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Armenia - Monitoring report

Date of the monitoring visit: from 12 to 15 May 2019
Report adopted on: 15 June 2021
Files : Report CPL40(2021)02 | Recommendation 456(2021) 
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This report follows the monitoring visit which took place in May 2019 to Armenia which ratified the European Charter of Local Self-Government in 2002.

 

The report notes with satisfaction that Armenia has ratified all the provisions of the Charter and is bound today by all of them. In addition, the consolidation of communities through mergers has been relaunched and new legislative initiatives have been prepared by the government in areas such as local referendums, public hearings and financial assistance to municipalities.

 

Nevertheless, the report notes in particular that the powers of the municipalities have not been extended to allow them to regulate and manage a substantial share of public affairs under their own responsibilities; municipalities have a limited role in delivering public services; there is no legally guaranteed consultation procedure between the central government and their national associations; the administrative supervision is not limited to the legal control of local government decisions and local authorities are not provided with the adequate and concomitant funding to exercise the delegated tasks.

 

Consequently, national authorities are called upon to increase the share of public affairs managed by local authorities to guarantee the right of local authorities to be consulted on matters that concern them directly, to revise and clarify “own” competences of municipalities and limit the state supervision of their own tasks to the control of legality and to ensure that local authorities have access to adequate financial resources of their own and accompany the delegation of the tasks from central to local level with adequate concomitant financial resources.

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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: Foundation of local self-government

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

 

142.     Article 2 of the Charter requires signatory countries to recognise the principle of local self‑government in their domestic legislation.

 

143.     In Armenia, both the constitution and the LGA recognise the principle of local self-government. As has been shown above, Article 179, paragraph 1, of the constitution and Article 3 of the Local Government Act recognise and define local self-governments. By their definitions, local self-government means the right and capacity of democratically elected local bodies to manage, under their scope of responsibility, the local public affairs in the interests of the local population.

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.

Article 3.1

1       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.

 

145.     Article 3, paragraph 1, requires that local authorities should 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 remit of local government, it should regulate and administer primarily those public affairs that affect the local community most and that it can carry out more effectively.

 

146.     The rapporteurs did not find any evidence that the powers and duties of the municipalities had been extended since the previous monitoring report, which found that “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”.18  Even municipal amalgamations, implemented since 2015, have not played a more prominent role in the provision of public services, despite the fact that the purpose of merger procedures was precisely to create more efficient and powerful municipalities. But the amalgamation processes have not been followed by the transfer of central government powers and duties in line with the principle of subsidiarity. Even if the term “a substantial share of public affairs” is a fairly broad expression, it requires that local authorities not only have just residual powers or secondary tasks, but that they should be able to shape effective local policies within their scope of responsibility, and should be able to provide a certain number of public services for the benefit of the local population. It should be remembered though that the amalgamation reform is not yet complete.

 

147.     It should also be noted that while some municipalities (especially Yerevan and larger municipalities) also carry out delegated state responsibilities, this does not imply the application of the principle of subsidiarity, as these public tasks and functions are carried out under full state control.


[18] CG/MON(25)5prov, Explanatory memorandum on local and regional democracy in Armenia, point 99.

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.

Article 3.2

2       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.

 

149.     The democratic character of local authorities, based on their direct legitimacy and the holding of free elections, is a core value of the Charter as it is entrenched in Article 3, paragraph 2.

 

150.     In Armenia, the main legislative and decision-making body of municipalities, the Community Council, is elected by secret ballot, on the basis of a direct, equal and universal right to vote.

 

151.     In each community, the Chief of Community (the mayor) is the main executive body. In a formal sense, he or she is responsible to the council, as far as the representative body, under certain conditions (for example, no council meeting is summoned in a six-month period), may initiate the removal of the mayor (LGA, Article 26). A decision is sent to the government for follow-up and for planning the election of a new mayor. However, the local council does not have a final say in this highly important matter, as the government decides on the initiative. Such an intervention by the central government in the organisational affairs of the local government seems unjustified. In principle, this power could arise from the government’s oversight over local governments, but even in this case, the possibility of the removal of a democratically elected mayor by central government would be problematic in respect of the Charter. When the community is reorganised by law into another administrative unit, early termination of powers of the mayor may also occur and is followed by local elections.

 

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.

 Article 4.1

1       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.

 

153.     It is an important guarantee of local autonomy that only the national constitution or legislative acts may specify mandatory tasks for local authorities.

 

154.     As a matter of fact, Article 182, part 1, of the Constitution of Armenia states that: The powers of the local self-governing bodies are their own in order to solve the obligatory and voluntary tasks of the community, as well as delegated by the state. Mandatory community tasks are set by law, and voluntary tasks are determined by community councils. In addition, Article 12 of the Law on Local Self-Government defines 20 obligatory community tasks.

 

155.     Still, other pieces of legislation, such as sectoral laws, assign compulsory tasks to local authorities, so it can be said that this requirement is, at least formally, met by the Armenian legal system, as Article 182(5) declares that “the powers of local self-government bodies shall be prescribed by law”.

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.

Article 4.2

2       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.

 

156.     This paragraph refers to the local governments’ right to undertake voluntary tasks, if they have sufficient capacity for doing so.

 

157.     As explained in point 3.1.5.2. of this report, in Armenia, there is the legal right for municipalities to undertake voluntary tasks, if they do not fall within the scope of responsibility of other public authorities, and the fulfilment of voluntary tasks cannot endanger the performance of compulsory and delegated functions. In fact, communities are generally empowered by the LGA to undertake tasks of local interest.

 

158.     So, this principle of the Charter is implemented, even if mostly only on paper, since the vast majority of communities, considering the lack of adequate resources and capacity, are not in a position to undertake non-mandatory tasks and functions. The formal implementation of this point is therefore justified by the rapporteurs, despite the lack of progress in this area compared to the experiences of the previous monitoring procedures.

 

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.

 Article 4.3

3       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.

 

159.     This requirement of the Charter lays down the principle of subsidiarity, without which no democratic local government system may exist. The principle allows the assignment of public tasks and functions to administrative agencies not established on the basis of elected local authorities, for the sake of efficiency and social expediency.

 

160.     In practice, the realisation of this principle can only be examined together with the scope of the responsibility of local authorities. As we have seen, most public affairs of local interest are managed by state administration bodies in Armenia, or, even if some of them are conferred on municipalities, they are administered as delegated powers and duties under strict central professional control. It is hardly defensible that public affairs, such as education, health and social care, which have a profound impact on the lives of local communities, can be more effectively managed from a central level or more democratically operated by non-elected public bodies.

 

161.     The rapporteurs do not question that the small and financially weak communities are not able to provide public services requiring special expertise, personnel and institutions. However, it should also be noted that the amalgamation processes have aimed at creating bigger and more powerful consolidated communities exactly to enable them to carry out such functions. In any way, it is circular reasoning to argue that municipalities should not get more revenues as they are not able to deliver costly public services, as well as supposing that more tasks and functions should not be transferred to municipalities because they do not have sufficient financial, personnel and technical resources to provide such local services. During the consultation procedure, the MTAI argued that several improvements in enlarged municipalities are already visible, such as expanded public services, new or renovated public infrastructure, the introduction of new services, a decrease in administrative costs and an increase in service delivery units, and increased organisational capacity in managing human resources, financial resources, tax administration and provision of administrative services.

 

162.     However, experience shows that effective reforms are still needed to make municipalities more capable of performing more public tasks and functions, in particular the rolling out and completion of territorial reforms, continuing human and institutional capacity development measures and designing and implementing a coherent decentralisation strategy aimed at strengthening local capacities and local democracy.

 

Article 4.4
Scope of local self government - Article ratified

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

  Article 4.4

4       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.

 

164.     Full and exclusive powers are a precondition of local self-government, which means that municipalities should be able to decide autonomously how they fulfil their mandatory tasks, and to have sufficient resources to carry out those tasks. The full and exclusive nature of these powers allows only a legal supervision exercised by central agencies over local authorities.

 

165.     There is no doubt that there are some less important public services that municipalities deliver themselves, but there are only a few such functions (like the maintenance of kindergartens or cultural facilities). However, the rapporteurs’ experience has been that many tasks performed by municipalities, such as the maintenance of public utilities or the operation of local transport, are often carried out jointly by municipalities and administrative agencies of central government. In these cases, municipalities have only complementary or secondary functions (like maintaining waterworks or waste disposal), sometimes without real decision-making competence.

 

 

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.

 

Article 4.5

5       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.

 

167.     The inherent nature of delegated powers is to allow some discretion for local authorities to decide on the best way to perform such tasks in the local circumstances. Although municipalities have very small executive functions in the range of delegated powers and functions, the rapporteurs were still left with the impression during the visit that local authorities can adapt the implementation of delegated powers to local contexts.

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.

 

  Article 4.6

6       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.

 

168.     The Charter requirement concerning the right of local authorities to be consulted “in due time and in an appropriate way” in matters which concern them directly is not reflected in the LGA, either in general or specific cases.

 

169.     As explained above (see section 3.1.10), there are still no institutionalised mechanisms of consultation between the central government and municipalities in Armenia. The government regularly circulates draft legislative proposals to public organisations, including the associations of local authorities, for opinion. The public council, operating under the authority of the MTAI, does not provide exclusivity in consulting local authorities, as it represents the platform for all public organisations. Although there is direct contact between the government and the national association of communities, it cannot replace a well-regulated, effective system of consultation that would provide not only relevant information to the municipalities about the issues relating to them but would also ensure their real involvement in the decision-making process prior to the relevant decisions being taken.

 

170.     During the consultation procedure, the MTAI opposed this view and underlined that legal issues are addressed through parliamentary channels (the Standing Committee of the National Assembly, meetings with the electorate, awareness campaigns, pooling of feedback from municipalities, exchange with the central and local authorities, analyses and reporting at panel sessions, etc.) and, in addition, administrative procedural and application issues are tackled through methodological support, circulation of elucidatory materials by line ministries co-ordinated by the MTAI, and topical meetings (on site and centrally). It also pointed to the website www.e-draft.am, established by the government as an online platform for gathering feedback from municipalities, and to the Official Gazette (Bulletin) of the government periodical Procurement Bulleting. It further argued that there are various specific consultation practices established by law that regulate a number of important aspects of interaction between the government and municipalities, for example in the area of legislation development, budgeting and local socio-economic development. The MTAI stressed that several initiatives were proposed by municipalities themselves through those channels (for example, the LED project proposals for joint funding of specific projects and the subventions).

 

171.     The MTAI pointed out that although no association can play an exclusive role in these consultations, the quality of consultations should be improved to establish a better dialogue between the parties concerning public policy making.

 

172.     However, although there are specialist national community organisations, financial officers and community council members, the Association of Communities of Armenia is the only nationwide association representing the interests of the municipalities. The rapporteurs heard that contact between the government, its line ministries and the national association is occasional and depends on the governmental will, which makes local authorities vulnerable. As the rapporteurs were made aware, in some cases the municipalities concerned learned about the ongoing amalgamation process from the press.

Article 5
Protection of local authority boundaries - Non 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.

 

Article 5: Protection of local authority boundaries       

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.

 

174.     The Charter requires that a change to local authority boundaries should give rise to prior consultation with the local communities concerned, possibly by means of a referendum where this is permitted by statute.

 

175.     As has been mentioned above, the amalgamation process has slowed down since the recent political changes but is expected to continue. In this light, despite the related constitutional provision (Article 190), the absence of legal guarantees to hear the opinions of the affected communities and local inhabitants is worrying. Occasionally held hearings and the practice of sporadic communication or informal consultation may not be enough to substitute the real and legally guaranteed prior consultation and involvement of local inhabitants.

 

176.     During the consultation procedure, the MTAI expressed their view that the consultation on the territorial reform through an institutionalised consultation mechanism between the government and the national association is questionable and has certain limitations because of vested interests of community leaders and members of the national association. However, it also informed the delegation that the two draft legal instruments are currently being discussed in the National Assembly to address the official hearings held in the National Assembly when it discusses amalgamation legislation, as is the possibility of holding local referendums concerning the amalgamation.

 

177.     The rapporteurs welcome such initiatives aimed at improving consultation process and trust they will be adopted soon. However, they would like to reaffirm that monitoring is an instant snapshot of the moment of a visit and, accordingly, the assessment of a country’s compatibility with the Charter is made in regard to the actual situation that they encounter and cannot be based on laws that are in the process of being created or that are earmarked for enactment at a future stage.

 

Article 6.1
Appropriate administrative structures and resources for the tasks of local authorities - Non 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.

Article 6.1 (analysis and conclusion)

1       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.

 

179.     Local authorities shall 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.

 

180.     In Armenia, according to data from the MTAI, in 2017 the total number of municipal servants was 6 324, while the total number of public employees in the local government sector was 39 324.19 It means that the average number of administrative staff in the communities is 12.6, which seems to be extremely low considering that the data also includes the figures for the larger municipalities.

 

181.     During the visit, the rapporteurs were left with the impression that in Armenia there is a highly centralised system, under the management of the Ministry of Territorial Administration and Infrastructures. During the consultation procedure, however, this ministry argued that the role of the government is only to assist and provide methodological guidance to municipalities with regard to staffing and recruitment of municipality staff. The numbers of local community staff are set by the Community Council.

 

182.     The rapporteurs note positively that in recent years several international development programmes have been launched in the country to provide professional training for local officials, and, according to the existing legislation, each municipal servant is bound to participate in professional training at least once every three years.

 


[19] Source: Ministry of Territorial Administration and Development.

Article 6.2
Appropriate administrative structures and resources for the tasks of local authorities - Non ratified

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

Article 6.2

2      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.

 

184.     Referring back to the preceding point, the rapporteurs note that the administrative capacities in the vast majority of municipalities are not sufficient to deliver public services fully and with due quality, and scarce budget resources are only sufficient for remunerating municipal staff. The limited administrative capacity and the lack of qualified human resources are serious problems in particular in small municipalities. For example, in Solak, a municipality with approximately 2 700 inhabitants, fewer than 20 people are employed by the community, and even local taxes are difficult to collect. During the consultation procedure, the Ministry of Territorial Administration and Infrastructures indicated that the territorial reform and the consolidation of communities aim at, among other things, improving organisational capacity and that there are several new initiatives that directly support development of staff competences in municipalities in various functional areas and disciplines, following the new realities (enlarged municipalities) and increased public pressure for good governance and increased responsiveness. The ministry also underlined that it is currently reviewing the existing training system to make it more adequate and up to date, which is based on real needs and linked to employees’ performance, and which strikes a balance between central and decentralised components of the system, among other things.

 

185.     The rapporteurs trust that the ongoing initiatives will improve the situation with regard to the conditions of service of local government employees and will demonstrate the awareness of the government about the importance of these issues. However, under the current circumstances, most local authorities are still not able to provide adequate training services for their staff members and offer a long-term career in public service. 

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.

Article 7.1

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

 

186.     Having regard to the findings of the previous paragraph, the poor conditions for administrative staff in the municipalities and the current political climate, which some interlocutors have described as “uncertain”, local councillors in a number of municipalities are hardly in a position to exercise their functions freely. However, this experience cannot be generalised.

 

187.     According to the LGA, it is an obligation of the Chief of Community to create necessary conditions within the community residence building to ensure the activities of the Community Council in accordance with this law and the council regulations.

 

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.

Article 7.2

2       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.

 

189.     The weak financial situation in which most local authorities find themselves apparently makes it difficult to compensate for all legitimate costs of the exercising of the rights and functions of council members.

 

190.     It is worth noting however that the members of the Community Council are entitled to receive reimbursement against the costs incurred by them while fulfilling their duties, although the law does not guarantee salary even in the greater municipalities.

 

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.

Article 7.3

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

 

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.

Article 8.1

1       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.

 

193.     Supervision provides for a direct influence by central government on the management of local authorities. It is therefore very important that the scope of oversight be limited to ensuring the legality of the operation of the municipalities.

 

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.

 Article 8.2

2       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.

 

195.     Any administrative supervision of the activities of local authorities can only aim at ensuring compliance with the law and constitutional principles. Administrative supervision may, however, be exercised by higher-level authorities with regard to expediency in respect of the tasks delegated to local authorities. Another important requirement that can be inferred from the Charter provisions is that the law should precisely define the administrative authorities empowered to exercise legal supervision over municipalities, thus eliminating the uncertainty inherent in the current legislation.

 

196.     As has been explained above (see section 3.1.8), the control exercised by regional governors goes far beyond the legal supervision of local government decisions, as far as mandatory local government tasks and functions are concerned.

 

197.     As far as the rapporteurs have been informed, in particular in the field of financial management of local authorities, there are overlapping supervisory powers of the regional governors and the Audit Chamber. This situation may create uncertainty among municipalities and makes it difficult for communities to prepare properly for the supervisory investigations.

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.

Article 8.3

3       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.

 

199.     As regards the proportionality of the intervention of the supervisory body, it must be emphasised that if the regional governors exercising legality control also exert financial control over the municipalities and, besides, exercise considerable administrative power in their own jurisdiction, there is a high risk that the influence of the centralised state administration will be decisive not only at regional but also at local level and that municipalities will inevitably become subordinate. There are signs that this risk may have materialised in Armenia.

 

200.     Central government supervision is evidently stronger and more intensive in the case of delegated powers where the key aspect must be to allow some discretion for municipalities. Otherwise they function as an off-site agency of central government. Although the rapporteurs perceived that, in certain cases, communities have for the most part only a minor role in exercising delegated powers, during the monitoring visit no objection to the disproportionality of central government supervision was raised; therefore the rapporteurs can conclude that there is compliance with this provision of the Charter.

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.

Article 9.2

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

 

206.     This article means that the resources available to local authorities should be sufficient and proportionate to their mandatory tasks and functions. This principle also implies that any new task assigned to local governments must be accompanied by the corresponding funding to cover the costs of the fulfilment of the new function.

 

207.     Article 186 of the Armenian Constitution defines that for the purpose of performing the mandatory tasks of a community, the law shall prescribe tax and non-tax sources that are necessary for ensuring the implementation of these tasks. The powers delegated to communities by the state shall be subject to mandatory financing from the state budget. According to the experience of the rapporteurs, in practice in Armenia many local authorities lack adequate financial resources and the lack of resources of municipalities is not only due to the fact that many communities, especially smaller ones, have only very limited opportunities to generate their own revenues, but also because central grants allocated for the fulfilment of compulsory tasks, according to most interlocutors heard by the rapporteurs, do not fully cover the costs of their performance. During the consultation procedure, the MTAI argued that the new policy of subvention funds from the state budget is currently being implemented in order to build and improve different infrastructures within the communities, as part of which the communities make decisions about infrastructure selection and submit applications, and, over the last two years, about AMD 8.5 billion (€16.2 million) of targeted subventions have been provided from the state budget.

 

208.     However, in particular, state subsidies paid for fulfilling delegated tasks are insufficient. This is not a negligible problem, as the financing of the fulfilment of delegated powers amounted to 24% of all municipal revenues in 2017.The lack of sufficient finance of delegated tasks generates more problems as a number of communities are not able to compensate for the missing funds from their own revenues.

 

209.     As already mentioned in section 3.1.5.3, during the consultation procedure, the CAA also pointed out that in the area of local self-government most of the powers delegated to local authorities by law are not exercised, as the state budget does not allocate adequate financial resources and the government has not established procedures for implementing them.

 

Article 9.8
Financial resources of local authorities - Article ratified

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

Article 9.8

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

 

226.     In this respect, while the legal frameworks of municipal borrowing are provided, experience shows that only the largest municipalities can afford to borrow, subject to government approval. Thus, this form of obtaining additional financial resources, although legally planned, does not provide additional resources for the vast majority of municipalities. Nevertheless, local authorities have access to financial markets to secure financial means, so this requirement of the Charter is formally met.

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.

 Article 9.7

 

7       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.

 

223.     In the terminology of the Charter, one of the forms of central grant is the “earmarked” grant, which means that state subsidies are allocated to local authorities for specific tasks. In this article, it is specified for capital expenditures when the central grant is transferred to specific investment projects. The Charter prefers the non-earmarked grant, because this way of funding allows local authorities to decide on the use of these funds on the basis of strategic decisions and expenditure preferences.

 

224.     During the visit, the rapporteurs received contradictory information from local authorities about the nature of central grants. However, during the consultation procedure, the MTAI informed the rapporteurs that a large share of central grants are not earmarked grants, without specifying the purpose, via financial equalisation mechanisms. Other central grants are earmarked, what are known as subventions. It also indicated that it is the municipality that proposes specific projects to the government to finance and that the new policy of subvention funds from the state budget is currently being implemented in order to build and improve different infrastructures within the communities, as part of which the communities make decisions on the selection of infrastructure and submit applications. Nonetheless, the rapporteurs would like to note that even if it is a municipality that proposes specific projects to the government to finance, under circumstances where there is a constant lack of resources, municipalities appear to have only minimal room for manoeuvre to decide how to spend their revenues, whatever the system of central grants is.

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.

Article 9.6

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

220.     Having regard to the Charter’s basic function to establish and promote the rights of local authorities, consultation between central and the local governments (or their associations) can be defined as a process by which the parties seek information, advice or the opinion of each other about particular topics, and/or discuss them. From the point of view of local governments, the main functions of consultation is to obtain relevant information on the decision-making process of central authorities affecting their interests; to provide an opportunity for local authorities to express their views and opinions on the relevant statutory laws and regulations at all stages of the decision-making process; and to make proposals and submit claims or complaints to central government, with the latter’s obligation to respond to them.

 

221.     The requirements of “appropriate way” and “due time” mean that consultation should take place in a way that provides real opportunity for local authorities to create and articulate their own views and proposals. During the consultation procedure, the MTAI highlighted that consultations with representatives of local authorities, the Union of Communities of Armenia, the union of community financial officers, and other interested NGOs and government bodies, are conducted on a regular basis. It mentioned the government-created website www.e-draft.am, which contains all legislative drafts including the ones related to local self-government and discussions in the Standing Committee of the National Assembly on Territorial Administration, Local Self-Government, Agriculture and Environment. The ministry specifically pointed out that the Ministry of Finance provides methodological support on the issues related to the process of budget planning and execution by Armenian communities by providing clarifications on specific issues raised by the latter (usually within a 10-day period).

 

222.     As the analysis has shown above (see paragraph 20, sections 3.1.10 and 4.3.6), there is no institutionalised and legally guaranteed mechanism of regular consultation between central and local governments. Referring again to the fragmentation of the Armenian local government system and the constant lack of sufficient financial resources of the municipalities, Article 9.6 is not complied with in Armenia.

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.

Article 9.5

5       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.

 

216.     Financial equalisation is a conventional method of assistance for the economically weaker local authorities, a well-known redistribution mechanism for counterbalancing regional disparities and diverse financial capacity of municipalities.

 

217.     As has been found, in Armenia there is a separate system of financial equalisation that is designed to compensate the economic disadvantages of the financially weak communities. In addition, the regional discrepancies, as well as the economic and social differences of the municipalities, are also handled indirectly, through the general system of state grants.

 

218.     Although financial equalisation has different possible methods and ways, designed to redress the effects of uneven economic development and capacity of local governments, the rapporteurs are of the opinion that in Armenia, the great differences between communities are not effectively counterbalanced in practice.

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 9.3

3       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.

 

211.     The municipalities’ power to impose local taxes and duties is recognised at both constitutional21 and legislative levels.22 Local authorities have the freedom to set the rate of local taxes within the limits of the law.


21Article 185(3) of the constitution.

22Article 57 of the LGA.

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 9.1

1       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.

 

201.     According to Article 9, paragraph 1, of the Charter, local authorities should 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 an important condition 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 the conditions laid down in Article 9 of the Charter are mandatory.

 

202.     Recognising that local authorities, through local taxes and duties, as well as some other resources, are entitled by the constitution and legislation to receive financial resources of their own, the rapporteurs however observed that in practice one of the major characteristics of the Armenian municipalities is the permanent lack of financial resources.

 

203.     The total budget revenues of municipalities amounted to AMD 126 554 million in 2017, which was a little less than in the previous year (however, since 1996, when the local government system was established in Armenia, it is the only year when total revenues declined). Of the total amount of municipal revenues, the share of local or “own” revenues was only 30.4% in that year, which shows that municipalities are highly dependent on central grants and other budgetary transfers.

 

204.     Although the 45% increase in the total revenues of the whole local government sector between 2011 and 2017 is spectacular, it should also be taken into account that the share of local government expenditures remains low both in total government spending (8.3%) and GDP (2.24%).20

 


[20] Source : http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=gov_10a_main&lang=en. 

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.

Article 9.4

4       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.

 

213.     In the proper understanding of the Charter, the diversification of revenues helps local authorities to react promptly to changes in costs of local services and protects them from unexpected economic difficulties, while the requirement of “buoyant” resources means the ability of local authorities to adjust their revenues to new circumstances, more plausibly, to increase their own resources.

 

214.     According to the assessment of the rapporteurs, in a formal sense, this requirement of the Charter is fulfilled as far as the existing laws empower local authorities to obtain revenues from different sources, including local taxes and duties, borrowing, utilisation of local government property, general and specific grants, etc.

 

215.     The problem remains, as has already been mentioned, that the income from these multiple sources is insufficient, and in many cases, such as borrowing, the mere possibility is only of a formal nature without any practical importance. In addition, having regard particularly to the absence of capital revenues (except for Yerevan and the largest cities), municipalities do not have enough financial and technical potential to make adequate local development strategies or follow the changing social requirements. The lack of sufficient resources makes them vulnerable to central influence, even if primary local interests are at stake.

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.

Article 10.1

1       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.

 

227.     The Charter requires signatory countries to provide for the right of local governments 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. Each member state is required 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.

 

228.     Both the constitution and the LGA empower municipalities to form associations for fulfilling their tasks and functions in a better and more effective way. The latter act, for instance, specifies the right of communities to create intercommunity associations with other communities with the objective of jointly solving individual problems as a basic principle of local self-government.

 

229.     At the moment, there are some existing intermunicipal co-operation frameworks, but there could be many more, given the fragmented municipal structure. As far as the rapporteurs have learned, since the last constitutional amendment in 2015, despite the intention to do so, no new associations have been established. Taking advantage of this opportunity could help to counterbalance the disadvantages of municipal fragmentation, and to overcome some difficulties of small municipalities, and could even be a kind of alternative to unpopular amalgamations. However, this would obviously require financial incentives.

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.

 Article 10.2

2       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.

 

231.     Although only in an indirect way, the LGA recognises the right of communities to form and join associations with the objective of co-ordinating the activities of the communities, as well as representing and protecting common interests, when it authorises the community councils to take a decision on these issues (Article 16(22)).

 

232.     There is a national association of Armenian municipalities that any community may freely join. For further detail on this issue, see Part 5. There is also an association of municipal councillors that formally exists.

 

233.     Thus, the right of municipalities to form and belong to associations in order to protect and promote their interests is guaranteed.

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.

Article 10.3

3       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.

 

234.     In Armenia, there are some international development projects that demonstrate that local authorities are not excluded from international co-operation.

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.

Article 11: Legal protection of local self-government

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.

 

235.     As far as the legal protection of local authorities is concerned, the rapporteurs regret to say that they have not had an opportunity to meet with representatives of the Constitutional Court, so they have no information on the judicial protection of local government rights in Armenia and how the available procedures work in practice.

 

236.     Having regard to the fact that municipalities are public law entities, they presumably have access to the ordinary courts to protect their rights in compliance with Article 11 of the Charter.

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.

As mentioned earlier, as permitted by Article 12 of the Charter, Armenia has made a number of declarations concerning the scope of the European Charter of Local Self-Government and stated that it does not consider itself bound by some articles. This non-ratification concerns Articles 5, 6, 7-2, and 10-3 of the Charter. 131. During the visit, the Congress delegation was pleased to note that the Armenian representatives all expressed a continuing desire to work with the Congress in maintaining and enhancing compliance with the Charter. 

ACCESSION

to the Council of Europe 25 January 2001

RATIFICATION

of the European Charter of Local Self-Government 25 January 2002

CONSTITUTION | NATIONAL LEGISLATION

In Armenia, both the constitution and the LGA recognise the principle of local self-government. As has been shown above, Article 179, paragraph 1, of the constitution and Article 3 of the Local Government Act recognise and define local self-governments. By their definitions, local self-government means the right and capacity of democratically elected local bodies to manage, under their scope of responsibility, the local public affairs in the interests of the local population.



26Ratified provision(s)
0Provision(s) with reservation(s)
5 Non ratified articles
17Compliant Provision(s)
6Partially Compliant Articles
7Non-compliant Provision(s)