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Czechia - Monitoring report

Date of the monitoring visit: from 2 to 4 March 2022

Report adopted on: 26 October 2022

Files : Report CG(2022)43-17 | Recommendation 486 (2022)
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This report on the situation of local and regional democracy in Czechia summarises the findings of the monitoring visit carried out from 2 to 4 March 2022. This is the third report assessing the implementation of the Charter in Czechia since the country ratified the Charter in 1999. The rapporteurs conclude that the system of local self-government in the country is functioning well and point to progress made in this respect since the previous monitoring in 2012. However, as the report highlights, the government needs to pay particular attention to some specific areas to achieve full compliance with the Charter. For example, local and regional authorities lack commensurate resources to perform their tasks. Coupled with municipal fragmentation this leads to inefficiencies in service delivery. Subnational governments, and in particular regions, are highly dependent on predominantly earmarked grants and transfers from the state, and their own sources of income are not sufficiently diverse and buoyant. Furthermore, despite general compliance with Article 4.6 of Charter, consultation rights of local and regional authorities on all matters that concern them could be enhanced.

Therefore, the report provides a series of recommendations to the national authorities to further increase the degree of compliance with the Charter. These include guaranteeing that funding matches the tasks to be fulfilled, reducing earmarking of grants, diversifying sources of income and strengthening participation and consultation rights of local and regional authorities’ associations, in particular, on parliamentary initiatives and emergency legislation. The rapporteurs also suggest further promoting and supporting intermunicipal co-operation to counter the effects of fragmentation. Finally, Czechia is invited to ratify Articles 4.5, 6.2 and 7.2 of the Charter that it did not ratify in 1999 but with which it complies in practice and sign and ratify the Additional Protocol to the Charter.

Article ratified Ratified with reservation Non ratified

Compliance Partial compliance Non compliance To be determined

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Article 2

Constitutional and legal foundation for local self government - Article ratified

The principle of local self government shall be recognised in domestic legislation, and where practicable in the constitution.

The Constitution of 16 December 1992 provides the framework for local government in the Czech Republic. Article 8 guarantees the right of autonomous territorial units to self-government. Chapter 7 Territorial Self-Government (Articles 99-105) contains detailed provisions on territorial self-government. Article 99 differentiates between local and regional levels of self-government specifying that the Czech Republic is subdivided into municipalities, which are the basic territorial self-governing units, and into regions, which are the higher territorial self-governing units. Article 101 (paragraph 3) establishes the legal status of territorial self-governing units as public corporations with their own property and budget while Article 4 of Article 101 (paragraphs 1 and 2) and Article 102 confirm the democratic character of local self-government at the constitutional level through the institutionalisation of elected representative bodies. The Constitution also states (Article 105) that territorial self-governing units will share in the exercise of state power on the basis of statutory authorisation.

Several legal texts exist regarding local and regional government, e.g., the Law on Municipalities (Act No. 128/2000) and the Law on Regions (Act No. 129/2000) which recognised the regions as autonomous entities and transferred a series of responsibilities to the new entities; Act No. 131/2000 which governs the capital city of Prague and Act No. 314/2002 which defines the different types of municipalities.

Thus, the principle of local self-government is expressly recognised in both the Constitution and in domestic legislation and is respected in practice. Therefore, the Rapporteurs conclude that Article 2 of the Charter is complied with in the Czech Republic.

Article 3.1

Concept of local self government - Article ratified

Local self-government denotes the right and the ability of local authorities, within the limits of the law, to regulate and manage a substantial share of public affairs under their own responsibility and in the interests of the local population.

Municipalities have a wide range of competences including education, social welfare, urban development, utilities, etc. Some competences are delegated, and some are carried out independently. The Municipal and Region Acts, as amended, make a distinction between autonomous and delegated responsibilities. While municipalities have equal status, they are divided into three categories according to the scope of their delegated responsibilities: 205 municipalities with extended powers (MEPs), 1 036 municipalities with some delegated powers (e.g., registry office, building authority), including 183 municipalities with an authorised municipal authority and the remainder which are basic municipalities.

The small size and low population of some municipalities restrict their functional capacity so inter-municipal collaboration is becoming more common. Some decentralisations had occurred between 2000 and 2015 but some municipal competences are currently being re-allocated from small municipalities to larger ones as part of the move towards ‘Client-oriented public administration 2030’ (Government Resolution no. 562/2020).

Regional responsibilities include upper secondary education, regional roads and public transport, economic development and planning and health. The regions manage their own property and own revenues as defined by law. In legal relationships, a region acts in its own name and bears responsibility for the resulting relationships.

Thus, local self-government has the constitutional and legal right to both regulate and manage certain public affairs and has a broad range of responsibilities allocated in line with the capacity of the various types of local government unit. The practice of using municipal statutes reinforces the regulatory role of local government.

It is the opinion of the rapporteurs that Article 3.1 is complied with in the Czech Republic.

Article 3.2

Concept of local self government - Article ratified

This right shall be exercised by councils or assemblies composed of members freely elected by secret ballot on the basis of direct, equal, universal suffrage, and which may possess executive organs responsible to them. This provision shall in no way affect recourse to assemblies of citizens, referendums or any other form of direct citizen participation where it is permitted by statute.

Local authorities in the Czech Republic are composed of members freely elected by secret ballot on the basis of direct, equal and universal suffrage.

Art. 102 of the Constitution outlines the basic rules of elections and electoral terms: ‘(1) Members of councils shall be elected by secret ballot on the basis of a universal, equal, and direct right to vote. (2) Councils shall have a four-year electoral term. The circumstances under which new elections for councils shall be called prior to the expiration of an electoral term shall be designated by the act.’

Representation and participation at local level are confirmed in the Czech legal system. Residents of a municipality or a region can elect and be elected as members of municipal and regional councils, propose local referendums and attend council sessions to express their opinion.

The constitutional basis for referenda is provided by Article 2, paragraph 2 of the Constitution, and detailed rules for municipal and regional referenda are laid down in Act No. 22/2004 concerning municipal referenda and Act No. 118/2012 concerning regional referenda.

The rapporteurs consider that Article 3.2 of the Charter is fully complied with in the Czech Republic.

Article 4.1

Scope of local self government - Article ratified

The basic powers and responsibilities of local authorities shall be prescribed by the constitution or by statute. However, this provision shall not prevent the attribution to local authorities of powers and responsibilities for specific purposes in accordance with the law.

The basic powers and responsibilities of local authorities are clearly defined in the Czech Constitution. The detailed powers and competences of the municipalities and regions in the Czech Republic can and are set by statute enabling the attribution to local authorities of further power and responsibilities. Radvan et al state that issues of self-administration may “only” be regulated by the constitutional act, regular statutes and other laws issued based on a special empowerment set forth in a statute’. The various changes that have taken place (some decentralisation up to 2015; the recent recentralisation as well as allocation of new tasks) illustrate the changing range of powers and responsibilities assigned to local and regional government.

The Constitution recognises two categories of local self-administration, i.e., municipalities and regions. The Municipal and Region Acts, as amended, make a clear distinction between autonomous and delegated competences. Furthermore, despite the fact that municipalities have equal status as regards autonomous competences, they are, however, divided into three categories according to the scope of their delegated responsibilities.

A judgement of the Constitutional Court declared that the constitutional guarantee of the right to self-government is clear while the definition of independent competence in the Constitution is laconic, i.e., left to "ordinary laws". The judgement also stated that the Constitutional Court considers local self-government to be an irreplaceable component in the development of democracy.

There is thus, a mix of constitutional, statutory and attributed powers underpinning sub-national governance in the Czech Republic. The Rapporteurs conclude that Article 4.1 is complied with in the Czech Republic.

Article 4.2

Scope of local self government - Article ratified

Local authorities shall, within the limits of the law, have full discretion to exercise their initiative with regard to any matter which is not excluded from their competence nor assigned to any other authority.

The same goes for the requirement about full discretion within the limits of the law according to Article 4 (2) of the Charter. As to the proper powers of local and regional authorities, there is not much to be added. When it comes to the powers delegated by law to a limited number of bigger municipalities and to the regions, on the other hand, the scope of discretion is generally much more limited. But the fact that Article 4 para. 1 explicitly opens up the way for the attribution of powers and responsibilities for specific purposes in accordance with the law, is but one of the elements that indicate that limited discretion in the execution of such functions is not in itself contrary to the obligations undertaken by the Charter (see further under Article 4 (5) of the Charter).

Article 4.3

Scope of local self government - Article ratified

Public responsibilities shall generally be exercised, in preference, by those authorities which are closest to the citizen. Allocation of responsibility to another authority should weigh up the extent and nature of the task and requirements of efficiency and economy.

Local government responsibilities in the Czech Republic are generally exercised by the authorities closest to the citizens. The independent powers of the municipalities cover the activities that are perceived to be in the interest of the municipality and its residents, enabling adaptation of operations to local conditions. Article 104(2) of the Czech Constitution states that the Municipal council shall have jurisdiction in matters of self-government, to the extent such matters are not entrusted by the act to the council of higher self-governing unit.

Interlocutors referred to the constitutional designation of the Czech Republic as a unitary state. Therefore, it is not possible to apply different legal norms regulating the same sphere for individual territorial units. However, in practice, local conditions are taken into account on the basis of the ‘administrative discretion’ of the decision-making body.

The 2000 Act on Municipalities promotes inter-municipal cooperation in the form of contracts for performing certain functions, establishment of voluntary municipal association and the creation of “mutual-interest associations of legal persons”. Such collaboration is common but ad hoc. Different types of cooperation exist and there is some overlap in the functions carried out by each association as no overarching legislative rules and recommendations are in place. Interlocutors from smaller units were concerned that the complexity of administration and tasks and the lack of clarity in the description of the respective governmental tasks could weaken subsidiarity.

As in other countries, the extent of subsidiarity is entwined with the financial powers of local government and the opportunities and capacity they have to finance and deliver particular activities as well as the range of ‘own competences’ for which they are responsible.

There is occasional disquiet about the levels to which certain tasks are allocated. A new Building Act caused lots of controversy and illustrates this unease. The Act changes the locus of authority, creating new state authorities to apply the New Building Act whereas currently the municipalities have delegated competence to serve as building authorities in the Czech Republic. Furthermore, statutory cities want their own municipal building regulations similar to those enjoyed by Prague prior to the new Act. Municipalities believe that, for example, moving decisions about tree-felling to MEPs (municipalities with extended powers) is inappropriate. The new government is considering further amending the Act. Similarly, municipalities feel that the misdemeanour agenda which is within the delegated competence of the municipalities of type I should be transferred to a higher level, e.g., MEPs because this task should be performed by a competent person (lawyer).

The rapporteurs conclude that tasks are allocated in a manner which seeks transparency and that tasks are, to date, generally assigned to the appropriate level. Notwithstanding the multiplicity of municipalities which dilutes effectiveness and efficiency, Article 4.3 is considered to be complied with.

Article 4.4

Scope of local self government - Article ratified

Powers given to local authorities shall normally be full and exclusive. They may not be undermined or limited by another, central or regional, authority except as provided for by the law.

Article 104(2) of the Czech Constitution states that the Municipal council shall have jurisdiction in matters of self-government, to the extent such matters are not entrusted by the act to the council of higher self-governing unit. This underlines the non-hierarchical relationship between the municipalities and the regions. Furthermore, only the judiciary may decide with binding effect upon contested questions regarding the limits to the powers of local and regional authorities under the law.

As stated earlier, there are differing categories of municipality with differing powers. The MEPs carry out a selected list of delegated competencies for other municipalities but within a collaborative, not hierarchical relationship.

The rapporteurs conclude that Article 4.4 is complied with in the Czech Republic.

Article 4.5

Scope of local self government - Non ratified

Where powers are delegated to them by a central or regional authority, local authorities shall, insofar as possible, be allowed discretion in adapting their exercise to local conditions.

Article 4.5 of the Charter has not been ratified by the Czech Republic. However, in practice, there is de facto application. Municipalities and regions can regulate the exercise of state administration within their competence by means of a decree. Local circumstances and what interlocutors referred to as ‘certain specificities’ may be taken into account which indicates ’administrative discretion’ for the decision-making bodies. Furthermore, the fact that in the Czech system there is a need for a judicial decision in cases where a local or regional authority disagrees with central government on the extent and/or substance of its responsibilities under the law makes Czech law compliant with the obligation under the Charter.

During discussions, interlocutors indicated that the Czech Republic could, in principle, proceed seamlessly to ratification of the provisions of Article 4.5 with regard to formally articulating the power of municipalities to adapting the exercise of delegated powers to local conditions. The rapporteurs encourage the Czech Republic to ratify this Article since in their view, though not ratified, this provision is respected in the country.

Article 4.6

Scope of local self government - Article ratified

Local authorities shall be consulted, insofar as possible, in due time and in an appropriate way in the planning and decision-making processes for all matters which concern them directly.

The Municipalities Act, the Regions Act and the Act on the Capital City of Prague each enshrine a general obligation of the State to consult with local self-governments on matters concerning them.

The Legislative Rules of the Government define the regions and associations of municipalities as ‘mandatory consultative bodies’. However, the only mandatory consultation included, refers to the preparation of legislation which refers to the independent or delegated competences of municipalities. Thus, when a government bill is being prepared which concerns the competences of the municipalities, the bill must be discussed with the regions, Prague, and associations representing the municipalities. It was also mentioned by interlocutors that sometimes local and regional authorities' comments are not considered, despite engagement in consultative processes.

Interlocutors referred to both formal and informal consultation processes with representatives of interest associations of municipal and regional self-governments or meetings with certain groups of representatives of local and regional authorities e.g., mayors, regional governors, secretaries of authorities. Representatives of the local authorities and their associations are full members of the Government Council for Public Administration which enables them to influence the processes and measures adopted. A Board of Deputy Ministers for Regulatory Reform and Effective Public Administration was established in 2007. Among its statutory members are the Union of Municipalities and the Association of Regions.

The obligatory impact assessment of new regulation requires examination of the impacts on local and regional authorities which usually involves consultation with them.

Involvement in EU and transnational programmes has enhanced consultation by involving regions, municipalities and communities in planning and implementation of the programmes.

The Covid 19 crisis uncovered some lacunae in the consultative processes. The approval of legislation in an "emergency regime" did not require mandatory consultation with the Union of Towns and Municipalities nor was it necessary to have thorough impact studies. This meant that municipalities were not always informed or aware of the financial implications of the adopted legislation. The lack of consultation about parliamentary proposals and emergency legislation which particularly impacts on local self-government was a concern for some interlocutors. It must be remembered, however, that as the Explanatory Report of the Contemporary Commentary on the Charter asserts ‘exceptional circumstances may override the consultation requirement particularly in cases of urgency’.

Many interlocutors drew attention to the legal obligations and institutionalised procedures for consultation and the active role of the representative bodies for municipalities and regions in consultation processes. Some interlocutors, however, perceived as ad hoc, the nature of some consultation e.g., on specific matters such as preparation of essential legislative documents or on non-legislative measures.

It is the opinion of the rapporteurs that statutory requirements for consultation are observed in the Czech Republic and there is general compliance with Article 4.6, but improvements should be made by expanding the formal mechanisms of consultation with local and regional authorities and their representative bodies, in particular, with regard to parliamentary proposals and emergency legislation which impacts on local self-government.

Article 5

Protection of local authority boundaries - Article ratified

Changes in local authority boundaries shall not be made without prior consultation of the local communities concerned, possibly by means of a referendum where this is permitted by statute.

Under Czech law, decisions to amalgamate two or more municipalities are based upon an agreement between the relevant municipalities (Act No. 128/2000). Assemblies of the affected municipalities enter into an agreement to merge or connect, if there is not an application for holding a local referendum on this issue within 30 days from publication of this decision, then it becomes valid, otherwise it is subject to approval by local referendum. During the meetings, the rapporteurs heard no complaints concerning the disrespect of Article 5 in practice.

Therefore, the obligation to consult about boundary adjustments seems respected and the Rapporteurs consider that the situation in the Czech Republic is compliant with the requirements of Article 5 of the Charter.

Article 6.1

Appropriate administrative structures and resources for the tasks of local authorities - Article ratified

Without prejudice to more general statutory provisions, local authorities shall be able to determine their own internal administrative structures in order to adapt them to local needs and ensure effective management.

Although the relationship between central and local government in the Czech Republic is clearly specified and regulated, local government units do have authority to adapt their internal administrative structures to local needs, within the applicable laws (mainly Act No. 129/2000 Coll., on Regions (Regional Establishment) and Act No. 128/2000 Coll., on Municipalities (Municipal Establishment). Each municipality has its own set of bodies: municipal council , municipal board, mayor and municipal office. Each municipal council has between 5 and 55 members, according to the number of inhabitants in the municipality. The executive body is the municipal board consisting of a mayor and between 5 and 11 members elected from among the council members.

While local government has a duty to establish financial and controlling committees, municipal boards may choose which other committees to establish and the objectives of the committees, the number of their members etc., reflecting the circumstances of the municipal board. Similarly, the 26 ´statutory cities´ (Art. 4 of the Municipalities Act) may decide to create town districts or quarters with their own committee structures.

It was clear from the interlocutors that there is general satisfaction and a belief that the current variety of structures facilitates effective management and decision-making, good administration and appropriate policies aimed at meeting collective needs and expectations.

The rapporteurs note that municipalities and regions are able to set their own internal administrative structures and may adapt them to the local needs so that effective management is ensured. Consequently, the Rapporteurs are satisfied that Article 6.1 is complied with in the Czech Republic.

Article 6.2

Appropriate administrative structures and resources for the tasks of local authorities - Non ratified

The conditions of service of local government employees shall be such as to permit the recruitment of high-quality staff on the basis of merit and competence; to this end adequate training opportunities, remuneration and career prospects shall be provided.

When ratifying the Charter, the Czech Republic excluded the legal effect of Article 6.2. Nevertheless, it can be asserted that the norms currently in place in the Czech Republic comply with the Charter principles. Sub-national government has discretion regarding recruitment and allocation of roles within their administrative and technical services. The Act on Officers of Territorial Self-Administration Units (Act no. 312/2002 Sb., as amended) regulates the status and obligations of officials working within local government. In the past, it was felt that any centrally imposed training programmes, career pathways etc. could be considered as interference in the autonomy of local and regional authorities. However, Act 312/2002 provides for a progressive system including compulsory initial education, continuous education, education of senior officials and special professional qualifications for individual administrative activities.

During the consultation procedure, the Ministry of the Interior highlighted revision of the Civil Servants Act to enable digitalisation of public administration and expand education and knowledge for local government officials, taking into account the particular issues of small municipalities. This is envisaged to free them from burdens caused by the verification of knowledge from activities which do not correspond to the scope of performance of their administrative activities.

The Contemporary Commentary on the Charter urges that local authority employees should be entitled to training opportunities, remuneration and career opportunities similar to employees at other levels of government so that local authorities can establish a sound and efficient staff policy. This appears to be the situation in the Czech Republic so the requirements of Article 6.2 could easily be institutionalised. This would be in keeping with the aspirations of the Client Orientated Public Administration 2030 strategy. During discussions, the Ministry of the Interior indicated that this is one of the Charter provisions which is under consideration for ratification.

Article 7.1

Conditions under which responsibilities at local level are exercised - Article ratified

The conditions of office of local elected representatives shall provide for free exercise of their functions.

The conditions of office of local elected representatives are primarily laid down in the Municipalities Act, Regions Act and the Act on the Capital City of Prague. There is also general protection of the rights mentioned in Article 7 of the Charter, in the Charter on the Fundamental Rights and Freedoms, which is a part of the Czech constitutional order. Arts. 69 and 70 of the Municipalities Act state that any member of the local government holds his or her office personally and cannot be deprived of any employment rights because of being elected and holding political office.

During the visit, interlocutors affirmed that the current conditions of office of local and regional elected representatives facilitate them to perform their duties. However, some issues arise regarding access to information in the case of disagreements.

Interlocutors pointed out that due to resource issues, there can be delays in responding by municipalities so currently, it is more advantageous for local representatives to request information via the Act on Free Access to Information, than rely on direct contact with the municipality.

The rapporteurs consider that Article 7.1 is complied with in the Czech Republic.

Article 7.2

Conditions under which responsibilities at local level are exercised - Non ratified

They shall allow for appropriate financial compensation for expenses incurred in the exercise of the office in question as well as, where appropriate, compensation for loss of earnings or remuneration for work done and corresponding social welfare protection.

The Czech Republic has not ratified Article 7.2 regarding financial compensation to elected representatives. Such questions are left to the discretion of the local and regional councils.

However, the Municipalities Act designates two categories of local government members: (i) members of local government who are released from their employment so that they can fulfil the duties connected with the office and (ii) those who were not released. The former obtain remuneration from the municipality, whereas the latter are granted leave by their employer with a salary compensation for performance of their office and are only compensated by their employer for the time they spend working for the municipality. The salary compensation is later repaid by the municipality. On the basis of a decision of the municipal council, the unreleased representatives may also receive remuneration (the unreleased mayor is always remunerated).

The opinion of the rapporteurs is that in practice, there is de facto application of Article 7.2 since the municipal assembly can decide the question of compensation and other relevant questions. The Rapporteurs were informed that discussions are underway about ratification of Article 7.2.

Article 7.3

Conditions under which responsibilities at local level are exercised - Article ratified

Any functions and activities which are deemed incompatible with the holding of local elective office shall be determined by statute or fundamental legal principles.

There are few barriers to holding elective office in the Czech Republic. Those that exist refer to those with restricted legal capacity and those serving a prison sentence. These restrictions are specified in Act No. 491/2001 Coll., on Municipal Elections. A further condition, which does not preclude election as a member of the municipal council, but rather the subsequent exercise of the mandate, is the condition set out in Section 5(2), (3) and (4) of the Elections Act, which addresses the issue of incompatibility of offices.

The principles underpinning in Article 7.3 of the Charter are evident in the Czech Charter on Fundamental Human Rights and Freedoms. Article 21 declares that all citizens shall have equal access to offices, i.e., shall have a right to run for an office, for instance, in local government. Compliance with these rights and freedoms is reviewed by the Constitutional Court.

Thus, any functions and activities which are deemed incompatible with the holding of local elective office are determined by statute or fundamental legal principles. Consequently, the Rapporteurs conclude that Article 7.3 is complied with in the Czech Republic.

Article 8.1

Administrative supervision of local authorities' activities - Article ratified

Any administrative supervision of local authorities may only be exercised according to such procedures and in such cases as are provided for by the constitution or by statute.

There is a complex method of supervision of local authorities within the Czech governance system based, particularly, on provisions in the Competence Act; the Municipalities Act (Articles 123, 124 and
129a are provisions concerning own competences, whereas Articles 125 and 129b concern the exercise of delegated competences and the supervision thereof); the Regions Act (Arts. 81, 82 and 87 deal with own competences whereas the supervision of exercise of state-administration is regulated by Articles 83, 84 and 88) and the Act on the Capital City of Prague. There are different approaches to supervision of the exercise of delegated and independent powers. Delegated competences are supervised in a hierarchical manner. The respective ministries supervise the regions, and the regions supervise the municipalities. The Ministry of the Interior has general supervisory authority over the independent competences of municipalities and regions. Where there is a specialised supervisory authority, it will carry out the inspection instead of the Ministry (parallel to it). A similar approach is used for the review of auditing, public procurement, etc.

Control of the management of territorial self-government units is regulated by Act No. 420/2004 Coll., on the review of the management of territorial self-government units and voluntary associations of municipalities, and Act No. 320/2001 Coll., on financial control in public administration. Such reviews focus on budgetary management, financial operations, property management, procurement procedures etc. The reviews in municipalities are carried out by regional authorities or independent auditors. The Ministry of Finance is entrusted by law with supervision of the reviews carried out by the regional authority or the auditor. In addition to this, Ministry of finance carries out reviews of regions. The Supreme Audit Office (SAO), an independent body, reviews the expenditure on delegated competences but not expenditure on ‘resources collected by municipalities or regions under their independent jurisdiction’ (Act 166/1993, Part 2, Section 3).

Interlocutors referred to the role of Ministry of the Interior in identifying, assessing and informing statutory supervisory acts within the multi-level system of governance. It was also pointed out that breaches of civil, commercial or labour law or financial control in public administration or the management of local authorities are dealt with by other bodies such as auditors, regional authorities or the Ministry of Finance.

The type of supervision that takes place is aimed at ensuring compliance with the principles of the rule of law and with fulfilment of the defined roles of public authorities, the protection of citizens’ rights and the effective management of public resources. Some interlocutors mentioned the increasing bureaucratic burden resulting from the supervisory processes which sometimes puts a strain on local authorities’ limited administrative resources. Other interlocutors drew attention to a non-systematic transfer of supervisory powers to central state administration bodies with specific sub-agendas. For example, since 2012, the Office for the Protection of Competition has had the power to supervise the performance of local governments in the field of protection of competition. In practice, this has led to the sanctioning of local governments for issuing generally binding decrees, the assessment of which has previously been exclusively entrusted to the Ministry of the Interior.

Supervision of Czech local authorities is exercised according to processes and procedures specified by the constitution or by statute. Therefore, the rapporteurs conclude that Article 8.1 is complied with in the Czech Republic.

Article 8.2

Administrative supervision of local authorities' activities - Article ratified

Any administrative supervision of the activities of the local authorities shall normally aim only at ensuring compliance with the law and with constitutional principles. Administrative supervision may however be exercised with regard to expediency by higher-level authorities in respect of tasks the execution of which is delegated to local authorities.

Control activities are carried out by the Ministry of the Interior with a focus on checking compliance with legislation by local and regional authorities when implementing their own spheres of competence. Such inspections may be carried out physically or remotely. If a municipal ordinance or other decision taken by the bodies of the municipality does not comply with the legal order, they may be revoked by the Constitutional Court. The Ministry notifies the municipality or region of the defects and suspends the validity of ordinances giving them time to fix them, or without due delay, if the decisions interfere with the fundamental rights.

If agencies of central government believe that territorial authorities have acted contrary to the law, and corrective action has not been taken, any further action is systematically left to the judicial branch of government.

The rapporteurs conclude that supervisory activity is generally focussed on ensuring compliance with the law and with constitutional principles. Therefore, Article 8.2 is complied with in the Czech Republic.

Article 8.3

Administrative supervision of local authorities' activities - Article ratified

Administrative supervision of local authorities shall be exercised in such a way as to ensure that the intervention of the controlling authority is kept in proportion to the importance of the interests which it is intended to protect.

The decrees which deal with reviews of the actions and management of territorial self-government units ensure that supervisory activities are proportionate. Article 101 (4) of the Czech Constitution decrees that ‘the state may intervene in the affairs of territorial self-governing units only if such is required for the protection of law and only in the manner provided for by statute’. Proportionality of supervisory activity is reinforced through the legal system. As Radvan et al assert ‘in the Czech Republic, the normative acts form a system in which the strongest are the constitutional acts, followed by the “regular” acts. The least power is assigned to a minister’s ordinances or government decrees’.

Despite the complexity of the supervisory system, local governments units retain discretion, and the judiciary is the final arbiter of transgression. Thus, intervention by controlling authorities is kept in proportion to the importance of the interests which it is intended to protect. The rapporteurs consider that Article 8.3 is complied with in the Czech Republic.

Article 9.2

Financial resources of local authorities - Article ratified

Local authorities' financial resources shall be commensurate with the responsibilities provided for by the constitution and the law.

One of the noticeable features of local government finance in the Czech Republic is the high proportion of earmarked grants, linked to delegated competences. The calculation of the contribution towards delegated competences at local level is based on the five types of administrative roles of municipalities: basic competence, registry offices, building authorities, municipalities with an authorized municipal authority, municipalities with extended powers. The total contribution assigned to a specific municipality consists of partial contributions for each relevant role. The coefficients for redistribution to the regions were set in 2005, reflecting the then costs of delivering delegated services and functions. Since then, circumstances have changed, with particular divergence in population trends. Interlocutors commented on the failure to take the population changes into account when taxes are redistributed.

Tax revenue directly levied at the local level (as opposed to revenue from shared taxes) represents only 1% of total tax revenue in the Czech Republic. Property tax is the only tax that belongs directly to municipalities. Municipalities thus directly raise only 8.3% of their own tax revenue.

For the regions, the most significant revenues are earmarked transfers received from the state budget and from state funds, which account for almost 2/3 of regional incomes. As the Ministry of the Interior states ‘regions are not financially self-sufficient and are therefore dependent on other resources. In the case of the regions, this is primarily revenue from transfers from the state'. Regions do not have power to raise taxes. Shared taxes allocated by centre account for almost 36% of all revenue for regions, with the largest share coming from Value Added Tax. Regions play the role of financial intermediary for payments such as wages of teachers. The direct costs of education represent funds from the state budget (from the chapter of the Ministry of Education, Youth and Sports), which the regions and Prague allocate directly to the relevant schools and school facilities. The Ministry of Finance describes education funding as ‘a flow non-investment transfer and the region and Prague cannot use these funds in any other way. For this reason, the received transfers of regions and Prague are reduced so as not to distort their economic results. The share of transfers (reduced by the direct costs of education) in income of regions is only 13,4 % instead of 60,7 %. The share of transfers (reduced by the direct costs of educations) in income of municipalities is only 10,51 % instead of 14,7 %. The share of transfers decreases significantly after deducting direct education costs’. Clearly, if direct education costs are deducted the number of transfers appears smaller but the education costs, however classified, form a significant part of the income of subnational government over which they do not have autonomy.

The principle articulated in Article 9.2 that local authorities' financial resources shall be commensurate with the responsibilities provided for by the constitution and the law is not unanimously accepted. Interlocutors from central level claimed that transfers for the delegated competences were adequate. Others argued that amount of compensation for the exercise of delegated competencies is still insufficient with municipalities and regions paying for or supplementing services in the field of health care, education, social services, etc. from their own budget.

A difference in expectations was noted. The Ministry of Finance stated that ’as the Czech Republic has a combined model of public administration, it is assumed that municipalities will also contribute to the financing of delegated competences from their own revenues’. Other interlocutors asserted that municipal and city budgets must sometimes be used to finance nationally imposed obligations. World Observatory on Subnational Government Finance and Investment supports such criticisms stating that, for example, ‘Education grants, a major component of central government earmarked transfers, are allocated on a per student basis, which does not efficiently reflect the actual cost of the service’.

The rapporteurs consider that Article 9.2 is partially complied with in the Czech Republic.

Article 9.8

Financial resources of local authorities - Article ratified

For the purpose of borrowing for capital investment, local authorities shall have access to the national capital market within the limits of the law.

Access to capital market is guaranteed in the Czech Republic. Loans and bond issue are also possible sources to finance local self-government expenditure. Both municipalities and regions have the possibility of taking out loans from commercial banks in the Czech Republic. The share of loans in the total debt of municipalities at the end of 2021 was 82.3%. Such loans are usually used for infrastructure, pre-financing of investment projects (co-financed from EU funds) and regeneration and construction of housing stock. Municipalities also use these funds for the reconstruction of school facilities, sports grounds and other civic amenities.

A balanced budget rule applies. The Czech Fiscal Council came into being in January 2018, as an independent supervisory body for the performance of public finances including SNG finance Act No. 23/2017 Coll, on the rules of budgetary responsibility, introduced the so-called fiscal rule, which stipulates that if the debt of a local government unit (regions and municipalities) exceeds 60 % of its average revenue over the last 4 years, it is obliged to reduce this debt by the end of the following year by at least 5% of the difference between the current level of debt and 60 % of its average revenue over the last 4 years. If the local authority fails to reduce the debt by the mandatory minimum, the Ministry of Finance shall temporarily suspend the transfer of tax revenue equal to 5% of the difference between the current level of debt and 60% of the average revenue over the last 4 years. As Figure 2 shows bank balance significantly exceeds debt levels reinforcing the observation that Czech municipalities are generally financially conservative. During the visit and consultation procedure, criticism was made by the Ministry of Finance that at a time of high inflation, municipalities are losing part of their savings unnecessarily by leaving these monies unspent. Thus, there are differences in financial philosophy and economic approaches between some central and local government actors.

Local authorities in the Czech Republic adopt a cautious approach to borrowing and their actions are systematically monitored by the centre. Borrowing opportunities are available and the rapporteurs consider that Article 9.8 is complied with in the Czech Republic.

Article 9.7

Financial resources of local authorities - Article ratified

As far as possible, grants to local authorities shall not be earmarked for the financing of specific projects. The provision of grants shall not remove the basic freedom of local authorities to exercise policy discretion within their own jurisdiction.

The Czech system involves a combination of constraint and autonomy. The majority of transfers, e.g., education funding, are allocated for specific purposes linked to delegated competences, limiting local authority freedom to exercise policy discretion. The high ratio of conditional (earmarked) to unconditional (general) grants is indicative of limited autonomy and not in keeping with the principles of the Charter. Interlocutors repeatedly drew attention to the high level of earmarked grants and the resultant constraints on expenditure preferences. Subsidies are required for the financing of larger infrastructure projects, particularly in small municipalities.

However, the financial resources coming from shared (state) taxes can be disposed of as municipalities choose, giving them a degree of financial autonomy. This allows them to allocate those resources to the tasks that have been prioritised by the particular unit of local self-government. Over the years some municipalities have managed to build up savings. The Ministry of Finance asserts that municipalities and regions have long term surplus accounting of 228.3 bn. CZK between 2013-21.

Although municipalities have some financial autonomy regarding shared taxes, local and particularly regional, government in the Czech Republic is constrained by the dominance of earmarked transfers. This approach does not conform fully with the principles of local self-government as outlined in the Charter. Therefore, the Rapporteurs consider that Article 9.7 is partially complied with.

Article 9.6

Financial resources of local authorities - Non ratified

Local authorities shall be consulted, in an appropriate manner, on the way in which redistributed resources are to be allocated to them.

Neither has Article 9.6 been ratified by the Czech Republic. The fact that no equalisation system has been put in place is seen as decreasing the relevance of this provision. Implicit redistribution does take place through the tax sharing formula, which is weighted towards small municipalities. There are ongoing discussions about subsidy policy at national and EU levels. The Ministry of Finance has also created a working party where the tax sharing system is discussed.

The Congress report on the recurring issues based on assessments resulting from Congress monitoring of the European Charter of Local Self-Government and election observation missions (reference period 2017-2020) states that ‘Article 9 also directly foresees consultation obligation of higher-level government on the way in which redistributed resources are to be allocated to local authorities’^. There is not such a system in place. Interlocutors referred to poor correlation between the current system of local finance/distribution of resources and between economic potential and needs of different categories of municipalities. There were particular concerns expressed about the limited rights and opportunities of larger and economically developed municipalities as well as inequity between different sized municipalities. Even without an equalisation system, a robust consultation system would help ensure optimal allocation and maximum impact of the redistributed resources. Consultations with representative organisations about the criteria to be used for the distribution of shared taxes could be institutionalised.

The rapporteurs heard about the intention to consider ratification of this article and would encourage this move that should be preceded by putting in place a robust consultation system on allocation of distributed resources.

Article 9.5

Financial resources of local authorities - Non ratified

The protection of financially weaker local authorities calls for the institution of financial equalisation procedures or equivalent measures which are designed to correct the effects of the unequal distribution of potential sources of finance and of the financial burden they must support. Such procedures or measures shall not diminish the discretion local authorities may exercise within their own sphere of responsibility.

Article 9.5 is another provision by which the Czech Republic is not bound. Fulfilment of this provision would require substantial change in the system of financing of municipalities. Despite clear asymmetries between the size, income and capabilities of municipalities, there is no equalisation mechanism in the Czech Republic. Inter-municipality disparities persist, particularly between large and small units and neither the grant allocation processes nor own resources are sufficient to overcome such disparities. Figure 2 illustrates the varying debt ratio/income levels. Regional disparities are perceived to be mitigated by the state (and EU) subsidy policy. Furthermore, there is no agreement within Union of Towns and Municipalities on adopting a tax equalisation scheme in the Czech Republic. Article 9.5 is particularly concerned about the protection of financially weaker local authorities. Without sufficient financial resources, municipalities do not have the ability to carry out local government functions as required by Article 3 of the Charter.

Furthermore, the current tax-sharing system does not appear to correct the inequalities, therefore it is recommended that some form of equalisation system be considered. A two-stream equalisation system has been suggested by the OECD with one stream from own tax base and another for fiscal equalisation. Such an approach would make redistribution flows more transparent and would also serve to incentivise subnational governments to develop their tax base.

Interlocutors informed the delegation that the absence of legislation or the varying legislative position of the relevant institutes does not yet allow the Czech Republic to accede to Article 9.5 as regards horizontal financial compensation, since it is not explicitly included in the Czech legal order. Nevertheless, they indicated that Article 9.5 is included in current discussions regarding further ratification of Charter articles.

Article 9.3

Financial resources of local authorities - Non ratified

Part at least of the financial resources of local authorities shall derive from local taxes and charges of which, within the limits of statute, they have the power to determine the rate.

The Czech Republic did not ratify Article 9.3 of the Charter. Yet, there are municipal taxes in the Czech Republic. Property tax is the exclusive revenue of municipal budgets. Municipalities can significantly influence the amount of property tax revenue by varying the coefficients. Municipalities may also levy local fees (on dogs, for spa or recreational stays, for the use of public spaces, on admission fees and on accommodation capacity, for vehicle permits, for disposal of municipal waste, for the assessment of a building plot for the possibility of connecting it to a water supply or sewerage system). Such fees are introduced by way of a generally binding municipal ordinance. The municipality can influence the rate payable but must comply with the legally set ceiling.

As the Contemporary Commentary on the Charter asserts, the power to levy local taxes is direct evidence of local financial autonomy. In the Czech Republic municipalities have the power, although rather limited, to levy local taxes but regions do not have autonomy in taxation, a key principle of the Charter. This would impede ratification of Article 9.3, a possibility which interlocutors indicated was currently being discussed.

Furthermore, in the opinion of the rapporteurs, local authorities could be encouraged to develop their tax base. The tax sharing formula could be adjusted to increase the weighting of factors linked to economic activity (number of employees) and income from such activity.

Article 9.1

Financial resources of local authorities - Article ratified

Local authorities shall be entitled, within national economic policy, to adequate financial resources of their own, of which they may dispose freely within the framework of their powers.

The Contemporary Commentary on the Charter states that the legal authority to perform certain functions is meaningless if local authorities are deprived of the financial resources to carry them out. Article 9 aims at ensuring that local authorities have adequate financial resources to carry out their tasks.

The high number and varying capacity of municipalities complicates the financial dimension of local government in the Czech Republic. With the average municipality size being the lowest among OECD countries in terms of both population and area and with almost 90% of municipalities having fewer than 2 000 inhabitants, the Czech system is fragmented. This fragmentation results in what the OECD describes as ‘below average public spending efficiency in the Czech Republic’.

Sub-national spending accounts for about one-quarter of general government expenditure, close to the average for OECD unitary countries. The expenditure of sub-sector S.1313 (local government sub-sector) in 2020 amounted to CZK 744.209 billion, approximately 13% of GDP. An amendment to Act. No. 243/2000 Coll., on Budgetary Allocation of Taxes in 2021 increased the share of taxes for municipalities and regions, from 23,58 % to 25,84 % for municipalities and from 8,92% to 9,78 % for regions.

Czech local self-government units have a right to their own financial resources, as implied in Art. 101(3) of the Constitution: ‘Local self-governing units are public law corporations which may own property and manage their affairs on the basis of their own budget’. Legislation such as Act no. 250/2000 Sb., Budgetary Rules on Local Budgets, the Municipalities Act and the Regions Act reinforce that right. The main source of own resources (as distinct from shared resources) are property tax and charges imposed by the municipality.

Local authorities may dispose of their resources freely. There is a significant difference in the investment patterns of large and small municipalities The OECD found that investment per capita in small municipalities (with less than 500 inhabitants) is less than half of investment per capita in mid-size (5 000 – 10 000 inhabitants) or large municipalities (over 100 000 inhabitants).

Thus, local authorities are entitled, within the legal framework (particularly Act No. 243/2000), to financial resources of their own, which they may dispose of freely within the framework of their powers. The adequacy of the funding is questioned by some actors. Nevertheless, the Rapporteurs believe that Article 9.1 is complied with in the Czech Republic.

Article 9.4

Financial resources of local authorities - Article ratified

The financial systems on which resources available to local authorities are based shall be of a sufficiently diversified and buoyant nature to enable them to keep pace as far as practically possible with the real evolution of the cost of carrying out their tasks.

Some diversity of potential incomes is possible for municipalities and regions in the Czech Republic with income streams available through own resources and grants. They also finance expenditure through loans and the issuing of bonds.

The buoyancy of local government income is affected both by national trends and levels of economic activity at sub-national level. Covid 19 impacted on local/regional incomes in the Czech Republic. In 2020 a one-off contribution of CZK 13.4 billion (CZK 1 250 per person) was granted from the state budget to municipalities to compensate for the economic consequences of the coronavirus outbreak. In 2021, regions and municipalities received a contribution to mitigate the effects of the Compensation Bonus Act, with regions receiving CZK 1.1 bn and municipalities receiving CZK 3.2 bn.

Sub-national authorities feel strongly dependent on income from central level. Interlocutors stressed that their financial resources are still not sufficient for the necessary investment in infrastructure and local development, leaving them largely dependent on subsidies from national or EU programmes.

Contrasting opinions were also expressed. Many municipalities show an excess of income over expenditure which central commentators feel should be invested. Those interlocutors raised questions about non-efficient utilisation of available public finance. There were also criticisms of the reluctance of many municipalities to use possibilities on the revenue side of their budgets - e.g., in setting local fees, in setting prices for services provided (rent, water, sewerage, heat, public transport), setting property tax coefficients, etc. This was perceived as a failure to use their fiscal autonomy.

The limited options for new sources of funding and the bounded potential for establishing and increasing local taxes make it difficult to consider local resources as having sufficient buoyancy to enable sub-national authorities to keep up with the actual changes in the costs for carrying out local government responsibilities and make the necessary investments in infrastructure, services etc. Delegation of tasks in a manner that does not indicate the source of full funding to meet the cost of the new responsibility is not compatible with the principle of buoyancy.

The system of revenue needs further diversification and flexibility. Interlocutors pointed out that many urban municipalities are feeling financial strain from providing services and infrastructure for large numbers of citizens from surrounding areas. They feel they should be given additional possibilities of taxation and fees.

Because of the limited opportunities for diversification and the insufficient buoyancy, the Rapporteurs consider that Article 9.4 is only partially complied with in the Czech Republic.

Article 10.1

Local authorities' right to associate - Article ratified

Local authorities shall be entitled, in exercising their powers, to co-operate and, within the framework of the law, to form consortia with other local authorities in order to carry out tasks of common interest.

As stated earlier, the large number of municipalities in the Czech Republic leads to fragmentation. Many small municipalities are financially vulnerable and administratively challenged. Inter-municipal collaboration has become the norm with voluntary association of municipalities in vogue since the 1990s. The Municipalities Act created much more favourable conditions for municipal mergers and mutual cooperation but for historical and ideological reasons there is a reluctance to merge. However, joint activities in the form of inter-municipal cooperation have been supported in many ways by central government leading to innovative and effective forms of collaboration.

Municipalities cooperate in various fields. The Act on Municipalities No. 128/2000 Coll., focused on inter-municipal cooperation for the exercise of own competences. Each voluntary union of municipalities is a legal entity with a signed contract, a budget and is regulated by a municipal statute. Most inter-municipal collaboration occurs in the areas of waste management, water supply and sewerage, maintenance of public spaces, education, social care, health services, joint provision of social, cultural and leisure activities, development of tourism or landscape care. Cooperation takes various legal forms, from the establishment of a voluntary union of municipalities to commercial companies bringing together several municipalities and carrying out relevant activities in this legal form (e.g., sewage systems and water supply systems).

Plans are proceeding for the institutionalisation of collaboration. In cooperation with the Ministry of Regional Development, the Ministry of the Interior is looking for solutions to support strategically conceived inter-municipal cooperation in functional micro-regions and metropolitan areas. In addition, the Ministry of the Interior is currently preparing a new amendment to the Act on Municipalities, which should better establish the legal position of voluntary unions of municipalities and enshrine the carrying out of administrative activities by voluntary unions of municipalities or communities of municipalities, by means of a ‘shared civil servant’ or what some interlocutors referred to as a ‘Flying Officer’.

In light of the above mentioned, the rapporteurs consider that Article 10.1 is complied with in the Czech Republic.

Article 10.2

Local authorities' right to associate - Article ratified

The entitlement of local authorities to belong to an association for the protection and promotion of their common interests and to belong to an international association of local authorities shall be recognised in each State.

Local authorities in the Czech Republic are entitled and encouraged to belong to an association. The main associations representing regional and local governments are the Association of Regions of the Czech Republic and the Union of Towns and Municipalities of the Czech Republic and the Association of Local Authorities of the Czech Republic. Under the Legislative Rules of the Government, central government must consult these organisations and seek their comments on legislative proposals and the implications and prerequisites of the legislative proposals which would impact on sub-national government.

The Union of Towns and Municipalities represents more than 2,700 (approx. 44%) of the Czech communities, municipalities, towns and cities. They represent more than 8 million (79%) of the total population of the Czech Republic. The Association of Regions of the Czech Republic promotes the regions' joint interests, overseeing the overall development of the territory and responding to the needs of citizens.

These organisations are also involved in international associations. For example, the Union of Towns and Municipalities of the Czech Republic (SMO ?R) has been taking active part in activities of the Council of European Municipalities and Regions (CEMR) since 1992. SMO ?R representatives also work as delegates in the Committee of the Regions (CoR) and cooperate with the Congress of Local and Regional Authorities of the Council of Europe. The organisation is also involved in the global organization United Cities and Local Governments (UCLG).

The municipal and regional associations seem vibrant and influential at home and abroad. Consultation processes have been institutionalised. Lessons from management of the Covid-19 crisis and comments from some interlocutors suggest that the consultative processes could be improved on emergency legislation. However, the Rapporteurs consider that Article 10. 2 is complied with in the Czech Republic.

Article 10.3

Local authorities' right to associate - Article ratified

Local authorities shall be entitled, under such conditions as may be provided for by the law, to co-operate with their counterparts in other States.

There are no institutional impediments to international collaboration. Municipalities may cooperate with other municipalities and with municipalities of other states and be members of international associations of territorial self-governing units. Unions of municipalities can cooperate with unions of municipalities in other states. The regions can cooperate with other regions and municipalities and with the territorial self-governing units of other states and be a member of international associations.

There is much international collaboration among Czech municipalities and regions, particularly under the aegis of the EU. Euroregions (or associations of municipalities) are an important part of cross-border cooperation in the Czech Republic. Projects are in place with Germany, Austria and Slovakia. According to interlocutors, the COVID-19 pandemic had a very negative impact on cross-border cooperation - it paralysed mobility (labour mobility and mobility of people), tourism (which is a significant economic activity of these regions), joint cross-border services and cultural activities, spheres which had been well developed prior to the pandemic.

Czech local authorities are entitled to co-operate with other local entities and have a specific right to form consortia and corporations. They are actively collaborating with their counterparts in other States.

The Contemporary Commentary on the Charter recommends assessment of the status of the Council of Europe’s international co-operation instruments during monitoring visits. Interlocutors made it clear that it is not expected that a ratification process will be launched in relation to the Additional Protocol to the Outline Convention on Trans-frontier Co-operation between Territorial Communities or Authorities (CETS No 159). This Convention falls within the competence of the Ministry of Regional Development, which is of the opinion that the Convention and its additional protocols are already obsolete.

Notwithstanding the situation with regard to CETS No. 159, the rapporteurs conclude that the requirements of Article 10.3 are satisfied in the Czech Republic.

Article 11

Legal protection of local selfgovernment - Article ratified

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.

The Constitution guarantees local governments judicial protection against illegal state interference in the right to self-government. Territorial units have legal personality. Within the framework of the exercise of self-governance, the have right to protect the self-governing rights assigned to them by law and the property that belongs to them before the independent court of law.

The Czech legal order offers several avenues for protecting rights of self-governing authorities:

Constitutional complaints under Article 87 (1) of the Constitution and Section 72 (1) of the Constitutional Court Act.
Disputes over competences under Article 87 (1) of the Constitution and Section 120 of the Constitutional Court Act.
Action in matters of self-government (Article 67 b) of the Code of Administrative Justice.
Action in matters of elections and referenda (Article 88 of the Code of Administrative Justice).
Competence Lawsuits (Article 97 of the Code of Administrative Justice).

Article 10 of the Czech Constitution states that promulgated treaties, to the ratification of which Parliament has given its consent and by which the Czech Republic is bound, form a part of the legal order. Consequently, the Constitutional Court has referred to the Charter in a range of its decisions initiated by the Ministry of the Interior or by members of parliament or senators.

The rapporteurs consider that local (and regional) authorities’ right of access to a judicial remedy is complied with in the Czech Republic.

ACCESSION

to the Council of Europe 30 June 1993

RATIFICATION

of the European Charter of Local Self-Government 7 May 1999

CONSTITUTION | NATIONAL LEGISLATION

The provisions enshrined in Article 8 as well as Chapter 7 of the 1992 Constitution take ample care of the requirement under Article 2 of the Charter that the principle of local self-government be recognised in the Constitution.

24Ratified provision(s)

0Provision(s) with reservation(s)

6 Non ratified articles

24Compliant Provision(s)

3Partially Compliant Articles

2Non-compliant Provision(s)