HEARING ON LOCAL AND REGIONAL DEMOCRACY IN ARMENIA 5 June 2014 Brussels

1. HEARING ON LOCAL AND REGIONAL DEMOCRACY IN ARMENIA5 June 2014 Brussels European Charter ProvisionesActual Implementation in Armenia David Tumanyan Member of the Group of Independent Experts on the European Charter of Local Self-Government

2. Subsidiarity.This principle is not fully effective due to the lack of necessary conditions. - Firstly, there is a legislative gap here. The local self-government is one-tier, and many of the functions, characteristic of it, are performed by central government bodies (secondary education, healthcare, public order, etc.). - Secondly, this one-tier system has many small and poor municipalities (about half of municipalities have less than 1000 inhabitants), the local authorities (LAs) of which are unable to fulfill the powers they have by law. Thus, the local self-government is not fully effective in Armenia.

3. General competence.The essence of the principle is that the LAs have a right to apply to any issue of interest to the municipality and solve it, if it is beyond the mandate of the state bodies. The real capacities of the LAs are so small, that they are actually unable to realize this right. This principle is not practically enforced in many municipalities. • Independence and responsibility.The degree of independence of LAs in the country in many ways depends on the overall state of democracy in the country. In this regard the situation is far from being satisfactory. The degree of development of local self-government institutions (mayor, council, associations, etc.) is low hence there is weak independence of LAs. Central authorities continue to behave as superior bodies to LAs, and the latter are extremely obedient and de facto recognise their subordination.

4. Financial independence.The Armenian authorities do not take measures to enhance the financial independence of municipalities. The share of municipal budgets in the expenses of the consolidated budget and GDP remains very small (in 2012-9.4% and 2.4%). To compare, these indicators in the countries of Central Europe and Baltic states make 20-30% and 7-13%, respectively. Around 50% of municipal revenues are constituted by official grants. • Financial equalisation.A significant shortcoming of the existing mechanism of financial equalisationis that its main indicator is the number of population within the municipality’s mandate and, to a certain extent, its financial capacities, while the needs of the municipalities are completely neglected. Besides, the equalisation grants are received by all municipalities, and not those in the greatest need.

5. Administrative supervision.According to the European Charter of Local Self-Government, the administrative supervision of LAs should only be extended top include the legal domain, i.e., the correspondence of the local decision-making to the Constitution and the laws. Only the scope of supervision over the delegated functions can be expanded, the so called special supervision. In practice the control over LAs is far beyond the legal frames and is implemented by different representatives of the upper tier of authorities.

6. Protection of common interest by LAs.The European Charter of Local Self-Government records the right of LAs to belong to an association for the protection of common interest. This means an establishment and activity of a municipalities associations on national and regional levels. Of course, the municipalities themselves are responsible in this matter, but the central authorities should ensure the necessary conditions, which are not provided yet. 24 municipal associations are established in the regions of Armenia, they are mostly busy with implementation of various projects rather than the protection of common interest. National association of municipalities is not strong yet.

7. The solution of problems of common interest to LAs.The European Charter of Local Self-Government records the right of LAs to form consortia with other LAs in order to carry out tasks of common interest. These tasks are not reflected in the legislation and there are not registered consortias yet. • Full and exclusive powers of LAs.This means that none of the central government bodies has a right to interfere with the power, given to the LAs, and direct this power. Besides, the power must be distinctly specified as belonging to the LAs, with no dubious interpretations possible. In reality the central government bodies not only often interfere and direct, but also often impose certain actions on the LAs.

8. Consultations.LAs shall be consulted by central authorities In due time and in an appropriate way in the planning and decision-making processes for all matters which concern them directly if possible. This requirement is actually fulfilled only formally because of the independence of LAs is very low. • Functioning of municipal service institute.Steps were taken to form the institute of municipal service. The RA Law “On Municipal Service” is in force. But, anyway, its implementation in small municipalities is in question and not effective in medium-size and large communities. • Local taxes rates determination. There are two local taxes in force (proporty and land taxes) but their rates are not determined by LAs.

9. Borrowing of LAs.LAs have not access to the national capital market in practice. • Legal protection of LAs.The right of LAs for legal protection is seldom applied. The main reason is that the court system of Armenia is not independent and does not enjoy the trust of the society. Among other reasons for this one can name the wish to avoid court hustle, lack of appropriate knowledge, etc.

10. Recommendations • Make necessary additions in the legislation for establishment of consortias and mergers of small municipalities and implementation in practice • Increase financial resources of LAs by adopting the Law on Hotel Tax, using tax-sharing model and transfering to LAs the right to determine local taxes rates • Allow LAs entrance to the national capital market • Develop new mechanism of financial equalisation and mechanisms of other state transfers (subventions and other grants) • Provide necessary conditions for enhancing real independency of LAs • Provide administrative supervision according to the requirements of the Charter • Provide citizens participation on affairs of LAs in practice • Transfer new responsibilities and appropriate finance to LAs

11. Thank you