Chancellor of Justice's speech at the 8th seminar of the European Network of Ombudsmen in Copenhagen

Ladies and gentlemen,

I am very honoured to participate in the 8th seminar of the European Network of Ombudsmen. I thank my colleagues Mr Gammeltoft-Hansen and Mr Diamandouros for inviting me to Copenhagen. I am sure the coming days will be very fruitful and enjoyable.

The topic of today “ombudsmen between politics and law”, is very intriguing. I, as I think everybody else in this room, have been accused of giving political statements or opinions. But I think that no ombudsman can operate in a completely politics free zone.

In Estonia this is especially hard, as the constitution gives the Chancellor of Justice, this is how my position is named in our constitution, also the power of preliminary constitutional review. I have an obligation to assess whether Estonian laws are in conformity with constitution. If not, I turn to Parliament and ask to amend the law. If they don’t follow my proposal I also have the chance to turn to Supreme Court and ask the court to declare the law unconstitutional.

It is very hard to criticize laws without entering to politics. So I balance every day between law and politics. I will give some examples of my daily practice and you can judge, whether it was pure law or also a bit of politics in it.

It comes as no surprise that the economic crisis of the past few years has changed the reality around us in more than one way. I guess you could even say that for many governments, the past few years have resembled a “sink or swim” situation. States have had to take decisive actions in order to meet the requirements of the fast-changing economic reality and keep their heads above the water. Estonia is no exception in that regard. But how to make the necessary political decisions in order to meet the state’s financial and economic needs without sacrificing the core constitutional principles?

In 2009, Estonia’s state budget was under pressure. Parliament decided to rise the general value added tax rate in Estonia from 18% to 20% (pure politics to get more money to state budget).  But! Pay attention to the dates, though: the amendments regarding the raising of the value added tax rate by 2% were adopted on 18th of June and were published in the State Gazette on 26th of June. The amendments to the Value Added Tax Act entered into force on July 1st 2009. In other words, this meant that there were only 4 days (and only two workdays!) between the publishing of the changes regarding the higher VAT rate and those changes coming into force.

I addressed the parliament on that matter. I considered that raising the VAT rate by 2% at such short notice is contrary to the freedom to conduct a business in conjunction with the principle of legal certainty. Do not get me wrong – I admit that the legislator has wide discretion in state budget and tax matters – this is politics! I also agree that the overall aim of the amendments – to balance the state budget – is important and legitimate. But even so, when taking political decisions in economically difficult times – such as raising the VAT rate – the legislator cannot just bluntly ignore the core constitutional principles. It derives from those constitutional principles that new regulations cannot be adopted and enforced “overnight”. The addressees of the regulation must be given time to learn about the new regulation and adjust their activities accordingly. This is especially so when the new regulation – such as raising the VAT rate – brings about a wide-scale change that affects a wide range of actors: not only the entrepreneurs, but also consumers, state and local municipality authorities etc. In practical terms: all the persons liable to VAT (ie VAT payers) had only 2 working days to re-arrange their accounting systems, modify software solutions, print new price tags etc in order to effectively enforce the new VAT rate. Even more so, it appeared that the parliament had not even substantially discussed the possible difficulties involved in the hasty implementation of the new VAT rate!

I concluded that the aim of amending the Value Added Tax Act did not outweigh the negative impacts related to the speedy enforcement of the higher VAT rate. Hence I made a proposal to the parliament to bring the amended Value Added Tax Act into conformity with the constitution. Although the parliament did not formally support my proposal, it did, however, still initiate a new draft act that in substance mitigated the negative effects of the sudden enforcement of new VAT rate and thus solved the central problems I had pointed out.

The bottom line of my story is: although the economic twists and turns may put states into difficult situations when trying to adjust to the new economic reality, the core constitutional values such as legal certainty and the overall trust of the people to the stability of the legal system cannot be sacrificed even in economically challenging times. The politicians must obey constitutional principles and if the chancellor reminds them these, then it is not politics, it is still law.

My second example comes from this autumn.

Estonia, as other euro-zone states, had to decide whether to join European Financial Stability Facility (EFSF) or not and if yes, on what terms.

The main point of this dispute was the role of the Parliament when taking a major financial obligation. The initial draft legislation on Estonia's joining the EFSF provided that the Parliament’s role was resolved solely to making a declaration that Estonia will contribute maximum guaranty required under the EFSF Framework Agreement. The Government was supposed to take care of the rest, including making the decision, whether to support every individual aid package granted by EFSF to a euro-zone state in financial difficulties, or not. In practice these arrangements would mean that the Parliament would lose the ability to control the obligations Estonia takes.

The Estonian Constitution provides that assuming state loans or other financial obligations falls exclusively within the competence of the Parliament. At the same time, some decisions concerning EFSF have to be taken quite quick and the parliamentary procedure is slower than governmental one. The reason is that when things are decided in government it is more safe from the public debate, the inconvenient questions and statements of opposition parties, the discontent of electorate etc. But does this correspond to the principle of parliamentary democracy, laid down in our Constitution? How will the electorate receive information of the crucial decisions made, understand the effects of these decisions and form their electoral preferences, if the decision-making process is not brought before the public?

I am convinced that the norm of the Constitution mentioned earlier should be construed in a way that all the important decisions, including the decisions on taking hefty financial obligations, must be made by the Parliament. The maximum guarantee, Estonia will be required to provide under the ESFS agreement, amounts to approximately 2 billion Euros. Although this sum is marginal in terms of EFSF, it is a considerable number for Estonia. This means that should Estonia be required to remit to EFSF the guaranteed amounts, many Estonia’s domestic processes may be disturbed.

This is why, in spite of the fact that my position does not require it, I felt obliged to intervene in the process of discussion of the draft legislation on Estonia's joining the EFSF. I sent a letter to the MP-s explaining my doubts on the constitutionality of the regulation suggested by this draft legislation. I asked the MP-s to re-consider, whether they are really ready to give one of their central rights to the Government. I emphasized that the economic state and sustainability of Estonia is the matter of the whole nation, and not only of a limited circle of officials enjoying the calmness of their office.

I am very happy to say that my letter raised an intense public discussion, which in turn led to a considerable improvement of draft legislation in question. I also hope that this debate made the Estonian authorities and high officials once again think about the values reflected in our Constitution as well as about their role in retaining these values.

And I admit, I may be crossed the line between law and politics but only to protect constitutional values.


Thank you for your attention!