CARTA-MONITORMonitoring
of the European Charter of Local Self-Government Conseil de l Europe

Latvia - Monitoring report

Date of the monitoring visit: from 12 to 14 September 2017

Report adopted on: 27 March 2018

Files : Report CPL(2024)47-03 | Recommendation 514(2024)
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This report assesses the implementation of the Charter in Latvia following a monitoring visit carried out from 20 to 22 February 2024. The report welcomes the strengthened opportunities for residents to engage in budgetary and decision making processes and the benefits of ongoing digitalisation for local governments.

However, the report raises concerns about the heavy reliance of local authorities on central funding, limited capacity for local resource generation and excessive earmarked grants, which limit local autonomy. Additionally, the rapporteurs note shortcomings in the funding of equalisation system, the lack of adequate financial resources for new competences at the local level, their over regulation by the central government as well as ambiguities in the division of competences. Furthermore, the ministerial discretionary power to suspend local council chairpersons along with the burdensome supervision
system pose risks of disproportionate central interference in local affairs. The report also highlights the absence of a legal obligation to consult local communities concerned in the event of the modification of local authority borders.

Consequently, the rapporteurs recommend increasing revenue potential at the local level, aligning local financial resources with local competences, simplifying supervision and clarifying the division of
competences. They also call for removing ministerial suspension powers, introducing mandatory consultations of local communities on local boundary changes, revising the equalisation fund criteria, and signing and ratifying the Additional Protocol to the European Charter of Local Self Government on the right to participate in the affairs of a local authority .

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.

Article 2 of the Charter is concerned with ensuring that the principles of local self government are enshrined in the legal and/or constitutional systems o f signatory states. In Latvia, the principle of local self government is not explicitly mentioned in the Constitution. However, Chapter 1 of the Constitution declares that the sovereign power of the State of Latvia is vested in the people of Latvia. Articl e 101 refers to the principles of citizen participation and local direct democracy stating that: every citizen of Latvia has the right, as provided for by law, to participate in the work of the State and of local government, and to hold a position in the civil service. Local governments shall be elected by Latvian citizens and citizens of the European Union who permanently reside in Latvia.

Latvia is bound by the entire Charter, except Article 9.8. In Latvia, acts of international law take precedence over domestic legislation and regulations , except the Constitution . Because the Charter is an act of international law ratified by Latvia, it has direct applicability. Consequently, despite lack of explicit mentio n of the principle of local self government in the Latvian Constitution, the Constitutional Court repeatedly proclaims the principle in its case law. For example, in Paragraph 11 of Case No. 2017 32 05, the Constitutional Court ruled that the totality of minimum requirements, or the principle of self governance comprises: 1) the existence of a local government and 2) direct democratic legitimisation of it. Thus, it creates the legal basis for the institutional existence and functional activities of local go vernments. The Constitutional Court continuously reinforce d the dominant position of the Charter in Latvian Law in rulings such as those on Case No. 22 41 01 and Case No. 2021 43 01.

Previous monitoring reports on Latvia referred to laws and documents which give implicit recognition to the principle of local self government . More recently, the Local Government Law adopted on 20 October 2022 states in Chapter 2 that local government is a derived public entity a local administration which has a decision making body elected by the residents a council and which independently ensures the performance of the functions and tasks specified in legal acts in the interests of the residents of its administrative territory 26 Thus, the rapporteurs are of the view that in law, Latvia upholds the principle that local authorities enjoy autonomy ” or self administration. Accordingly, the r apporteurs consider that Article 2 of the Charter is formally complied with in Latvia. They consider it advisable to enshrine the principle of local self government explicitly at the constitutional level.

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.

35. Article 3.1 of the Charter requires evaluation of whether, in law and in practice, local authorities have the right, capacity and possibility to manage a significant share of public affairs for which they have responsibility and which, as the Contemporary
Commentary on the Charter states, are capable of being carried out at local level.

36. According to the Local Government Law 2022, local governments in Latvia have a range of competences: 1) autonomous competence autonomous functions and voluntary initiatives
implemented as autonomous functions and 2) assigned competence delegated administrative tasks.

37. The specific powers of local authorities, outlined in Section 4 of the Local Government Law, are as follows:

1) to organise water management, heating supply, and municipal waste management services for inhabitants, irrespective of the ownership of the housing fund;
2) to take care of improvements and sanitary cleanliness of the administrative territory of the
local government (lighting and maintenance of areas intended for public use; development and
maintenance of parks, squares, and green areas; flood prevention measures; establishment
and maintenance of cemeteries and places for burial of dead animals), and also to lay down the
requirements for the maintenance of territories and structures, insofar it is related to public safety, maintenance of sanitary cleanliness, and preservation of the urban landscape;
3) to take care of the construction, maintenance, and management of roads owned by the local
government;
4) to take care of the education of inhabitants, including the provision of compulsory education
and availability of pre school education, secondary education, vocationally oriented education, interest related education, and adult education;
5) to provide a culturally diverse offer to inhabitants and the opportunity to take part in cultural life, to contribute to the preservation of the cultural heritage in the territory of the local government and to support cultural activities;
6) to take care of the health of inhabitants to take measures for promoting healthy lifestyle and organise availability of health care services;
7) to promote the development of the sport, including the maintenance and development of
sports bases of the local government, to support athletes and sports clubs, including professional sports clubs, and to provide support for the organisation of sporting events;
8) to carry out youth work;
9) to ensure support to inhabitants in solving social problems, and also the possibility to receive social assistance and social services;
10) to provide assistance to inhabitants in resolving housing problems, and also to promote the
creation, maintenance, and modernisation of the housing fund;
11) to implement the protection of the rights and interests of children and persons under trusteeship;
12) to facilitate and support economic activity in the administrative territory of the local government;
13) to issue permits and licences for commercial activities;
14) to participate in ensuring public order and security, including by establishing and financing
the municipal police;

15) in accordance with the spatial plan of the local government, to determine land utilisation and development thereof;
16) to ensure the rule of law of the administrative proceedings related to the construction process;
17) to perform civil status act registrations;
18) to take measures in civil protection and disaster management, in the field of fire safety and fire fighting;
19) to organise public transport services;
20) to facilitate sustainable administration and management of natural capital, and also to
determine the procedures for the use of local government property in public use, unless it is laid
down otherwise in laws;
21) to ensure the availability of sobering up services;
22) to contribute to climate change mitigation and adaptation.

38. The State has shared responsibilities with local governments in the field of:
- spatial planning;
- infrastructure management;
- economic policy and development;
- welfare;
- school education;
- culture.

39. Therefore, in Latvian law, municipalities have the power to regulate and manage a substantial share of public affairs ”. Chapter III of the 2022 Local Government Law Law29 includes Article 10 which delineates many competences of the municipal council such as enacting binding regulations, formulating and approving plans and public policies; deciding on dividing or merging the administrative territory;
establishing and reorga nising the municipal administration etc. Municipalities have the right to establish associations or foundations and capital companies; acquire and expropriate movable and immovable property; privatise facilities owned by the local government; enter into various transactions; introduce some local fees and determine their rate; decide on tax rates and tax relief; bring actions in court and raise complaints with administrative institutions.

40. Councils may issue binding regulations in order to ensure the performance of autonomous functions. Binding regulations ensuring the performance of autonomous functions of a local government may provide for the right of the local government to issue administrative acts laying down legal obligations and set ting forth administrative offences and administrative penalties applicable thereto. Local authorities in Latvia may approve local regulations on a wide range of issues e.g., buildings and urban planning; protection and maintenance of public forests and wat ers; markets and street trading; public order; the protection of domestic animals, and the organisation of public transport.

41.Local government expenditure as a proportion of the national general, government consolidated
budget, is internationally regarded as an indicator of the significance of local government's role. Latvia
ranks below Scandinavian countries but marginally higher than the other Baltic states and better than
most East European states. Figure 1 illustrates Latvia s comparative standing rega rding local
government expenditure.

42. A fact finding Congress mission carried out in 2019 (see page 7), which raised concerns about
the ATR, pointing to centralisation, limited consultation and decreased local budget autonomy,
concluded that municipalities own ” resources remain inadequate and their funding depends too much on government budgetary priorities, issues that they perceive as running counter to Article 3.1.

43. During this monitoring visit interlocutors raised the issue of the ongoing dependence of local government on central funding for implementation of their competences, the high proportion of grants
which are earmarked, the limited opportunities for local governments to leverage own resources and
difficult financial situations in some municipalities who struggle to balance thei r budgets . Some interlocutors stated that they consider that local government is constrained by state requirements.
The LALRG contends that in the new local government law restriction of local authorities ’ voluntary initiatives is envisaged . The Association also referred to over regulation and the tendency to expect greater uniformity in local services which they perceive as reducing local authorities ’ discretion.

44. The rapporteurs are of the opinion that the legislative provisions assigning a substantial's hare of public affairs to local government in Latvia satisfy the requirements of Article 3.1. However, they consider that in practice some local authorities still lack the capacity to effectively manage a substantial share of public affairs under their own responsibility and in the interests of the local population due to inadequate financial resources. This constraint is further compounded by rather tight administrative and financial control exercised by the state (which will be developed under the analysis of Articles 9 and 8.3 of the Charter), particularly the detailed rules of the Cabinet of Ministers.

45. Therefore, the rapporteurs conclude that Article 3.1 is partially complied with.

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.

46. Article 3, paragraph 2 declares that the right of self government must be exercised by democratically constituted authorities, it confirms that local autonomy does not solely involve the transfer of powers and responsibilities from central to local authorities but also requires local government to transmit and reflect, the will of the local population. The Article also indica tes that direct and participatory forms of democracy play complementary roles to that of representative forms of democracy.

47. In Latvia the 2022 Local Government Law outlines the institutional structure of local government and decrees that councils shall be composed of elected councillors the number of whom shall be determined by the Law on the Election of Local Government Councils. Section 27 of the 2022 Act specifies that council shall take decisions during a quorate council meeting. The local council is the body for debate and decision making. Council members are directly elected by the citizens of the
municipalities, in equal, direct, secret, and proportional elections for a four year term. A proportional representation list system with a 5% threshold is in place. Since 2020, lists of candidates may no longer be submitted by associations of voters in municipal elections, but only by registered political parties,
registered associations of registered political parties, or two or more registered political parties that have not joined a registered association of political parties. Only candidate lists from registered political parties are valid. This provision drew criticism from some interlocutors who felt that voters’ associations should be allowed to nomi nate candidates, thereby avoiding monopolisation by political parties. However, the Constitutional Court has upheld the constitutionality of certain aspects of this system. Seats are allocated using the Saint Lagüe method to determine which list is the winner. Then, within each list votes are counted to determine which candidate on each list has received the most votes.

48.The number of councillors per municipal council is indexed to the population of the municipality. For the 2021 local elections:
- 15 councillors were elected in municipalities with a population of up to 30,000;
- 19 councillors in municipalities with a population of between 30,001 and 60,000;
- 23 councillors in municipalities with more than 60,000 residents;
- 13 councillors in cities with population of up to 50,000 residents and
- 15 councillors in cities with over 50,000 residents.

49. Elections are held in accordance with the Law on the Election of Local Councils (originally adopted in 1994 and most recently amended in 2022). Citizens of Latvia and other Member States of the European Union over the age of 18 have the right to participate in local government elections. All voters must be registered in the Electoral register. Citizens of the European Union must be registered in the Latvian Population Register 90 days before the elections in order to participate in local government elections in Latvia. Voters have the right to vote in the constituency where they have their registered place of residence 90 days before the election day or in the municipality where they own real estate.

50. Latvian local councils elect the mayor who leads and organises the work of the local council. S/he represents the local entity in vario us forums and for formal procedures. The Local Government Law provides for other bodies such as standing committees with councils obliged to establish a finance
committee, a development committee and committees responsible for social, educational, and cultural matters. Councils may also establish other committees all of which are elected from among the elected councillors. Standing committees prepare draft decisions for the local council. Elected councils make important political decisions affecting the municipality or city, reflecting the various legal competences of the councils. These decisions include the local budget, local generally binding regulations, the local economic and development plans, local internal by laws, the local master plan, the naming of streets and public places, remuneration of council members and the mayor. The sessions of the council are open (except for the cases laid down in law). Local governments must provide a live audiovisual transmission of the council meeting on its official website.

51. In addition to direct democratic procedures, Latvian local authorities facilitate various participative democratic opportunities. Until recently, many such activities were of an ad hoc nature with significant inter-municipal variations. The new Local Government Law includes a separate chapter (Chapter VI) Involvement of Society in the Work of a Local Government that significantly extends the legal basis for citizen participation. Some of the instruments include (a) local referenda, as regulated by the Local Government Referendum Law (b) collective submissions (c) direct involvement of residents in allocating 0.5 per cent of the annual municipal spending through a participatory budgeting process. (d) Advisory Committees and Commissions.(e) public discussions and public information (f) Inhabitants’ Councils - Section 58 of the Local Government Law declares that in order to ensure the representation of the interests of the inhabitants of local communities and the development of the territory of the local government by promoting mutual cooperation and coordinated action of the inhabitants for the common good, advisory local government authorities may be established in the local government inhabitant councils Municipal councils are required to issue the by laws of the inhabitants’ council binding regulations which determine the conditions for the establishment and operation of the inhabitant council. Some interlocutors expressed disappointment with the optional nature and advisory role of the inhabitant councils.

52. An innovative online platform called Mana Balss (My Voice) empowers individuals to formulate and circulate citizens ’ initiatives digitally. In 2022, the platform submitted 23 initiatives to parliament and 14 to local governments. Eight of these initiatives were incorporated into law, addressing issues like animal protection and recycling policy. Additionally, three initiatives garnered support from local governments.

53.The Local Government Referendum Law is due to come into effect on 1 September 2024. Its purpose as articulated in Article 1 is to promote the participation of local government residents in deciding issues of local importance. It allows for a referendum to be called for three issues, namely, the sustainable development strategy of the local government the decisions of the council by which the municipality proposes the construction of a new public building, as well as on dissolution of the municipal council. The LALRG was critical of the limited scope of the new law, considering it not adequate for organisation of decision making about important local government issues.

54. Regulations of the Cabinet of Ministers, No. 769 of 2023 determine the procedure for the Cabinet of Ministers to coordinate with local governments on issues affecting the interests of all local governments. Such co-ordination is specified for draft laws and draft Cabinet of Ministers regulations that concern local governments as well as for the annual budget determination process.

55. From the above it is clear that, in Latvia, the principles of local democracy (both representative and direct) underpinning Article 3.2 are upheld. The rapporteurs consider that Article 3.2 is complied with in Latvia.

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.

56. This paragraph of the Charter requires, in the inter ests of clarity and legal certainty, that the basic powers and responsibilities of local authorities be stipulated in the constitution or by statute, so as to ensure predictability, continuity and protection for local self government.

57. Unlike many other countries, Latvia s Constitution does not include any specific chapter dealing with the structures or powers of local government. However, as referred to in previous sections, Article 101 of the Constitution does articulate important principles of local go vernment. As evidenced by its rulings, the Constitutional Court regards Article 101 on citizen participation in local authority activities as a safeguard for local self government. Furthermore, the European Charter of Local Self Government directly provid es additional protection for local government because acts of international law take precedence over domestic legislation and regulations in Latvia , except for Constitution.

58. A range of statutes underpins local government structures and practices in Latvia. Currently, the most significant piece of Latvian legislation dealing with local self government is the 2022 Local Government Law (which replaced the 1994 Act which had been revised continually) with the most recent amendments signed into Law in March 2024. Until its withdrawal in October 2022, the Law on Local Governments, which was adopted in 1994, regulated the general rules and economic basis of the operation of Latvian local governments, the competence of local governments, the council and its institutions, as well as the rights and duties of the chairman of the council, the relations of local governments with the Cabinet of Ministers and ministries, as well as the general rules of mutual relations between local governments. Current provisions dealing with these issues are contained in the 2022 Local Government Law. As Ikstens concludes the overall distribution of powers and municipal functions remained largely intact. The Law decrees that voluntary initiatives may be planned and funded by municipalities if this does not interfere with the performance of autonomous functions and delegated administrative tasks. Section 10. point 19 of the 2022 Local Government Law enables councils to take decisions with respect to procedures for the performance of the autonomous functions of the local government and for determining the officials responsible for the performance thereof ”. Regulation of the territorial divisions has undergone many changes from the 1998 Law on Administrative Territorial Reform, to the 2020 Law on Administrative Territories and Populated Areas, a new law which institutionalised the current units of local government.

59. The Cabinet of Ministers ” is the name originally bestowed on the government in Latvia's Constitution of 1922 and reinstated in 1993. Local governments are subject to the Regulations adopted by the Cabinet of Ministers because the Regulations are generally binding legal acts, binding on every
person and institution in Latvia Among recent important regulations affecting local government are: Regulations of the Cabinet of Ministers of June 15, 2021 No. 386, Rules for changing the status of administrative centre, village and city, as well as determining, amending and updating the territorial
division of administrative territory, district and village boundaries and Regulations of the Cabinet of Ministers of December 19, 2023 No. 769 Procedure in which the Cabinet of Ministers coordinates with local governments issues affecting the interests of all local governments Some interlocutors suggest
that over regulation is increasing since local authorities ’ duties are described in detail in the rules adopted by the Cabinet of Ministers.

60. The 2022 Law on Local Governments makes a clear distinction between autonomous, voluntary and assigned competences. The law also establishes general rules regarding the organisation of work, election of chairs and committees, functions of chairs and executive directors, audit, property, inter
municipal cooperation, etc. The powers and responsibilities of local government in Latvia are laid out by statute although differences in interpretation occasionally arise between levels and between political and administrative actors as was evident in the various discussions during the m onitoring visit and in
the submissions to the rapporteurs during the consultation procedure.

61. The rapporteurs consider that Latvia is in compliance with Article 4.1

62. Article 4, paragraph 2, decrees that local authorities must have the right to exercise their initiative on matters not explicitly excluded from their competence by law. It also articulates the need for full discretion to exercise their initiative”, thereby condemning any restrictions on local authorities ’ discretion
which might arise from management, fiscal or budgeting rules that require a sound legal basis for spending. Article 4.2 also draws attention to the need for cl arity about the manner in which responsibility is shared between local and national bodies.

63. The 2022 Local Government Law assigns to local government a range of autonomous competences . Section 5(3) states that voluntary initiatives shall be planned an d financing for the fulfilment thereof shall be provided if it does not interfere with the performance of autonomous functions and delegated administrative tasks within the competence of the local government". Local government interlocutors pointed out that, in practice, the autonomy of local authorities is constrained by inadequate resources and the increasing number of obligatory tasks and centrally set standards for certain assigned tasks. Article 6 of the Lo cal Government Law states that when delegating an administration task, the financing necessary for the performance of the respective administration task shall be provided to the local government”. Funding is provided but the payments do not always corres pond with the full costs incurred at local level. e.g., the non wage costs of municipal policing. Some interlocutors observed that MEPRD sets up a list of different voluntary initiatives to be performed by local authorities not in order to develop their d iversity, but with an intention to reduce opportunities of voluntary initiatives MEPRD interlocutors affirm that local governments implement voluntary initiatives from their own budgets and themselves choose which voluntary initiatives should be implemen ted. It was also pointed
out that in the public interest it is necessary to specify in detailed laws the conditions and procedure for the exercise of certain competences. Thus, the extent of the discretion of local authorities varies between spheres. The task of dealing with at risk youth was cited as a task ab out which it was not clear at which level responsibility lies. Similarly, it was pointed out that while hospitals may be owned by cities, the services to be provided by them are predominantly assigned by central government, thereby reducing local discretion. Interlocutors from MEPRD explained such involvement by asserting that the Law on Local Governments stipulates that the state can undertake the performance of a task that is part of the autonomous function of the local government, observing the principle of subsidiarity and proportionality. This means that an administrative task that is part of the function is performed by a
subject which is closer to the citizen and can perform the task more efficiently ’.

64. Some interlocutors referred to tendencies towards over regulation since local authorities ’ duties are often described in detail in the rules of the Cabinet of Ministers. During the consultation procedure the LALRG also pointed out that local issues are exc essively regulated by the Regulations of the Cabinet of Ministers. The issues of autonomy and over regulation have also been addressed by external observers. The 2022 SGI Report for Latvia Latvia on Sustainable Governance Indicators asserts that the central government has a tendency to overregulate, a practice that may negatively affect the local government s discretionary authority. The same publication cites the warning from the President's Strategic Advisory Council that over regulation is seriously encroac hing on local government autonomy. The Council has called for a limit to bureaucratisation and a reduction in the volume of regulations governing functions that are mandated as autonomous. Both national and municipal interlocutors from
the sector, decried the over regulation and curbs which directly and indirectly limit local government autonomy.

65. For some tasks, the expenses related to performing government tasks imposed on municipalities are not fully covered from the state budget because the full costs had not been anticipated. Aspects of school reform and the non pay costs of municipal policing were cited as examples. Interlocutors from the local government sector assert that such shortfalls limit the discretionary spending of municipalities.

66. The rapporteurs consider that local authorities in Latvia do have legal discretion to implement their initiatives as specified, particularly, in Article 5 of the Local Government Law. However, in practice centrally-set service standards for assigned tasks, funding gaps and the need to adapt local spending to the state budget priorities negatively impact this discretion. Consequently, the rapporteurs assert that Article 4.2 is partially complied with in Latvia.

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.

Consult reply indicated at article 4.1

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.

67. This Article reinforces the principle of subsidiarity which aims to ensure that decisions are made at the most appropriate level. The Charter urges the execution of public responsibilities at the level closest to citizens. This principle is perceived in the Contemporary Commentary as vitally important for the protection of local authorities against trends towards upscaling and re centralisation that threaten to render local self government meaningless ”.

68. Both upward and downward subsidiarity are in place in Latvia. The section of Chapter 2 of the 2022 Local Government Law, which deals with local governments autonomous competences, concludes with a provision which upholds the principle of subsidiarity, namely: the State may take over the performance of a task falling within the autonomous function of the local government in the cases and in accordance with the procedures laid down in law by complying with the principles of subsidiarity and proportionality ”. The State Administrative Structure Law includes t he principle of subsidiarity among ten main principles of public administration.

69. The 2022 Voluntary National Review (VNR) of Latvia's compliance with the Sustainable Development Goals portrays the planning system as evidence of subsidiarity, stating that the Latvian planning system is decentralised and follows the principle of subsidiarity. Specific action is initiated by the planning level closest to the respective problem to be solved. The national government addresses issues that cannot be best addres sed at the local government, community or individual level. The national and local governments support and encourage citizens ’ initiatives.

70. Section 2.1 of the 2022 Local government Law states that a local government is a derived public entity, i.e. a local administration, which has a decision making body, i.e. a council, elected by the inhabitants and which independently ensures and is responsible for the performance of the functions and tasks laid down for it in legislative acts in the interests of the inhabitants of its administrative territory ”. It clearly provides that local governments, within the scope of their competence and the law, shall act independently. However, implementation of the principle of subsidiarity, is inextricably linked to the organisational, financial and professional capacity and autonomy of local authorities. The reforms have led to improvements in organisational and professional capacity but local authorities financial dependence on the centre, as evidenced by the high proportion of grants which are earmarked and the limited opportunities for local governments to leverage own resources, restricts its autonomous decision making.

71. The issue of national approval of local authorities’ general binding regulations was raised by some interlocutors in the context of subsidiarity. Section 44.2 of the 2022 Law on Local Governments states that binding regulations ensuring the performance of autonomous functions of a local government may provide for the right of the local government to issue administrative acts laying down legal obligations, insofar as they are necessary for the implementation of the norms included in the binding regulations regulations.” Section 45 gives councils the right to issue binding regulations and to provide for admini strative liability for the violation thereof. However, Section 47 decrees that the council shall send in writing the binding regulations referred to in Section 45 of this Law, and also the binding regulations regarding matters of social security and prote ction of the rights of the child and regarding the rates of taxes and fees of the local government and the explanatory memorandum thereof to the Ministry of Environmental Protection and Regional Development for the provision of an opinion, or in the case o f the binding regulations and the explanatory memorandum thereof laid down in another law to the ministry specified in the relevant law ”. The Minister for Environmental Protection and Regional Development may suspend the unlawful binding regulations or s eparate provisions thereof on the basis of a reasoned order. Section 66 outlines the entitlement of a council to submit an application to the Constitutional Court for the revocation of the order of the Minister on the suspension of the binding regulations. Some local government interlocutors perceive the requirement for an opinion as a constraint on their autonomy and a violation of subsidiarity, while central government interlocutors perceive this review process as a means to ensure alignment with national objectives and regulations. It was also pointed out that the range of binding regulations on which the MEPRD provides an opinion has been reduced significantly with the introduction of the Local Government Law .

72. Notwithstanding the issues outlined above, the r apporteurs conclude that Article 4.3 is complied with in Latvia.

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.

73. Compliance with Article 4.4 requires that limitations on the powers given to local government should be exceptional and should be based on objective reasons and interpreted narrowly. This provision also discourages the overlapping of responsibilities betwe en levels of government.

74. The 2018 Monitoring Report criticised the qualified nature of many tasks designated as autonomous but restricted by terms such as participation or collaboration in the provision of a public service. It also drew attention to the many and detailed regulations governing the way local governments in Latvia must exercise their own competences and deliver the local public services, stating in Paragraph 60 that this fact seriously undermines the real capacity of local governments to de sign and to implement local public policies ”. While the 2022 Local Government Law provides greater clarification of the respective areas of competence and the 22 autonomous tasks listed in Article 4 of Chapter 2 are without qualification, some interlocutor s assert that their discretion is still limited. LALRG points to the number of new autonomous functions which are compulsory established (e.g., municipal police and establishment of sobering centres) and which obligations constrain local authority freedom to prioritise their selected autonomous tasks. Similarly, other local interlocutors asserted that dependence on state financing compromises municipalities' autonomy and their ability to address local priorities effectively and independently.

75. During the m onitoring visit, the distribution of competences also came in for criticisms by interlocutors with local actors citing the lack of clarity about competences and the overlapping of competences (e.g., auditing). LALRG expressed fears that, with its emphasis on uniformity, the 2022 Local Government Law will lead to restriction of local authorities’ voluntary initiatives. National commentators asserted that the Local Government Law includes an improved model of the organisation of municipal operations, which reduces the possibility of different interpretation and application of legal norms and is aimed at more efficient administration and public involvement in municipal work, and mutual cooperation between municipalities”. Local government interlocutors also raised the issue of multiple auditing processes which they believe is an overlapping of competences. It was asserted by LALRG representatives that in evaluating the quality and efficiency of local authorities’ performance the SAO overlaps with the functions of the MEPRD and external audit.

76. The 2022 Local Government Law ordains that the state continues to have a role in certain autonomous functions. Section 4.4 of Chapter 2 of the 2022 Local Government Law states that in the cases and by the procedures pro vided for in external legal acts, the State shall participate in the implementation and financing of specific autonomous functions ””.

77. In the opinion of the r apporteurs, local governments in Latvia have significant legal capacity and many important governmental ” powers which are clearly specified in the 2022 Local Government Law. Various legislative acts and regulations issued by the Cabinet of Ministers seek to clarify the division of competences, but interlocutors assert that ambiguities sometimes exist. Clarification is still required in some aspects of the allocation of powers to different levels Therefore, the rapporteurs believe that Article 4.4 is partially complied with in Latvia.

Article 4.5

Scope of local self government - Article 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.

78. The Contemporary Commentary affirms that Article 4 paragraph 5 aims at protecting local authorities as decision makers and ensuring that, insofar as possible, local authorities have discretion to adapt the exercise of their delegated powers to local conditions. The Contemporary Commentary asserts that such discretion ensures that local authorities are not merely acting as agents of higher level authorities.

79. In accordance with the procedures laid down in Latvia's State Administration Structure Law an administration task falling within the competence of t he s tate or another derived public entity may be delegated to a local government. When performing the administration tasks delegated by the State, the local government represents the State and is subordinated to the Cabinet of Ministers. The State is liable for the lawful and efficient performance of the delegated administration task.

80. Local councils can shape the exercise of their delegated functions, albeit within the oversight of central government ministries, to take account of local circumstances.

81.During the visit, interlocutors referred to many instances where municipalities adapt their delegated powers to local conditions with the details and conditions of the execution of those functions following
from special local regulatory enactments. Example s included social services, public transport, land use, etc.

82. While cognisant of the negative effect the multiplicity of regulations may have on local authorities ’ discretion to adapt the exercise of their delegated powers to local circumstances, the rapporteurs consider that Article 4.5 is complied with in Latvia.

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.

83. Through Article 4 paragraph 6, the Charter introduces a procedural requirement for timely and appropriate consultation of local authorities. This implies that local authorities should be able to obtain full information on proposals, decisions and policies that concern them directly; that local authorities
should have the opportunity to feed into the policy making process before decisions and policies become legally binding and that local authorities should have the time and ability to formulate and present their perspective. As the Contemporary Commentary asserts, this principle aims to ensure the genuine
participation of local stakeholders in decision making of those entities h aving power to define the rights of local authorities.

84. The report following the Congress fact finding mission of 2019 was very critical about the limited consultation which took place prior to major reform of local government system stating that neither the local authorities concerned nor the national association itself took part in the design of the reform, as the plan was drawn up solely by experts from the ministry concerned. In addition to criticism about the lack of meaningful consultation during the ATR, some interlocutors pointed out during the visit that Covid 19 pandemic and Russia s war in Ukraine led to rushed decisions and limited consultation with
local authorities and social partners.

85.LALRG considers that, in legal terms, Latvia has one of the most developed consultation systems in Europe. Section 48 of the State Administration Structure Law (as consolidated in December 2022) requires that institutions shall involve representatives of public organisations and other organised groups and/or individual competent persons in their activities by including such persons in working groups, advisory councils or by asking them to provide opinions. Latvia has very clear requirements for consultation of local authorities. Section 82 1 of the 2022 Local Government Law states that: The Cabinet shall agree with local governments upon all issues that affect the interests of all local governments The section specifies the requirement for consultation regarding draft laws and draft
Cabinet regulations that pertain to local governments and consultation regarding financial and budgetary matters. (See also the section on Article 9.6).

86. Section 79(2) of the Local Government Law states that a local government association in which more than half of all city governments, and also more than half of all municipality governments have joined as members, is entitled to represent local governments in discussions with the Cabinet 45 LALRG
plays a key role in such negotiations. In addition to the budgetary negotiations outlined above, there are annual discussions with each ministry. The non mandated consultation system includes weekly participation in State Secretary meetings, meetings of the Cabinet of Ministers with advisers having right to vote; and participation at Saeima committee meetings when preparing draft laws for all three readings
of draft legislation. LALRG representatives participate at co-decision process in more than 40 consultative councils, formed by central government ministers or the Cabinet of Ministers, a s well as tripartite social dialogue meetings.

87. The Local Government Referendum Law, although limited and specific was welcomed. There seemed consensus among interlocutors that the situation with regard to consultation has improved. One interlocutor state d that in the past, local government was treated as the enemy, but the situation is
gradually changing ”. There was general agreement that the situation has improved significantly in recent times, though interlocutors would welcome discussions on the reaso n for decisions which seem to ignore or reject the content of consultation processes. Although some interlocutors consider that there are still limitations to the effectiveness of the consultation mechanisms, when decisions are made without
adequate consi deration of the resources and capacities available to municipalities, the rapporteurs
conclude that Article 4.6 is currently complied with in Latvia .

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.

88. Article 5 of the Charter states that 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. Thus, Charter does introduce procedural rules for changes in local authority
boundaries. According to the Contemporary Commentary it is therefore a mandatory procedural requirement that no change in local boundaries may be adopted without consultation, which must take place at a timely stage before a final decision on the matter is made.The Comm entary (paragraph 94) clarifies that consultation in accordance with the Charter does not rule out obligatory mergers or boundary changes, but that the procedures must be laid down by law.

89. The issue of boundary changes has long been contentious in Latvia. A 2011 monitoring report noted that central government was accused of insufficient consultation and discussion with its interlocutors ” regarding boundary changes. Written during a time when controversy raged in Latvia about reform of local govern ment units, the 2020 Report from the fact finding visit draws attention to the difference in nuance between the French and English versions of the Charter. It asserts that the spirit of the Charter seeks to ensure the genuine and effective participation n ot only of local executive and
governance bodies but also, and above all, of the residents.

90. Such participation was not fully enabled in the lead up to the 2021 Administrative Territorial Reform. In the lead up to and implementation of the 2021 reform and the changing of municipal boundaries, concerns were expressed by politicians, citizens and representative groups about job losses in the
public sector (a major source of employment in more isolated rural regions) and that the larger towns in the merged units would attract greater resources, centralize services and weaken already faltering smaller towns and villages.There was widespread disquiet about many of the new municipal boundaries and resentment that meaningful consultation had not taken place. Academic commentators state that the reform initiative was criticized by the municipalities because of insufficient communication among the levels of governance and political ignorance of the opinions expressed by local communities towards possible mergers. Reference was also made to cases taken to the Constitutional Court regarding the lack of consultation. The 2020 Congress rapporteurs were unambiguous in their conclusion that neither the individual local authorities concerned, nor the national association was able genuinely to negotiate on the key aspects of the reform, as the government plan was only altered in respect of certain minor and technical points. During the 2024 Monitoring visit, interlocutors referred to the failure, during the ATR process, to consult local communities or to take into consideration opinions
expressed by communities who wished to retain their existing municipal boundaries asserting, for example, that the opinion of 98% of Ikš?ile municipality inhabitants (expressed in a representative survey) was not taken into account. It should be noted that the Constitutional Court of Latvia decided on the constitutionality of the merger of Ikš?ile and Ogre in the Case No 2020 37 0106 52 In the same case, the inclusion of the Skulte parish in the Saulkrasti municipality was declared unconstitutional As stated earlier, in 2021, the Constitutional Court declared the integration of Varak?ani municipality into Rezekne municipality unconstitutional . Also in the case 2020 41 0106, the inclusion of Il?kste municipality in the Augšdaugava municipality and the inclusion of Ozolnieki municipality in the Jelgava municipality were declared unconstitutional However, in all these cases, the Constitutional Court held that the consultation with municipalities had taken place in accordance with the applicable legal regulation . It recognised the contested provisions of the legislation the Annex Administrative territories, their administrative centres and territorial units to the Law on Administrative Territories and opulated Areas) as being compliant with Article 4 .6 and Article 5 of the Charter.

91. A linguistic issue about the Latvian translation of the Charter was brought to the attention of the delegation by NGO members from Ogre municipality. They assert that the Latvian wording prior consultation with the relevant local authority’ is interpreted to mean consultation with the local municipality rather than consultation with the local community residents.They claim that the interests of the residents of the former Ikš?ile, Lielv?rde, and ?egums municipalities cannot be represented in the newly created Ogre municipality because the population of these three former municipalities is significantly smaller than that of the former Ogre municipality and the city. Therefore, the current Ogre municipality council usually represents the interests of the city of Ogre, without adequately developing the areas and territories annexed to the newly established municipality. Thus, Article 5 was clearly not complied with during the ATR and, as a result residents of the annexed territories lack the opportunity to find full fledged representation in the municipality due to significant differences in population size between the municipalities' inhabited areas. In addition, the NGO referred to Article 58 of the 2022 Local Government Law which states that a consultative municipal institution the Residents' Council the Council ” may be established in the municipality They perceive that the law does not give residents themselves the opportunity to establish such councils. Therefore, they argued, the involvement of local communities depends solely on the goodwill of the newly established municipalities whether they are interested in establishing such a Council or not. The rapporteurs consider that citizen participation in local public affairs should be promoted, which seems to be the objective of the said legal
provision. They thus encourage the establishment of the residents’ councils in municipalities. As for the issue of cons ultation during the ATR in Latvia, it has already been thoroughly examined in the previous fact finding report by the Congress, which identified violations of Articles 4.6 and 5 during the reform
process at that moment. Consequently, the rapporteurs consider there is no necessity to reanalyse the same issue in the current report, as the circumstances have changed since then.

92. The situation seems to be improving gradually. Section 6 (5) of the 2020 Law on Administrative Territories and Populated Areas states that when amalgamating or dividing an administrative territory, and also when modifying its borders, the interests of the residents of the country and local government, the Cabinet opinion, and decisions of the councils of interested local governme nts shall be evaluated”. The rapporteurs assert that the term evaluated ” is weak and does not necessitate responsiveness to consultation processes. Section 10 ( 5) of the 2022 Local Government Law states that only a council
can: decide on the division or amalgamation of the administrative territory of the local government with another administrative territory, the modification of the boundaries of the administrative territory, or the change of the name ”. Such provisions, if fully implemented, should avoid recurrence of such problems.

93. Interlocutors expressed disappointment that the new Local Government Law does not provide an opportunity to organise a referendum in case of modification of local authority borders ’’’. Section 54 of the 2022 Local Government Law, while advocating consultation, also limits such consultation, stating
that in order to promote citizens' participation in the decision making of issues of local importance and to respect the interests of citizens, the local government shall hold a public consultation on matters of its autonomous competence. Such consultations shall not be held on issues such as the municipal
budget, municipal service fees, tax or fee rates, appointment and dismissal of municipal officials, on issues of the internal work organisation of the municipality, as well as on issues within the competence of other institutions.

94. In 2022 a Local Government Referendum Law was adopted and will enter into force in September 2024. It aims to pr omote the participation of local government residents in deciding issues of local importance. It allows for a referendum to be called for three issues, namely, the sustainable development
strategy of the local government the decisions of the council by wh ich the municipality proposes the construction of a new public building, as well as on dissolution of the municipal council . Some interlocutors asserted that, although welcome, the law limits the type of issues on which local referendums may be held and criticised the failure to include a requirement for referendums on boundary issues.

95. Cabinet Regulations due to come into effect in 2025 aim to improve the situation regarding consultation on boundary issues Regulations of the Cabinet of Ministers, No. 386 of 2021 determine: 1) procedures for determining, amending and updating the boundaries of the territorial division of administrative territories; 2) procedures for determining the status of the administrat ive centre, city and village, amending and updating the borders.

96. The ATR led to controversy about the processes for changing local authority boundaries , with 21 challenges by councils ruled on by the Constitutional Court . The rapporteurs note the greater awareness of the need to consult affected persons and bodies and welcome the recent measures that
have been put in place to foster better consultation processes and urge introduction of a mandatory community consultation process prior to boundary changes. Meanwhile, the rapporteurs conclude that currently in Latvia , Article 5 is partially complied with.

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.

97. This provision aims to safeguard local autonomy by ensuring that local authorities can independently put in place administrative structures and arrangements appropriate to the needs of their citizens and which enable them to provide a full range of public services in a manner appropriate to local circumstances. The Contemporary Commentary advocates that power of local entities to organise their affairs should be exercised with due respect for the generally accepted principles of effective and efficient gove rnance while meeting collective needs and expectations.

98. Latvian local authorities have clear self organisation powers. Article 2 of the 2022 Local Government Law states that the local government is responsible for the activity of the council and local government administration, unless otherwise provided by law. Article 10 gives municipal councils the power to establish and reorganise the municipal administration, including establishing, reorganising and liquidating its constituent institutions, as well as issuing regulations of municipal institutions. Article 20 states that the structure of the municipal administration is determined by the municipal regulations and
that the council establishes a central administration a municipal institution that provides organisational and technical service to the council and committees and performs other functions specified in the municipal regulations. In order to ensure the availability of services provided by the municipality in regional parishes and regional cities, Article 23 empowers the municipal council to establish a parish or city administration or an association administration of territorial unit s It also states that the municipal council may establish the administration of the association of territorial division units (parishes or parishes and cities), if the territorial division of the district specified in the municipal regulations includes a union of territorial division units, providing services in each unit of territorial division forming the union. The Local Government Law Section 7 states that the municipality may delegate certain administrative tasks
falling within its autonomous competence to another person.

99. Interlocutors did not express any dissatisfaction regarding administrative structures and arrangements. Some referred to the fact that the ATR has resulted in municipalities being now able to streamline their administrative processes, improve communication and transparency, centralise functions and employ staff with a higher level of skills and experience. MRDEP interlocutors indicated that the increased availability of staff and provision of specialists in municipalities allows entrepreneurs to utilise various support mechanisms, thereby fostering business development and innovation. The Ministry also referenced the optimisation of the education system as a result of the mergers stating that now there is at least one secondary school in all municipalities, and the costs of intermunicipal settlements have decreased Local interlocutors referred to the learning that has taken place through interaction with other munic ipalities and the opportunities to create new structures for maintenance etc. so that administrative structures and processes are more effective.

100. Consequently, the rapporteurs are satisfied that Article 6.1 is complied with in Latvia.

Article 6.2

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

101. Article 6 paragraph 2 is concerned with the organisational and institutional autonomy of local government, asserting indicating that local authorities should have discretion regarding recruitment of personnel and the freedom to determine the conditions of ser vice of their employees. The Contemporary
Commentary on the Charter (paragraph 106) urges that local authority employees should be entitled to training opportunities, remuneration and career opportunities similar to employees at other levels of government.

102. Local governments in Latvia enjoy autonomy in the field of human resources and in the management of their staff. They can appoint and dismiss their own employees without the need to get the approval from State authorities. Local governments have discretion to decide on the remuneration of their staff but as Article 23.3 of the 2022 Local Government Law states, remuneration of employees of the municipal administration is determined in accordance with the 2009 Law on Remuneration of Officials and Employees of State and Local Government Authorities (as amended). This law e nsures that equal conditions are observed in determining the remuneration of officials (employees) in state and local government institutions. Some interlocutors mentioned inclusion of local government personnel within the Single Remuneration system as lim iting motivation, but this criticism was not widespread.

103. T he rapporteurs are satisfied that Article 6.2 is complied with in Latvia.

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.

104. Article 7 paragraph 1 seeks to ensure that citizens are free to serve as elected representatives and are not prevented from holding political office owing to financial or material considerations and that, local councillors should not be prevented from disc harging their duties. The Contemporary Commentary interprets Article 7.1 as providing that each local authority be able to take its own discretionary decisions ”concerning the precise conditions of office that apply to elected representatives within its jurisdiction.

105. Section 71 of the Local Government Law lists positions which Councillors of a Local Government Council are restricted from holding. Latvia's Law on the Prevention of Conflict of Interest in the activities of public officials is continually updated. Articles 9 11 contain clear guidelines with regard to limitations
on earnings, restrictions on commercial activity and restrictions on issuing, supervising, controlling, investigating, or punishing functions of administrative acts and concluding contracts. Such clarifications are prudent and avoid ambiguity.

106. Interlocutors referred to a range of legal norms that they perceive as reducing motivation to obtain the status of council member or mayor, for example, too long a cooling down period ’ during which it is forbidden to work in local government institutions and enterprises after leaving the office. When losing
the office, compensation is not provided. A fter leaving the office, it is difficult to find a new job ”.

107. Interlocutors alerted the delegation that moves were afoot to introduce some form of security check for mayors. There was some wariness about such developments, but interlocutors were awaiting details. Since the visit, a law has been passed on 21 March 2024 and local government officials will need a special permit for access to state secrets, according to a law proposed by the President of Latvia and endorsed by the Saeima. The permit will be required for the head and deputy head of a municipality, as well as for the executive director and their deputy. It is anticipated that the municipality will have to send a request to the competent state security authority to grant a special permit to the mayor and their deputy no later than one month after their election to office. The same deadline is also set for the municipality's Executive Director and Deputy Director Director. Some interlocutors pointed to the risk that security check power could be abused in peace times, for political motives. Currently, at national level, the Latvian State Security Service (VDD) conducts checks on the circulation of state secrets according to the requirements within the institutions supervised by VDD and also consults the respective institutions on protection of state secrets and safeguarding their circulation. VDD issues the second and third category security clearances for work with state secrets, which correspond respectively the classification level secret and confidential.

108.The 2020 fact finding delegation considered that the manner and process of the dismissal of the Mayor of Riga was in breach of Article 7.1 of the Charter. Changes since then have not tighten ed such processes. The legality of the dismissal was upheld by three levels of administrative courts, the final decision being adopted by the Supreme Court in November 2023. Article 69 (1) of the 2022 Local Government Law states that the Minister for Environmental Protection and Regional Development may suspend a chairperson of a council from fulfilment of the duties of office on the basis of a justified order
if the chairperson of the council fails to comply with or violates external legal acts or fails to enforce court judgements”. Section 4 allows for judicial appeal, decreeing that within one month after the publication of the order of the Minister for Environmental Protection and Regional Development, a chairperson of a council has the right to apply to the court for the revocation of the order Articles 69(4) and (5), state that if the chairperson does not appeal against the suspension order or if a court upholds the suspension order, then the chairperson is not only suspended but dismissed from the position LALRG expresses concerns, asserting that in such cases, multiple and significant violations of law are identified by experts ’
opinion, not based on decision of the court. An opportunity to appeal to court does not improve the situation, since the process usually last s for several years. The process as it currently operates risks abuse because of possible political bias in the obtaining of expert assessment and as LALRG asserts,
the responsible minister may use suspension of a mayor as a tool for fighting with their political competitors . Interlocutors from the MEPRD assert that this provision is more about supervision process in Latvia and not about conditions of office of local elected representatives for free exercise of their functions.

109. The Contemporary Commentary on the Charter states that Article 7 provides that disqualification from the holding of local elective office should only be based on objective legal criteria’. It also states that the fight against corruption should be balanc ed against the need to ensure that local politicians are not unduly threatened by the prospect of arbitrary prosecutions. The possibility of suspend ing an elected mayor by the discretionary decision of a politician is incompatible with such principles. The Congress fact finding delegation in 2020 determined that this power is not limited by substantive
criteria or by any other criteria which could ensure t hat any suspension measure is proportionate and neither arbitrary nor unreasonable. In this connection, the rapporteurs believe that even though this mechanism is provided for by law, it does not satisfy the minimum requirements for legal certainty and does not offer enough safeguards to prevent the administrative power being exercised arbitrarily.

110. The rapporteurs consider that the continued existence of the extraordinary powers by which the Minister for Environmental Protection and Regional Development may suspend the Chair of a council (mayor) and the parliament's power to dissolve a local council (with the MEPRD responsible for triggering the procedure) may risk abuse and can be construed as potentially restricting the holding of a representative position at local level. In its ruling on the 2021 dismissal of Riga city Council (Case No. 2020 16 01) the Constitutional Court, although upholding the legal grounds used for dismissal, noted that in a democra tic state governed by the rule of law the relations between the state and local governments should be developed in the form of a dialogue, abiding by the principle of good faith and mutual respect, to ensure effective public administration and use of resources ”.

111. In light of the above, the rapporteurs consider that Article 7.1 is partially complied with in Latvia.

Article 7.2

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

112. Article 7 paragraph 2 of the Charter aims to ensure that local elected representatives receive appropriate financial compensation and to avoid situations where the conditions of office might prevent, limit, or exclude potential local candidates from standing for office due to financial considerations. Article 7.2 is also concerned with ensuring that elected representativ es receive appropriate compensation and remuneration so that they are not at a financial loss due to their public role. Paragraph 113 of the Contemporary Commentary advocates that local bodies should provide adequate remuneration for work done by elected representatives and that remuneration should realistically reflect the workload of their office ”.

113. In accordance with Article 10 of the 2022 Local Government Law, one of the competences of a municipal council in Latvia is to determine the remuneration of the chairman of the council, as well as other salaried positions in the council and the remuneration for them . Such salaries are determined in accordance with the 2009 Law on Remuneration of Officials and Employees of State and Local Government Institutions (as amended). This Law decrees that the monthly salary of members of the municipal council may not exceed the amount of the base monthly salary, to which the coefficient
determined by law is applied applied. In Latvia, many councillors are part time and receive an allowance for attending meetings etc. In bigger cities, councillors are full time employees, receiving a salary but they do not usually receive additional financial benefits. Some interlocutors pointed to the need to increase such salaries and allowances to reflect changing financial circumstances.

114. The rapporteurs consider that Article 7.2 is complied with in Latvia.

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.

115. This paragraph focuses on functions and activities that could be incompatible with the position of an elected councillor. It deals with compatibility between the holding of a representative position at local level and other activities, either public or private, establishing that the functions ” and activities ” that cannot be made compatible with holding a local position once the candidate has been elected shall be determined by statute or fundamental legal principles. Paragraph 120 of the Contemporary Commentary urges that restrictions on holding elected office should be as limited as possible. The Contemporary Commentary (paragraph 122) perceives this Paragraph as serving to discourage the simultaneous
holding of more than one political man date.

116. Since 2002, Latvia has had a Law on Prevention of Conflict of Interest in Activities of Public Officials, which aims to promote the openness and responsibility of public officials before the public, as well as public trust in the activities of public officials. The Corruption Prevention and Combating Bureau
(KNAB) monitors implementation of the Law which has been amended on several occasions with further amendments in force from April 2024. In its 2023 Rule of Law Report, the European Commission positively assessed the measures extending the income restrictions applicable to members of local government councils under the Law. The amendments prohibit the members from be ing remunerated by organisations and companies from funds that have been provided by the respective municipality. These officials will also not be allowed to receive remuneration from an organisation for two years after
they have made a decision or participated in decision making to grant public funds to the organisation organisation. This restriction does not apply in cases where funds have been awarded as a result of an open competition or for the performance of a delegated administrative task. Officials are also prevented from receiving remuneration from an organisation for two years after they have been involved in decision making to grant public funds to the organisation.

117. The rapporteurs commend the ongoing efforts to ensure compatibility between the holding of a representative position at local level and other activities and th e various anti corruption measures being implemented in Latvia . They consider that Article 7.3 is complied with.

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.

In Latvia, the control and supervision of local authorities by the State is performed by different bodies and institutions. The control of the State ministries and departments over local authorities is very limited, and strictly regulated in the Law. To begin with, the line Ministry that is in general responsible for the supervision and control of the local entities is the Ministry of Environmental Protection and Regional Development (hereinafter, “MEPRD”). It may seems weird that a Ministry with such a name would be responsible for supervising local authorities, however the reason is that this body is the result of a merger of two pre-existing ministries, one of which was responsible of this tasks. Within the MEPRD there is a General Department that is especially responsible for this activity.

The MEPRD carries out a limited control over local authorities, due to the fact that they are autonomous under the Law. For what concerns the individual or particular decisions adopted by the local bodies (administrative acts), the Minister cannot cancel, revoke, quash or suspend those decisions. In those cases, the individual or company that is affected by the said decision can sue the local body in the administrative court.

In the case of local binding regulations adopted by the council, the controlling scenario is different, but here again the control of the MEPRD over local bodies is only a control of legality and “ex post facto”. As a rule, whenever a local authority approves a local binding regulation it has to send it, together with the explanatory memorandum to the MEPRD, for the provision of an opinion. The draft is analysed from the legal perspective (lack of competence, infringement of national laws or regulations, etc.) during a period of 30 days. If, during that time, the Minister does not release an opinion raising objections to the local regulation, then the local government shall publish the adopted regulation in the official journal (Latvijas VÃ„â€œstnesis). If the Ministry finds that there is a problem of lawfulness, it will forward an opinion in that sense to the local authority. The local authority may amend or change the regulation in conformity with the said ministerial opinion and after that the local regulation may be officially published.

If the local council refuses to do so, then the Minister may suspend the regulation by means of a substantiated order, which will be published in the official gazette. In this case, the Chairperson of the local council must convene an extraordinary meeting of the council in order to analyse and discuss the situation, a meeting of which the Minister must be informed. If the local council decides not to revoke or to amend the local regulation in accordance with the ministerial order, it must submit an application to the Constitutional Court regarding the revocation of the suspensive order of the Minister. In this case, the order remains in force until the proclamation of the judgment of the said court. The delegation was told that during the process there are informal talks and dialogue between the local authorities and the MEPRD. This procedure is regulated at arts. 45 and 49 of the Law on Local Governments.

In general, the current system of inter-administrative control by State ministries does not seem to raise concern or controversy on the part of local authorities, and they feel free to take the decisions that they find more convenient. Most of the interlocutors met by the rapporteurs said that they did not have experienced any real case of attempt of unlawful control from the State authorities, and that the control takes place at the legality stage.

There also two extraordinary measures that can be adopted by State authorities in this domain. The first is the dismissal of the Council Chairman, in cases of neglect of duty or serious irregularities in his behaviour. The decision about the dismissal of a “mayor” is adopted by the MEPRD after the appropriate contradictory procedure (under art. 91 of the Law on Local Governments). Once the Minister adopts such decision, the affected individual can litigate in the competent court.

The second form of extraordinary control that the State may exert on a local authority is the dissolution of the local council. This decision must be adopted by the Saeima by means of an Act, although the MEPRD is responsible for triggering the procedure. This device is strictly limited to situations of serious malfunctioning of the local council, or when it repeatedly fails to observe the Constitution or to execute court judgments. Ministry´s representatives reported that in 25 years there have been only two cases of dissolution of a council in Latvia.

Still at State ministries level, and apart from the MRDEP, Latvian local authorities may be also controlled by the Ministry of Finance. The Ministry of Finance monitors the local government’s commitment process related to borrowings and guarantees according to the established procedure, and regularly analyses the financial situation of local governments based on monthly reports. The Ministry of Finance carries out the above-mentioned activities in order to avoid initiating the process of financial stabilization of municipalities in case of extraordinary financial difficulties in which the municipality has come. The stabilization process is carried out according to the Law "On Stabilization of Local government Finances and the monitoring of Financial Activities of Local Governments". The purpose of this Law is to regulate the procedures by which the stabilization of local government finances shall be performed, in order to ensure the continuous fulfilment of the functions of local governments as prescribed by Law in cases when local governments have come into extreme financial difficulties. The procedure set by the law prescribes a strict monitoring process for the arrangement of the financial situation of the local government. Beyond the State ministries, local entities may be also controlled by the State Audit Office (hereinafter, “SAO”), by the Anti-corruption Agency and even by the Competition Authority. Since the last two bodies exert a marginal influence in this domain, we will focus on the activity carried out by the SAO.

The SAO of Latvia performs an important role in the control of local accounting, budgeting and public expenditures, a role that has been reinforced by recent measures adopted in the wake of the economic crisis and the control of deficit. The SAO is an independent agency that reports to the Saeima. It audits all the public sector and entities, and of course all the local entities and their commercial companies, foundations or structures. In this sense, art. 74 of the Law on Local Governments provides that “the SAO within the scope of its competence shall supervise the actions of local governments with financial means and property”. In carrying out its functions, the SAO performs financial audits on the one hand, and compliance and performance audits on the other hand.

In the field of financial audits, the main form of local government’s financial control is an obligatory audit performed by a private Audit Company. Activities of the SAO are complementary. In Latvia the main forms of financial control of local authorities is two-fold: (a) on the one hand, an internal control performed both by the finance committee, which is one the standing committees that must be set up in every local authority (art. 51 of the Law on Local Governments; art. 60 thereof enumerates its competences) and by the Audit Commission, which is not compulsory, and even more frequent in the cities than in the small municipalities. In this sense, it should be noted that the system relies on the responsibility of the local elected ruler, since there is no internal inspector verifying ex ante the regularity of the expenses. (b) However the main form of local governments financial control is an obligatory annual audit, that is performed by a private audit company, which audits the account of local authorities.

As concerns other types of audits, the SAO supervises the economy, efficiency and effectiveness of particular sector, field or issue of the local authorities, what is chosen for audit. Legislation permits the SAO to decide on the content of local policy decisions. For instance, the SAO had analysed whether local governments provide some administrative services to residents at reasonable costs. The SAO appraises the ability of municipalities and cities to perform their original competences within their remit, as well as the competences transferred from the State. The SAO though, has no power to paralyse or suspend a public expenditure by a local authority, and it cannot declare or impose responsibilities on the local officials. If criminal behaviour is detected, the case is reported to the criminal prosecutors. The SAO also issues recommendations on budgeting, expenditure process and financial management. The Latvian association of local and regional authorities claimed that the current legislation permits the SAO to decide de facto on the content of local policy decisions.

In the light of the precedent, the Delegation draws the conclusion that the provisions of article 8 of the Charter are respected in Latvia.

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.

Consult reply indicated at article 8.1

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.

Consult reply indicated at article 8.1

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.

The principle underpinning Article 9.2, i.e., that local authorities ’ financial resources shall be commensurate with the responsibilities provided for by the constitution and the law, requires that local authorities should have sufficient financial resources corresponding to the responsibilities assig ned to them. This paragraph states that the revenues and mandatory tasks of local authorities should be balanced to ensure an adequate relationship between the financial resources available to a local authority and the tasks it performs.

In legal terms, the obligation on the state to provide financing commensurate with delegated responsibilities is clear. Article 4 part 5 of the 2022 Local Government Law declares that when transferring a new autonomous function or task to the local government, the perfor mance of which involves increased expenditures, sources of financing for ensuring the performance of such function or task shall be concurrently determined for the local government. Article 6 of the Local Government Law states that when delegating an admi nistration task, the financing necessary for the performance of the respective administration task shall be provided to the local government”. MEPRD provides guidelines (recommendations) for local governments in relation to budget issues on determining service prices, determining administrative expenses, internal control system, etc . The Law on Budget and Financial Management states in Section 15.3 3 that, in order to ensure the stable financing necessary for the performance of local government functions , the distribution of the financing for earmarked grants and grants shall be approved.

151. However, in practice, there are gaps between delegated tasks and financing. Many interlocutors pointed out the knock on ’ costs of mandated functions, for which the pa yments from the state do not correspond with the costs incurred by municipalities. Examples included responsibility for working with young people at risk; the non wage costs of municipal policing, the cost of school meals and the cost of hospital services. Interlocutors pointed out that because of the inadequate funding, each of the 43 municipalities now work differently with young people at risk, leading to varying interpretations of municipal duties, differing capacities among municipalities, and a lack of financial resources. This disparity has resulted in a lack of uniformity in approach across municipalities.

Interlocutors believe that while efforts have been made to devolve responsibilities to local authorities, the lack of adequate accompanying fin ancial support has undermined their autonomy and ability to govern efficiently. Similarly, the capital city, Riga, has been assigned various additional responsibilities but there is a notable absence of additional financial support from central government. Interlocutors state that this places strain on the city's resources and compromises its ability to effectively manage these tasks. They argue that since the previous monitoring visit, due to financial and fiscal decisions made by the central government re garding the national budget, there has been a noticeable
reduction in the financial autonomy of local authorities . This results from changes in the funding allocated to them and an increase in their functional obligations without accompanying financial support.

The ATR was also perceived by some interlocutors as being responsible for unforeseen costs since, prior to being merged, neighbouring municipalities charged different levies and provided varying levels of social assistance. Similarly, in merged conglomerat ions, where one municipality had previously provided free travel for school children, free travel became compulsory for the whole expanded municipality. Thus, where mergers occurred, many municipalities were required to make upward adjustments to ensure pa rity so, in C ? sis , for example, expenses rose faster than income.

In light of the above, the r apporteurs conclude that Article 9.2 is partially complied with in Latvia.

Article 9.8

Financial resources of local authorities - Non 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.

180. Article 9, paragraph 8, refers to local authority access to the national capital market for the purpose of borrowing for capital investment. Such borrowing enables local authorities to finance important projects. Latvia is not bound by article 9.8 of the Charter.

181. There are strict restrictions imposed regarding borrowing by Latvian local authorities with a debt limit for all municipalities specified in the annual state budget. Legal Instruments include the Cabinet Regulation No. 590 adopted 10 December 201 9, Regulations on Local Government Borrowings and Guarantees and the Law on Budget and Financial Management. Municipalities may only carry out long term borrowing to finance investment projects (e.g., infrastructure), not operational costs, and they can apply for a short term loan Borrowings must be approved by a special Commission created at the Ministry of Finance. LALRG has a representative on this Commission. Local governments are supposed to borrow preferentially from the State Treasury and only have access to the private financial markets/banks if the lending conditions are more favourable than the lending conditions offered by the State treasury. For EU projects, state permission to borrow is not required.

182. The issue of local government borrowing w as rather contentious among interlocutors, and they also expressed various opinions about whether to ratify Article 9.8.

183. Local government interlocutors were quite concerned by the legal stipulation requiring local government borrowing to be approved by central government and the restrictions on local government borrowing on the capital market, asserting that their autonomy is being restricted. The LALRG asserts that borrowing is overregulated, because the state establishes the permitted goals of borrowing. Central government actors pointed to the prudence ensured by the emphasis on borrowing from the state. They also pointed out the increasing opportunities for borrowing to co finance EU programmes.

184. The rapporteurs consider that constraints on borrowing and the requirements for state approval of most loans, while prudent, limit the options for voluntary initiatives. They conclude that the requirements of Article 9.8 of the Charter are not yet sufficiently fulfilled in Latvia to warrant ratification of this Article.

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.

177. The Contemporary Commentary asserts that the ratio of conditional (earmarked) and unconditional (general) grants is considered a relevant indicator for measuring the financial autonomy of local authorities. Article 9.7 seeks to ensure an effective balance between conditional and unconditional grants, thereby reducing restrictions on a local authority's freedom to exercise discretion with regard to its expenditure priorities. The Article also seeks to ensure that a grant for a specific purpose does not
undermine a local authority's freedom to exercise discretion within its own sphere of competence. Even when services are financed with grants, there should still be a basic freedom for local authorities to exercise policy discretion. The OECD (Wofi2023) asserts that all grants from the central government are earmarked and, in 2020, 85.2% of them were current grants against 14.8% of capital grants. Transfers include, in particular, grants for the remuneration of teachers, road maintenance and
construction, investment projects or financing of EU projects. LALRG claims that the balance between earmarked and general grants was destroyed during the last five years. There are increasingly fewer
gen eral subsidies and more earmarked grants”.

178. Interlocutors repeatedly referred to the high proportion of earmarked grants as limiting their financial autonomy. Some interlocutors asserted that the high proportion of earmarked grants deters local authorities from taking permitted legal actions against the state because they perceive the allocation of some of such grants as being subjective.

179. As in other countries, earmarked grants are used as a tool to implement national policies uniformly in Latvia, but they restrict the financial autonomy of local authorities. Therefore, the rapporteurs conclude that Article 9.7 is not complied with.

Article 9.6

Financial resources of local authorities - Article ratified

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

172. This article refers to the general principle of consultation, as enshrined at Article 4.6.but Article 9.6 specifically focuses on consultation about the manner in which redistributed resources are to be allocated to local authorities. The Contemporary Commentary stresses that consultation is required on the way in which redistributed resources are to be allocated to local authorities by other levels of government. Thus, in addition to the general principle of consultation in Article 4.6, the Charter also specifically underlines the right of local governments to be consulted about the way in which redistributed resources are to be all ocated to them by other levels of government.

173. In accordance with Article 79 (2) of the Local Government Law, Latvian local authorities are extensively consulted by State bodies and institutions regarding financing. Local government associations in which more than half of all city governments, and also more than half of all municipality governments are members, may represent local governments in discussions with the Cabinet. LALRG plays a key role in such consultations, representing local authorities in va rious fora. Section 82.1 of the 2022 Local Government Law states that the Cabinet shall agree with local governments upon all issues that affect the interests of all local governments:
1) draft laws and draft Cabinet regulations that pertain to local go
vernments;
2) the amounts of grants and earmarked grants to be provided to local governments for the current financial year;
3) State budget subsidy to the financial equalisation fund of local governments;
4) sources of financing of administrative tasks delegated to local governments;
5) other issues related to planning the local government budget regarding which the Cabinet has agreed to with local governments each year prior to the start of the financial year”.

174. The minutes of negotiations on the agr eed issues and disagreements of this process must be discussed by Cabinet. When, forwarding the annual draft law on the State budget or the draft medium
term budget framework law to the Saeima, the Cabinet must attach those minutes. This protocol is a compulsory component of the state budget preparation process.

175. Some local government interlocutors referred to differing understandings (by local and national actors) of the financing problems confronting municipalities with the result that the consultation processes do not always resolve the issues.

176. The formal stru ctures for consultation on financial matters involve local actors or their representatives in decisions about the allocation of redistributed resources. Therefore, the r apporteurs consider that Article 9.6 is complied with in Latvia but urge vigilance to ensure that the consultation is timely and meaningful.

Article 9.5

Financial resources of local authorities - Article 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.

168. The Contemporary Commentary states that Article 9.5 of the Charter aims to ensure sufficient financial resources, allowing local authorities not only to cover the expenses relating to their own and delegated functions but also those relating to the politic al and administrative apparatus necessary to carry out the tasks assigned to them. It thus addresses the question of the financial situation of municipalities that are financially disadvantaged.

169. The Latvian system of local government financing includes an equalisation mechanism, the Local Government Finance Equalisation Fund. This fund aims at reducing the disparities between local entities. The Fund is governed by the 2015 Law on Equalisation of Local Government Finances (as amended). This Law ( Article 5) states that the assessed revenues of the municipality consist of the municipality's projected revenues from the real estate tax and the share of the income tax revenue distribution determined for municipal budgets in the annual state budget law. Article 6 sets out criteria for the calculation of the financial equalisation of local governments. Criteria characterising local
government expenditures are used statistical indicators independent of local government activity such as population profiles and municipal area. The equalisation formula means that local authorities with a budget surplus transfer part of their surplus to the Local Government Finance Equalisation Fund, which redistributes these transfers to local authorities with a deficit. Interlocuto rs pointed out that every year the state's contribution to the Equalisation Fund fluctuates, making it difficult for municipalities to plan.

170. Since the ATR, the contributions to the equalisation fund by some municipalities have increased. In 2023, the States' general contribution to the equalisation fund had decreased so that the equalisation process was assessed by some interlocutors as more like mutual redistribution of income among local authorities because of variations in the dotation from the state . Interlocutors pointed out that in at least one third of local authorities, the equalisation algorithm cannot secure performance of autonomous functions at least for minimum quality and volume. In recent discussions with the Minister for Finance, the President of Latvia supported calls for a review of the equalisation system, asserting that the total needs and costs have increased for all municipalities, but the existing funding is insufficient. Interlocutors from the Ministry of Finance indicated that a new mechanism is being prepared which will address issues such as population imbalance. Currently, both financially well off and less well off municipalities feel frustrated. Therefore, any new reforms require a review of existing resources. However, for the 2024 budget, new measures were put in place. According to the information from the Ministry of Finance, for all municipalities, in 2024 an average increase of 8.1% in equalised revenue is planned compared to 2023. A one off additional grant in the amount of EUR 7 million has also been agreed for 19 municipalities with the lowest revenue.

171. Latvia's equalisation fund continues to evolve and, while noting the concerns expressed by some interlocutors, the rapporteurs state that Article 9.5 is formally complied with in Latvia, although the situation can be improved.

Article 9.3

Financial resources of local authorities - Article 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 Charter considers tax levying powers to be a crucial part of local self government. Article 9.3 focuses on the need for local authorities to derive at least part of their financial resources from local taxes of which they have the power to determine t he rate (within the limits of statute). The power to levy local taxes is seen as direct evidence of local financial autonomy. Such taxes are a local government tool for making political choices. The Charter does not state that a local authority's own resources must contain a particular proportion of local taxes, but it does make it mandatory for at least part to derive from local taxes and charges.

The 2020 Congress Report, following the fact finding visit, observed in Paragraph 128, that no progress was noted in terms of the expansion of local taxation or the weakness of local government funding in Latvia, which is in breach of Article 9.3 of the Charter ””. The situation has not changed significantly since that Report. Figure 3 shows the declining proport ion of tax revenues attributable to local governments with only 16.2% of the 2024 budget coming from this source.

The most significant shared tax is the personal income tax (PIT). Its receipts represented 86.0% of SNG tax revenue in 2020, 43.5% of SNG revenue and 4.8% of GDP. The PIT is regulated and collected by the State Revenue Service. It is partially redistributed to municipalities according to residence criteria.

A special grant to compensate for the reduction in the share of PIT as a result of labour tax reform was implemented from 2018 to 2023 but was discontinued for 2024 from the state budget. In January 2021, the municipal share of PIT decreased from 80% to 75% and the monthly threshold for non taxable revenue increased, resulting in a decrease of revenue for local governments. However, during preparation of the 2024 budget the Government has committed to guarantee 100% of the personal income tax projection for local governments.

Municipalities also receive a share of the tax on lotteries and gambling, as well as a share of the natural resource tax ( which includes, inter alia, tax on pollution, radioactive waste and incineration of dangerous waste) which must be used for environmental protection purposes. Since January 2024, in accordance with Section 28, Paragraph 4 of the Natural Resources Tax Law, the distribution of income from disposal of municipal waste and industrial waste has been changed to 8 0 in the state basic budget and from 15% to 20% in the budget of the local government in whose territory the waste is disposed of .

Section 3 (2) of the Law on Taxes and Fees Fees71 states that i. a specific tax law may grant local governments the right to apply reliefs to such payments which are payable into the local government budgets and to determine the object and rate of the immovable property tax Thus, s pecific laws may provide for a payment of various fees (e.g. g., road usage charges charges. This opportunity is widely availed of with regard to the immovable property tax, which is levied on all land and buildings, whether housing or commercial. It is collected at the central government level and local governments can vary the tax rate within limits set by the state 100% is redistributed to municipalities but LALRG asserts that share of this tax in local government income is being purposely reduced and replaced with earmarked grants. In 2020, real estate tax accounted for 13.5% of local tax revenue, 6.8% of local revenue and 0.8% of GDP, slightly below the OECD average (1.0% of GDP in 2019) 73 Some local authorities provide immovable property tax rebates which are more than compensated for by increased income tax revenue for the municipalities. Such rebates are also used to attract or revitalise business activity. Consequently, there is tax competition between local governments to attract businesses and residents, particularly, those with high incomes. Some interlocutors referred to municipalities that offered discounts in order to increase the number of residents but did not spend any of their finances on industrial development or employment opportunities. There were also complaints about the municipalities in which the tax tourists ’
work having to bear the costs of infrastructure, services etc., while the municipalities which offered the tax reductions reap rewards from increased PIT allocations. With regard to local fee income, the ATR
led to some problems where merged municipalities had previously charged different fee levels and had to agree a compromise rate. Some interlocutors also criticised the fact that some local authorities do not
endeavour to increase the ir income from fees etc even though opport unities to do so exist .

In light of the above, the rapporteurs assert that local authorities in Latvia derive a part of their financial resources from state taxes and local fees for which they have the power to determine the rate (within the limits of st atute). However, as this income stream does not seem to be sufficient to ensure the greatest possible financial independence of local authorities and opportunities for locally derived income remain limited, the rapporteurs consider that Article 9.3 is partially complied with in Latvia.

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 Contempo rary Commentary on the Charter stresses that Article 9.1 establishes the right of local authorities to have their own resources and the freedom to spend them. This paragraph focuses on the own ” resources of local government, customarily referring to resou rces generated locally such as local taxes, charges, fees, etc. Accordingly, states are expected to ensure that local authorities have the legal, budgetary, and fiscal capacity to make use of these rights and the means to implement their policies.

In addition to the Local Government Law, the key pieces of legislation dealing with local government finance are Law on Budgets and Financial Management (as amended), the Law on Local Government Budgets ( as amended), the Law on Equalisation of Local Government Finances, and the Law on Taxes and Fees (as amended)

Section 42 of the Law on Budgets and Financial Management (as amended) articulates the rights of Latvian local governments to revenues, stating that local governments are entitled to budgetary revenue in accordance with laws, in order to ensure a stable and secure revenue base conforming to the requirements of macroeconomic stability.

Municipalities prepare their own budgets, but local authority budgets are linked to the national budget with all ocations reflecting national priorities. During national budget negotiations, a Memorandum of Understanding and Disagreement between the Cabinet and the LA LRG is signed.

Section 3(2) of the Law on the Budgets and Financial Management states that local government budgets shall consist of a basic budget, dotations and gifts. The main source of SNG revenue is taxes, which are, however, mostly shared with central government. Tax revenue accounted for half of subnational government revenue in 2020, well above the OECD average for unitary countries (35.4%) and the EU27 average (40.1%). By contrast, the share of grants and subsidies is lower than the averages for the OECD unitary countries and EU27 (respectively 53.3% and 46.6%), while revenues coming from local public services (tariffs and fees) and property income account for a small share of SNG revenue, below OECD and EU27 averages 66 Figure 2 shows the various types of local government revenue by type in 2021.

The Law on Budgets and Financial Management (as amended) also states that local governments are entitled to impose local government fees in accordance with the procedures and in the amounts laid down in laws. However, locally generated charges form a very small part of local government income. In 2020, tariffs and fees accounted for 0.8% of GDP and 7.1% of SNG revenue. Revenue generated by asset sales and rentals, as well as by local public companies, represented 0.4% of the SNG revenue in 2020. There is high dependence of local government on central government funding.

A significant share of SNG expenditure is allocated to education, in particular for the payment of teachers ’ salaries and the financing of the maintenance and operating costs of educational facilities. Education accounts for 37.0% of SNG expenditure, a much larger percentage than the OECD unitary countries and EU27 averages (respectively 18.8% and 18.5%) as well as 4.0% of GDP (vs 2.3% in OECD unitary countries and 3.0% in EU27). Economic affairs and transport is the second most important area of SNG spending (16.9%), followed by social protection (10.2%), health (9.3%) and housing and communities (9.2%). SNGs in Latvia are also responsible for the majority of public spending in housing
and community amenities (96.1%) and, to a lesser extent, in recreation, culture and religion (58.3%) and education (55.1%).

Interlocutors highlighted th e precarious financial situation of some municipalities as a result of inflation, energy costs, depopulation, and inadequate funding. LALRG members pointed out that since the administrative territorial reform (ATR), the volume of functions carried out has increased but the purchasing power of income decreases and the grants from central government do not fully cover the full cost of mandated tasks.

Local government in Latvia has legal entitlement to resources and legal autonomy to decide how to spend any own resources, however, local authorities ’ non assigned resources are limited, with few opportunities to generate such income. In recent years the fiscal power of local government has been reduced while the proportion of earmarked grants has increased. Ear marked grants are often inadequate to cover the full costs of mandatory tasks and services. Interlocutors highlighted that
dependence on central government funding compromises municipalities' ability to address local priorities effectively and independently

Consequently, the rapporteurs conclude that Article 9.1 is not
complied with in Latvia.

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.

162. Article 9.4 is about the need for local government to have different types and sources of income which ensure local authorities’ resilience vis á vis external economic factors. The Contemporary Commentary argues that the diversification of income sources is crucial if local authorities are to maintain their autonomy during fluctuation in economic cycles. Article 9.4 also emphasises that systems of local finance should be buoyant., i.e., “able to adapt to new circumstances, needs and macroeconomic scenarios and be sufficient to cover service delivery”.

163. Section 9of the Law on Local Government Budgets states that local governments have the right to apply tax relief to payments which are made into the local government budgets in accordance with the procedures provided for in the relevant tax law, and also to impose local government duties and determine their rates in accordance with the procedures laid down in the Law On Taxes and Fees.

164.Section 42 (2) of the Law on Budgets and Financial Management states that local governments are entitled to impose local government fees in accordance with the procedures and in the amounts laid down in laws. However, fee income is a very small part of local authority budgets. Local authorities in Latvia are highly dependent on central government financing.

165. The OECD (WOFI 2023) points out that all taxes benefiting SNGs are apportionments in the collection of some state taxes, i.e. shared taxes with local governments not having any real taxation powers. Tax revenue and grants and subsidies together amount to 91.7% of local government income. Figure 5 shows local government revenue by category, illustrating the high dependence on central government funding.

166. Many of the grants to local government in Latvia are earmarked, leaving little autonomy for their dispersal. Interlocutors drew attention to the reductions in income e.g. every year local governments’ share of labour taxes decreases andcalled repeatedly for a system which would bring stability and predictability to local government financing and enable municipalities to plan projects.

167. While local government resources seem relatively diversified, the rapporteurs heard many complaints about their limited buoyancy, which does not enable local authorities to keep pace as far as practically possible with the real evolution of the cost of carrying out their tasks. Their sources and types of income are limited, and many finance streams are static rather than dynamic and buoyant, thereby inhibiting the ability to respond to changing needs or opportunities. Therefore, the rapporteurs consider that Article 9.4 is partially complied with.

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.

185. Article 10, paragraph 1, of the Charter refers to types of functional co-operation between local authorities either seeking greater efficiency through joint projects or seeking increased effectiveness by carrying out tasks which are beyond the capacity of a single authority. Local authorities in Council of Europe member states have a general right to co operate with one another in order to deliver local services or discharge their responsibilities. This entitlement to cooperate with other local entities is
supplemented by a more specific right, namely the right to form consortia, i.e. to create separate organisations and/or joint institutional structures.

186. The 2022 Local Government Law stipulates that municipalities cooperate in accordance with the regulations set forth in the State Administration Structure Law. Furthermore, municipalities have the right
to form joint associations, institutions, and commissions, as well as to join them .

187. Interlocutors stated that municipalities have the right to implement mutual cooperation in accordance with th e Public Agencies Law, by forming joint agencies and foundations for the promotion of common interests of municipalities. Municipalities have the right to unite in associations, create foundations for the performance of joint functions, and represent interests in direct state administration. Regarding the formation of associations, the purpose of such associations is to allow the realisation of the joint visions of several municipalities or to discuss issues of joint territorial development. However, associations cannot duplicate the activities conducted by the private sector or be formed in cooperation
with private individuals within the framework of this regulation. The municipality ensures the performance of its functions through its administration and ca pital companies.

188. Thus, in order to solve joint tasks, local governments can establish joint institutions by mutual agreement. Such institutions operate on the basis of regulations approved by the respective councils Some municipalities have established j oint cooperation authorities in the fields of:
- civil protection,
- education,
- waste management,
- the management of the local government property,
- promotion of the economic activity ,
- ensuring public order,
- organisation of public transport services,
- protection of children's rights.

189. Examples of inter municipal collaboration highlighted by MEPRD include collaboration regarding public transportation (state cities, in cooperation with surrounding district municipalities), territorial planning, and inves tment planning An example of inter governmental co operation was instanced by Sigulda where the municipality operates a client service centre jointly with central government in order to provide social services. In Jurmala, a municipality visited by the de legation, cooperation with
neighbouring municipalities takes place, for example, within the framework of the civil protection plan and within the framework of various projects . Interlocutors pointed out that since the ATR, co operation is obligatory in cas es, where, after the reform, a state city is separated from municipalities around that city. In such cases, the main areas of cooperation are the development of a sustainable development strategy and a development programme. Municipalities near the eastern border have established joint committees to ensure security.

190. T he rapporteurs are satisfied that Article 10.1 is complied with in Latvia.

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.

192. Chapter 9 of the 2022 Local Government Law de als with cooperation of local governments and participation in associations and foundations. It gives municipalities the right, within the framework established by the Law on State Administration, to form joint associations, institutions and commissions, as well as join them. Some of the main representative organisations are: the Latvian Association of Local and Regional Governments , the Latvian Association of Large Cities and the Association of Regional Development Centres. As the sections on Paragraph 4.6 and 9.6, supra, showed, LALRG represents and defends the rights and interests of local government in various settings. Voluntary
membership of LALRG is relatively high (41 from 43 local governments)”. LALRG, on behalf of local authorities, participates in co decision processes in more than 40 consultative councils, formed by central government ministers or the Cabinet of Ministers, and tripartite social dialogue meeting, co-operating with organisations such as the Latvian Association of Free Trade Unions, Latvian Confederation of Employers, Latvian Chamber of Trade and Industry and the Latvian Academy of
science LALRG representatives informed the delegation that cooperation with interest groups (several of them are organised in associations, others in structural units of the LARG) take place increasingly, because common interests are best served in such collaborations. LALRG is actively involved in international bodies. It is a member of the Council of European Municipalities and Regions (CEMR) and has a permanent representation in Brussels.

193. In light of the above, the rapporteurs are satisfied that Article 10.2 is complied with in Latvia.

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.

194. Article 10.3 refers to the cooperation of local authorities with their counterparts in other's tates and reinforces the right to engage in cross-border cooperation. This Charter provision sets out the right to engage in transnational, or transborder co operation, an important form of inter local co-operation.

195. The 2022 Local Government Law provides for the rights of municipalities and municipal associations to cooperate with municipalities and their associations in other countries, provided such cooperation does not conflict with the laws of the cooperating countries and complies with agreements mutually concluded by those countries. To ensure this, a municipality or municipal association is required to inform the Ministry of Foreign Affairs about the cooperation agreement concluded with a foreign municipality or municipal association. It is not necessary to inform the Ministry of Foreign Affairs about such cooperation agreements that are concluded under the supervision of the competent authorities and in accordance with the established requirements within the framework of implementing projects financed by foreign financial assistance (e.g., European Union Structural Funds and other instruments).

196. Involvement in EU projects and actions has fostered international cooperation by Latvian local authorities. Latvian municipalities may initiate and participate in joint cross border, transnational and interregional cooperation projects, making partnerships with European institutions and organisations on different levels. The MEPRD informed the delegation that during the 2014-2020 planning period in Latvia, a round 500 institutions (municipalities, regions, NGOs, entrepreneurs, state institutions) made joint investments and cooperation with more than 2,000 cooperation institutions in Europe ’. For the 2021-2027 funding period, Latvian partners (including municip alities) will implement projects in 6 Interreg programs. Already, 205 international projects have been approved, in which 354 Latvian institutions cooperate with more than 1 200 international partners.

197. In view of the above, the rapporteurs conclude that Article 10.3 is complied with in Latvia.

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.

Latvian local authorities, as legal entities, do have the right to go to courts in order to defend their rights, ownerships or interests, just as another entity would do. Therefore, municipalities and cities can have access to the regular courts, where they can defend their interests and rights.

The same is true concerning litigation in the Constitutional Court. Each and every local authority may have access to the Constitutional Court when it believes that a measure adopted by a State authority and addressed to it violates the rights of that local authority. As a matter of fact, the Latvian system is in this respect one of the most advanced, progressive and liberal of all Europe. In very few countries a single local authority has the right to appeal in the Constitutional Court to defend local autonomy, since in the majority of the countries individual local entities are barred from this possibility. Moreover, litigation in the Constitutional Court is free for the plaintiff local authority, and there are no litigation fees associated.

This reality is the most remarkable from the fact that, as seen supra, the Latvian Constitution does not contain in its written text recognise explicitly the principle of local self-government. The architect or craftsman of this state of facts is the Constitutional Court, which has played a key role not only in the guarantee of the applicability of such principle but also in recognising the direct invocability in courts of the Charter.

The Constitutional Court is regulated by art. 85 of the Constitutional and among other functions, it reviews cases concerning the conformity of laws with the Constitution and with international treaties ratified by Latvia (like the Charter). According to data provided to the Delegation by some Justices of the Constitutional Court, between 1997 and 2015 the local authorities have submitted 38 applications in the Constitutional Court. In most of these proceedings, the local authorities claimed that a given piece of national legislation had violated the principle of local autonomy; that the contested measure violated the Law on Local Governments; or that it violated the Charter. Local authorities can complain not only against acts of the Parliament, but also against governmental regulations and against the suspensive order issued by the Minister of Envionmental Protection and Regional Development when he suspends local binding regulations. Thus, in 16 cases the local authorities complained about regulations of the Cabinet of Ministers, and in nine of the cases, the local authorities complained about the suspensive decisions of the Minister. In some of the appeals directed against governmental regulations, the Cabinet had accepted to amend the contested regulation during the judicial procedure, therefore the appeal did not lead to a final ruling of the merits, for the case became moot. Out of those 38 appeals lodged by local authorities, 13 have resulted in a ruling on the merits and in four of these cases the Constitutional Court has found that the contested measure is contrary to a legal norm of a higher legal force.

The controlling provisions of the Constitution that are used by the Constitutional Court to adjudicate the appeals are: art. 1 (the principle of democratic state, as according to the case-law of the Constitutional Court it includes also the local authorities); art. 25 (reference is made to local governments); art. 104and, especially, art. 101.From these articles, the Constitutional Court has declared that the principle of local government is an inherent constitutional principle of the country.

For what concerns the legal status of the Charter, the Constitutional Court has the competence to declare that an Act of Parliament or a regulation of the Cabinet of Ministers is not in conformity with the Charter, since it is an act of International Law that has been ratified by Latvia, and the acts of international law take precedence over domestic legislation and regulations. Therefore, the Constitutional Court understands that any violation of the Charter would be at the same time a violation of the Constitution. In defending and articulating this position, the Latvian Constitutional Court is probably the champion of all European constitutional courts in the guarantee of the applicability and effectiveness of the Charter.

Among the different cases where the Constitutional Court has analysed the applicability of the Charter stand the following ones: Case n° 2007/2101: this case deals with an Act that regulated the transport services between Riga and the neighbouring local authorities. Case n° 2008/08.0106: this case pertains to the administrative reform of municipalities. Case n° 2009/04.06: 32 local councils challenged in this case the Act establishing the territorial reform of 2008, claiming that there was no provision for the local authorities to be heard, and thus that article 5 of the Charter had been violated. Once the proceedings were open, the Saeima amended the rule in order to introduce provisions on local governments consultation, thus making the case moot. Case n° 2016/2303: in this case the Constitutional Court analysed whether the Cabinet of Ministers can adopt a regulation that provides for a minimum number of pupils at a particular grade who have to attend a particular school in oder for that school to be able to deliver education at the said grade, and if this could be binding on the affected local authorities. The local authority won the case. Case n° 2009/2406: in this case the Constitutional Court noted that the power of the Minister of Environmental Protection and Regional Development to suspend a local regulation does not violate the principle of self-government. Case n° 2013/1005: this case was discontinued since the Minister of Environmental Protection and Regional Development changed his decision during the course of the procedure.

During the visit, the LPS made the claim that they would like to be recognised by the law as a legitimate actor in proceedings in the Constitutional Court, in representation of the whole group of Latvian local governments whenever a piece of parliamentary legislation or a Cabinet regulation does not comply with the principle of local self-government. Currently this is not possible because the appeal must be filed by the affected local authority/ies.

The Delegation asked the Constitutional Court representatives about their opinion on this matter, and the Justices said that they were not, in principle, against this possibility, something that would lead to an “abstract” control of constitutionality. Other interlocutors, though, were not convinced about the convenience of that arrangement. The MPs that the Delegation met at the Saeima were clearly reluctant about this proposal, because they consider that the current situation is sufficient, in which any local authority may lodge an application to the Constitutional Court. The representatives of the Ministry of Environmental Protection and Regional developement were also asked about this possibility, but they replied that they did not have a clear position on that.

In the light of the precedent, the Delegation understands that Latvia complies with article 11 of the Charter.

ACCESSION

to the Council of Europe 10 February 1995

RATIFICATION

of the European Charter of Local Self-Government 5 December 1996

CONSTITUTION | NATIONAL LEGISLATION

In Latvia, the principle of local self-government is not explicitly recognised or proclaimed as such in the Constitution. The Charter entered into force in Latvia in 1997, and from this very moment it became “the law of the land”. The lack of explicit mentions to the principle of local self-government in the Constitution has not been an obstacle for the Constitutional Court to declare and proclaim the principle of self-government in a consistent case-law.

29Ratified provision(s)

0Provision(s) with reservation(s)

1 Unratified Provision(s)

29Compliant Provision(s)

0Partially Compliant Provision(s)

0Non-compliant Article