcomes this ratification, it regrets that the Croatian Government has made extensive use of the possibilities afforded by Article 12 of the Charter with regard to the acceptance of only a limited number of its provisions. The provisions not accepted by the Croatian authorities include the following important provisions:

* Article 4 para. 3, which defines the principle of subsidiarity ;

* Article 4 para. 5, which provides for flexibility in adapting delegated powers to local conditions ;

* Article 4 para. 6, which provides that local authorities should be consulted on matters concerning them directly ;

* Article 8 para. 3, which requires that administrative supervision be carried out in such a way as to ensure that the intervention of the administrative authorities is kept in proportion to the importance of the interests it aims to protect .

* Article 9 para. 5, which provides for the existence of a mechanism of financial equalisation to protect the interest of financially weaker local authorities .

* Article 9 para. 7, which states that grants to local authorities should not be earmarked for specific purposes .

* Article 10 para. 2, which acknowledges the right of local authorities to belong to an association for the protection and promotion of their common interests .

Although there is no legal obligation for a state to ratify the European Charter of Local Self-Government in its entirety - the commitment entered into by Croatia on accession referred to the signature and ratification of the European Charter of Local Self-Government in broad terms only - the Congress would like to make the following three observations:

1. The explanatory report on the European Charter of Local Self-Government clearly states that the possibility of ratifying only certain provisions of the Charter or of ratifying provisions at different stages, expressly provided for in Article 12, concerns "individual governments [which] may still face constitutional or practical impediments to subscribing to particular provisions of the Charter"; that nevertheless "as the ultimate aim remains compliance with all the provisions of the Charter, the Parties are specifically enabled to add to their undertakings as and when this becomes possible" . As a consequence of this official interpretation, the Congress invites Croatia to extend the scope of applicability of the Charter to all of its articles as rapidly as possible.

2. Moreover, the status of the European Charter of Local Self-Government as a whole has changed since it was opened for signature in 1985. For example, in its Opinion 136/95 on the revision of the Treaty of European Union, the Committee of the Regions of the European Union asked that the principle of local self-government, as defined by the Council of Europe's Charter of Local Self-Government, be embodied in the Treaty. As a result the Charter's status in Europe is changing and the Charter, as a whole, is gradually becoming a general principle of European law which the states might be obliged to accept, just as they are obliged to accept the European Convention on Human Rights.

3. Some of the articles in respect of which the Croatian Government did not wish to contract obligations extend beyond the scope of local self-government in the strict sense of the term and relate to the fundamental principles of the rule of law, democracy and respect for human rights; this applies, for example, to the principle of keeping administrative supervision measures in proportion to the importance of the interests they protect. The Congress wishes to stress that the exclusion of certain of these articles from the instrument of ratification deposited by Croatia on 11 October does not mean that this state does not have to respect the fundamental principles they embody.

B. MAIN QUESTIONS RAISED

The visit of the CLRAE delegation provided the opportunity to raise a number of questions concerning the smooth running and the logical development of local self-government in Croatia. Although some of these questions concern current events, it should be pointed out that they all concern matters in respect of which the CLRAE has already had occasion to express its concern.

1. Problems in the interpretation of the Local Administration and Autonomy Act

The Local Administration and Autonomy Act of 29 December 1992, as amended by law 117/93 of 31 December 1993, has already been examined by several Council of Europe experts. Although they all agree that this law is, on the whole, well drafted, they all also draw attention to a number of provisions which, depending on how they are interpreted, could pose problems of compatibility with European principles relating to local self-government and democracy.

The experts' fears (a) have unfortunately been borne out by the actions of the Croatian authorities - particularly with regard to the "duality of office" of the Zupan. The experts' presumption that this law would be in conformity with the Charter was based on a reasonable and moderate interpretation of the said law. Unfortunately, however, the actions of the Croatian Government (b), particularly with regard to the election of the Mayor of Zagreb and the election of the regional Assembly of the Zupanija of Primorsko-Goranska, clearly show that this law does not effectively guarantee local self-government and that it is therefore imperative that it be amended. It also appears necessary to provide, as required by Article 11 of the European Charter of Local Self-Government for the right of recourse to a judicial remedy enabling local and regional authorities to defend their autonomy (c). Moreover, the delegation noted during its meetings with local representatives that the problems concerning the distribution of powers and the resources allocated to local authorities had not be satisfactorily settled. As a result, all of the representatives whom the delegation met demanded that the existing legislation be revised (d).

a. Reservations expressed by the experts with regard to certain provisions of the Local Administration and Autonomy Act

The various CLRAE delegations that have visited Croatia and the ensuing reports have always expressed reservations with regard to certain provisions of the Croatian Local Administration and Autonomy Act. In the report following the very first visit to Croatia to observe local elections in February 1993, it is stated that "a question to which the CLRAE delegation has given much of its attention is that of the status of the 'county prefect' " (CPL/P (27) 70 rev., p. 18). This same report notes that "In this connection, the CLRAE delegation finds two main causes for bewilderment." The first concerns fundamental principles. "There is cause for bewilderment, too, in the practical implications: Articles 31, 32 and 33 of the law of 29.12.92 confer on the President of the Republic powers of intervention in regional political life which are not inconsiderable and not without consequence, in particular when a region's elected political majority is not that of the President and the Parliament. To conclude, however: it may be too early to form a complete and final opinion on Croatia's regional institutions." (CPL/P (27) 70 rev., p. 19).

These reservations are reiterated in all the subsequent reports , almost always with great caution so as not to prejudge any plausible interpretation, consistent with European standards, that might have been made of this legislation. However, we are obliged to note that the actions of the Croatian Government mean that we can no longer presume that there is a compatible interpretation. It is therefore not too early to have an opinion on this matter and such an opinion can only be negative. These provisions of the law give rise to practices which are not compatible with the principles of local self-government. It is therefore imperative that they be amended.

b. Examples of how the law has been interpreted in a manner incompatible with the fundamental principles of local self-government

The attention of the Congress has already been drawn to two extremely alarming situations: on the one hand the repeated refusal to confirm the democratic election of the Mayor of Zagreb (i) and on the other hand the dissolution of the regional Assembly of Primorsko-Goranska (ii). Moreover, the visit by the CLRAE delegation coincided with the resignation of the Zupan of Osijek-Baranja, which was ordered by the government. In the latter case, the information in the Croatian press tended to show that the reasons for removing the Zupan from office were justified. Nevertheless, this affair highlighted the inconsistencies to which the dual office of the Zupan gave rise. The regional Assembly which had elected the Zupan had been presented with the fait accompli of the Zupan's resignation and when the CLRAE delegation visited Osijek, the Assembly had still not met to discuss the outcome of this situation and, if it considered it acceptable, to approve the decision and take the appropriate steps.

i. The precedent of the Mayor of Zagreb

Without reiterating all of the details of this case, which has already been the subject of CLRAE intervention on numerous occasions, we would like to point out that in its conclusions on the state of local and regional democracy in Croatia the Bureau of the Congress held that "the latest developments regarding the election of the Mayor of Zagreb [were] symptomatic of serious democratic malfunction arising from the dual office vested by law in a single person" (CG/BUR (2) 101 rev., p. 2, point B). These same conclusions stressed that "arbitrary or party-political rejection of local elections is incompatible with the Council of Europe's European Charter of Local Self-Government." (CG/BUR (2) 101 rev., pp. 6 and 7, point 11).

The delegation is compelled to note that despite promises to amend the law so as to take account of the fundamental criticisms made by the Congress in this report with regard to Croatian legislation, no progress has been noted.

A minimum solution would be to fix objective criteria constituting the sole grounds on which the central authorities could refuse to endorse the election of a Zupan by the Regional Assembly. Alternatively, the problem of the duality of office of the Zupan could be solved by separating the two posts of representative of central government at regional level and of head of the regional authority.

ii. The situation in Primorsko-Goranska

As was stated in the introduction, the Head of the CLRAE Secretariat has been informed of a situation in which the democratic functioning of the "regional" institutions is strongly criticised. Indeed, the recent dissolution of the regional Assembly of the Zupanija of Primorsko-Goranska seems to have been accompanied by actions which raise questions as to the functioning of democracy in Croatia. On the basis of testimonies gathered by the delegation both from representatives of the signatories to the letter of 19 September 1997 (who specially made the journey to Zagreb to meet the CLRAE delegation) and from Mr MLAKAR, the Minister in office at that time, the CLRAE delegation is obliged to note that, in addition to questions of principle that the Croatian legislation as it stands, raises the use of certain provisions of this law in situations such as that of the Zupanija of Primorsko-Goranska is resulting in a deterioration of the climate in which the democratic institutions function.

Moreover, it is important to underline the context in which the above events have taken place, which gives the Congress all the more cause for concern; indeed the situation is unfortunately not new. This same regional Assembly had already been dissolved during the previous legislature and, after having nominated a Government Commissioner in the place of the democratically elected bodies (the Assembly and the Zupan), the government had not taken the trouble to organise fresh elections. This is a flagrant violation of the Local Administration and Autonomy Act.

The explanations offered by the government in a memorandum sent to the Head of the Congress Secretariat on 6 October 1997 do not convince the members of the Congress. Although a number of provisions of a new law (enacted in September 1995 and introducing new rules for the election of regional and local authorities) were adopted, their implementation was subject to the enactment of an additional law - which it appears was not passed until the beginning of 1997. This does not justify depriving the citizens of one region of the country of their democratic rights for a period of 17 months. As can be seen from the information submitted to the CLRAE on 6 October 1997, the technical choices of the Croatian legislators are insufficient to deal with such situations: there would have been no difficulty in including transitional provisions in the new law, ensuring that its entry into force would not have an undesirable effect. The CLRAE has, on numerous occasions, offered to send legal experts to assist in the drafting of laws on local self-government, for the very purpose of avoiding such unfortunate situations. This situation, and its grave consequences in terms of democratic functioning, merely confirm the need for the Croatian Government to accept the legal assistance offered by the CLRAE.

The Congress is therefore obliged to note that the undertaking given by the Deputy Prime Minister of Croatia and put in writing in paragraphs D and E of the Conclusions on the various reports concerning the state of local and regional democracy in Croatia of April 1996, to revise the Local Administration and Autonomy Act and to consult the Council of Europe experts on this revision, has not been honoured. The consequences for the functioning of Croatian democratic institutions are grave.

Although the dissolution of the Assembly is not at variance with the law, it must be followed by fresh elections within 60 days of the dissolution. A date for fresh elections had not yet been fixed when the delegation first visited Croatia in October 1997. Mr MLAKAR, Minister, informed the CLRAE delegation that only the Croatian Government had the right to fix the date of fresh elections and that a date would be set at the government's meeting on 23 October, at which this question would be placed on the agenda. Although the Congress has been informed that the government did not take the decision on that date, the rapporteurs note with satisfaction that, although later developments in this affair prove that there are more general difficulties in the democratic functioning of Croatian institutions, the Croatian Government is indeed willing to honour its commitments in the field of local democracy. The rapporteurs were pleased to learn that a by-election was held on 29 and 30 November 1997, as this had made it possible for the authorities of the Zupanija of Primorsko-Goranska to function properly again. The solution to this problem may augur well for fruitful co-operation between the CLRAE and the Croatian authorities in the future.

c. The inability of local and regional authorities to ask a court to interpret the law

The CLRAE rapporteurs have been informed of the situation in the municipality of Korçula. The close results of the election held on 13 April 1997 - which gave 14 out of 26 seats to a coalition of opposition parties and 12 to a coalition headed by the HDZ - were declared null and void in one polling station and the voters concerned were called upon to vote once more on 27 April 1997. The results of these elections left the same two groups on an equal footing, with 13 elected councillors each, which made it impossible in practice to elect the executive authorities of the municipality since, in accordance with the procedure provided for in Section 29 of the Local Administration and Autonomy Act, the Mayor must be elected by an absolute majority of the whole representative assembly. Despite endeavours to reach a political compromise, the election of the executive bodies proved to be impossible.

Following these events, the Minister responsible for the local and regional administration of the state decided to dissolve the elected Council and to reinstate the Council which had been in operation during the previous legislature. The elected representatives of Korçula challenged this decision, which they considered to be based on an erroneous interpretation of the law. However, it appears that it is not possible for a municipality to challenge a decision interpreting the law - in the present case the decision taken by the Minister - before an independent court. Without examining the merits of the parties’ lines of reasoning, the CLRAE rapporteurs note that this situation is diametrically opposed to the requirements of Article 11 of the European Charter of Local Self-Government. Indeed the Charter states 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 the constitution or domestic legislation”. Nor did Croatia express any reservations with regard to this article. The rapporteurs therefore ask that the revised version of the legislation include a right of recourse to a judicial remedy, as provided for in Article 11 of the European Charter of Local Self-Government, thus providing the judicial guarantees required for respect for local self-government in accordance with Recommendation 39 (1998), adopted on 6 March 1998 by the Standing Committee of the CLRAE, on the incorporation of the European Charter of Local Self-Government into the legal systems of ratifying countries and on the legal protection of local self-government.

d. Requests for the revision of existing legislation

All of the local elected representatives who were met by the delegation on the premises of the association of local authorities - irrespective of their political allegiances - wished to see Croatian legislation amended so as to improve local self-government. In particular, they wanted a clear indication of the distribution of powers, the relations between local and regional levels and the regulations governing the financing of local authorities.

The powers of the counties with regard to the "co-ordination" of municipal functions appear to give rise to complications and problems which do nothing to give each level of government clear legitimacy. It would seem important, on the one hand, that clearly defined powers be conferred on the counties and, on the other hand, that their relations with local authorities be defined in a more precise and operational manner.

Moreover, the difference in powers between the municipalities and the towns - the latter have the same powers as municipalities (as defined in Section 13 of the Local Administration and Autonomy Act) plus the powers provided for in Section 14 - seems to incite a large number of local authorities to claim the status of town. The Congress finds this situation unfortunate and feels that the functions of the various sizes of local authorities ought to be clearly distinguished by law, on the basis of the real needs of the inhabitants, with an attempt being made to determine which authorities are most capable of meeting these needs.

In October 1997 the delegation had the opportunity to discuss this question with the Deputy Speaker of the lower Chamber of the Croatian Parliament and Chair of the Committee on Constitutional and Legal Affairs and with the Vice-Chair of this committee. Both of them were of the opinion that the law of 29 December 1992 should not be amended. This contradicts the assurances given to the delegation by Mr MLAKAR, the Minister responsible for local and regional government, who claimed that a reform bill existed and soon be submitted to the parliament for enactment.

During its visit in February 1998, the delegation met the members of the Committee on Local and Regional Self-Government of the upper chamber of the national parliament, who told the delegation that an initial debate had been held in the parliament on a motion for substantial amendments to the Local Administration and Autonomy Act of 29 December 1992. A separate debate was also being held on specific provisions relating to the financing of local and regional authorities, which might soon be included in the law. The delegation reiterated the CLRAE’s offer to assist by providing experts, and the idea of setting up a Joint Committee composed of experts from the Croatian Parliament and experts from the Council of Europe was raised.

In an interview on 11 February, the Minister responsible for local and regional government confirmed the existence of draft amendments to the law, in particular a section on transfrontier co-operation, of which a large part had already been drafted. The two main areas being dealt with at the current stage of the proceedings appear to concern local and regional finances and the distribution of powers between the different levels of government. A draft amendment concerning the financing of local and regional authorities is, it appears, being prepared by the ministries concerned and should be submitted to parliament for a preliminary reading in early March 1998 (see below). A draft amendment concerning the distribution of responsibilities among local authorities, towns and Zupanije is apparently also being prepared. Several other draft amendments (proposed by members of parliament) also appear to be circulating within the parliament.

Mr MLAKAR committed himself, before the media, to co-operating with the CLRAE experts in further reviewing the Local Administration and Autonomy Act. However, he considers that the reforms relating to finances and local powers and responsibilities are on the one hand too far advanced and on the other hand too urgent to be included in the co-operation arrangements with the Council of Europe. Although the rapporteurs welcome the fact that the Minister has accepted the idea of setting up a Joint Committee, composed of Croatian and CLRAE experts, they wish to stress that the questions of financing local and regional authorities and the distribution of powers are of fundamental importance for the existence of genuine local and regional self-government, giving local authorities "the right and the ability ¼ to regulate and manage a substantial share of public affairs under their own responsibility and in the interests of the local population” (Article 3 para. 1, European Charter of Local Self-Government). They therefore earnestly request the Croatian authorities to accept the assistance of the Council of Europe experts at the earliest possible stage of the legislative review. This question ought to be clarified, particularly as Croatia undertook to consult CLRAE experts on these draft legislative reforms but has so far failed to do so.

The Deputy Minister of Foreign Affairs, Mr DROBNJAC, whom the delegation met in February 1998, also showed interest and endorsed the principle of setting up a joint committee of experts with a view to revising Croatian legislation on local and regional self-government.

Meanwhile, Mr MLAKAR, the Minister responsible for local and regional self-government, has been replaced, in a minor cabinet reshuffle that took place in early March 1998.

2. The problem of the redistribution of powers by means of special laws

One problem often mentioned by local elected representatives is that of the distribution of powers. Sections 13, 14 and 15 of the Local Administration and Autonomy Act respectively define the tasks for which the municipalities, towns and Zupanije are responsible. These very broad definitions do not suffice to identify clearly, in operational terms, the powers assigned to the local authorities. At the same time the Croatian Parliament is drawing up the legislative framework for the new state. The enactment of sectoral laws, for example on education, health or culture, often results in a ministry being given powers which in fact overlap with those of the local authorities.

Not only should the Croatian Parliament take greater account of this problem in drawing up new laws but it could also deal with it by revising the Local Administration and Autonomy Act so that it defines the particular range of powers attributed to the different levels of government and clearly stipulates the means to be allocated to the local authorities not only in operational terms but also in terms of human and financial resources.

On the other hand, the specific nature of the tasks assigned to the intermediary level of government, ie the Zupanije, must be more clearly defined with regard to both their own specific responsibilities and the co-ordination of activities involving co-operation between municipalities. Meetings with local and regional elected representatives (members of both the executive and the representative assemblies), have shown that this question has not been clearly settled by the law and this not only makes the work of the authorities less effective but also impairs their capacity to secure genuine legitimacy. The rapporteurs therefore stress the need:

- to clarify the distribution of powers in the Local Administration and Autonomy Act;

- to ensure that these powers are proportionate to the means available to the different levels of local government;

- to provide means of ensuring that the powers of the various local and regional authorities cannot be called into question or fundamentally altered by sectoral laws.

3. The problem of the financing of local and regional authorities

Although all the local elected representatives whom the delegation met during the visit felt that the situation of local self-government had generally improved, they also all complained of the difficulties relating to the financing of local authorities. It appears that a number of aspects of the present system are rather unsatisfactory. One of the main difficulties of devising a system for financing local and regional authorities in Croatia is the huge disparity between the economic situations of the poorest authorities - those which have been seriously affected by the armed conflict and in which the destruction and the employment situation are making it extremely difficult to get the local economy off the ground again - and those which were not directly affected by the war and should be in a position to make substantial investment so as to get the mainly tourist industry going again despite the fact that it was seriously affected by the indirect consequences of the armed conflict.

The current tax system appears to be relatively generous - at least on paper. Some 25% of income tax is allocated - in the form of a shared tax - to local authorities, whereas 5% of the revenue produced by income tax is earmarked for the Zupanije. The money is redistributed in proportion to the amount actually collected in each municipality or region and therefore without any financial equalisation procedures.

Forty per cent of the tax on profits is set aside for the municipalities and Zupanije (the apportionment between these two levels was not clearly indicated).

Unfortunately, in view of the current economic situation in Croatia, neither of these taxes produces much revenue - they produce no revenue at all in some regions - and on no account do they provide sufficient funds to meet the needs of local authorities, irrespective of whether they are in areas affected by the war or in those which were spared. The principles of the redistribution of funds by the state also appear to be extremely vague.

- It appears that although the state does distribute grants to the regions whose economy has been most seriously affected by the armed conflict, the local authorities are not involved in their redistribution. The state has in fact set up its own special department for the reconstruction and rehabilitation of the areas affected by the conflict; this decentralised government department - composed mainly of the Ministry for Reconstruction - directly manages projects in the disaster-stricken areas and distributes grants to help the population in the most seriously affected areas (for example by giving grants to home owners for the reconstruction of their homes). It appears that as a result the municipalities in the “poor regions” are sorely lacking legitimacy as the tasks are either carried out or financed directly by the decentralised government department; and in the “rich regions”, the decentralised government department, for reasons of priority which are admittedly understandable, does not make any investment, which means that the local authorities must meet the running costs of facilities such as hospitals and schools, which are onerous in relation to the average economic level of these more privileged regions. If this is in fact the system currently applied in Croatia, then it is diametrically opposed to the most basic principles of local self-government and in particular the principle of subsidiarity, as defined in Article 4 para. 3 of the European Charter of Local Self-Government. This situation could explain why the Croatian national authorities excluded the principle of subsidiarity from their declaration of acceptance of the Charter.

- A second possible explanation which could be deduced from the delegation’s discussions is that there appear to be no precise rules governing the distribution of grants to local authorities. According to the estimates given by the people we met, which are consistent, the proportion of local authorities' own income amounts to less than 10% (6% to 9%). This means that 90% of local authorities' income is distributed by the government on a discretionary basis. If this is true, the actual scope of local self-government in Croatia is seriously limited. If this is so, it also appears that the regional authorities play an important - but not clearly defined - role in the redistribution of grants within the region. The respective roles of the Zupan and the regional Assembly in this regard were not clearly explained to the delegation.

- At all events, it appears that financial resources, powers and responsibilities are still not always - indeed seldom - carefully matched.

For all of these reasons the rapporteurs consider it advisable to set up co-operation with the Council of Europe experts with a view to laying down clear rules on the financing of local authorities so as to make for transparency in procedures and the allocation of resources and ensure that the principle of subsidiarity is observed. The main aim of such co-operation should be to increase the efficiency of the services offered by local or regional authorities in the interests of the citizens. It is essential that such co-operation involve both the Ministry of Finance and, where appropriate, the ministries that have large decentralised departments.

4. Problems concerning local authorities' right of association

Previous reports have already examined the composition and functioning of the Croatian Association of Local Authorities in (see CPL/BUR (28) 36 rev., p. 5 and CG/BUR (2) 22, p. 18). The only association recognised by the government was, at the time of the October 1997 visit, being reorganised and its next plenary assembly should result in the adoption of new statutes endorsing a dual structure within a single association, ie a Board representing the "towns" and a Board representing the municipalities. The fact that under current legislation 122 authorities which are members of the association are registered as "towns" suggests that the current conditions for accession to this status (10 000 inhabitants or special circumstances) only take very vague account of the urban characteristics of such authorities. This situation can but give rise to questions, for instance as to whether it is not the result of a deliberate policy on the part of the government in as far as virtually all of the big towns in Croatia (ie those with more than 100 000 inhabitants) are governed by opposition parties.

The visit to Croatia in February 1998 provided the opportunity to meet the new leaders of the association, who informed the rapporteurs that the bi-cameral structure of the association gave it greater freedom of action.

The big towns are also members of an unofficial association which the government considers illegal because of a law, of which we have not been informed, that requires an association which defends the interests of local government to be composed of more than 50% of the local authorities and to which it seems Section 11 of the Local Administration and Autonomy Act refers. Besides the fact that this provision appears strange and could, in many cases, result in local authorities being deprived of their right of association and that it explains Croatia's refusal to include Article 10 para. 2 in its ratification of the European Charter of Local Self-Government, the rapporteurs wish to point out that these regulations could also be incompatible with the freedom of association expressly guaranteed by Article 11 of the European Convention on Human Rights. It should also be possible for large or medium-sized towns and cities as well as rural municipalities to set up associations legally.

5. Specific problems in the zone governed by UNTAES

Part of the visit in October 1997 was devoted to observing local democracy in the zone then administered by the UN Transitional Administration for Eastern Slavonia. After meeting the Prefect of Vukovar-Sriejmka, the elected Mayor of Vukovar, the members of the "Joint Municipalities Council", the Head of the UN Civilian Administration, Mr Fischer, and representatives of the Association of displaced persons in Eastern Slavonia (meeting in Zagreb), the rapporteurs hold out little hope for the sustainable functioning of the institutions elected in April 1997 in this zone.

The different parties we met each had a different view of the situation and there was no real willingness to co-operate with regard to the functioning of democratic institutions. The CLRAE also has a duty to express its concern since the mere existence of the institutions of local democracy is obviously not sufficient to solve the problems caused by the situation and the way in which these institutions are being used by the various parties may undermine the confidence of the region in democratic institutions, which is indispensable to their functioning, for a long time.

It was unfortunately not possible during the February 1998 visit to return to Eastern Slavonia where Croatia had re-established full sovereignty in January 1998.

6. Croatian local and regional authorities and transfrontier co-operation

The Congress has also already had the opportunity to give its opinion on this question (see in particular CG/BUR (2) 101 rev., p. 9, paras. 24-25). Section 11 of the Local Administration and Autonomy Act provides in para. 4 that Croatian local authorities may "co-operate with the corresponding bodies in other states", "under the conditions laid down by law". The highest Croatian authorities have on several occasions interpreted this provision in an extremely restrictive manner which in fact prohibited any form of transfrontier co-operation. One of the arguments put forward in support of this restrictive interpretation is that the "conditions laid down by law" cannot be met in as far as the legislative provisions do not exist.

At the delegation's request, the Ministry of Administration informed the rapporteurs that approximately ten sections were currently being drafted on this question and should, once finalised, be included in the revised Local Administrative and Autonomy Act. The Congress is prepared to provide technical and legal assistance in drafting this legislation as well and in bringing it into line both with existing Croatian legislation and with European standards in this field.

In this connection, your rapporteurs would remind you that the Conclusions on the various reports concerning the state of local and regional democracy in Croatia adopted by the Bureau of the Congress in April 1996 considered that "Croatia's present geographic situation makes ongoing cross-border co-operation a necessity for the country's economic growth and for peaceful development throughout the region" (CG/BUR (2) 101 rev., p. 9, point 24). This observation is still valid and the rapporteurs welcome the information they have received, according to which this type of co-operation is currently being pursued on the initiative of local authorities in border regions.

C. CONCLUSIONS

1. The CLRAE draws attention to the positive attitude of the Croatian authorities, which have expressed the wish to establish and sustain close and consistent co-operation with it so as to improve the situation of local and regional self-government in Croatia. The rapporteurs particularly stress the important step which the ratification - on 11 October 1997 - of the European Charter of Local Self-Government constitutes in terms of guaranteeing local autonomy; the CLRAE hopes that Croatia will extend its acceptance to all the articles of the Charter as soon as possible.

The rapporteurs also point out that the alarming situation in the Zupanija of Primorsko-Goranska (see above, pp. 11), of which they had been informed prior to their initial visit, was rapidly settled, and that a situation compatible with the principles of democracy was thus restored.

2. The CLRAE, nevertheless, notes that some substantial difficulties continue to exist and therefore asks the Government of the Republic of Croatia to:

a. keep it informed of:

- changes in the situation in Eastern Slavonia, particularly in the Zupanija of Osijek-Baranja;

- progress with the various new bills and amendments to existing laws which were mentioned by the Minister of Administration and the parliamentary committees;

b. seriously consider devising clear rules based on objective criteria, the implementation of which can be submitted to democratic scrutiny, as far as the financing of local and regional authorities is concerned;

c. co-operate sincerely with the CLRAE and the experts which the latter places at the disposal of the Croatian Government with a view to the revision and drafting of legislation relating to all aspects of local and regional self-government;

d. envisage enlarging the scope of the European Charter of Local Self-Government, in accordance with Article 12 para. 3 of the Charter, as soon as legislative and democratic progress make this possible.

3. The Congress is also obliged to note that the Croatian Local Administration and Autonomy Act can no longer be presumed to be compatible with the principles of local self-government, given the unfortunate developments to which the interpretation of some of its provisions has given rise. The Congress therefore considers it essential that the Croatian Local Administration and Autonomy Act be amended without further delay, in co-operation with the CLRAE experts (see 4 below).

4. The Congress reiterates its offer to co-operate with the Croatian Government:

a. It draws particular attention to the undertaking to consult Council of Europe experts in due course on the legislative changes required with regard to the scope and the functioning of local self-government; this undertaking has been reiterated on several occasions by Croatia but has never been honoured.

b. The Congress gives its unconditional support to the rapid establishment of a Joint Committee of Experts (the principle of which was accepted by the Croatian authorities on 11 February 1998 (see pp 14 above)) and stresses the need for the joint committee to set to work immediately so as to be able, in a spirit of co-operation and receptiveness, to submit its observations early enough in the legislative process for the Croatian Parliament to be informed of them in time.

c. The Congress would also draw attention to the plan to hold a major conference on the progress of local and regional democracy in Croatia, which was provisionally endorsed by the government, (CG/BUR (2) 101 rev., p. 11, point J) and expresses the wish that such a conference be held in the near future.

5. The Congress is concerned at the state of local self-government in Eastern Slavonia and invites all the parties to co-operate so that local democratic institutions can function, thus making it possible to guarantee the most fundamental human rights to all the peoples in this region. The Congress solemnly calls on all member the parties to ensure that the policies they support do not undermine the principles of local and regional self-government - and consequently the confidence that citizens should legitimately be able to place in local democratic institutions.

6. The Congress stresses the need to define the responsibilities of the various levels of government more clearly. In particular, the role and the principles of the democratic functioning of the Zupanije should be clarified so as to enable this intermediary level to function efficiently in the interests of the populations concerned. The Congress also calls upon the Joint Committee of Experts to deal with this question.

7. The Congress hopes that effective co-operation with Croatia, along the lines defined above, will make it possible to settle all or most of the questions raised in this report by the next plenary session so that Croatia is no longer considered to be one of the countries in which "major problems of local democracy exist".



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