Volume 9 Numbers 1/2

Winter/Spring 2000

Constitutional Watch
     A country-by-country update on constitutional politics in Eastern Europe and the ex-USSR

Estonia - In December, Estonia's right-of-center coalition government won adoption of a radical change to the country's tax code, abolishing corporate-profit taxes. The measure was part of the eight-month-old government's broader agenda for economic development, which aims to liber-alize the market and stimulate private investment.

In August, the three-party governing coalition (comprising the Pro Patria Union [PPU], the Reform Party [RP], and the Moderate Party [MP]) agreed to push for economic liberalization despite the significant budgetary crunch predicted for 2000. The staunchly promarket RP fought hardest for the change, although PPU and MP were also in favor. After a few months delay, the amendments were adopted on December 15, by a 52 to 38 margin in the 101-member Riigikogu (parliament). With this, the docket was cleared for adoption of the 2000 state budget, which was accepted by a similar margin.

While the center-left opposition (led by the Center Party [CP]) claimed the tax-code revision only benefited Estonia's business elite, it did not attempt to block its adoption. This was in contrast to a number of other parliamentary debates, during which the opposition purposefully overloaded parliament with dozens of legislative amendments or continually called for ten-minute recesses in order to filibuster coalition bills. For example, during a debate on amending Estonia's prop-erty- restitution law, in February, the opposition dragged out a parliament session for more than 12 hours. Although the coalition, with a solid majority of three seats, generally survived these challenges, the opposi-tion's tactics often left the government exasperated.

After the new year, Prime Minister Mart Laar (PPU) came out with another daring economic proposal, suggesting that Estonia adopt the European Union's single currency-the euro-even before the country's anticipated accession to the union, in 2004. Laar explained that Estonia's currency, the kroon, was already pegged to the German mark, which is fixed to the other euro currencies. In addition, the kroon is regulated by a currency board, making it one of the most stable currencies in Eastern Europe. By joining the euro zone early, Laar argued, Estonia would benefit from the positive publicity as well as lower interest rates in the euro zone.

On January 21, Laar was so forward as to put the idea directly to the EU Commission president, Romano Prodi, during his visit to Tallinn. Prodi welcomed the proposal but cautioned that it was somewhat premature and would require a great deal of coordination. Among Estonian bankers, economists, and finance officials, Laar's idea also elicited mixed reactions, with a number of economists praising the idea while Laar's own finance minister, Siim Kallas (RP), was opposed.

With a number of the coalition's economic reforms adopted by the end of 1999, attention turned in early 2000 to political reform and, in particular, to amending the Constitution. On January 12, the chairman of parliament's Constitutional Commission, Liia Hanni (MP), announced that the coalition would launch a major effort to achieve the necessary political consensus among Estonia's parties for a number of changes to the eight-year-old Basic Law. Hanni cited three main areas in which amendments needed consid-eration. First, she noted a long-standing point of legal confusion surrounding the president's precise preroga-tives as "supreme commander of the national defense of Estonia" (Art. 78.16). Since Estonia's presidency is largely ceremonial, a number of constitutional experts have suggested that responsibility for defense be vested in the government. This would include appointing and dismissing Estonia's armed-forces chief.

Second, Hanni raised the prospect of amending the Constitution's first article regarding Estonia's state sovereignty in connection with its entry into the EU. Since Art. 1 reads "Estonia is an independent and sovereign democratic republic wherein the supreme power of state is vested in the people," Hanni asked whether this would still be true once Estonia is an EU member. Hanni cited a number of countries that have included an explicit delegation of some state authority to the EU within their constitutions, although she admitted that a number of others have not done so.

Lastly, Hanni also acknowledged that the consti-tutional- amendment process was likely to reopen the perpetual debate in Estonian politics as to whether the president should be elected by popular vote. Currently, parliament elects the president by a two-thirds majority, and if it fails in three attempts, the decision is handed to an electoral college, composed of parliament and approximately 250 representatives from local govern-ments (Art. 79). While CP and a number of other opposition parties favor direct election, the governing coalition is opposed. Although the existing system is viewed as somewhat clumsy (for instance, in 1996 the reelection of President Lennart Meri required the convening of an electoral college), direct election of the president has also been criticized because it might create a situation of dual sovereignty, in which both the parliament and president would have popular mandates.

Hanni suggested that the parliament attempt to deal with technical changes in the Constitution by using the document's simplified amendment procedure (chapter 15), which requires a four-fifths majority vote. More-fundamental changes could be adopted by refer-endum, during 2002 or even 2003. At the same time, Hanni allowed that, given the current state of govern-ment- opposition relations, finding consensus on even the most basic set of changes would be difficult-a fact conceded by a number of opposition politicians as well.

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Estonia's Constitutional Review Chamber (CRC) heard three cases in the first two months of the year. In its first decision, on February 9, the chamber struck down a municipal decree, issued by the city of Narva, that sought to regulate customs traffic in and around the town, situated on Estonia's northeastern border with Russia. (Roughly 95 percent of Narva's population is ethnically Russian.) In particular, the decree required trucks to pay special processing charges, while parked on a specially designated lot, before they were allowed to cross the border. City authorities claimed that the measure was needed to relocate a backlog of trucks stretching into the city center (the border post is next to the main city square); it is noteworthy, however, that the special fee benefited only the company that managed the lot.

Legal Chancellor Eerik-Juhan Truuvali, who had brought the case, argued the decree was illegal on numerous grounds. (The legal chancellor, which is described in Arts. 139-145 of the Constitution, is an "independent official supervising the accordance with the Constitution and legislation of the legal acts issued by the state legislature and executive, as well as by local government bodies" [Art. 139].) Most importantly, it lacked proper reference to national law supporting such regulations (especially the fees). Article 154 of the Constitution reads that "all local issues shall be resolved and managed by local governments, which shall operate independently pursuant to law." While the first part of this sentence has been taken to mean that local govern-ments are free to govern their own affairs, the second part has been interpreted by the CRC to indicate that local governments cannot assume functions otherwise not assigned to them by national law. (For example, in 1994 a Tallinn city-council ordinance allowing traffic officials to boot illegally parked cars was thrown out on the grounds that national law did not explicitly permit such forms of punishment.)

In this case, the legal chancellor's protest had even greater justification because the original Narva decree cited Estonia's Business Code as its legal basis, even though this law in no way regulates municipal affairs. In his appeal, Truuvali termed the town's actions "unprecedented legal nihilism." The Narva government subsequently sought to justify the ordinance through other laws (including traffic regulations). It also stated that it simply needed to do something to prevent trucks from polluting the city center. Truuvali, however, was not swayed. The CRC agreed with Truuvali and struck down the Narva decrees.

In late January, the CRC gathered again to hear a long-awaited case regarding a challenge to Estonia's austerity budget for 1999. In June 1999, the government coalition had pushed through parliament a set of emer-gency spending cuts, which included 103 million kroons ($660,000) intended to help local governments finance alternative housing for individuals forced out of resti-tuted homes. The decrease brought strong criticism from Siiri Oviir, the deputy speaker of parliament and prominent leader of the opposition CP. Oviir, who is an experienced lawyer, argued that the move was unconsti-tutional according to Art 116.2, which reads the "Riigikogu shall not eliminate or reduce expenditure in the state budget or in its draft, which is prescribed by other laws." This provision was meant to ensure stability in state funding for long-term policy decisions.

Oviir maintained that funding for residents forced out of restituted houses was precisely such a policy. Oviir appealed to the legal chancellor for advice. In August, Truuvali agreed with her and called on the parliament to restore the funding. (According to the Constitution [Art. 142], the legal chancellor must first call on the legislative or executive body in violation of the Constitution to amend its act, and if it refuses to do so, only then can the chancellor appeal to the CRC.) Parliament considered the request in September, but the government coalition defeated any amendments by a vote of 45 to 35, alleging that the austerity budget was not a real legal act and therefore could not be chal-lenged by the legal chancellor. Truuvali then submitted a formal appeal to the CRC.

Yet on January 26, when the CRC was due to hand down its decision, the chairman of the chamber, Uno Lohmus, announced that the five-member body had been unable, after long deliberations, to reach a consensus decision and would therefore take the unprecedented step of submitting the case to the full 17-member Supreme Court (of which CRC judges are also members) for a final ruling. (According to Estonia's Law on the Constitutional Review Court Procedure, the CRC may refer a case to the full Supreme Court if it fails to arrive at a reasonable consensus.)

On March 17, the Supreme Court handed down its decision. The Court ruled against the legal chan-cellor, arguing that it could not declare the amendments null and void because it could not assess whether or not the budget cuts would de facto halt implementation of the housing law. The Court did state, however, that the government must fulfill its obligation under the housing law regardless of whether the state budget provides the pertinent resources.

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