The Constitutional Court terminated proceedings in the case on the procedure for review of requests of budget institutions
On 8 June 2011, the Constitutional Court adopted a decision to terminate legal proceedings in the case No. 2011-18-01 “On Compliance of Section 162 (4) and Section 19 (5) of the Law “On Budget and Financial Management” with Article 1, Article 83 and Article 87 of the Satversme of the Republic of Latvia”.
Contested Norms
Section 162 (4) and Section 19 (5) of the wording of the Law on Budget and Financial Management that as effective before 1 January 2012 established the procedure for review of budgetary requests of the Chancellery of the President, the Supreme Court, the Constitutional Court, the State Audit Office, the National Electronic Mass Media Council, the General Prosecutor’s Office and the Office of the Ombudsman, according to which, when deciding on the maximum amount of State budget expenses for each particular institution, the Cabinet of Ministers is committed to hear opinion of respective institutions. However, budgetary requests of these institutions could be amended without consent of the institution in case if they exceeded the maximum amount of State budget expenses per institutions as confirmed by the Cabinet of Ministers. Such legal regulatory framework has been preserved also in the present wording of the Law on Budget and Financial Management.
The Facts
The applicant, the State Audit Office Council holds that creation of financial pressure and influencing of the amount of funding necessary for functioning of independent institutions cause threat to independence of these institutions and effective fulfilment of their functions. True independence of independent institutions and implementation of the principle of separation of powers could be ensured only in case if budgetary requests of independent institutions would be assessed by the legislator and observance of all principles of a democratic State enshrined in the Satversme would be assured. Likewise, the procedure for hearing of independent institutions by the Cabinet of Ministers and the Saeima should be regarded as anticonstitutional.
Court Findings and the Ruling
Although the Contested Norms have become invalid on 1 January 2012, the Constitutional Court assessed amendments introduced into the effective wording of the Law on Budget and Financial Management compared to the regulatory framework included into the Contested Norms [16.3].
Legal regulatory framework similar to that of the Contested Norms is established in Section 162 (8), Section 19 (5) and Section 20 (41) of the Law on Budget and Financial Management. The Constitutional Court concluded that, in respect to hearing and registering of opinions of independent institutions regarding the necessary amount of funds to fulfil their functions and reporting of them to the Saeima, respective sections of the present wording of the Law on Budget and Financial Management has preserved the exact wording of the Contested Norms [16.3].
The Constitutional Court indicated in the judgment that several constitutional authorities and independent institutions have drawn attention to possible anticonstitutionality of the effective wording of the Law on Budget and Financial Management and failure to property execute judgment in the case No. 2010‑06‑01. This should be taken into consideration by the Saeima and the Cabinet of Ministers when preparing planned amendments to normative acts related to procedure of budget elaboration [16.3].
The Constitutional Court indicated that pursuant to the effective legal regulatory framework those are only members of the Cabinet of Ministers who have the right to raise objects against content of protocol decision and to request coordination of the final version of a protocol decision elaborated at a Cabinet of Ministers meeting by the State Chancellery and a particular member. Consequently, independent institutions have not proper possibility to express their opinion on funding necessary for execution of their functions because they cannot submit specifications or corrections to the minutes of a Cabinet of Ministers meeting that is annexed to an explanatory note of a draft law on the State budget and transferred to the Saeima. Consequently, this causes a risk that the Saeima might receive an incomplete opinion of a particular independent institutions regarding funding necessary for fulfilment of its functions. The minutes neither provide a full substantiation of a Cabinet of Ministers decision in case if the Cabinet of Ministers does not agree to the opinion of the independent institutions regarding necessary funding and rejects the opinion [17.1].
The Constitutional Court recognized that the Contested Norms establish procedure, according to which registering of opinion of independent institutions should take place in Cabinet of Ministers meetings. However, the particular procedure fails to ensure reaching of its aim, which is assuring dignified cooperation of the Cabinet of Ministers and independent institutions when elaborating budgets of these institutions, as well as proper reporting of opinion of independent institutions to the Saeima [17.1].
The Constitutional Court indicated that, although the legislator can equate the model for ensuring functioning of independent institutions to financial independence of constitutional authorities, no hierarchical and clear state governance system can be formed, provided the present procedure, where constitutional authorities would be clearly distinct from State administration institutions. Therefore the legal regulatory framework included into the Contested Norms does not facilitate functioning of a unitary and hierarchically structured State power [17.2].
Likewise, the Court emphasized that the Cabinet of Ministers is committed to respect the choice of the legislator to grant guarantees of independence to certain institutions, and this is the Cabinet of Ministers that is responsible for communicating, at full extent and according to a due procedure, to the Saeima the opinions of independent institutions submitted to the Cabinet of Ministers [17.3]
The Constitutional Court recognized that the procedure, according to which opinions of independent institutions might not be communicated to the Saeima or they are communicated only partially, is inadequate because the final decision either to grant or not funds to a particular independent institution should be taken by the Saeima in particular. Consequently, the Cabinet of Ministers is committed not only to hearing opinions of independent institutions related to their budgetary procedure, but also providing an extended substantiation in case if these opinions are not taken into consideration, as well as ensuring communication of opinions of independent institutions and the substantiation of the opinion to the Saeima [17.3].
The Constitutional Court holds that the constitutional tradition requiring that each public institution or a non-governmental institution expressing respective will and having found out the term of review of a particular issue, is heard at meetings of Saeima committees responsible for budget elaboration and they can express their opinion also in writing testifies observance of the principle of good administration when reviewing State budget project at the Saeima. However, such practice that has not been regulated in legal norms and the precondition of which is active participation of a particular institution in work of Saeima committees may turn out to be insufficient to ensure complete financial independence of independent institutions [17.4].
Therefore the Constitutional Court drew attention of the Saeima to the fact that normative acts do not establish any procedure for ensuring participation of independent institutions in budget project discussions at the Saeima in respect to issues that relate to their financial independence [17.4].
The Constitutional Court concluded that sections of effective wording of the Law on Budget and Financial Management corresponding to the Contested Norms establish a different procedure for elaboration of budgets of independent institutions. Second, the contested legal regulatory framework shall be regarded as question of interpretation and application of the Contested Norms and the corresponding norms of the Law on Budget and Financial Management because it follows from conclusions of the Applicant and other independent institutions that the alleged anticonstitutionality is based particularly on the practice of interpretation and application of norms adopted by the Cabinet of Ministers. Third, the fact that no procedure exists, according to which independent institutions are heard by the Saeima, shall be regarded as a legal gap because elaboration of such regulatory framework is the task of the legislator
The Constitutional Court indicated that, in the present case, retroactive force of the judgment would cause legal uncertainty in the field where legal stability is of great importance. State budget concerns a wide circle of persons and it would have a material impact on the national economy in general. Therefore retroactive effect of the judgment would cause legal uncertainty. However, this consideration shall serve as basis for termination of legal proceedings [18.2].
Consequently, the Constitutional Court terminated proceedings in the case No. 2011-18-01 “On Budget and Financial Management” with Article 1, Article 83 and Article 87 of the Satversme of the Republic of Latvia”.
The Judgment of the Constitutional Court is final and not subject to appeal.
Linked case: 2011-18-01