The Constitutional Court initiates a case on fulfilment of the principle of establishment of remuneration to officials for their work in board and fulfilment of their officiary duties in a capital company
On 31 January 2012, the First Panel of the Constitutional Court initiated a case “On Compliance of Section 6 and Section 7 of 30 March 2012 Cabinet of Ministers Regulation No. 311 “Provisions Regarding Number of Members of the Board of State or Local Government Capital Companies and Remuneration of a Member of the Council or the Board, a Representative of a Local Government Shareholder and the Chief Employee” with Section 96 (2) [1] of the Law “On State and Local Government Capital Shares and Companies” and Article 107[2] of the Satversme of the Republic of Latvia”.
Contested Norm
30 March 2012 Cabinet of Ministers Regulation No. 311 “Provisions Regarding Number of Members of the Board of State or Local Government Capital Companies and Remuneration of a Member of the Council or the Board, a Representative of a Local Government Shareholder and the Chief Employee”:
Section 6: “Chairman of the Board of a capital company shall have a common wage for the work in the Board and fulfilment of officiary duties in the capital company. To establish wage of the Chairman of the Board of a capital company, the coefficient shall be applied pursuant to the annex of the present Regulation”.
Section 7: “A member of the Board of a capital company shall have a common wage for the work in the Board and fulfilment of officiary duties in the capital company up to 90 per cent of the wage of the Chairman of the Board”.
The Facts
The Applicants – Mr Edvīns Bērziņš, Mr Aivars Strakša and Mr Ēriks Šmauksts occupy two positions in SJSC “Latvijas Dzelzceļš”, namely, a member of the Board and a Vice-President, whilst Mr Uģis Magone is the Chairman and the President of the Board.
Wage for fulfilment of officiary duties of a member (also Chairman) of the Board has been established, in respect to the Applicants, in accordance with 30 March 2012 Cabinet of Ministers Regulation No. 311 “Provisions Regarding Number of Members of the Board of State or Local Government Capital Companies and Remuneration of a Member of the Council or the Board, a Representative of a Local Government Shareholder and the Chief Employee”, whilst that of another position, namely, President or Vice President – in separate labour contracts that inter alia include the following clause: “as long as an Employee occupies a position of an elected member of the Board of a company, provisions of the agreement shall be applicable insofar as they are not restricted by or contradict external legal acts (..), as long as such restrictions exist.”
The Contested Norms establish a common wage for the work in the Board and fulfilment of officiary duties in a capital company. According to the Applicants, this shall be regarded as a restriction to receive remuneration for fulfilling the officiary duties of President and Vice President.
The Applicants indicate that, neither the Law “On Prevention of Conflict of Interests in Activities of Public Officials”, nor the Law “On State and Local Government Capital Shares and Companies” contain a prohibition to members of the Boards of State capital companies act as a member of the Board and to concurrently hold another office in the capital company; neither they establish any restriction to gaining of income in such a case. No other effective law of the Republic of Latvia establishes any such prohibition/restriction to hold multiple offices and gain income.
The restriction to gaining income is established in the Cabinet of Ministers Regulation No. 311; however, taking into account Section 9 (1) of the Law “On Prevention of Conflict of Interests in Activities of Public Officials”, such restriction cannot be established in Cabinet of Ministers Regulation, which according to Section 15 (2) of the Administrative Procedure Law is a legal act of a lower legal force if compared to a law.
The Applicants are of the viewpoint that, when issuing the Contested Norms, the Cabinet of Ministers has exceeded the authorization conferred to it.
Consequently, the Applicants hold that their fundamental right established in Article 107 of the Satversme are infringed; therefore they ask the Constitutional Court to recognize the words “common” and “fulfilment of officiary duties” as non-compliant with Section 96 (2) of the Law “On State and Local Government Capital Shares and Companies” and Article 107 of the Satversme of the Republic of Latvia.
Taking into account the fact that the application did not contain legal substantiation in respect to possible non-compliance of the Contested Norms with Section 9 (1) of the Law “On Prevention of Conflict of Interests in Activities of Public Officials”, the Constitutional Court initiated a case insofar as the Applicants contest compliance of the Contested Norms with Section 96 (2) of the Law “On State and Local Government Capital Shares and Companies” and Article 107 of the Satversme of the Republic of Latvia.
Legal proceedings
The Cabinet of Ministers was asked to provide, before 2 April 2012, a reply on facts of the case and legal substantiation thereof.
The term of preparation of the case is 30 June 2012.
[1] Section 96. Wage of Members of the Board of a Share Company
- A member of the Board shall receive a wage in accordance to the amount of his or her duties and economic status of the company.
- Wage of a member of the Board shall be calculated in accordance with the average monthly wage of an employee of the previous year of the State published in the official statistical report of the Central Statistical Bureau, it being approximated in full lats and that can be applied, based on criteria characterizing company size, a coefficient that shall not be higher than 6. Wage of a member of the Board shall be reassessed on annual basis, and the wage is paid starting from 1 April of each respective year. Criteria characterizing public variables and the maximum applicable coefficient for establishment of wage pursuant to company size shall be determined by the Cabinet of Ministers.
[2] Article 107 of the Satversme of the Republic of Latvia: “107. Every employed person has the right to receive, for work done, commensurate remuneration which shall not be less than the minimum wage established by the State, and has the right to weekly holidays and a paid annual vacation.”
Linked case: 2012-04-03