Cyprus

Cyprus - Monitoring report

Date of the monitoring visit: from 5 to 7 April 2016
Report adopted on: 20 October 2016

This report concerning the monitoring of local democracy in Cyprus is the third since the country ratified the Charter in 1988. The report notes with satisfaction the decision of the Republic of Cyprus to accept, on 26 October 2003, to be bound by Article 5 of the Charter. It also underlines the political commitment of the Cypriot Government in favour of the participation of citizens in local public affairs and also welcomes the signature and ratification of the Additional Protocol to the European Charter of Local Self-Government (CETS No. 207) by the Republic of Cyprus. However, the rapporteurs express certain concerns regarding the weakness and imprecision of the legislative basis for the powers of local authorities and the conditions under which they are exercised, as well as a lack of constitutional safeguards for the principle of local self-government and the status of local authorities. The rapporteurs also noted that there is strong government supervision over the exercise of the regulatory powers of local authorities, over their human, administrative and budgetary resources, and in particular over small communities.

 

The Cypriot authorities are therefore urged to reduce their supervision over local government. It is also recommended that the Government clearly recognise the legislative status and, if possible, the constitutional status of local authorities, as well as the principle of self-government for all local authorities; strengthen the legislative basis for the position of both municipalities and rural communities as essential institutions; assign substantial powers and responsibilities to local authorities; determine precisely, by way of legislation, which administrative authorities are empowered to exercise legal supervision over municipalities; limit all kinds of central government supervision over local authorities to an a posteriori control; allocate adequate financial resources to local authorities and establish a transparent and predictable calculation method for central grants to local authorities. Lastly, the report calls on the Cypriot authorities to ensure the direct applicability of the European Charter of Local Self-Government within the domestic legal system.

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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 requires signatory countries to recognise the principle of local self-government in their domestic legislation.

 

In Cyprus, the relevant constitutional provisions (Chapter VIII) do not meet this requirement of the Charter, since they provide local self-government only for some large cities and in an indirect way (among incompatibility rules). The two relevant laws, the Municipalities Law and the Communities Law, in their present form, do contain general provisions on local government, but they are considered too vague and not comprehensive enough to be seen as recognizing local self-government as a whole, and do not clearly ensure the principle of subsidiarity. The two relevant laws, in their present form contain rules only for the establishment or the merger of new local authorities. The situation is thus not in conformity with Article 2.

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.


The Charter requires that local authorities must have “a substantial share of public affairs under their own responsibility”. Although the Charter does not specify which tasks and functions must fall within the competence of local governments, primarily those public affairs should be regulated and administered by them which affect most the local community and can effectively be carried out by local authorities.

 

In the current situation, this requirement is hardly met by local government system of Cyprus, where the most important and costly local public services are provided by the state. Local authorities take part in service delivery only to a limited extent. Cyprus has expressed its will to extend the competences of local authorities through the ongoing reform. This encouraging trend can however not be extensively detailed in this report as the reform has not been implemented yet, the monitoring visit being an assessment of local and/or regional democracy in a country at a given time. However, the rapporteurs take note of this promising evolution.

 

Regarding Article 3 paragraph 2 of the Charter, the Cypriot legal system recognizes certain forms of citizen participation like local referendum and public hearing. As it was referred to above, local referendum has to be held before any decision about the amalgamation or the change of administrative status of local authorities. Furthermore, consultative referenda can be held also in order to ascertain the opinion of local population on serious matters of public interest. In our knowledge, such a referendum is only rarely called; one well-known example was the municipal referendum in Nicosia on the restoration and transformation of the old stadium in 2008. According to the Town and Planning Law of 1972, public hearing can be organized in the course of planning permit procedures.

 

In sum, Article 3 paragraph 1 is not complied with by Cyprus, as the rapporteurs found that local governments do not regulate and manage “a substantial share of public affairs under their own responsibility”.

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.


Regarding Article 3 paragraph 2 of the Charter, the Cypriot legal system recognizes certain forms of citizen participation like local referendum and public hearing. As it was referred to above, local referendum has to be held before any decision about the amalgamation or the change of administrative status of local authorities. Furthermore, consultative referenda can be held also in order to ascertain the opinion of local population on serious matters of public interest. In our knowledge, such a referendum is only rarely called; one well-known example was the municipal referendum in Nicosia on the restoration and transformation of the old stadium in 2008. According to the Town and Planning Law of 1972, public hearing can be organized in the course of planning permit procedures. 

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.


In theory, the legal definition of local government powers and duties correspond to the requirements of the Charter, as they are defined in the following way: “[the] municipalities shall have competence to administer all the local affairs thereof and all the powers lawfully vested in a municipality shall be exercised by the council and the mayor”. However, the relevant laws (mainly the Municipalities Law and Communities Law) confer to local authorities only minimal responsibilities. As it was already discussed, most important and costly public services are carried out by central government agencies, rather than local authorities. Despite public health, social and welfare services, education belong to the most important local public affairs, the local authorities do not have any responsibilities in fulfilling these tasks, or they have only minimal functions (like maintenance of school buildings).

 

The main and recurrent explanation of the representatives of the Cypriot central government the Congress delegation heard was that local authorities do not have enough capacity and resources (including sufficient financial means, staff and expertise) to tackle these core functions. However, even though it can be true, this argument can be used for the claim for strengthening local authorities, and making them able to cope with these tasks. Municipalities – in particular the great cities having significant economic potential – should get sufficient financial and other kinds of resources for managing and administering the most important tasks of the local community.

 

The Congress delegation found that the “own” tasks and the delegated powers often are not clearly separated, which has negative effects on both the accountability and the finance of local communities. Undoubtedly, the scope of local autonomy is much wider when a function falls within the responsibility of local government, while the pure execution of a centrally delegated task makes a local community in a subordinate position to the central authorities.

 

The current system of local government of Cyprus hardly meets the requirements of Article 4 paragraph 4 of the Charter, as most powers of local authorities are not exclusive and full. In fact, some of the powers of local authorities, like the issuing of planning permits are delegated, or strictly controlled by the central government. The regulatory power of the municipalities and the communities, for instance, is fully submitted to central government, as all local regulations are to be approved by the Council of Ministers with the goal, according to the government, of ensuring legality control. Through the direct elections of mayors and councillors, the representative bodies of local authorities have sufficient democratic legitimacy to exert public power and to make public policy in an autonomous way, without central tutelage.

 

As for the requirement of the Charter on the rights of local authorities to be consulted “in due time and in an appropriate way” in the matters which concern them directly, the relevant laws recognise this principle in general. However, there are no available information about the existence of an institutionalised and regular consultation system between the central government and local authorities guaranteed by law. The national delegation to the Congress stressed during the consultation procedure on the present report that although local authorities and their unions are consulted from time to time, they do not consider the extent and quality of consultation as being adequate or timely, as frameworks of these talks have been guided by the central government.

 

To summarise these findings, the rapporteurs express their opinion that non-compliance problems arise with the implementation of paragraphs 2 and 4 of Article 4.

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.


See answer 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.


See answer at article 4.1

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.


See anwser at article 4.1

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.

 


See answer at article 4.1

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.

 


See answer at article 4.1

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.

 


The Charter requires that local authority boundaries should not be changed without prior consultation with the local communities concerned, possibly by means of a referendum where this is permitted by statute.

 

The relevant legislation contains sufficient guarantees for local authorities to be consulted prior to any initiative for merging them, as it stipulates that before submitting such a legislative proposal, the Government must call local referenda in the respective communities, and the results of these popular votes must be attached to the legislative initiative. As a consequence, Article 5 is fully implemented.

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.


Local authorities must have the right to determine their internal administrative structures and they should be able to adapt them to local needs and ensure effective management. Apparently, this organisational autonomy can be restricted only by law, in order to ensure the democratic operation of all local governments. The Charter requires that the right conditions must be provided for the office of local elected representatives in order to ensure free exercise of their functions.

 

According to the opinion of the rapporteurs, the requirement of the appropriate administrative structures and resources of local authorities is not implemented in a satisfactory way in Cyprus, in particular in case of small communities. A number of communities are not able to carry out their mandatory functions, but need the assistance of central authorities. These local authorities often do not have sufficient staff or financial means to employ local civil servants and public employees. As the Congress delegation was told, there are great and unjustified differences between the municipalities and communities in their personnel and other technical resources. For example, Kokkinotrimithia Community is poorly supplied with staff (only five employees), whereas it has a comparable population to the neighbouring municipality which employs about a hundred people.

 

During the visit of the rapporteurs, the need for the strong central control over the municipalities and the communities was frequently explained with the insufficient resources of local authorities. It was also said that municipalities and communities are legal persons guided by public law. As such entities, by contrast to private companies and organisations, legal persons of public law have the duty under the General Principles of Public Law to manage their affairs applying the principles of good governance. Another recurring argument against the greater engagement of local authorities was the alleged high level of corruption at municipal and communal governments. However, none of these arguments are convincing. If local authorities do not have enough capacity to carry out more tasks or to perform their duties in a more autonomous way, they should get sufficient resources to do so. The fight against corruption is a general effort in all Member States of the Council of Europe, which deserves to be strongly encouraged; nonetheless, it is not a compelling reason for keeping local politicians and officials far from public resources or from public authority.

 

In this situation, it can be concluded that while paragraph 1 of this Article is respected, paragraph 2 of the said provision is only partly complied with.

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.


See answer at article 6.1

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.


Studying the relevant laws on the municipalities and the communities, it is striking that, apart from their elections, and some incompatibility rules, none of them regulate the legal standing of the elected members of the local councils. Neither their rights, nor allowances are enumerated by these laws. Nevertheless, during the consultation procedure, the Ministry of Interior indicated that pursuant to a decision of the Council of Ministers, mayors and municipal councillors benefit from an actual remuneration, whereas according to a specific law, the central government gives compensation to all community council presidents. The rapporteurs have not found any legal guarantee for the conditions of the free exercise of the councillors’ functions. That is why Article 7 of the Charter, according to the assessment of the rapporteurs, seems not to be implemented in Cyprus.

Article 7.2
Conditions under which responsibilities at local level are exercised - Non ratified

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


See answer at article 7.1

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.


See answer at article 7.1

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.


Any administrative supervision of the activities of the local authorities can only aim 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.

 

Another important requirement which can be derived from the Charter’s provisions is that the law should precisely determine which administrative authorities are empowered to exercise legal supervision over municipalities, thus eliminating the uncertainty of the current legislation.

 

According to the rapporteurs, the central government control exercised by the line ministries, the Audit Office, the District Officers, and even by the Parliament is not limited to legal supervision. In fact, through the supervisory powers, the central authorities exert great influence on the daily work as well as on the strategic decisions of local councils. The central approval of a number of local government decisions surely goes far beyond the legality control of local acts which practice is not compatible with the Charter.

 

Consequently, as far as the practice of central supervision exerted by central government agencies exceeds the legality control over local governments’ acts, the requirements of Article 8 are not met.

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.


See answer 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.


See answer at article 8.1

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.


Article 9 paragraph 1 of the Charter provides that local authorities must have adequate financial resources of their own, of which they may dispose freely within the framework of their powers. Financial autonomy is an essential component of the principle of local self-government and for the exercise of a wide range of responsibilities in the field of local public affairs. These elements are cumulative and not alternative, which means that all conditions laid down in this provision of the Charter are mandatory.

 

Another basic principle requires that local authorities must have sufficient financial resources in proportion to the responsibilities assigned to them by law. On the basis of the available data and information, it is particularly difficult to assess if and how this requirement is met in Cyprus. While some NGOs claim that the insufficient fund prevents a lot of small communities to provide appropriate public services, others may argue that the principle of adequate finance seems to be more or less met in Cyprus, but only because municipalities have only extremely limited functions.

 

As it was described, local authorities are obliged, according to the Municipalities, the Communities and the Fiscal Responsibility and Budget System (FRBSL) Laws, to submit their annual budget to the central government for approval. During the monitoring visit, the Congress delegation had some opportunities to discuss this issue with leaders and senior officials of two central ministries, other central agencies, and the representatives of the visited local authorities and local government unions. The dominant view of the central authorities is that the municipalities and the communities are parts of the state and they receive grants from the central government. They spend public money, and the state (central government) is the warrant of local government deficit and debt. All these circumstances justify the prior consent of the central government to the local budgets. However, Article 9 paragraph 1 of the Charter requires that local authorities must be entitled to dispose freely of their own resources. This requirement is hardly compatible with the compulsory central government consent to local budgets, where the central authorities may impose special conditions and expectations for local authorities to this approval. Since all council members of the municipalities and the communities are democratically elected in Cyprus, they have enough legitimacy to decide how they spend their revenues. Local authorities should be accountable to their own voters, rather than to the preferences of central government in local public affairs. As stated above, the Ministry of Interior has a different point of view on this issue, highlighting the fact that this control is confined to the sole lawfulness of the proposed budget and that the central government hence does not impose its own proposals upon local authorities. However, according to the rapporteurs, the practice of central approval of local government budget shows the picture of an overcentralized financial system, in which most important local decisions are influenced or tightly controlled by the central government.

 

According to the conclusions of the rapporteurs, in the absence of a predictable and transparent calculation method of central grants, local authorities cannot be sure for getting enough money for their compulsory tasks and functions. They are hardly able to plan their current expenditure if they can just hope that they will receive the usual amount of central subsidy. It is conspicuous in particular when the total amount of central grant has been significantly decreased in the past few years. 116. The presumed calculation method which is based on the previous year’s data of local budgets brings about certain risks for local authorities, because the decrease of local revenues as a consequence of the negative effects of world financial crisis and the drop of central grants as these took place in the last years, might become permanent, fixing local revenues steadily at a low level (see supra para 89. for more details).

 

As some representatives of local authorities said, the allocation of state subsidies is not preceded by an investigation or assessment of real financial needs of local authorities. In this system, it is doubtful whether local governments are able to produce public services at the same level in all towns and the rural areas. Moreover, if the central planning is not based on a careful assessment of local needs, the use of central grants is unlikely to be effective. This view has been opposed during the consultation procedure by the Ministry of Interior, which stated that the central government’s contribution to the local government projects of the poorest authorities reaches 100% of the local investment costs, in addition to the fact that the Ministry of Interior, as stated above, may distribute extra grants to those in need, at its own discretion and based on specific criteria.

 

There is a similar problem with the specific (or earmarked) grants, as most part of the local development projects is financed by central government. In the lack of sufficient local revenues for capital expenditure, local authorities are vulnerable to central encroachment upon local affairs. In fact, most development plans including the smallest local development, like road repairs or bicycle road construction are made at central government level. It seems to be an ineffective way of planning and implementing local development policies and projects. Once again though, the Ministry of Interior disapproved this statement during the consultation procedure, saying that all local authorities without any exception had the possibility to assume and implement on their own development projects, provided they have the necessary financial resources.

 

The Charter requires that at least a part of local revenues should come from local taxes. Article 9 paragraph 3 comprises a definition of local taxes claiming that local authorities, within the limits of the law, must have the power to determine the rate of these taxes. Moreover, local taxes are really “proper” revenues only if the imposition of local taxes is a free decision of local government. In Cyprus, the share of local taxes in local budgets is relatively high, even if some of these revenues are not genuine local taxes (but rather, they are fees and charges paid by users of certain local public services). The only problem which has arisen in this area was the weak capacity of communities to collect local taxes. In this respect, the tax authorities of the central government could make invaluable contribution to the respective local authorities to collect local taxes.

 

Neither the Municipalities Law nor the Communities Law contain the principle of concomitant (adequate) finance, and the practice shows that central grants are not adjusted to the local needs. So, there is no guarantee for adequate local government finance proportionate to mandatory functions of the municipalities and communities.

 

As to the overall assessment of the compliance with Article 9, the rapporteurs concluded that paragraphs 4 and 5 of this Article are not implemented, while the prevalence of paragraphs 2 and 6 are not guaranteed, since the principle of adequate finance, as it is entrenched in paragraph 2 and the prior consultation with local authorities in an appropriate manner in financial issues as required by paragraph 6, do not have any legal safeguard in the relevant statutes.

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.


See answer at article 9.1

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.


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.


See answer at article 9.1

Article 9.5
Financial resources of local authorities - Non ratified

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


See answer at article 9.1

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.


See answer at article 9.1

Article 9.7
Financial resources of local authorities - Non 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.


112. Article 9 paragraph 1 of the Charter provides that local authorities must have adequate financial resources of their own, of which they may dispose freely within the framework of their powers. Financial autonomy is an essential component of the principle of local self-government and for the exercise of a wide range of responsibilities in the field of local public affairs. These elements are cumulative and not alternative, which means that all conditions laid down in this provision of the Charter are mandatory. 113. Another basic principle requires that local authorities must have sufficient financial resources in proportion to the responsibilities assigned to them by law. On the basis of the available data and information, it is particularly difficult to assess if and how this requirement is met in Cyprus. While some NGOs claim that the insufficient fund prevents a lot of small communities to provide appropriate public services, others may argue that the principle of adequate finance seems to be more or less met in Cyprus, but only because municipalities have only extremely limited functions. 114. As it was described, local authorities are obliged, according to the Municipalities, the Communities and the Fiscal Responsibility and Budget System (FRBSL) Laws, to submit their annual budget to the central government for approval. During the monitoring visit, the Congress delegation had some opportunities to discuss this issue with leaders and senior officials of two central ministries, other central agencies, and the representatives of the visited local authorities and local government unions. The dominant view of the central authorities is that the municipalities and the communities are parts of the state and they receive grants from the central government. They spend public money, and the state (central government) is the warrant of local government deficit and debt. All these circumstances justify the prior consent of the central government to the local budgets. However, Article 9 paragraph 1 of the Charter requires that local authorities must be entitled to dispose freely of their own resources. This requirement is hardly compatible with the compulsory central government consent to local budgets, where the central authorities may impose special conditions and expectations for local authorities to this approval. Since all council members of the municipalities and the communities are democratically elected in Cyprus, they have enough legitimacy to decide how they spend their revenues. Local authorities should be accountable to their own voters, rather than to the preferences of central government in local public affairs. As stated above, the Ministry of Interior has a different point of view on this issue, highlighting the fact that this control is confined to the sole lawfulness of the proposed budget and that the central government hence does not impose its own proposals upon local authorities. However, according to the rapporteurs, the practice of central approval of local government budget shows the picture of an overcentralized financial system, in which most important local decisions are influenced or tightly controlled by the central government. 115. According to the conclusions of the rapporteurs, in the absence of a predictable and transparent calculation method of central grants, local authorities cannot be sure for getting enough money for their compulsory tasks and functions. They are hardly able to plan their current expenditure if they can just hope that they will receive the usual amount of central subsidy. It is conspicuous in particular when the total amount of central grant has been significantly decreased in the past few years. 116. The presumed calculation method which is based on the previous year’s data of local budgets brings about certain risks for local authorities, because the decrease of local revenues as a consequence of the negative effects of world financial crisis and the drop of central grants as these took place in the last years, might become permanent, fixing local revenues steadily at a low level (see supra para 89. for more details). 117. As some representatives of local authorities said, the allocation of state subsidies is not preceded by an investigation or assessment of real financial needs of local authorities. In this system, it is doubtful whether local governments are able to produce public services at the same level in all towns and the rural areas. Moreover, if the central planning is not based on a careful assessment of local needs, the use of central grants is unlikely to be effective. This view has been opposed during the consultation procedure by the Ministry of Interior, which stated that the central government’s contribution to the local government projects of the poorest authorities reaches 100% of the local investment costs, in addition to the fact that the Ministry of Interior, as stated above, may distribute extra grants to those in need, at its own discretion and based on specific criteria. 118. There is a similar problem with the specific (or earmarked) grants, as most part of the local development projects is financed by central government. In the lack of sufficient local revenues for capital expenditure, local authorities are vulnerable to central encroachment upon local affairs. In fact, most development plans including the smallest local development, like road repairs or bicycle road construction are made at central government level. It seems to be an ineffective way of planning and implementing local development policies and projects. Once again though, the Ministry of Interior disapproved this statement during the consultation procedure, saying that all local authorities without any exception had the possibility to assume and implement on their own development projects, provided they have the necessary financial resources. 119. The Charter requires that at least a part of local revenues should come from local taxes. Article 9 paragraph 3 comprises a definition of local taxes claiming that local authorities, within the limits of the law, must have the power to determine the rate of these taxes. Moreover, local taxes are really “proper” revenues only if the imposition of local taxes is a free decision of local government. In Cyprus, the share of local taxes in local budgets is relatively high, even if some of these revenues are not genuine local taxes (but rather, they are fees and charges paid by users of certain local public services). The only problem which has arisen in this area was the weak capacity of communities to collect local taxes. In this respect, the tax authorities of the central government could make invaluable contribution to the respective local authorities to collect local taxes. 120. Neither the Municipalities Law nor the Communities Law contain the principle of concomitant (adequate) finance, and the practice shows that central grants are not adjusted to the local needs. So, there is no guarantee for adequate local government finance proportionate to mandatory functions of the municipalities and communities. 121. As to the overall assessment of the compliance with Article 9, the rapporteurs concluded that paragraphs 4 and 5 of this Article are not implemented, while the prevalence of paragraphs 2 and 6 are not guaranteed, since the principle of adequate finance, as it is entrenched in paragraph 2 and the prior consultation with local authorities in an appropriate manner in financial issues as required by paragraph 6, do not have any legal safeguard in the relevant statutes.
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.


112. Article 9 paragraph 1 of the Charter provides that local authorities must have adequate financial resources of their own, of which they may dispose freely within the framework of their powers. Financial autonomy is an essential component of the principle of local self-government and for the exercise of a wide range of responsibilities in the field of local public affairs. These elements are cumulative and not alternative, which means that all conditions laid down in this provision of the Charter are mandatory. 113. Another basic principle requires that local authorities must have sufficient financial resources in proportion to the responsibilities assigned to them by law. On the basis of the available data and information, it is particularly difficult to assess if and how this requirement is met in Cyprus. While some NGOs claim that the insufficient fund prevents a lot of small communities to provide appropriate public services, others may argue that the principle of adequate finance seems to be more or less met in Cyprus, but only because municipalities have only extremely limited functions. 114. As it was described, local authorities are obliged, according to the Municipalities, the Communities and the Fiscal Responsibility and Budget System (FRBSL) Laws, to submit their annual budget to the central government for approval. During the monitoring visit, the Congress delegation had some opportunities to discuss this issue with leaders and senior officials of two central ministries, other central agencies, and the representatives of the visited local authorities and local government unions. The dominant view of the central authorities is that the municipalities and the communities are parts of the state and they receive grants from the central government. They spend public money, and the state (central government) is the warrant of local government deficit and debt. All these circumstances justify the prior consent of the central government to the local budgets. However, Article 9 paragraph 1 of the Charter requires that local authorities must be entitled to dispose freely of their own resources. This requirement is hardly compatible with the compulsory central government consent to local budgets, where the central authorities may impose special conditions and expectations for local authorities to this approval. Since all council members of the municipalities and the communities are democratically elected in Cyprus, they have enough legitimacy to decide how they spend their revenues. Local authorities should be accountable to their own voters, rather than to the preferences of central government in local public affairs. As stated above, the Ministry of Interior has a different point of view on this issue, highlighting the fact that this control is confined to the sole lawfulness of the proposed budget and that the central government hence does not impose its own proposals upon local authorities. However, according to the rapporteurs, the practice of central approval of local government budget shows the picture of an overcentralized financial system, in which most important local decisions are influenced or tightly controlled by the central government. 115. According to the conclusions of the rapporteurs, in the absence of a predictable and transparent calculation method of central grants, local authorities cannot be sure for getting enough money for their compulsory tasks and functions. They are hardly able to plan their current expenditure if they can just hope that they will receive the usual amount of central subsidy. It is conspicuous in particular when the total amount of central grant has been significantly decreased in the past few years. 116. The presumed calculation method which is based on the previous year’s data of local budgets brings about certain risks for local authorities, because the decrease of local revenues as a consequence of the negative effects of world financial crisis and the drop of central grants as these took place in the last years, might become permanent, fixing local revenues steadily at a low level (see supra para 89. for more details). 117. As some representatives of local authorities said, the allocation of state subsidies is not preceded by an investigation or assessment of real financial needs of local authorities. In this system, it is doubtful whether local governments are able to produce public services at the same level in all towns and the rural areas. Moreover, if the central planning is not based on a careful assessment of local needs, the use of central grants is unlikely to be effective. This view has been opposed during the consultation procedure by the Ministry of Interior, which stated that the central government’s contribution to the local government projects of the poorest authorities reaches 100% of the local investment costs, in addition to the fact that the Ministry of Interior, as stated above, may distribute extra grants to those in need, at its own discretion and based on specific criteria. 118. There is a similar problem with the specific (or earmarked) grants, as most part of the local development projects is financed by central government. In the lack of sufficient local revenues for capital expenditure, local authorities are vulnerable to central encroachment upon local affairs. In fact, most development plans including the smallest local development, like road repairs or bicycle road construction are made at central government level. It seems to be an ineffective way of planning and implementing local development policies and projects. Once again though, the Ministry of Interior disapproved this statement during the consultation procedure, saying that all local authorities without any exception had the possibility to assume and implement on their own development projects, provided they have the necessary financial resources. 119. The Charter requires that at least a part of local revenues should come from local taxes. Article 9 paragraph 3 comprises a definition of local taxes claiming that local authorities, within the limits of the law, must have the power to determine the rate of these taxes. Moreover, local taxes are really “proper” revenues only if the imposition of local taxes is a free decision of local government. In Cyprus, the share of local taxes in local budgets is relatively high, even if some of these revenues are not genuine local taxes (but rather, they are fees and charges paid by users of certain local public services). The only problem which has arisen in this area was the weak capacity of communities to collect local taxes. In this respect, the tax authorities of the central government could make invaluable contribution to the respective local authorities to collect local taxes. 120. Neither the Municipalities Law nor the Communities Law contain the principle of concomitant (adequate) finance, and the practice shows that central grants are not adjusted to the local needs. So, there is no guarantee for adequate local government finance proportionate to mandatory functions of the municipalities and communities. 121. As to the overall assessment of the compliance with Article 9, the rapporteurs concluded that paragraphs 4 and 5 of this Article are not implemented, while the prevalence of paragraphs 2 and 6 are not guaranteed, since the principle of adequate finance, as it is entrenched in paragraph 2 and the prior consultation with local authorities in an appropriate manner in financial issues as required by paragraph 6, do not have any legal safeguard in the relevant statutes.
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.


The Charter requires the signatory countries to provide for the right for local governments to cooperate and, within the framework of the law, to form consortia with other local authorities in order to carry out tasks of common interest.

 

According to this requirement, each member State has to recognise 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. Furthermore, local governments must be consulted, insofar as possible, in due time and in an appropriate way, in the planning and decision-making processes for all matters that concern them directly.

 

As it was discussed above, both the municipalities and the communities have their own national associations representing their interests in the central government decision-making. The Congress delegation is not aware that the freedom of local authorities to associate would be limited in any way. Both the Municipalities and the Communities Laws entrench the rights of local authorities to be registered and participate as a member of their relevant unions.

 

The freedom of local authorities to establish or join associations as well as to express their views and promote their interests is not limited in Cyprus, so this article is completely respected.

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.


See answer at article 10.1

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.


See answer at article 10.1

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.


As far as the Congress delegation has been informed, the judicial protection of local governments’ interests is provided by the Cypriot legal system. Article 146 of the Constitution declares that any person whose rights or legitimate interests are adversely and directly affected by a decision, an act or omission of any organ, authority or person, exercising any executive or administrative authority which is contrary to any of the provisions of the Constitution or of any law or is made in excess or in abuse of powers vested in such organ or authority or person, may recourse to the Supreme Court for legal remedy. Under this constitutional provision, some local authorities took legal recourse to the Supreme Court for remedy against certain central government actions in the past few years. In addition, local governments may turn to the administrative court in the case of a conflict of powers with another public authority in the protection of their own competences. Consequently, the situation complies with Article 11 of the Charter.

Article 12.3
Undertakings - Non ratified

Any Party may, at any later time, notify the Secretary General that it considers itself bound by any paragraphs of this Charter which it has not already accepted under the terms of paragraph 1 of this article. Such undertakings subsequently given shall be deemed to be an integral part of the ratification, acceptance or approval of the Party so notifying, and shall have the same effect as from the first day of the month following the expiration of a period of three months after the date of the receipt of the notification by the Secretary General.


127. Since the ratification of the Charter, Cyprus has not considered itself bound by paragraph 2 of Article 7 of this convention. During the monitoring process, the rapporteurs have not received any explanation for sustaining the non-ratificaion of this provision. The spirit of the Charter requires the acceptance of all of its provisions, unless certain compelling interests exist justifying the reservation. 128. In the views of the rapporteurs, the legal status of the Charter in the domestic legal system of Cyprus makes some concern. Although the Charter, as an international treaty and according to the Constitution of Cyprus should have a legal force and a direct application, it is not seen as a self-executing legal norm. The Supreme Court, in the case of Pandelides v. Leantzi (1991) 3 C.L.R. 293 declared that the Charter, even though ratified by law, was not directly applicable, because its wording had been considered too vague to give rise to concrete rights and obligations recognized by domestic law. However, Cyprus, by signing and ratifying this convention, undertook a commitment to implement its provisions, so it cannot refer to any internal decision or specific legal interpretation to justify the non-compliance with its provisions. 129. In this regard, the rapporteurs draw the attention of the Cypriot authorities to the fact that the relevant jurisprudence of the Supreme Court declaring the Charter as a directly non-applicable legal tool violates Article 12 paragraph 1, as each signatory country under this provision undertook the implementation of all articles of the Charter, with the exceptions of reservations they made at the time of signature and ratification, and have maintained since then.
Article 12.2
Undertakings - Non ratified

Each Contracting State, when depositing its instrument of ratification, acceptance or approval, shall notify to the Secretary General of the Council of Europe of the paragraphs selected in accordance with the provisions of paragraph 1 of this article.


127. Since the ratification of the Charter, Cyprus has not considered itself bound by paragraph 2 of Article 7 of this convention. During the monitoring process, the rapporteurs have not received any explanation for sustaining the non-ratificaion of this provision. The spirit of the Charter requires the acceptance of all of its provisions, unless certain compelling interests exist justifying the reservation. 128. In the views of the rapporteurs, the legal status of the Charter in the domestic legal system of Cyprus makes some concern. Although the Charter, as an international treaty and according to the Constitution of Cyprus should have a legal force and a direct application, it is not seen as a self-executing legal norm. The Supreme Court, in the case of Pandelides v. Leantzi (1991) 3 C.L.R. 293 declared that the Charter, even though ratified by law, was not directly applicable, because its wording had been considered too vague to give rise to concrete rights and obligations recognized by domestic law. However, Cyprus, by signing and ratifying this convention, undertook a commitment to implement its provisions, so it cannot refer to any internal decision or specific legal interpretation to justify the non-compliance with its provisions. 129. In this regard, the rapporteurs draw the attention of the Cypriot authorities to the fact that the relevant jurisprudence of the Supreme Court declaring the Charter as a directly non-applicable legal tool violates Article 12 paragraph 1, as each signatory country under this provision undertook the implementation of all articles of the Charter, with the exceptions of reservations they made at the time of signature and ratification, and have maintained since then.
Article 12.1
Undertakings - Non ratified

Each Party undertakes to consider itself bound by at least twenty paragraphs of Part I of the Charter, at least ten of which shall be selected from among the following paragraphs:

 

– Article 2,

– Article 3, paragraphs 1 and 2,

– Article 4, paragraphs 1, 2 and 4,

– Article 5,

– Article 7, paragraph 1,

– Article 8, paragraph 2,

– Article 9, paragraphs 1, 2 and 3,

– Article 10, paragraph 1,

– Article 11.


127. Since the ratification of the Charter, Cyprus has not considered itself bound by paragraph 2 of Article 7 of this convention. During the monitoring process, the rapporteurs have not received any explanation for sustaining the non-ratificaion of this provision. The spirit of the Charter requires the acceptance of all of its provisions, unless certain compelling interests exist justifying the reservation. 128. In the views of the rapporteurs, the legal status of the Charter in the domestic legal system of Cyprus makes some concern. Although the Charter, as an international treaty and according to the Constitution of Cyprus should have a legal force and a direct application, it is not seen as a self-executing legal norm. The Supreme Court, in the case of Pandelides v. Leantzi (1991) 3 C.L.R. 293 declared that the Charter, even though ratified by law, was not directly applicable, because its wording had been considered too vague to give rise to concrete rights and obligations recognized by domestic law. However, Cyprus, by signing and ratifying this convention, undertook a commitment to implement its provisions, so it cannot refer to any internal decision or specific legal interpretation to justify the non-compliance with its provisions. 129. In this regard, the rapporteurs draw the attention of the Cypriot authorities to the fact that the relevant jurisprudence of the Supreme Court declaring the Charter as a directly non-applicable legal tool violates Article 12 paragraph 1, as each signatory country under this provision undertook the implementation of all articles of the Charter, with the exceptions of reservations they made at the time of signature and ratification, and have maintained since then.

ACCESSION

to the Council of Europe

RATIFICATION

of the European Charter of Local Self-Government

26Ratified provision(s)
0Provision(s) with reservation(s)
7 Non ratified articles
7Compliant Provision(s)
5Partially Compliant Articles
10Non-compliant Provision(s)