The Norm of the Waste Management Law is Incompatible with the Satversme
On 6 December 2012 the Constitutional Court passed a judgement in the Case No. 2012-01-01 “On Compliance of Para 12 of Transitional Provisions of the Waste Management Law, insofar as it Applies to Contracts Entered into not Applying the Regulatory Enactments Regarding Public Procurement or in Non-Compliance with the Regulatory Enactments Regarding Public Procurement, with Article 1 of the Satversme.”
The protection of the legal certainty of some waste management managers for an unlimited period of time is disproportional to the infringement caused to public interest if competition is distorted and the possibility to receive higher quality service for more adequate pay is denied.
Contested Norm
Para 12 of Transitional provisions of the Waste Management Law: “Until 26 July 2005 the contract entered into by and between a local government and a municipal waste manager regarding collection, transport, reloading and storage of municipal waste shall expire within the term specified in the contract. If after 26 July 2005 the local government and the municipal waste manager have entered into or extended the contract regarding collection, transport, reloading and storage of municipal waste, not applying the regulatory enactments regarding public procurement or in non-compliance with the regulatory enactments regarding public procurement, the referred to contract shall be terminated not later than until 1 July 2013.”
Norm of Higher Legal Force
Article 1 of the Satversme: “Latvia is an independent democratic republic.”
The Facts
The Department of Administrative Cases of the Senate of the Supreme Court of the Republic of Latvia is examining a case, in the framework of which limited liability company “Lobbel” has asked to recognize the action of the Riga City Council and the Department of Environment of the Riga City Council by prohibiting the applicant to participate in waste management in Riga unlawful and to impose the obligation to organise procurement procedure. The Administrative Regional Court rejected the applicant’s claim on the basis of the Waste Management Law norms releasing the local government from the duty to organise procurement procedure and to conclude new agreements, until the waste management agreements concluded before 26 July 2005 are in force, including those agreements, which have been concluded not applying the regulatory enactments on public procurement or in non-compliance with regulatory enactments on public procurement.
The Applicant – the Senate of the Supreme Court – holds that the contested norm contradicts the principle of a law-governed state, as in accordance with it the legal consequences caused by unlawfully concluded agreements and the legal certainty, thus created, are respected.
Court Findings and Ruling
On the scope of the claim
The Court, taking into consideration the actual circumstances of the case and the legal substantiation, assessed the first sentence of Para 12 of Transitional Provisions of the Waste Management Law, insofar as it applies to contracts entered into not applying or inappropriately applying the regulatory enactments on public procurement. [9]
On the content of the contested norm
The Constitutional Court recognised: it follows from the contested norm that the contracts on waste management, which have been concluded before 26 July 2005, remain in force until the expiry of their term of validity. [11]
Thus, the legislator has protected the legal certainty of individual persons, providing that the contracts on waste management remain in force, even though the procurement procedure has not been applied in concluding them. [11]
On the obligation to apply procurement procedure
The Constitutional Court concluded that the requirement to apply regulatory enactments regulating public procurement, when concluding waste management contracts, had to be abided by already since 1 January 2002. Moreover, such contracts could not have been concluded for a period of time exceeding the restriction set in the law. [13]
The requirement to apply the procurement procedure aims to promote competition, effective use of state and local government resources, decreasing the cost of services to be provided to inhabitants and, finally, ensures the well-being of the whole society. [15]
On the protection of legal certainty
The legislator, adopting the contested norm, was protecting the certainty of persons that concrete rights, which follow from the contracts entered into prior the adoption of the Waste Management Law, will be retained. Thus, the legislator has envisaged protection of those persons, whose contracts were concluded without applying the procurement procedure. Moreover, the said protection was established for the whole period of validity of such contracts. [14]
The Constitutional Court reminded that the protection of legal certainty cannot be absolute. When new regulation is introduced, reasonable balance between the legal certainty of individual persons and public interests should be found. [15] Considerate transition to the new regulation can manifest itself as setting of a reasonable term. [16]
The Court assessed, whether the legislator, protecting the legal certainty of waste managers, has set a reasonable term for the transition to the new legal regulation and has considered the balance between the protection of persons’ legal certainty and ensuring the interests of the whole society. [16]
The contested norm causes a situation, when the waste management contracts entered into without applying the procurement procedure can stay in force for a long time. For example, in Riga waste management contracts have been concluded till 2020, in Liepāja – till 2020, in Jelgava – even till 2029. During the period of validity of these contracts it is impossible to ensure free competition between the market players and effective use of the local government resources. [17]
Thus, the legislator’s choice to ensure unrestricted protection to contracts entered into prior 26 July 2005, not abiding with the requirement on the public procurement procedure, creates unfounded advantages to a group of particular persons and significantly infringes upon the interests of the whole society. Thereby competition is distorted and the possibility to receive quality service for adequate pay is denied. [17]
The Constitutional Court indicated that the legal certainty of particular persons within unlimited period of time is not proportional to the infringement caused to public interests, therefore in this case the safeguarding of interests significant to the public should be given priority compared to the principle of legal certainty. [17]
The Constitutional Court recognised the first sentence of Para 12 of Transitional Provisions of the Waste Management Law, insofar as it applies to contracts entered into not applying or inappropriately applying the regulatory enactments on public procurement, as incompatible with Article 1 of the Satversme of the Republic of Latvia.
On the time, when the contested norm becomes invalid
The Constitutional Court recognised that declaring the contested norm invalid as of the day of pronouncing the judgement might create significant consequences in the field of waste management, i.e., it might create uncertainty in a field, which has special importance in ensuring the societal well-being. The legislator has already defined a transitional period, when other waste management contracts entered into or extended, without applying or inappropriately applying regulatory enactments on public procurement, become invalid. Therefore applying one transitional period to all waste management contracts entered into without applying or inappropriately applying regulatory enactments on public procurement would be substantiated.
Thus, the Constitutional Court provided that the first sentence of Para 12 of Transitional provisions of the Waste Management Law, insofar it applies to contracts entered into not applying or inappropriately applying the regulatory enactments on public procurement become invalid as of 1 July 2013.
The judgement is final and not subject to appeal and comes into force as of the day of its pronouncement.
Linked case: 2012-01-01