Chancellor of Justice: Faster than planned increase in environmental charges is not in conformity with the Constitution

The Chancellor of Justice is of the position that the established rates of extraction charges and water abstraction charges are contrary to the principle of legitimate expectation arising from the Constitution, due to which the Chancellor of Justice has made a proposal to the Government of the Republic to bring the regulations into conformity with the Constitution.

The Association of Estonian Mining Companies, the Association of Construction Material Producers of Estonia, the Estonian Peat Association and the Federation of Estonian Chemical Industries submitted a request to the Chancellor of Justice asking him to check whether the rates of mineral resources extraction charges and water abstraction charges applicable as of April 2013 are in conformity with the Constitution.

The Government established the rates of environmental charges in 2009 applicable prospectively through 2010-2015, but in October last year a decision was made to amend the regulations by increasing, with a new regulation, the rates of extraction charges and some of the rates of water abstraction charges from April 2013 faster and in a larger scope than planned. According to the initial plan, from 1 April 2013 to 1 January 2015 the environmental charges would have been increased on two occasions by approx. 5%; according to the new regulation, the charge will be increased on three occasions by approx. 20%.

The Chancellor of Justice emphasises that he does not cast any doubt on the right of the state to demand environmental charges for use of natural resources. The Chancellor of Justice is of the opinion that the state has a constitutional obligation to ensure the sustainable use of natural resources and require compensation for environmental damage and, generally, environmental charges are in every respect justified measures for the achievement of these objectives. However, according to the Chancellor of Justice the amendments to the regulation of environmental charges must be in conformity with the principle of legitimate expectation arising from the Constitution.

According to Hent Kalmo, the Adviser and Deputy to the Chancellor of Justice, in 2009 the Government established schedules for increasing the rates of environmental charges. On the basis of the schedules, undertakings could plan their expenses and investments, presuming thereby that the charges would not be changed to their detriment before 2015. “The possibility of foreseeing a change in extraction charges over five years could affect the investment decisions of holders of extraction and water abstraction permits and decisions that concern entry into long-term contracts,” Kalmo explained. Therefore, the Chancellor of Justice found that the undertakings had a legitimate expectation, protected by the Constitution, for the preservation of the rates of charges established in regulations in 2009.

When determining the increase in the rates of charges in 2009 prospectively for five years, the Government had to take into account that by doing so it would make a binding promise to undertakings in respect of the establishment of charges. The Chancellor of Justice is of the opinion that under such conditions the schedule of the rates of charges can only be changed in exceptional circumstances which the Government could not have taken into account in 2009. The Minister of the Environment found that such exceptional circumstances include the fact that the Estonian economy was again on the rise after 2009 and, as economic growth continued, the quantities of extractable mineral resources would also increase, due to which natural resources should be used more efficiently. However, the Chancellor of Justice found that no developments have occurred or are forecast in the Estonian economy and extraction volumes of mineral resources that the Government could not have foreseen in 2009. Similarly, to the knowledge of the Chancellor of Justice, no sharp deterioration in the general condition of mineral resources in Estonia has occurred since the regulations under review took effect.