The Financial Guarantee of Local Government and Possibilities for its Protection

Author:Vallo Olle
Position:Docent of Administrative Law, University of Tartu
Vallo Olle
Docent of Administrative Law
University of Tartu
The Financial Guarantee
of Local Government and
Possibilities for its Protection
1. Introduction
Themes related to the nancial guarantee of local government (LG) tend to be ‘evergreen’ both in Estonia
and more broadly. One can here refer to the words spoken a full 20 years ago by P. Galina, then mayor of the
Italian city of Cesena and vice-president of the National Association of Italian Municipalities: ‘The reform of
local nances in our country, centring on the provision of independent resources, is another fata morgana:
despite the new regulations, municipal bodies are still obliged to operate under conditions of uncertainty as
to the nancial resources actually available.’*1 Cuts made in the basis for LG income and lack of clarity sur-
rounding determination and funding of LG units (LGUs) represent the situation in which on 16 March 2010
the highest judicial authority of the Estonian state—the Supreme Court acting en banc in Constitutional
supervision procedure—made an important decision declaring unconstitutional the failure to adopt such
legislation of general application as would
1) Stipulate what obligations imposed on LGUs by law are of a local character and which are of a
national character, and
2) Distinguish between the funds allocated to LGUs for deciding on and organising the addressing of
local issues from the funds allocated for performance of national obligations and provide for fund-
ing of the national obligations imposed on LGUs by law out of the state budget.*2
These conclusions of the Supreme Court have not lost their relevance.
The author’s aim is to proceed from the Constitution of the Republic of Estonia*3 (CRE), European
Charter of Local Self-Government*4 (ECLSG), valid legislation, case law of the Supreme Court, and relevant
legal literature*5 to give answers to the following main questions:
1 Conference on the European Charter of Local Self-Government (Barcelona, 23.–25.1.1992). ‘What have you done with the
European Charter of Local Self-Government?’ Legislation and Jurisprudence. Standing Conference of Local and Regional
Authorities of Europe. Studies and Texts, No. 27. Council of Europe Press 1993, p. 86.
2 Supreme Court en banc decision of 16.3.2010, 3-4-1-8-09. – RT III 2010, 13, 97 (in Estonian). English text available at http:// (most recently accessed on 20.3.2012).
3 Eesti Vabariigi põhiseadus. – RT 1992, 26, 349; RT I, 27.4.2011, 1 (in Estonian).
4 Euroopa kohaliku omavalitsuse harta. – RT II 1994, 26, 95.
5 There is a scarcity of relevant legal writings on this particular subject in the Estonian language. The following ones can be
mentioned: Eesti Vabariigi põhiseadus. Kommenteeritud väljaanne. Teine, täiendatud väljaanne (Constitution of the Repub-
lic of Estonia. Commented Edition. Second, Revised Edition). Tallinn: Juura 2008; T. Kolk. Millist kohaliku omavalitsuse
rahastamise süsteemi nõuab põhiseadus? (Which Funding System is Required by the Constitution?). – Riigikogu Toimetised

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