A case has been initiated on the norms providing for reforms of the management of the port of Ventspils
On 29 September 2022 the 3rd Panel of the Constitutional Court initiated a case “On Compliance of Section 4, Paragraph Three, Clauses 1 and 3, Section 4, Paragraphs Five and Nine of the Law On Ports; Paragraph 16, Sub-paragraph 2 of the Transitional Provisions, Section 11, Paragraph Two of the Law of 10 February 2022 “Amendments to the Law On Ports”, as well as Section 4, Paragraph One of the Freeport of Ventspils Law with Article 1 and the First Sentence of Article 101, Paragraph Two of the Satversme of the Republic of Latvia”.
The contested norms
In accordance with Section 4, Paragraph Three, Clauses 1 and 3 of the Law On Ports, the relevant port authority has possession of state and municipal land and aquatorium, as well as in the ports of Riga, Liepāja and Ventspils – common hydro technical structures of the port (jetties, current control dikes, breakwaters, shore reinforcements), fairways, berths owned by the state or local government, but in other ports – common hydro technical structures and berths owned by the state or local government.
Section 4, Paragraph Five of the Law On Ports stipulates that the port authority is entitled to:
1) lease, rent the immovable property in its possession owned by the State or the local government, grant the right of superficies for it, encumber it with the property rights, including with servitudes for the construction of buildings (structures) and the construction of aboveground and underground communications or for the performance of other economic activities;
2) build the buildings (structures) necessary for the port operation as independent property objects on the land in its possession owned by the State or the local government. These buildings (structures) shall be entered in the Land Register by the port authority in its own name. The port authority has the same rights also in respect of land of legal or natural persons in respect of which a personal servitude has been established.
Paragraph Nine of this Law provides for that the State and the local government are entitled to alienate the immovable property in the territory of the port owned by it, with the state transferring it to the local government and the local government transferring it to the state without consideration.
Whereas, Paragraph 16, Sub-paragraph 2 of the Transitional Provisions of this Law stipulates as follows: “In order to ensure the continuity of the operation of the ports of Rīga and Ventspils, the State shall, until 1 September 2022, invest the property and assets owned by the Free Port Authority of Ventspils in the equity capital of the Joint-Stock Company “Ventas osta” in accordance with the procedures laid down in the Law on Governance of Capital Shares of a Public Person and Capital Companies and if an agreement is reached with the Ventspils local government on its participation in the capital company, the Ventspils local government shall invest the property and assets owned by it in the territory of the port provided that the State owns not less than 60 per cent and the Ventspils local government – not more than 40 per cent of the capital shares (stocks). The shareholders of the capital shares (stocks) shall enter into the shareholders’ agreement in order to determine and specify the rights and obligations of the shareholders and to define the responsibility in relation to the joint management of a capital company.”
In accordance with Section 11, Paragraph Two of the Law of 10 February 2022 “Amendments to the Law On Ports”, the second and third paragraphs of Article 12 have been deleted from the Law On Ports. Accordingly, until 26 April 2022, the second paragraph of Article 12 of the Law On Ports provided for that financial resources of the port authority may be used only for the management and development of the port and its infrastructure, as well as for the performance of the functions set out in Section 7 of this Law. Port authorities may give their financial resources as a gift (donate) to the State by transferring to the state budget. The Cabinet of Ministers decides on the use of the donated funds. The Cabinet of Ministers may exercise this right provided that the Budget and Finance (Tax) Commission of the Saeima examines the information provided by the Cabinet of Ministers within three business days from the date of receipt thereof and does not object to the use of the respective gift (donation). Paragraph Three of the aforementioned Section stipulated that the port authority may not participate with its own financial resources in the activities of commercial companies outside the port area.
Whereas, Section 4, Paragraph One of the Freeport of Ventspils Law stipulates as follows: “State and municipal land within the territory of the Freeport may not be sold, given as a gift or otherwise alienated, except for in the cases provided for in the Law On Ports or investment in the share capital of a capital company established for the management of the Freeport.”
Norm with a higher legal force
Article 1 of the Constitution of the Republic of Latvia (hereinafter referred to as — the Satversme): 1 “Latvia is an independent democratic republic.”
First sentence of Article 101, Paragraph Two of the Satversme: “Local governments shall be elected by Latvian citizens and citizens of the European Union who permanently reside in Latvia.”
The facts of the case
The case was initiated based on the application of Ventspils
State City Council. The contested norms provide for the regulation of the municipality’s immovable property located in the territory of the port, as well as the reform of the port management. According to the Applicant, the economic basis of existence of the municipality as an institution derives from the principle of the municipality. Whereas, the contested norms allegedly substantially limit this economic basis, because, due to the contested norms, the municipality loses the right to fully dispose of its property, revenues of the local government decrease accordingly, and as a result the performance of the autonomous functions of the local government is negatively affected. This allegedly affects both the competences of the Ventspils State City Council and the right to financial autonomy. Such restriction of the rights of the local government allegedly does not have a legitimate aim and does not comply with the principle of proportionality, moreover, the principle of good legislation has not been allegedly observed in the adoption of the contested norms. Thus, the rights of the local government contained in Article 1 and the first sentence of the second part of Article 101 of the Satversme have been unjustifiably infringed.
Judicial proceedings
The Constitutional Court has requested the authority which has issued the contested act, i.e., the Saeima, to submit to the Constitutional Court a written reply presenting the facts of the case and legal basis by 29 November 2022.
- The deadline for preparation of the case is 28 February 2023.
The Court shall decide on the procedure and date for hearing the case after the case is prepared.
The decision on initiation of the case is available here.
Press release in PDF is available here.
Linked case: 2022-35-01